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

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

(Exact ~~name~~Name of ~~registrant~~Registrant as ~~specified~~Specified in ~~its charter)~~Its Charter)

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

Indicate by check mark whether the ~~registrant~~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~~Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒No☐ 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.

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 12, 2020, 119,336,588~~November 3, 2023, 139,769,070 shares of the registrants’ common stock were outstanding.

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,”~~"contemplate," "continue," "could," "design," "estimate," "expect," "intend," "may," "plan," "potentially," "predict," "project," "should," ~~“target,”~~ "target," "will," ~~“would,”~~ "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, regarding, among other things:~~10-Q.

~~We caution you that the foregoing list does not contain all of the forward-looking statements made 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.

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:

As of
December 31,

As of
June 30,

2019

2020

ASSETS

Current Assets:

Cash and cash equivalents

$
217,734

$
651,035

Restricted cash

1,853

21,853

Accounts receivable, net of allowance of $789 and $1,135, respectively

30,848

15,287

Inventory

205,746

141,063

Prepaid expenses and other current assets

9,149

17,808

Total current assets

465,330

847,046

Property and equipment, net

7,828

9,783

Intangible assets, net

572

297

Goodwill

78,172

78,172

Operating lease right-of-use assets

—

15,437

Other assets

11,485

12,472

Total assets

$
563,387

$
963,207

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
   AND STOCKHOLDERS’ (DEFICIT) EQUITY

Current Liabilities:

Accounts payable

$
18,987

$
20,133

Accrued expenses

38,491

40,898

Vehicle floorplan

173,461

109,783

Deferred revenue

17,323

15,488

Operating lease liabilities, current

—

4,640

Other current liabilities

11,572

13,115

Total current liabilities

259,834

204,057

Operating lease liabilities, excluding current portion

—

11,750

Other long-term liabilities

3,073

1,965

Total liabilities

262,907

217,772

Commitments and contingencies (Note 8)

Redeemable convertible preferred stock, $0.001 par value; 86,123,364
   and 10,000,000 shares authorized as of December 31, 2019 and June 30, 2020,
   respectively; 83,568,628 and zero shares issued and outstanding as of
   December 31, 2019 and June 30, 2020, respectively

874,332

—

Stockholders’ (deficit) equity:

Common stock, $0.001 par value; 113,443,854 and 500,000,000 shares authorized as of
   December 31, 2019 and June 30, 2020, respectively; 8,650,922 and 119,336,588 shares
   issued and outstanding as of December 31, 2019 and June 30, 2020, respectively

8

119

Additional paid-in-capital

—

1,424,675

Accumulated deficit

(573,860
)

(679,359
)
Total stockholders’ (deficit) equity

(573,852
)

745,435

Total liabilities, redeemable convertible preferred stock and stockholders’ (deficit) equity

$
563,387

$
963,207

See accompanyingnotes to these unaudited condensed consolidated financial statements.


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2020			2019			2020			2023			2022			2023			2022
Revenue:
Retail vehicle, net	$	200,402		$	196,150		$	379,152		$	504,862		$	147,710		$	234,353		$	419,548		$	1,283,263
Wholesale vehicle		54,531			50,921			106,651			106,497			30,898			47,604			75,593			270,489
Product, net		5,491			5,736			9,236			16,780			13,075			13,181			36,499			51,954
Finance														40,823			40,654			114,939			120,005
Other		473			286			917			726			3,128			5,005			10,700			13,841
Total revenue		260,897			253,093			495,956			628,865			235,634			340,797			657,279			1,739,552
Cost of sales		247,052			245,486			470,099			602,871
Cost of sales:
Retail vehicle														144,654			218,726			414,917			1,234,138
Wholesale vehicle														32,393			49,178			81,019			276,749
Product														917			—			2,518			—
Finance														8,481			4,699			22,755			10,368
Other														1,095			863			3,170			2,969
Total cost of sales														187,540			273,466			524,379			1,524,224
Total gross profit		13,845			7,607			25,857			25,994			48,094			67,331			132,900			215,328
Selling, general and administrative expenses		43,692			47,911			80,275			106,291			79,586			134,643			263,078			475,627
Depreciation and amortization		1,501			1,083			3,034			2,049			11,010			9,833			31,845			27,728
Impairment charges														—			1,017			1,353			206,127
Loss from operations		(31,348	)		(41,387	)		(57,452	)		(82,346	)		(42,502	)		(78,162	)		(163,376	)		(494,154	)
Gain on debt extinguishment														—			(37,917	)		(19,640	)		(37,917	)
Interest expense		3,388			1,297			6,106			4,123			12,058			9,704			30,915			28,617
Interest income		(1,415	)		(715	)		(3,264	)		(2,671	)		(5,506	)		(5,104	)		(16,369	)		(12,991	)
Revaluation of preferred stock warrant		60			21,260			142			20,470
Other income, net		(12	)		(53	)		(31	)		(86	)
Other loss, net														33,543			5,383			65,019			26,897
Loss before provision (benefit) for income taxes		(33,369	)		(63,176	)		(60,405	)		(104,182	)		(82,597	)		(50,228	)		(223,301	)		(498,760	)
Provision (benefit) for income taxes		(29	)		52			74			105			260			899			918			(22,085	)
Net loss	$	(33,340	)	$	(63,228	)	$	(60,479	)	$	(104,287	)	$	(82,857	)	$	(51,127	)	$	(224,219	)	$	(476,675	)
Accretion of redeemable convertible preferred stock		(25,879	)		—			(43,843	)		—
Net loss attributable to common stockholders	$	(59,219	)	$	(63,228	)	$	(104,322	)	$	(104,287	)
Net loss per share attributable to common stockholders, basic and diluted	$	(6.90	)	$	(2.00	)	$	(12.16	)	$	(5.21	)	$	(0.59	)	$	(0.37	)	$	(1.61	)	$	(3.46	)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted		8,580,150			31,599,497			8,579,539			20,035,476			139,692,323			138,118,679			139,123,352			137,817,839

See accompanying notes to these unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN ~~REDEEMABLE CONVERTIBLE~~STOCKHOLDERS’ EQUITY

Redeemable Convertible
Preferred Stock

Common Stock

Additional
Paid-in

Accumulated

Total
Stockholders’

Shares

Amount

Shares

Amount

Capital

Deficit

(Deficit) Equity

Balance at December 31, 2019

83,568,628

$
874,332

8,650,922

$
8

$
—

$
(573,860
)

$
(573,852
)
Stock-based compensation

—

$
—

—

$
—

$
600

$
—

$
600

Exercise of stock options

—

—

2,774

—

6

—

6

Repurchase of common stock

—

—

(200,000
)

—

(606
)

(1,212
)

(1,818
)
Issuance of Series H redeemable
   convertible preferred stock, net
   of issuance costs

1,964,766

26,714

—

—

—

—

—

Net loss

—

—

—

—

—

(41,059
)

(41,059
)
Balance at March 31, 2020

85,533,394

$
901,046

8,453,696

$
8

$
—

$
(616,131
)

$
(616,123
)
Issuance of common stock

—

$
—

183,870

$
—

$
2,127

$
—

$
2,127

Conversion of redeemable convertible
   preferred stock to common stock

(85,533,394
)

(901,046
)

85,533,394

86

900,960

—

901,046

Conversion of redeemable convertible
   preferred stock warrant to common
   stock warrant

—

—

—

—

21,873

—

21,873

Issuance of common stock in IPO,
   net of offering costs

—

—

24,437,500

24

496,486

—

496,510

Stock-based compensation

—

—

—

—

4,100

—

4,100

Exercise of stock options

—

—

500

—

7

—

7

Exercise of common stock warrants

—

—

636,112

1

—

—

1

Vesting of restricted stock units

—

—

133,334

—

—

—

—

Common stock shares withheld to
   satisfy employee tax withholding
   obligations

—

—

(41,818
)

—

(878
)

—

(878
)
Net loss

—

—

—

—

—

(63,228
)

(63,228
)
Balance at June 30, 2020

—

$
—

119,336,588

$
119

$
1,424,675

$
(679,359
)

$
745,435

See accompanyingnotes to these unaudited condensed consolidated financial statements.

Six Months Ended
June 30,

2019

2020

Operating activities

Net loss

$
(60,479
)

$
(104,287
)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

3,146

2,059

Amortization of debt issuance costs

179

375

Stock-based compensation expense

1,536

4,700

Loss on disposal of property and equipment

764

—

Provision for inventory obsolescence

1,889

(1,564
)
Revaluation of preferred stock warrant

142

20,470

Other

—

632

Changes in operating assets and liabilities:

Accounts receivable

(14,544
)

14,863

Inventory

(76,209
)

66,247

Prepaid expenses and other current assets

(1,814
)

(7,909
)
Other assets

(1,488
)

(1,285
)
Accounts payable

6,501

919

Accrued expenses

7,224

4,714

Deferred revenue

2,664

(1,835
)
Other liabilities

2,592

1,905

Net cash (used in) provided by operating activities

(127,897
)

4

Investing activities

Purchase of property and equipment

(794
)

(3,128
)
Net cash used in investing activities

(794
)

(3,128
)
Financing activities

Repayments of long-term debt

(3,340
)

—

Proceeds from vehicle floorplan

420,518

465,663

Repayments of vehicle floorplan

(349,545
)

(529,341
)
Payment of vehicle floorplan upfront commitment fees

—

(1,125
)
Proceeds from the issuance of redeemable convertible preferred stock, net

—

21,694

Repurchase of common stock

(542
)

(1,818
)
Common stock shares withheld to satisfy employee tax withholding obligations

—

(878
)
Proceeds from the issuance of common stock in connection with IPO, net of underwriting discount

—

504,023

Payments of costs related to IPO

—

(1,740
)
Proceeds from exercise of stock options

347

13

Other financing activities

268

(66
)
Net cash provided by financing activities

67,706

456,425

Net (decrease) increase in cash, cash equivalents and restricted cash

(60,985
)

453,301

Cash, cash equivalents and restricted cash at the beginning of period

163,509

219,587

Cash, cash equivalents and restricted cash at the end of period

$
102,524

$
672,888

Supplemental disclosure of cash flow information:

Cash paid for interest

$
5,176

$
2,743

Cash paid for income taxes

$
209

$
—

Supplemental disclosure of non-cash investing and financing activities:

Accretion of redeemable convertible preferred stock

$
43,843

$
—

Costs related to IPO included in accrued expenses and accounts payable

$
—

$
5,051

Conversion of redeemable convertible preferred stock warrant to common stock warrant

$
—

$
21,873

Issuance of common stock as upfront payment to nonemployee

$
—

$
2,127

Accrued property and equipment expenditures

$
101

$
611

See accompanyingnotes to these unaudited condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosures. On an ongoing basis, the Company evaluates its estimates, including, among others, those related to income taxes, the realizability of inventory, stock-based compensation, contingencies, revenue-related reserves, fair value measurements, ~~goodwill,~~ and useful lives of property and equipment and intangible assets. The Company bases its estimates on historical experience, market conditions, and on various other assumptions that are believed to be reasonable. Actual results may differ from these estimates.

Beginning in the first quarter of 2020, the COVID-19 pandemic caused by the novel coronavirus has negatively impacted, and may continue to negatively impact, the macroeconomic environment in the United States and globally, as well as the Company’s business, financial condition and results of operations. Due to the evolving and uncertain nature of COVID-19, it is reasonably possible that it could materially impact the Company’s estimates, particularly those noted above that require consideration of forecasted financial information, in the near to medium term. The ultimate impact will depend on numerous evolving factors that the Company may not be able to accurately predict, including the duration and extent of the pandemic, the impact of federal, state, local and foreign governmental actions, consumer behavior in response to the pandemic and other economic and operational conditions the Company may face.

Comprehensive Loss

The Company did ~~not~~not have any other comprehensive income or loss for the three and ~~six~~nine months ended ~~June~~September 30, ~~2019~~2023 and ~~2020.~~2022. Accordingly, net loss and comprehensive loss are the same for the periods presented.

Restricted Cash

Restricted cash ~~as of December 31, 2019 and June 30, 2020~~primarily includes cash deposits required under ~~letter of credit agreements as explained in Note 8 – Commitments and Contingencies. Restricted cash as of June 30, 2020 also includes a $20.0 million cash deposit required under~~ the Company’s ~~2020~~2022 Vehicle Floorplan Facility as explained in Note 710 – Vehicle Floorplan ~~Facilities.~~Facility and UACC restricted cash. UACC collects and services receivables under the securitization transactions and warehouse credit facilities. These collections are restricted for use until properly remitted each month under the terms of the servicing agreement. Refer to Note 11 — Warehouse Credit Facilities of Consolidated VIEs and Note 12 — Long Term Debt for further detail.

Finance Receivables

~~Advertising~~Finance receivables consist of installment contracts the Company originates through UACC to finance the vehicles it sells, as well as installment contracts acquired by UACC from its existing network of third-party dealership customers.

The Company's finance receivables are generally secured by the vehicles being financed.

Finance receivables over 90 days delinquent are considered nonaccrual finance receivables. Interest income is subsequently recognized only to the extent cash payments are received. Finance receivables may be restored to accrual status when a customer settles all delinquency balances and future interest and principal payments are reasonably assured.

Finance Receivables Held for Sale, Net

Finance receivables that the Company intends to sell and not hold to maturity are classified as held-for-sale. The Company intends to sell finance receivables either through securitization transactions or forward flow arrangements. Finance receivables classified as held for sale are recorded at the lower of cost or fair value. Deferred acquisition costs and any discounts or premiums are deferred until the finance receivables are sold and are then recognized as part of the total gain or loss on sale and recorded in “Finance Revenue” and "Product, net" in the condensed consolidated statements of operations. Refer to Note 3 – Revenue Recognition.

The Company records a valuation allowance to report finance receivables at the lower of amortized cost basis or fair value. To determine the valuation allowance, finance receivables are evaluated collectively as they represent a large group of smaller-balance homogeneous loans. To the extent that actual experience differs from estimates, significant adjustments to the Company's valuation allowance may be needed. Fair value adjustments are recorded in "Other loss, net" in the condensed consolidated statements of operations. Principal balances of finance receivables are charged-off when the Company is unable to sell the finance receivable and the related vehicle has been repossessed and liquidated or the receivable has otherwise been deemed uncollectible. As of September 30, 2023 and December 31, 2022, the

Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

valuation allowance for finance receivables classified as held for sale was $15.3 million and $10.5 million, respectively. Refer to Note 16 – Financial Instruments and Fair Value Measurements.

Finance Receivables at Fair Value

Finance receivables at fair value represent finance receivables that the Company does not intend to sell in the immediate future and for which the fair value option was elected. Fair value adjustments are recorded in "Other loss, net" in the condensed consolidated statements of operations. Refer to Note 16 – Financial Instruments and Fair Value Measurements.

Consolidated CFEs

The Company elected the fair value option upon consolidation of the assets and liabilities of its variable interest entities ("VIEs") related to the 2021-1, 2022-2, and 2023-1 securitization transactions. Refer to Note 4 – Variable Interest Entities and Securitizations. These VIEs are consolidated collateralized financing entities (CFEs) and are accounted for using the measurement alternative in accordance with ASU 2014-13, Measuring the Financial Assets and Liabilities of a Consolidated Collateralized Financing Entity (“ASU 2014-13"). During the three and nine months ended September 30, 2023 and 2022, the Company recognized the following revenue and expenses associated with these CFEs in the condensed consolidated statements of operations:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Finance revenue	$	22,936		$	9,999		$	62,704		$	35,039
Product revenue	$	3,198		$	—		$	9,172		$	—
Finance cost of sales	$	(5,246	)	$	(937	)	$	(14,075	)	$	(2,941	)
Product cost of sales	$	(917	)	$	—		$	(2,518	)	$	—
Other loss, net	$	(23,709	)	$	(3,479	)	$	(47,919	)	$	(15,798	)

The assets and liabilities of the CFEs are presented as part of the current and noncurrent “Finance receivables at fair value”, “Current portion of long term debt”, and "Long term debt, net of current portion", respectively, on the condensed consolidated balance sheets. Refer to Note 4 – Variable Interest Entities and Securitizations and Note 16 – Financial Instruments and Fair Value Measurements for further details.

Business Combinations

The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. The Company will continue to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments will be recorded to the Company’s condensed consolidated statement of operations.

Advertising

Advertising costs are expensed as incurred and are included within “Selling, general and administrative expenses” in the condensed consolidated statements of operations. Advertising expenses were ~~$12.7~~$13.4 million and ~~$11.6~~$14.9 million for the three months ended ~~June~~September 30, ~~2019~~2023 and ~~2020,~~2022, respectively, and ~~$19.8~~$39.9 million and ~~$29.5~~$69.8 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2023 and ~~2020,~~2022, respectively.

Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Shipping and Handling

~~The Company’s logistics costs related to transporting its used vehicle inventory primarily include third-party transportation fees. The portion of these~~

Logistics costs related to inbound transportation from the point of acquisition to the relevant reconditioning facility isare included in cost of sales when the related used vehicle is sold. Logistics costs not included in cost of sales are accounted for as costs to ~~fulfil~~fulfill contracts with customers and are included in “Selling, general and administrative expenses” in the condensed consolidated statements of operations and were ~~$2.7~~$2.2 million and ~~$5.5~~$4.9 million for the three months ended ~~June~~September 30, ~~2019~~2023 and ~~2020,~~2022, respectively, and ~~$4.9~~$6.3 million and ~~$11.3~~$39.9 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2023 and ~~2020,~~2022, respectively.

~~VROOM, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Concentration of Credit Risk and Significant Customers

The Company’s principal financial instruments subject to potential concentration of credit risk are cash and cash equivalents and accounts receivable, which are unsecured. The Company’s cash ~~and cash equivalents~~balances are maintained at various large, reputable financial institutions. Deposits held with financial institutions may at times exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and, therefore, management believes they bear minimal risk. The Company’s cash equivalents primarily consist of money market funds that hold investments in highly liquid U.S. treasury securities and commercial paper investments. Concentration of credit risk with respect to accounts receivable is generally mitigated by a large customer base.

For the three and ~~six~~nine months ended ~~June~~September 30, ~~2019~~2023 and ~~2020,~~2022, no customer represented 10% or more of the Company’s revenues and no customer represented more than 10% of the Company’s accounts receivable as of September 30, 2023 and December 31, ~~2019 and June 30, 2020.~~2022.

Liquidity

The Company has had negative cash flows and generated losses from operations since inception and has historically had to rely on debt and equity financing to fund its operations. Further, the Company expects to incur additional losses in the future.

As of September 30, 2023, the Company had cash and cash equivalents of $208.6 million and restricted cash of $80.5 million. The primary source of liquidity is cash generated through financing activities.

Since inception, the Company has relied on borrowings under its vehicle floorplan facilities to finance its inventory. The term of the vehicle floorplan facility generally matures within one to two years and the Company typically renews those facilities at least annually. The 2022 Vehicle Floorplan Facility has a borrowing capacity of $228.1 million as of September 30, 2023, of which ~~it has funded primarily through issuances~~$15.6 million was unutilized and provides a committed credit line of ~~common and preferred stock.~~up to $500.0 million which is scheduled to mature on March 31, 2024. The Company has ~~historically funded vehicle inventory purchases through~~commenced discussions with its ~~vehicle~~floorplan lender, Ally Bank and Ally Financial (together “Ally”), regarding an amended floorplan facility ~~(refer~~that would extend the term beyond the current expiration date. Ally recently indicated its willingness to ~~Note 7 –~~extend the floorplan facility beyond June 2024 would be contingent upon the Company raising additional capital. The 2022 Vehicle Floorplan ~~Facilities). As further discussed in Note 7,~~Facility remains a committed facility through March 31, 2024. Prior to that date, the Company ~~entered into~~intends to continue its discussions with Ally over the terms of an amended facility and may engage with other lenders over the terms of an alternative facility. In the event that a ~~new vehicle floorplan facility~~capital raise is required by Ally or another lender, there can be no assurance that such additional capital would be available in ~~March 2020 which increased~~ the ~~borrowing capacity up~~required amount or on terms acceptable to ~~$450.0 million and extended the term through March 2021.~~

~~In accordance with Accounting Standards Update No. 2014-15,~~ ~~Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40)~~, the Company, ~~has evaluated whether there is substantial doubt about~~if at all. Failure to secure floorplan financing beyond the expiration of the 2022 Vehicle Floorplan Facility would have a material adverse effect on the Company’s ability to ~~meet~~finance its ~~obligations within one year from the financial statement issuance date. In connection~~inventory and operate its core used automotive sales business.

UACC has four warehouse credit facilities with ~~the previous issuance~~an aggregate borrowing limit of ~~the consolidated financial statements~~$825.0 million as of ~~and for the year ended December 31, 2019, uncertainties relating~~September 30, 2023. As of September 30, 2023, outstanding borrowings related to the ~~COVID-19 pandemic, combined with the Company’s losses~~Warehouse Credit Facilities were $294.7 million and ~~negative cash flows from operations since inception, and the fact that management’s plan~~excess borrowing capacity was $72.5 million. Refer to ~~obtain additional capital had not yet been completed, raised substantial doubt about the Company’s ability to continue as a going concern. However, following the successful completion~~Note 11 – Warehouse Credit Facilities of the Company’s IPO in June 2020, in which it raised proceeds of $504.0 million from the IPO, net of the underwriting discount and before deducting offering expenses of $7.5 million as described above, management completed an updated evaluation of the Company’s ability to continue as going concern and has concluded the factors that previously raised substantial doubt about the Company’s ability to continue as going concern no longer exist as of the issuance date of these condensed consolidated financial statements.Consolidated VIEs for further discussion.

~~Nonemployee Share-Based Payments~~

~~On May 15, 2020,~~If the Company ~~entered~~is unable to enter into an ~~agreement with Rocket Auto LLC~~amended or alternative floorplan facility, it will pursue strategies to adjust its core used automotive operations and ~~certain of its affiliates (collectively, “Rocket”) providing for the launch of an ecommerce platform under the “Rocket Auto” brand for the marketing~~preserve liquidity and ~~sale of vehicles directly to consumers (the “RA Agreement”).~~reduce fixed and variable costs. The Company ~~will list~~anticipates that its used vehicle inventory for sale on the Rocket Auto platform, but all sales of the Company’s inventory will be conducted through the Company’s platform. Rocket Auto is expected to launch publicly during the second half of the year ending December 31, 2020 and, during the term of the RA Agreement, Rocket has agreed to ensure that not less than a minimum percentage of all used vehicles sold or leased through the platform on a monthly basis will be Vroom inventory. The Company has agreed to pay Rocket a combination ofexisting cash and ~~stock for vehicle sales made through~~cash equivalents, the ~~platform, including upfront equity consisting~~2022 Vehicle Floorplan Facility and UACC credit facilities will

Table of 183,870 shares of the Company’s common stock that were issued upon execution of the RA Agreement, and the potential issuance to Rocket of up to an additional 8,641,914 shares of common stock, over a four-year period based upon sales volume of Vroom inventory through the Rocket Auto platform.Contents

~~The Company accounts for the issuance of its common stock under the RA agreement in accordance with ASC 718,~~ ~~Compensation – Stock Compensation~~, including the provisions that apply to share-based payments issued to nonemployees for goods or services. The Company determined that the grant date was May 15, 2020 for both the upfront shares issued and the additional shares that potentially are to be issued based on sales volume through the Rocket Auto platform. The fair value of the Company’s common stock on the grant date was determined to be $11.57 per share. The grant date fair value of the upfront shares issued was initially recognized as an asset within “Other assets” in the condensed consolidated balance sheet, which will subsequently be amortized within “Selling, general and administrative expenses” over the term of the RA agreement commencing on the launch date. The grant date fair value of the potential shares to be issued will be recognized within “Selling, general and administrative expenses” as sales of Vroom’s inventory associated with the Rocket Auto platform occur and such shares are earned.

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

be sufficient to support the Company for at least the next twelve months from the date of issuance of the condensed consolidated financial statements.

The Company’s projected cashflows are subject to various assumptions, including its growth rate, sales margin, GPPU, marketing costs, reduction in fixed and variable expenses, as well as market conditions. The Company bases its estimates on historical experience, market conditions and on various other assumptions that it believes to be reasonable.

Accounting Standards Adopted

In ~~February 2016,~~October 2021, the FASB issued ASU ~~2016-02, Leases~~2021-08, Business Combinations (Topic ~~842)~~805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which ~~amends the accounting guidance on leases. The new standard~~ requires ~~a lessee to recognize right-of-use~~contract assets and ~~lease obligations on~~contract liabilities acquired in a business combination to be recognized in accordance with Topic 606 as if the ~~balance sheet for most lease agreements. Leases are classified as either operating or finance, with classification affecting~~acquirer had originated the pattern of expense recognition in the statement of operations. The FASB also subsequently issued amendments to the standard to provide additional practical expedients and an additional transition method option.

contracts. The Company adopted Topic 842 as of January 1, 2020 using the modified retrospective approach with a cumulative-effect adjustment to opening retained earnings (accumulated deficit) with no restatement of comparative periods. Upon adoption, the Company recognized $18.4 million of operating lease liabilities and $17.4 million of operating lease right-of-use assets. The adoption of Topic 842 did not result in a cumulative effect adjustment to accumulated deficit.

Topic 842 provides various optional practical expedients for transition. The Company elected to utilize the package of practical expedients for transition which permitted the Company to not reassess its prior conclusions regarding whether a contract is or contains a lease, lease classification and initial direct costs. The Company did not elect the hindsight practical expedient to determine lease terms.

Topic 842 also provides optional practical expedients for an entity’s ongoing lease accounting. The Company elected the short-term lease recognition exemption for all leases that qualify and the practical expedient to not separate lease and non-lease components of leases.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement,~~ related to updated requirements over the disclosures of fair value measurements. Under ASU 2018-13, certain disclosure requirements for fair value measurements were eliminated, modified or added to facilitate better disclosure regarding recurring and non-recurring fair value measurements. The Company adopted the guidance on January 1, ~~2020~~2023, which did not have a material impact on the ~~Company’s~~Company's condensed consolidated financial statements and related disclosures.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial instruments, Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~, which amends the guidance on the impairment of financial instruments by requiring measurement and recognition of expected credit losses for most financial assets, including trade receivables, and other instruments that are not measured at fair value through net income. The Company adopted the guidance on January 1, 2020 which did not have a material impact on the Company’s consolidated financial statements and related disclosures.

~~Accounting Standards Issued But Not Yet Adopted~~

The Company previously qualified as an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and it had elected to delay adoption of new or revised accounting standards until those standards apply to private companies. The Company ceased to qualify as an EGC because its annual revenue for the fiscal year ended December 31, 2019 exceeded $1.07 billion. The Company continued to be treated as an EGC through June 11, 2020, which was the date the Company consummated the IPO. Accordingly, since the Company can no longer be treated as an EGC, effective dates included in these condensed consolidated financial statements reflect the effective dates that apply to public companies.

~~In December 2019, the FASB issued ASU 2019-12,~~ ~~Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes~~, which enhances and simplifies various aspects of the income tax accounting guidance including the elimination of certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The guidance will be effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.

~~VROOM, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

3. Revenue Recognition

The Company recognizes revenue upon transfer of control of goods or services to customers, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The Company may collect sales taxes and other taxes and government fees from customers on behalf of governmental authorities at the time of sale as required. These taxes are accounted for on a net basis and are not included in revenues or cost of sales.

The Company’s revenue is disaggregated within the condensed consolidated statements of operations and is generated from customers throughout the United States. ~~The Company recognizes revenue at a point in time as described below.~~

Retail Vehicle Revenue

The Company sells used vehicles to its retail customers through its ecommerce platform and TDA retail location. The transaction price for used vehicles is a fixed amount as set forth within the customer contract at the time of sale. Customers frequently trade-in their existing vehicle to apply toward the transaction price of a used vehicle. Trade-in vehicles represent non-cash consideration which the Company measures at fair value based on external and internal market data for each specific vehicle. The Company satisfies its performance obligation and recognizes revenue for used vehicle sales generally at a point in time when the vehicles are delivered to the customer for ecommerce sales or picked up by the customer for TDA sales. The revenue recognized by the Company includes the agreed upon transaction price, including any delivery charges and document fees stated within the customer contract. Revenue excludes any sales taxes, title and registration fees, and other government fees that are collected from customers.

The Company receives payment for used vehicle sales directly from the customer at the time of sale or ~~from third-party financial institutions~~arranges financing within a short period of time following the ~~sale if the customer obtains financing.~~sale. Payments received prior to delivery ~~or pick-up~~ of used vehicles are recorded as “Deferred revenue” within the condensed consolidated balance sheets.

The Company offers a return ~~policy~~program for used vehicle sales and establishes a provision for estimated returns based on historical information and current trends. The reserve for estimated returns is presented gross on the condensed consolidated balance sheets, with an asset recorded in “Prepaid expenses and other current assets” and a refund liability recorded in “Other current liabilities.”

