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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, 2024

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

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 7, 2024, 1,809,267 shares of the registrants’ common stock were outstanding.

 


TABLE OF CONTENTS

 

 

 

Page

 

 

 

Part I - Financial Information

5

Item 1.

Financial Statements (unaudited)

5

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 (unaudited)

5

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023 (unaudited)

6

 

Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three Months Ended March 31, 2024 and 2023 (unaudited)

7

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023 (unaudited)

8

 

Notes to Condensed Consolidated Financial Statements (unaudited)

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

45

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

60

Item 4.

Controls and Procedures

60

 

 

 

Part II - Other information

61

Item 1.

Legal Proceedings

61

Item 1A.

Risk Factors

62

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

65

Item 3.

Defaults Upon Senior Securities

65

Item 4.

Mine Safety Disclosures

65

Item 5.

Other Information

65

Item 6.

Exhibits

65

 

Signatures

69

 

2


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, including the impact of the Value Maximization Plan and Ecommerce Wind-Down, the ongoing activities of and potential growth of our UACC and CarStory businesses, and the impact, if any, of identified errors in our financial statements, and the impact, if any, of identified errors in our financial statements, 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:

there are risks associated with the discontinuance of our ecommerce operations and wind-down of our used vehicle dealership business;
our Value Maximization Plan may not be successful, and may not lead to growth and enhanced profitability for our UACC or CarStory businesses;
we may not generate sufficient liquidity to operate our business;
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;
our level of indebtedness could have a material adverse effect on our ability to generate sufficient cash to fulfill our obligations under such indebtedness, to react to changes in our business and to incur additional indebtedness to fund future needs;
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;
the geographic concentration of UACC's borrowers or dealerships 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;
our recent reverse stock split may not result in the market price per share of our common stock to either exceed or remain in excess of the $1.00 minimum bid price as required by Nasdaq (as defined herein), or have any of its other anticipated impacts, and we may be unable to satisfy other Nasdaq continued listing rules;
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;
UACC's securitizations may expose it to financing and other risks, and there can be no assurance that it will be able to access the securitization market in the future, which may require it to seek more costly financing;
UACC is currently experiencing increasing credit losses in interests it holds in automotive finance receivables and its credit scoring systems may not effectively forecast its automotive receivables loss rates. Higher than anticipated credit losses or prepayments or the inability to effectively forecast loss rates may negatively impact our operating results;
if UACC loses servicing rights on its automobile contracts, our results of operations would be negatively impacted;

 

3


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;
our actual operating results may differ significantly from our guidance; and
the risks described in the section titled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023 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.

 

 

 

4


 

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,

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

90,990

 

 

$

135,585

 

Restricted cash (including restricted cash of consolidated VIEs of $48.1 million and $49.1 million, respectively)

 

 

49,516

 

 

 

73,234

 

Finance receivables at fair value (including finance receivables of consolidated VIEs of $381.3 million and $341.4 million, respectively)

 

 

421,279

 

 

 

348,670

 

Finance receivables held for sale, net (including finance receivables of consolidated VIEs of $450.0 million and $457.2 million, respectively)

 

 

454,189

 

 

 

503,546

 

Interest receivable (including interest receivables of consolidated VIEs of $13.4 million and $13.7 million, respectively)

 

 

14,142

 

 

 

14,484

 

Property and equipment, net

 

 

2,414

 

 

 

4,982

 

Intangible assets, net

 

 

125,136

 

 

 

131,892

 

Operating lease right-of-use assets

 

 

6,751

 

 

 

7,063

 

Other assets (including other assets of consolidated VIEs of $11.4 million and $13.3 million, respectively)

 

 

39,708

 

 

 

59,429

 

Assets from discontinued operations

 

 

18,142

 

 

 

196,537

 

Total assets

 

$

1,222,267

 

 

$

1,475,422

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Warehouse credit facilities of consolidated VIEs

 

$

516,276

 

 

$

421,268

 

Long-term debt (including securitization debt of consolidated VIEs of $238.0 million and $314.1 million at fair value, respectively)

 

 

548,142

 

 

 

626,583

 

Operating lease liabilities

 

 

9,809

 

 

 

10,459

 

Other liabilities (including other liabilities of consolidated VIEs of $16.0 million and $14.3 million, respectively)

 

 

61,260

 

 

 

61,321

 

Liabilities from discontinued operations

 

 

25,293

 

 

 

228,120

 

Total liabilities

 

 

1,160,780

 

 

 

1,347,751

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.001 par value; 500,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 1,795,626 and 1,791,286 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

2

 

 

 

2

 

Additional paid-in-capital

 

 

2,089,814

 

 

 

2,088,381

 

Accumulated deficit

 

 

(2,028,329

)

 

 

(1,960,712

)

Total stockholders’ equity

 

 

61,487

 

 

 

127,671

 

Total liabilities and stockholders’ equity

 

$

1,222,267

 

 

$

1,475,422

 

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

5


VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Interest income

 

$

51,077

 

 

$

34,368

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

Warehouse credit facility

 

 

9,471

 

 

 

3,099

 

Securitization debt

 

 

4,869

 

 

 

4,345

 

Total interest expense

 

 

14,340

 

 

 

7,444

 

Net interest income

 

 

36,737

 

 

 

26,924

 

 

 

 

 

 

 

 

