VRM

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2026, for Vroom, Inc. (VRM). The Company operates as a holding company with two primary reportable segments: UACC (United Auto Credit Corporation), a non-prime automotive finance company, and CarStory, an AI-powered analytics and digital services platform. The Company emerged from a Prepackaged Chapter 11 Case on January 14, 2025, adopting fresh start accounting. Consequently, financial results prior to this date are classified as "Predecessor" and are not directly comparable to the "Successor" periods presented in this filing. The Company has substantially completed the wind-down of its former e-commerce used vehicle dealership business, which is now reported as discontinued operations.

Key Financial Metrics

Note: YTD 2025 figures in the table represent the "Successor" period (Jan 15 - June 30, 2025) for direct comparability with 2026, unless noted as "Combined" which includes the Predecessor period (Jan 1 - Jan 14, 2025) as presented in management's discussion.

Material Changes vs. Prior Period

• Profitability Improvement: The Company reported a net income of $0.6 million from continuing operations for Q2 2026, a significant improvement from a net loss of $8.9 million in Q2 2025. This was primarily driven by a 48.6% reduction in realized and unrealized losses on finance receivables.
• Credit Losses: Realized and unrealized losses decreased to $10.7 million in Q2 2026 from $20.9 million in Q2 2025. Management attributes this to improved credit performance in vintages underwritten since September 2025 using a redeveloped custom credit-scoring model.
• Revenue Decline: CarStory revenue declined 29.7% year-over-year to $1.3 million, attributed to the loss of a major customer and changes in service scope. UACC interest income decreased 4.7% due to a smaller loan portfolio balance ($807.7 million vs. $849.0 million).
• Expense Management: Total expenses decreased 5.5% year-over-year. Compensation and benefits dropped 11.1% due to reduced headcount, while software and IT costs increased 5.1% due to subscription fees.
• Capital Structure: In May 2026, the Company entered into an Exchange Agreement to issue up to $50.0 million in 2032 Notes, exchanging $28.5 million of existing debt. Additionally, $22.5 million was raised through the issuance of Vroom Automotive Preferred Units in January 2026.

Guidance, Outlook, and Risks

• Strategic Plan: Management is executing a "Long-Term Strategic Plan" focused on four initiatives: building a world-class lending program (using AI underwriting), optimizing the dealer network, enhancing operational excellence in originations, and improving servicing effectiveness via digital tools.
• Liquidity Position: As of June 30, 2026, the Company has $16.4 million in cash and $58.9 million in restricted cash. It maintains $10.5 million in excess borrowing capacity under Warehouse Credit Facilities, $10.0 million under the 2032 Notes, and $27.0 million under a Delayed Draw Facility. Management believes these resources are sufficient for the next 12 months.
• Key Risks:
  • Credit Quality: UACC operates in the non-prime market, which is sensitive to macroeconomic factors. The Company notes increasing credit losses in certain receivables and the risk that credit scoring systems may not effectively forecast loss rates.
  • Liquidity and Financing: The business relies heavily on Warehouse Credit Facilities and securitization markets. Failure to renew these facilities or access capital markets could materially adversely affect operations. Two of the three warehouse facilities expire in August 2026 and April 2027.
  • Macroeconomic Factors: Inflation, interest rates, vehicle depreciation, and geopolitical conflicts (specifically citing the conflict in the Middle East) pose risks to consumer demand and borrowing costs.
  • Regulatory and Legal: The Company faces ongoing regulatory inquiries and potential fines, as well as routine litigation.

Investor Verification Checklist

• Warehouse Facility Renewals: Verify the status of renewals for the two Warehouse Credit Facilities expiring in August 2026 and April 2027, as failure to renew could restrict lending operations.
• Credit Loss Trends: Monitor the "Realized and unrealized losses" line item closely to confirm if the improvement in Q2 2026 is sustainable or if macroeconomic pressures are causing a rebound in losses.
• CarStory Customer Concentration: Assess the impact of the lost major customer on CarStory's future revenue trajectory and the success of efforts to replace that revenue.
• Preferred Unit Obligations: Review the terms of the $22.5 million Vroom Automotive Preferred Units, specifically the variable distribution rates (SOFR + spread) and redemption dates, to understand future cash flow obligations.
• Going Concern Assessment: While management asserts sufficiency of funds for 12 months, investors should monitor cash burn rates and the ability to execute securitization transactions in a constrained market.