Wholesale Vehicle Revenue

The Company sells vehicles that do not meet its retail sales criteria through ~~third-party~~ wholesale ~~auctions.~~channels. Vehicles sold ~~at auction~~through wholesale channels are acquired from customers who trade-in their vehicles when making a purchase from the Company, ~~and also~~ from customers who sell their vehicles to the Company in direct-buy ~~transactions.~~transactions, and from liquidation of vehicles previously listed for retail sale. The transaction price for wholesale vehicles is a fixed ~~amount that is determined at the auction.~~amount. The Company satisfies its performance obligation and recognizes revenue for wholesale vehicle sales at a point in time when the vehicle is ~~sold at auction.~~sold. The transaction price is typically due and collected within a short period of time following the vehicle sales.

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Product Revenue

The Company’s product revenue consists of income from financing vehicle sales for Vroom customers through UACC and fees earned on selling ~~extended warranty~~third-party financing and value-added products, such as vehicle service contracts, guaranteed asset protection (“GAP”) and tire and wheel ~~and tire~~ coverage.

As a result of the UACC Acquisition (as defined below), the Company generates ecommerce product revenue by providing Vroom customers with automotive financing solutions through its captive financing operation. The Company earns interest income on finance receivables before they are sold, interest income on finance receivables held in consolidated VIEs, and gains on the sale of finance receivables. Refer to Note 4 – Variable Interest Entities and Securitizations.

The Company also sells ~~these~~third-party financing and value-added products pursuant to arrangements with the third parties that provide these products and are responsible for their fulfillment. The Company concluded that it is an agent for these transactions because it does not control the products before they are transferred to the customer. The Company recognizes product revenues on a net basis when the customer enters into an arrangement for the products, which is typically at the time of a used vehicle sale.

Customers may enter into a retail installment sales contract to finance the purchase of used vehicles. The Company sells these contracts on a non-recourse basis to various financial institutions. The Company receives a fee from the financial institution based on the difference between the interest rate charged to the customer that purchased the used vehicle and the interest rate set by the financial institution. These fees are recognized upon sale and assignment of the installment sales contract to the financial institution, which occurs concurrently at the time of a used vehicle sale.

~~VROOM, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

A portion of the fees earned on ~~these~~third-party financing and value-added products is subject to chargebacks in the event of early termination, default, or prepayment of the contracts by end-customers. The Company’s exposure for these events is limited to the fees that it receives. An estimated refund liability for chargebacks against the revenue recognized from sales of these products is recorded in the period in which the related revenue is recognized and is based primarily on the Company’s historical chargeback experience. The Company updates its estimates at each reporting date. As of September 30, 2023 and December 31, ~~2019 and June 30, 2020,~~2022, the Company’s reserve for chargebacks was ~~$3.3~~$6.7 million and ~~$4.1~~$8.2 million, respectively, of which ~~$1.8~~$3.6 million and ~~$2.2~~$4.4 million, respectively, are included within “Accrued expenses” and ~~$1.5~~$3.1 million and ~~$1.9~~$3.8 million, respectively, are included in “Other long-term liabilities.”

The Company also is contractually entitled to receive profit-sharing revenues based on the performance of the ~~extended warranty~~vehicle service policies once a required claims period has passed. The Company recognizes profit-sharing revenues to the extent it is probable that it will not result in a significant revenue reversal. The Company estimates the revenue based on historical claims and cancellation data from its customers, as well as other qualitative assumptions. The Company reassesses the estimate at each reporting period with any changes reflected as an adjustment to revenues in the period identified. As of September 30, 2023 and December 31, ~~2019 and June 30, 2020,~~2022, the Company recognized ~~$6.9~~$21.0 million and ~~$8.5~~$22.5 million, respectively, related to cumulative profit-sharing payments to which it expects to be entitled, of which ~~$0.3~~$2.0 million and ~~$0.8~~$1.6 million, respectively, are included within “Prepaid expenses and other current assets” and ~~$6.6~~$19.0 million and ~~$7.7~~$20.9 million, respectively, are included within “Other assets.”

~~Other~~

Finance Revenue

~~Other~~

The Company’s finance revenue ~~primarily~~is related to finance receivables originated by UACC for its network of third-party dealership customers and consists of ~~labor~~interest income earned on finance receivables before they are sold, interest income earned on finance receivables held in consolidated VIEs, and ~~parts revenue earned~~gains on the sale of finance receivables. Refer to Note 4 – Variable Interest Entities and Securitizations.

Interest income deemed uncollectible is reversed at the time the finance receivable is charged off. An account is considered delinquent if a scheduled payment has not been received by the ~~Company~~date such payment was contractually due. Finance receivables over 90 days delinquent are considered nonaccrual finance receivables. Income is subsequently recognized only to the extent cash payments are received until the borrower is able to make periodic interest and principal

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

payments in accordance with the finance receivable terms. Late charges and other fees are calculated at predetermined amounts or percentages of overdue finance receivable balances and are recorded on a cash basis.

Servicing income represents the annual fees earned on the outstanding principal balance of the finance receivables serviced. Fees are earned monthly at an annual rate of approximately 4% for ~~vehicle repair services at TDA.~~the 2022-1 securitization transaction and 3.25% for the 2022-2 and 2023-1 securitization transactions of the outstanding principal balance of the finance receivables serviced. From January to March 2023, UACC waived the monthly servicing fees related to the 2022-2 securitization transaction, which resulted in consolidation of the 2022-2 VIE. Refer to Note 4 – Variable Interest Entities and Securitizations.

Contract Costs

The Company has elected, as a practical expedient, to expense sales commissions when incurred because the amortization period would have been less than one year. These costs are recorded within “Selling, general and administrative expenses” in the condensed consolidated statements of operations.

4. Variable Interest Entities and Securitizations

A VIE is an entity that either (i) has insufficient equity to finance its activities without additional subordinated financial support, or (ii) has equity investors who lack the characteristics of a controlling financial interest. The Company consolidates VIEs for which it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. Assets recognized as a result of consolidating VIEs do not represent additional assets that could be used to satisfy claims against the Company's general assets. Liabilities recognized as a result of consolidating VIEs do not represent additional claims on the Company's general assets, rather they represent claims against the specific assets of the consolidated VIEs.

UACC has the power to direct significant activities of its VIEs when it has the ability to exercise discretion in the servicing of financial assets or control investment decisions. UACC generally retains a portion of the economic interests in UACC-sponsored asset-backed securitization transactions, which could be retained in the form of a portion of the senior interests, the subordinated interests, residual interests, or servicing rights.

UACC has developed a securitization program that involves selling finance receivables to securitization trusts through the private issuance of asset-backed securities which are collateralized by the finance receivables. UACC establishes and sponsors these transactions which create and pass along risks to the variable interest holders, specifically, consumer credit risk and pre-payment risk. In February and July 2022, UACC completed the 2022-1 and 2022-2 securitization transactions, respectively, and in January 2023, UACC completed the 2023-1 securitization transaction.

The securitization trusts established in connection with asset-backed securitization transactions are VIEs. For each VIE that UACC establishes in its role as sponsor of securitization transactions, the Company performs an analysis to determine if it is the primary beneficiary of the VIE. For all securitization transactions consummated prior to the Acquisition Date, the Company consolidated VIEs and accounted for these transactions as secured borrowings.

UACC has no obligation to repurchase or replace any securitized asset that subsequently becomes delinquent in payment or otherwise is in default, except when representations and warranties about the eligibility of the securitized assets are breached, or when certain changes are made to the underlying asset contracts. Securitization investors have no recourse to UACC or its other assets and have no right to require UACC to repurchase the investments. UACC has no obligation to provide liquidity or contribute cash or additional assets to the VIEs and does not guarantee any asset-backed securities.

In January 2023, UACC completed the 2023-1 securitization transaction, in which it sold approximately $238.7 million of rated asset-backed securities, for proceeds of $237.8 million. In April 2023, UACC sold the non-investment grade securities related to the 2023-1 securitization transaction for $23.1 million. UACC still retains the residual interests related to the 2023-1 securitization transaction. The trust is collateralized by finance receivables with an aggregate

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

principal balance of $326.4 million. These finance receivables are serviced by UACC. The Company consolidated the 2023-1 VIE and accounted for this transaction as a secured borrowing.

UACC is the primary beneficiary of the 2021-1 and 2023-1 securitization trusts, as it has both the power to direct the activities that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. UACC also retained a portion of the economic interests in the 2021-1 and 2023-1 asset-backed securitization transactions, in the form of residual interests in accordance with Regulation RR of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Risk Retention Rules"). The Risk Retention Rules require the Company to retain at least 5% of the beneficial interests issued by the securitization trusts. Refer to Note 12 – Long Term Debt for further details.

In July 2022, UACC sold a pool of finance receivables in the 2022-2 securitization transaction. UACC retained the servicing rights to these finance receivables and receives an "at market" servicing fee. UACC retained an insignificant amount of the asset-backed securities issued in the securitization in order to comply with risk retention rules. Originally, the Company concluded that it is not the primary beneficiary of the 2022-2 securitization trust because UACC retained interests in the VIE are insignificant. Therefore, the Company did not originally consolidate the 2022-2 trust. From January to March 2023, although not contractually required, UACC elected to waive its servicing fee on the 2022-2 securitization, due to higher-than-expected losses, which transferred more than an insignificant portion of the corresponding risk of loss from the VIE to the Company. Since UACC has the power to direct the significant activities of the VIE, as it is the servicer, and additionally it absorbs the risk of loss, the Company concluded that it is the primary beneficiary of the VIE. In March 2023, the Company accounted for the transaction as secured borrowings and consolidated the 2022-2 securitization trust. The beneficial interest was then eliminated.

The VIE model allows for a measurement alternative when a reporting entity elects the fair value option and consolidates a collateralized financing entity (“CFE”). This measurement alternative eliminates the accounting mismatch that may arise from measurement differences between the CFE’s financial assets and third-party financial liabilities in earnings and attributes those earnings to the controlling equity interest in the consolidated income statement. The 2021-1, 2022-2, and 2023-1 securitization trusts consolidated by UACC meet the definition of a CFE, therefore, the Company has elected to apply the measurement alternative when consolidating these VIEs. Refer to Note 16 – Financial Instruments and Fair Value Measurements for further detail.

UACC has four senior secured warehouse credit facilities. Through trusts, UACC entered into warehouse facility agreements with certain banking institutions, primarily to finance the purchase and origination of finance receivables as well as to provide funding for general operating activities. These trusts are secured by eligible finance receivables which are pledged as collateral for the warehouse facilities. These trusts are consolidated VIEs. Refer to Note 11 – Warehouse Credit Facilities of Consolidated VIEs for further details on the warehouse facilities.

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Creditors or beneficial interest holders of VIEs for which the Company is the primary beneficiary generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to the Company. The following table presents the total assets and total liabilities associated with the Company's variable interests in consolidated VIEs in the condensed consolidated balance sheets (in thousands):


	As of September 30, 2023
	Securitization Vehicles		Warehouse Facilities1		Total
Current Assets:
Restricted cash	$	31,311	$	15,924	$	47,235
Finance receivables at fair value		11,227		991		12,218
Finance receivables held for sale		—		338,375		338,375
Other current assets		15,415		8,912		24,327
Total Current Assets		57,953		364,202		422,155
Finance receivables at fair value		354,567		22,093		376,660
Other assets		—		1,992		1,992
Total Assets	$	412,520	$	388,287	$	800,807
Current Liabilities:
Current portion of securitization debt	$	186,559	$	—	$	186,559
Warehouse credit facilities		—		294,653		294,653
Accrued expenses		1,421		1,912		3,333
Total Current Liabilities		187,980		296,565		484,545
Securitization debt, net of current portion		175,347		—		175,347
Other liabilities		4,340		5,166		9,506
Total Liabilities	$	367,667	$	301,731	$	669,398

	As of December 31, 2022
	Securitization Vehicles		Warehouse Facilities1		Total
Current Assets:
Restricted cash	$	9,023	$	15,654	$	24,677
Finance receivables at fair value		5,336		6,156		11,492
Finance receivables held for sale		—		305,917		305,917
Other current assets		2,730		9,004		11,734
Total Current Assets		17,089		336,731		353,820
Finance receivables at fair value		72,568		47,024		119,592
Total Assets	$	89,657	$	383,755	$	473,412
Current Liabilities:
Current portion of securitization debt	$	47,239	$	—	$	47,239
Warehouse credit facilities		—		229,518		229,518
Accrued expenses		90		1,439		1,529
Total Current Liabilities		47,329		230,957		278,286
Securitization debt, net of current portion		32,590		—		32,590
Other liabilities		686		6,724		7,410
Total Liabilities	$	80,605	$	237,681	$	318,286

1 Refer to Note 11 – Warehouse Credit Facilities of Consolidated VIEs for further details of the warehouse facilities.

UACC establishes securitization trusts to purchase finance receivables. The securitization trusts issue asset-backed securities, which are collateralized by the finance receivables that UACC sells to the securitization trusts. Upon sale of the finance receivables to the securitization trusts, the Company recognizes a gain or loss on sales of finance receivables if it determines it qualifies for sale accounting treatment and it is not the primary beneficiary of the VIE.

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

In February 2022, UACC sold a pool of finance receivables in the 2022-1 securitization transaction. UACC retained the servicing rights to these finance receivables and receives an "at market" servicing fee. UACC retained an insignificant amount of the asset-backed securities issued in the securitization in order to comply with risk retention rules. The 2022-1 securitization trust is a VIE that the Company does not consolidate. As the servicer, UACC retained the power to direct the activities that are most significant to the entities, however, the Company concluded that it is not the primary beneficiary of the 2022-1 securitization trust because UACC retained interests in the VIE are insignificant. The beneficial interest retained by UACC included rated notes and unrated residual certificates issued by the 2022-1 securitization trust.

In July 2022, UACC completed the 2022-2 securitization transaction, as discussed above, and recognized a gain on sale for the three and nine months ended September 30, 2022.

During the three and nine months ended September 30, 2022, the Company sold $242.3 million and $523.7 million of rated asset-backed securities, respectively, and $17.3 million and $49.6 million of residual certificates, respectively, through securitization transactions. The total gain related to finance receivables sold pursuant to securitization transactions was $16.0 million and $45.6 million for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2023 and December 31, 2022, the assets UACC retains in the unconsolidated VIEs were approximately $5.3 million and $20.6 million, respectively, and are included in "Beneficial interests in securitizations" in the Company's condensed consolidated balance sheet. The beneficial interests in securitizations are subject to restrictions on transfer pursuant to UACC’s obligations as a sponsor under Risk Retention Rules. These securities are interests in securitization trusts, thus there are no contractual maturities. In the nine months ended September 30, 2023, the Company entered into a Risk Retention Financing Facility to finance the majority of its retained beneficial interests in securitizations. Refer to Note 12 – Long Term Debt for further detail.

The following table summarizes the amortized cost, the carrying amount, which is the fair value, and the maximum exposure to losses of UACC's assets related to unconsolidated VIEs (in thousands):


	As of September 30, 2023						As of December 31, 2022
	Aggregate Principal Balance		Carrying Value		Total Exposure		Aggregate Principal Balance		Carrying Value		Total Exposure
Rated notes	$	5,397	$	5,132	$	5,132	$	19,233	$	18,664	$	18,664
Certificates		—		155		155		—		1,928		1,928
Other assets		310		310		310		310		310		310
Total unconsolidated VIEs	$	5,707	$	5,597	$	5,597	$	19,543	$	20,902	$	20,902

Total exposure represents the estimated loss UACC would incur under severe, hypothetical circumstances, such as if the value of the interests in the securitization trusts and any associated collateral declined to zero. The Company believes the possibility of this is remote. As such, the total exposure presented above is not an indication of the Company's expected losses.

5. Acquisition

UACC Acquisition

On February 1, 2022, the Company completed the acquisition (the "UACC Acquisition") of 100% of Unitas Holdings Corp., a Delaware corporation, including its wholly owned subsidiaries United PanAm Financial Corp. and UACC. Unitas Holdings Corp. (now known as Vroom Finance Corporation), United PanAm Financial Corp. (now known as Vroom Automotive Financial Corporation) and UACC, as well as their other subsidiaries, are now wholly owned subsidiaries of the Company. This acquisition accelerates the Company's strategy of establishing a captive financing arm and underwriting vehicle financing for its customers, the results of which are included within the Ecommerce reporting segment. UACC will also continue its current operations with its network of third-party dealership customers, including the purchases and servicing of vehicle installment contracts, which constitutes the separate Retail Financing reporting

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

segment. The cash consideration transferred was approximately $315.4 million at the Acquisition Date, inclusive of immaterial measurement period adjustments.

The following table summarizes the fair value of the identified assets acquired and liabilities assumed as of the Acquisition Date, inclusive of immaterial measurement period adjustments (in thousands):


	Fair Value
Cash and cash equivalents	$	5,294
Restricted cash		42,631
Finance receivables at fair value		296,927
Finance receivables, held for sale		263,393
Intangible assets		156,000
Goodwill		42,886
Other assets		25,934
Total assets acquired	$	833,065
Warehouse credit facilities		(178,067	)
Long term debt		(285,704	)
Deferred tax liability		(23,855	)
Other liabilities		(30,026	)
Total liabilities assumed	$	(517,652	)
Net assets acquired	$	315,413

The estimated fair value of the finance receivables that were designated as held for sale were determined using the discounted cash flow method under the income approach. The Company determined the fair value of these finance receivables utilizing sales prices based on an estimated securitization transaction, adjusted for transaction costs, risk and a normal profit margin associated with securitization transactions. The significant assumptions used in the valuation were discount rate, prepayment rate, cumulative net losses, weighted average interest rate and recovery rate. Such fair value measurement of finance receivables held for sale is considered Level 3 of the fair value hierarchy.

The Company acquired two types of finance receivables that are accounted for under the fair value option: (i) those that were sold in one of the securitization transactions that UACC completed in 2019, 2020 or 2021, and (ii) those that were not eligible to be sold in future securitization transactions. The estimated fair value of the finance receivables that were previously sold were valued using the measurement alternative by reference to the fair value of the securitization debt. See Note 16 – Financial Instruments and Fair Value Measurements for more information regarding the measurement alternative and the fair value of these finance receivables. The fair value of the ineligible finance receivables was determined using a discounted cash flow method under the income approach. The significant assumptions used in the valuation were discount rate and recovery rate. Such fair value measurement of finance receivables accounted for under the fair value option is considered Level 3 of the fair value hierarchy.

The estimated fair value of the securitization debt of consolidated VIEs was determined using the discounted cash flow method under the income approach. The significant assumption used in the valuation was the yield. Such fair value measurement of securitization debt is considered Level 3 of the fair value hierarchy.

The estimated fair value of the warehouse credit facilities of consolidated VIEs approximated its carrying value due to the proximity of the Acquisition Date to the payoff date. These notes were acquired on February 1, 2022, as part of the UACC Acquisition and were paid off with the proceeds from the 2022-1 securitization transaction that UACC completed on February 16, 2022.

The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill which is not deductible for tax purposes. Goodwill is primarily attributable to the workforce of the acquired business as well as benefits related to integrating UACC’s financing operations to establish a captive financing arm and underwrite vehicle financing for the Company's customers. All of the goodwill was assigned to the Ecommerce reporting unit.

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The following table summarizes the identifiable intangible assets acquired and their estimated weighted average useful life at the date of acquisition (in thousands):

Purchased technology represents the fair value of UACC’s proprietary technology used to support all aspects of their business including underwriting, servicing, and risk management. The estimated fair value of the purchased technology was determined using a relief-from-royalty method under the income approach. The significant assumptions used in the relief-from-royalty method include estimates about future expected cash flows from the purchased technology, including the revenue growth rates, the royalty rate, the obsolescence factor and the discount rate.

Customer relationships represents UACC's relationship with its network of dealer customers. UACC has expertise in the non-prime credit dealer market serving as the key link between independent dealerships and consumers. UACC has developed expertise and robust relationships in the independent dealer market as demonstrated by its active dealership network. The estimated fair value of the customer relationships was determined using a multi-period excess earnings method under the income approach. The significant assumptions used in the multi-period excess earnings method include estimates about future expected cash flows from the customer relationships, including pre-tax income margins and the discount rate.

Trade name represents the value of the UACC trade name. The UACC brand is an important factor in the marketing of UACC’s services to prospective dealership customers. The fair value of the trade name acquired was determined using a relief-from-royalty method under the income approach. The significant assumptions used in the relief-from-royalty method include future expected cash flows from the trade name, the royalty rate, and the discount rate.

The fair values assigned to assets acquired and liabilities assumed are based on management’s estimates and assumptions. The allocation of the total consideration transferred to the assets acquired, including intangible assets and goodwill, as well as the liabilities assumed was final as of December 31, 2022.

The transaction costs associated with the UACC Acquisition were not material for the three months ended September 30, 2022 and were $5.7 million for the nine months ended September 30, 2022, and are included within "Selling, general and administrative expenses" in the condensed consolidated statement of operations.

The aggregate revenue and net income of UACC consolidated into the Company’s financial statements from the date of the acquisition was $47.7 million and $17.7 million for the three months ended September 30, 2022, respectively and $133.7 million and $37.9 million for the nine months ended September 30, 2022, respectively.

Unaudited Pro Forma Information

The unaudited pro forma financial information in the table below summarizes the combined results of the Company and UACC, as though the companies had been combined on January 1, 2021. The pro forma adjustments include incremental amortization of intangible assets and a non-recurring tax adjustment of $24.1 million for the nine months ended September 30, 2022. The pro forma information is presented for informational purposes only and may not be indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2021 or that may occur in the future, and does not reflect future synergies, integration costs, or other such costs or savings. The pro forma information for the nine months ended September 30, 2022 is as follows:


	Nine Months Ended September 30,
	2022
Total revenue	$	1,755,023
Net loss	$	(488,866	)

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

8. Goodwill and Intangible Assets

Goodwill

The following table summarizes the activity in the carrying value of goodwill by reporting unit for the nine months ended September 30, 2022 (in thousands):


	Ecommerce			Wholesale			TDA			Total
Balance as of December 31, 2021	$	152,876		$	1,720		$	4,221		$	158,817
Acquisition		42,886			—			—			42,886
Goodwill impairment charge		(195,762	)		(1,720	)		(4,221	)		(201,703	)
Balance as of September 30, 2022	$	—		$	—		$	—		$	—

There was no goodwill as of September 30, 2023.

As of March 31, 2022, a quantitative interim goodwill impairment assessment was performed over the Company's reporting units due to further sustained declines in the Company's and comparable companies' stock prices during the three months ended March 31, 2022.

The Company estimated the fair value of the Ecommerce, Wholesale, and TDA reporting units using the discounted cash flow method under the income approach. The significant assumptions used in the valuation include revenue growth rates, future gross profit margins and operating expenses used to calculate projected future cash flows, determination of the weighted average cost of capital, and future economic and market conditions. The terminal value is based on an exit revenue multiple which requires significant assumptions regarding the selection of appropriate multiples that consider relevant market trading data. The Company bases its estimates and assumptions on its knowledge of the automotive and ecommerce industries, recent performance, expectations of future performance and other assumptions the Company believe to be reasonable.

The Company determined that the estimated fair value of the Ecommerce, Wholesale, and TDA reporting units was less than their carrying amounts. The Company recorded a goodwill impairment charge of $201.7 million in the condensed consolidated statements of operations for the nine months ended September 30, 2022.

Refer to Note 5 – Acquisition for more information related to the acquisition that occurred in the nine months ended September 30, 2022.

Intangible Assets

Intangible assets, net consisted of the following (in thousands):


	September 30, 2023							December 31, 2022
	Gross Carrying Value		Accumulated Amortization			Carrying Value		Gross Carrying Value		Accumulated Amortization			Carrying Value
Developed and purchased technology	$	108,700	$	(33,801	)	$	74,899	$	108,700	$	(21,053	)	$	87,647
Customer relationships		69,400		(15,167	)		54,233		69,400		(8,661	)		60,739
Trademarks and trade names		12,200		(2,688	)		9,512		12,200		(1,676	)		10,524
Total intangible assets	$	190,300	$	(51,656	)	$	138,644	$	190,300	$	(31,390	)	$	158,910

Refer to Note 5 – Acquisition for more information related to the acquisition that occurred in the nine months ended September 30, 2022.

Amortization expense for intangible assets was $6.8 million for the three months ended September 30, 2023 and 2022, and $20.3 million and $18.5 million for the nine months ended September 30, 2023 and 2022, respectively.

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The estimated amortization expense ~~included within “Cost~~for intangible assets subsequent to September 30, 2023, consists of ~~sales” was immaterial.~~the following (in thousands):


Year Ending December 31:
For remainder of 2023	$	6,756
2024		27,022
2025		27,022
2026		21,979
2027		21,882
Thereafter		33,983
	$	138,644

6.9. Accrued Expenses and Other Current Liabilities

The Company’s accrued expenses consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Accrued marketing expenses	$	4,476	$	2,093
Vehicle related expenses		11,238		14,789
Sales taxes		4,849		5,983
Accrued compensation and benefits		16,127		28,276
Accrued professional services		2,373		3,488
Accrued legal settlements(1)		3,816		7,383
Interest payable		5,875		3,990
Other		8,681		10,793
Total accrued expenses	$	57,435	$	76,795

(1) Accrued legal settlements are primarily related to legal challenges stemming from operational challenges created by the Company's prior rapid growth, which resulted in additional costs incurred, including legal settlements.

December 31,

June 30,

2019

2020

Accrued marketing expenses

$
3,158

$
6,488

Vehicle related expenses

8,923

8,234

Sales taxes

7,455

11,304

Accrued compensation and benefits

3,386

2,654

Accrued professional services

2,964

5,537

Accrued Series H preferred stock issuance costs

5,020

—

Other

7,585

6,681

Total accrued expenses

$
38,491

$
40,898

The Company’s other current liabilities consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Vehicle payable	$	4,407	$	3,617
Reserve for estimated returns		2,512		3,919
Insurance payable		2,817		4,551
Other		2,548		5,606
Total other current liabilities	$	12,284	$	17,693

In ~~March 2020,~~November 2022, the Company ~~entered into a new vehicle~~amended its floorplan facility with Ally Bank and Ally Financial (the ~~“2020~~“2022 Vehicle Floorplan Facility”)~~, which replaced the Company’s previous vehicle floorplan facility.~~. The ~~2020~~2022 Vehicle Floorplan Facility provides a committed credit line of up to ~~$450.0~~$500.0 million which ~~expires in~~ is scheduled to mature on March ~~2021.~~ 31, 2024.

The amount of credit available ~~is determined~~to the Company on a monthly basis ~~based on a calculation that considers~~equals the product of (1) the greater of five times the aggregate number of retail units sold during the most recent month for which information is available or the aggregate number of retail units sold during the five most recent months for which information is available and (2) the greater of the average outstanding ~~borrowings and vehicle units paid off by~~floorplan balance of all vehicles on the ~~Company within~~floorplan as of the immediately preceding ~~three-month period. The~~month-end or the average monthly outstanding floorplan balance of all vehicles on the floorplan as of month-end for the immediately preceding five months. As of September 30, 2023, the Company elected to increase its monthly credit line availability by $25 million, as discussed below, bringing the borrowing capacity of the 2022 Vehicle Floorplan Facility to

$228.1 million, of which $15.6 million was unutilized. As of December 31, 2022, the borrowing capacity of the 2022 Vehicle Floorplan Facility was $343.9 million, of which $66.9 million was unutilized.

Additionally, the Company may elect to increase its monthly credit line availability by an additional ~~$25.0~~$25.0 million during any ~~three~~four months ~~of each year. As of June 30, 2020,~~in the period from November 1, 2022 through March 31, 2024, subject to the maximum $500.0 million credit limit. The 2022 Vehicle Floorplan Facility allows for more flexibility in the Company's borrowing ~~capacity~~capacity. Consistent with the terms of the 2020 Vehicle Floorplan Facility, ~~was $200.0 million,~~the Company and Vroom Automotive, LLC have provided Ally with a guaranty of ~~which $90.2 million was unutilized.~~

~~Outstanding borrowings related to~~payment of all amounts owed under the ~~2020~~2022 Vehicle Floorplan Facility ~~are due~~ as well as a security interest in all or substantially all tangible, intangible, and other personal property of Vroom, Inc., to secure obligations under the ~~vehicles financed are sold, or in any event, on the maturity date.~~ 2022 Vehicle Floorplan Facility.