Realized and unrealized losses, net of recoveries

 

 

30,819

 

 

 

15,728

 

Net interest income after losses and recoveries

 

 

5,918

 

 

 

11,196

 

 

 

 

 

 

 

 

Noninterest (loss) income:

 

 

 

 

 

 

Servicing income

 

 

2,019

 

 

 

2,854

 

Warranties and GAP income, net

 

 

(9,642

)

 

 

2,835

 

CarStory revenue

 

 

2,979

 

 

 

3,170

 

Gain on debt extinguishment

 

 

 

 

 

8,709

 

Other income

 

 

2,784

 

 

 

3,032

 

Total noninterest (loss) income

 

 

(1,860

)

 

 

20,600

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

Compensation and benefits

 

 

24,110

 

 

 

23,221

 

Professional fees

 

 

3,343

 

 

 

4,973

 

Software and IT costs

 

 

4,622

 

 

 

5,246

 

Depreciation and amortization

 

 

7,626

 

 

 

7,232

 

Interest expense on corporate debt

 

 

1,391

 

 

 

1,340

 

Impairment charges

 

 

2,752

 

 

 

 

Other expenses

 

 

4,454

 

 

 

5,199

 

Total expenses

 

 

48,298

 

 

 

47,211

 

 

 

 

 

 

 

 

Loss from continuing operations before provision for income taxes

 

 

(44,240

)

 

 

(15,415

)

Provision for income taxes from continuing operations

 

 

436

 

 

 

54

 

Net loss from continuing operations

 

$

(44,676

)

 

$

(15,469

)

Net loss from discontinued operations

 

$

(22,941

)

 

$

(59,272

)

Net loss

 

$

(67,617

)

 

$

(74,741

)

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders, continuing operations, basic and diluted

 

$

(24.90

)

 

$

(8.93

)

Net loss per share attributable to common stockholders, discontinued operations, basic and diluted

 

$

(12.79

)

 

$

(34.23

)

Total net loss per share attributable to common stockholders, basic and diluted

 

$

(37.68

)

 

$

(43.16

)

Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted

 

 

1,794,303

 

 

 

1,731,636

 

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

6


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, 2022

 

 

1,727,525

 

 

$

2

 

 

$

2,075,931

 

 

$

(1,596,100

)

 

$

479,833

 

Stock-based compensation

 

 

 

 

$

 

 

$

2,041

 

 

$

 

 

$

2,041

 

Vesting of restricted stock units

 

 

7,501

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

$

 

 

$

 

 

$

(74,741

)

 

$

(74,741

)

Balance at March 31, 2023

 

 

1,735,026

 

 

$

2

 

 

$

2,077,972

 

 

$

(1,670,841

)

 

$

407,133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2023

 

 

1,791,286

 

 

$

2

 

 

$

2,088,381

 

 

$

(1,960,712

)

 

$

127,671

 

Stock-based compensation

 

 

 

 

$

 

 

$

1,433

 

 

$

 

 

$

1,433

 

Vesting of restricted stock units

 

 

4,340

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

$

 

 

$

 

 

$

(67,617

)

 

$

(67,617

)

Balance at March 31, 2024

 

 

1,795,626

 

 

$

2

 

 

$

2,089,814

 

 

$

(2,028,329

)

 

$

61,487

 

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

7


VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Operating activities

 

 

 

 

 

 

Net loss from continuing operations

 

$

(44,676

)

 

$

(15,469

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Impairment charges

 

 

2,752

 

 

 

 

Profit share receivable

 

 

9,642

 

 

 

 

Gain on debt extinguishment

 

 

 

 

 

(8,709

)

Depreciation and amortization

 

 

7,626

 

 

 

7,224

 

Amortization of debt issuance costs

 

 

843

 

 

 

802

 

Losses on finance receivables and securitization debt, net

 

 

40,163

 

 

 

16,603

 

Stock-based compensation expense

 

 

1,324

 

 

 

1,679

 

Provision to record finance receivables held for sale at lower of cost or fair value

 

 

306

 

 

 

(1,251

)

Amortization of unearned discounts on finance receivables at fair value

 

 

(4,792

)

 

 

(5,320

)

Other, net

 

 

(1,921

)

 

 

(3,256

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Finance receivables, held for sale

 

 

 

 

 

 

Originations of finance receivables held for sale

 

 

(130,404

)

 

 

(143,174

)

Principal payments received on finance receivables held for sale

 

 

40,387

 

 

 

20,731

 

Other

 

 

404

 

 

 

1,850

 

Interest receivable

 

 

342

 

 

 

(3,737

)

Other assets

 

 

3,022

 

 

 

7,069

 

Other liabilities

 

 

(61

)

 

 

(6,740

)

Net cash used in operating activities from continuing operations

 

 

(75,043

)

 

 

(131,698

)

Net cash provided by operating activities from discontinued operations

 

 

98,167

 

 

 

46,677

 

Net cash provided by (used in) operating activities

 

 

23,124

 

 

 

(85,021

)

Investing activities

 

 

 

 

 

 

Finance receivables at fair value

 

 

 

 

 

 

Originations of finance receivables at fair value

 

 

 

 

 

(3,392

)

Principal payments received on finance receivables at fair value

 

 

35,195

 

 

 

41,850

 

Consolidation of VIEs

 

 

 

 

 

11,409

 

