UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39315

VROOM, INC.

(Exact name of registrant as specified in its charter)

Delaware	90-1112566
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

3600 W Sam Houston Pkwy S, Floor 4

Houston, Texas 77042

(Address of principal executive offices) (Zip code)

(518) 535-9125

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	VRM	Nasdaq Global Select

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 4, 2022, 138,109,097 shares of the registrants’ common stock were outstanding.

TABLE OF CONTENTS

		Page
Part I - Financial Information		6
Item 1.	Financial Statements (unaudited)	6
	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (unaudited)	6
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021 (unaudited)	7
	Condensed Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months Ended June 30, 2022 and 2021 (unaudited)	8
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 (unaudited)	9
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	42
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	74
Item 4.	Controls and Procedures	74
Part II - Other Information		75
Item 1.	Legal Proceedings	75
Item 1A.	Risk Factors	77
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	114
Item 3.	Defaults Upon Senior Securities	114
Item 4.	Mine Safety Disclosures	114
Item 5.	Other Information	114
Item 6.	Exhibits	115
	Signatures	118

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding general economic and market conditions, our future results of operations and financial condition, business strategy, and plans and objectives of management for future operations, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as "anticipate," "believe," "contemplate," "continue," "could," "design," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "project," "should," "target," "will," "would," or the negative of these terms or other similar terms or expressions, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available. These forward-looking statements are subject to a number of known and unknown risks, uncertainties, assumptions, 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, including risks described in the section titled "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q.

Other sections of this Quarterly Report on Form 10-Q include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report or to conform these statements to actual results or to changes in our expectations. You should read this Quarterly Report on Form 10-Q and the documents that we reference or incorporate by reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this report with the understanding that our actual future results, levels of activity, performance, and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

3

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include, but are not limited to, the following:

•we may not successfully execute or achieve the expected benefits of our previously announced Realignment Plan and other cost saving measures we may take in the future, and our efforts may result in further actions and may adversely affect our business, financial condition and results of operations;

•despite the cost saving measures, reduced growth rates and increased focus on liquidity and profitability contemplated by the Realignment Plan, we may need to raise additional capital through debt or equity financings to achieve our business objectives and there can be no assurance that such financings will be available in amounts or on terms acceptable to us, if at all;

•the impact of the COVID-19 pandemic;

•general business and economic conditions and risks related to the larger automotive ecosystem, including consumer demand;

•we have a history of losses and we may not achieve or maintain profitability in the future;

•we may not be able to generate sufficient revenue to generate positive cash flow on a sustained basis;

•our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our debt obligations;

•we have a limited operating history and are still building out our foundational systems;

•our recent, rapid growth is not indicative of our near term growth under our Realignment Plan and, when we return to rapid growth, we may not be able to manage our growth effectively;

•we may be unable to successfully integrate the United Auto Credit Corporation ("UACC") business into our business and develop UACC into a captive lending operation for Vroom, or realize the anticipated benefits of the UACC Acquisition or those benefits could take longer than anticipated;

•UACC's ability to sell automotive finance receivables and generate gains on sales of these finance receivables may decline in the future; any material reduction could harm our business, results of operations, and financial condition;

•we rely on third-party vendors for key components of our business, which exposes us to increased risks;

•we have entered into outsourcing arrangements with third parties related to our customer experience team, and any difficulties experienced in these arrangements could result in an interruption of our ability to sell our vehicles and value-added products;

•our business, sales and results of operations are materially affected by our customer experience, our reputation and our brand;

•we face a variety of risks associated with the operation of our vehicle reconditioning centers by us and our third-party service providers, any of which could materially and adversely affect our business, financial condition and results of operations;

4

•we currently rely heavily on third-party carriers to transport our vehicle inventory throughout the United States. Thus, we are subject to business risks and costs associated with such carriers and with the transportation industry, many of which are out of our control;

•we are optimizing our proprietary logistics operations, including vehicle pick-ups and delivery from our last mile hubs and line haul transportation of vehicles between our last mile hubs, which will further expose us to increased risks related to ownership of infrastructure and the transportation of vehicles;

•the current geographic concentration where we provide reconditioning services and store inventory and where UACC has a high concentration of borrowers creates an exposure to local and regional downturns or severe weather or catastrophic occurrences that may materially and adversely affect our business, financial condition and results of operations;

•if we or our third-party providers sustain cyber-attacks or other privacy or data security incidents that result in security breaches, we could suffer a loss of sales and increased costs, exposure to significant liability, reputational harm and other negative consequences;

•we operate in a highly regulated industry and are subject to a wide range of federal, state and local laws and regulations and failure to comply with these laws and regulations could have a material adverse effect on our business, financial condition and results of operations;

•we are, and may in the future be, subject to legal proceedings in the ordinary course of our business. If the outcomes of these proceedings are adverse to us, it could have a material adverse effect on our business, financial condition and results of operations; and

•our actual operating results may differ significantly from our guidance.

5

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

VROOM, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

	As of			As of
	June 30,			December 31,
	2022			2021
ASSETS
Current Assets:
Cash and cash equivalents	$	532,642		$	1,132,325
Restricted cash (including restricted cash of consolidated VIEs of $33.5 million and $0 million, respectively)		153,741			82,450
Accounts receivable, net of allowance of $19.5 million and $8.9 million, respectively		60,122			105,433
Finance receivables at fair value (including finance receivables of consolidated VIEs of $13.6 million and $0 million, respectively)		14,461			—
Finance receivables held for sale, net (including finance receivables of consolidated VIEs of $253.1 million and $0 million, respectively)		295,303			—
Inventory		535,772			726,384
Beneficial interests in securitizations		13,432			—
Prepaid expenses and other current assets		61,430			55,700
Total current assets		1,666,903			2,102,292
Finance receivables at fair value (including finance receivables of consolidated VIEs of $164.6 million and $0 million, respectively)		213,323			—
Property and equipment, net		49,836			37,042
Intangible assets, net		172,425			28,207
Goodwill		—			158,817
Operating lease right-of-use assets		11,281			15,359
Other assets		28,531			25,033
Total assets	$	2,142,299		$	2,366,750
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	43,631		$	52,651
Accrued expenses		107,091			121,508
Vehicle floorplan		422,452			512,801
Warehouse credit facilities of consolidated VIEs		210,577			—
Current portion of securitization debt of consolidated VIEs at fair value		115,325			—
Deferred revenue		17,800			75,803
Operating lease liabilities, current		7,097			6,889
Other current liabilities		22,139			57,604
Total current liabilities		946,112			827,256
Long term debt, net of current portion (including securitization debt of consolidated VIEs of $51.8 million and $0 million at fair value, respectively)		674,331			610,618
Operating lease liabilities, excluding current portion		8,347			9,592
Other long-term liabilities		18,458			4,090
Total liabilities		1,647,248			1,451,556
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value; 500,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 138,102,755 and 137,092,891 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		135			135
Additional paid-in-capital		2,069,246			2,063,841
Accumulated deficit		(1,574,330	)		(1,148,782	)
Total stockholders’ equity		495,051			915,194
Total liabilities and stockholders’ equity	$	2,142,299		$	2,366,750

See accompanying notes to these unaudited condensed consolidated financial statements.

6

VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share amounts)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenue:
Retail vehicle, net	$	341,724		$	608,116		$	1,048,910		$	1,062,439
Wholesale vehicle		82,901			128,108			222,885			246,132
Product, net		14,324			22,306			38,773			37,878
Finance		32,121			—			79,808			—
Other		4,367			3,360			8,836			6,559
Total revenue		475,437			761,890			1,399,212			1,353,008
Cost of sales:
Retail vehicle		319,903			577,636			1,015,412			1,012,903
Wholesale vehicle		84,834			119,592			227,571			237,898
Finance		3,402			—			6,126			—
Other		941			1,534			2,106			2,903
Total cost of sales		409,080			698,762			1,251,215			1,253,704
Total gross profit		66,357			63,128			147,997			99,304
Selling, general and administrative expenses		152,990			123,898			340,984			232,764
Depreciation and amortization		10,039			3,058			17,895			5,900
Impairment charges		3,407			—			205,110			—
Loss from operations		(100,079	)		(63,828	)		(415,992	)		(139,360	)
Interest expense		9,533			3,880			18,913			7,692
Interest income		(3,935	)		(2,062	)		(7,887	)		(4,358	)
Other loss (income), net		9,156			(33	)		21,514			(48	)
Loss before provision for income taxes		(114,833	)		(65,613	)		(448,532	)		(142,646	)
Provision (benefit) for income taxes		256			194			(22,984	)		350
Net loss	$	(115,089	)	$	(65,807	)	$	(425,548	)	$	(142,996	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.83	)	$	(0.48	)	$	(3.09	)	$	(1.05	)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted		138,075,210			136,507,177			137,667,419			136,002,344