The ~~2020~~2022 Vehicle Floorplan Facility bears interest at a rate equal to the ~~1-Month LIBOR rate applicable in the immediately preceding month~~Prime Rate, announced per annum by Ally Bank, plus ~~a spread of 425~~175 basis points. ~~The 2020 Vehicle Floorplan Facility is collateralized by the Company’s vehicle inventory and certain other assets and~~Additionally, the Company is subject to amended covenants ~~that require it~~and events of default. The Company is required to maintain a certain level of equity in the vehicles that are financed, to maintain at least ~~10%~~20.0% of the ~~outstanding borrowings~~credit line in cash and cash equivalents, ~~to maintain 10% of the monthly credit line availability on deposit with Ally Bank~~ and to maintain a minimum ~~tangible adjusted net worth~~required balance with Ally of ~~$167.0 million, which is defined as shareholder (deficit) equity plus redeemable convertible preferred stock as determined under U.S. GAAP.~~at least 15.0% of the daily floorplan principal balance outstanding. The Company was required to pay ~~an upfront~~a commitment fee ~~of $1.1 million~~ upon execution of the ~~2020~~2022 Vehicle Floorplan Facility.

~~The Company previously entered into a vehicle floorplan (the “2016 Vehicle Floorplan Facility”) with Ally Bank~~

As of September 30, 2023 and ~~Ally Financial in April 2016, as subsequently amended. The 2016 Vehicle Floorplan Facility consisted of a revolving line of credit with a borrowing capacity of $220.0 million as of~~ December 31, ~~2019, which could be used to finance the Company’s vehicle inventory.~~

The interest rate on the 2016 Vehicle Floorplan Facility was equal to the 1-Month LIBOR rate applicable in the immediately preceding month plus a spread of 425 basis points and was payable on a monthly basis.

~~As of December 31, 2019 and June 30, 2020,~~2022, outstanding borrowings on the vehicle floorplan facilities were ~~$173.5~~$212.5 million and ~~$109.8~~$277.0 million, respectively. Cash deposits required under the vehicle floorplan facilities of $31.9 million and $34.6 million are classified as "Restricted cash" within the condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022, respectively.

Interest expense incurred by the Company for the vehicle floorplan facilities was ~~$2.5~~$4.9 million and ~~$1.0~~$6.5 million for the three months ended ~~June~~September 30, ~~2019~~2023 and ~~2020,~~2022, respectively, and ~~$4.4~~$14.1 million and ~~$3.7~~$19.8 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2023 and ~~2020,~~2022, respectively, which are recorded within “Interest expense” in the condensed consolidated statements of operations. The weighted average interest rate on the vehicle floorplan borrowings was ~~6.00%~~10.25% and ~~4.49%~~9.25% as of September 30, 2023 and December 31, ~~2019 and June 30, 2020,~~2022, respectively.

As of September 30, 2023 and December 31, ~~2019 and June 30, 2020,~~2022, the Company was in compliance with all covenants related to the vehicle floorplan facilities.

In connection with the vehicle floorplan facilities, the Company entered into credit balance agreements with Ally Bank and Ally Financial that ~~permits~~permit the Company to deposit cash with the bank for the purpose of reducing the amount of interest payable for borrowings. Interest credits earned by the Company were ~~$1.3~~$3.5 million and ~~$0.7~~$3.9 million for the three months ended ~~June~~September 30, ~~2019~~2023 and ~~2020,~~2022, respectively, and ~~$2.8~~$9.3 million and ~~$2.4~~$11.4 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2023 and ~~2020,~~2022, respectively, which are recorded within “Interest income” in the condensed consolidated statements of operations.

8.In August 2023, the Company amended its 2022 Vehicle Floorplan Facility to modify certain terms, and also amended the credit balance agreements to modify the minimum required credit balance calculation.

12. Long Term Debt

Debt instruments, excluding the 2022 Vehicle Floorplan Facility, which is discussed in Note 10 — Vehicle Floorplan Facility, and warehouse credit facilities of consolidated VIEs, which are discussed in Note 11 — Warehouse Credit Facilities of Consolidated VIEs, consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Current portion of securitization debt of consolidated VIEs	$	186,559	$	47,239
Current portion of financing of beneficial interest in securitizations		10,486		—
Total current portion of long term debt	$	197,045	$	47,239
Convertible senior notes	$	327,837	$	359,254
Securitization debt of consolidated VIEs, net of current portion		175,347		32,590
Financing of beneficial interest in securitizations		7,859		—
Junior subordinated debentures		10,310		10,310
Long term debt, net of current portion	$	521,353	$	402,154
Total debt	$	718,398	$	449,393

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Convertible Senior Notes

On June 18, 2021, the Company issued $625.0 million aggregate principal amount of 0.75% unsecured Convertible Senior Notes due 2026 (the “Notes”), including $75.0 million aggregate principal amount of such notes pursuant to the exercise in full of the overallotment option granted to the initial purchasers. The Notes were issued pursuant to an indenture (the “Indenture”), between the Company and U.S. Bank National Association, as trustee.

The Notes bear interest at a rate of 0.75% per annum, payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2022. The Notes will mature on July 1, 2026, subject to earlier repurchase, redemption or conversion. The total net proceeds from the offering, after deducting commissions paid to the initial purchasers and debt issuance costs paid to third-parties, were approximately $608.9 million.

Each $1,000 principal amount of the Notes will initially be convertible into 17.8527 shares of the Company’s common stock, which is equivalent to an initial conversion price of approximately $56.01 per share, subject to adjustment upon the occurrence of specified events. The Notes are convertible, at the option of the noteholders, on or after April 1, 2026. Prior to April 1, 2026, the Notes are convertible only under the following circumstances:

•

During any fiscal quarter commencing after the fiscal quarter ending on September 30, 2021 (and only during such fiscal quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is greater than or equal to 130% of the conversion price of the Notes on each applicable trading day;

•

During the five consecutive business day period after any ten consecutive trading day period in which the trading price per $1,000 principal amount of the Notes for each day of that ten consecutive trading day period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate of the Notes on such trading day;

•

If the Company calls any or all of the Notes for redemption; or

•

Upon the occurrence of specific corporate events such as a change in control or certain beneficial distributions to common stockholders (as set forth in the Indenture).

The Company may settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

The Company may not redeem the Notes prior to July 6, 2024. On or after July 6, 2024, the Company may redeem all or any portion of the Notes for cash equal to 100% of the principal amount of the Notes being redeemed plus any accrued and unpaid interest if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period.

If the Company undergoes a fundamental change (as defined in the Indenture), subject to certain conditions, holders of the Notes may require the Company to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100% of the principal amount of the Notes plus any accrued and unpaid interest. In addition, if specific corporate events occur prior to the maturity date or if the Company issues a notice of redemption, the Company will increase the conversion rate by pre-defined amounts for a holder who elects to convert their Notes in connection with such a corporate event. During the three and nine months ended September 30, 2023, the conditions allowing holders of the Notes to convert were not met.

During the nine months ended September 30, 2023, the Company repurchased $32.8 million in aggregate principal amount of the Notes, net of deferred issuance costs, for $13.2 million in open-market transactions. The Company recognized a gain on extinguishment of debt of $19.6 million for the nine months ended September 30, 2023. During the

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

nine months ended September 30, 2022, the Company repurchased $56.4 million in aggregate principal amount of the Notes, net deferred issuance costs, for $18.5 million in open-market transactions. The Company recognized a gain on extinguishment of debt of $37.9 million for the nine months ended September 30, 2022.

The Company accounts for the Notes as a single liability-classified instrument measured at amortized cost. As of September 30, 2023, the unamortized debt discount and debt issuance costs was $4.7 million and the net carrying value was $327.8 million. As of December 31, 2022, the unamortized debt discount and debt issuance costs was $6.5 million and the net carrying value was $359.3 million.

The Notes were issued at par value and fees associated with the issuance of these Notes are amortized to interest expense using the effective interest method over the contractual term of the Notes. The interest expense was $1.1 million and $1.9 million for the three months ended September 30, 2023 and 2022, respectively, and $3.3 million and $5.9 million for the nine months ended September 30, 2023 and 2022, respectively. The effective interest rate of the Notes is 1.3%.

Securitization Debt of Consolidated VIEs

The securitization debt was issued under UACC's securitization program. The Company elected to account for the securitization debt under the fair value option using the measurement alternative. Fair value adjustments are recorded in "Other loss, net" in the condensed consolidated statements of operations. Refer to Note 16 – Financial Instruments and Fair Value Measurements. For the 2021-1, 2022-2, and 2023-1 securitization transactions, the Company consolidated the VIEs and accounted for these transactions as secured borrowings. Refer to Note 4 – Variable Interest Entities and Securitizations for further discussion.

Upon the issuance of the securitization debt for the 2021-1 and 2023-1 securitization transactions, UACC retained the residual interests. UACC also retains the servicing rights for all finance receivables that were securitized; therefore, it is responsible for the administration and collection of the amounts owed under the contracts. In Q1 2023, UACC waived its servicing fees related to the 2022-2 securitization and subsequently consolidated the 2022-2 trust. The securitization agreements also require certain funds to be held in restricted cash accounts to provide additional collateral for the borrowings or to be applied to make payments on the securitization debt. Restricted cash under the various agreements totaled approximately $31.3 million and $9.0 million as of September 30, 2023 and December 31, 2022, respectively.

Wholly owned bankruptcy remote subsidiaries of UACC were formed to facilitate the above asset-backed financing transactions. Bankruptcy remote refers to a legal structure in which it is expected that the applicable entity would not be included in any bankruptcy filing by its parent or affiliates. All of the assets of these subsidiaries have been pledged as collateral for the related debt. None of the assets of these subsidiaries are available to pay other creditors of the Company or its affiliates.

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The securitization debt issued is included in “Current portion of long term debt” and "Long term debt, net of current portion" on the condensed consolidated balance sheet. The securitization debt of consolidated VIEs consisted of the following (in thousands):


As of September 30, 2023
Series	Final Scheduled Payment Date	Initial Principal		Contractual Interest Rate		Outstanding Principal		Fair Value
United Auto Credit 2021-1-D	June 10, 2026	$	29,380	1.14	%	$	11,664	$	11,573
United Auto Credit 2021-1-E	June 10, 2026		20,800	2.58	%		20,800		20,515
United Auto Credit 2021-1-F	September 10, 2027		13,910	4.30	%		13,910		13,674
United Auto Credit 2022-2-A	April 10, 2025		119,139	4.39	%		13,708		13,697
United Auto Credit 2022-2-B	December 10, 2025		30,324	5.41	%		30,324		30,254
United Auto Credit 2022-2-C	May 10, 2027		26,533	5.81	%		26,533		26,215
United Auto Credit 2022-2-D	January 10, 2028		32,889	6.84	%		32,889		32,419
United Auto Credit 2022-2-E	April 10, 2029		33,440	10.00	%		33,440		30,474
United Auto Credit 2023-1-A	July 10, 2025		118,598	5.57	%		40,516		40,455
United Auto Credit 2023-1-B	July 10, 2028		51,157	5.91	%		51,157		50,727
United Auto Credit 2023-1-C	July 10, 2028		33,326	6.28	%		33,326		32,936
United Auto Credit 2023-1-D	July 10, 2028		35,653	8.00	%		35,653		35,860
United Auto Credit 2023-1-E	September 10, 2029		23,256	10.98	%		23,256		23,107
Total rated notes		$	568,405			$	367,176	$	361,906


As of December 31, 2022
Series	Final Scheduled Payment Date	Initial Principal		Contractual Interest Rate		Outstanding Principal		Fair Value
United Auto Credit 2021-1-C	June 10, 2026	$	29,640	0.84	%	$	18,466	$	18,322
United Auto Credit 2021-1-D	June 10, 2026		29,380	1.14	%		29,380		28,481
United Auto Credit 2021-1-E	June 10, 2026		20,800	2.58	%		20,800		19,685
United Auto Credit 2021-1-F	September 10, 2027		13,910	4.30	%		13,910		13,341
		$	93,730			$	82,556	$	79,829

The final scheduled payment date represents legal maturity of the remaining balance sheet securitization debt. Securitization debt is expected to become due and to be paid prior to those dates, based on amortization of the finance receivables pledged to the Trusts.Expected payments, which will depend on the performance of such receivables, as to which there can be no assurance, are $44.5 million in 2023, $155.3 million in 2024, $94.4 million in 2025, $47.1 million in 2026 and $25.9 million in 2027.

The aggregate principal balance and the fair value of finance receivables pledged to the securitization debt consists of the following (in thousands):


	As of September 30,				As of December 31,
	2023				2022
	Aggregate Principal Balance		Fair Value		Aggregate Principal Balance		Fair Value
United Auto Credit 2021-1	$	47,600	$	45,332	$	84,477	$	77,904
United Auto Credit 2022-2		145,424		125,880		—		—
United Auto Credit 2023-1		227,460		194,582		—		—
Total finance receivables of CFEs	$	420,484	$	365,794	$	84,477	$	77,904

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Financing of Beneficial Interests in Securitizations

On May 3, 2023, UACC entered into a Risk Retention Financing Facility enabling it to finance asset-backed securities issued in its securitization transactions and held by UACC pursuant to applicable risk retention rules. Under this facility, UACC sells such retained interests and agrees to repurchase them on a future date. In its initial transaction under this facility, UACC pledged $24.5 million of its retained beneficial interests as collateral, and received proceeds of $24.1 million, with expected repurchase dates ranging from March 2025 to September 2029. The securitization trusts will distribute payments related to UACC's pledged beneficial interests in securitizations directly to the lender, which will reduce the beneficial interests in securitizations and the related debt balance. Pledged collateral levels are monitored and are generally maintained at an agreed-upon percentage of the fair value of the amounts borrowed during the life of the transactions. In the event of a decline in the fair value of the pledged collateral, UACC may be required to transfer cash or additional securities as pledged under this facility. At the termination of this agreement, UACC is obligated to return the amounts borrowed.

The outstanding balance of this facility, net of unamortized debt issuance costs, was $18.4 million as of September 30, 2023, with $10.5 million included in "Current portion of long term debt" and $7.9 million included in "Long-term debt, net of current portion" on the condensed consolidated balance sheet. As of September 30, 2023, the fair value of the collateral pledged under this facility was $18.6 million.

Junior Subordinated Debentures

On July 31, 2003, UACC issued junior subordinated debentures (trust preferred securities) of $10.0 million through a subsidiary, UPFC Trust I. The trust issuer is a 100 percent owned finance subsidiary and the securities are fully and unconditionally guaranteed by Vroom Automotive Finance Corporation. The interest is paid quarterly at a variable rate, equal to SOFR + 3.05%. The final maturity of these securities is on October 7, 2033; however, they can be called at par any time at the Company’s discretion.

13. Commitments and Contingencies

~~Litigation~~

Litigation

From time to time, the Company is involved in various claims and legal actions that arise in the ordinary course of business and an unfavorable resolution of any of these matters could materially affect the Company’s future results of operations, cash flows or financial position. The Company is also party to various disputes that the Company considers routine and incidental to its business. ~~We accrue~~The Company does not expect the results of any of these routine actions to have a material effect on the Company’s business, results of operations, financial condition, or cash flows. The Company accrues a liability when a loss is considered probable and the amount can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, ~~we do~~the Company does not record a liability, but instead ~~disclose~~discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can be made. Legal fees are expensed as incurred. As

Beginning in March 2021, multiple putative class actions were filed in the U.S. District Court for the Southern District of ~~December 31, 2019 and June 30, 2020,~~New York by certain of the Company’s stockholders against the Company ~~was~~and certain of the Company’s officers alleging violations of federal securities laws. The lawsuits were captioned Zawatsky et al. v. Vroom, Inc. et al., Case No. 21-cv-2477; Holbrook v. Vroom, Inc. et al., Case No. 21-cv-2551; and Hudda v. Vroom, Inc. et al., Case No. 21-cv-3296. All three of the lawsuits asserted similar claims under Sections 10(b) and 20(a) of the Exchange Act, and SEC Rule 10b-5. In each case, the named plaintiff(s) sought to represent a proposed class of all persons who purchased or otherwise acquired the Company’s securities during a period from June 9, 2020 to March 3, 2021 (in the case of Holbrook and Hudda), or November 11, 2020 to March 3, 2021 (in the case of Zawatsky). In August 2021, the Court consolidated the cases under the new name In re: Vroom, Inc. Securities Litigation, Case No. 21-cv-2477, appointed a lead plaintiff and lead counsel and ordered a consolidated amended complaint to be filed. The court-appointed lead plaintiff subsequently filed a consolidated amended complaint that reasserts claims under Sections 10(b) and 20(a) of the Exchange Act, and SEC Rule 10b-5 against the Company and certain of the Company’s officers, and added new claims under Sections 11, 12 and 15 of the Securities Act against the Company, certain of its officers, certain of its directors, and the underwriters of

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

the Company’s September 2020 secondary offering. The Company filed a motion to dismiss all claims, and briefing of this motion is complete. The Company believes this lawsuit is without merit and intends to vigorously contest these claims. While the outcome of any complex legal proceeding is inherently unpredictable and subject to significant uncertainties, based upon information presently known to management, the Company believes that the potential liability, if any, will not ~~a party to any legal proceedings that, individually or in the aggregate, are reasonably expected to~~ have a material adverse effect on the Company’s ~~consolidated~~financial condition, cash flows, or results of ~~operations, financial condition~~ operations.

In August 2021, November 2021, January 2022, and February 2022, various Company stockholders filed purported shareholder derivative lawsuits on behalf of the Company in the U.S. District Court for the Southern District of New York against certain of the Company’s officers and directors, and nominally against the Company, alleging violations of the federal securities laws and breaches of fiduciary duty to the Company and/or ~~cash flows. However,~~related violations of Delaware law based on the ~~results~~same general course of ~~these matters cannot be predicted with certainty,~~conduct alleged in In re: Vroom, Inc. Securities Litigation. All four lawsuits have been consolidated under the case caption In re Vroom, Inc. Shareholder Derivative Litigation, Case No. 21-cv-6933, and the court has approved the parties’ stipulation that the cases would remain stayed pending final resolution of In re: Vroom, Inc. Securities Litigation. All four derivative suits remain in preliminary stages and there have been no substantive developments in any matter.

In April 2022, one of the Company’s stockholders filed a purported shareholder derivative lawsuit on behalf of the Company in the U.S. District Court for the District of Delaware against certain of the Company’s officers and directors, and nominally against the Company, alleging violations of the federal securities law and breaches of fiduciary duty to the Company and/or related violations of Delaware law based on the same general course of conduct alleged in In re: Vroom, Inc. Securities Litigation. The case is captioned Godlu v. Hennessy et al., Case No. 22-cv-569, and the court has approved the parties’ stipulation that the case would remain stayed pending final resolution of In re: Vroom, Inc. Securities Litigation. This lawsuit remains in preliminary stages and there have been no substantive developments.

The Attorney General of Texas, on behalf of the State of Texas, filed a petition in April 2022 and an ~~unfavorable resolution~~amended petition in October 2023, in the District Court of ~~one~~Travis County Texas against the Company, alleging violation of the Texas Deceptive Trade Practices − Consumer Protection Act, Texas Business and Commerce Code § 17.41 et seq (Texas v. Vroom Automotive LLC, and Vroom Inc., Case No. D-1-GN-001809). The purported violations are based on alleged deficiencies and other issues in the Company’s marketing of used vehicles and fulfilment of customer orders, including the titling and registration of sold vehicles. Vroom Automotive, LLC and the Attorney General of the State of Texas have agreed to a temporary injunction in which Vroom Automotive, LLC agrees to adhere to its existing practice of possessing title for all vehicles it sells or ~~more matters could~~advertises as available for sale on its ecommerce platform. The parties are engaged in discovery and Vroom continues to work cooperatively with the office of the Attorney General of the State of Texas towards a resolution. Because the case is at an early stage and the outcome of any complex legal proceeding is inherently unpredictable and subject to significant uncertainties, the Company cannot determine at present whether any potential liability would have a material adverse effect on the Company’s ~~consolidated~~financial condition, cash flows, or results of ~~operations, financial condition~~operations.

In July 2022 and August 2022, respectively, certain plaintiffs filed two putative class action lawsuits in the District Court of Cleveland County, Oklahoma and the New York State Supreme Court, respectively, against Vroom, Inc., and Vroom Automotive LLC as defendants, alleging, among other things, deficiencies in Vroom’s titling and registration of sold vehicles: BlakeSonne, individually and on behalf of all others similar situated, v. Vroom Automotive, LLC and Vroom, Inc., No. CJ-2022-822 and Emely Reyes Martinez, on behalf of all others similarly situated, v. Vroom Automotive, LLC and Vroom Inc., No. 652684/2022. The Company removed the cases to the U.S. District Court for the Western District of Oklahoma (Case No. 22-cv-761) and the U.S. District Court for the Southern District of New York (Case No. 22-cv-7631), respectively, and filed motions to compel arbitration of all claims in both cases. In September 2023, Vroom’s motions to compel arbitration were granted in both cases, and the court actions are stayed pending the outcome of any arbitration proceeding over the respective plaintiffs’ individual claims.

As previously disclosed, the Company has been subject to audits, requests for information, investigations and other inquiries from its regulators relating to increased customer complaints concerning the same or ~~cash flows.~~similar matters alleged in the State of Texas petition. These regulatory matters could continue to progress into legal proceedings as well as enforcement actions. The Company has incurred fines in certain states and could continue to incur fines, penalties, restitution, or alterations in the Company's business practices, which in turn, could lead to increased business expenses, additional limitations on the Company's business activities and further reputational damage, although to date such

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

~~Letters~~expenses have not had a material adverse effect on the Company’s financial condition, cash flows, or results of ~~Credit~~operations.

Nasdaq Notice

On June 23, 2023, the Company received written notice from The Nasdaq Stock Market LLC (“Nasdaq”) informing the Company that it has ~~obtained stand-by letters~~regained compliance with Nasdaq Listing Rule 5450(a)(1), which requires that companies listed on the Nasdaq Global Select Market maintain a minimum bid price of ~~credit totaling $1.9 million~~$1.00 per share.

As previously reported, on April 14, 2023, the Company received a letter from Nasdaq indicating that, for the preceding 30 consecutive business days, the bid price for the Company’s common stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Select Market pursuant to ~~satisfy conditions under two lease agreements. The~~Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Price Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company ishad been provided an initial period of 180 calendar days from the Nasdaq notification, or until October 11, 2023, to regain compliance. To regain compliance, the Company was required to maintain the Minimum Bid Price Requirement for a ~~cash deposit~~minimum of ~~$1.9 million~~ten consecutive business days.

In its June 23, 2023 notice, Nasdaq notified the Company that the closing bid price of its common stock had been at $1.00 per share or greater for 11 consecutive business days, from June 8, 2023 to June 22, 2023. Accordingly, the Company regained compliance with the ~~financial institution that issued~~Minimum Bid Price Requirement and the ~~stand-by letters of credit, which is classified as “Restricted cash” within the condensed consolidated balance sheets as of December 31, 2019 and June 30, 2020, respectively.~~matter was closed.

Other Matters

The Company enters into agreements with third parties in the ordinary course of business that may contain indemnification provisions. In the event that an indemnification claim is asserted, the Company’s liability, if any, would be limited by the terms of the applicable agreement. Historically, the Company has not incurred material costs to defend lawsuits or settle claims related to indemnification provisions.

The Company’s leasing activities primarily consist of real estate leases for its operations, including office space, the Company’s reconditioning facility, the TDA retail location, the Company’s Sell Us Your Car centers, parking lots and other facilities. The real estate leases have terms ranging from six months to eight years. The Company also has leases for various types of equipment, which are not material, individually or in the aggregate. The Company assesses whether each lease is an operating or finance lease at the lease commencement date. The Company does not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company does not have any significant leases that have not yet commenced but that create significant rights and obligations for the Company.

The Company’s real estate leases often require it to make payments for maintenance in addition to rent as well as payments for real estate taxes and insurance. Maintenance, real estate taxes, and insurance payments are generally variable costs which are based on actual expenses incurred by the lessor. Therefore, these amounts are not included in the consideration of the contract when determining the right-of-use asset and lease liability but are reflected as variable lease expenses.

Leases with an initial term of 12 months or less are not recorded on the Company’s consolidated balance sheet and expense for these leases are recognized on a straight-line basis over the lease term.

Certain of the Company’s real estate leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years. The exercise of lease renewal options is at the Company’s sole discretion. If it is reasonably certain that the Company will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of the Company’s right-of-use assets and lease liabilities. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

~~As of June 30, 2020, the weighted-average remaining lease term and discount rate for the Company’s operating leases were 4.0 years and 3.4%, excluding short-term operating leases.~~

As the rate implicit in the lease is generally not readily determinable for the Company’s operating leases, the discount rates used to determine the present value of the Company’s lease liabilities are based on the Company’s incremental borrowing rate at the lease commencement date and commensurate with the remaining lease term. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. The Company determines its incremental borrowing rate based on a synthetic credit rating that was developed with the assistance of a third-party specialist.

~~The Company’s lease costs and activity for the three and six months ended June 30, 2020 were as follows (in thousands):~~

The maturity of the Company’s lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on the Company’s condensed consolidated balance sheet as of June 30, 2020 were as follows (in thousands):

Future minimum payments under non-cancelable operating leases with initial terms of one year or more consisted of the following as of December 31, 2019 in accordance with ASC Topic 840 (in thousands):

In accordance with ASC Topic 840, rent expense was $1.9 million and $3.4 million for three and six months ended June 30, 2019. Certain of the Company’s lease agreements contain escalation clauses, and accordingly, the Company records the rent expense on a straight-line basis over the lease term. Deferred rent under ASC Topic ASC 840 is recorded within “Accrued expenses” in the condensed consolidated balance sheet.

~~10. Redeemable Convertible~~14. Preferred Stock and Stockholders’ ~~(Deficit)~~ Equity

~~As of December 31, 2019, the Company had eight outstanding series of~~ ~~redeemable convertible preferred stock (collectively the “Series Preferred”)~~. The Company classified its Series B through H Preferred Stock (collectively the “Senior Preferred Stock”) as temporary equity within the Company’s consolidated balance sheet as of December 31, 2019 because the instruments contained redemption rights. The Company concluded that the Senior Preferred Stock were considered probable of becoming redeemable through November 2019 and therefore recorded accretion to their redemption values of $132.8 million during the year ended December 31, 2019. During December 2019, the Company ceased accretion of the Senior Preferred Stock to their redemption values due to a sufficiently high likelihood of an IPO requiring a conversion of the instruments into common stock.

As of December 31, 2019, the Company classified its Series A Preferred Stock as temporary equity within the Company’s consolidated balance sheets because the instrument contained liquidation features, including a liquidation preference in the event of a deemed liquidation event, that were not solely within the Company’s control. The Company did not adjust the carrying value of the Series A Preferred Stock to its redemption value because it was not probable that the Series A Preferred Stock would become redeemable.

On January 8, 2020, the Company completed an additional closing of its Series H Preferred Stock whereby it sold and issued an aggregate of 1,964,766 shares of Series H Preferred Stock in exchange for gross proceeds of $26.7 million. The proceeds were used for general corporate purposes and business development.

~~Immediately upon closing of the IPO, the Company’s outstanding preferred stock was automatically converted into an aggregate of 85,533,394 shares of the Company’s common stock.~~ On June 11, 2020, the Company amended its certificate of incorporation to authorize the issuance of up to 10,000,000 shares of Preferred Stock. As of ~~June~~September 30, ~~2020,~~2023, there was no preferred stock issued or outstanding.

~~The authorized, issued and outstanding shares, issue price, conversion price, liquidation preference, and carrying value of the Series Preferred as of December 31, 2019 were as follows:~~

As of December 31, 2019

(in thousands, except share and per share amounts)

Shares
authorized

Shares
issued and
outstanding

Issue
price

Per share
conversion
price

Liquidation
preference

Carrying
value

Series A

3,983,996

3,983,996

$
1.61

$
1.61

$
6,419

$
6,167

Series B

4,716,484

4,716,484

2.48

2.48

11,709

42,425

Series C

9,134,242

9,134,242

5.93

5.93

54,209

88,739

Series D

14,431,136

14,431,136

6.58

6.58

95,000

142,724

Series E

6,163,792

6,163,792

8.11

8.11

50,000

64,042

Series F

12,705,580

12,115,610

8.53

8.53

103,346

127,820

Series G

16,280,040

16,280,040

8.98

8.98

146,113

174,764

Series H

18,708,094

16,743,328

13.60

13.60

227,651

227,651

86,123,364

83,568,628

$
694,447

$
874,332

On June 11, 2020, the Company amended its certificate of incorporation to effect a ~~2-for-1~~2-for-1 forward stock split of shares of the Company’s outstanding common stock, such that each share of common stock, ~~$0.001~~$0.001 par value became two shares of common stock, ~~$0.001~~$0.001 par value per share. The shares of common stock authorized for issuance was increased to ~~500,000,000.~~500,000,000. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders.

In connection with the offering of shares of Series B Preferred Stock, the Company issued warrants to an investor in return for providing ongoing advisory services (“Series B Warrants”). The Series B Warrants allowed the investor to purchase up to 161,136 shares of common stock with an exercise price of $0.72 per share. The Series B Warrants vested in equal monthly installments through October 1, 2017. Upon the closing of the IPO, all of the Series B Warrants were exercised cashless by the holder which resulted in the net issuance of 155,862 shares of the Company’s common stock.

In August 2017, the Company issued a warrant (the “Series F Preferred Stock Warrant”) which allowed the holders to purchase up to 589,970 shares of the Company’s Series F Preferred Stock, or common stock upon conversion of the Company’s preferred stock into common stock, with an exercise price of $8.53 per share. The holders exercised the warrant on June 23, 2020 cashless, which resulted in the net issuance of 480,250 shares of the Company’s common stock. Prior to the conversion of the Company’s preferred stock into common stock, the Series F Preferred Stock Warrant was classified as a liability due to the contingent redemption features of the Series F Preferred Stock and was measured at fair value at each reporting date. Refer to Note 12 – Financial Instruments and Fair Value Measurements.

~~11.~~15. Stock-based Compensation

On May 28, 2020, the Company adopted the 2020 Incentive Award Plan (“the 2020 Plan”), which authorized the issuance of (i) up to 3,019,108 shares of the Company’s common stock, (ii) ~~up to 4% of~~ an annual increase on the first day of each year beginning on January 1, 2022 and ending on January 1, 2030 of up to 4% of the shares of common stock outstanding on an as-converted basis on the last day of the immediately preceding fiscal year, and (iii) any shares of the Company’s common stock subject to awards under the 2014 Plan which are forfeited or lapse unexercised and which following the effective date are not issued under the 2014 Plan. Awards may be issuedin the form of restricted stock units, restricted stock, stock appreciation rights, and stock options. As of ~~June~~September 30, 2023, the Company has registered an additional 11,011,780 shares of the Company's common stock to be issued pursuant to the 2020 Plan. As of September 30, 2023, there were ~~3,093,498~~1,527,629 shares available for future issuance under the 2020 Plan.

~~Stock Options~~

~~The~~

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VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

On May 20, 2022, the Company adopted the 2022 Inducement Award Plan (the “Inducement Award Plan”). Awards under the Inducement Award Plan may only be granted to a newly hired employee who has not previously been an employee or a member of the Board or an employee who is being rehired following ~~table summarizes~~a bona fide period of non-employment by the Company, in each case as a material inducement to the employee’s entering into employment. An aggregate of 3,000,000 shares of the Company’s common stock ~~option activity~~are reserved for issuance under the ~~six months ended June~~Inducement Award Plan. As of September 30, ~~2020:~~2023, there were 2,547,122 shares available for future issuance under the Inducement Award Plan.

Shares

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Contractual Life

Outstanding as of December 31, 2019

6,340,000

$
3.92

8.22

Granted

420,500

10.46

Exercised

(3,274
)

4.21

Forfeited / cancelled

(417,150
)

4.30

Outstanding as of June 30, 2020

6,340,076

$
4.33

7.79

Vested and exercisable as of December 31, 2019

2,684,160

$
3.58

7.41

Vested and exercisable as of June 30, 2020

3,451,864

$
3.63

7.05

RSUs

The Company recognized ~~$0.7~~$2.7 million and ~~$0.6~~$0.9 million of stock-based compensation expense related to ~~stock options~~RSUs for the three months ended ~~June~~September 30, ~~2019~~2023 and ~~2020,~~2022, respectively, and ~~$1.5~~$6.6 million and ~~$1.2~~$5.5 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2023 and ~~2020,~~2022, respectively. As of September 30, 2023 and December 31, ~~2019 and June 30, 2020,~~2022, the Company had ~~$5.2~~$14.8 million and ~~$4.7~~$18.2 million, respectively, of unrecognized stock-based compensation expense that is expected to be recognized over a weighted-average period of ~~2.6~~1.8 and 1.9 years, ~~and 2.7 years,~~ respectively.

~~VROOM, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~The~~On May 9, 2022, 1,200,000 RSUs having a grant date fair value of ~~stock options~~$1.08 per share were granted ~~during~~to the ~~six months ended June 30, 2020 was~~ ~~estimated at the time~~CEO and on May, 20, 2022, an aggregate of 3,190,000 RSUs having a grant ~~using the~~ ~~Black-Scholes option-pricing model and utilized the following weighted average assumptions:~~

Six Months Ended
June 30, 2020

Fair value of common stock (per share)

$
10.46

Expected term (in years)

5.9 — 6.3

Risk-free interest rate

1.7%

Expected volatility

36.3% — 36.6%

Dividend yield

—%

~~The weighted average~~date fair value of $1.45 per share were granted to certain members of the management team. On July 25, 2022, 140,000 RSUs having a grant date fair value of $1.64 per share were granted to a member of the management team. The RSUs were issued under the 2020 Plan and will vest on the third anniversary of the grant date, subject to continued employment through that date. The vesting of the RSUs will accelerate in one-third increments if the Company's common stock ~~options granted~~achieves a closing price at or above $7.50 per share for twenty consecutive trading days during the ~~six months ended June 30, 2020 was estimated to be $3.97~~three-year vesting period; a closing price at or above $15.00 per ~~share. The aggregate intrinsic value~~share for twenty consecutive trading days in the second or third years of ~~options exercised~~the vesting period; and a closing price at or above $21.00 per share for twenty consecutive trading days during the ~~six months ended June 30, 2020 was immaterial, and~~third year of the ~~aggregate intrinsic value of options outstanding and options exercisable as of June 30, 2020 was $303.1 million and $167.5 million, respectively.~~

~~RSUs~~

~~The following table summarizes activity for restricted stock units (“RSUs”) for the six months ended June 30, 2020:~~

Shares

Weighted Average
Grant Date Fair Value per Share

Unvested and outstanding as of December 31, 2019

408,000

$
4.01

Granted

2,214,276

11.28

Vested

(133,334
)

3.60

Forfeited / cancelled

(540
)

11.57

Unvested and outstanding as of June 30, 2020

2,488,402

$
10.50

The Company recognized $0.0 million and $3.3 million of stock-based compensation expense related to RSUs for the three months ended June 30, 2019 and 2020, respectively, and $0.0 million and $3.3 million for the six months ended June 30, 2019 and 2020, respectively.vesting period. As of ~~December 31, 2019 and June~~September 30, ~~2020,~~2023, the Company had $1.3 million and $20.9 million, respectively, of unrecognized stock-based compensation expense that is expected to be recognized over a weighted-average period of 2.4 years and 1.9 years, respectively. accelerated vesting conditions were not met.

As a result of completing its IPO in June 2020, the Company commenced the recognition of compensation expense for 510,278 RSUs that vest upon the occurrence of a liquidity event, which includes an IPO, and continuous service that generally ranges from 12 to 48 -months.

In February 2020, the Company granted 367,782 RSUs to its chief executive officer that vest upon the achievement of performance-based conditions, which includes Revenue and EBITDA targets for fiscal year 2022, and the achievement of a liquidity event, which includes a change of control or an IPO. As a result of completing its IPO in June 2020, and the probability of achieving the performance-based conditions, the Company commenced recognition of compensation expense. Accordingly, $0.5 million of stock-based compensation expense was recorded for these RSUs for the three and six months ended June 30, 2020.

Certain of the Company’s RSU grants are subject to acceleration upon a change of control and termination within 12 months, and upon death, disability, retirement and certain “good leaver” circumstances.

~~During the years ended December 31, 2014 and 2015, the Company granted awards of 4,751,874 shares of restricted common stock (the “RSAs”).~~

~~The following table summarizes the activity related to the Company’s RSAs for the six months ended June 30, 2020:~~

For the three and six months ended June 30, 2019, the expense related to the RSAs was immaterial. For the three and six months ended June 30, 2020, the expense related to the RSAs was $0.2 million. As of June 30, 2020, there was no remaining unrecognized stock-based compensation expense related to the RSAs.

U.S. GAAP defines fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. These estimates are subjective in nature and involve uncertainties and matters of judgment, and therefore cannot be determined with precision. U.S. GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and establishes the following three levels of inputs that may be used to measure fair value:

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted market prices in markets that are not active; or model-derived valuations or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

The Company holds certain financial assets that are required to be measured at fair value on a recurring basis. Additionally, the Company elected the fair value option for the financial assets and liabilities of UACC’s consolidated CFEs, beneficial interests in the 2022-1 securitization transaction, certain of UACC’s finance receivables that are ineligible to be sold as of the Acquisition Date, and certain other finance receivables. Under the fair value option allowable under ASC 825, “Financial Instruments” (“ASC 825”), the Company may elect to measure at fair value financial assets and

liabilities that are not otherwise required to be carried at fair value. Subsequent changes in fair value for designated items are reported in earnings.

The following tables present the Company’s financial assets and liabilities measured at fair value on a recurring ~~basis:~~basis (in thousands):

`	As of December 31, 2019

	Level 1		Level 2		Level 3		Total		As of September 30, 2023
	(in thousands)								Level 1		Level 2		Level 3		Total
Financial Assets
Cash and cash equivalents:
Money market funds	$	70,059	$	—	$	—	$	—	$	11,232	$	—	$	—	$	11,232
CFE assets:
Finance receivables										—		—		365,794		365,794
Finance receivables at fair value										—		—		34,903		34,903
Beneficial interests in securitizations										—		5,287		—		5,287
Total financial assets	$	70,059	$	—	$	—	$	—	$	11,232	$	5,287	$	400,697	$	417,216
Financial Liabilities
Other long-term liabilities:
Series F Preferred Stock Warrant		—		—		1,403		1,403
CFE liabilities:
Securitization debt of consolidated VIEs										—		361,906		—		361,906
Total financial liabilities	$	—	$	—	$	1,403	$	1,403	$	—	$	361,906	$	—	$	361,906

`	As of June 30, 2020
	Level 1		Level 2		Level 3		Total		As of December 31, 2022
	(in thousands)								Level 1		Level 2		Level 3		Total
Financial Assets
Cash and cash equivalents:
Money market funds	$	100,016	$	—	$	—	$	—	$	182,687	$	—	$	—	$	182,687
CFE assets:
Finance receivables										—		—		77,904		77,904
Finance receivables at fair value										—		—		75,270		75,270
Beneficial interests in securitizations										—		20,592		—		20,592
Total financial assets	$	100,016	$	—	$	—	$	—	$	182,687	$	20,592	$	153,174	$	356,453
Financial Liabilities
CFE liabilities:
Securitization debt of consolidated VIEs										—		79,829		—		79,829
Total financial liabilities									$	—	$	79,829	$	—	$	79,829

22Valuation Methodologies of Financial Instruments Measured at Fair Value on a Recurring Basis

The following is a description of the valuation methodologies used for financial instruments carried at fair value. These methodologies are applied to financial assets and liabilities across the fair value levels discussed above, and it is the observability of the inputs used that determines the appropriate level in the fair value hierarchy for the respective asset or liability.

Money Market Funds: Money market funds primarily consist of investments in highly liquid U.S. treasury securities, with original maturities of three months or less and are classified as Level 1. The Company determines the fair value of cash equivalents based on quoted prices in active markets.

Financial assets and liabilities of CFEs: The Company elected the fair value option for the assets and liabilities of its consolidated VIEs related to securitization transactions that were deemed to be CFEs.

In accordance with ASC 825, the Company has elected the fair value option, for the eligible financial assets and liabilities of the 2021-1, 2022-2, and 2023-1 consolidated CFEs in order to mitigate potential accounting mismatches between the carrying value of the financial assets and liabilities. To eliminate potential measurement differences, the Company elected the measurement alternative included in ASU 2014-13, allowing the Company to measure both the

financial assets and liabilities of a qualifying CFE using the fair value of either the CFE’s financial assets or liabilities, whichever is more observable. Under the measurement alternative prescribed by ASU 2014-13, the Company recognizes changes in the CFE’s net assets, including changes in fair value adjustments and net interest earned, in its condensed consolidated statements of operations.

The Company is required to determine whether the fair value of the financial assets or the fair value of the financial liabilities of the eligible CFEs are more observable, but in either case, the methodology results in the fair value of the financial assets of the securitization trust being equal to the fair value of their liabilities. The Company determined that the fair value of the liabilities of the securitization CFEs are more observable, since market prices of their liabilities are based on non-binding quoted prices provided by broker dealers who make markets in similar financial instruments. The assets of the securitization CFEs are not readily marketable, and their fair value measurement requires information that may be limited in availability.

In determining the fair value of the securitization debt of consolidated CFEs, the broker dealers consider contractual cash payments and yields expected by market participants. Broker dealers also incorporate common market pricing methods, including a spread measurement to the treasury curve or interest rate swap curve as well as underlying characteristics of the particular security including ratings, coupon, collateral type and seasoning or age of the security. When the Company obtains prices from multiple broker dealers for the same security and has a consensus among them, it deems these fair values to be based on observable valuation inputs and classified as Level 2 of the fair value hierarchy. Where a third-party broker dealer quote is not available, an internal model is utilized using unobservable inputs or if the Company has multiple quotes that are not within determined range, it classified the securitization debt as Level 3 of the fair value hierarchy.

The financial assets of the consolidated CFEs are an aggregate value derived from the fair value of the CFEs liabilities. The Company determined that CFEs finance receivables in their entirety should be classified as Level 3 of the fair value hierarchy.

Finance receivables at fair value: Finance receivables at fair value represent finance receivables for which the Company elected the fair value option in accordance with ASC 825. These receivables primarily relate to finance receivables that the Company does not intend to sell in the immediate future due to various factors such as: delinquencies, bankruptcy, etc. The Company estimates the fair value of these receivables using a discounted cash flow model and incorporates key inputs that include performance rate, default rate, recovery rate, and weighted average coupon rates, as well as certain macroeconomics events the Company believes market participants would consider relevant.

Beneficial interests in securitization: Beneficial interests in securitization relate to the 2022-1 securitization completed in February 2022 and include rated notes as well as certificates. The beneficial interests in the 2022-2 securitization completed in July 2022 were eliminated upon consolidation of the VIE in March 2023. Refer to Note 4 – Variable Interest Entities and Securitizations. The Company elected the fair value option on its beneficial interests in securitization.

Beneficial interests may initially be classified as Level 2 if the transactions occur within close proximity to the end of each respective reporting period. Subsequently, similar to the securitization debt described above, fair value is determined by requesting a non-binding quote from broker dealers, or by utilizing market acceptable valuation models, such as discounted cash flows. Broker dealer quotes may be based on an income approach, which converts expected future cash flows to a single present value amount, with specific consideration of inputs relevant to particular security types. Such inputs may include ratings, collateral types, geographic concentrations, underlying loan vintages, delinquencies and defaults, loss severity assumptions, prepayments, and weighted average coupons and maturities. When the volume or level of market activity for a security is limited, certain inputs used to determine fair value may not be observable in the market. Broker dealer quotes may also be based on a market approach that considers recent transactions involving identical or similar securities. When the Company obtains prices from multiple broker dealers for the same security and has a consensus among them, it deems these fair values to be based on observable valuation inputs and classified as Level 2 of the fair value hierarchy. Where a third-party broker dealer quote is not available, the Company utilizes an internally developed model using unobservable inputs. If internally developed models are utilized or if the

Company has multiple quotes that are not within a consensus range of each other, the Company deems these securities to be classified as Level 3 of the fair value hierarchy.

The following table presents a reconciliation of the ~~Series F Preferred Stock Warrant,~~financial assets, which iswere measured at fair value on a recurring basis using Level 3 ~~inputs:~~inputs (in thousands):

Series F Preferred
Stock Warrant

(in thousands)

Balance as of December 31, 2019

$
1,403

Change in fair value

20,470

Conversion to common stock warrant

(21,873
)
Balance as of June 30, 2020

$
—


	Finance Receivables of Consolidated CFEs			Finance Receivables at Fair Value
Fair value as of January 1, 2023	$	77,904		$	75,270
Reclassification of finance receivables held for sale to finance receivables at fair value, net		248,081			—
Transfer within Level 3 categories		24,175			(24,175	)
Consolidation of VIEs		180,706			—
Losses included in other income		(67,035	)		(1,349	)
Issuances, net of discount		—			3,392
Paydowns		(117,002	)		(19,641	)
Other		18,965			1,406
Fair value as of September 30, 2023	$	365,794		$	34,903


	Finance Receivables of Consolidated CFEs			Finance Receivables at Fair Value			Securitization Debt of Consolidated CFEs
Fair value as of January 1, 2022	$	—		$	—		$	—
Acquired in business combination		262,644			34,283			275,394
Transfer out of Level 3		—			—			(275,394	)
Transfer within Level 3 categories		(50,938	)		50,938			—
Losses included in other income		(24,293	)		(9,078	)		—
Issuances, net of discount		—			49,475
Sales		(24,312	)		(14,114	)		—
Paydowns		(78,379	)		(28,450	)		—
Other		9,739			2,511			—
Fair value as of September 30, 2022	$	94,461		$	85,565		$	—

~~Prior~~During the nine months ended September 30, 2023, $180.7 million of finance receivables related to the ~~closing~~2022-2 securitization transaction were consolidated and classified as Level 3 and $248.1 million of finance receivables held for sale related to the ~~IPO on June 11, 2020 and the related conversion~~2023-1 securitization transaction were reclassified to Level 3 finance receivables of ~~the Company’s preferred stock into common stock, the Company estimated~~consolidated CFEs.

The Company's transfers between levels of the fair value hierarchy are assumed to have occurred at the beginning of the ~~Series F Preferred Stock Warrant based~~reporting period on a quarterly basis, except for assets and liabilities acquired during the ~~Black-Scholes option-pricing~~prior period as described below.

During the nine months ended September 30, 2022, transfers out of Level 3 liabilities related to securitization debt of consolidated CFEs. The transfer out of Level 3 was the result of achieving consensus pricing from third-party broker dealers who utilize market observable inputs to price the liabilities. Upon acquisition, the Company utilized unobservable pricing information and an internal discounted cash flows model to value the CFEs liabilities. The Company obtained consensus broker dealers quotes as of September 30, 2022. For the CFEs liabilities acquired during the period, the transfer was presumed to occur immediately after the Acquisition Date.

Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Other Relevant Data for Financial Assets and Liabilities for which ~~utilized~~FVO Was Elected

The following table presents the ~~value of shares sold~~gains or losses recorded in "Other loss, net" in the ~~Company’s latest preferred stock financing and allocated~~condensed consolidated statements of operations related to the ~~estimated equity~~eligible financial instruments for which the fair value ofoption was elected (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2023		2022			2023			2022
Financial Assets
Finance receivables of CFEs	$	23,103	$	3,930		$	54,987		$	19,225
Finance receivables at fair value		2,027		(1,004	)		605			7,248
Beneficial interests in securitizations		238		206			1,160			527
Financial Liabilities
Debt of securitized VIEs		335		(275	)		(6,916	)		(2,990	)
Total net loss included in other income	$	25,703	$	2,857		$	49,836		$	24,010

The following table presents other relevant data related to the Company to each class of the Company’s outstanding securities using an option-pricing back-solve model. Upon the closing of the IPO, the Series F Preferred Stock Warrant converted into a common stock warrant and the warrant liability was remeasuredfinance receivables carried at fair value ~~for~~(in thousands):


As of September 30, 2023	Finance Receivables of CFEs at Fair Value		Finance Receivables at Fair Value
Aggregate unpaid principal balance included within finance receivables that are reported at fair value	$	420,484	$	40,538
Aggregate fair value of finance receivables that are reported at fair value	$	365,794	$	34,903
Unpaid principal balance of receivables within finance receivables that are reported at fair value and are on nonaccrual status (90 days or more past due)	$	6,605	$	736
Aggregate fair value of receivables carried at fair value that are on nonaccrual status (90 days or more past due)	$	5,793	$	580


As of December 31, 2022	Finance Receivables of CFEs at Fair Value		Finance Receivables at Fair Value
Aggregate unpaid principal balance included within finance receivables that are reported at fair value	$	84,477	$	89,068
Aggregate fair value of finance receivables that are reported at fair value	$	77,904	$	75,270
Unpaid principal balance of receivables within finance receivables that are reported at fair value and are on nonaccrual status (90 days or more past due)	$	1,097	$	1,499
Aggregate fair value of receivables carried at fair value that are on nonaccrual status (90 days or more past due)	$	985	$	1,311

All finance receivables of CFEs are pledged to the ~~last time based on the quoted price~~CFEs trusts.

The following table presents other relevant data related to securitization debt of ~~the Company’s publicly traded common stock. On June 23, 2020, the holders exercised the Series F Preferred Stock Warrant.~~consolidated VIEs carried at fair value (in thousands):


As of September 30, 2023	Securitization debt of consolidated VIEs at Fair Value
Aggregate unpaid principal balance of rated notes of securitized VIEs	$	367,176
Aggregate fair value of rated notes of securitized VIEs	$	361,906

Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


As of December 31, 2022	Securitization debt of consolidated VIEs at Fair Value
Aggregate unpaid principal balance of rated notes of securitized VIEs	$	82,556
Aggregate fair value of rated notes of securitized VIEs	$	79,829

Fair Value of Financial Instruments Not Carried at Fair Value

The carrying amounts of restricted cash, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short-term nature. The carrying value of the 2022 Vehicle Floorplan Facility and the Warehouse Credit Facilities was determined to approximate fair value due to its short-term duration and variable interest rate that approximates prevailing interest rates as of each reporting period.

Finance receivables held for sale, net: For finance receivables eligible to be sold, the Company determines the fair value of finance receivables utilizing sales prices based on estimated securitization transactions, adjusted for transformation costs, risk and a normal profit margin associated with securitization transactions. Such fair value measurement of finance receivables held for sale, net is considered Level 3 of the fair value hierarchy. The carrying value and fair value of the finance receivables held for sale, net were as follows (in thousands):


	September 30,		December 31,
	2023		2022
Carrying value	$	375,664	$	299,235
Fair value	$	378,619	$	299,925

From time to time the Company may mark certain receivables classified as held for sale to fair value and classified as financial instruments recorded at fair value on a non-recurring basis. As of September 30, 2023 and December 31, 2022, there were $24.2 million and $22.4 million of finance receivables that were marked to fair value on a non-recurring basis, respectively. These are finance receivables that became delinquent and no longer meet the expected sales criteria. The Company uses a discounted cash flow model to estimate the present value of future recoveries for finance receivables. Such fair value measurement of finance receivables held for sale, net is considered Level 3 of the fair value hierarchy.

~~13.~~

Convertible Senior Notes:The fair value of the Notes, which are not carried at fair value on the accompanying condensed consolidated balance sheets, was determined utilizing actual bids and offer prices of the Notes in markets that are not active and are classified within Level 2 of the fair value hierarchy.


	September 30,		December 31,
	2023		2022
Carrying value	$	327,837	$	359,254
Fair value	$	174,556	$	128,026

Financing of beneficial interests in securitizations: The fair value of the financing of beneficial interests in securitizations, which are not carried at fair value on the accompanying condensed consolidated balance sheets, approximated their carrying value as of September 30, 2023 and are classified within Level 3 of the fair value hierarchy.

Junior Subordinated Debentures: The fair value of the junior subordinated debentures, which are not carried at fair value on the accompanying condensed consolidated balance sheets, approximated their carrying value as of September 30, 2023 and December 31, 2022 and are classified within Level 3 of the fair value hierarchy.

Fair Value of Financial Instruments on a Nonrecurring Basis

Assets and liabilities acquired as part of a business combination and goodwill attributable to each of the Company's reporting units are recorded at fair value on a nonrecurring basis. Refer to Note 5 – Acquisitions and Note 8 – Goodwill and Intangible Assets for additional information.

17. Restructuring Activities

On May 5, 2022, the Company approved the Realignment Plan, which was designed to position the Company for long-term profitable growth by prioritizing unit economics, reducing operating expenses and maximizing liquidity.

In connection with the Realignment Plan, the Company reduced headcount across the organization and closed its New York City, Detroit, and one of its Houston office locations as well as several Sell Us Your Car® center facilities. Additionally, the Company streamlined TDA's operations and closed its service center. The service center was repurposed to replace the reconditioning facility in Stafford, Texas, which was also closed. The Company also restructured its network of logistics hubs in order to align with reduced unit volume and its regional operating model.

The restructuring activities associated with the Realignment Plan were substantially completed during 2022.

On January 18, 2023, the Company executed a reduction in force as part of the continued focus on reducing variable and fixed costs. The Company reduced Vroom’s headcount by approximately 275 employees based on the assessment of the Company's business needs, key initiatives, and long-term success and profitable growth. For the nine months ended September 30, 2023, the Company incurred expenses of approximately $4.1 million, primarily consisting of severance.

On April 26, 2023, as part of the Company’s ongoing reexamination of all facets of the business, the Company implemented an organizational restructuring that included a reduction in force. The Company reduced Vroom’s headcount by approximately 120 employees and incurred total expenses of approximately $2.3 million for the nine months ended September 30, 2023, primarily consisting of severance costs, as a result of this reduction in force.

The following table summarizes the components of the restructuring and related charges:


	Three Months Ended September 30,				Nine Months Ended September 30,				Total Charges Incurred to Date
	2023		2022		2023		2022
Charges by activity:
Severance and termination benefits (1)	$	274	$	2,226	$	6,655	$	7,172	$	14,013
Impairment of operating lease right-of-use assets (2)		—		1,017		—		4,424		6,491
Other costs (3)		—		—		—		1,176		1,176
Total restructuring and related charges	$	274	$	3,243	$	6,655	$	12,772	$	21,680

(1) Severance and termination costs consist of severance costs provided to employees who have been terminated as well outplacement costs and COBRA benefits.

(2) Impairment of operating lease right-of-use assets consist of costs associated with planned facility closures that will continue to be incurred under the contract for its remaining term without economic benefit to the Company.

(3) Other costs incurred to date consist of legal expenses incurred in connection with the Realignment Plan and acceleration of depreciation of property and equipment related to the planned facility closures.

Severance and termination benefits and other costs are included in "Selling, general, and administrative expenses" in the condensed consolidated statements of operations for the three and nine months ended September 30, 2023 and 2022.

The following table is a reconciliation of the beginning and ending restructuring liability for the nine months ended September 30, 2023 and 2022:


Balance as of December 31, 2022	$	810
Accrual and accrual adjustments		6,655
Cash payments		(7,098	)
Balance as of September 30, 2023	$	367

Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


Balance as of December 31, 2021	$	—
Accrual and accrual adjustments		7,755
Cash payments		(5,702	)
Balance as of September 30, 2022	$	2,053

The restructuring liability for severance and termination benefits is reflected in "Accrued Expenses" in the condensed consolidated balance sheet as of September 30, 2023 and December 31, 2022.

18. Segment Information

The Company has three reportable segments: Ecommerce, ~~TDA,~~Wholesale, and ~~Wholesale.~~Retail Financing. No operating segments have been aggregated to form the reportable segments.

The Company determined its operating segments based on how the chief operating decision maker (“CODM”) reviews the Company’s operating results in assessing performance and allocating resources. The CODM reviews revenue and gross profit for each of the reportable segments. Gross profit is defined as revenue less cost of sales incurred by the segment. The CODM does not evaluate operating segments using asset information as these are managed on an ~~enterprise wide~~enterprise-wide group basis. Accordingly, the Company does ~~not~~not report segment asset information. As of September 30, 2023 and December 31, ~~2019 and June 30, 2020, the Company did not have any~~2022, long-lived assets were predominantly located ~~outside of~~in the United States.

The Ecommerce reportable segment represents retail sales of used vehicles through the Company’s ecommerce platform, ~~and fees~~revenue earned on vehicle financing originated by UACC or the Company's third-party financing sources and sales of value-added products associated with those ~~vehicle~~vehicles sales. The ~~TDA~~Wholesale reportable segment represents sales of used vehicles through wholesale channels. The Retail Financing reportable segment represents UACC’s operations with its network of third-party dealership customers, including the purchases and servicing of vehicle installment contracts. Revenues within the "All Other" category consist of retail sales of used vehicles from TDA and fees earned on sales of value-added products associated with those ~~vehicle sales. The Wholesale reportable segment represents~~vehicles sales ~~of used vehicles through wholesale auctions.~~and the CarStory business.

