Vroom(VRM) - 2024 Q4 - Annual Report

Part I Business Vroom now focuses on its UACC auto finance and CarStory analytics subsidiaries after ceasing ecommerce operations - On January 22, 2024, Vroom announced the wind-down of its used vehicle ecommerce operations to preserve liquidity and focus on its UACC and CarStory businesses[29] - The company commenced and emerged from a prepackaged Chapter 11 bankruptcy case between November 2024 and January 2025, which discharged approximately $290 million in debt and cancelled previous equity interests[24][30] - The company's common stock was relisted on the Nasdaq Global Market under the ticker "VRM" on February 20, 2025, after being suspended due to the bankruptcy filing[25] - The core operating businesses are now United Auto Credit Corporation (UACC), an automotive finance company, and CarStory, LLC, an AI-powered analytics platform[28] - As of December 31, 2024, UACC serviced a portfolio of approximately 78,000 retail installment sales contracts with an aggregate principal balance of $1.0 billion[33] UACC Business Operations UACC is a non-prime indirect auto lender that funds operations through warehouse facilities and securitizations - UACC offers four main lending programs: Preferred (standard non-prime), Bankruptcy, Commercial, and a newer Near Prime program for applicants with a minimum FICO of 600[37][43] - UACC's funding model relies on pledging retail installment contracts to warehouse credit facilities and then selling them to third-party investors via private securitization transactions[49][52] - The company competes with national and regional finance companies, banks, and credit unions, many of which have greater financial resources and access to lower-cost capital[53] CarStory Business Operations CarStory provides AI-powered analytics and vehicle valuation services to the automotive industry - CarStory's database includes data for an estimated 90% of U.S. consumer vehicles, aggregating information from over 3.5 million unique VINs listed for sale daily[58] - The platform's patented neural-net algorithm provides a highly accurate market price, the "CarStory Real Market Price," which accounts for local market dynamics and dealer performance[59] Long-Term Strategic Plan The company's strategy focuses on returning UACC to profitability by reducing losses and growing originations - Key objectives are to achieve pre-COVID Cumulative Net Losses (CNL), grow originations with low CNL, and lower operating costs[64] - Strategic initiatives include building world-class lending and sales programs, and achieving operational excellence in originations and servicing by leveraging advanced analytics and AI[64][65] Risk Factors The company faces significant risks related to its bankruptcy emergence, liquidity, credit losses, and competition - The recent emergence from the Prepackaged Chapter 11 Case could adversely affect business relationships, and historical financial information is not indicative of future performance due to a significantly altered capital structure and the adoption of fresh start accounting[88][91] - There are significant risks associated with the discontinuance of the ecommerce operations, including incurring additional charges, potential disruption to remaining businesses, and exposure to contingent liabilities[94][96] - UACC is experiencing increasing credit losses on its automotive finance receivables, driven by economic conditions[126] - The company's ability to operate depends on UACC's access to funding, primarily through its Warehouse Credit Facilities, which require renewal in 2025, and its ability to execute securitization transactions on favorable terms[99][137] - A former noteholder, Mudrick Capital Management, L.P., acquired a significant ownership interest (76.5% as of the report date) and can significantly influence all matters submitted to stockholders, including the election of directors[202] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - Not Applicable[270] Cybersecurity Vroom has implemented a cybersecurity risk management program overseen by the Board's Audit Committee - The cybersecurity program includes risk assessments, an information security program, use of external service providers, employee training, an incident response plan, and third-party risk management[274] - The Board's Audit Committee has oversight responsibility for cybersecurity risk, with the Chief Technology Officer having primary management responsibility[275][276][277] Properties The company leases three office facilities for its UACC operations in California, Texas, and New York | Location | Size (sq. ft.) | Purpose | Lease Expiration | | :--- | :--- | :--- | :--- | | Newport Beach, CA | ~20,058 | UACC Corporate HQ | March 31, 2029 | | Fort Worth, TX | ~106,500 | UACC Servicing Center | September 2031 | | Buffalo, NY Area | ~12,000 | UACC Buyer Center | January 1, 2032 | Legal Proceedings Vroom is subject to various legal proceedings, including a securities class action and regulatory settlements - The company emerged from its Prepackaged Chapter 11 Case on January 14, 2025[285] - A consolidated securities class action lawsuit is pending in the Southern District of New York, alleging violations of federal securities laws[286] - The company reached an agreement with the FTC to pay $1 million in customer redress to resolve allegations of violations related to its former ecommerce business[289] - A final agreement was reached with the Attorney General of Texas to resolve claims, under which the company will pay $2 million in civil penalties and $1 million in attorneys' fees[290] Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[292] Part II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Vroom's new common stock began trading on Nasdaq in February 2025 following its emergence from bankruptcy - Following emergence from Chapter 11, all old common stock was cancelled; new common stock began trading on the Nasdaq Global Market on February 20, 2025, under the ticker "VRM"[311][312] - As of March 7, 2025, there were 14 stockholders of record for the 5,163,109 shares of new common stock outstanding[7][313] - The company has never declared or paid cash dividends and does not intend to in the foreseeable future[314] Management's Discussion and Analysis of Financial Condition and Results of Operations The company's financial discussion centers on its post-bankruptcy structure and the performance of its UACC and CarStory segments - The company emerged from its Prepackaged