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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 September 30, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39315

 

VROOM, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

90-1112566

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

3600 W Sam Houston Pkwy S, Floor 4

Houston, Texas 77042

(Address of principal executive offices) (Zip code)

 

(518) 535-9125

(Registrant's telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value

 

VRM

 

Nasdaq Global Select

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

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

 

 


Table of Contents

TABLE OF CONTENTS

 

 

 

 

 

 

 

Page

 

Part I - Financial Information

6

Item 1.

Financial Statements

6

 

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited)

6

 

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

7

 

Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

8

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (unaudited)

9

 

Notes to Condensed Consolidated Financial Statements (unaudited)

11

Item 2.

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

44

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

78

Item 4.

Controls and Procedures

78

 

Part II - Other Information

79

Item 1.

Legal Proceedings

79

Item 1A.

Risk Factors

81

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

118

Item 3.

Defaults Upon Senior Securities

118

Item 4.

Mine Safety Disclosures

119

Item 5.

Other Information

119

Item 6.

Exhibits

120

 

Signatures

122

 

2


Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding 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.

 

3


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SUMMARY RISK FACTORS

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

we may not successfully complete the execution of or achieve the expected benefits of our previously announced Realignment Plan and other cost saving measures we may take in the future, and our efforts may result in further actions and may adversely affect our business, financial condition and results of operations;
despite the cost saving measures, reduced growth rates and increased focus on liquidity and profitability contemplated by the Realignment Plan, we may need to raise additional capital through debt or equity financings to achieve our business objectives and there can be no assurance that such financings will be available in amounts or on terms acceptable to us, if at all;
the impact of the COVID-19 pandemic;
general business and economic conditions and risks related to the larger automotive ecosystem, including consumer demand;
we have a history of losses and we may not achieve or maintain profitability in the future;
we may not be able to generate sufficient revenue to generate positive cash flow on a sustained basis;
our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our debt obligations;
we have a limited operating history and are still building out our foundational systems;
our recent, rapid growth is not indicative of our near term growth under our Realignment Plan and, when we return to rapid growth, we may not be able to manage our growth effectively;
we may be unable to successfully integrate the United Auto Credit Corporation ("UACC") business into our business and develop UACC into a captive lending operation for Vroom, or realize the anticipated benefits of the UACC Acquisition or those benefits could take longer than anticipated;
UACC's ability to sell automotive finance receivables and generate gains on sales of these finance receivables may decline in the future; any material reduction could harm our business, results of operations, and financial condition;
we rely on third-party vendors for key components of our business, which exposes us to increased risks;
we have entered into outsourcing arrangements with third parties related to our customer experience team, and difficulties experienced in these arrangements have and could continue to result in an interruption of our ability to sell our vehicles and value-added products;
our business, sales and results of operations are materially affected by our customer experience, our reputation and our brand;

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we face a variety of risks associated with the operation of our vehicle reconditioning centers by us and our third-party service providers, any of which could materially and adversely affect our business, financial condition and results of operations;
we currently rely heavily on third-party carriers to transport our vehicle inventory throughout the United States. Thus, we are subject to business risks and costs associated with such carriers and with the transportation industry, many of which are out of our control;
we are optimizing our proprietary logistics operations, including vehicle pick-ups and delivery from our last mile hubs and line haul transportation of vehicles between our last mile hubs, which will further expose us to increased risks related to ownership of infrastructure and the transportation of vehicles;
the current geographic concentration where we provide reconditioning services and store inventory and where UACC has a high concentration of borrowers creates an exposure to local and regional downturns or severe weather or catastrophic occurrences that may materially and adversely affect our business, financial condition and results of operations;
if we or our third-party providers sustain cyber-attacks or other privacy or data security incidents that result in security breaches, we could suffer a loss of sales and increased costs, exposure to significant liability, reputational harm and other negative consequences;
we operate in a highly regulated industry and are subject to a wide range of federal, state and local laws and regulations and failure to comply with these laws and regulations could have a material adverse effect on our business, financial condition and results of operations;
we are, and may in the future be, subject to legal proceedings in the ordinary course of our business. If the outcomes of these proceedings are adverse to us, it could have a material adverse effect on our business, financial condition and results of operations; and
our actual operating results may differ significantly from our guidance.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

VROOM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

As of

 

 

As of

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

509,660

 

 

$

1,132,325

 

Restricted cash (including restricted cash of consolidated VIEs of $19.5 million and $0 million, respectively)

 

 

94,305

 

 

