Vroom(VRM) - 2025 Q3 - Quarterly Report

Financial Performance - The company reported a net loss from continuing operations of $27.1 million for the three months ended September 30, 2025, compared to a net loss of $37.7 million for the same period in 2024 [322]. - Adjusted net loss for the three months ended September 30, 2025, was $25.7 million, an improvement from $33.3 million in the prior year [322]. - The combined results for the nine months ended September 30, 2025, reflect a significant operational shift due to the emergence from the Prepackaged Chapter 11 Case, impacting comparability with prior periods [323]. - UACC's profitability is challenged by increased operating expenses and productivity issues, necessitating investments in IT systems and process improvements [328]. - The net loss from continuing operations for the three months ended September 30, 2025, was $27,142, a reduction of $10,602 or 28.1% from a loss of $37,744 in 2024 [344]. - Adjusted net loss increased by $5.9 million or 29.8% to $25.8 million for the three months ended September 30, 2025, from $19.9 million for the same period in 2024, primarily due to higher realized and unrealized losses and decreased interest income [370]. - Adjusted net income increased by $4.3 million or 120.4% to $0.7 million for the nine months ended September 30, 2025, compared to a loss of $3.6 million in the same period of 2024, mainly due to lower expenses [404]. Debt and Financing - The company issued $10.0 million aggregate principal amount of 5.00% unsecured Convertible Notes due 2030 on August 29, 2025 [292]. - The company emerged from the Prepackaged Chapter 11 Case on January 14, 2025, without any remaining long-term debt at the Vroom, Inc. level [295]. - As of September 30, 2025, UACC had three Warehouse Credit Facilities with an aggregate borrowing capacity of $600 million, expiring between June 2026 and August 2027, to support operational needs [331]. - UACC's outstanding borrowings related to Warehouse Credit Facilities were $269.8 million, with an aggregate borrowing limit of $600.0 million [427]. - UACC entered into a Risk Retention Financing Facility, with outstanding borrowings of $23.1 million as of September 30, 2025, and pledged $29.9 million of retained beneficial interests as collateral [424]. - The company has renewed multiple Warehouse Credit Facilities, with significant terms remaining unchanged, except for increased minimum liquidity covenants [426]. Revenue and Income - Interest income for the three months ended September 30, 2025, was $44,829, a decrease of $5,384 or 10.7% compared to $50,213 for the same period in 2024 [344]. - Total interest expense decreased by $2,032 or 13.2% to $13,315 for the three months ended September 30, 2025, down from $15,347 in 2024 [344]. - Noninterest income totaled $9,511 for the three months ended September 30, 2025, down $1,210 or 11.3% from $10,721 in 2024 [344]. - Total noninterest income for the nine months ended September 30, 2025, increased by $11,698 or 65.4% to $29,578 compared to $17,880 in 2024 [345]. - CarStory revenue decreased by $1.6 million or 53.4% to $1.3 million for the three months ended September 30, 2025, from $2.9 million for the same period in 2024, primarily due to the loss of a major customer [372]. - CarStory revenue decreased by $2.8 million or 31.5% to $6.0 million for the nine months ended September 30, 2025, from $8.8 million for the same period in 2024, primarily due to a change in service scope and loss of a major customer [401]. Operational Changes - The company aims to achieve pre-COVID Cumulative Net Losses (CNL) or lower, grow origination with pre-COVID CNL or lower, and lower operating costs as part of its long-term strategic plan [314]. - The company plans to enhance its lending program by using advanced models and analytics to predict losses and drive profitable growth [319]. - The company launched a native consumer mobile app in September 2024 to improve customer engagement and communication [319]. - The company has discontinued reporting through its Ecommerce and Wholesale segments, now organized into two reportable segments: UACC and CarStory [341]. - Seasonal trends indicate that used vehicle sales peak early in the year, influenced by income tax refunds, with increased funding activity during the first quarter [334]. Market Conditions - UACC's credit losses have been adversely affected by higher interest rates, inflation, and vehicle depreciation, leading to increased delinquency rates and losses for the nine months ended September 30, 2025 [327]. - The automotive finance market is experiencing volatility due to macroeconomic factors, including sustained inflation and fluctuating interest rates, impacting consumer sentiment and financing accessibility [335]. - The ongoing geopolitical conflicts and potential government shutdowns pose risks to capital access and overall business operations [338][339]. Cash Flow and Liquidity - As of September 30, 2025, the company had cash and cash equivalents of $12.4 million and restricted cash of $55.0 million [414]. - UACC anticipates that existing cash and cash equivalents, along with credit agreements, will support operations for at least the next twelve months [420]. - Net cash provided by operating activities from continuing operations increased to $50.6 million for the nine months ended September 30, 2025, compared to a net cash utilized of $(154.2) million for the same period in 2024 [430]. - Net cash flows from investing activities shifted from a net cash provided of $92.1 million in 2024 to $(81.8) million utilized in 2025, primarily due to a $319.7 million increase in originations of finance receivables held for investment [432]. - Net cash flows from financing activities increased to $22.4 million for the nine months ended September 30, 2025, up from $7.5 million in 2024 [433]. Asset Valuation and Intangibles - Identified intangible assets total $14.2 million, primarily consisting of technology, trade names, trademarks, and customer relationships, with significant assumptions including royalty rates and discount rates [448]. - The royalty rate for technology-based intangibles valued using the relief from royalty income approach is estimated at 5.0%, with a discount rate of 25% [450]. - Lease liabilities are measured as the present value of remaining lease payments, with incremental borrowing rates ranging from approximately 6.2% to 7.6% [451]. - Right of use asset values are estimated based on the corresponding lease liabilities [451].