Vroom Announces Fourth Quarter and Full Year 2022 Results

February 28, 2023

Significant Sequential Cost Reductions and Continued Progress on Long-Term Roadmap

NEW YORK–(BUSINESS WIRE)–Vroom, Inc. (Nasdaq:VRM), a leading ecommerce platform for buying and selling used vehicles, today announced financial results for the fourth quarter and fiscal year ended December 31, 2022.

HIGHLIGHTS OF FOURTH QUARTER 2022 VERSUS THIRD QUARTER 2022

Ecommerce gross profit per unit of $1,233 as compared to $4,206
SG&A expenses of $90.8 million as compared to $134.6 million
Net income of $24.8 million as compared to net loss of $(51.1) million
Adjusted EBITDA of $(70.9) million as compared to $(73.3) million
Adjusted EBITDA excluding securitization gain and non-recurring costs of $(70.5) million as compared to $(73.5) million

HIGHLIGHTS OF FISCAL YEAR 2022⁽¹⁾ VERSUS FISCAL YEAR 2021

Ecommerce gross profit per unit of $2,545 compared to $2,206
SG&A expenses of $566.4 million compared to $547.8 million
Net loss of $(451.9) million compared to $(370.9) million
Adjusted EBITDA of $(337.2) million compared to $(340.2) million
Adjusted EBITDA excluding securitization gain and non-recurring costs of $(357.4) million compared to $(340.2) million

^{(1) Fiscal year 2022 includes UACC’s results of operations starting on February 1, 2022.}

Tom Shortt, Chief Executive Officer of Vroom, said, “In the fourth quarter we continued to make progress on our three key objectives and four strategic initiatives. We significantly reduced operating expenses quarter over quarter and continued to improve our operations and customer experience. We improved our titling process enabling us to end the year with 87% of units available for sale or pending sale versus 52% at the end of Q3, however it also increased the age of our inventory available for sale and inventory sold.

Gross profit per unit declined from $4,206 in Q3 to $1,233 in Q4 primarily due to three items. The decline quarter over quarter was impacted primarily by three items. First, the percentage of sales from aged units increased 5X from Q3 to Q4; 36% of our units sold during the 4th quarter were aged units we’ve held >270 days. Second, increased industry wide market depreciation. Third, higher inventory reserves primarily driven by recent electric unit OEM price decreases.

During 2022 we strategically slowed down the business while we improved our customer experience and processes across titling and registration, pricing, marketing, reconditioning and logistics, and began to insource our sales function from our primary third-party resource. During 2023, we expect to resume growth, sell through aged vehicles, improve variable cost per unit and reduce fixed costs.”

Bob Krakowiak, Vroom’s Chief Financial Officer, commented, “During the fourth quarter we further maximized liquidity and strengthened our balance sheet by repurchasing $198 million of our convertible notes and unlocking $70 million of cash-in-inventory and restricted cash. Combined with earlier note repurchases, we repurchased $254 million of our convertible notes throughout 2022. During 2023, we will continue to pursue opportunities to enhance our liquidity.”

FOURTH QUARTER 2022 FINANCIAL DISCUSSION

All financial comparisons for the fourth quarter are on a year-over-year basis unless otherwise noted.