 

82,450

 

Accounts receivable, net of allowance of $26.7 million and $8.9 million, respectively

 

 

23,733

 

 

 

105,433

 

Finance receivables at fair value (including finance receivables of consolidated VIEs of $10.9 million and $0 million, respectively)

 

 

13,644

 

 

 

 

Finance receivables held for sale, net (including finance receivables of consolidated VIEs of $137.1 million and $0 million, respectively)

 

 

210,729

 

 

 

 

Inventory

 

 

437,828

 

 

 

726,384

 

Beneficial interests in securitizations

 

 

23,984

 

 

 

 

Prepaid expenses and other current assets

 

 

58,576

 

 

 

55,700

 

Total current assets

 

 

1,372,459

 

 

 

2,102,292

 

Finance receivables at fair value (including finance receivables of consolidated VIEs of $135.8 million and $0 million, respectively)

 

 

166,382

 

 

 

 

Property and equipment, net

 

 

50,520

 

 

 

37,042

 

Intangible assets, net

 

 

165,668

 

 

 

28,207

 

Goodwill

 

 

 

 

 

158,817

 

Operating lease right-of-use assets

 

 

24,392

 

 

 

15,359

 

Other assets

 

 

29,539

 

 

 

25,033

 

Total assets

 

$

1,808,960

 

 

$

2,366,750

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

36,800

 

 

$

52,651

 

Accrued expenses

 

 

103,903

 

 

 

121,508

 

Vehicle floorplan

 

 

345,272

 

 

 

512,801

 

Warehouse credit facilities of consolidated VIEs

 

 

135,453

 

 

 

 

Current portion of securitization debt of consolidated VIEs at fair value

 

 

54,652

 

 

 

 

Deferred revenue

 

 

16,313

 

 

 

75,803

 

Operating lease liabilities, current

 

 

8,268

 

 

 

6,889

 

Other current liabilities

 

 

19,061

 

 

 

57,604

 

Total current liabilities

 

 

719,722

 

 

 

827,256

 

Long term debt, net of current portion (including securitization debt of consolidated VIEs of $40.8 million and $0 million at fair value, respectively)

 

 

607,790

 

 

 

610,618

 

Operating lease liabilities, excluding current portion

 

 

20,620

 

 

 

9,592

 

Other long-term liabilities

 

 

15,696

 

 

 

4,090

 

Total liabilities

 

 

1,363,828

 

 

 

1,451,556

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock, $0.001 par value; 500,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 138,154,063 and 137,092,891 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

 

135

 

 

 

135

 

Additional paid-in-capital

 

 

2,070,454

 

 

 

2,063,841

 

Accumulated deficit

 

 

(1,625,457

)

 

 

(1,148,782

)

Total stockholders’ equity

 

 

445,132

 

 

 

915,194

 

Total liabilities and stockholders’ equity

 

$

1,808,960

 

 

$

2,366,750

 

 

See accompanying notes to these unaudited condensed consolidated financial statements.

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VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Retail vehicle, net

 

$

234,353

 

 

$

735,716

 

 

$

1,283,263

 

 

$

1,798,155

 

Wholesale vehicle

 

 

47,604

 

 

 

131,306

 

 

 

270,489

 

 

 

377,438

 

Product, net

 

 

13,181

 

 

 

26,544

 

 

 

51,954

 

 

 

64,422

 

Finance

 

 

40,654

 

 

 

 

 

 

120,005

 

 

 

 

Other

 

 

5,005

 

 

 

3,190

 

 

 

13,841

 

 

 

9,749

 

Total revenue

 

 

340,797

 

 

 

896,756

 

 

 

1,739,552

 

 

 

2,249,764

 

Cost of sales:

 

 

 

 

 

 

 

 

 

 

 

 

Retail vehicle

 

 

218,726

 

 

 

708,071

 

 

 

1,234,138

 

 

 

1,720,974

 

Wholesale vehicle

 

 

49,178

 

 

 

129,203

 

 

 

276,749

 

 

 

367,101

 

Finance

 

 

4,699

 

 

 

 

 

 

10,368

 

 

 

 

Other

 

 

863

 

 

 

1,393

 

 

 

2,969

 

 

 

4,296

 

Total cost of sales

 

 

273,466

 

 

 

838,667

 

 

 

1,524,224

 

 

 

2,092,371

 

Total gross profit

 

 

67,331

 

 

 

58,089

 

 

 

215,328

 

 

 

157,393

 

Selling, general and administrative expenses

 

