Vroom, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Financial statements are unaudited. Amounts below are in U.S. dollars; financial figures are in millions unless otherwise noted.
Business context and reporting period
Vroom substantially completed its ecommerce and used-vehicle dealership wind-down on March 29, 2024, following its January Value Maximization Plan. The company now focuses on UACC, an indirect auto lender serving third-party dealers, and CarStory, an automotive analytics and digital-services business. Ecommerce and dealership results are reported as discontinued operations, and prior-period figures were recast. A 1-for-80 reverse stock split took effect in February; share and per-share data are adjusted accordingly.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Interest income | $51.1 | $34.4 |
| Net interest income | $36.7 | $26.9 |
| Credit and fair-value losses, net of recoveries | $30.8 | $15.7 |
| Net interest income after losses and recoveries | $5.9 | $11.2 |
| CarStory revenue | $3.0 | $3.2 |
| Net loss from continuing operations | $(44.7) | $(15.5) |
| Net loss from discontinued operations | $(22.9) | $(59.3) |
| Total net loss | $(67.6) | $(74.7) |
| Adjusted EBITDA loss (non-GAAP) | $(32.2) | $(16.3) |
Continuing-operations revenue is not presented as a single consolidated total; results principally reflect UACC interest income and CarStory revenue. UACC’s net interest income after losses and recoveries fell 47% year over year as credit and fair-value losses rose. UACC’s Adjusted EBITDA loss widened to $10.1 million from $4.5 million; CarStory generated $0.6 million of Adjusted EBITDA in both periods, while corporate Adjusted EBITDA loss widened to $22.6 million from $12.4 million.
Discontinued operations recorded $189.1 million of revenue and $3.6 million of gross profit, compared with $153.4 million and $3.9 million, respectively, a year earlier. Q1 2024 included $14.7 million of severance and personnel costs and $11.9 million of contract and lease termination costs. Revenue includes substantial wholesale vehicle liquidation activity and is not directly comparable with the prior-period mix.
At March 31, cash and cash equivalents were $91.0 million, restricted cash was $49.5 million, total assets were $1.22 billion, and stockholders’ equity was $61.5 million. Continuing-operations operating cash flow was negative $75.0 million; discontinued operations provided $98.2 million of operating cash flow, leaving total operating cash flow positive $23.1 million. Cash, cash equivalents and restricted cash declined $68.3 million during the quarter to $140.5 million.
Warehouse borrowings were $516.3 million, with $53.9 million of excess borrowing capacity and an aggregate facility limit of $825 million. Separately, long-term debt was $548.1 million, including $287.2 million carrying value of 0.75% convertible notes due July 2026 and $237.9 million of securitization debt. The warehouse facilities mature between June and September 2025; the company reported compliance with their covenants. Cash and restricted cash are not all freely available for general use.
Material changes versus the prior comparable period
- Interest income rose 48.6%, reflecting a larger finance-receivable portfolio and the consolidation of the 2022-2 securitization. Warehouse interest expense more than tripled, to $9.5 million, as borrowings and the weighted-average rate increased.
- Net interest income after credit and fair-value losses declined to $5.9 million from $11.2 million; losses nearly doubled to $30.8 million.
- Warranties and GAP income was a $9.6 million loss versus $2.8 million of income. Management attributed the change primarily to a revised estimate of expected proceeds from legacy product profit-sharing arrangements.
- Continuing-operations net loss increased by $29.2 million. Total net loss improved because discontinued-operation losses were lower than in Q1 2023.
- Cash from continuing operations remained negative, although the outflow narrowed by $56.7 million year over year. Total cash declined $68.3 million, compared with an $83.3 million decline in Q1 2023.
Outlook, risks, contingencies and unusual items
- Management expects existing cash and UACC warehouse facilities to support operations and obligations for at least 12 months from the filing date. This expectation depends on credit performance, warehouse advance rates, securitization access and execution of the wind-down and business plans; it is not a guarantee.
- Management estimated 2024 wind-down cash charges of approximately $16.4 million for severance and personnel costs and $14.3 million for contract and lease terminations. Further wind-down costs may arise through year-end. Approximately 800 employees were affected.
- UACC reported higher credit losses and loss severity, which management expects to pressure results for the remainder of 2024. Rising rates and losses have reduced some warehouse advance rates and may make securitizations more costly or difficult. UACC focuses primarily on non-prime borrowers.
- In April 2024, UACC completed a securitization with $261.3 million of proceeds against $380.1 million of receivables. Unfavorable pricing led it to retain certain securities and residual interests, so the transaction is accounted for as secured borrowing. In May, UACC sold $37.5 million of initially retained Class E securities for $35.9 million; it continued to hold the residual interest and $15.8 million of rated notes.
- In May 2024, Vroom and the FTC reached an agreement, subject to final approval, to resolve allegations: $1 million of customer redress and a permanent injunction. A separate Texas settlement requires $2 million in civil penalties and $1 million in attorneys’ fees, payable in installments in 2024 and 2025, plus an injunction. Securities and derivative litigation remains pending; the company says it intends to contest the securities case.
- The company identified prior-period errors involving overstatements of accounts payable and other liabilities, totaling $5.5 million, and concluded they were not material to previously issued statements. It revised comparative information; the filing says cash-flow statements were unaffected. Management reported disclosure controls effective at the reasonable-assurance level as of March 31.
- Nasdaq bid-price compliance was regained after the reverse split, but the company could receive another deficiency notice if its share price again falls below the minimum for the specified period. The filing also describes senior leadership changes, including a CFO transition effective May 17, 2024.
Important facts for investors to verify
- Whether UACC’s credit losses, delinquencies and recovery assumptions stabilize, and how those trends affect fair values, warehouse advance rates and securitization economics.
- Whether available liquidity remains adequate as warehouse facilities approach 2025 maturities, wind-down costs continue, and cash is used to fund operations.
- Whether UACC can renew or replace warehouse facilities and complete future securitizations on acceptable terms, including disposition of retained interests from the 2024-1 transaction.
- Actual remaining wind-down costs and any material contingent liabilities, including final approval and implementation of the FTC agreement and payments under the Texas settlement.
- Progress toward reducing corporate costs and improving UACC profitability, while CarStory revenue and results remain comparatively small.
- Potential dilution: the company had up to $47.5 million of gross proceeds remaining under its at-the-market equity program at March 31, 2024; verify subsequent use and any stock-plan changes.