Ecommerce Results

	Three Months Ended December 31,												Year Ended December 31,
	2022			2021			Change			% Change			2022		2021		Change			% Change
	(in thousands, except unit data and average days to sale)												(in thousands, except unit data and average days to sale)
Ecommerce units sold		4,144			21,243			(17,099	)		(80.5	)%		39,278		74,698		(35,420	)		(47.4	)%
Ecommerce revenue:
Vehicle revenue	$	131,069		$	715,874	$		(584,805	)		(81.7	)%	$	1,304,797	$	2,360,368	$	(1,055,571	)		(44.7	)%
Product revenue		10,689			22,846			(12,157	)		(53.2	)%		59,398		82,001		(22,603	)		(27.6	)%
Total ecommerce revenue	$	141,758		$	738,720	$		(596,962	)		(80.8	)%	$	1,364,195	$	2,442,369	$	(1,078,174	)		(44.1	)%
Ecommerce gross profit:
Vehicle gross profit	$	(5,579	)	$	10,042	$		(15,621	)		(155.6	)%	$	40,575	$	82,745	$	(42,170	)		(51.0	)%
Product gross profit		10,689			22,846			(12,157	)		(53.2	)%		59,398		82,001		(22,603	)		(27.6	)%
Total ecommerce gross profit	$	5,110		$	32,888	$		(27,778	)		(84.5	)%	$	99,973	$	164,746	$	(64,773	)		(39.3	)%
Average vehicle selling price per ecommerce unit	$	31,629		$	33,699	$		(2,070	)		(6.1	)%	$	33,220	$	31,599	$	1,621			5.1	%
Gross profit per ecommerce unit:
Vehicle gross profit per ecommerce unit	$	(1,346	)	$	473	$		(1,819	)		(384.6	)%	$	1,033	$	1,108	$	(75	)		(6.8	)%
Product gross profit per ecommerce unit		2,579			1,075			1,504			139.9	%		1,512		1,098		414			37.7	%
Total gross profit per ecommerce unit	$	1,233		$	1,548	$		(315	)		(20.3	)%	$	2,545	$	2,206	$	339			15.4	%
Ecommerce average days to sale		244			76			168			221.1	%		131		74		57			77.2	%

Results by Segment

	Three Months Ended December 31,											Year Ended December 31,
	2022			2021⁽¹⁾		Change			% Change			2022			2021⁽¹⁾		Change			% Change

	(in thousands, except unit data)											(in thousands, except unit data)
Units:
Ecommerce		4,144			21,243		(17,099	)		(80.5	)%		39,278			74,698		(35,420	)		(47.4	)%
Wholesale		1,768			8,742		(6,974	)		(79.8	)%		20,876			37,163		(16,287	)		(43.8	)%
All Other ⁽²⁾		350			2,105		(1,755	)		(83.4	)%		3,758			7,212		(3,454	)		(47.9	)%
Total units		6,262			32,090		(25,828	)		(80.5	)%		63,912			119,073		(55,161	)		(46.3	)%

Revenue:
Ecommerce	$	141,758		$	738,720	$	(596,962	)		(80.8	)%	$	1,364,195		$	2,442,369	$	(1,078,174	)		(44.1	)%
Wholesale		23,039			121,543		(98,504	)		(81.0	)%		293,528			498,981		(205,453	)		(41.2	)%
Retail Financing ⁽³⁾		32,537			—		32,537			100.0	%		152,542			—		152,542			100.0	%
All Other ⁽⁴⁾		12,015			74,228		(62,213	)		(83.8	)%		138,636			242,905		(104,269	)		(42.9	)%
Total revenue	$	209,349		$	934,491	$	(725,142	)		(77.6	)%	$	1,948,901		$	3,184,255	$	(1,235,354	)		(38.8	)%
Gross profit (loss):
Ecommerce	$	5,110		$	32,888	$	(27,778	)		(84.5	)%	$	99,973		$	164,746	$	(64,773	)		(39.3	)%
Wholesale		(4,359	)		7,783		(12,142	)		(156.0	)%		(10,620	)		18,120		(28,740	)		(158.6	)%
Retail Financing ⁽³⁾		28,744			—		28,744			100.0	%		138,381			—		138,381			100.0	%
All Other ⁽⁴⁾		(36	)		4,035		(4,071	)		(100.9	)%		17,053			19,233		(2,180	)		(11.3	)%
Total gross profit	$	29,459		$	44,706	$	(15,247	)		(34.1	)%	$	244,787		$	202,099	$	42,688			21.1	%
Gross profit (loss) per unit ⁽⁵⁾:
Ecommerce	$	1,233		$	1,548	$	(315	)		(20.3	)%	$	2,545		$	2,206	$	339			15.4	%
Wholesale	$	(2,465	)	$	890	$	(3,355	)		(377.0	)%	$	(509	)	$	488	$	(997	)		(204.3	)%