Principal payments received on beneficial interests

 

 

773

 

 

 

2,144

 

Purchase of property and equipment

 

 

(644

)

 

 

(814

)

Net cash provided by investing activities from continuing operations

 

 

35,324

 

 

 

51,197

 

Net cash provided by (used in) investing activities from discontinued operations

 

 

5,747

 

 

 

(4,379

)

Net cash provided by investing activities

 

 

41,071

 

 

 

46,818

 

Financing activities

 

 

 

 

 

 

Proceeds from borrowings under secured financing agreements

 

 

 

 

 

238,735

 

Principal repayment under secured financing agreements

 

 

(73,647

)

 

 

(42,784

)

Principal repayments of financing of beneficial interests in securitizations

 

 

(2,651

)

 

 

 

Proceeds from warehouse credit facilities

 

 

125,100

 

 

 

135,900

 

Repayments of warehouse credit facilities

 

 

(30,092

)

 

 

(241,351

)

Repurchases of convertible senior notes

 

 

 

 

 

(5,883

)

Other financing activities

 

 

(40

)

 

 

(156

)

Net cash provided by financing activities from continuing operations

 

 

18,670

 

 

 

84,461

 

Net cash used in financing activities from discontinued operations

 

 

(151,178

)

 

 

(129,560

)

Net cash used in financing activities

 

 

(132,508

)

 

 

(45,099

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(68,313

)

 

 

(83,302

)

Cash, cash equivalents and restricted cash at the beginning of period

 

 

208,819

 

 

 

472,010

 

Cash, cash equivalents and restricted cash at the end of period

 

$

140,506

 

 

$

388,708

 

 

(Continued on following page)

 

8


VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

(unaudited)

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

13,497

 

 

$

6,347

 

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

 

 

See accompanying notes to these unaudited condensed consolidated financial statements.

 

9


Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Description of Business and Basis of Presentation

Description of Business and Organization

 

Vroom, Inc., through its wholly owned subsidiaries (collectively, the "Company”), is a leading automotive finance company that offers vehicle financing to consumers through third-party dealers and an artificial intelligence-powered analytics and digital services platform for automotive retail.

 

In January 2021, the Company completed the acquisition of Vast Holdings, Inc. (d/b/a CarStory). On February 1, 2022 (the "Acquisition Date"), the Company completed the acquisition of Unitas Holdings Corp. (now known as Vroom Finance Corporation), including its wholly owned subsidiaries United PanAm Financial Corp. (now known as Vroom Automotive Financial Corporation) and United Auto Credit Corporation ("UACC").

 

The Company was incorporated in Delaware on January 31, 2012 under the name BCM Partners III, Corp. On June 25, 2013, the Company changed its name to Auto America, Inc. and on July 9, 2015, the Company changed its name to Vroom, Inc.

 

Value Maximization Plan

 

The Company was previously an end-to-end ecommerce platform to buy and sell used vehicles. On January 22, 2024, the Company announced that its Board of Directors ("Board") had approved a Value Maximization Plan, pursuant to which the Company discontinued its ecommerce operations and wound down its used vehicle dealership business in order to preserve liquidity and enable the Company to maximize stakeholder value through its remaining businesses. The Company ceased transacting through vroom.com, completed transactions for customers who had previously contracted with the Company to purchase or sell a vehicle, halted purchases of additional vehicles, sold substantially all of its used vehicle inventory through wholesale channels, paid off its vehicle floorplan financing facility dated November 4, 2022 with Ally Bank and Ally Financial Inc. (the "2022 Vehicle Floorplan Facility") and conducted a reduction-in-force commensurate with the reduced operations. As of March 29, 2024, the Company substantially completed the wind-down of its ecommerce operations and used vehicle dealership business (the "Ecommerce Wind-Down").

 

The Company owns and operates UACC, a leading automotive finance company that offers vehicle financing to its customers through third-party dealers under the UACC brand, and CarStory, an artificial intelligence-powered analytics and digital services platform for automotive retail. The UACC and CarStory businesses continue to serve their third-party customers, with their operations substantially unaffected by the Ecommerce Wind-Down.

 

The accounting requirements for reporting the Company's ecommerce operations and used vehicle dealership business as a discontinued operation were met as of March 29, 2024. Accordingly, the condensed consolidated financial statements and notes to the condensed consolidated financial statements reflect the results of the Company's ecommerce operations and used vehicle dealership business as a discontinued operation for the periods presented. Refer to Note 5 — Discontinued Operations for further detail. The Company is now organized into two reportable segments: UACC and CarStory. The UACC reportable segment represents UACC’s operations with its network of third-party dealership customers, including the purchase and servicing of vehicle retail installment sales contracts. Prior to the Ecommerce Wind-Down, UACC also offered vehicle financing to Vroom’s customers through its ecommerce platform, the UACC reportable segment also includes the runoff of these previously originated contracts. The CarStory reportable segment represents sales of AI-powered analytics and digital services to automotive dealers, automotive financial services companies and others in the automotive industry. Refer to Note 15 — Segment Information for further detail.

 

 

10


Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

Reverse Stock Split

On February 13, 2024, the Company effected a 1-for-80 reverse stock split of the Company’s common stock. All shares of the Company’s common stock, stock-based instruments and per-share data included in these condensed consolidated financial statements have been retroactively adjusted as though the stock split has been effected prior to all periods presented.

