VRM - Vroom Reports Third Quarter 2020 Results

Vroom Delivers Record Ecommerce Units and Gross Profit

Ecommerce Unit Sales Up 59% YoY

Ecommerce Gross Profit Up 120% YoY

Vroom, Inc. (NASDAQ:VRM), a leading e-commerce platform for buying and selling used vehicles, today announced financial results for the third quarter ended September 30, 2020 (“Q3 2020”).

HIGHLIGHTS OF THIRD QUARTER 2020

• 8,823 ecommerce units sold, up 59% YoY
• Ecommerce revenue of $221.8 million, up 25% YoY
• Ecommerce gross profit of $19.3 million, up 120% YoY

Paul Hennessy, Chief Executive Officer of Vroom, commented:

“I am very pleased with our results for the third quarter, in which we successfully managed the challenges presented by the COVID-19 pandemic, outperformed our plan, demonstrated the strength of our business model, and hit the accelerator on significantly scaling our business. By doing the things we said we would do -- adding vehicle inventory, increasing marketing, relying on data to drive decision making, and enhancing our customer experience -- we increased the velocity of the Vroom flywheel, drove conversion and increased GPPU. We will continue to execute our plan and invest in the growth of our business as we transform the market for buying and selling used vehicles.”

COVID-19 Update

Note: All sequential comparisons are on a current quarter over prior quarter basis.

After the initial disruption in our ecommerce operations due to the COVID-19 pandemic, consumer demand for used vehicles has returned to pre-COVID-19 levels and, in the three months ended September 30, 2020, we experienced continued strong consumer demand for our ecommerce solutions and contact-free delivery. Ecommerce units sold increased sequentially 31.4% to 8,823 units driven by increased consumer demand, higher inventory levels and increased marketing spend, and ecommerce revenue increased sequentially 26.3% to $221.8 million.

Ecommerce gross profit and gross profit per unit experienced strong sequential growth of 167.4% to $19.3 million and 103.5% to $2,188 per unit, respectively.

THIRD QUARTER 2020 FINANCIAL DISCUSSION

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

Ecommerce Results

Ecommerce Units

Ecommerce units sold increased 58.6% to 8,823 driven by increased consumer demand, higher inventory levels and increased marketing spend. Average monthly unique visitors to our platform increased 19.4% to 928,277.

Ecommerce Revenue

Ecommerce revenue increased 24.5% to $221.8 million.

• Ecommerce Vehicle revenue increased 22.6% to $214.0 million. The increase in ecommerce Vehicle revenue was primarily attributable to the increase in ecommerce units sold, partially offset by a decrease in the average selling price per unit, which decreased from $31,370 to $24,248. The decrease in average selling price was driven by demand predicted by our data analytics.
• Ecommerce Product revenue increased 117.0% to $7.8 million. The increase in ecommerce Product revenue was primarily attributable to the increase in ecommerce units sold, and further increased by an improvement in ecommerce Product revenue per unit, which increased from $648 to $886 per unit. The increase in ecommerce Product revenue per unit was driven by higher attachment rates, improved financing features in our ecommerce platform as well as our strategic partnerships.

Ecommerce Gross Profit

Ecommerce gross profit increased 120.0% to $19.3 million.

• Ecommerce Vehicle gross profit increased 122.1% to $11.5 million. The increase in ecommerce Vehicle gross profit was due to a $373 increase in ecommerce Vehicle gross profit per unit, driven primarily by improvements in inbound logistics and reconditioning costs and the increase in ecommerce units sold.
• Ecommerce Product gross profit increased 117.0% to $7.8 million. The increase in ecommerce Product gross profit was primarily attributable to the increase in ecommerce units sold, and further increased by an improvement in ecommerce Product gross profit per unit, which increased from $648 to $886 per unit. The increase in Product gross profit per unit was driven by higher attachment rates, improved financing features in our ecommerce platform as well as our strategic partnerships.

Ecommerce Gross Profit per Unit

Ecommerce gross profit per unit increased 38.7% to $2,188.

• Ecommerce Vehicle gross profit per unit increased 40.2% to $1,302, driven primarily by improvements in inbound logistics and reconditioning costs.
• Ecommerce Product gross profit per unit increased 36.7% to $886. The increase in Product gross profit per unit was driven by higher attachment rates, improved financing features in our ecommerce platform as well as our strategic partnerships.

Results by Segment

Total Units

Total units sold increased 15.3% to 16,452.

• Ecommerce units sold increased 58.6% to 8,823, as discussed above.
• TDA units sold decreased 55.4% to 1,463, primarily due to continued disruptions related to the COVID-19 pandemic in the Houston area.
• Wholesale units sold increased 13.8% to 6,166, primarily due to an increase of wholesale grade units purchased from consumers.

Total Revenue

Total revenue decreased 5.1% to $323.0 million.