(1)		In the second quarter of 2022, we reevaluated our reporting segments based on relative revenue and gross profit and significance in our long term strategy. As a result of that analysis, we determined to no longer report TDA as a separate operating segment. As of June 30, 2022, we are organized into three reportable segments: Ecommerce, Wholesale, and Retail Financing. We reclassified TDA revenue and TDA gross profit from the TDA reportable segment to the “All Other” category to conform to current year presentation.
(2)		All Other units consist of retail sales of used vehicles from TDA.
(3)		The Retail Financing segment represents UACC’s operations with its network of third-party dealership customers as of the closing of the UACC acquisition in February 2022.
(4)		All Other revenues and gross profit consist of retail sales of used vehicles from TDA and fees earned on sales of value-added products associated with those vehicles sales and the CarStory business.
(5)		Gross profit per unit metrics exclude the Retail Financing gross profit and All Other gross profit.

SG&A

	Three Months Ended December 31,													Year Ended December 31,
		2022				2021		Change			% Change				2022			2021		Change			% Change

	(in thousands)													(in thousands)
Compensation & benefits	$		52,043		$		59,332	$	(7,289	)		(12.3	)%	$		251,153	$		204,913	$	46,240			22.6	%
Marketing expense			9,852				37,214		(27,362	)		(73.5	)%			79,670			125,481		(45,811	)		(36.5	)%
Outbound logistics			(902	)			27,800		(28,702	)		(103.2	)%			39,023			85,788		(46,765	)		(54.5	)%
Occupancy and related costs			5,955				4,849		1,106			22.8	%			23,363			17,448		5,915			33.9	%
Professional fees			6,870				8,435		(1,565	)		(18.6	)%			33,455			24,386		9,069			37.2	%
Software and IT costs			11,164				8,383		2,781			33.2	%			44,570			27,749		16,821			60.6	%
Other			5,778				20,328		(14,550	)		(71.6	)%			95,153			62,058		33,095			53.3	%
Total selling, general & administrative expenses	$		90,760		$		166,341	$	(75,581	)		(45.4	)%	$		566,387	$		547,823	$	18,564			3.4	%

Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. GAAP, we believe the following non-GAAP financial measures are useful in evaluating our operating performance:

EBITDA;
Adjusted EBITDA;
Adjusted EBITDA excluding non-recurring costs to address operational and customer experience issues;
Adjusted EBITDA excluding securitization gain;
Adjusted EBITDA excluding securitization gain and non-recurring costs to address operational and customer experience issues;

These non-GAAP financial measures have limitations as analytical tools in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with U.S. GAAP. Because of these limitations, these non-GAAP financial measures should be considered along with other operating and financial performance measures presented in accordance with U.S. GAAP. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with U.S. GAAP. We have reconciled all non-GAAP financial measures with the most directly comparable U.S. GAAP financial measures.

EBITDA, Adjusted EBITDA, Adjusted EBITDA excluding non-recurring costs to address operational and customer experience issues, Adjusted EBITDA excluding securitization gain, and Adjusted EBITDA excluding securitization gain and non-recurring costs to address operational and customer experience issues are supplemental performance measures that our management uses to assess our operating performance and the operating leverage in our business. Because each of these non-GAAP financial measures facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes.

EBITDA

We calculate EBITDA as net loss before interest expense, interest income, income tax expense and depreciation and amortization expense.

Adjusted EBITDA

We calculate Adjusted EBITDA as EBITDA adjusted to exclude realignment costs, acquisition related costs, change in fair value of finance receivables, goodwill impairment charge, gain on debt extinguishment, acceleration of non-cash stock-based compensation, and other costs, which primarily relate to the impairment of long-lived assets. Changes in fair value of finance receivables can fluctuate significantly from period to period and relate primarily to historical loans and debt which have been securitized, and acquired on February 1, 2022 from UACC. Our ongoing business model is to originate or purchase finance receivables with the intent to sell which we recognize at the lower of cost or fair value. Therefore, these historical finance receivables acquired, which are accounted for under the fair value option, will experience fluctuations in value from period to period. We believe it is appropriate to remove this temporary volatility from our Adjusted EBITDA results to better reflect our ongoing business model. Additionally, these historical finance receivables acquired from UACC are expected to run-off within approximately 12 months.

