Vroom Announces First Quarter 2024 Results

Rhea-AI Summary

Vroom, Inc. (Nasdaq:VRM) announced its financial results for Q1 2024, revealing $91.0 million in cash, a $(44.7) million net loss, and $(32.2) million Adjusted EBITDA. The company completed the ecommerce wind-down and securitized $262.5 million in assets. The CEO is proud of the team's execution and focus on United Auto Credit (UACC). With actions to monetize the ecommerce platform, Vroom aims to enhance UACC and CarStory profitability.

Positive

• Successful completion of UACC securitization transaction

• Focus on UACC portfolio performance and profitability

• Monetization of ecommerce platform

Negative

• $(44.7) million net loss from continuing operations

• $(32.2) million Adjusted EBITDA

• Cash burn from ecommerce wind-down

Insights

Financial Analyst

Examining the financial results of Vroom, Inc., several critical figures stand out. The company ended the quarter with $91 million in cash and cash equivalents, which is a key liquidity indicator. However, the net loss from continuing operations expanded significantly to $(44.7) million, an increase of 188.8% compared to the previous year. Adjusted EBITDA, a profitability measure that excludes certain expenses, was $(32.2) million, which may indicate operational challenges. Spotlighting the balance sheet, the successful completion of a securitization transaction added $262.5 million of sold securities, which potentially strengthens their financial positioning.

From an investor's perspective, the deepening losses and negative Adjusted EBITDA might be concerning, reflecting operational inefficiencies or market pressures. However, efforts to enhance UACC's profitability and the monetization of the ecommerce platform could suggest forward-looking strategies to stabilize and grow the business. It's essential to monitor the balance between cost management initiatives and strategic investments for future profitability.

Market Research Analyst

The strategic shift in Vroom's operations, indicated by the wind-down of their ecommerce segment, reflects a pivot in business model focus. The alignment of reporting segments with United Auto Credit (UACC) and CarStory suggests a narrowed concentration on financing and data analytics. Vroom's emphasis on the performance of its loan origination at UACC signals a commitment to improving its core financial services vertical. It is important to highlight the 48.6% year-over-year increase in interest income, which suggests growing financing activity.

However, this comes alongside a sharp 92.6% increase in total interest expense, which could erode net interest income over time. The reported 95.9% rise in net realized and unrealized losses, net of recoveries, is also a potential red flag, as it may reflect increasing credit risk within their financing operations. Investors might find solace in the double-digit interest income growth, yet the accompanying rise in credit losses and interest expenses could temper optimism regarding UACC's ability to drive future profitability.

Debt Analyst

The detailed financials reveal a significant increase in interest expenses, mainly due to the warehouse credit facility, which saw a 205.6% jump. This suggests a substantial increase in borrowing costs, which could be attributed to both an increase in borrowed volume and potentially higher interest rates. The securitization debt interest expense also saw an uptick of 12.1%, indicative of the company's reliance on debt financing to fund its operations.

Investors should consider the impact of these increased financing costs on Vroom's debt servicing ability. The 707.4% increase in the provision for income taxes, despite the larger operating loss, indicates a less favorable tax position. Overall, the financial health of Vroom seems challenged by higher leverage and interest burdens. Careful scrutiny will be required to assess the sustainability of their financial strategy and the potential risks to debt repayment capacity.

Successfully Completed UACC Securitization Transaction in April 2024

Continued Progress on UACC Origination Performance

NEW YORK--(BUSINESS WIRE)-- Vroom, Inc. (Nasdaq:VRM) today announced financial results for the first quarter ended March 31, 2024.

HIGHLIGHTS OF FIRST QUARTER 2024

• $91.0 million cash and cash equivalents as of March 31, 2024
• $(44.7) million net loss from continuing operations
• $(32.2) million Adjusted EBITDA
• Substantially completed the ecommerce wind-down
• Adopted new reporting segments to align with continuing operations at United Auto Credit (UACC) and CarStory

Tom Shortt, the Company’s Chief Executive Officer, said “As we previously announced, our ecommerce wind-down was substantially completed during the first quarter of 2024. I am extremely proud of our team’s timely and orderly execution of the wind-down and continued focus on strengthening UACC’s operations. We have focused on portfolio performance at UACC and currently expect originations since early 2023 to perform at a level that enables UACC to drive toward profitability. We continue to take other actions to maximize stakeholder value by seeking to monetize our ecommerce platform and grow and enhance the profitability of UACC and CarStory.”