Chapter 11 Case on January 14, 2025, eliminating long-term debt at the Vroom, Inc. level[323][324] - The Value Maximization Plan resulted in the wind-down of the ecommerce business and incurred cash charges of approximately $15.8 million for severance and $13.9 million for contract/lease terminations in 2024[333][334] - As of December 31, 2024, the company had $29.3 million in cash and cash equivalents and $49.0 million in restricted cash[415] | Metric | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Net loss from continuing operations | $(138,240) | $(85,097) | | Net loss from discontinued operations | $(26,884) | $(279,514) | | Total Net Loss | $(165,124) | $(364,611) | | Adjusted EBITDA | $(83,423) | $(88,291) | Results of Operations The net loss from continuing operations widened to $138.2 million in 2024 from $85.1 million in 2023 - UACC's interest income increased 12.7% to $204.0 million in 2024 due to a larger average loan portfolio, while interest expense grew 41.7% to $59.4 million due to higher average borrowings and interest rates[381][384] - Corporate activities recorded a $10.4 million net loss on warranties and GAP for 2024, a significant increase from a $2.2 million loss in 2023, primarily due to a revised estimate of expected recoveries[406] UACC Segment Performance (Year Ended Dec 31) | Metric (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net interest income after losses | $45,973 | $46,705 | | Total noninterest income | $22,624 | $21,121 | | Total expenses | $129,972 | $115,492 | | Adjusted EBITDA | $(29,808) | $(23,185) | CarStory Segment Performance (Year Ended Dec 31) | Metric (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | CarStory revenue | $11,610 | $12,384 | | Total expenses | $17,477 | $16,503 | | Adjusted EBITDA | $912 | $3,399 | Liquidity and Capital Resources The company's liquidity relies on cash reserves and UACC's access to its $825.0 million warehouse credit facilities - UACC has four Warehouse Credit Facilities with an aggregate borrowing limit of $825.0 million; as of Dec 31, 2024, $359.9 million was outstanding[415][429] - In March 2025, the company entered into a $25.0 million delayed draw term loan facility with its majority shareholder, Mudrick Capital Management, L.P., maturing in December 2026[420][538] - In Q2 2024, UACC completed a securitization transaction, selling approximately $300.0 million of asset-backed securities, which was accounted for as secured borrowings[423] Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements for fiscal years 2024 and 2023 Consolidated Balance Sheets Total assets decreased to $1.07 billion in 2024, resulting in a stockholders' deficit of $30.9 million Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $29,343 | $135,585 | | Total Assets | $1,066,696 | $1,475,422 | | Liabilities subject to compromise | $291,577 | $0 | | Total Liabilities | $1,097,641 | $1,347,751 | | Total stockholders' (deficit) equity | $(30,945) | $127,671 | Consolidated Statements of Operations The company reported a total net loss of $165.1 million for fiscal year 2024 Consolidated Statement of Operations Highlights (in thousands) | | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Net interest income after losses | $22,605 | $14,048 | | Total noninterest income | $26,351 | $75,126 | | Total expenses | $180,776 | $173,629 | | Net loss from continuing operations | $(138,240) | $(85,097) | | Net loss from discontinued operations | $(26,884) | $(279,514) | | Net Loss | $(165,124) | $(364,611) | | Net Loss Per Share | $(91.07) | $(209.17) | Consolidated Statements of Cash Flows Cash, cash equivalents, and restricted cash decreased by $130.5 million during 2024 Consolidated Cash Flow Highlights (in thousands) | | Year Ended Dec 31, 2024 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities (continuing) | $(175,758) | $(482,027) | | Net cash provided by investing activities (continuing) | $114,883 | $185,334 | | Net cash (used in) provided by financing activities (continuing) | $(14,810) | $223,150 | | Net decrease in cash, cash equivalents and restricted cash | $(130,450) | $(263,191) | Controls and Procedures Management concluded that the company's disclosure controls and internal controls were effective as of year-end 2024 - Management concluded that as of December 31, 2024, the company's disclosure controls and procedures were effective[747] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2024[748] Other Information This section discloses a new term loan facility and significant equity grants to the CEO in March 2025 - On March 8, 2025, the company entered into a $25.0 million delayed draw term loan facility with Mudrick Capital Management, L.P., its majority shareholder[753] - On March 11, 2025, the Board approved grants of 287,949 RSUs and 259,400 stock options to CEO Thomas Shortt[751] Part III Directors, Executive Officers, and Corporate Governance Information regarding directors and governance is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from Vroom's Proxy Statement for its 2025 Annual Meeting of Stockholders[765] Executive Compensation Information regarding executive compensation is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from Vroom's Proxy Statement for its 2025 Annual Meeting of Stockholders[766] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from Vroom's Proxy Statement for its 2025 Annual Meeting of Stockholders[766] Certain Relationships and Related Transactions, and Director Independence Information regarding related transactions is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from Vroom's Proxy Statement for its 2025 Annual Meeting of Stockholders[767] Principal Accounting Fees and Services Information regarding accountant fees is incorporated by reference from the 2025 Proxy Statement - Information required by this item is incorporated by reference from Vroom's Proxy Statement for its 2025 Annual Meeting of Stockholders[767] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Annual Report - The exhibits include the company's Restated Certificate of Incorporation (Exhibit 3.2), Amended and Restated Bylaws (Exhibit 3.3), and the Warrant Agreement (Exhibit 10.34) related to the emergence from bankruptcy[771][772] - Material contracts filed include the Loan and Security Agreement with Mudrick Capital Management (Exhibit 10.40) and various Warehouse Agreements for UACC (Exhibits 10.36-10.39)[774][776] Form 10-K Summary The company has not provided a summary for its Form 10-K - None[779]