Adjusted EBITDA excluding non-recurring costs to address operational and customer experience issues

We calculate Adjusted EBITDA excluding non-recurring costs to address operational and customer experience issues as Adjusted EBITDA adjusted to exclude the non-recurring costs incurred to address operational and customer experience issues, including rental cars for our customers and legal settlements with customers and state DMVs. While we expect to continue to incur these costs over the next few quarterly periods, we do not expect these costs to continue to be incurred once our operational issues have been resolved.

Adjusted EBITDA excluding securitization gain

We calculate Adjusted EBITDA excluding securitization gain as Adjusted EBITDA adjusted to exclude the securitization gain from the sale of UACC’s finance receivables, and believe that it provides a useful perspective on the underlying operating results and trends and a means to compare our period-over-period results.

Adjusted EBITDA excluding securitization gain and non-recurring costs to address operational and customer experience issues

We calculate Adjusted EBITDA excluding securitization gain and non-recurring costs to address operational and customer experience issues as Adjusted EBITDA adjusted to exclude the securitization gain from the sale of UACC’s finance receivables and the non-recurring costs incurred to address operational and customer experience issues.

The following table presents a reconciliation of the foregoing non-GAAP financial measures to net loss, which is the most directly comparable U.S. GAAP measure:

	Three Months Ended December 31,						Year Ended December 31,
	2022			2021			2022			2021

	(in thousands)						(in thousands)
Net income (loss)	$	24,765		$	(129,792	)	$	(451,910	)	$	(370,911	)
Adjusted to exclude the following:
Interest expense		12,076			7,228			40,693			21,948
Interest income		(6,372	)		(3,053	)		(19,363	)		(10,341	)
Provision (benefit) for income taxes		2,405			375			(19,680	)		754
Depreciation and amortization		10,702			3,718			38,707			13,215
EBITDA	$	43,576		$	(121,524	)	$	(411,553	)	$	(345,335	)
Realignment costs	$	2,253		$	—		$	15,025		$	—
Acquisition related costs		—			1,678			5,653			5,090
Change in fair value of finance receivables		3,917			—			8,372			—
Goodwill impairment charge		—			—			201,703			—
Gain on debt extinguishment		(126,767	)		—			(164,684	)		—
Acceleration of non-cash stock-based compensation		2,439			—			2,439			—
Other		3,679			—			5,806			—
Adjusted EBITDA	$	(70,903	)	$	(119,846	)	$	(337,239	)	$	(340,245	)
Non-recurring costs to address operational and customer experience issues		374			—			25,433			—
Adjusted EBITDA excluding non-recurring costs to address operational and customer experience issues	$	(70,529	)	$	(119,846	)	$	(311,806	)	$	(340,245	)
Securitization gain		—			—			(45,589	)		—
Adjusted EBITDA excluding securitization gain	$	(70,903	)	$	(119,846	)	$	(382,828	)	$	(340,245	)
Adjusted EBITDA excluding securitization gain and non-recurring costs to address operational and customer experience issues	$	(70,529	)	$	(119,846	)	$	(357,395	)	$	(340,245	)