~~VROOM, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Information about the Company’s reportable segments are as follows (in thousands):

	Three Months Ended June 30, 2019
	Ecommerce		TDA		Wholesale			Consolidated
Revenues from external customers	$	120,953	$	85,413	$	54,531		$	260,897
Gross profit	$	7,295	$	6,101	$	449		$	13,845

	Three Months Ended June 30, 2020
	Ecommerce		TDA		Wholesale			Consolidated
Revenues from external customers	$	175,568	$	26,604	$	50,921		$	253,093
Gross profit (loss)	$	7,219	$	931	$	(543	)	$	7,607

	Six Months Ended June 30, 2019									Three Months Ended September 30, 2023
	Ecommerce		TDA		Wholesale			Consolidated		Ecommerce		Wholesale			Retail Financing		All Other		Total
Revenues from external customers	$	210,808	$	178,497	$	106,651		$	495,956	$	149,851	$	30,898		$	40,823	$	14,062	$	235,634
Gross profit	$	13,049	$	12,179	$	629		$	25,857	$	14,339	$	(1,495	)	$	32,341	$	2,909	$	48,094

	Six Months Ended June 30, 2020									Three Months Ended September 30, 2022
	Ecommerce		TDA		Wholesale			Consolidated		Ecommerce		Wholesale			Retail Financing		All Other		Total
Revenues from external customers	$	408,740	$	113,628	$	106,497		$	628,865	$	225,441	$	47,604		$	40,654	$	27,098	$	340,797
Gross profit (loss)	$	21,486	$	6,346	$	(1,838	)	$	25,994
Gross profit										$	27,034	$	(1,574	)	$	35,954	$	5,917	$	67,331


	Nine Months Ended September 30, 2023
	Ecommerce		Wholesale			Retail Financing		All Other		Total
Revenues from external customers	$	423,713	$	75,593		$	114,939	$	43,034	$	657,279
Gross profit	$	36,566	$	(5,426	)	$	92,184	$	9,576	$	132,900

	Nine Months Ended September 30, 2022
	Ecommerce		Wholesale			Retail Financing		All Other		Total
Revenues from external customers	$	1,222,436	$	270,489		$	120,005	$	126,622	$	1,739,552
Gross profit	$	94,862	$	(6,260	)	$	109,637	$	17,089	$	215,328

Table of Contents

VROOM, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The reconciliation between reportable segment gross profit to consolidated loss before provision (benefit) for income taxes is as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Reconciliation to consolidated total revenue
Total reportable segment revenue	$	221,572		$	313,699		$	614,245		$	1,612,930
All Other revenues		14,062			27,098			43,034			126,622
Consolidated total revenue	$	235,634		$	340,797		$	657,279		$	1,739,552
Reconciliation to consolidated loss before (benefit) provision for income taxes
Total reportable segment gross profit	$	45,185		$	61,414		$	123,324		$	198,239
All Other gross profit		2,909			5,917			9,576			17,089
Selling, general and administrative expenses		79,586			134,643			263,078			475,627
Depreciation and amortization		11,010			9,833			31,845			27,728
Impairment charges		—			1,017			1,353			206,127
Gain on debt extinguishment		—			(37,917	)		(19,640	)		(37,917	)
Interest expense		12,058			9,704			30,915			28,617
Interest Income		(5,506	)		(5,104	)		(16,369	)		(12,991	)
Other loss, net		33,543			5,383			65,019			26,897
Consolidated loss before provision (benefit) for income taxes	$	(82,597	)	$	(50,228	)	$	(223,301	)	$	(498,760	)

The Company computes income taxes using the liability method. This method requires recognition of deferred tax assets and liabilities, measured by enacted rates, attributable to temporary differences between the financial statements and the income tax basis of assets and liabilities. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that certain deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those specific jurisdictions prior to the dates on which such net operating losses expire. The Company maintained a full valuation allowance against its net deferred tax assets because the Company has determined that it is it more likely than not that these assets will not be fully realized based on a current evaluation of expected future taxable income and the Company isbeing in a cumulative 3-year loss position.

The Company’s effective tax rate for the three months ended ~~June~~September 30, ~~2019~~2023 and ~~2020~~2022 was ~~(0.12)~~(0.31)% and ~~0.09%~~(1.79)%, respectively. The Company’s effective tax rate for the nine months ended September 30, 2023 and 2022 was (0.41)% and 4.43%, respectively. The effective tax rate for the ~~six~~nine months ended ~~June~~September 30, ~~2019 and 2020~~2022 was ~~(0.10)% and (0.12)% respectively.~~primarily driven by a deferred tax benefit recorded for the decrease of Valuation Allowance resulting from the acquisition of Unitas Holdings Corp. (now known as Vroom Finance Corporation) that occurred during the nine months ended September 30, 2022 of $23.9 million.

The Company is subject to tax in the United States and many state and local jurisdictions. The Company, with certain exceptions, is no longer subject to income tax examinations by U.S. federal, state and local for tax years ~~2015~~2016 and prior. The company is not currently under audit for any US federal or state income tax audits.

The Internal Revenue Code (IRC) Section 382 provides for a limitation of the annual use of net operating loss and tax credit carryforwards following certain ownership changes (as defined by the IRC Section 382) that limits the Company’s ability to utilize these carryforwards. The Company completed a Section 382 study to determine the applicable limitation, if any. It was determined that the Company has undergone ~~three ownership changes. There were~~four ownership changes ~~in July 2013, November 2014 and July 2015~~the most recent of which was April 2021. These changes will substantially limit the use of the net operating losses generated before the change in control.

The Company acquired Unitas Holdings Corp. (now known as Vroom Finance Corporation) on February 1, 2022 in a stock acquisition, refer to Note 5 – Acquisitions for additional information. The NOLs and other tax attributes acquired are also subject to Section 382 limitations.

The Company has ~~not~~not identified any uncertain tax positions as of September 30, 2023 or December 31, ~~2019~~2022. Any interest and penalties related to uncertain tax positions shall be recorded as a component of income tax expense. To date, no interest or ~~June 30, 2020.~~penalties have been accrued in relation to uncertain tax positions.

On August 16, 2022, the Inflation Reduction Act of 2022 ("IRA") was signed into law. The IRA includes implementation of a new alternative minimum tax, an excise tax on stock buybacks, and significant tax incentives for energy and climate initiatives, among other provisions. The Company is evaluating the provisions included under the IRA and does not expect the provisions to have a material impact to the Company's condensed consolidated financial statements.

20. Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders:


	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands, except share and per share amounts)	2023			2022			2023			2022
Net loss	$	(82,857	)	$	(51,127	)	$	(224,219	)	$	(476,675	)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted		139,692,323			138,118,679			139,123,352			137,817,839
Net loss per share attributable to common stockholders, basic and diluted	$	(0.59	)	$	(0.37	)	$	(1.61	)	$	(3.46	)

Three Months Ended
June 30,

Six Months Ended
June 30,

(in thousands, except share and per share amounts)

2019

2020

2019

2020

Net loss

$
(33,340
)

$
(63,228
)

$
(60,479
)

$
(104,287
)
Accretion of redeemable convertible preferred stock

(25,879
)

—

(43,843
)

—

Net loss attributable to common stockholders

$
(59,219
)

$
(63,228
)

$
(104,322
)

$
(104,287
)
Weighted-average number of shares outstanding used to
   compute net loss per share attributable to common
   stockholders, basic and diluted

8,580,150

31,599,497

8,579,539

20,035,476

Net loss per share attributable to common stockholders,
   basic and diluted

$
(6.90
)

$
(2.00
)

$
(12.16
)

$
(5.21
)

The following potentially dilutive shares were not included in the calculation of diluted shares outstanding for the periods presented as the effect would have been anti-dilutive:

	As of June 30,
	2019		2020		As of September 30,
Redeemable convertible preferred stock		66,825,300		—
Warrants		161,136		—
					2023		2022
Convertible senior notes						5,936,226		10,132,119
Stock options		5,985,508		6,340,076		2,379,519		3,273,021
Restricted stock awards		3,873,214		3,249,382
Restricted stock units		408,000		2,488,402		14,008,261		8,879,252
Total		77,253,158		12,077,860		22,324,006		22,284,392

In July 2015, the Company entered into a management services agreement (“MSA”) with Catterton Management Company, L.L.C. (“Catterton Management”), an affiliate of L Catterton (“Catterton”), a holder of more than 5% of the Company’s outstanding capital stock, pursuant to which Catterton Management agreed to provide consulting services on certain business and financial matters. Under the MSA, the Company agreed to pay Catterton Management an annual fee of $0.3 million until the expiration of the MSA upon the earlier of (i) termination by mutual consent of the parties and (ii) such time that Catterton and/or its affiliates cease to be one of the Company’s stockholders. For the years ended December 31, 2019 and 2020, payments of the annual fees were waived. In May 2020, the MSA was terminated.

In January 2019, the Company entered into a vendor agreement (“Vendor Agreement”) with AutoNation, Inc. (“AutoNation”), an affiliate of Auto Holdings, Inc., a holder of more than 5% of the Company’s outstanding capital stock, pursuant to which AutoNation agreed to provide certain reconditioning and repair services for vehicles owned by the Company. Amounts due under the Vendor Agreement for parts supplied and services performed by AutoNation become due and payable as they accrued. For the three and six months ended June 30, 2019, the Company incurred $0.4 million of costs under the Vendor Agreement. The Vendor Agreement was terminated in February 2020.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our ~~interim~~ condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. As discussed in the section titled "Special Note Regarding Forward-Looking Statements," the following discussion and analysis contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and ~~those discussed~~ in the section titled "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 (the “Annual Report”), as updated by the section titled "Risk Factors" in Part II, Item 1A of this Quarterly Report on Form 10-Q. Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Vroom is an innovative, end-to-end ecommerce platform that is transforming the used vehicle industry by offering a better way to buy and a better way to sell used vehicles. Our scalable, data-driven technology brings all phases of the car buying and selling process to consumers wherever they are, and offers an extensive selection of used vehicles, transparent pricing, competitive financing, and at-home pick-up and delivery. We are deeply committed to creating an exceptional experience for our customers.

We take a vertically integrated, hybrid approach and leverage the benefits of national scale and local efficiency. We are driving enduring change in the industry ~~on a national scale. We take a vertically integrated, asset-light approach that is~~by reinventing all phases of the vehicle buying and selling process, from discovery to delivery and everything in between. Our platform encompasses:

Based on data from Cox Automotive, there were an estimated 36.2 million used vehicle transactions in 2022. According to a 2022 NADA Auto Retailing market summary, the U.S. automotive industry generated approximately $1.2 trillion in sales in 2021. The U.S. used automotive market is ~~the largest consumer product category, generating approximately $841 billion from sales of approximately 40 million units in 2019. The industry is~~ highly fragmented ~~with over 42,000 dealers~~ and ~~millions of peer-to-peer transactions. It also is~~ ripe for disruption as an industry that is notorious for consumer dissatisfaction and has one of the lowest levels of ecommerce ~~penetration at only 0.9%.~~penetration. Industry reports estimate that ecommerce penetration will grow to as much as half of all used vehicle sales by 2030. Our platform, coupled with our national presence and brand, provides a significant competitive advantage versus local dealerships and regional players that lack nationwide reach and scalable technology, operations and logistics. The traditional auto dealers and peer-to-peer market do not ~~and cannot~~ offer consumers what we offer.

In ~~December 2015,~~2022, we ~~acquired Houston-based Texas Direct Auto, or TDA, which included our proprietary vehicle reconditioning center, or Vroom VRC, our sole physical retail location~~developed a long-term road map designed to achieve three key objectives: prioritizing unit economics over growth, significantly reducing operating expenses, and ~~our Sell Us Your Car~~^® ~~centers. From the launch of our combined operations in January 2016, our business has grown significantly as~~maximizing liquidity. In 2023, we have ~~scaled~~refined these three key objectives to prioritize unit economics and growth, improve costs per unit and maximize liquidity.

In order to achieve these objectives, we are focused on four strategic initiatives:

These four initiatives are designed to further our progress in building a profitable business model, enable us to build a well-oiled machine across our operations ~~developed our ecommerce platform~~ and ~~leveraged the network effects inherent in our model.~~

For the three and six months ended June 30, 2020, we generated $253.1 million and $628.9 million in total revenue, respectively, representing a 3.0% decrease and a 26.8% increase, respectively, over $260.9 million and $496.0 million for the three and six months ended June 30, 2019. Our business generated a net loss of $33.3 million and $63.2 million for the three months ended June 30, 2019 and 2020, and a net loss of $60.5 million and $104.3 million for the six months ended June 30, 2019 and 2020, respectively. We intendposition us to ~~continue to invest in growth to scale our company responsibly and drive towards profitability.~~resume growth.

We generate revenue through the sale of used vehicles, vehicle financing and value-added products. We sell vehicles directly to consumers primarily through our Ecommerce ~~segment.~~ segment as a licensed dealer.

As a result of the ~~largest segment in~~UACC Acquisition on February 1, 2022, we are developing a captive financing operation for Vroom customers, which will enable us to provide our ~~business, Ecommerce revenue grew 45.2% from~~customers with expanded financing solutions across the ~~three months ended June 30, 2019 to the three months ended June 30, 2020~~credit spectrum and ~~93.9% from the six months ended June 30, 2019 to the six months ended June 30, 2020, and we~~an enhanced customer experience, while generating improved unit economics. We also expect ~~Ecommerce~~ to continue to ~~outgrow our other segments as it is~~generate ecommerce product revenue through interest income on UACC's finance receivables generated by loans provided to Vroom customers and UACC’s sale of such finance receivables in securitization transactions or forward flow arrangements. Additionally, we expect UACC to continue to purchase and service finance receivables originated by its network of third-party dealership customers and generate finance revenue, including interest income earned on finance receivables before the ~~core focus~~loans are sold, interest income on finance receivables held in consolidated VIEs, and, when applicable, gains on sale of ~~our growth strategy.~~securitized finance receivables. Over time, we intend to grow the third-party dealership network and business.

We also sell vehicles through wholesale ~~auctions,~~channels, which provide a revenue source for vehicles that do not meet our Vroom retail sales criteria. ~~Additionally, we generate revenue through the retail sale of used vehicles and value-added products at Houston-based Texas Direct Auto, or TDA.~~

For the three months ended ~~June~~September 30, ~~2020,~~2023, our Ecommerce, ~~TDA~~Wholesale, and ~~Wholesale~~Retail Financing segments represented ~~69.4%~~63.6%, ~~10.5%~~13.1%, and ~~20.1%~~17.3% of our total revenue, respectively. For the ~~six~~nine months ended ~~June~~September 30, ~~2020,~~2023 our Ecommerce, ~~TDA~~Wholesale, and ~~Wholesale~~Retail Financing segments represented ~~65.0%~~64.5%, ~~18.1%~~11.5%, and ~~16.9%~~17.5% of our total revenue, respectively.

Our retail gross profit consists of two components: Vehicle Gross Profit and Product Gross Profit. Vehicle Gross Profit is calculated as the aggregate retail sales price for all vehicles sold to customers along with delivery fee revenue and document fees received from customers, less the aggregate cost to acquire such vehicles, the aggregate cost of inbound transportation for such vehicles to our vehicle reconditioning centers, which we refer to as VRCs, and the aggregate cost of reconditioning such vehicles for sale. Product Gross Profit consists of fees earned on vehicle financing originated by our third-party financing sources and any third-party value-added products sold as part of a vehicle sale. Because we are paid fees on the third-party financing and other value-added products we sell, our gross profit on such products is equal to the revenue we generate. Starting in 2022, Product Gross Profit also includes (i) interest income earned on finance receivables from Vroom customers that we originate through UACC before the loans are sold, (ii) interest income on finance receivables held in consolidated variable interest entities ("VIEs") less the interest expense incurred on securitization debt, and when applicable (iii) gain on sales of securitized finance receivables. See “—Key Operating and Financial Metrics.”

Below is an explanation of how we calculate vehicle gross profit per unit and product gross profit per unit:

Our profitability depends primarily on ~~increasing unit sales and operating leverage, as well as~~ improving unit ~~economics.~~economics and achieving operating leverage. We deploy ~~an asset-light~~a hybrid strategy that optimizes a combination of ownership and operation of assets by us with strategic third-party partnerships. Our hybrid approach also applies to the third-party value-added products we sell to ~~customers, which enables us to generate~~customers. Historically, we generated additional revenue streams without ~~taking on the risk associated with~~directly underwriting vehicle financing or protection ~~products.~~products; however, the UACC Acquisition enables us to underwrite vehicle financing for our customers. As we ~~scale,~~resume growth, we expect to benefit from efficiencies and operating leverage across our business, including our marketing and technology investments, and our inventory procurement, logistics, reconditioning and sales processes.

Before a vehicle is listed for retail sale on our platform, it undergoes a thorough reconditioning process in order to meet our Vroom retail sales criteria. The efficiency of this reconditioning process is a key element in our ability to profitably grow. To recondition vehicles, we rely on a combination of our Vroom VRC along with a network of VRCs owned and operated by third parties. We intend to continue to expand our network of third-party VRCs and going forward intend to make capital investments in additional Vroom VRCs. Utilizing this hybrid approach, we have increased our total reconditioning capacity from 223 units per day as of June 30, 2019, to 313 units per day as of June 30, 2020, including an increase from 78 units per day to 169 units per day at our third-party VRCs. As we increase the number of vehicles in our inventory and expand our reconditioning capacity, we expect that reconditioning costs per unit will decrease as we benefit from economies of scale and operating leverage in reconditioning costs. See “—Key Factors and Trends Affecting our Operating Results—Ability to expand and optimize our reconditioning capacity to satisfy increasing demand.”

For our logistics operations, we primarily use our strategic carrier arrangements with national haulers, which allows us to efficiently deliver vehicles to customers throughout the United States while focusing on expanding other critical components of our business, such as the volume and selection of vehicles in our inventory. This strategy enhances the flexibility, agility and speed of our growth while reducing the need for additional capital commitments as we scale. In addition, by strategically partnering with third party carriers with widely dispersed locations, we are able to quickly expand our last mile delivery hubs and enhance our customer experience. By leveraging the experience and data at our disposal from the tens of thousands of deliveries we have completed, we are finding ways to enhance the efficiencies in our logistics network, and we are developing our hybrid strategy with the intent to build out our proprietary logistics network. See “—Key Factors and Trends Affecting our Operating Results—Ability to expand and develop our logistics network.”

We generate revenue by earning fees for selling value-added products to customers in connection with vehicle sales. Currently, our third-party value-added product offering consists of finance and protection products, including financing from third-party lenders for our customers’ vehicle purchases, as well as sales of extended warranty contracts, GAP products and wheel and tire coverage. As we scale our business, we intend to introduce additional value-added products that will be attractive to our customers and drive revenue and profitability growth. We expect that both expanded product offerings and increased attachment rates in value-added product sales will have a positive impact on our profitability. See “—Key Factors and Trends Affecting our Operating Results—Ability to increase and better monetize value-added products.”

Gross profit is defined as revenue less cost of sales for each segment. Reflected below is a summary of ~~reportable~~ segment revenue and ~~reportable~~ segment gross profit for the three and ~~six~~nine months ended ~~June~~September 30, ~~2019~~2023 and ~~2020:~~2022:


	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended September 30,						Nine Months Ended September 30,
	2019		2020			2019		2020			2023			2022			2023			2022
	(in thousands)					(in thousands)					(in thousands)						(in thousands)
Revenue:
Ecommerce	$	120,953	$	175,568		$	210,808	$	408,740		$	149,851		$	225,441		$	423,713		$	1,222,436
TDA		85,413		26,604			178,497		113,628
Wholesale		54,531		50,921			106,651		106,497			30,898			47,604			75,593			270,489
Retail Financing												40,823			40,654			114,939			120,005
All Other												14,062			27,098			43,034			126,622
Total revenue	$	260,897	$	253,093		$	495,956	$	628,865		$	235,634		$	340,797		$	657,279		$	1,739,552
Gross profit:
Gross profit (loss):
Ecommerce	$	7,295	$	7,219		$	13,049	$	21,486		$	14,339		$	27,034		$	36,566		$	94,862
TDA		6,101		931			12,179		6,346
Wholesale		449		(543	)		629		(1,838	)		(1,495	)		(1,574	)		(5,426	)		(6,260	)
Retail Financing												32,341			35,954			92,184			109,637
All Other												2,909			5,917			9,576			17,089
Total gross profit	$	13,845	$	7,607		$	25,857	$	25,994		$	48,094		$	67,331		$	132,900		$	215,328

We regularly review a number of metrics, including the following key operating and financial metrics, to evaluate our business, measure our performance, identify trends in our business, prepare financial forecasts and make strategic decisions. We believe these operational measures are useful in evaluating our performance, in addition to our financial results prepared in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP. You should read the key operating and financial metrics in conjunction with the following discussion of our results of operations and together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. We focus heavily on metrics related to unit economics as improved gross profit per unit is a key element of our growth and profitability strategies.

The calculation of our key operating and financial metrics is straightforward and does not rely on significant projections, estimates or assumptions. Nevertheless, each of our key operating and financial metrics has limitations because each focuses specifically on only one standard by which to evaluate our business, without taking into account other applicable standards, performance measures or operating trends by which our business could be evaluated. Accordingly, no single metric should be viewed as the bellwether by which our business should be measured. Rather, each key operating and financial metric should be considered in conjunction with other metrics and components of our results of operations, such as each of the other key operating and financial metrics and our revenues, inventory, loss from operations and segment results.

Ecommerce units sold is defined as the number of vehicles sold and shipped to customers through our ecommerce platform, net of returns under our Vroom 7-Day Return ~~Policy.~~Program. Ecommerce units sold ~~excludes~~exclude on-site sales of vehicles at TDA and through the ~~TDA and~~ Wholesale ~~segments. As we continue to expand our ecommerce business, we expect that ecommerce units sold will be the primary driver of our revenue growth. Additionally, each~~segment. Each vehicle sale through our ecommerce platform also creates the opportunity to leverage such sale to provide vehicle financing, sell value-added ~~products. Continued ecommerce growth will also increase the number of~~products and acquire trade-in vehicles ~~acquired~~ from our customers, which we can either recondition and add to our inventory or sell atthrough wholesale ~~auctions.~~channels.

Vehicle Gross Profit per ecommerce unit, which we refer to as Vehicle GPPU, for a given period is defined as the aggregate retail sales price and delivery charges for all vehicles sold through our Ecommerce segment less the aggregate costs to acquire those vehicles, the aggregate costs of inbound transportation to the VRCs and the aggregate costs of reconditioning those vehicles in that period, divided by the number of ecommerce units sold in that period. ~~As we continue to expand our ecommerce business, we~~We believe Vehicle GPPU ~~will be~~is a key driver of our long-term profitability.

Product Gross Profit per ecommerce unit, which we refer to as Product GPPU, for a given period is defined as the aggregate fees earned on sales of third-party vehicle financing and value-added products in that period, net of the reserves for chargebacks on such products in that period, divided by the number of ecommerce units sold in that period. Because we are paid fees on the vehicle financing and value-added products we sell, our gross profit is equal to the revenue we generate from the sale of ~~value added~~such products. ~~We plan~~Starting in 2022, Product Gross Profit also includes (i) interest income earned on finance receivables from Vroom customers to ~~introduce initiatives to increase~~finance vehicle sales that we originate through UACC before the ~~attachment rates~~loans are sold, (ii) interest income on finance receivables held in consolidated VIEs less the interest expense incurred on securitization debt, and when applicable (iii) gain on sales of ~~value-added products and expand our offerings~~securitized finance receivables, divided by the number of ~~value-added products which will grow our Product GPPU.~~ecommerce units sold in that period.

Total Gross Profit per ecommerce unit, which we refer to as Total GPPU, for a given period is calculated as the sum of Vehicle GPPU and Product GPPU. We view Total GPPU as a key metric of the profitability of our Ecommerce segment.

Average monthly unique visitors is defined as the average number of individuals who access our ecommerce platform within a calendar month. We calculate the average monthly unique visitors over any period by dividing the aggregate monthly unique visitors during such period by the number of months in that period. We use average monthly unique visitors to measure the quality of our customer experience, the effectiveness of our marketing campaigns and customer acquisition as well as the strength of our brand and market penetration.

Average monthly unique visitors is calculated using data provided by Google Analytics. The computation of average monthly unique visitors excludes individuals who access our platform multiple times within a calendar month, counting such individuals only one time for purposes of the calculation. If an individual accesses our ecommerce platform using different devices or different browsers on the same device within a given month, the first access through each such device or browser is counted as a separate monthly unique visitor.

We define listed vehicles as the aggregate number of vehicles listed on our platform at any given point in time. Vehicles available for sale is a key indicator of our performance because we believe that the number of vehicles listed on our platform is a key driver of vehicle sales and revenue growth. Increasing the number of vehicles listed on our platform results in a greater selection of vehicles for our customers, creating demand and increasing conversion.

We define ecommerce average days to sale as the average number of days between our acquisition of vehicles and the final delivery of such vehicles to customers through our ecommerce platform. We calculate average days to sale for a given period by dividing the aggregate number of days between the acquisition of all vehicles sold through our ecommerce platform during such period and final delivery of such vehicles to customers by the number of ecommerce units sold in that period. ~~Average~~Ecommerce average days to sale excludes vehicles sold on-site at TDA and through the ~~TDA and~~ Wholesale ~~segments. Average~~segment. Ecommerce average days to sale is an important metric because a reduction in the number of days between the acquisition of a vehicle and the delivery of such vehicle typically results in a higher gross profit per unit.

Inventory turnover is a measure of how well we are optimizing our inventory. We calculate inventory turnover for a given period as total retail and wholesale cost of sales for the respective period annualized and divided by average inventory (computed using the current and immediately preceding quarter-end balances). Our inventory turnover ratio is an important metric as a higher turnover ratio reflects a more efficient use of our capital and typically results in a higher gross profit per unit.

We calculate inventory days to supply for a given period by dividing average inventory by total retail and wholesale cost of sales per day for the respective period. Inventory days to supply is an important metric because a reduction in the inventory days to supply typically results in a higher gross profit per unit.

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, Adjusted EBITDA, and Adjusted ~~loss from operations, Non-GAAP net loss, Non-GAAP net loss per share and Non-GAAP net loss per share, as adjusted.~~EBITDA excluding securitization gain. 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.

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

We calculate EBITDA as net loss before interest expense, interest income, income tax expense and depreciation and amortization expense.

We calculate Adjusted EBITDA as EBITDA adjusted to exclude severance costs, gain on debt extinguishment, severe weather-related costs, goodwill impairment charge, realignment costs, acquisition related costs, and other costs, which relate to the impairment of long-lived assets. Changes in fair value of financial instruments can fluctuate significantly from period to period and were previously related primarily to historical loans and debt that have been securitized, and were acquired on February 1, 2022 from UACC. Our ongoing business model is to originate or purchase finance receivables with the intent to sell, which we recognize at the lower of cost or fair value. As a result of current market conditions, the financial instruments related to the 2022-2 and 2023-1 securitization transactions are recognized on balance-sheet and accounted for under the fair value option. See Note 16 — Financial Instruments and Fair Value Measurements to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. As a result, the majority of our finance receivables are now carried at fair value and a significant portion of the risk of loss associated with these finance receivables have been retained by UACC. We therefore have determined we will no longer make any adjustments for such fluctuations in fair value to our Adjusted EBITDA results. We have recast the prior periods presented to conform to current period presentation. We may account for future securitizations as on balance sheet transactions depending on market conditions.

We calculate Adjusted EBITDA excluding securitization gain as Adjusted EBITDA adjusted to exclude the securitization gain from the sale of UACC's finance receivables as it provides a useful perspective on the underlying operating results and trends as well as a means to compare our period-over-period results.