Basis of Presentation

 

The condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. The condensed consolidated balance sheet as of December 31, 2023, included herein, was derived from the audited consolidated financial statements as of that date. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2023.

 

The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, and in management’s opinion, include all adjustments, which consist of only normal recurring adjustments necessary for the fair statement of the Company’s condensed consolidated balance sheet as of March 31, 2024 and its results of operations for the three months ended March 31, 2024 and 2023. The results for the three months ended March 31, 2024 are not necessarily indicative of the results expected for the current fiscal year or any other future periods. Certain prior year amounts have been reclassified to conform to the current year presentation related to discontinued operations and new financial statement presentation as a result of the Ecommerce Wind-Down and the reverse stock split.

 

Principles of Consolidation

 

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

 

 

2. Summary of Significant Accounting Policies

 

Use of Estimates

 

The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. On an ongoing basis, the Company evaluates its estimates, including, among others, those related to finance receivables, income taxes, stock-based compensation, contingencies, warranties and GAP (as defined below) income-related reserves, fair value measurements and useful lives of property and equipment and intangible assets. The Company bases its estimates on historical experience, market conditions, and on various other assumptions that are believed to be reasonable. Actual results may differ from these estimates.

 

Comprehensive Loss

The Company did not have any other comprehensive income or loss for the three months ended March 31, 2024 and 2023. Accordingly, net loss and comprehensive loss are the same for the periods presented.

 

Restricted Cash

 

Restricted cash primarily includes UACC restricted cash. UACC collects and services finance receivables under the securitization transactions and warehouse credit facilities. These collections are restricted for use until properly remitted each month under the terms of the servicing agreement. UACC also maintains a reserve account for each

 

11


Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

securitization and warehouse credit facility to provide additional collateral for the borrowings. Refer to Note 9 — Warehouse Credit Facilities of Consolidated VIEs and Note 10 — Long Term Debt for further detail.

 

Finance Receivables

 

Finance receivables consist of retail installment sale contracts purchased or acquired by UACC from its existing network of third-party dealership customers at a discount as well as retail installment sale contracts UACC offered to Vroom’s customers through its ecommerce platform prior to the Ecommerce Wind-Down.

 

The Company's finance receivables are generally secured by the vehicles being financed.

 

Finance receivables over 90 days delinquent are considered nonaccrual finance receivables. Interest income is subsequently recognized only to the extent cash payments are received until the consumer is able to make periodic interest and principal payments in accordance with the finance receivable terms.

Finance Receivables Held for Sale, Net

 

Finance receivables that the Company intends to sell and not hold to maturity are classified as held for sale. The Company intends to sell finance receivables through securitization transactions. Finance receivables classified as held for sale are recorded at the lower of cost or fair value. Deferred acquisition costs and any discounts are deferred until the finance receivables are sold and are then recognized as part of the total gain or loss on sale. Refer to Note 3 – Revenue Recognition.

 

The Company records a valuation allowance to report finance receivables at the lower of cost or fair value. To determine the valuation allowance, finance receivables are evaluated collectively as they represent a large group of smaller-balance homogeneous loans. To the extent that actual experience differs from estimates, significant adjustments to the Company's valuation allowance may be needed. Fair value adjustments are recorded in "Realized and unrealized losses, net of recoveries" in the consolidated statements of operations. Principal balances and corresponding deferred acquisition costs and discounts of finance receivables are charged-off when the Company is unable to sell the finance receivable and the related vehicle has been repossessed and liquidated or the receivable has otherwise been deemed uncollectible. As of March 31, 2024 and December 31, 2023, the valuation allowance for finance receivables classified as held for sale was $32.9 million and $33.8 million, respectively. Refer to Note 14 – Financial Instruments and Fair Value Measurements.


Finance Receivables at Fair Value

 

Finance receivables for which the fair value option was elected under ASC 825 are classified as finance receivables at fair value. The Company reassesses the estimate for fair value at each reporting period with any changes reflected as a fair value adjustment and recorded in "Realized and unrealized losses, net of recoveries" in the consolidated statements of operations. The Company recognizes the acquisition fees as other income at the time of issuance and recognizes the acquisition costs as an expense in the period incurred.

 

Finance receivables at fair value include both finance receivables held for sale at fair value as well as finance receivables held for investment at fair value. Finance receivables held for sale at fair value represent finance receivables that the Company intends to sell but elected the fair value option as described above. The aggregate principal balance and the fair value of the finance receivables held for sale at fair value was $140.6 million and $125.6 million, respectively and the aggregate principal balance and the fair value of the finance receivables held for investment at fair value was $343.3 million and $295.7 million, respectively as of March 31, 2024. The Company did not have any finance receivables held for sale at fair value as of December 31, 2023.

 

Refer to Note 14 – Financial Instruments and Fair Value Measurements.

