Vroom, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited. Comparisons are with Q1 2020 unless noted. Vroom operates an ecommerce used-vehicle platform and reports Ecommerce, Wholesale, and Texas Direct Auto (TDA) segments.
Financial and operating results
Amounts are in millions of dollars except per-share data, percentages, and unit metrics.
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $591.1 | $375.8 | +57.3% |
| Gross profit | $36.2 | $18.4 | +96.7% |
| Gross margin | 6.1% | 4.9% | +1.2 percentage points |
| SG&A | $109.1 | $58.4 | +86.9% |
| Operating loss | $(75.5) | $(41.0) | Loss widened |
| Net loss | $(77.2) | $(41.1) | Loss widened |
| EBITDA, company-defined non-GAAP | $(72.6) | $(39.2) | Loss widened |
| Operating cash flow | $29.6 | $(25.1) | Improved |
- Revenue mix: Retail vehicle revenue was $454.3 million (+47.2%); wholesale vehicle revenue was $118.0 million (+112.4%); product revenue was $15.6 million (+41.0%). Other revenue was $3.2 million.
- Segments: Ecommerce revenue was $422.3 million (+81.1%) with gross profit of $31.8 million. Wholesale revenue was $118.0 million with a $0.3 million gross loss. TDA revenue fell 45.0% to $47.6 million and gross profit fell to $2.8 million.
- Ecommerce metrics: Units sold rose 95.5% to 15,504; total gross profit per unit increased 14.2% to $2,054. Vehicle gross profit per unit rose to $1,151, while product gross profit per unit decreased 5.3% to $903. Average days to sale increased from 68 to 83.
- Expense and profitability: SG&A growth outpaced revenue growth, reflecting higher compensation, marketing, outbound logistics, and public-company and scaling costs. Net loss per share was $(0.57), compared with $(4.85) in Q1 2020; the prior-year comparison is affected by the much lower weighted-average share count before the 2020 IPO and preferred-stock conversion.
- Cash flows: Operating cash flow was positive, chiefly reflecting inventory reduction and higher payables, accrued expenses, and deferred revenue; it should not be read as evidence of operating profitability. Investing cash use was $79.4 million, including $76.1 million for the CarStory acquisition. Financing cash use was $73.4 million, primarily reflecting net floorplan repayments.
Liquidity, debt, and balance sheet
- At March 31, 2021, cash and cash equivalents were $940.3 million and restricted cash was $26.6 million. Cash, cash equivalents, and restricted cash totaled $966.8 million, down $123.2 million during the quarter.
- Vehicle inventory was $337.7 million, down from $423.6 million at year-end 2020. Total current assets were $1.42 billion; current liabilities were $455.1 million.
- Vehicle floorplan borrowings were $253.0 million, down from $329.2 million at year-end. The facility’s borrowing capacity was $415.2 million, with $162.2 million unused; it matures September 30, 2022 and bears interest at one-month LIBOR plus 4.25%. The company reported covenant compliance.
- Total liabilities were $471.1 million. In addition to floorplan borrowings, the balance sheet includes operating lease liabilities. The filing reports no material off-balance-sheet arrangements.
Material changes, outlook, and risks
- CarStory acquisition: Completed January 7, 2021 for approximately $117.1 million: $77.0 million cash, $39.0 million in stock, and $1.0 million in assumed unvested options. The acquisition added $34.3 million of identifiable intangible assets and $81.1 million of goodwill; its Q1 results were not material. Purchase accounting remained preliminary.
- Management outlook: The company said existing cash and the floorplan facility should fund working capital and capital expenditures for at least the next 12 months. It expected continued losses and rising SG&A, and planned further investment in customer support, marketing, reconditioning, and proprietary logistics. No numerical revenue or earnings guidance is provided in the filing text.
- Operating pressures: Management described used-vehicle supply constraints and elevated wholesale prices, partly linked to new-car manufacturing delays and microchip shortages. Carrier shortages and higher shipping costs contributed to delivery delays. Ecommerce days to sale rose amid sales-support constraints, aged-inventory sales, and slower movement of consumer-sourced vehicles.
- COVID-19: Management said used-vehicle demand had recovered and exceeded pre-pandemic levels, but the pandemic’s future operational and financial effects remained uncertain.
- Legal contingency: Three putative securities class actions filed in March 2021 allege misleading statements or omissions. The company said the cases were preliminary, believed them to be without merit, and did not expect a material adverse effect based on information then known; outcomes remain uncertain.
- Controls: Management concluded disclosure controls were not effective as of March 31, 2021 because previously identified material weaknesses in financial-reporting controls remained unremediated. Remediation was ongoing; management said additional procedures supported fair presentation of the reported financial statements.
- Other risks: The company cited its history of losses, uncertainty about sustained positive cash flow and future profitability, execution and scaling challenges, reliance on third-party vendors and carriers, customer experience and data-security risks, and possible stock-price volatility.
Key facts for investors to verify
- Whether unit growth and improving ecommerce vehicle gross profit per unit can overcome rising SG&A and reduce operating losses.
- Whether the positive operating cash flow is repeatable or mainly reflects working-capital movements, particularly inventory reduction and deferred revenue.
- Floorplan availability, borrowing-base capacity, covenant compliance, and the effect of variable interest rates as inventory needs change.
- Progress in reducing ecommerce days to sale and resolving customer-support, carrier-capacity, and delivery-cost pressures.
- CarStory’s contribution to revenue, operating performance, and the preliminary acquisition valuation as purchase accounting is finalized.
- Developments in the securities litigation and remediation and testing of the disclosed material weaknesses in internal controls.