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


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2020			2019			2020			2023			2022			2023			2022
	(in thousands)						(in thousands)						(in thousands)						(in thousands)
Net loss	$	(33,340	)	$	(63,228	)	$	(60,479	)	$	(104,287	)	$	(82,857	)	$	(51,127	)	$	(224,219	)	$	(476,675	)
Adjusted to exclude the following:
Interest expense		3,388			1,297			6,106			4,123			12,058			9,704			30,915			28,617
Interest income		(1,415	)		(715	)		(3,264	)		(2,671	)		(5,506	)		(5,104	)		(16,369	)		(12,991	)
Provision (benefit) for income taxes		(29	)		52			74			105			260			899			918			(22,085	)
Depreciation and amortization expense		1,557			1,089			3,146			2,059
Depreciation and amortization														11,248			9,995			32,421			28,005
EBITDA	$	(29,839	)	$	(61,505	)	$	(54,417	)	$	(100,671	)	$	(64,797	)	$	(35,633	)	$	(176,334	)	$	(455,129	)
One-time, IPO related acceleration of non-cash stock-based compensation		—			1,262			—			1,262
One-time, IPO related non-cash revaluation of preferred stock warrant		—			21,260			—			20,470
Severance costs													$	274		$	—		$	6,655		$	—
Gain on debt extinguishment														—			(37,917	)		(19,640	)		(37,917	)
Hail storm costs														—			—			2,353			—
Goodwill impairment charge														—			—			—			201,703
Realignment costs														—			3,243			—			12,772
Acquisition related costs														—			—			—			5,653
Other														—			—			1,352			2,127
Adjusted EBITDA	$	(29,839	)	$	(38,983	)	$	(54,417	)	$	(78,939	)	$	(64,523	)	$	(70,307	)	$	(185,614	)	$	(270,791	)
Securitization gain														—			(15,972	)		—			(45,589	)
Adjusted EBITDA excluding securitization gain													$	(64,523	)	$	(86,279	)	$	(185,614	)	$	(316,380	)

~~We calculate Adjusted loss from operations as loss from operations adjusted to exclude the one-time, IPO related acceleration~~

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

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. We calculate Non-GAAP net loss per share as Non-GAAP net loss divided by weighted average number of shares outstanding. The following table presents a reconciliation of Non-GAAP net loss and Non-GAAP net loss per share to net loss and net loss per share, which are the most directly comparable U.S. GAAP measures:

Three Months Ended
June 30,

Six Months Ended
June 30,

2019

2020

2019

2020

(in thousands, except share and per share amounts)

Net loss

$
(33,340
)

$
(63,228
)

$
(60,479
)

$
(104,287
)
Accretion of redeemable convertible preferred stock

(25,879
)

—

(43,843
)

—

Net loss attributable to common stockholders

$
(59,219
)

$
(63,228
)

$
(104,322
)

$
(104,287
)
Add: One-time IPO related acceleration of non-cash stock
   based compensation

—

1,262

—

1,262

Add: One-time IPO related non-cash revaluation of
   preferred stock warrant

—

21,260

—

20,470

Non-GAAP net loss

$
(59,219
)

$
(40,706
)

$
(104,322
)

$
(82,555
)

Weighted-average number of shares outstanding used to
   compute net loss per share, basic and diluted

8,580,150

31,599,497

8,579,539

20,035,476

Net loss per share, basic and diluted

$
(6.90
)

$
(2.00
)

$
(12.16
)

$
(5.21
)
Impact of one-time IPO related acceleration of non-cash stock
   based compensation

-

0.04

-

0.07

Impact of one-time IPO related non-cash revaluation of
   preferred stock warrant

-

0.67

-

1.02

Non-GAAP net loss per share, basic and diluted

$
(6.90
)

$
(1.29
)

$
(12.16
)

$
(4.12
)
Non-GAAP net loss per share, as adjusted, basic and
   diluted^(a)

$
(0.28
)

$
(0.34
)

$
(0.51
)

$
(0.70
)

^(a⁾Non-GAAP net loss per share, as adjusted has been computed to give effect to, as of the beginning of each period presented, (i) the shares of common stock issued in connection with our IPO and (ii) the automatic conversion of all outstanding shares of redeemable convertible preferred stock into shares of common stock that occurred upon the consummation of our IPO. The computation of Non-GAAP net loss per share, as adjusted is as follows:

On June 11, 2020, we completed an initial public offering “IPO” in which we sold 24,437,500 shares of common stock, which included 3,187,500 shares sold pursuant to the exercise by the underwriters of an option to purchase additional shares, at a public offering price of $22.00 per share. We received proceeds of approximately $504.0 million, net of underwriting discount and before deducting offering expenses of $7.5 million, from sales of our shares in the IPO. Prior to the completion of the IPO, we effected a 2-for-1 forward stock split of all the issued and outstanding shares of our common stock the (“Stock Split”). As a result of the Stock Split and the completion of the IPO, all of our redeemable convertible preferred stock outstanding automatically converted into an aggregate of 85,533,394 shares of our common stock.

On May 15, 2020, we entered into an agreement with Rocket Auto LLC and certain of its affiliates (collectively, “Rocket”) providing for the launch of an e-commerce platform under the “Rocket Auto” brand for the marketing and sale of vehicles directly to consumers (the “RA Agreement”). We will list our used vehicle inventory for sale on the Rocket Auto platform, but all sales of the inventory will be conducted through our platform. Rocket Auto is expected to launch publicly during the second half of 2020 and, during the term of the RA Agreement, Rocket has agreed to ensure that not less than a minimum percentage of all used vehicles sold or leased through the platform on a monthly basis will be Vroom inventory. We will pay Rocket a combination of cash and stock for vehicle sales made through the platform, including upfront equity consisting of 183,870 shares of our common stock that were issued upon execution of the RA Agreement, and the potential issuance to Rocket of up to an additional 8,641,914 shares of common stock, over a four-year period based upon sales volume of Vroom inventory through the Rocket Auto platform.

In March 2020, the World Health Organization declared a global pandemic related to the rapidly growing outbreak of a novel strain of coronavirus known as COVID-19. In the following weeks, many states and counties across the United States responded by implementing a number of measures designed to prevent its spread, including stay-at-home or shelter-in-place orders, quarantines and closure of all non-essential businesses.

The COVID-19 pandemic has rapidly escalated in the United States, creating significant uncertainty and economic disruption, and leading to record levels of unemployment nationally. Due to the evolving nature of the COVID-19 crisis, we continue to monitor the situation closely and assess the impact on our business. We expect our operations will continue to be adversely impacted throughout at least 2020, however, the magnitude and duration of the ultimate impact is impossible to predict with certainty due to:

The COVID-19 pandemic began to have an impact on our ecommerce operations during the last three weeks of March 2020. Between March 11, 2020 and March 31, 2020, we experienced an approximate 15% decrease in total ecommerce revenue due to a decrease in consumer demand as compared to the 20 days prior to March 11, 2020.

In March 2020, due to the drop in demand in the early days of the pandemic, as well as uncertainty regarding future vehicle pricing in both the retail and wholesale markets, we made the strategic decision to quickly reduce our exposure to inventory risk and floorplan liabilities. Commencing in late March 2020, we reduced vehicle prices in order to drive vehicle sales and quickly reduce the amount of inventory that was purchased pre-COVID-19. We also paused all vehicle acquisitions other than trade-ins, and we sold at wholesale auctions many units that had not yet been reconditioned. As a result of these strategic decisions, our total inventory levels went from approximately 8,500 retail and wholesale units as of the beginning of March 2020 to approximately 2,500 retail and wholesale units at the end of April 2020. In late April 2020, we started to rebuild our inventory levels.

Due to the inventory price reductions that began in late March, our demand returned to pre-COVID-19 levels, and we experienced robust ecommerce vehicle sales; however, those sales were at a reduced gross profit per unit. During April and May 2020, we sold 2,880 and 1,934 ecommerce units, respectively, and gross profit per unit was $1,236 and $191, respectively, as compared to the 2,771 units we sold at $1,769 gross profit per unit in March 2020. In late April 2020, we began to acquire new inventory, with a primary focus on high-demand models. In June 2020, we sold 1,899 ecommerce units and our gross profit per unit increased to $1,714. As of June 30, 2020, we had an inventory of 6,811 retail and wholesale units. We intend to continue to build our inventory levels strategically.

The COVID-19 pandemic and the actions taken in response have had a significant impact on our VRC operations. In April 2020, six of our thirteen third-party VRCs that we had operating at the time were either partially closed or completely closed, which initially resulted in approximately 500 vehicles left either with incomplete reconditioning or no reconditioning across these third-party VRCs. As a result of these closures at our third-party VRCs, we prioritized the reconditioning of vehicles that were near completion, relocated vehicles to third-party VRCs that remained open and listed such vehicles for sale, or sold vehicles at wholesale to minimize the risk of price deterioration. As of June 30, 2020, we were able to successfully access and sell all these stranded vehicles. We began purchasing vehicles again on April 20, 2020 and as of June 30, 2020 our Vroom VRC and third party VRCs collectively returned to pre-COVID-19 capacity.

As of the date of this Quarterly Report on Form 10-Q, we continue to experience disruption across our logistics network due to the COVID-19 pandemic, with a limited number of third-party providers available to deliver our vehicles, which has resulted in a slowdown of inventory being picked up and delivered to our VRCs and in sold units being delivered to customers. In addition, our transportation costs have increased as the remaining carriers have increased prices.

Commencing on March 24, 2020, counties in the Houston area began to implement stay-at-home or shelter-in-place orders with limited exceptions for essential businesses. Both TDA and our back-office facility in Houston qualified as essential businesses under the relevant ordinances and remained open. However, as a result of these orders, as well as continuous impact of the COVID-19 pandemic in the Houston area, we saw a significant reduction in foot traffic that caused us to experience an approximate 63.4% decrease in unit sales for the second quarter of 2020 as compared to the first quarter of 2020. These conditions continue in the Houston area and as a result we are unsure when TDA will return to normal operations.

Most of our corporate, engineering and back-office operations have been able to successfully transition to a remote working environment. However, we have experienced certain productivity challenges with remote work and the various shut-down orders have had a significant effect on certain of our back-office functions, such as the titling and registration of vehicles sold to customers, which has been challenged by the temporary closure of state division of motor vehicle offices across the United States.

As a result of these developments, we have experienced an adverse impact on our revenue, gross profit, results of operations and cash flows. The situation is fluid and additional impacts to our business may arise.

In response to the COVID-19 disruptions, in addition to managing our inventory exposure, we have implemented a number of measures to protect the health and safety of our workforce. These measures include restrictions on non-essential business travel, the institution of work-from-home policies wherever feasible and the implementation of strategies for workplace safety at our facilities. We are following the guidance from public health officials and government agencies, including implementation of enhanced cleaning measures, social distancing guidelines, wearing of masks, eliminating non-essential vendor / guest visitation, and requiring temperature checks and health attestations prior to entering buildings. Seating, signage, and cleaning materials have been added to ensure adherence to best practices for employee health and safety during this pandemic. Where feasible, we operate on a rotating team schedule to reduce exposure and also require

any diagnosed or exposed employees to self-isolate for up to two weeks. Effective May 3, 2020, approximately one-third of our workforce was placed on furlough. The majority of employees furloughed were in reconditioning, logistics, acquisitions and TDA sales, which were the positions most affected by the reduction in unit volume. However, since we restarted vehicle acquisitions and increased our Vroom VRC operations, as of the beginning of August 2020, most of the previously furloughed employees have returned to work. Additionally, we instituted an across-the-board salary reduction for our non-furloughed salaried employees. All salaries were reinstated to pre-COVID-19 levels by July 2020. In the second quarter of 2020, we also took measures to reduce operating expenses by negotiating reductions and deferrals in payments to landlords, vehicle listing sites, service providers and commercial vendors, and we significantly reduced marketing expenditures through May 2020.

We have taken several precautionary measures to enhance our customer experience during the pandemic, such as increasing the level of cleaning and sanitation of vehicles prior to making delivery to our customers. Additionally, we adjusted our delivery protocols to provide contact-free delivery and pick up of vehicles.

While our ecommerce business, including contact-free delivery, is continuing to operate nationwide, the COVID-19 crisis has had a significant impact on our business operations. We are unable to accurately predict the ultimate impact that the COVID-19 disruptions will have on our business and financial results going forward due to the uncertainties surrounding the extent, duration and risk of recurrence of such disruptions. Nevertheless, we believe the measures we have taken and will continue to take will position Vroom to emerge from the crisis in a healthy financial position, and that our business model and years of experience with ecommerce vehicle sales and home delivery enable us to be highly responsive to increased consumer desire for ecommerce solutions and contact-free delivery.

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors and trends, including the following:

~~Ability to drive revenue growth by cost effectively increasing the volume and selection of vehicles in our inventory~~

Our growth is primarily driven by vehicle sales. Vehicle sales growth, in turn, is largely driven by the volume of inventory and the selection of vehicles listed on our platform. Accordingly, we believe that having the appropriate volume and mix of vehicle inventory is critical to our ability to drive growth.

The continued growth of our vehicle inventory requires a number of important capabilities, including the ability to finance the acquisition of inventory at competitive rates, source high quality vehicles across various acquisition channels nationwide, secure adequate reconditioning capacity and execute effective marketing strategies to increase consumer sourcing. In addition, our ability to accurately forecast pricing and consumer demand for specific types of vehicles is critical to sourcing high quality, high-demand vehicles. This ability is enabled by our data science capabilities that leverage the growing amount of data at our disposal and fine-tune our supply and sourcing models. As we continue to invest in our operational efficiency and data analytics, we expect that we will continue to cost effectively increase the volume and optimize the selection of our ecommerce inventory.

~~Ability to capitalize on the continued migration of vehicle purchasers to ecommerce platforms through data-driven marketing efforts~~

While the overall ecommerce penetration rate in used vehicle sales remains low, over the last several years, ecommerce used vehicle sales have experienced significant growth. There has been a shift in consumer buying patterns towards more convenient, personalized, and on-demand purchases, as well as a demand for ecommerce across more diverse categories, including the used vehicle market. We expect that the ecommerce model for buying and selling used vehicles will continue to grow and such growth may be accelerated by the COVID-19 pandemic. Our ability to continue to benefit from this trend will be an important driver of our future performance.

We seek to improve our brand awareness among consumers through national marketing campaigns in order to strengthen our customer acquisition funnel. We also use digital performance marketing such as search engine marketing, automotive aggregator sites and social media to acquire customers more cost effectively. Our aggregate marketing spend has increased over time, with our first national brand marketing campaign commencing in the first quarter of 2019, and we expect to continue to invest in both national brand marketing and performance marketing efforts. As we leverage our national brand, we believe this investment in marketing spend will drive additional demand and sales. We also believe that we have the ability to drive down the cost of acquisition per unit sold by increasing the efficiency of our marketing spend.

The quality of the customer experience on our ecommerce platform is critical to our ability to attract new visitors to our platform, convert such visitors into customers and increase repeat customers. Our ability to drive higher customer conversion depends on our ability to make our platform a compelling choice for consumers based on our functionalities and consumer offerings.

Data ~~analytics~~science and ~~experimentation~~testing drive decision making across all of our conversion and sourcing efforts. By analyzing the data generated by the millions of visitors and tens of thousands of transactions on our platform, and continually testing strategies to maximize conversion rates, we form a better understanding of consumer preferences and try to create a more tailored ecommerce ~~experience. As~~experience for consumers looking to purchase vehicles. Similarly, for consumers looking to sell vehicles to us, we ~~continue~~use a vast set of data and data science to provide an automated pricing platform that delivers real time, market-driven appraisals, and continually test and optimize in order to further refine our approach to enhance the customer experience and drive increased vehicle purchases.

Increased conversion also depends on our ability to provide the necessary customer support and sales support. Our ongoing investment in our customer experience operations includes investments in processes, technology, and data science. We are continuing to invest in our ~~brand~~processes, in order to remove friction and increase transaction flow, and in technology and data science to automate and improve our customer experience, reduce costs per transaction and to drive conversion.

As part of our long-term roadmap, we have been scaling our in-house sales team, have ceased using all third-party sales providers and have meaningfully increased the level of sales supported internally, which we believe will improve our customer experience, and lower our selling costs. Our sales operation is now fully in-house, however, the transition away from third-party sales providers negatively impacted our sales volume through the first half of 2023. Nevertheless, we do not expect this transition to have a long-term impact on our sales volume, or financial condition and results of operations as we continue to reduce costs and optimize our internal sales force. The ability to successfully grow an effective internal sales team will be critical to our ability to achieve profitable growth.

In order to address the operational challenges created by our prior rapid growth from 2020 through the first quarter of 2022, including delays in titling and registering vehicles purchased by our customers, we have undertaken various initiatives to improve our transaction processing, enhance our customer experience, and reduce our regulatory risk. These initiatives include increased digitization and electronic transmission of transaction documents and implementation of our digital title vault to ensure that titles are quality checked and vaulted in Vroom's name prior to listing of vehicles on our website. As we improve the customer experience and drive efficiency in transaction processing, we expect that we will attract more visitors, improve conversion, ~~and~~ drive greater ~~sales.~~sales and continue to source vehicles from consumers. If we cannot manage our growth effectively to maintain the quality and efficiency of our customers’ experience, our business, financial condition and results of operations could be materially and adversely affected. See “Risks Related to Our Growth and Strategy—Our prior rapid growth is not indicative of our short-term strategy under our long-term roadmap and, if and when we return to rapid growth, we may not be able to manage our growth effectively" in our Annual Report.

Ability to optimize the mix of inventory ~~sources~~ to drive increased gross profit and improvements to our unit economics

Improving unit economics and driving increased gross profit requires a number of important capabilities, including the ability to finance the acquisition of inventory at competitive rates, source high quality vehicles across various acquisition channels nationwide, secure adequate reconditioning capacity, and execute effective marketing strategies. In addition, our ability to accurately forecast pricing and consumer demand for specific types of vehicles is critical to sourcing high quality, high-demand vehicles, as well as lower-price point vehicles to take advantage of the expanded sales opportunities to customers across the credit spectrum enabled by the UACC Acquisition. The ability to source the optimal mix of quality inventory will continue to be a key driver of improved unit economics and increased gross profit. This ability is enabled by our data science capabilities that leverage the growing amount of data at our disposal and generate

predictive data analytics that fine-tune our supply and sourcing models. As we continue to invest in our operational efficiency and data science, we expect that we will improve our unit economics and in turn drive increased gross profit.

We strategically source inventory from consumers, auctions, ~~consumers,~~ rental car companies, OEMs and dealers. ~~Auctions,~~For the three and nine months ended September 30, 2023, vehicles sourced from consumers ~~and rental car companies~~ represent the ~~vast~~substantial majority ~~of our inventory sources, accounting for approximately 55%, 28%, and 15%~~ of our retail inventory sold, ~~for~~although we expect the ~~three months ended June 30, 2020, respectively,~~percentage of vehicles sourced from consumers to decline in the fourth quarter as we evaluate the optimal mix of sourcing channels and ~~51%, 34%,~~strive to source vehicles in a way to maximize our average gross profit per unit and ~~14% for the six months ended June 30, 2020, respectively.~~improve unit economics. Because the quality of vehicles and associated ~~gross~~contribution margin (gross margin less variable costs) profile vary across each channel, the mix of inventory sources has an impact on our profitability. ~~We continually evaluate the optimal mix of sourcing channels and will source vehicles in a way that maximizes our average gross profit per unit and improves our unit economics.~~ For example, purchasing vehicles at ~~third-party~~third party auctions is competitive, and consequently, vehicle prices at ~~third-party~~third party auctions tend to be higher than vehicle prices for vehicles sourced directly from consumers. ~~Accordingly, as part~~However, sourcing from consumers requires increased marketing, transportation, and reconditioning expenses. We continually evaluate the optimal mix of sourcing channels and strive to source vehicles in a way that generates the highest sales margins, lowest variable costs, and shortest inventory turns in order to maximize our average gross profit per unit and improve our unit economics.

As we made progress on our initiatives to address the operational challenges created by our prior rapid growth from 2020 through the first quarter of 2022, a higher portion of our ~~sourcing strategy,~~unit sales in the first half of 2023 was from aged inventory as we ~~seek to increase~~obtained titles for vehicles not previously listed for sale, which negatively impacted our GPPU. As of September 30, 2023, we sold through the ~~percentage of vehicle sales that we source from consumers.~~

~~Our ability to increase the percentage of inventory sourced directly from consumers will depend on the popularity and success~~substantial majority of our ~~ecommerce platform.~~ aged inventory and expect our sales margin and GPPU to be negatively impacted by our aged inventory mix to a lesser extent in the fourth quarter of 2023.

In ~~order~~the latter half of 2022, we began inspecting consumer sourced vehicles at pickup and making real time adjustments to ~~continue to increase the percentage~~acquisition pricing as a result of ~~vehicles that we source directly from consumers, we are expanding~~ our ~~national marketing efforts that are focused on our Sell Us Your Car~~^® ~~proposition,~~scaling proprietary logistics operation, which we ~~believe~~expect will ~~result in more customers gaining familiarity with~~provide improvements to our platform. We expect that, as consumers experience the convenience of our platform to sell or trade in their used vehicles, the percentage of inventory we source directly from consumers will continue to grow.overall gross profit per unit over time.

We have begun to pursue third party inventory listings that will expand our sourcing channels through third party sellers while offering us attractive revenue models in an asset light, debt free structure.

Before a vehicle is listed for retail sale on our platform, it undergoes a thorough reconditioning process in order to ~~satisfy increasing demand~~

meet our Vroom retail sales criteria. The efficiency of this reconditioning process is a key element in our ability to grow profitably. Our ability to recondition purchased vehicles to our quality standards is a critical component of our business. Historically, we have successfully increased our reconditioning capacity as our business has grown, and our future success will depend on our ability to ~~expand and~~continue to optimize our reconditioning capacity to satisfy ~~increasing~~ customer ~~demand.~~ demand, maximize profitability, and enhance the customer experience.

We employ a hybrid approach that combines the use of our ~~Vroom VRC~~proprietary vehicle reconditioning center ("VRC") and VRCs primarily operated by a single third-party ~~VRCs~~provider to best meet our reconditioning needs.

In 2019, we significantly increased our reconditioning capacity within our Vroom VRC by overhauling our operations and applying lean manufacturing techniques and other software-enabled technological advances. As we continue to grow our business, we We intend to ~~continue to invest in increased~~optimize reconditioning capacity and operational efficiency through distributed third-party VRC locations and ~~going forward we expect to invest in~~ additional proprietary ~~reconditioning capacity to provide added scale with reduced lead-time and greater flexibility. Additionally, our~~VRCs. Our use of third-party VRCs to recondition vehicles allows us to avoid additional capital expenditures, quickly ~~increase~~adjust capacity, maintain greater operational flexibility and broaden our geographic footprint to drive lower logistics costs. ~~In 2019~~Proprietary VRCs will enable us to have increased control over our reconditioning operations, ensure adequate capacity, optimize our end-to-end supply chain and ~~through early August 2020,~~support our regional operating model. We have integrated regional management of our distributed reconditioning and logistics operations as part of our ongoing efforts to optimize our operations and enhance our customer experience.

Our existing facilities in the Atlanta area provide us with the space and opportunity to develop a second proprietary VRC in the future, depending on our future reconditioning needs. Going forward, we ~~expanded our~~will continue to seek to optimize the combination of strategic and geographically dispersed proprietary and third-party ~~VRC operations by adding fifteen additional VRCs across the nation for a current total of sixteen. See “—Liquidity and Capital Resources.”~~

VRCs. We will continue to leverage our data ~~analytics~~science and deep industry experience to strategically select ~~both Vroom VRCs and third-party VRCs in~~VRC locations where we believe there is the highest supply and demand for our ~~vehicles. We expect that our continued investment in reconditioning capacity~~vehicles and ~~technology will lower our reconditioning costs per unit and drive greater operational efficiency, higher gross profit per unit and improved unit economics.~~enable us to leverage a regional operating model.

~~We primarily use third-party carriers and are developing a hybrid strategy to build out~~

As we scaled our business, we not only added proprietary ~~logistics network. We are in the process of optimizing~~line-haul capability, but also built our third-party logistics network ~~nationally~~nationwide through the development of strategic carrier arrangements with national ~~haulers. As we continue to grow, we plan to significantly consolidate~~haulers and the consolidation of our carrier base into a smaller number of carriers in dedicated operating regions. We expect that these enhanced logistics operations, combined with the expansion of strategically located VRCs, will drive efficiency in our logistics operations. We have been accelerating our strategy to optimize our hybrid approach by focusing on improving

the quality and reliability of our logistics operations. We previously prioritized investment in our last mile hub delivery operations, where we had the greatest impact on the customer experience, including by investing in short-haul vehicles to make regional deliveries from our last mile hubs, and line-haul vehicles for hub-to-hub shipments on high-volume routes and to shorten delivery routes for third-party carriers. We are continuing to expand the range of our proprietary logistics network to increase the percentage of vehicles picked up from and delivered to customers by our Vroom fleet. By leveraging our proprietary logistics network for inbound transportation related to acquisitions, we are able to increase driveway inspections for consumer sourced vehicles, which in turn improves the quality and pricing of acquisitions. We are also continuing to invest in our processes and technology to remove inefficiencies and increase automation. Consistent with our long-term roadmap and the continued development of our regional operating model, we intend to continue to strategically combine the operation of our proprietary fleet with the use of third-party carriers, as well as synchronize our end-to-end supply chain to increase sales velocity and optimize flow of our inventory. We plan to reduce the number of miles our vehicles travel and lower our inbound and outbound transportation costs using our regional operating model. We believe these initiatives will enable us to reduce logistics costs ~~thus lowering costs~~ per ~~unit. Our VRCs also serve as pooling points to aggregate acquired vehicles~~mile, improve our inventory turnover and ~~can serve as hubs for staging vehicles for last-mile delivery to customers, which we expect will result in an improved experience for customers.~~provide the highest level of customer service. We recently launched a number of enhancements to our last-mile delivery service to enrich our customer experience. We expect that these enhancements will result in an increase in outbound shipping costs, thereby increasing our SG&A expenses. However, we expect any such increase to be offset by certain cost efficiencies gained from improvements in our reconditioning and logistics operations, which will ultimately lead to reduced total costs per unit. Consistent with our hybrid strategy, we also intend to build out our proprietary logistics network. Over time, we expect that optimizing our logistics network through this hybrid approach will result in improved unit economics, increased profitability and an enhanced customer experience.

As we scaled our business, we achieved a national presence and brand that provides a significant competitive advantage versus local and regional dealers, and has enabled us to take advantage of efficiencies and lower costs of national brand advertising. Our national vehicle operations enable us to leverage a regional operating model, which is designed to drive growth, reduce our operating expenses, increase our operating leverage and ~~better monetize value-added products~~improve our unit economics, while also enhancing our customer experience. The regional operating model will increasingly enhance our approach to each component of our vehicle operations. We are currently evaluating initiatives to be rolled out in select markets in order to leverage our regional operating model. We believe the efficiencies and cost savings expected to be achieved through the regional operating model will be important components of our path to profitability.

Revenue earned on vehicle financing, both through our continued partnerships with third-party lenders and the development of ~~value-added products is~~our captive financing capabilities, present an ~~integral part of providing a seamless vehicle-buying experience~~opportunity to grow our ~~customers. These products~~business and drive profitability. Strategic partnerships with lenders such as Chase and Ally Financial provide ~~added~~enhanced revenue streams for us, as well as offering convenience, assurance and efficiency for our customers and have contributed to improvements in Product GPPU. In addition, the acquisition of UACC in February 2022 has enabled us to expand our offerings across the credit spectrum and accelerate the development of our captive financing operation, which is one of the key strategic initiatives under our long-term roadmap. We expect to develop UACC into a full captive financing arm with disciplined lending expertise, which would enable us to increase our ecommerce unit sales, expand our penetration into sales to customers across the credit spectrum and improve our unit economics.

While credit losses are inherent in the automotive finance receivables business, several variables have affected UACC’s recent loss and delinquency rates, including rising interest rates, the current inflationary environment and vehicle depreciation. UACC is currently experiencing higher loss severity and higher losses on its finance receivables, which has negatively impacted the fair value of our finance receivables and the losses recognized for the three and nine months ended September 30, 2023. Higher than anticipated credit losses may continue to negatively impact our business throughout the remainder of 2023, especially because UACC primarily operates in the sub-prime sector of the market which is expected to have more volatility. Certain advance rates available to UACC on borrowings from the Warehouse Credit Facilities have decreased as a result of the increasing credit losses in UACC's portfolio and overall rising interest rates. Any future decreases on available advance rates may have an adverse impact on our liquidity.

The success of UACC's business is highly dependent on the ability to securitize and sell the automotive finance receivables that it underwrites. As a result of increasing interest rates, the current inflationary environment and vehicle depreciation in the used automotive industry, UACC is experiencing higher loss severity in a soft securitization market. As a result, UACC may not be able to securitize its loan portfolio on favorable terms, or may not be able to sell the subordinate notes or residual certificates issued in its securitizations at a favorable price or at all.

We intend to structure UACC's securitization transactions to achieve off-balance sheet accounting treatment and recognize a gain on sale of the securitized finance receivables. However, if UACC fails to sell the subordinate notes or the residual interests, it will preclude us from recognizing the sale and result in the securitization trust being consolidated and therefore remaining on balance sheet. In January 2023, UACC completed the 2023-1 securitization transaction, selling the investment grade rated asset-backed securities, and in April 2023, UACC sold the non-investment grade rated securities. As a result of current market conditions, which led to unfavorable pricing, UACC retained the residual interests and we accounted for the 2023-1 securitization transaction as secured borrowings. The related finance receivables and securitization debt remain on balance sheet. In the future, we may account for UACC securitizations as on balance sheet transactions depending on the market conditions.

In addition, due to the increased loss severity, UACC elected to waive monthly servicing fees related to the 2022-2 securitization transaction in the first quarter of 2023. The waiver of monthly servicing fees related to the 2022-2 securitization transaction resulted in consolidation of the related finance receivables and securitization debt on our financial statements. Waiver of monthly servicing fees also resulted in reduced servicing income.