 

Consolidated CFEs

 

 

12


Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

The Company elected the fair value option upon consolidation of the assets and liabilities of its variable interest entities ("VIEs") related to the 2022-2 and 2023-1 securitization transactions. Refer to Note 4 – Variable Interest Entities and Securitizations. These VIEs are consolidated collateralized financing entities (CFEs) and are accounted for using the measurement alternative in accordance with ASU 2014-13, Measuring the Financial Assets and Liabilities of a Consolidated Collateralized Financing Entity (“ASU 2014-13"). During the three months ended March 31, 2024 and 2023, the Company recognized the following revenue and expenses associated with these CFEs in the condensed consolidated statements of operations:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Interest income

 

$

18,117

 

 

$

20,628

 

Interest expense

 

$

(4,906

)

 

$

(4,397

)

Realized and unrealized losses, net of recoveries

 

$

(15,751

)

 

$

(8,675

)

Noninterest income, net

 

$

273

 

 

$

(3,378

)

 

The assets and liabilities of the CFEs are presented as part of "Restricted cash", “Finance receivables at fair value”, "Interest receivable", "Other Assets", "Long term debt", and "Other liabilities", respectively, on the consolidated balance sheets. Refer to Note 4 – Variable Interest Entities and Securitizations and Note 14 – Financial Instruments and Fair Value Measurements for further details.

 

Concentration of Credit Risk and Significant Customers

 

The Company’s principal financial instruments subject to potential concentration of credit risk are cash and cash equivalents and finance receivables. The Company’s cash balances are maintained at various large, reputable financial institutions. Deposits held with financial institutions may at times exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and, therefore, management believes they bear minimal risk. The Company’s cash equivalents primarily consist of money market funds that hold investments in highly liquid U.S. government securities. Concentration of credit risk with respect to finance receivables is generally mitigated by a large consumer base.

 

UACC’s customers, in this instance, are the third-party automotive dealers through which it purchases or acquires retail installment sale contracts for consumers. CarStory’s customers are dealers, automotive financial services companies and others in the automotive industry who purchase CarStory’s digital retailing services. For the years ended March 31, 2024 and 2023, no customer represented 10% or more of the Company’s income and no customer represented more than 10% of the Company’s finance receivables as of March 31, 2024 and 2023.

 

Liquidity

 

As of March 31, 2024, the Company had cash and cash equivalents of $91.0 million and restricted cash of $49.5 million. Restricted cash primarily includes restricted cash required under UACC's securitization transactions and Warehouse Credit Facilities of $48.1 million. The Company has historically had negative cash flows and generated losses from operations and the Company’s primary source of liquidity has been cash generated through financing activities.

 

In January 2024, the Company announced its Value Maximization Plan to discontinue its ecommerce operations and wind-down its used vehicle dealership business, refer to Note 1 — Description of Business and Basis of Presentation — Value Maximization Plan. As a result of the liquidation of the Company's vehicle inventory as part of the Ecommerce Wind-Down, the Company repaid all amounts outstanding under the 2022 Vehicle Floorplan Facility in the first quarter of 2024 and the agreement was terminated.

 

UACC has four warehouse credit facilities with an aggregate borrowing limit of $825.0 million as of March 31, 2024. As of March 31, 2024, outstanding borrowings related to the Warehouse Credit Facilities were $516.3 million and excess borrowing capacity was $53.9 million. As of March 31, 2024, the Company was in compliance with all covenants related to the Warehouse Credit Facilities.

 

 

13


Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

Failure to satisfy these and or any other requirements contained within the agreements would restrict access to the Warehouse Credit Facilities and could have a material adverse effect on the financial condition of the Company, results of operations and liquidity. Certain breaches of covenants may also result in acceleration of the repayment of borrowings prior to the scheduled maturity. Refer to Note 9 – Warehouse Credit Facilities of Consolidated VIEs for further discussion.

 

The Company expects to use cash and cash equivalents to finance future capital requirements and UACC’s Warehouse Credit Facilities to fund finance receivables. Certain advance rates available to UACC on borrowings from the Warehouse Credit Facilities have decreased as a result of the increasing credit losses in UACC’s portfolio and overall rising interest rates. Any future decreases on available advance rates may have an adverse impact on our liquidity.

 

The Company’s future capital requirements will depend on many factors, including the ability to realize benefits of the Value Maximization Plan, available advance rates on the Warehouse Credit Facilities, our ability to complete additional securitization transactions at terms favorable to us, and our future credit losses.

The Company anticipates that existing cash and cash equivalents and UACC's Warehouse Credit Facilities will be sufficient to support the Company’s ongoing operations and obligations, inclusive of the Ecommerce Wind-Down, for at least the next twelve months from the date of issuance of the condensed consolidated financial statements.

 

Accounting Standards Adopted

 

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with Topic 606 as if the acquirer had originated the contracts. The Company adopted the guidance on January 1, 2023, which did not have a material impact on the Company's condensed consolidated financial statements and related disclosures.

 

Accounting Standards Issued But Not Yet Adopted

 

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis, primarily through enhanced disclosures of significant segment expenses. The guidance will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and requires retrospective application to all periods presented upon adoption, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its condensed consolidated financial statements and related disclosures.

 

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. The guidance will be effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its condensed consolidated financial statements and related disclosures.

 

3. Revenue Recognition

 

The Company’s revenue is disaggregated within the condensed consolidated statements of operations and is generated from consumers throughout the United States.

 

Interest Income

 

The Company’s interest income is related to finance receivables originated by UACC for its network of third-party dealership customers and vehicle financing UACC offered to Vroom’s customers through its ecommerce platform prior to the Ecommerce Wind-down. Interest income also includes discount income on finance receivables held for investment at fair value, which represents the amortization of unearned acquisition discounts over the contractual life of the underlying

 

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Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

finance receivables using the interest method. Interest income on each automotive finance receivables is calculated based on the finance receivable’s outstanding principal balance multiplied by the contractual interest rate.