 

134,643

 

 

 

148,718

 

 

 

475,627

 

 

 

381,482

 

Depreciation and amortization

 

 

9,833

 

 

 

3,376

 

 

 

27,728

 

 

 

9,276

 

Impairment charges

 

 

1,017

 

 

 

 

 

 

206,127

 

 

 

 

Loss from operations

 

 

(78,162

)

 

 

(94,005

)

 

 

(494,154

)

 

 

(233,365

)

Gain on debt extinguishment

 

 

(37,917

)

 

 

 

 

 

(37,917

)

 

 

 

Interest expense

 

 

9,704

 

 

 

7,028

 

 

 

28,617

 

 

 

14,720

 

Interest income

 

 

(5,104

)

 

 

(2,930

)

 

 

(12,991

)

 

 

(7,288

)

Other loss (income), net

 

 

5,383

 

 

 

(10

)

 

 

26,897

 

 

 

(58

)

Loss before provision for income taxes

 

 

(50,228

)

 

 

(98,093

)

 

 

(498,760

)

 

 

(240,739

)

Provision (benefit) for income taxes

 

 

899

 

 

 

29

 

 

 

(22,085

)

 

 

379

 

Net loss

 

$

(51,127

)

 

$

(98,122

)

 

$

(476,675

)

 

$

(241,118

)

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

 

$

(0.37

)

 

$

(0.72

)

 

$

(3.46

)

 

$

(1.77

)

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

 

 

138,118,679

 

 

 

136,766,015

 

 

 

137,817,839

 

 

 

136,256,901

 

 

See accompanying notes to these unaudited condensed consolidated financial statements.

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VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

 

134,043,969

 

 

$

132

 

 

$

2,004,841

 

 

$

(777,871

)

 

$

1,227,102

 

Issuance of common stock for acquisition of business

 

 

1,072,117

 

 

$

1

 

 

$

39,029

 

 

$

 

 

$

39,030

 

Fair value of unvested stock options assumed in acquisition of business

 

 

 

 

 

 

 

 

1,017

 

 

 

 

 

 

1,017

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,820

 

 

 

 

 

 

2,820

 

Exercise of stock options

 

 

687,336

 

 

 

1

 

 

 

2,820

 

 

 

 

 

 

2,821

 

Vesting of restricted stock units

 

 

499,879

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(77,189

)

 

 

(77,189

)

Balance at March 31, 2021

 

 

136,303,301

 

 

$

134

 

 

$

2,050,527

 

 

$

(855,060

)

 

$

1,195,601

 

Stock-based compensation

 

 

 

 

$

 

 

$

5,392

 

 

$

 

 

$

5,392

 

Exercise of stock options

 

 

395,491

 

 

 

 

 

 

1,560

 

 

 

 

 

 

1,560

 

Vesting of restricted stock units

 

 

18,555

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(65,807

)

 

 

(65,807

)

Balance at June 30, 2021

 

 

136,717,347

 

 

$

134

 

 

$

2,057,479

 

 

$

(920,867

)

 

$

1,136,746

 

Stock-based compensation

 

 

 

 

$

 

 

$

1,542

 

 

$

 

 

$

1,542

 

Exercise of stock options

 

 

164,631

 

 

 

1

 

 

 

703

 

 

 

 

 

$

704

 

Vesting of restricted stock units

 

 

21,649

 

 

 

 

 

 

 

 

 

 

 

$

 

Common stock shares cancelled to satisfy working capital adjustment related to the CarStory acquisition

 

 

(5,673

)

 

 

 

 

 

(219

)

 

 

 

 

$

(219

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(98,122

)

 

$

(98,122

)

Balance at September 30, 2021

 

 

136,897,954

 

 

$

135

 

 

$

2,059,505

 

 

$

(1,018,989

)

 

$

1,040,651

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

137,092,891

 

 

$

135

 

 

$

2,063,841

 

 

$

(1,148,782

)

 

$

915,194

 

Stock-based compensation

 

 

 

 

$

 

 

$

3,629

 

 

$

 

 

$

3,629

 

Vesting of restricted stock units

 

 

602,630

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(310,459

)

 

 

(310,459

)

Balance at March 31, 2022

 

 

137,695,521

 

 

$

135

 

 

$

2,067,470

 

 

$

(1,459,241

)

 

$

608,364

 

Stock-based compensation

 

 

 

 

$

 

 

$

1,776

 

 

$

 

 

$

1,776

 

Vesting of restricted stock units

 

 

50,516