We generate revenue by earning fees for selling value-added products to customers in connection with vehicle sales. Currently, our other third-party value-added product offerings consist of protection products, such as vehicle service contracts, GAP protection and tire and wheel coverage. Our offering of value-added products in addition to vehicle financing is an integral part of providing a seamless vehicle-buying experience to our customers. We sell our ~~third-party value-added~~protection products through our strategic relationships with ~~multiple lenders and other~~ third parties who bear the incremental risks associated with the underwriting of ~~finance and~~such protection products. In the fourth quarter of 2019 and first quarter of 2020, we entered into strategic partnerships with lenders such as Chase and Santander which have contributed to improvements in Product GPPU. Additionally, through our on-going data analytics, experimentation and further development of our ecommerce technology, we expect to increase attachment rates of our existing value-added products while finding new opportunities to include additional finance and protection and other value-added products. Because we are paid fees on value-added products we sell, our gross profit is equal to the revenue we generate on such sales. As a result, such sales help drive total gross profit per unit. We expect that, as we scale our business, we will increase the breadth and variety of value-added products offered to customers and improve attachment rates to our vehicle sales, which in turn will grow revenue and drive profitability.

Used vehicle sales ~~are~~have historically been seasonal. The used vehicle industry typically experiences an increase in sales early in the calendar year and reaches its highest point late in the first quarter and early in the second quarter. Vehicle sales then level off through the rest of the year, with the lowest level of sales in the fourth quarter. This seasonality has historically corresponded with the timing of income tax refunds, which are an important source of funding for vehicle purchases. Additionally, used vehicles typically depreciate at a faster rate in the last two quarters of each year and a slower rate in the first two quarters of each year. ~~In line with these macro~~However, the past few years have not followed typical depreciation trends ~~our gross profit per unit has historically been higher in the first half of the year when compared to the second half of the year.~~and there remains continued uncertainty surrounding market trends. See “Risk Factors—Risks Related to Our ~~Business—~~Financial Condition and Results of Operations—We may experience seasonal and other fluctuations in our quarterly results of operations, which may not fully reflect the underlying performance of our ~~business.”~~business” in our Annual Report.

Both the United States and global economies are experiencing a sustained inflationary environment and the Federal Reserve’s efforts to tame inflation have led to, and may continue to lead to, increased interest rates, which affects automotive finance rates, reducing discretionary spending and making vehicle financing more costly and less accessible to many consumers. On March 10 and March 12, 2023, the Federal Deposit Insurance Corporation ("FDIC") took control and was appointed receiver of Silicon Valley Bank and Signature Bank, respectively. Other regional banks also closed or faced risk of closure, which created additional economic uncertainty. Starting on September 15, 2023, the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW") initiated a strike against three of America's major automakers. As of October 30, 2023, the three automakers made tentative deals with the UAW, which ended the strike, but has led to economic uncertainty within the automotive industry and may lead to potential shortages of vehicle parts. Moreover, geopolitical conflicts and war, including those in Europe and the Middle East, have increased global economic and political uncertainty, which has caused dramatic fluctuations in global financial markets. A significant escalation or expansion of economic disruption could continue to impact consumer spending, disrupt our supply chain, broaden inflationary costs, and could have a material adverse effect on our results of operations. We will continue to actively monitor and develop responses to these disruptions, but depending on duration and severity, these trends could continue to negatively impact our business throughout the remainder of 2023 and into 2024.

We sell retail vehicles through both our ecommerce platform and TDA. Revenue from vehicle sales, including any delivery charges, ~~are~~is recognized when vehicles are delivered to the customers or picked up at our TDA retail location, net of a reserve for estimated returns. The number of units sold and the average selling price (“ASP”) per unit are the primary factors impacting our retail revenue stream.

The number of units sold depends on the volume of inventory and the selection of vehicles listed on our ecommerce platform, our ability to attract ~~new~~and convert customers, our brand awareness, ~~and~~ our ability to ~~expand~~optimize our reconditioning operations and logistics ~~network.~~network, and our ability to provide adequate sales and sales support to service our demand.

ASP depends primarily on our acquisition and pricing ~~strategy,~~strategies (which in turn depend in part on demand predicted by our data analytics), retail used ~~car~~vehicle market prices, our average days to sale and our reconditioning and logistics costs.

As a data-driven company, we ~~have focused~~acquire inventory based upon demand predicted by our ~~inventory on low-mileage, high-demand vehicles with average selling prices~~data analytics. We expect ASP to continue to fluctuate as a result of ~~approximately $30,000. As we ramp up~~market conditions and based upon demand predicted by our vehicle acquisitions following our strategic decision to reduce inventory in response to the COVID-19 pandemic, and as we scale our business going forward, we have begun to strategically take advantage of a broader portion of the used vehicle market by adding more lower priced vehicles to our inventory. This will allow us to expand our vehicle selection, while potentially decreasing the average selling price per unit in any given period. See “—Impact of COVID-19”.data analytics.

We sell vehicles that do not meet our Vroom retail sales criteria through ~~third-party~~ wholesale ~~auctions.~~channels. Vehicles sold ~~at auction~~through wholesale channels are acquired from customers who trade-in their vehicles when making a purchase from us, ~~and also~~ from customers who sell their vehicle to us in direct-buy ~~transactions.~~transactions, and from liquidation of vehicles previously listed for retail sale. The number of wholesale vehicles sold and the ~~average selling price~~ASP per unit are the primary drivers of wholesale revenue. The ~~average selling price~~ASP per unit is affected by the mix of the vehicles we acquire and general supply and demand conditions in the wholesale market.

We generate revenue by financing vehicle sales through UACC, earning fees on sales of third-party financing, and sales of value-added products to our customers in connection with vehicle sales, ~~including fees earned~~such as vehicle service contracts, GAP protection and tire and wheel coverage.

As a result of the UACC Acquisition, we generate ecommerce product revenue from receivables generated by financing provided to Vroom customers through our captive financing operation. We earn interest income on ~~customer vehicle financing from third-party lenders~~such finance receivables before the loans are sold, interest income on finance receivables held in consolidated VIEs, and, ~~fees earned~~when applicable, gain on the sales of ~~other value-added products, such~~these securitized finance receivables. We account for sales of these finance receivables in accordance with ASC Topic 860, Transfers and Servicing of Financial Assets ("ASC 860"). In order for transfers of the finance receivables to qualify as ~~extended warranty contracts, GAP products~~sales, the finance receivables being transferred must be legally isolated, may not be constrained by restrictions from further transfer, and ~~wheel~~must be deemed to be beyond our control. Although our long-term plan is to structure future securitization transactions to qualify for sale accounting, similar to the 2022-1 securitization transaction, for which the gain on sale was recorded in “Finance revenue”, as discussed below, current market conditions may impact our ability to achieve sales accounting treatment.

In January 2023, UACC completed the 2023-1 securitization transaction, retaining the residual interests, and ~~tire coverage.~~ we accounted for this transaction as secured borrowings. During the first quarter of 2023, we also consolidated the 2022-2 securitization transaction and accounted for it as secured borrowings. Refer to "Finance revenue" below for further details.

The revenue we are able to generate from these sales will be dependent on the current market conditions, the number of finance receivables UACC originates with our customers, the average principal balance of the finance receivables, the credit quality of the portfolio, and the price at which they are sold in securitization transactions or through forward flow arrangements.

We also earn fees on ~~these~~third-party financing and value-added products pursuant to arrangements with the third parties that sell and administer these products. For accounting purposes, we are an agent for these transactions and, as a result, we recognize fees on a net basis when the customer enters into an arrangement to purchase these products or obtain third-party financing, which is typically at the time of a vehicle sale. Our gross profit on product revenue is equal to the revenue we generate.

Product revenue is affected by the number of vehicles sold, the attachment rate of value-added products and the amount of fees we receive on each product. Product revenue also consists of estimated profit-sharing amounts to which we are entitled based on the performance of third-party protection products once a required claims period has passed.

A portion of the fees we receive is subject to chargeback in the event of early termination, default, or prepayment of the contracts by our customers. We recognize product revenue net of reserves for estimated chargebacks.

Our finance revenue is related to finance receivables originated by UACC for its network of third-party dealership customers and consists of ~~labor~~interest income earned on finance receivables before the loans are sold, interest income earned on finance receivables held in consolidated VIEs, and, ~~parts~~when applicable, gains on the sale of securitized finance receivables.

UACC acquires and services finance receivables from its network of third-party dealership customers and generates revenue through the sales of these financing receivables. We account for sales of finance receivables in accordance with ASC 860.

For any securitization transactions that are accounted for as secured borrowings, we recognize interest income, which includes finance charges and servicing fees in accordance with the terms of the related customer agreements.

In February 2022, UACC completed the 2022-1 securitization transaction, which qualified as sales, therefore we recorded a gain on the sale of the finance receivables. The amount of the gain is equal to the fair value of the net proceeds received less the carrying amount of the finance receivables. Although our long-term plan is to structure future securitization transactions similar to the 2022-1 securitization transaction and account for them as sales, market conditions may impact our ability to achieve sales accounting treatment. In January 2023, UACC completed the 2023-1 securitization transaction, selling the investment grade rated asset-backed securities, and in April 2023, UACC sold the non-investment grade rated securities. As a result of current market conditions, which led to unfavorable pricing, UACC retained the residual interests and we accounted for the 2023-1 securitization transaction as secured borrowings. The related finance receivables and securitization debt remain on balance sheet. We may account for future securitizations as on balance sheet transactions depending on the market conditions.

Servicing income represents the annual fees earned ~~by us~~on the outstanding principal balance of the finance receivables serviced. Fees are earned monthly at an annual rate of approximately 4% for the 2022-1 securitization transaction and 3.25% for the 2022-2 and 2023-1 securitization transactions of the outstanding principal balance of the finance receivables serviced.

As a result of increasing interest rates, the current inflationary environment and vehicle ~~repair services at TDA.~~depreciation in the used automotive industry, UACC is experiencing higher loss severity in a soft securitization market. The increased loss severity could lead to reduced servicing income if UACC elects to waive monthly servicing fees going forward as it did in the first quarter of 2023. The waiver of servicing fees related to the 2022-2 securitization transaction resulted in consolidation of the related finance receivables and securitization debt on our financial statements.

See “Note 3—Revenue Recognition” and "Note 4 – Variable Interest Entities and Securitizations" to our condensed consolidated ~~interim~~ financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Retail cost of sales primarily includes the costs to acquire vehicles, inbound transportation costs and direct and indirect reconditioning costs associated with preparing vehicles for sale. Costs to acquire vehicles are primarily driven by the inventory source, vehicle mix and general supply and demand conditions of the used vehicle market. Inbound transportation costs include costs to transport the vehicle to our VRCs. Reconditioning costs include parts, labor and third-party reconditioning costs directly attributable to the vehicle and allocated overhead costs. Cost of sales also includes any accounting adjustments to reflect vehicle inventory at the lower of cost or net realizable value.

Wholesale cost of sales primarily includes costs to acquire vehicles sold through wholesale channels as well as any accounting adjustments to reflect vehicle inventory at the lower of cost or net realizable value.

Product cost of sales consists of interest expense incurred on securitization debt related to finance receivables originated by UACC for Vroom customers.

Finance cost of sales consists of interest expense incurred on securitization debt originated by UACC for its network of third-party dealership customers and collection expenses related to servicing finance receivables.

Total gross profit is defined as total revenue less costs associated with such revenue.

Our selling, general, and administrative expenses, which we refer to as SG&A expenses, consist primarily of advertising and marketing expenses, outbound transportation costs, employee compensation, occupancy costs of our facilities, ~~and~~ professional fees for accounting, auditing, tax, legal and consulting ~~services.~~services and software and IT costs.

We expect that our SG&A expenses will increase in the future as we expand our operations, hire additional employees and continue to increase our marketing spend to build brand awareness and increase consumer traffic on our platform. We also expect to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with SEC and stock exchange requirements, director and officer insurance costs, and investor and public relations costs.

Our depreciation and amortization expense primarily ~~includes~~includes: depreciation related to our leasehold improvements ~~as well as~~and logistics fleet; amortization related to intangible assets in acquired ~~in the TDA acquisition~~businesses; and capitalized internal use software costs incurred in the development of our platform and website applications. Depreciation expense related to our Vroom VRC and the portion of depreciation expense for our proprietary logistics fleet related to inbound transportation is included in cost of sales in the condensed consolidated statements of operations.

Impairment charges represent an impairment charge to write down the carrying amount of goodwill to fair value and lease impairment charges related to closing physical office locations and Sell Us Your Car® centers.

Gain on debt extinguishment represents the gain recognized from the repurchase of a portion of our outstanding Convertible Senior Notes due 2026 (the "Notes") in open-market transactions.

Our interest expense primarily includes (i) interest expense related to our vehicle floorplan facility with Ally Bank and Ally Financial (the "2022 Vehicle Floorplan ~~Facility,~~Facility"), as discussed below, which is used to finance our inventory, ~~as well as~~ (ii)

interest expense on our ~~term loan facility,~~Notes, and (iii) interest expense on UACC's Warehouse Credit Facilities, which ~~was repaid in full in December 2019.~~is used to fund our finance receivables.

Interest income primarily represents interest credits earned on cash deposits maintained in relation to our 2022 Vehicle Floorplan ~~Facility.~~Facility as well as interest earned on cash and cash equivalents.

Other loss, net primarily represents realized and unrealized losses on finance receivables, securitization debt and beneficial interests in securitizations as well as recoveries from losses previously recognized on finance receivables.

The following table presents our condensed consolidated results of operations for the periods indicated:


		Three Months Ended June 30,										Six Months Ended June 30,												Three Months Ended September 30,											Nine Months Ended September 30,
		2019				2020			% Change				2019				2020			% Change				2023				2022			% Change				2023				2022			% Change
		(in thousands)											(in thousands)											(in thousands)											(in thousands)
Revenue:
Retail vehicle, net	$		200,402		$		196,150			(2.1	)%	$		379,152		$		504,862			33.2	%	$		147,710		$		234,353			(37.0	)%	$		419,548		$		1,283,263			(67.3	)%
Wholesale vehicle			54,531				50,921			(6.6	)%			106,651				106,497			(0.1	)%			30,898				47,604			(35.1	)%			75,593				270,489			(72.1	)%
Product, net			5,491				5,736			4.5	%			9,236				16,780			81.7	%			13,075				13,181			(0.8	)%			36,499				51,954			(29.7	)%
Finance																									40,823				40,654			0.4	%			114,939				120,005			(4.2	)%
Other			473				286			(39.5	)%			917				726			(20.8	)%			3,128				5,005			(37.5	)%			10,700				13,841			(22.7	)%
Total revenue			260,897				253,093			(3.0	)%			495,956				628,865			26.8	%			235,634				340,797			(30.9	)%			657,279				1,739,552			(62.2	)%
Cost of sales			247,052				245,486			(0.6	)%			470,099				602,871			28.2	%
Cost of sales:
Retail vehicle																									144,654				218,726			(33.9	)%			414,917				1,234,138			(66.4	)%
Wholesale vehicle																									32,393				49,178			(34.1	)%			81,019				276,749			(70.7	)%
Product																									917				—			100.0	%			2,518				—			100.0	%
Finance																									8,481				4,699			80.5	%			22,755				10,368			119.5	%
Other																									1,095				863			26.9	%			3,170				2,969			6.8	%
Total cost of sales																									187,540				273,466			(31.4	)%			524,379				1,524,224			(65.6	)%
Total gross profit			13,845				7,607			(45.1	)%			25,857				25,994			0.5	%			48,094				67,331			(28.6	)%			132,900				215,328			(38.3	)%
Selling, general and administrative expenses			43,692				47,911			9.7	%			80,275				106,291			32.4	%			79,586				134,643			(40.9	)%			263,078				475,627			(44.7	)%
Depreciation and amortization			1,501				1,083			(27.8	)%			3,034				2,049			(32.5	)%			11,010				9,833			12.0	%			31,845				27,728			14.8	%
Impairment charges																									—				1,017			(100.0	)%			1,353				206,127			(99.3	)%
Loss from operations			(31,348	)			(41,387	)		32.0	%			(57,452	)			(82,346	)		43.3	%			(42,502	)			(78,162	)		45.6	%			(163,376	)			(494,154	)		66.9	%
Gain on debt extinguishment																									—				(37,917	)		100.0	%			(19,640	)			(37,917	)		48.2	%
Interest expense			3,388				1,297			(61.7	)%			6,106				4,123			(32.5	)%			12,058				9,704			24.3	%			30,915				28,617			8.0	%
Interest income			(1,415	)			(715	)		(49.5	)%			(3,264	)			(2,671	)		(18.2	)%			(5,506	)			(5,104	)		7.9	%			(16,369	)			(12,991	)		26.0	%
Revaluation of stock warrant			60				21,260			35,333.3	%			142				20,470			14,315.5	%
Other income, net			(12	)			(53	)		341.7	%			(31	)			(86	)		177.4	%
Other loss, net																									33,543				5,383			523.1	%			65,019				26,897			141.7	%
Loss before provision (benefit) for income taxes			(33,369	)			(63,176	)		89.3	%			(60,405	)			(104,182	)		72.5	%			(82,597	)			(50,228	)		64.4	%			(223,301	)			(498,760	)		55.2	%
Provision (benefit) for income taxes			(29	)			52			(279.3	)%			74				105			41.9	%			260				899			(71.1	)%			918				(22,085	)		104.2	%
Net loss	$		(33,340	)	$		(63,228	)		89.6	%	$		(60,479	)	$		(104,287	)		72.4	%	$		(82,857	)	$		(51,127	)		62.1	%	$		(224,219	)	$		(476,675	)		53.0	%

The following table presents our Ecommerce segment results of operations for the periods indicated:


	Three Months Ended June 30,											Three Months Ended September 30,
	2019		2020			Change			% Change			2023		2022			Change			% Change
	(in thousands, except unit data and average days to sale)											(in thousands, except unit data and average days to sale)
Ecommerce units sold		3,856		6,713			2,857			74.1	%		4,561		6,428			(1,867	)		(29.0	)%
Ecommerce revenue:
Vehicle revenue	$	118,569	$	170,460	$		51,891			43.8	%	$	136,949	$	212,980	$		(76,031	)		(35.7	)%
Product revenue		2,384		5,108			2,724			114.3	%		12,902		12,461			441			3.5	%
Total ecommerce revenue	$	120,953	$	175,568	$		54,615			45.2	%	$	149,851	$	225,441	$		(75,590	)		(33.5	)%
Ecommerce gross profit:
Vehicle gross profit	$	4,911	$	2,111	$		(2,800	)		(57.0	)%	$	2,354	$	14,573	$		(12,219	)		(83.8	)%
Product gross profit		2,384		5,108			2,724			114.3	%		11,985		12,461			(476	)		(3.8	)%
Total ecommerce gross profit	$	7,295	$	7,219	$		(76	)		(1.0	)%	$	14,339	$	27,034	$		(12,695	)		(47.0	)%
Average vehicle selling price per ecommerce unit	$	30,749	$	25,393	$		(5,356	)		(17.4	)%	$	30,026	$	33,133	$		(3,107	)		(9.4	)%
Product revenue per ecommerce unit													2,829		1,939			890			45.9	%
Gross profit per ecommerce unit:
Vehicle gross profit per ecommerce unit	$	1,274	$	314	$		(960	)		(75.4	)%	$	516	$	2,267	$		(1,751	)		(77.2	)%
Product gross profit per ecommerce unit		618		761			143			23.1	%		2,628		1,939			689			35.5	%
Total gross profit per ecommerce unit	$	1,892	$	1,075	$		(817	)		(43.2	)%	$	3,144	$	4,206	$		(1,062	)		(25.2	)%
Ecommerce average days to sale		64		66			2			3.1	%		202		186			16			8.6	%

Ecommerce units sold ~~increased 2,857,~~decreased 1,867, or ~~74.1%~~29.0%, from ~~3,856~~6,428 for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~6,713~~4,561 for the three months ended ~~June~~September 30, ~~2020.~~2023. This ~~increase~~decrease was driven by ~~process improvements in~~ our ~~ecommerce platform, our national advertising campaign which continues~~strategic decision to ~~strengthen our national brand awareness~~prioritize unit economics over unit sales volume as well as ~~greater consumer acceptance~~macroeconomic factors. As we continue to improve our processes, we began to resume growth in the second quarter of ~~our business model as a result of disruptions caused by the COVID-19 pandemic. Average monthly unique visitors~~2023. Going forward, we expect to ~~our website grew~~continue to grow ecommerce units sequentially.

Ecommerce average days to sale increased from ~~628,659~~186 days for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~999,899~~202 days for the three months ended ~~June~~September 30, 2023. We have undertaken various initiatives to address the operational challenges created by our prior rapid growth from 2020 ~~representing year over year growth~~through the first quarter of ~~59.1%. We~~2022, in particular with titling and registration processes. While these initiatives are designed to improve our transaction processing, enhance our customer experience, and reduce our regulatory risk, they resulted in delays in listing vehicles for sale and caused a higher portion of our unit sales in the third quarter of 2023 to be from aged inventory as compared to the third quarter of 2022, which increased the number of days between our acquisition of vehicles and the final delivery of such vehicles to customers. As of September 30, 2023, we have sold through the substantial majority of our aged inventory, therefore we expect ecommerce ~~units sold~~average days to sale to continue to ~~grow~~decrease sequentially in the ~~future as we increase our inventory selection~~fourth quarter of 2023 and ~~marketing efforts and improve conversion.~~into 2024.

Ecommerce vehicle revenue ~~increased $51.9~~decreased $76.1 million, or ~~43.8%~~35.7%, from ~~$118.6~~$213.0 million for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~$170.5~~$136.9 million for the three months ended ~~June~~September 30, ~~2020.~~2023. The ~~increase~~decrease in ecommerce vehicle revenue was primarily attributable to the ~~2,857 increase~~1,867 decrease in ecommerce units sold, which ~~increased~~decreased vehicle revenue by ~~$87.9~~$61.9 million, ~~partially offset by~~and a ~~lower average selling price~~decrease in ASP per unit, which decreased from ~~$30,749~~$33,133 for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~$25,393~~$30,026 for the three months ended ~~June~~September 30, ~~2020~~2023 and decreased vehicle revenue by ~~$36.0~~$14.2 million.

The decrease in ~~average selling price~~ASP per unit was driven by our strategic decision to reduce vehicle pricing in order to sell pre-COVID-19 inventory and our focus on acquiring high-demand vehicles. We expect ecommerce vehicle revenue will continue to grow driven by increases in ecommerce units sold.

~~In the three months ended June 30, 2020, the escalation of the COVID-19 pandemic within the United States initially negatively impacted consumer demand and ecommerce revenue growth. However,~~ due to ~~our strategic decision to reduce vehicle pricing in order to sell pre-COVID-19 inventory, we were able to maintain~~ the ~~number~~mix of ~~ecommerce units~~vehicles sold ~~at pre-COVID levels, through April 30, 2020. The significant reduction in our inventory and pause in vehicle acquisitions negatively impacted~~during the third quarter of 2023, primarily as a result of a higher portion of our unit sales ~~for~~being from aged inventory compared to the ~~remainder~~third quarter of ~~the three months ended June 30, 2020. In late April 2020, we started gradually rebuilding~~2022, as well as market depreciation. We expect ASP to continue to fluctuate as a result of market conditions and adjustments to our inventory ~~levels. Due to greater customer acceptance of~~based upon demand predicted by our ~~business model and focus on contact-free delivery, we expect sales to return to pre-COVID levels in the near future.~~data analytics.

Ecommerce product revenue increased ~~$2.7~~$0.4 million, or ~~114.3%~~3.5%, from ~~$2.4~~$12.5 million for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~$5.1~~$12.9 million for the three months ended ~~June~~September 30, ~~2020.~~2023. The increase in ecommerce product revenue was primarily attributable to ~~the 2,857 increase in ecommerce units sold, which increased product revenue by $1.8 million and a~~

~~$143~~an increase in product revenue per unit, which increased ~~product revenue by $0.9 million. Product revenue per unit increased by $143~~ from ~~$618~~$1,939 for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~$761~~$2,829 for the three months ended ~~June~~September 30, ~~2020, which was primarily due to higher attachment rates, improved financing features in our ecommerce platform~~2023 and ~~our strategic partnerships. We expect ecommerce~~increased product revenue ~~will continue to grow in~~by $4.0 million, partially offset by the ~~future driven by increases~~1,867 decrease in ecommerce units sold, ~~new~~which decreased product ~~offerings, initiatives to improve~~revenue by $3.6 million. The increase in product ~~attachment rates and increases in~~revenue per unit ~~profit.~~is primarily due to an increase in interest income earned on finance receivables from Vroom customers originated or serviced by UACC as compared to the third quarter of 2022.

Ecommerce vehicle gross profit decreased ~~$2.8~~$12.2 million, or ~~57.0%~~83.8%, from ~~$4.9~~$14.6 million for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~$2.1~~$2.4 million for the three months ended ~~June~~September 30, ~~2020.~~2023. The decrease in vehicle gross profit was primarily attributable to ~~a $960~~the $1,751 decrease in vehicle gross profit per unit from $2,267 for the three months ended September 30, 2022 to $516 for three months ended September 30, 2023, which decreased vehicle gross profit by ~~$6.4~~$8.0 million, ~~partially offset by~~as well as the ~~2,857 increase~~1,867 decrease in ecommerce units sold, which ~~increased~~decreased vehicle gross profit by $3.6 million . Vehicle gross profit per unit decreased by $960 from $1,274 for the three months ended June 30, 2019 to $314 for the three months ended June 30, 2020 primarily attributable to our strategic decision to reduce vehicle pricing$4.2 million. The decrease in order to drive vehicle sales in the early stages of the COVID-19 pandemic. In late April 2020, due to the increase in consumer demand and pricing becoming more stable, we started to rebuild our inventory focusing on higher margin vehicles and our gross profit per unit began to approach pre-COVID levels in June 2020.

~~As we continue to mature our infrastructure, increase the number of VRCs and optimize our network of VRCs, we expect ecommerce~~ vehicle gross profit per unit was primarily driven by lower sales margin on aged inventory, and lower shipping fees as a result of free shipping options for customers.

As we made progress on our initiatives to ~~increase~~address the operational challenges created by our prior rapid growth from 2020 through the first quarter of 2022, our unit sales in the ~~future driven~~third quarter of 2023 continued to be affected by ~~reduced costs across acquisitions, logistics~~sales of aged inventory, which negatively impacted our sales margin and ~~reconditioning.~~GPPU. As of September 30, 2023, we sold through the substantial majority of our aged inventory and expect our sales margin and GPPU to be negatively impacted by our aged inventory mix to a lesser extent in the fourth quarter of 2023.

Ecommerce product gross profit ~~increased $2.7~~decreased $0.5 million, or ~~114.3%~~3.8%, from ~~$2.4~~$12.5 million for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~$5.1~~$12.0 million for the three months ended ~~June~~September 30, ~~2020.~~2023. The ~~increase~~decrease in ecommerce product gross profit was primarily attributable to the ~~2,857 increase~~1,867 decrease in ecommerce units sold, which ~~increased~~decreased product gross profit by ~~$1.8~~$3.6 million, ~~and~~partially offset by a ~~$143~~$689 increase in product gross profit per unit, which increased product gross profit by ~~$0.9 million . The increase in product~~$3.1 million. Product gross profit per unit was primarily attributable to higher attachment rates, improved financing features in our ecommerce platform and our strategic partnerships. The increase was partially offset by the lower average selling price per unit which reduced the fees we earned on our financing products. We expect ecommerce product gross profit will continue to grow in the future driven by increases in ecommerce units sold, new product offerings, initiatives to improve product attachment rates and increases in per unit profit.

~~The following table presents our TDA segment results of operations for the periods indicated:~~

Three Months Ended
June 30,

2019

2020

Change

% Change

(in thousands, except unit
data and average days to sale)

TDA units sold

2,792

1,110

(1,682
)

(60.2
)%
TDA revenue:

Vehicle revenue

$

81,833

$

25,690

$

(56,143
)

(68.6
)%
Product revenue

3,107

628

(2,479
)

(79.8
)%
Other

473

286

(187
)

(39.5
)%
Total TDA revenue

$

85,413

$

26,604

$

(58,809
)

(68.9
)%
TDA gross profit:

Vehicle gross profit

$

2,723

$

236

$

(2,487
)

(91.3
)%
Product gross profit

3,107

628

(2,479
)

(79.8
)%
Other gross profit

271

67

(204
)

(75.3
)%
Total TDA gross profit

$

6,101

$

931

$

(5,170
)

(84.7
)%
Average vehicle selling price per TDA unit

$

29,310

$

23,144

$

(6,166
)

(21.0
)%
Gross profit per TDA unit:

Vehicle gross profit per TDA unit

$

975

$

212

$

(763
)

(78.2
)%
Product gross profit per TDA unit

1,113

566

(547
)

(49.2
)%
Total gross profit per TDA unit

$

2,088

$

778

$

(1,310
)

(62.7
)%
TDA average days to sale

45

44

(1
)

(2.2
)%

~~TDA units sold decreased 1,682, or 60.2%,~~increased from ~~2,792~~$1,939 for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~1,110~~$2,628 for the three months ended ~~June~~September 30, 2020. Although our physical retail location remained open, consumer demand for vehicles at TDA declined significantly due to government mandated “stay-at-home” orders and other disruptions related to the COVID-19 pandemic. We expect our TDA units sold will continue to be negatively impacted by the COVID-19 crisis, but the ultimate extent and duration of the impact is uncertain at this time.

