Vroom(US:VRM)2023-08-07 16:00Part I - Financial Information Financial Statements (unaudited) Vroom's Q2 2023 unaudited financials show decreased assets, increased liabilities, and a significant net loss on reduced revenue Condensed Consolidated Balance Sheets As of June 30, 2023, total assets decreased to $1.59 billion, liabilities increased to $1.25 billion, and equity declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $237,925 | $398,915 | | Inventory | $208,871 | $320,648 | | Total current assets | $889,573 | $1,220,109 | | Total assets | $1,591,869 | $1,619,027 | | Liabilities & Equity | | | | Vehicle floorplan | $132,480 | $276,988 | | Total current liabilities | $667,363 | $703,320 | | Total liabilities | $1,253,633 | $1,143,786 | | Total stockholders' equity | $338,236 | $475,241 | Condensed Consolidated Statements of Operations Q2 2023 revenues fell to $225.2 million with a $66.3 million net loss, reflecting a strategic shift prioritizing unit economics Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $225,178 | $475,437 | $421,645 | $1,399,212 | | Total gross profit | $46,001 | $66,357 | $84,806 | $147,997 | | Loss from operations | $(52,611) | $(100,079) | $(120,874) | $(415,992) | | Net loss | $(66,318) | $(115,089) | $(141,362) | $(425,548) | | Net loss per share | $(0.48) | $(0.83) | $(1.02) | $(3.09) | Condensed Consolidated Statements of Cash Flows H1 2023 net cash used in operations increased to $232.1 million, with overall cash decreasing by $167.8 million Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(232,125) | $(137,519) | | Net cash provided by (used in) investing activities | $94,694 | $(226,573) | | Net cash used in financing activities | $(30,348) | $(164,300) | | Net decrease in cash, cash equivalents and restricted cash | $(167,779) | $(528,392) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes revenue and unit sales declines to a strategic shift prioritizing unit economics, cost reduction, and liquidity maximization - The company's long-term roadmap prioritizes unit economics over growth, aims to significantly reduce operating expenses, and maximize liquidity254 - Vroom executed two reductions in force in January and April 2023, cutting approximately 395 employees combined, with expected annualized cost savings of $27.0 million and $15.0 million, respectively261262 - The company repurchased $32.8 million of its Convertible Senior Notes in H1 2023 for $13.2 million, recognizing a gain on debt extinguishment of $19.6 million260416 Key Operating Metrics Comparison | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Ecommerce units sold | 4,127 | 9,233 | 8,060 | 28,706 | | Vehicle gross profit per ecommerce unit | $290 | $2,166 | $75 | $1,100 | | Product gross profit per ecommerce unit | $2,664 | $1,463 | $2,683 | $1,263 | | Total gross profit per ecommerce unit | $2,954 | $3,629 | $2,758 | $2,363 | Results of Operations Q2 2023 total revenue fell 52.6% to $225.2 million, driven by declining ecommerce units, with SG&A expenses decreasing 43.2% Ecommerce Segment Performance - Q2 2023 vs Q2 2022 | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Ecommerce units sold | 4,127 | 9,233 | (55.3)% | | Vehicle revenue | $126,529K | $308,123K | (58.9)% | | Product revenue | $11,696K | $13,509K | (13.4)% | | Total ecommerce gross profit | $12,189K | $33,509K | (63.6)% | | Vehicle gross profit per unit | $290 | $2,166 | (86.6)% | | Product gross profit per unit | $2,664 | $1,463 | 82.1% | Wholesale Segment Performance - Q2 2023 vs Q2 2022 | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Wholesale units sold | 1,834 | 5,867 | (68.7)% | | Wholesale revenue | $30,800K | $82,901K | (62.8)% | | Wholesale gross loss | $(3,993)K | $(1,934)K | 106.5% | Retail Financing Segment Performance - Q2 2023 vs Q2 2022 | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Retail Financing revenue | $42,128K | $32,121K | 31.2% | | Retail Financing gross profit | $34,068K | $28,720K | 18.6% | - SG&A expenses decreased by $66.0 million (43.2%) in Q2 2023 compared to Q2 2022, primarily due to reductions in compensation & benefits, outbound logistics, and marketing372 Liquidity and Capital Resources As of June 30, 2023, Vroom held $237.9 million in cash, relying on credit facilities, and anticipates sufficient liquidity for the next twelve months - As of June 30, 2023, the company held $237.9 million in cash and cash equivalents and $66.3 million in restricted cash410 - The company has a committed credit line of up to $500.0 million under its 2022 Vehicle Floorplan Facility, maturing March 31, 2024418 - UACC has four warehouse credit facilities with an aggregate borrowing limit of $850.0 million, with $177.9 million outstanding as of June 30, 2023427 - Management believes existing cash and credit facilities are sufficient to support operations for at least the next twelve months411 Quantitative and Qualitative Disclosure About Market Risk The company's primary market risk is interest rate fluctuations on its variable-rate debt, totaling $310.4 million - The company's main market risk is interest rate fluctuations on its variable-rate debt, which includes the $132.5 million Vehicle Floorplan Facility and $177.9 million in Warehouse Credit Facilities440441 - A hypothetical 10% change in interest rates during H1 2023 would have changed interest expense by $1.1 million441 Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2023, with no material changes to internal controls - As of June 30, 2023, the Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level445 - No material changes were made to the internal control over financial reporting during the quarter ended June 30, 2023446 Part II - Other Information Legal Proceedings Vroom faces a securities class action, shareholder derivative lawsuits, and a Texas Attorney General petition regarding trade practices - The company is defending against a consolidated securities class action lawsuit (In re: Vroom, Inc. Securities Litigation) alleging violations of the Exchange Act and Securities Act447 - Multiple shareholder derivative lawsuits have been filed and are currently stayed pending the resolution of the main securities litigation448449 - The Attorney General of Texas filed a petition against the company alleging violations of the Texas Deceptive Trade Practices Act related to vehicle marketing, titling, and registration450 Risk Factors Key risks include potential Nasdaq delisting, $1.1 billion in indebtedness, and challenges with the UACC acquisition including rising credit losses - The company faces a risk of delisting from Nasdaq if its stock price fails to maintain the minimum $1.00 bid price, despite having regained compliance in June 2023454455 - As of June 30, 2023, the company had approximately $1.1 billion in consolidated indebtedness, which could limit operational flexibility and increase vulnerability to adverse economic conditions458 - The company may not realize the anticipated benefits of the UACC acquisition, which is critical to its long-term strategy, due to integration challenges and increased legal and regulatory scrutiny466 - UACC is experiencing higher credit losses and loss severity on its automotive finance receivables due to rising interest rates, inflation, and vehicle depreciation, which negatively impacts operating results and the ability to securitize loans on favorable terms468472477 Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities No material change occurred in the planned use of proceeds from the company's June 2020 IPO - There has been no material change in the planned use of proceeds from the company's June 2020 IPO478 Other Information On August 7, 2023, the company amended its 2022 Vehicle Floorplan Facility with Ally Bank and Ally Financial - On August 7, 2023, the company amended its 2022 Vehicle Floorplan Facility with Ally Bank and Ally Financial481 Exhibits This section indexes all exhibits filed with the Quarterly Report on Form 10-Q, including key agreements and officer certifications