Bob Krakowiak, Vroom’s Chief Financial Officer, commented, “We ended the quarter with cash and cash equivalents of approximately $91 million. The cash burn was primarily a result of the ecommerce wind-down, as we paid severance and other personnel-related costs and incurred exit costs associated with early termination or modification of ecommerce contracts and leases. I am pleased with the completion of UACC’s 2024-1 securitization transaction, in which $262.5 million of rated asset-backed securities were sold in April 2024, and $37.5 million of non-investment grade securities initially retained were subsequently sold in early May 2024.”

FIRST QUARTER 2024 FINANCIAL DISCUSSION

All financial comparisons are on a year-over-year basis unless otherwise noted.

		Three Months Ended March 31,
		2024				2023				$ Change				% Change
Interest income		$	51,077			$	34,368			$	16,709				48.6	%
Interest expense:
Warehouse credit facility			9,471				3,099				6,372				205.6	%
Securitization debt			4,869				4,345				524				12.1	%
Total interest expense			14,340				7,444				6,897				92.6	%
Net interest income			36,737				26,924				9,812				36.4	%
Realized and unrealized losses, net of recoveries			30,819				15,728				15,091				95.9	%
Net interest income after losses and recoveries			5,918				11,196				(5,279	)			(47.1	)%
Noninterest (loss) income:
Servicing income			2,019				2,854				(835	)			(29.3	)%
Warranties and GAP income, net			(9,642	)			2,835				(12,477	)			(440.1	)%
CarStory revenue			2,979				3,170				(191	)			(6.0	)%
Gain on debt extinguishment			—				8,709				(8,709	)			(100.0	)%
Other income			2,784				3,032				(248	)			(8.2	)%
Total noninterest (loss) income			(1,860	)			20,600				(22,460	)			(109.0	)%
Expenses:
Compensation and benefits			24,110				23,221				889				3.8	%
Professional fees			3,343				4,973				(1,630	)			(32.8	)%
Software and IT costs			4,622				5,246				(624	)			(11.9	)%
Depreciation and amortization			7,626				7,232				394				5.4	%
Interest expense on corporate debt			1,391				1,340				51				3.8	%
Impairment charges			2,752				—				2,752				100.0	%
Other expenses			4,454				5,199				(745	)			(14.3	)%
Total expenses			48,298				47,211				1,087				2.3	%
Loss from continuing operations before provision for income taxes			(44,240	)			(15,415	)			(28,825	)			187.0	%
Provision for income taxes from continuing operations			436				54				382				707.4	%
Net loss from continuing operations		$	(44,676	)		$	(15,469	)		$	(29,207	)			188.8	%
Net loss from discontinued operations		$	(22,941	)		$	(59,272	)		$	36,331				61.3	%
Net loss		$	(67,617	)		$	(74,741	)		$	7,124				9.5	%

Results by Segment

UACC

		Three Months Ended March 31,
		2024				2023				Change				% Change
		(in thousands, except unit data and average days to sale)
Interest income		$	51,541			$	35,299			$	16,242				46.0	%
Interest expense:
Warehouse credit facility			9,471				3,099				6,372				205.6	%
Securitization debt			4,869				4,345				524				12.1	%
Total interest expense			14,340				7,444				6,896				92.6	%
Net interest income			37,201				27,855				9,346				33.6	%
Realized and unrealized losses, net of recoveries			27,761				12,272				15,489				126.2	%
Net interest income after losses and recoveries			9,439				15,582				(6,143	)			(39.4	)%
Noninterest income:
Servicing income			2,019				2,854				(835	)			(29.3	)%
Warranties and GAP income, net			1,610				2,203				(593	)			(26.9	)%
Other income			2,470				1,054				1,416				134.3	%
Total noninterest income			6,099				6,111				(12	)			(0.2	)%
Expenses:
Compensation and benefits			18,788				18,537				252				1.4	%
Professional fees			876				2,541				(1,664	)			(65.5	)%
Software and IT costs			3,097				2,705				392				14.5	%
Depreciation and amortization			6,021				5,627				394				7.0	%
Interest expense on corporate debt			471				197				274				139.1	%
Impairment charges			2,752				—				2,752				100.0	%
Other expenses			2,523				2,420				103				4.3	%
Total expenses			34,529				32,026				2,503				7.8	%
Adjusted EBITDA		$	(10,147	)		$	(4,467	)		$	(5,680	)			127.1	%
Interest income on cash and cash equivalents		$	(568	)		$	(448	)			(120	)			26.7	%
Stock compensation expense		$	168			$	490				(322	)			(65.8	)%

CarStory

		Three Months Ended March 31,
		2024				2023				Change				% Change
		(in thousands, except unit data and average days to sale)
Noninterest income:
CarStory revenue		$	2,979			$	3,170			$	(191	)			(6.0	)%
Other income			173				48				125				260.4	%
Total noninterest income			3,152				3,218				(66	)			(2.1	)%
Expenses:
Compensation and benefits			2,214				2,401				(187	)			(7.8	)%
Professional fees			122				177				(55	)			(31.1	)%
Software and IT costs			167				174				(7	)			(4.0	)%
Depreciation and amortization			1,605				1,605				-				0.0	%
Other expenses			118				149				(31	)			(20.8	)%
Total expenses			4,225				4,505				(280	)			(6.2	)%
Adjusted EBITDA		$	559			$	567			$	(8	)			(1.4	)%
Interest income on cash and cash equivalents		$	(173	)		$	(46	)			(126	)			272.1	%
Stock compensation expense		$	200			$	296				(95	)			(32.3	)%

Corporate

		Three Months Ended March 31,
		2024				2023				Change				% Change
		(in thousands, except unit data and average days to sale)
Interest income		$	(464	)		$	(931	)		$	467				50.2	%
Realized and unrealized losses, net of recoveries			3,058				3,456				(398	)			(11.5	)%
Net interest income after losses and recoveries			(3,521	)			(4,387	)			865				19.7	%
Noninterest (loss) income:
Warranties and GAP income, net		$	(11,252	)		$	632			$	(11,884	)			(1,880.4	)%
Gain on debt extinguishment			—				8,709				(8,709	)			(100.0	)%
Other income			141				1,930				(1,789	)			(92.7	)%
Total noninterest (loss) income			(11,111	)			11,271				(22,382	)			(198.6	)%
Expenses:
Compensation and benefits			3,109				2,284				824				36.1	%
Professional fees			2,345				2,256				89				3.9	%
Software and IT costs			1,358				2,366				(1,009	)			(42.6	)%
Interest expense on corporate debt			920				1,143				(223	)			(19.5	)%
Other expenses			1,813				2,631				(819	)			(31.1	)%
Total expenses			9,544				10,681				(1,137	)			(10.6	)%
Adjusted EBITDA		$	(22,564	)		$	(12,398	)		$	(10,166	)			82.0	%
Interest income on cash and cash equivalents		$	(264	)		$	(1,930	)			1,666				86.3	%
Stock compensation expense		$	956			$	894				63				7.0	%

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 and Adjusted EBITDA. 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 and Adjusted EBITDA are supplemental performance measures that our management uses to assess our operating performance and the operating leverage in our business. Because EBITDA and Adjusted EBITDA facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes.

EBITDA and Adjusted EBITDA

We calculate EBITDA as net loss before interest expense on corporate debt, interest income on cash and cash equivalents, income tax expense and depreciation and amortization expense.

We calculate Adjusted EBITDA as EBITDA adjusted to exclude stock compensation expense, gain on debt extinguishment and long-lived asset impairment charges.

The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net loss, which is the most directly comparable U.S. GAAP measure:

		Three Months Ended March 31,
		2024				2023
		(in thousands)
Net loss from continuing operations		$	(44,676	)		$	(15,469	)
Adjusted to exclude the following:
Interest expense on corporate debt			1,391				1,340
Interest income on cash and cash equivalents			(1,005	)			(2,425	)
Provision for income taxes			436				54
Depreciation and amortization			7,626				7,232
EBITDA		$	(36,228	)		$	(9,268	)
Stock compensation expense			1,324				1,679
Gain on debt extinguishment			—				(8,709	)
Impairment charges			2,752				—
Adjusted EBITDA		$	(32,152	)		$	(16,298	)

About Vroom (Nasdaq: VRM)

Vroom owns and operates United Auto Credit Corporation (UACC), a leading indirect automotive lender serving the independent and franchise dealer market nationwide, and CarStory, a leader in AI-powered analytics and digital services for automotive retail. During fiscal 2023, Vroom also operated an end-to-end ecommerce platform to buy and sell used vehicles. Pursuant to its previously announced Value Maximization Plan, Vroom discontinued its ecommerce operations and used vehicle dealership business.