FOURTH QUARTER 2022 AS COMPARED TO THIRD QUARTER 2022

	Three Months Ended December 31,			Three Months Ended September 30,
	2022			2022			Change			% Change
	(in thousands, except unit data)
Total revenues	$	209,349		$	340,797		$	(131,448	)		(38.6	)%
Total gross profit	$	29,459		$	67,331		$	(37,872	)		(56.2	)%
Ecommerce units sold		4,144			6,428			(2,284	)		(35.5	)%
Ecommerce revenue	$	141,758		$	225,441		$	(83,683	)		(37.1	)%
Ecommerce gross profit	$	5,110		$	27,034		$	(21,924	)		(81.1	)%
Vehicle gross (loss) profit per ecommerce unit	$	(1,346	)	$	2,267		$	(3,613	)		(159.4	)%
Product gross profit per ecommerce unit		2,579			1,939			640			33.0	%
Total gross profit per ecommerce unit	$	1,233		$	4,206		$	(2,973	)		(70.7	)%
Wholesale units sold		1,768			3,128			(1,360	)		(43.5	)%
Wholesale revenue	$	23,039		$	47,604		$	(24,565	)		(51.6	)%
Wholesale gross loss	$	(4,359	)	$	(1,574	)	$	(2,785	)		176.9	%
Wholesale gross loss per unit	$	(2,465	)	$	(503	)	$	(1,962	)		(390.1	)%
Retail Financing revenue	$	32,537		$	40,654		$	(8,117	)		(20.0	)%
Retail Financing gross profit	$	28,744		$	35,954		$	(7,210	)		(20.1	)%
Total selling, general, and administrative expenses	$	90,760		$	134,643		$	(43,883	)		(32.6	)%

	Three Months Ended December 31,			Three Months Ended September 30,
	2022			2022			Change			% Change

	(in thousands)
Net income (loss)	$	24,765		$	(51,127	)	$	75,892			148.4	%
Adjusted to exclude the following:
Interest expense		12,076			9,704			2,372			24.4	%
Interest income		(6,372	)		(5,104	)		(1,268	)		24.8	%
Provision for income taxes		2,405			899			1,506			167.5	%
Depreciation and amortization		10,702			9,995			707			7.1	%
EBITDA	$	43,576		$	(35,633	)	$	79,209			222.3	%
Realignment costs	$	2,253		$	3,243		$	(990	)		(30.5	)%
Change in fair value of finance receivables		3,917			(3,012	)		6,929			230.0	%
Gain on debt extinguishment		(126,767	)		(37,917	)		(88,850	)		234.3	%
Acceleration of non-cash stock-based compensation		2,439			—			2,439			100.0	%
Other		3,679			—			3,679			100.0	%
Adjusted EBITDA	$	(70,903	)	$	(73,319	)	$	2,416			3.3	%
Non-recurring costs to address operational and customer experience issues		374			15,785			(15,411	)		(97.6	)%
Adjusted EBITDA excluding non-recurring costs to address operational and customer experience issues	$	(70,529	)	$	(57,534	)	$	(12,995	)		(22.6	)%
Securitization gain		—			(15,972	)		15,972			100.0	%
Adjusted EBITDA excluding securitization gain	$	(70,903	)	$	(89,291	)	$	18,388			20.6	%
Adjusted EBITDA excluding securitization gain and non-recurring costs to address operational and customer experience issues	$	(70,529	)	$	(73,506	)	$	2,977			4.0	%

Financial Outlook

For the full year 2023, we expect the following results:

Adjusted EBITDA⁽¹⁾ of $(250.0) to $(200.0) million
Year-end cash and cash equivalents of $150.0 to $200.0 million

^{(1) A reconciliation of non-GAAP guidance measures to corresponding GAAP measures for the full year 2023 Financial Outlook is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, the costs and expenses that may be incurred in the future. We have provided a reconciliation of GAAP to non-GAAP financial measures for the fourth quarter and full year 2022 in the reconciliation table in the Non-GAAP Financial Measures section above.}

The foregoing estimates are forward-looking statements that reflect the Company’s expectations as of February 28, 2023 and are subject to substantial uncertainty. See “Forward-Looking Statements” below.

Conference Call & Webcast Information

Vroom management will discuss these results and other information regarding the Company during a conference call and audio webcast Wednesday, March 1, 2023 at 8:30 a.m. ET.