 

An account is considered delinquent if a scheduled payment has not been received by the date such payment was contractually due. Interest income deemed uncollectible is reversed at the time the finance receivable is charged off. Finance receivables over 90 days delinquent are considered nonaccrual finance receivables. Income is subsequently recognized only to the extent cash payments are received until the borrower is able to make periodic interest and principal payments in accordance with the finance receivable terms.

 

Servicing Income

 

Servicing income represents the annual fees earned on the outstanding principal balance of the finance receivables serviced as well as late charges, collection payments, and other fees. Fees are earned monthly at an annual rate of approximately 4% for the 2022-1 securitization transaction and 3.25% for the 2022-2 and 2023-1 securitization transactions of the outstanding principal balance of the finance receivables serviced. Late charges and other fees are calculated at predetermined amounts or percentages of overdue finance receivable balances and are recorded on a cash basis. From January to March 2023, UACC waived the monthly servicing fees related to the 2022-2 securitization transaction, which resulted in consolidation of the 2022-2 VIE. Servicing fees related to the 2022-2 and 2023-1 securitization transactions are eliminated in consolidation. Refer to Note 4 – Variable Interest Entities and Securitizations.

 

Warranties and GAP income

 

Prior to the Ecommerce Wind-Down, the Company offered third-party financing and third-party value-added products such as vehicle service contracts, guaranteed asset protection (“GAP”) and tire and wheel coverage, to its used vehicle customers pursuant to arrangements with the third parties that sell and administered these products and are responsible for their fulfillment.

 

UACC also offers third-party vehicle service contracts and United Auto Credit GAP to consumers who obtain financing through UACC. United Auto Credit GAP is a debt waiver product that provides protection for consumers who purchase the product by waiving the difference between the actual cash value of the consumer’s vehicle and the balance of the consumer’s contract, subject to the terms and conditions of the United Auto Credit GAP, in the event of a total loss resulting from collision or theft. The total fees are earned over the contractual life of the related financial receivables on straight-line basis.

 

The Company concluded that it is an agent for any transactions with third-parties because it does not control the products before they are transferred to the consumer. The Company recognizes revenue on a net basis when the consumer enters into an arrangement for the products.

 

A portion of the fees earned on third-party financing and value-added products is subject to chargebacks in the event of early termination, default, or prepayment of the contracts by end-customers. The Company’s exposure for these events is limited to the fees that it receives. An estimated refund liability for chargebacks against the revenue recognized from sales of these products is recorded in the period in which the related revenue is recognized and is based primarily on the Company’s historical chargeback experience. The Company updates its estimates at each reporting date. As of March 31, 2024 and December 31, 2023, the Company’s reserve for chargebacks was $13.3 million and $11.8 million, respectively, which are included within “Other liabilities.”

 

The Company also is contractually entitled to receive profit-sharing revenues based on the performance of the vehicle service policies once a required claims period has passed. The Company recognizes profit-sharing revenues to the extent it is probable that it will not result in a significant revenue reversal. The Company estimates the revenue based on historical claims and cancellation data from its customers, as well as other qualitative assumptions. The Company reassesses the estimate at each reporting period with any changes reflected as an adjustment to warranties and GAP income in the period identified. As of March 31, 2024 and December 31, 2023, the Company recognized $10.4 million and $22.3 million, respectively, related to cumulative profit-sharing payments to which it expects to be entitled, which are included within “Other assets."

 

 

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Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

CarStory Revenue

 

CarStory generates advertiser, publisher and other user service revenue. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been performed, collection of the fees is reasonably assured, the fees are fixed or determinable, and no significant obligations by the Company remain. Generally, this results in revenues billed and recorded monthly in the month that services were performed and earned.

 

Deferred revenue includes advances received from customers in excess of revenue recognized.

 

The Company may collect sales taxes and other taxes and government fees from customers on behalf of governmental authorities at the time of sale as required. These taxes are accounted for on a net basis and are not included in revenues or cost of sales.

 

4. Variable Interest Entities and Securitizations

 

A VIE is an entity that either (i) has insufficient equity to finance its activities without additional subordinated financial support, or (ii) has equity investors who lack the characteristics of a controlling financial interest. The Company consolidates VIEs for which it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. Assets recognized as a result of consolidating VIEs do not represent additional assets that could be used to satisfy claims against the Company's general assets. Liabilities recognized as a result of consolidating VIEs do not represent additional claims on the Company's general assets, rather they represent claims against the specific assets of the consolidated VIEs.

 

UACC has the power to direct significant activities of its VIEs when it has the ability to exercise discretion in the servicing of financial assets or control investment decisions. UACC generally retains a portion of the economic interests in UACC-sponsored asset-backed securitization transactions, which could be retained in the form of a portion of the senior interests, the subordinated interests, residual interests, or servicing rights.

 

UACC has developed a securitization program that involves selling finance receivables to securitization trusts through the private issuance of asset-backed securities which are collateralized by the finance receivables. UACC establishes and sponsors these transactions which create and pass along risks to the variable interest holders, specifically, consumer credit risk and pre-payment risk. In January 2023, UACC completed the 2023-1 securitization transaction.

