Vroom, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. Comparisons are with Q1 2021. Vroom acquired UACC on February 1, 2022, so reported results include only two months of UACC and are not directly comparable with the prior year.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change / context |
|---|---|---|---|
| Total revenue | $923.8 million | $591.1 million | Up 56.3% |
| Gross profit / gross margin | $81.6 million / 8.8% | $36.2 million / 6.1% | Gross profit up 125.7%; margin improved, partly reflecting UACC finance revenue |
| SG&A | $188.0 million | $109.1 million | Up 72.3% |
| Goodwill impairment | $201.7 million | None | Wrote off all goodwill following declines in Vroom’s and comparable companies’ stock prices |
| Operating loss | $315.9 million | $75.5 million | Loss increased materially, primarily due to impairment and higher expenses |
| Net loss / diluted loss per share | $310.5 million / $2.26 | $77.2 million / $0.57 | Net loss increased; non-GAAP net loss was $97.5 million, or $0.71 per share |
| Operating cash flow | Used $15.1 million | Provided $29.6 million | Turned negative |
| Cash, cash equivalents and restricted cash | $797.5 million | $966.8 million at March 31, 2021 | Cash and equivalents alone were $600.7 million, down from $1.132 billion at December 31, 2021 |
Retail vehicle revenue rose 55.7% to $707.2 million; wholesale revenue rose 18.6% to $140.0 million; product revenue rose 57.0% to $24.4 million. Finance revenue was $47.7 million, principally from UACC. The February 2022 UACC securitization generated a $29.6 million gain on sale. Ecommerce units sold rose 25.6% to 19,473, but ecommerce gross profit per unit fell 14.2% to $1,763: vehicle gross profit per unit declined 48.3% to $595, partly offset by product gross profit per unit rising 29.3% to $1,168. Wholesale recorded a $2.8 million gross loss.
Balance sheet, debt and liquidity
At March 31, 2022, total assets were $2.339 billion and stockholders’ equity was $608.4 million, down from $915.2 million at year-end 2021. Total liabilities were $1.730 billion. Debt carrying value was $826.4 million, excluding the $569.9 million vehicle floorplan borrowing. Debt included $611.4 million net carrying value of 0.75% convertible notes due 2026 and $204.6 million of securitization debt; UACC also had $10.3 million of junior subordinated debentures. The floorplan facility had a $700 million commitment, approximately $130.1 million unused capacity, and a March 2023 maturity. Vroom reported compliance with applicable floorplan and warehouse facility covenants.
Management stated that cash and equivalents and the floorplan facility were expected to cover working capital and capital expenditure needs for at least 12 months from the filing date. However, management warned that further financing might be needed if revenue, cost reductions or cash generation fall short; future financing may not be available on acceptable terms. Q1 cash and restricted cash declined $417.2 million. Investing cash use was $212.0 million, including the UACC acquisition, and financing cash use was $190.2 million.
Material changes and management commentary
- UACC acquisition consideration was approximately $316.1 million. Management expects the business to support captive financing, broaden lending across credit profiles and improve unit economics, but integration and benefits remain uncertain.
- On May 5, after quarter-end, the board approved a realignment plan: reduce the pace of unit sales, target higher-return marketing, cut approximately 270 positions (about 14% of the workforce), regionalize operations, close specified offices and Texas vehicle-purchase centers, streamline TDA and automate sales operations. Management expects $135–$165 million of cost reductions and operating improvements for the remainder of 2022 versus a Q1 annualized baseline. Estimated charges include $4 million cash severance-related costs and $7 million of lease impairment charges. These are estimates and may not be achieved.
- On May 9, Thomas H. Shortt became CEO, succeeding Paul J. Hennessy; Robert J. Mylod, Jr. became Independent Executive Chair.
- Management cited used-car market volatility, inflation, labor shortages and reconditioning/logistics constraints. Vehicle GPPU pressure reflected depreciation on less fuel-efficient vehicles, higher-mileage inventory and parts inflation. Adesa, a reconditioning and hub provider being acquired by a competitor, intended to discontinue reconditioning services; Vroom said it was replacing capacity and relocating affected hubs.
- Rocket Auto arrangements were suspended effective April 26, 2022 while Vroom discussed a possible restructuring.
Risks and contingencies
Key risks include persistent losses and cash use; execution of the realignment and UACC integration; dependence on the single Ally floorplan provider and its 2023 maturity; reliance on securitization and receivables-sale markets; vehicle price, inventory, margin and credit-loss volatility; third-party logistics, reconditioning and customer-service dependencies; and regulatory, customer-experience and reputational challenges. The Texas Attorney General filed a consumer-protection case in April 2022 concerning alleged marketing, order-fulfillment, titling and registration deficiencies. The parties agreed to a temporary injunction requiring Vroom to adhere to its existing title-possession practice and a 45-day stay to pursue resolution. The filing also describes pending securities class and derivative litigation; outcomes are uncertain.
Most important facts for investors to verify
- Whether the realignment delivers the stated $135–$165 million of savings and improvements, while reducing sales volume without further harming unit economics.
- Cash burn, unrestricted liquidity, restricted-cash availability, floorplan capacity and renewal or replacement of the facility before its March 2023 maturity.
- UACC integration progress, financing performance, receivables credit quality and the repeatability of securitization gains and funding access.
- Recovery in vehicle gross profit per unit and control of reconditioning, logistics, inventory-aging and wholesale losses.
- Developments in the Texas matter, other regulatory inquiries and securities litigation, including any effect on costs, operations or customer trust.