See accompanying notes to these unaudited condensed consolidated financial statements.

7

VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2020		134,043,969	$	132	$	2,004,841	$	(777,871	)	$	1,227,102
Issuance of common stock for acquisition of business		1,072,117	$	1	$	39,029	$	—		$	39,030
Fair value of unvested stock options assumed in acquisition of business		—		—		1,017		—			1,017
Stock-based compensation		—		—		2,820		—			2,820
Exercise of stock options		687,336		1		2,820		—			2,821
Vesting of restricted stock units		499,879		—		—		—			—
Net loss		—		—		—		(77,189	)		(77,189	)
Balance at March 31, 2021		136,303,301	$	134	$	2,050,527	$	(855,060	)	$	1,195,601
Stock-based compensation		—	$	—	$	5,392	$	—		$	5,392
Exercise of stock options		395,491		—		1,560		—			1,560
Vesting of restricted stock units		18,555		—		—		—			—
Net loss		—		—		—		(65,807	)		(65,807	)
Balance at June 30, 2021		136,717,347	$	134	$	2,057,479	$	(920,867	)	$	1,136,746
	Common Stock				Additional Paid-in		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balance at December 31, 2021		137,092,891	$	135	$	2,063,841	$	(1,148,782	)	$	915,194
Stock-based compensation		—	$	—	$	3,629	$	—		$	3,629
Vesting of restricted stock units		602,630		—		—		—			—
Net loss		—		—		—		(310,459	)		(310,459	)
Balance at March 31, 2022		137,695,521	$	135	$	2,067,470	$	(1,459,241	)	$	608,364
Stock-based compensation		—	$	—	$	1,776	$	—		$	1,776
Vesting of restricted stock units		50,516		—		—		—			—
Issuance of restricted stock purchase agreement		356,718		—		—		—			—
Net loss		—		—		—		(115,089	)		(115,089	)
Balance at June 30, 2022		138,102,755	$	135	$	2,069,246	$	(1,574,330	)	$	495,051

See accompanying notes to these unaudited condensed consolidated financial statements.

8

VROOM, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2022			2021
Operating activities
Net loss	$	(425,548	)	$	(142,996	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment charges		205,110			—
Depreciation and amortization		18,010			6,028
Amortization of debt issuance costs		2,523			698
Realized gain on the 2022-1 securitization transaction		(29,617	)		—
Deferred taxes		(23,855	)		—
Losses on finance receivables and securitization debt, net		29,457			—
Stock-based compensation expense		5,405			8,212
Provision to record inventory at lower of cost or net realizable value		(2,006	)		3,093
Other, net		3,466			2,818
Changes in operating assets and liabilities:
Finance receivables, held for sale
Originations of finance receivables held for sale		(319,314	)		—
Principal payments received on finance receivables held for sale		23,179			—
Proceeds from sale of finance receivables held for sale, net		271,820			—
Other		(4,011	)		—
Accounts receivable		34,192			(41,393	)
Inventory		192,618			(99,412	)
Prepaid expenses and other current assets		13,513			(26,669	)
Other assets		(1,670	)		(3,948	)
Accounts payable		(15,352	)		36,507
Accrued expenses		(23,832	)		26,306
Deferred revenue		(58,003	)		16,788
Other liabilities