 

The securitization trusts established in connection with asset-backed securitization transactions are VIEs. For each VIE that UACC establishes in its role as sponsor of securitization transactions, the Company performs an analysis to determine if it is the primary beneficiary of the VIE.

 

UACC has no obligation to repurchase or replace any securitized asset that subsequently becomes delinquent in payment or otherwise is in default, except when representations and warranties about the eligibility of the securitized assets are breached, or when certain changes are made to the underlying asset contracts. Securitization investors have no recourse to UACC or its other assets and have no right to require UACC to repurchase the investments. UACC has no obligation to provide liquidity or contribute cash or additional assets to the VIEs and does not guarantee any asset-backed securities.

 

In 2023, UACC completed the 2023-1 securitization transaction, in which it sold rated asset-backed non-investment grade securities, for proceeds of $260.9 million. UACC still retains the residual interests related to the 2023-1 securitization transaction. The trust is collateralized by finance receivables with an aggregate principal balance of $326.4 million. These finance receivables are serviced by UACC. The Company consolidated the 2023-1 VIE and accounted for this transaction as a secured borrowing. UACC retained the servicing rights to these finance receivables and receives an "at market" servicing fee.

 

UACC is the primary beneficiary of the 2023-1 securitization trusts, as it has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive

 

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Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

benefits from the entity that could potentially be significant to the VIE. UACC also retained a portion of the economic interests in the 2023-1 asset-backed securitization transactions, in the form of residual interests in accordance with Regulation RR of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Risk Retention Rules"). The Risk Retention Rules require the Company to retain at least 5% of the beneficial interests issued by the securitization trusts. Refer to Note 10 – Long Term Debt for further details.

 

In July 2022, UACC sold a pool of finance receivables in the 2022-2 securitization transaction. UACC retained the servicing rights to these finance receivables and receives an "at market" servicing fee. UACC retained an insignificant amount of the asset-backed securities issued in the securitization in order to comply with Risk Retention Rules. Originally, the Company concluded that it is not the primary beneficiary of the 2022-2 securitization trust because UACC retained interests in the VIE are insignificant. Therefore, the Company did not originally consolidate the 2022-2 trust. From January to March 2023, although not contractually required, UACC elected to waive its servicing fee on the 2022-2 securitization, due to higher-than-expected losses, which transferred more than an insignificant portion of the corresponding risk of loss from the VIE to the Company. Since UACC has the power to direct the significant activities of the VIE, as it is the servicer, and additionally it absorbs the risk of loss, the Company concluded that it is the primary beneficiary of the VIE. In March 2023, the Company accounted for the transaction as secured borrowings and consolidated the 2022-2 securitization trust. The beneficial interest was then eliminated.

 

The VIE model allows for a measurement alternative when a reporting entity elects the fair value option and consolidates a collateralized financing entity (“CFE”). This measurement alternative eliminates the accounting mismatch that may arise from measurement differences between the CFE’s financial assets and third-party financial liabilities in earnings and attributes those earnings to the controlling equity interest in the consolidated income statement. The 2022-2 and 2023-1 securitization trusts consolidated by UACC meet the definition of a CFE, therefore, the Company has elected to apply the measurement alternative when consolidating these VIEs. Refer to Note 14 – Financial Instruments and Fair Value Measurements for further detail.

 

UACC has four senior secured warehouse credit facilities. Through trusts, UACC entered into warehouse facility agreements with certain banking institutions, primarily to finance the purchase and origination of finance receivables as well as to provide funding for general operating activities. These trusts are secured by eligible finance receivables which are pledged as collateral for the warehouse facilities. These trusts are consolidated VIEs. Refer to Note 9 – Warehouse Credit Facilities of Consolidated VIEs for further details on the warehouse facilities.

 

 

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

Creditors or beneficial interest holders of VIEs for which the Company is the primary beneficiary generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to the Company. The following table presents the total assets and total liabilities associated with the Company's variable interests in consolidated VIEs, as classified in the condensed consolidated balance sheets (in thousands):

 

 

 

As of March 31, 2024

 

 

 

Securitization Vehicles

 

 

Warehouse
Facilities
1

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Restricted cash

 

$

21,581

 

 

$

26,522

 

 

$

48,103

 

Finance receivables at fair value

 

 

239,978

 

 

 

141,360

 

 

 

381,338

 

Finance receivables held for sale

 

 

 

 

 

450,006

 

 

 

450,006

 

Interest receivable

 

 

4,344

 

 

 

9,064

 

 

 

13,408

 

Other assets

 

 

4,411

 

 

 

6,985

 

 

 

11,396

 

Total Assets

 

$

270,314

 

 

$

633,937

 

 

$

904,251

 

Liabilities:

 

 

 

 

 

 

 

 

 

Securitization debt

 

$

237,899

 

 

$

 

 

$

237,899

 

Warehouse credit facilities

 

 

 

 

 

516,276

 

 

 

516,276

 

Other liabilities

 

 

3,334

 

 

 

12,713

 

 

 

16,047

 

Total Liabilities

 

$

241,233

 

 

$

528,989

 

 

$

770,222

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2023

 

 

 

Securitization Vehicles

 

 

Warehouse
Facilities
1

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Restricted cash

 

$

28,458

 

 

$

20,688

 

 

$

49,146

 

Finance receivables at fair value

 

 

316,998

 

 

 

24,446

 

 

 

341,444

 

Finance receivables held for sale

 