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 the potential impacts of the execution of and the expected benefits and cost-savings, if any, from our Value Maximization Plan, including the completion of the wind-down of the ecommerce business, our expectations regarding United Auto Credit Corporation and CarStory, the impact from the UACC’s 2024-1 securitization transaction, and future results of operations and financial position, including our liquidity outlook for 2024. 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, 2023, as updated by our Quarterly report on Form 10-Q for the quarter ended March 31, 2023, 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.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
		As of March 31,				As of December 31,
		2024				2023
ASSETS
Cash and cash equivalents		$	90,990			$	135,585
Restricted cash (including restricted cash of consolidated VIEs of $48.1 million and $49.1 million, respectively)			49,516				73,234
Finance receivables at fair value (including finance receivables of consolidated VIEs of $381.3 million and $341.4 million, respectively)			421,279				348,670
Finance receivables held for sale, net (including finance receivables of consolidated VIEs of $450.0 million and $457.2 million, respectively)			454,189				503,546
Interest receivable (including interest receivables of consolidated VIEs of $13.4 million and $13.7 million, respectively)			14,142				14,484
Property and equipment, net			2,414				4,982
Intangible assets, net			125,136				131,892
Operating lease right-of-use assets			6,751				7,063
Other assets (including other assets of consolidated VIEs of $11.4 million and $13.3 million, respectively)			39,708				59,429
Assets from discontinued operations			18,142				196,537
Total assets		$	1,222,267			$	1,475,422
LIABILITIES AND STOCKHOLDERS’ EQUITY
Warehouse credit facilities of consolidated VIEs		$	516,276			$	421,268
Long-term debt (including securitization debt of consolidated VIEs of $238.0 million and $314.1 million at fair value, respectively)			548,142				626,583
Operating lease liabilities			9,809				10,459
Other liabilities (including other liabilities of consolidated VIEs of $16.0 million and $14.3 million, respectively)			61,260				61,321
Liabilities from discontinued operations			25,293				228,120
Total liabilities			1,160,780				1,347,751
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, $0.001 par value; 500,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 1,795,626 and 1,791,286 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively			2				2
Additional paid-in-capital			2,089,814				2,088,381
Accumulated deficit			(2,028,329	)			(1,960,712	)
Total stockholders’ equity			61,487				127,671
Total liabilities and stockholders’ equity		$	1,222,267			$	1,475,422

VROOM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
		Three Months Ended March 31,
		2024				2023
Interest income		$	51,077			$	34,368
Interest expense:
Warehouse credit facility			9,471				3,099
Securitization debt			4,869				4,345
Total interest expense			14,340				7,444
Net interest income			36,737				26,924
Realized and unrealized losses, net of recoveries			30,819				15,728
Net interest income after losses and recoveries			5,918				11,196
Noninterest (loss) income:
Servicing income			2,019				2,854
Warranties and GAP income, net			(9,642	)			2,835
CarStory revenue			2,979				3,170
Gain on debt extinguishment			—				8,709
Other income			2,784				3,032
Total noninterest (loss) income			(1,860	)			20,600
Expenses:
Compensation and benefits			24,110				23,221
Professional fees			3,343				4,973
Software and IT costs			4,622				5,246
Depreciation and amortization			7,626				7,232
Interest expense on corporate debt			1,391				1,340
Impairment charges			2,752				—
Other expenses			4,454				5,199
Total expenses			48,298				47,211
Loss from continuing operations before provision for income taxes			(44,240	)			(15,415	)
Provision for income taxes from continuing operations			436				54
Net loss from continuing operations		$	(44,676	)		$	(15,469	)
Net loss from discontinued operations		$	(22,941	)		$	(59,272	)
Net loss		$	(67,617	)		$	(74,741	)
Net loss per share attributable to common stockholders, continuing operations		$	(24.90	)		$	(8.93	)
Net loss per share attributable to common stockholders, discontinued operations		$	(12.79	)		$	(34.23	)
Total net loss per share attributable to common stockholders, basic and diluted		$	(37.68	)		$	(43.16	)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted			1,794,303				1,731,636

VROOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
		Three Months Ended March 31,
		2024				2023
Operating activities
Net loss from continuing operations		$	(44,676	)		$	(15,469	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment charges			2,752				—
Profit share receivable			9,642				—
Gain on debt extinguishment			—				(8,709	)
Depreciation and amortization			7,626				7,224
Amortization of debt issuance costs			843				802
Losses on finance receivables and securitization debt, net			40,163				16,603
Stock-based compensation expense			1,324				1,679
Provision to record finance receivables held for sale at lower of cost or fair value			306				(1,251	)
Amortization of unearned discounts on finance receivables at fair value			(4,792	)			(5,320	)
Other, net			(1,921	)			(3,256	)
Changes in operating assets and liabilities:
Finance receivables, held for sale
Originations of finance receivables held for sale			(130,404	)			(143,174	)
Principal payments received on finance receivables held for sale			40,387				20,731
Other			404				1,850
Interest receivable			342				(3,737	)
Other assets			3,022				7,069
Other liabilities			(61	)			(6,740	)
Net cash used in operating activities from continuing operations			(75,043	)			(131,698	)
Net cash provided by operating activities from discontinued operations			98,167				46,677
Net cash provided by (used in) operating activities			23,124				(85,021	)
Investing activities
Finance receivables at fair value
Originations of finance receivables at fair value			—				(3,392	)
Principal payments received on finance receivables at fair value			35,195				41,850
Consolidation of VIEs			—				11,409
Principal payments received on beneficial interests			773				2,144
Purchase of property and equipment			(644	)			(814	)
Net cash provided by investing activities from continuing operations			35,324				51,197
Net cash provided by (used in) investing activities from discontinued operations			5,747				(4,379	)
Net cash provided by investing activities			41,071				46,818
Financing activities
Proceeds from borrowings under secured financing agreements			—				238,735
Principal repayment under secured financing agreements			(73,647	)			(42,784	)
Principal repayments of financing of beneficial interests in securitizations			(2,651	)			—
Proceeds from warehouse credit facilities			125,100				135,900
Repayments of warehouse credit facilities			(30,092	)			(241,351	)
Repurchases of convertible senior notes			—				(5,883	)
Other financing activities			(40	)			(156	)
Net cash provided by financing activities from continuing operations			18,670				84,461
Net cash used in financing activities from discontinued operations			(151,178	)			(129,560	)
Net cash used in financing activities			(132,508	)			(45,099	)
Net decrease in cash, cash equivalents and restricted cash			(68,313	)			(83,302	)
Cash, cash equivalents and restricted cash at the beginning of period			208,819				472,010
Cash, cash equivalents and restricted cash at the end of period		$	140,506			$	388,708

VROOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(in thousands)
(unaudited)
Supplemental disclosure of cash flow information:
Cash paid for interest		$	13,497			$	6,347
Supplemental disclosure of non-cash investing and financing activities:
Finance receivables from consolidation of 2022-2 securitization transaction		$	—			$	180,706
Elimination of beneficial interest from the consolidation of 2022-2 securitization transaction		$	—			$	9,811
Securitization debt from consolidation of 2022-2 securitization transaction		$	—			$	186,386
Reclassification of finance receivables held for sale to finance receivables at fair value, net		$	—			$	248,081

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240510890980/en/

Investor Relations:

Vroom

Jon Sandison

investors@vroom.com

Source: Vroom, Inc.

FAQ

What were Vroom's cash equivalents as of March 31, 2024?

Vroom reported $91.0 million in cash and cash equivalents as of March 31, 2024.

What was Vroom's net loss from continuing operations in Q1 2024?

Vroom incurred a net loss of $(44.7) million from continuing operations in the first quarter of 2024.

What actions did Vroom take to maximize stakeholder value?

Vroom focused on portfolio performance at UACC, aimed to monetize the ecommerce platform, and enhance the profitability of UACC and CarStory to maximize stakeholder value.