Vroom, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; the supplied text does not provide a clear standalone fourth-quarter income statement. Comparisons below are FY2021 versus FY2020.
Business context
Vroom operates an online used-vehicle retail platform, wholesale vehicle business and Texas Direct Auto (TDA) dealership. It also earns fees on financing and protection products. Ecommerce was the primary growth engine, accounting for 76.7% of FY2021 revenue. The CarStory acquisition closed in January 2021. The United Auto Credit Corporation (UACC) acquisition closed on February 1, 2022, after year-end, and therefore is not included in FY2021 results.
Financial and operating performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $3,184.3 million | $1,357.7 million |
| Gross profit / gross margin | $202.1 million / 6.3% | $71.5 million / 5.3% |
| Operating loss | $358.6 million | $178.6 million |
| Net loss | $370.9 million | $202.8 million |
| Adjusted EBITDA (non-GAAP) | $(340.2) million | $(170.5) million |
| Cash used in operating activities | $568.7 million | $355.3 million |
- Revenue increased 134.5%; cost of sales rose 131.9%, while SG&A increased 123.1% to $547.8 million. Operating losses widened despite higher gross profit.
- Ecommerce revenue rose 166.8% to $2,442.4 million. Ecommerce units sold increased 116.6% to 74,698; total gross profit per ecommerce unit rose 25.0% to $2,206. Average days to sale increased from 66 to 74.
- Wholesale gross profit improved to $18.1 million from a $1.4 million loss. TDA units sold declined 2.3% to 7,212.
- FY2021 investing cash outflow was $104.3 million, including $75.9 million net cash for CarStory. Financing cash inflow was $797.7 million, including $608.9 million net proceeds from convertible notes.
- At year-end, cash and cash equivalents were $1,132.3 million; restricted cash was $82.5 million. Inventory was $726.4 million, up from $423.6 million.
- Debt included $512.8 million of vehicle floorplan borrowings and $625.0 million principal amount of 0.75% convertible notes due 2026 (carrying value $610.6 million). The filing also cites approximately $1,123.4 million of consolidated indebtedness; this differs from the sum of those stated principal balances.
Material changes and unusual items
- FY2021 used-vehicle supply constraints and strong demand—partly tied to new-car production delays and the semiconductor shortage—supported higher used-vehicle prices and average selling prices. Ecommerce average selling price increased 23.2% to $31,599.
- Higher ecommerce unit gross profit reflected stronger retail pricing, more consumer-sourced vehicles and reconditioning improvements; late-year depreciation on premium inventory and higher reconditioning costs partly offset gains.
- SG&A growth reflected increased staffing and sales support, marketing, and outbound logistics. Marketing expense was $125.5 million versus $62.4 million; outbound logistics expense was $85.8 million versus $30.3 million.
- CarStory was acquired for approximately $116.6 million in total consideration, including cash, stock and assumed options. No goodwill impairment was recorded; the Ecommerce reporting unit’s estimated fair value exceeded carrying value by 50% in the year-end interim test.
- In February 2022, Vroom acquired UACC for approximately $300 million and reported a subsequent off-balance-sheet securitization of approximately $318.5 million principal balance of auto loans. Acquisition accounting was incomplete when the 10-K was filed.
Outlook, risks and contingencies
- Management said existing cash and the vehicle floorplan facility were expected to support working capital and capital spending for at least 12 months from the filing date. No clear numeric FY2022 revenue or earnings guidance is provided in the supplied text.
- Management expects continued investment and higher expenses for UACC integration, marketing, technology, reconditioning and proprietary logistics. It expects efficiency and unit-economics improvements over time, but cautions that results depend on execution and market conditions.
- The vehicle floorplan facility was amended in February 2022 to extend maturity to March 31, 2023. It is variable-rate; management expected higher interest expense in 2022 as rates rose. Year-end unused capacity was approximately $187.2 million.
- Adesa U.S., a major third-party reconditioning provider that also hosted some last-mile hubs, announced it would discontinue reconditioning services following a change of control. Vroom must replace capacity and relocate affected hubs; labor shortages and partner constraints were already affecting throughput and costs.
- Rapid growth outpaced operations, creating customer-service backlogs and delays in transaction processing, titling and registration. The company reported increased customer complaints and related regulatory inquiries in the preceding six months.
- Other material risks include continued losses and cash burn, inventory pricing and depreciation, carrier and reconditioning dependence, competition, COVID-19 disruption, regulatory and data-security exposure, and UACC integration, credit-loss and securitization risks.
- Consolidated securities and shareholder derivative lawsuits were pending. Vroom said it believed the claims were without merit and did not expect potential liability to materially affect results, but outcomes are uncertain.
- The independent auditor gave unqualified opinions on the financial statements and internal control over financial reporting. Previously reported material weaknesses were described as remediated.
Investor facts to verify
- Whether revenue growth translates into better operating leverage and lower losses, given FY2021 operating cash burn of $568.7 million.
- Current cash, restricted cash, floorplan availability, covenant compliance and financing terms after the February 2022 UACC acquisition and facility amendment.
- Progress replacing Adesa reconditioning capacity and relocating hubs, and the resulting effects on throughput, delivery times and per-unit costs.
- Trends in ecommerce gross profit per unit, days to sale, returns, inventory valuation and customer complaints, especially as used-vehicle prices normalize.
- UACC integration results, loan-sale and securitization economics, retained credit exposure, and the final purchase accounting and goodwill amounts.
- Status and potential financial impact of the securities and derivative litigation and regulatory inquiries.