 

 

 

 

457,185

 

 

 

457,185

 

Interest receivable

 

 

6,107

 

 

 

7,586

 

 

 

13,693

 

Other assets

 

 

6,283

 

 

 

6,987

 

 

 

13,270

 

Total Assets

 

$

357,846

 

 

$

516,892

 

 

$

874,738

 

Liabilities:

 

 

 

 

 

 

 

 

 

Securitization debt

 

$

314,095

 

 

$

 

 

$

314,095

 

Warehouse credit facilities

 

 

 

 

 

421,268

 

 

 

421,268

 

Other liabilities

 

 

4,534

 

 

 

9,801

 

 

 

14,335

 

Total Liabilities

 

$

318,629

 

 

$

431,069

 

 

$

749,698

 

 

1 Refer to Note 9 – Warehouse Credit Facilities of Consolidated VIEs for further details of the warehouse facilities.

 

UACC establishes securitization trusts to purchase finance receivables. The securitization trusts issue asset-backed securities, which are collateralized by the finance receivables that UACC sells to the securitization trusts. Upon sale of the finance receivables to the securitization trusts, the Company recognizes a gain or loss on sales of finance receivables if it determines it qualifies for sale accounting treatment and it is not the primary beneficiary of the VIE or accounts for these securitization transactions as secured financing when it is the primary beneficiary.

 

In February 2022, UACC sold a pool of finance receivables in the 2022-1 securitization transaction. UACC retained the servicing rights to these finance receivables and receives an "at market" servicing fee. UACC retained an insignificant amount of the asset-backed securities issued in the securitization in order to comply with Risk Retention Rules. The 2022-1 securitization trust is a VIE that the Company does not consolidate. As the servicer, UACC retained the power to direct the activities that are most significant to the entities, however, the Company concluded that it is not the primary beneficiary of the 2022-1 securitization trust because UACC retained interests in the VIE are insignificant. The beneficial interest retained by UACC included rated notes and unrated residual certificates issued by the 2022-1 securitization trust.

 

 

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

As of March 31, 2024 and December 31, 2023, the assets UACC retains in the unconsolidated VIEs were approximately $3.7 million and $4.5 million, respectively, and are included in "Other assets" in the Company's consolidated balance sheet. The beneficial interests in securitizations are subject to restrictions on transfer pursuant to UACC’s obligations as a sponsor under Risk Retention Rules. These securities are interests in securitization trusts, thus there are no contractual maturities. During the three months ended March 31, 2023, the Company entered into a Risk Retention Financing Facility to finance the majority of its retained beneficial interests in securitizations. Refer to Note 10 – Long Term Debt for further detail.

 

The following table summarizes the amortized cost, the carrying amount, which is the fair value, and the maximum exposure to losses of UACC's assets related to unconsolidated VIEs (in thousands):

 

 

 

As of March 31, 2024

 

 

As of December 31, 2023

 

 

 

Aggregate Principal Balance

 

 

Carrying Value

 

 

Total Exposure

 

 

Aggregate Principal Balance

 

 

Carrying Value

 

 

Total Exposure

 

Rated notes

 

$

3,766

 

 

$

3,545

 

 

$

3,545

 

 

$

4,538

 

 

$

4,345

 

 

$

4,345

 

Certificates

 

 

 

 

 

177

 

 

 

177

 

 

 

 

 

 

140

 

 

 

140

 

Other assets

 

 

310

 

 

 

310

 

 

 

310

 

 

 

310

 

 

 

310

 

 

 

310

 

Total unconsolidated VIEs

 

$

4,076

 

 

$

4,032

 

 

$

4,032

 

 

$

4,848

 

 

$

4,795

 

 

$

4,795

 

 

Total exposure represents the estimated loss UACC would incur under severe, hypothetical circumstances, such as if the value of the interests in the securitization trusts and any associated collateral declined to zero. The Company believes the possibility of this is remote. As such, the total exposure presented above is not an indication of the Company's expected losses.

 

5. Discontinued Operations

 

As discussed in Note 1 – Description of Business and Basis of Presentation, the Ecommerce Wind-Down was substantially completed as of March 29, 2024. The Company's ecommerce operations were previously a reportable segment and the exit represents a strategic shift that had a major effect on the Company's operations and financial results. Therefore, in accordance with ASC 205, as of and for the three months ended March 31, 2024, the Company reported the ecommerce operations and used vehicle dealership business as discontinued operations and recast prior periods to reflect this presentation.

 

During the three months ended March 31, 2024, the Company incurred charges of approximately $14.7 million for severance and other personnel-related costs and approximately $11.9 million for contract and lease termination costs as a result of the Ecommerce Wind-Down recorded in "Net loss from discontinued operations" in the consolidated statements of operations.

 

 

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Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

The following table summarizes the major income and expense line items from discontinued operations as reported in the condensed consolidated statements of operations (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Revenue:

 

 

 

 

 

 

Retail vehicle, net

 

$

47,320

 

 

$

135,387

 

Wholesale vehicle

 

 

140,127

 

 

 

13,895

 

Product, net

 

 

1,635

 

 

 

4,158

 

Total revenue

 

 

189,082

 

 

 

153,440

 

Cost of sales:

 

 

 

 

 

 

Retail vehicle

 

 

43,673

 

 

 

135,724

 

Wholesale vehicle