To access the conference call, please register at this embedded link. Registered participants will be sent a unique PIN to access the call. A listen-only webcast will also be available via the same link and at ir.vroom.com. An archived webcast of the conference call will be accessible on the website within 48 hours of its completion.

About Vroom (Nasdaq: VRM)

Vroom is an innovative, end-to-end ecommerce platform that offers a better way to buy and a better way to sell used vehicles. The Company’s scalable, data-driven technology brings all phases of the vehicle buying and selling process to consumers wherever they are and offers an extensive selection of vehicles, transparent pricing, competitive financing, and contact-free, at-home pick-up and delivery. For more information visit www.vroom.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation statements regarding expected timelines with respect to, our execution of and the expected benefits from our long term roadmap and cost-saving initiatives; our ability to improve our transaction processes and customer experience; our plans to sell through aged vehicles, improve variable cost per unit and reduce fixed costs; our future growth, our business strategy and our plans, including our ongoing ability to integrate and develop United Auto Credit Corporation into a captive finance operation; our future results of operations and financial position, including our ability to improve our unit economics and our outlook for the full year 2023, including with respect to our liquidity and our plans to enhance liquidity. These statements are based on management’s current assumptions and are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. For factors that could cause actual results to differ materially from the forward-looking statements in this press release, please see the risks and uncertainties identified under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which is available on our Investor Relations website at ir.vroom.com and on the SEC website at www.sec.gov. All forward-looking statements reflect our beliefs and assumptions only as of the date of this press release. We undertake no obligation to update forward-looking statements to reflect future events or circumstances.

VROOM, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) (unaudited)

	As of December 31,
	2022			2021
ASSETS
Current Assets:
Cash and cash equivalents	$	398,915		$	1,132,325
Restricted cash (including restricted cash of consolidated VIEs of $24.7 million and $0 million, respectively)		73,095			82,450
Accounts receivable, net of allowance of $21.5 million and $8.9 million, respectively		13,967			105,433
Finance receivables at fair value (including finance receivables of consolidated VIEs of $11.5 million and $0 million, respectively)		12,939			—
Finance receivables held for sale, net (including finance receivables of consolidated VIEs of $305.9 million and $0 million, respectively)		321,626			—
Inventory		320,648			726,384
Beneficial interests in securitizations		20,592			—
Prepaid expenses and other current assets		58,327			55,700
Total current assets		1,220,109			2,102,292
Finance receivables at fair value (including finance receivables of consolidated VIEs of $119.6 million and $0 million, respectively)		140,235			—
Property and equipment, net		50,201			37,042
Intangible assets, net		158,910			28,207
Goodwill		—			158,817
Operating lease right-of-use assets		23,568			15,359
Other assets		26,004			25,033
Total assets	$	1,619,027		$	2,366,750
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	34,702		$	52,651
Accrued expenses		76,795			121,508
Vehicle floorplan		276,988			512,801
Warehouse credit facilities of consolidated VIEs		229,518			—
Current portion of securitization debt of consolidated VIEs at fair value		47,239			—
Deferred revenue		10,655			75,803
Operating lease liabilities, current		9,730			6,889
Other current liabilities		17,693			57,604
Total current liabilities		703,320			827,256
Long term debt, net of current portion (including securitization debt of consolidated VIEs of $32.6 million and $0 million at fair value, respectively)		402,154			610,618
Operating lease liabilities, excluding current portion		20,129			9,592
Other long-term liabilities		18,183			4,090
Total liabilities		1,143,786			1,451,556
Commitments and contingencies (Note 14)
Stockholders’ equity:
Common stock, $0.001 par value; 500,000,000 shares authorized as of December 31, 2022 and 2021; 138,201,903 and 137,092,891 shares issued and outstanding as of December 31, 2022 and 2021, respectively		135			135
Additional paid-in-capital		2,075,798			2,063,841
Accumulated deficit		(1,600,692	)		(1,148,782	)
Total stockholders’ equity		475,241			915,194
Total liabilities and stockholders’ equity	$	1,619,027		$	2,366,750