• Ecommerce revenue increased 24.5% to $221.8 million, as discussed above.
• TDA revenue decreased 63.9% to $37.3 million. TDA revenue decreased primarily due to the decrease in TDA units sold and a lower average selling price per unit, which decreased from $30,236 to $24,316.
• Wholesale revenue increased 8.3% to $64.0 million. The increase in wholesale revenue was primarily attributable to the increase in wholesale units sold, partially offset by a decrease in wholesale average selling price per unit, which decreased from $10,896 to $10,375.

Total Gross Profit

Total gross profit increased 62.4% to $25.4 million.

• Ecommerce gross profit increased 120.0% to $19.3 million, as discussed above.
• TDA gross profit decreased 57.9% to $2.8 million. TDA gross profit decreased primarily due to lower TDA units sold and a decrease in TDA gross profit per unit of $146.
• Wholesale gross profit increased to $3.3 million. Wholesale gross profit increased primarily due to an increase in wholesale gross profit per unit of $496.

Total Gross Profit per Unit

Total gross profit per unit increased 40.8% to $1,547.

• Ecommerce gross profit per unit increased 38.7% to $2,188.
• TDA gross profit per unit decreased 7.4% to $1,828.
• Wholesale gross profit per unit increased to $542.

SG&A

Selling, general and administrative expenses increased 20.0% to $61.1 million. The increase was primarily due to a $3.6 million increase in stock-based compensation included within compensation and benefits, a $4.2 million increase in outbound logistics costs partially attributable to the growth in ecommerce units sold, which increased outbound logistics costs by $2.5 million, and increases in market rates of logistics providers, which increased outbound logistics costs by $1.7 million, and a $3.3 million increase in other selling, general and administrative expenses primarily related to additional insurance costs associated with being a publicly traded company. These increases were offset by a $1.7 million decrease in professional fees.

We expect selling, general and administrative expenses to increase in the future as we scale our business and sell more ecommerce units. We will also continue to invest in and improve our customer experience and invest in expanding our proprietary logistics network including our last-mile delivery operations.

Loss from Operations and Net Loss

Loss from operations slightly increased 0.3% to $36.9 million. Net loss decreased 4.8% to $37.9 million.

Non-GAAP Measures

In addition to our results determined in accordance with accounting principles generally accepted in the United States, or GAAP, we believe the following non-GAAP financial measures are useful in evaluating our operating performance: EBITDA, Adjusted EBITDA, Adjusted loss from operations, Non-GAAP net loss, Non-GAAP net loss per share and Non-GAAP net loss per share, as adjusted. 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 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 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 GAAP. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

We calculate EBITDA as net loss before interest expense, interest income, income tax expense and depreciation and amortization expense and we calculate Adjusted EBITDA as EBITDA adjusted to exclude the one-time, IPO related acceleration of non-cash stock-based compensation expense and the one-time, IPO related non-cash revaluation of a preferred stock warrant. We calculate Adjusted loss from operations as operating loss adjusted to exclude the one-time, IPO related acceleration of non-cash stock-based compensation expense and we calculate Non-GAAP net loss as net loss adjusted to exclude the one-time, IPO related acceleration of non-cash stock-based compensation expense and the one-time, IPO related non-cash revaluation of a preferred stock warrant. The following table presents a reconciliation of the Non-GAAP measures to the most directly comparable financial measures prepared in accordance with GAAP, for each of the periods presented.

EBITDA and Adjusted EBITDA

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.

Adjusted loss from operations

Non-GAAP net loss, Non-GAAP net loss per share and Non-GAAP net loss per share, as adjusted

Financial Outlook

We expect another quarter of significant year-over-year growth in ecommerce unit sales and revenue for Q4 2020 and continued strength in total ecommerce gross profit per unit. Through the third quarter, our year-to-date ecommerce units sold has grown 86% over the prior year. Combined with our strong sequential growth quarter to quarter, we believe we are on track for continued growth into 2021. For Q4 2020, we expect the following results:

• Ecommerce unit sales of 10,500 to 11,500, implying 25% sequential growth and Q4 year over year growth of 74% at the middle of the guidance range.
• Average ecommerce selling price per unit of $24,500 to $25,500 and average ecommerce gross profit per unit of $2,050 to $2,150.
• TDA unit sales of 1,400 to 1,600, average selling price per unit of $24,500 to $25,500 and average gross profit per unit of $1,650 to $1,750.
• Wholesale unit sales of 6,000 to 7,000, average selling price per unit of $9,500 to $10,500 and average gross profit per unit of breakeven to $100.
• Total revenue of $372 to $414 million.
• Total gross profit of $24 to $28 million.
• EBITDA of ($52) to ($44) million.
• Stock-based compensation expense of $4.3 million.
• Net loss per share of ($0.41) to ($0.35).

Prior to our IPO, our shares outstanding primarily consisted of shares of redeemable convertible preferred stock, which automatically converted to shares of common stock upon the consummation of our IPO. In addition, all warrants outstanding were exercised upon the IPO or shortly thereafter, and certain stock-based compensation shares were issued or vested upon the IPO. We expect the following number of GAAP weighted average shares outstanding for the remainder of 2020: