Vroom, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Amounts below are in U.S. dollars; financial statement amounts are generally in millions unless stated otherwise.
Business context and reporting period
Vroom operates an online used-vehicle platform, wholesale sales business, and vehicle-financing business. It acquired UACC on February 1, 2022, adding retail financing operations and pursuing a captive-financing strategy. Beginning in Q2, the company reported Ecommerce, Wholesale, and Retail Financing segments; TDA activity was moved to “All Other.”
On May 5, Vroom approved a Realignment Plan focused on unit economics, lower expenses, and liquidity, including reduced sales volumes, workforce and location reductions, and changes to marketing, reconditioning, and logistics. CEO Thomas Shortt succeeded Paul Hennessy effective May 9.
Key financial metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $475.4 | $761.9 | $1,399.2 | $1,353.0 |
| Gross profit | $66.4 | $63.1 | $148.0 | $99.3 |
| Gross margin | 14.0% | 8.3% | 10.6% | 7.3% |
| Loss from operations | $(100.1) | $(63.8) | $(416.0) | $(139.4) |
| Net loss | $(115.1) | $(65.8) | $(425.5) | $(143.0) |
| Net loss per share | $(0.83) | $(0.48) | $(3.09) | $(1.05) |
| Adjusted EBITDA loss | $(85.6) | $(60.7) | $(193.0) | $(133.3) |
| Adjusted EBITDA loss, excluding securitization gain | $(85.6) | $(60.7) | $(222.6) | $(133.3) |
Q2 revenue fell 37.6% year over year, principally reflecting a 49.5% decline in Ecommerce units sold as Vroom deliberately prioritized unit economics over volume. Six-month revenue rose 3.4%, including UACC revenue after acquisition. Q2 Ecommerce gross profit per unit improved to $3,629 from $2,718; the six-month figure declined to $2,363 from $2,413. Ecommerce average days to sale increased to 128 from 68 in Q2 and to 110 from 76 for the six-month period. Wholesale reported a gross loss of $1.9 million in Q2 and $4.7 million for six months.
Q2 SG&A was $153.0 million, up 23.5% year over year; six-month SG&A was $341.0 million, up 46.5%. Six-month results included a $201.7 million goodwill impairment. The Q2 net loss also included $9.2 million of other loss, primarily related to fair-value losses on finance receivables.
Operating cash flow was $(137.5) million for the first six months, versus $(151.9) million a year earlier. Investing cash flow was $(226.6) million, including the UACC acquisition; financing cash flow was $(164.3) million. Cash, cash equivalents, and restricted cash declined $528.4 million from year-end to $686.4 million. At June 30, unrestricted cash was $532.6 million and restricted cash was $153.7 million.
At June 30, total assets were $2.14 billion, total liabilities $1.65 billion, and stockholders’ equity $495.1 million. Debt included $612.2 million carrying value of convertible notes, $167.1 million of securitization debt, and $10.3 million of junior subordinated debentures; vehicle floorplan borrowings were $422.5 million and UACC warehouse borrowings were $210.6 million. The filing cites approximately $1.42 billion of consolidated principal indebtedness in its risk discussion. The $625 million convertible notes bear 0.75% interest and mature in 2026; the floorplan facility’s $700 million commitment matures March 31, 2023, with $277.5 million available at quarter-end.
Outlook, commentary, risks, and unusual items
- Management expected $135–$165 million of cost reductions and operating improvements for the remainder of 2022 compared with the first-quarter annualized level. It warned that savings may fall short and costs may exceed estimates. Restructuring activities were expected to be substantially complete in Q3.
- The company expected 2022 revenue to decline compared with 2021. Management stated existing cash and the vehicle floorplan facility were expected to support working capital and capital expenditures for at least the next 12 months, while also warning that additional financing might be needed and may not be available on acceptable terms.
- Realignment charges were $9.5 million in the first half, including severance, lease impairment, and other costs. Vroom expected about $2.0 million of additional lease impairment charges in the second half and further logistics-related severance costs in Q3.
- UACC’s February securitization generated a $29.6 million gain. A subsequent July securitization generated $265.6 million of proceeds; the filing does not provide a clear amount for that transaction’s gain in the supplied text.
- Key operating and market risks include unresolved titling and registration issues, customer complaints, used-car price and demand volatility, inflation and higher interest rates, execution of cost reductions, financing access, and UACC’s ability to integrate and continue selling receivables through securitizations or other channels.
- Legal matters include a Texas Attorney General action alleging consumer-protection violations relating to vehicle marketing and order fulfillment, including titles and registration; the company agreed to a temporary injunction concerning title possession. Securities class and shareholder derivative litigation also remained pending. The company said it could not assess whether potential liability in the Texas matter would be material.
- Management reported disclosure controls were effective at the reasonable-assurance level as of June 30, 2022, with no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether the planned $135–$165 million of savings are achieved, and how they affect cash burn and unit economics.
- Unrestricted cash, restricted cash, operating cash use, and the company’s ability to maintain liquidity without additional financing.
- Renewal or replacement of the vehicle floorplan facility before its March 2023 maturity, plus compliance with borrowing covenants.
- Trends in Ecommerce units, days to sale, gross profit per unit, inventory values, and wholesale margins.
- UACC integration, credit performance, securitization economics, and ongoing access to warehouse and receivables-sale funding.
- Progress and potential financial consequences of customer, title-and-registration, regulatory, and securities-litigation matters.