TDA vehicle revenue decreased $56.1 million, or 68.6%, from $81.8 million for the three months ended June 30, 2019 to $25.7 million for the three months ended June 30, 2020. The decrease in TDA vehicle revenue was2023, primarily due to ~~the 1,682 decrease~~an increase in ~~TDA units sold which decreased TDA vehicle revenue~~interest income earned, partially offset by ~~$49.3 million and a lower average selling price per unit, which decreased~~interest expense on securitization debt related to finance receivables from ~~$29,310 for the three months ended June 30, 2019 to $23,114 for the three months ended June 30, 2020 and decreased revenue~~Vroom customers originated or serviced by ~~$6.8 million . We expect our TDA vehicle revenue will continue to be negatively impacted by the COVID-19 pandemic, but the ultimate extent and duration of the impact is uncertain at this time.~~

TDA product revenue decreased $2.5 million, or 79.8% from $3.1 million for the three months ended June 30, 2019 to $0.6 million for the three months ended June 30, 2020. The decrease in TDA product revenue was primarily attributable to the 1,682 decrease in TDA units sold, which decreased TDA product revenue by $1.9 million and the decrease in product revenue per unit of $547 for the three months ended June 30, 2020UACC as compared to the ~~three months ended June 30, 2019 which decreased revenue by $0.6 million .~~third quarter of 2022.

~~TDA other revenue decreased $0.2 million, or 39.5% from $0.5 million for the three months ended June 30, 2019 to $0.3 million for the three months ended June 30, 2020.~~

TDA vehicle gross profit decreased $2.5 million, or 91.3%, from $2.7 million for the three months ended June 30, 2019 to $0.2 million for the three months ended June 30, 2020. The decrease was primarily attributable to the 1,682 decrease in TDA units sold, which decreased TDA vehicle gross profit by $1.6 million and a $763 decrease in TDA vehicle gross profit per unit for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019, which decreased vehicle gross profit by $0.9 million. We expect our TDA vehicle gross profit to continue to be negatively impacted by the COVID-19 pandemic and limited consumer demand at TDA, but the ultimate extent and duration of the impact is uncertain at this time.

TDA product gross profit decreased $2.5 million, or 79.8%, from $3.1 million for the three months ended June 30, 2019 to $0.6 million for the three months ended June 30, 2020. The decrease in TDA product gross profit was primarily attributable to the 1,682 decrease in TDA units sold, which decreased TDA product gross profit by $1.9 million and the decrease in product gross profit per unit of $547 for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019, which decreased product gross profit by $0.6 million .

~~TDA other gross profit decreased $0.2 million, or 75.3%, from $0.3 million for the three months ended June 30, 2019 to $0.1 million for the three months ended June 30, 2020.~~

The following table presents our Wholesale segment results of operations for the periods indicated:


		Three Months Ended June 30,													Three Months Ended September 30,
	2019			2020				Change			% Change			2023				2022				Change			% Change
	(in thousands, except unit data)													(in thousands, except unit data)
Wholesale units sold			5,396		3,259				(2,137	)		(39.6	)%			2,270			3,128				(858	)		(27.4	)%
Wholesale revenue	$		54,531	$	50,921		$		(3,610	)		(6.6	)%	$		30,898		$	47,604		$		(16,706	)		(35.1	)%
Wholesale gross profit (loss)	$		449	$	(543	)	$		(992	)		(220.9	)%
Wholesale gross loss														$		(1,495	)	$	(1,574	)	$		79			5.0	%
Average selling price per unit	$		10,106	$	15,625		$		5,519			54.6	%	$		13,611		$	15,219		$		(1,608	)		(10.6	)%
Wholesale gross profit (loss) per unit	$		83	$	(167	)	$		(250	)		(301.2	)%
Wholesale gross loss per unit														$		(659	)	$	(503	)	$		(156	)		31.0	%

Wholesale units sold decreased ~~2,137,~~858, or ~~39.6%~~27.4%, from ~~5,396~~3,128 for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~3,259~~2,270 for the three months ended ~~June~~September 30, ~~2020,~~2023, primarily driven by a ~~reduction~~decrease in wholesale units purchased from ~~customers as~~consumers and a ~~result~~lower number of trade-in vehicles associated with the ~~COVID-19 pandemic.~~decrease in the number of ecommerce units sold.

Wholesale revenue decreased ~~$3.6~~$16.7 million, or ~~6.6%~~35.1%, from ~~$54.5~~$47.6 million for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~$50.9~~$30.9 million for the three months ended ~~June~~September 30, ~~2020.~~2023. The decrease was primarily attributable to the ~~2,137~~858 decrease in wholesale units sold, which decreased wholesale revenue by ~~$21.6~~$13.1 million, ~~partially offset by~~as well as a ~~higher average selling price~~lower ASP per wholesale ~~units~~unit, which ~~increased from $10,106 for the three months ended June 30, 2019 to $15,625 for the three months ended June 30, 2020 and increased~~decreased wholesale revenue by ~~$18.0~~$3.6 million. The increase in average selling price per unit was primarily driven by the sale of retail quality vehicles through the wholesale auctions as we initially reduced our inventory levels in order to respond to the decreased consumer demand due to the COVID-19 pandemic.

Wholesale ~~vehicle~~ gross ~~profit decreased $1.0 million, or 220.9% from gross profit of $0.5~~loss remained relatively flat at $1.6 million for the three months ended ~~June~~September 30, ~~2019~~2022 as compared to ~~a loss of $0.5~~$1.5 million for the three months ended ~~June~~September 30, ~~2020.~~ 2023.

The ~~decrease was primarily attributable to a $250 decrease in wholesale gross profit per unit~~following table presents our Retail Financing segment results of operations for the three months ended June 30, 2020, as compared to the three months ended June 30, 2019 which decreased wholesale gross profit by $0.8 million and the 2,137 decrease in wholesale units sold which decreased wholesale gross profit by $0.2 million. periods indicated:

~~Selling, general and administrative expenses increased $4.2 million, or 9.7%, from $43.7~~

Retail Financing revenue remained relatively flat at $40.7 million for the three months ended ~~June~~September 30, ~~2019~~2022 as compared to ~~$47.9~~$40.8 million for the three months ended ~~June~~September 30, ~~2020.~~2023.

Retail Financing gross profit decreased $3.7 million, or 10.0%, from $36.0 million for the three months ended September 30, 2022 to $32.3 million for the three months ended September 30, 2023. The ~~increase~~decrease was primarily ~~due to a $3.4 million~~driven by the gain on sale recognized in the third quarter of 2022 and an increase in ~~stock-based compensation~~interest expense on securitization debt,

partially offset by an increase in interest income earned on finance receivables with third-party dealership customers as a result of the consolidation of the 2022-2 and 2023-1 securitization transactions.

SG&A expenses decreased $55.0 million, or 40.9%, from $134.6 million for the three months ended September 30, 2022 to $79.6 million for the three months ended September 30, 2023. The total decrease was primarily caused by:

We expect SG&A expenses to decrease in the ~~COVID-19 pandemic.~~ future driven by further reductions in both fixed and variable cost components as we continue to optimize our operations. We may not be able to fully realize further cost savings and benefits initially anticipated from the long-term roadmap, and the future costs may be greater than expected.

Depreciation and amortization expenses ~~decreased $0.4 million, or 27.8%,~~increased from ~~$1.5~~$9.8 million for the three months ended ~~June~~September 30, ~~2019~~2022 to ~~$1.1~~$11.0 million for the three months ended ~~June~~September 30, ~~2020. The decrease was primarily due~~2023 as a result of amortization related to ~~reduced amortization expense as certain intangible assets were fully amortized.~~our capitalized internal use software costs incurred in the development of our platform and website applications.

~~Interest expense decreased $2.1 million, or 61.7%, from $3.4~~Impairment Charges

Impairment charges represent lease impairment charges of $1.0 million for the three months ended ~~June~~September 30, ~~2019~~2022, related to ~~$1.3~~closing a physical office location in Houston, Texas.

Gain on debt extinguishment represents a gain of $37.9 million for the three months ended ~~June~~September 30, ~~2020.~~ ~~The decrease was primarily attributable~~2022, related to the ~~lower outstanding~~repurchase of $56.4 million in aggregate principal balance of the ~~Vehicle Floorplan Facility due to reduction in vehicles inventory levels as a result~~Notes, net of ~~our initial response to the COVID-19 pandemic as well as the repayment of our term loan facility in December 2019.~~deferred issuance costs, for $18.5 million.

Interest ~~income decreased $0.7~~expense increased $2.4 million, or ~~49.5%~~24.3%, from ~~$1.4~~$9.7 million for the three months ended ~~June~~September 30, ~~2019~~2023, to ~~$0.7~~$12.1 million for the three months ended ~~June~~September 30, ~~2020.~~2023. The increase was primarily attributable to an increase in interest expense incurred on UACC's Warehouse Credit Facilities, which increased interest expense by $4.7 million. The increase was partially offset by a decrease of $1.5 million in interest expense related to a lower outstanding balance on the 2022 Vehicle Floorplan Facility, as well as a decrease in interest ~~income was primarily driven by lower interest earned~~expense on ~~cash deposits maintained with Ally Bank as~~the Notes of $0.9 million due to the repurchase of a ~~result~~portion of the ~~lower outstanding balance~~Notes during the second half of ~~the Vehicle Floorplan Facility.~~2022 and first half of 2023.

~~The increase in revaluation of preferred stock warrant of $21.2~~Interest income

Interest income remained relatively flat at $5.1 million for the three months ended ~~June~~September 30, ~~2020~~2022 as compared to $5.5 million for the three months ended ~~June~~September 30, ~~2019~~2023.

Other loss, net increased $28.1 million, or 523.1%, from $5.4 million for the three months ended September 30, 2022 to $33.5 million for the three months ended September 30, 2023. The increase in other loss was ~~related~~primarily driven by an increase in realized and unrealized losses on finance receivables as a result of a larger loan portfolio as well higher loss rates on our overall portfolio as of September 30, 2023 as compared to ~~the revaluation of the warrant to purchase Series F preferred stock which was converted to a warrant to purchase common stock upon the IPO and subsequently exercised in June 2020.~~September 30, 2022.

The following table presents our Ecommerce segment results of operations for the periods indicated:


	Six Months Ended June 30,											Nine Months Ended September 30,
	2019		2020			Change			% Change			2023		2022			Change			% Change
	(in thousands, except unit data and average days to sale)											(in thousands, except unit data and average days to sale)
Ecommerce units sold		7,043		14,643			7,600			107.9	%		12,621		35,134			(22,513	)		(64.1	)%
Ecommerce revenue:
Vehicle revenue	$	207,199	$	396,065	$		188,866			91.2	%	$	387,585	$	1,173,727	$		(786,142	)		(67.0	)%
Product revenue		3,609		12,675			9,066			251.2	%		36,128		48,709			(12,581	)		(25.8	)%
Total ecommerce revenue	$	210,808	$	408,740	$		197,932			93.9	%	$	423,713	$	1,222,436	$		(798,723	)		(65.3	)%
Ecommerce gross profit:
Vehicle gross profit	$	9,440	$	8,811	$		(629	)		(6.7	)%	$	2,956	$	46,153	$		(43,197	)		(93.6	)%
Product gross profit		3,609		12,675			9,066			251.2	%		33,610		48,709			(15,099	)		(31.0	)%
Total ecommerce gross profit	$	13,049	$	21,486	$		8,437			64.7	%	$	36,566	$	94,862	$		(58,296	)		(61.5	)%
Average vehicle selling price per ecommerce unit	$	29,419	$	27,048	$		(2,371	)		(8.1	)%	$	30,710	$	33,407	$		(2,697	)		(8.1	)%
Product revenue per ecommerce unit													2,863		1,386			1,477			106.6	%
Gross profit per ecommerce unit:
Vehicle gross profit per ecommerce unit	$	1,340	$	602	$		(738	)		(55.1	)%	$	234	$	1,314	$		(1,080	)		(82.2	)%
Product gross profit per ecommerce unit		512		866			354			69.1	%		2,663		1,386			1,277			92.1	%
Total gross profit per ecommerce unit	$	1,852	$	1,468	$		(384	)		(20.7	)%	$	2,897	$	2,700	$		197			7.3	%
Ecommerce average days to sale		64		67			3			4.7	%		266		118			148			125.4	%

Ecommerce units sold ~~increased 7,600,~~decreased 22,513, or ~~107.9%~~64.1%, from ~~7,043~~35,134 for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~14,643~~12,621 for the ~~six~~nine months ended ~~June~~September 30, ~~2020,~~2023. This decrease was driven by our ~~increased inventory levels, process improvements~~strategic decision to prioritize unit economics over unit sales volume starting in the middle of the second quarter of 2022, pressure on servicing our ~~ecommerce platform and our national advertising campaign which has strengthened our national brand awareness as well as greater consumer acceptance of our business model~~demand as a result of ~~the COVID-19 pandemic. Average monthly unique visitors~~reducing third-party sales support staff and scaling our internal sales team, as well as macroeconomic factors.

Ecommerce average days to ~~our website~~sale increased from ~~520,074~~118 days for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~973,457~~266 days for the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2023. We have undertaken various initiatives to address the operational challenges created by our prior rapid growth from 2020 through the first quarter of 2022, in particular with titling and registration processes. While these initiatives are designed to improve our transaction processing, enhance our customer experience, and reduce our regulatory risk, they resulted in delays in listing vehicles for sale and caused a higher portion of our unit sales throughout 2023 to be from aged inventory which increased the number of days between our acquisition of vehicles and the final delivery of such vehicles to customers. As of September 30, 2023, we have sold through the substantial majority of our aged inventory, therefore we expect ecommerce ~~units sold~~average days to sale to continue to ~~grow~~decrease in the ~~future as we increase our inventory selection~~fourth quarter of 2023 and ~~marketing efforts and improve conversion.~~into 2024.

Ecommerce vehicle revenue ~~increased $188.9~~decreased $786.1 million, or ~~91.2%~~67.0%, from ~~$207.2~~$1,173.7 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~$396.1~~$387.6 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2023. The ~~increase~~decrease in ecommerce vehicle revenue was primarily attributable to the ~~7,600 increase~~22,513 decrease in ecommerce units sold, which increased revenue by $223.6 million, partially offset by a lower average selling price per unit, which decreased from $29,419 for the six months ended June 30, 2019 to $27,048 for the six months ended June 30, 2020 and decreased revenue by $34.7 million. The decrease in average selling price per unit was driven by our strategic decision to reduce vehicle pricing in order to sell pre-COVID-19 inventory and our focus on acquiring high-demand vehicles. We expect ecommerce vehicle revenue will continue to grow driven by increases in ecommerce units sold.

Ecommerce product revenue increased $9.1 million, or 251.2%, from $3.6 million for the six months ended June 30, 2019 to $12.7 million for the six months ended June 30, 2020. The increase was attributable to the increase in product revenue per unit of $354, which increased product revenue by $5.2 million, and the 7,600 increase in ecommerce units sold which increased revenue by $3.9 million. Product revenue per unit increased $354 from $512 for the six months ended June 30, 2019 to $866 for the six months ended June 30, 2020, which was primarily due to higher attachment rates, improved financing features in our ecommerce platform and our strategic partnerships. We expect ecommerce product revenue will continue to grow in the future driven by increases in ecommerce units sold, new product offerings, initiatives to improve product attachment rates and increases in per unit profit.

Ecommerce vehicle gross profit decreased $0.6 million, or 6.7%, from $9.4 million for the six months ended June 30, 2019 to $8.8 million for the six months ended June 30, 2020. The decrease was attributable to lower vehicle gross profit per unit, which decreased vehicle gross profit by $10.8 million partially offset by the 7,600 increase in ecommerce units sold which increased vehicle gross profit by $10.2 million. Vehicle gross profit per unit decreased by $738 from $1,340 for the six months ended June 30, 2019 to $602 for the six months ended June 30, 2020, primarily attributable to our strategic decision to reduce vehicle pricing in order to drive vehicle sales in the early stage of the COVID-19 pandemic. In late April 2020, due to the increase in consumer demand and pricing becoming more stable, we started to rebuild our inventory focusing on higher margin vehicles and our gross profit per unit began to approach pre-COVID levels in June 2020.

As we continue to mature our infrastructure, increase the number of VRCs and optimize our network of VRCs, we expect ecommerce vehicle gross profit per unit to increase in the future driven by reduced costs across acquisitions, logistics and reconditioning.

Ecommerce product gross profit increased $9.1 million, or 251.2%, from $3.6 million for the six months ended June 30, 2019 to $12.7 million for the six months ended June 30, 2020. The increase was attributable to higher product gross profit per unit, which increase product gross profit by $5.2 million, and the 7,600 increase in ecommerce units sold which increased product gross profit by $3.9 million during the six months ended June 30, 2020, as compared to June 30, 2019. We expect ecommerce product gross profit will continue to grow in the future driven by increases in ecommerce units sold, new product offerings, initiatives to improve product attachment rates and increases in per unit profit.

~~The following table presents our TDA segment results of operations for the periods indicated:~~

Six Months Ended
June 30,

2019

2020

Change

% Change

(in thousands, except unit
data and average days to sale)

TDA units sold

6,162

4,145

(2,017
)

(32.7
)%
TDA revenue:

Vehicle revenue

$

171,952

$

108,797

$

(63,155
)

(36.7
)%
Product revenue

5,628

4,105

(1,523
)

(27.1
)%
Other

917

726

(191
)

(20.8
)%
Total TDA revenue

$

178,497

$

113,628

$

(64,869
)

(36.3
)%
TDA gross profit:

Vehicle gross profit

$

6,125

$

2,019

$

(4,106
)

(67.0
)%
Product gross profit

5,628

4,105

(1,523
)

(27.1
)%
Other gross profit

426

222

(204
)

(47.9
)%
Total TDA gross profit

$

12,179

$

6,346

$

(5,833
)

(47.9
)%
Average vehicle selling price per TDA unit

$

27,905

$

26,248

$

(1,657
)

(5.9
)%
Gross profit per TDA unit:

Vehicle gross profit per TDA unit

$

994

$

487

$

(507
)

(51.0
)%
Product gross profit per TDA unit

913

990

77

8.4
%
Total gross profit per TDA unit

$

1,907

$

1,477

$

(430
)

(22.5
)%
TDA average days to sale

49

47

(2
)

(4.1
)%

TDA units sold decreased 2,017, or 32.7%, from 6,162 for the six months ended June 30, 2019 to 4,145 for the six months ended June 30, 2020. Although our physical retail location remained open, consumer demand for vehicles at TDA declined significantly due to government mandated “stay-home” orders and other disruptions related to the COVID-19 pandemic. We expect our TDA units sold will continue to be negatively impacted by the COVID-19 pandemic, but the ultimate extent and duration of the impact is uncertain at this time.

TDA vehicle revenue decreased $63.2 million, or 36.7%, from $172.0 million for the six months ended June 30, 2019 to $108.8 million for the six months ended June 30, 2020. The decrease was driven by the 2,017 decrease in TDA units sold, which decreased vehicle revenue by ~~$56.3~~$752.1 million, and ~~the lower average selling price~~a decrease in ASP per unit, which decreased from ~~$27,905~~$33,407 for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~$26,248~~$30,710 for the ~~six~~nine months ended ~~June~~September 30, ~~2020~~2023 and decreased vehicle revenue by ~~$6.9~~$34.0 million.

The decrease in ASP per unit was primarily due to significant market appreciation in the first half of 2022. We expect ASP to continue to fluctuate as a result of market conditions and adjustments to our inventory based upon demand predicted by our data analytics.

Ecommerce product revenue decreased ~~$1.5~~$12.6 million, or ~~27.1%~~25.8%, from ~~$5.6~~$48.7 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~$4.1~~$36.1 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2023. The decrease in ecommerce product revenue was primarily attributable to the 22,513 decrease in ecommerce units sold, which decreased product revenue by $31.2 million, partially offset by an increase in product revenue per unit, which increased from $1,386 for the nine months ended September 30, 2022 to $2,863 for the nine months ended September 30, 2023 and increased product revenue by $18.6 million. The increase in product revenue per unit is primarily due to an increase in interest income earned on finance receivables from Vroom customers originated or serviced by UACC as compared to the nine months ended September 30, 2022.

Ecommerce vehicle gross profit decreased $43.2 million, or 93.6%, from $46.2 million for the nine months ended September 30, 2022 to $3.0 million for the nine months ended September 30, 2023. The decrease in vehicle gross profit was primarily attributable to the 22,513 decrease in ecommerce units sold, which decreased vehicle gross profit by $29.6 million. Additionally, vehicle gross profit per unit decreased $1,080 from $1,314 for the nine months ended September 30, 2022 to $234 for nine months ended September 30, 2023, which decreased vehicle gross profit by $13.6 million. The decrease was primarily driven by ~~the 2,017 decrease in TDA units sold in the six months ended June 30, 2020~~lower sales margin on aged inventory and higher reconditioning costs per unit related to an increased mix of higher mileage and aged vehicles along with significant parts inflation. The decreases were partially offset by a lower inventory reserve as ~~compared to the six months ended June 30, 2019.~~

~~TDA other revenue decreased $0.2 million, or 20.8%, from $0.9 million for the six months ended June 30, 2019 to $0.7 million for the six months ended June 30, 2020.~~

TDA vehicle gross profit decreased $4.1 million, or 67.0%, from $6.1 million for the six months ended June 30, 2019 to 2.0 million for the six months ended June 30, 2020. The decrease was attributable toa result of a decrease in ~~TDA vehicle gross profit per~~inventory levels as we continued to sell through our aged inventory.

As we made progress on our initiatives to address the operational challenges created by our prior rapid growth from 2020 through the first quarter of 2022, a higher portion of our unit sales through the third quarter of ~~$507,~~2023 was from aged inventory, which ~~decreased vehicle gross profit by $2.1 million~~negatively impacted our sales margin and ~~the 2,017 decrease in TDA units~~GPPU. As of September 30, 2023, we sold inthrough the ~~six months ended June 30, 2020 as compared to June 30, 2019, which decreased vehicle gross profit by $2.0 million. We~~

substantial majority of our aged inventory and expect our ~~vehicle gross profit to continue~~sales margin and GPPU to be negatively impacted by our aged inventory mix to a lesser extent in the ~~COVID-19 pandemic and limited consumer demand at TDA, but the ultimate extent and duration~~fourth quarter of ~~the impact is uncertain at this time.~~2023.

Ecommerce product gross profit decreased ~~$1.5~~$15.1 million, or ~~27.1%~~31.0%, from ~~$5.6~~$48.7 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~$4.1~~$33.6 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2023. The decrease in ecommerce product gross profit was primarily attributable to the ~~2,017~~22,513 decrease in ~~TDA~~ecommerce units sold, ~~during the six months ended June 30, 2020 as compared to June 30, 2019.~~which decreased product gross profit by $31.2 million, partially offset by a $1,277 increase in product gross profit per unit, which increased product gross profit by $16.1 million. Product gross profit per unit ~~slightly~~ increased from ~~$913~~$1,386 for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~$990~~$2,663 for the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2023, primarily due to an increase in interest income earned, partially offset by interest expense on securitization debt related to finance receivables from Vroom customers originated or serviced by UACC.

~~TDA other gross profit decreased $0.2 million, or 47.9%, from $0.4 million for the six months ended June 30, 2019 to $0.2 million for the six months ended June 30, 2020.~~Wholesale

The following table presents our Wholesale segment results of operations for the periods indicated:


		Six Months Ended June 30,												Nine Months Ended September 30,
	2019			2020				Change			% Change			2023			2022				Change			% Change
	(in thousands, except unit data)													(in thousands, except unit data)
Wholesale units sold			10,626		7,944				(2,682	)		(25.2	)%		5,273			19,108				(13,835	)		(72.4	)%
Wholesale revenue	$		106,651	$	106,497		$		(154	)		(0.1	)%	$	75,593		$	270,489		$		(194,896	)		(72.1	)%
Wholesale gross profit (loss)	$		629	$	(1,838	)	$		(2,467	)		(392.2	)%
Wholesale gross loss														$	(5,426	)	$	(6,260	)	$		834			13.3	%
Average selling price per unit	$		10,037	$	13,406		$		3,369			33.6	%	$	14,336		$	14,156		$		180			1.3	%
Wholesale gross profit (loss) per unit	$		59	$	(231	)	$		(290	)		(491.5	)%
Wholesale gross loss per unit														$	(1,029	)	$	(328	)	$		(701	)		213.7	%

Wholesale units sold decreased ~~2,682,~~13,835, or ~~25.2%~~72.4%, from ~~10,626~~19,108 for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~7,944~~5,273 for the ~~six~~nine months ended ~~June~~September 30, ~~2020,~~2023, primarily driven by a decrease in ~~the~~wholesale units purchased from consumers and a lower number of trade-in vehicles ~~as a result of~~associated with the decrease in the number of ~~TDA~~ecommerce units ~~sold~~sold.

Wholesale revenue decreased $194.9 million, or 72.1%, from $270.5 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020 as compared~~2022 to ~~June 30, 2019.~~

~~Wholesale revenue remained relatively flat~~$75.6 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020 as compared to the six months ended June 30, 2019.~~2023. The decrease ~~in wholesale revenue~~ was primarily attributable to the ~~2,682~~13,835 decrease in wholesale units sold, which decreased wholesale revenue by ~~$26.9~~$195.8 million, partially offset by a higher ~~average selling price~~ASP per wholesale unit, which increased wholesale revenue by $0.9 million.

Wholesale gross loss decreased $0.9 million, or 13.3%, from ~~$10,037~~$6.3 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~$13,406~~$5.4 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020 and~~2023. The change was primarily attributable to the 13,835 decrease in wholesale units sold, which decreased wholesale gross loss by $4.5 million, partially offset by a $701 increase in wholesale gross loss per unit from $328 for the nine months ended September 30, 2022 to $1,029 for the nine months ended September 30, 2023, which increased ~~revenue~~wholesale gross loss by ~~26.7~~$3.6 million.

The increase in ~~average selling price~~wholesale gross loss per unit was primarily driven by lower sales margins and was partially offset by a lower inventory reserve as a result of a decrease in inventory levels. During the ~~sale~~nine months ended September 30, 2023, certain of ~~retail quality~~our vehicles located in our Orlando, Florida and Denver, Colorado locations were damaged by hail storms, which resulted in an aggregate loss of $2.4 million, net of insurance recoveries. As of September 30, 2023, the majority of hail damaged vehicles have been sold through the wholesale ~~auctions as we initially reduced~~market.

The following table presents our ~~inventory levels in order to respond to~~Retail Financing segment results of operations for the periods indicated:

Retail Financing revenue decreased ~~consumer demand due to the COVID-19 pandemic.~~

~~Wholesale vehicle gross profit decreased $2.4~~$5.1 million, or ~~392.2%~~4.2%, from ~~gross profit of $0.6~~$120.0 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~a loss of $1.8~~$114.9 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2023. The decrease was primarily ~~attributable~~driven by the gain on sale of finance receivables of $45.6 million for the nine months ended September 30, 2022 related to the 2022-1 and 2022-2 securitization transactions, as well as a ~~$290~~decline in servicing income and product income net of cancellations. The decrease was partially offset by an increase in ~~wholesale~~interest income earned on finance receivables with third-party dealership customers as a result of the consolidation of the 2022-2 and 2023-1 securitization transactions.

Retail Financing gross profit ~~per unit~~decreased $17.4 million, or 15.9%, from $109.6 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020 as compared~~2022 to $92.2 million for the nine months ended September 30, 2023. The decrease was primarily driven by the gain on sale of finance receivables of $45.6 million for the nine months ended September 30, 2022 related to the ~~six months ended June 30, 2019.~~2022-1 and 2022-2 securitization transactions, as well as a decline in servicing income and product income net of cancellations. Additionally, the decrease was caused by increase in collection expenses related to servicing finance receivables originated by UACC and an increase in interest expense on securitization debt. The decrease was partially offset by an increase in interest income earned on finance receivables with third-party dealership customers as a result of the consolidation of the 2022-2 and 2023-1 securitization transactions.

~~Selling, general and administrative~~SG&A expenses ~~increased $26.0~~decreased $212.5 million, or ~~32.4%~~44.7%, from ~~$80.3~~$475.6 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~$106.3~~$263.1 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2023. The ~~increase~~total decrease was primarily ~~due to~~ caused by:

We expect SG&A expenses to decrease in the future driven by further reductions in both fixed and variable cost components as we continue to optimize our operations. We may not be able to fully realize further cost savings and benefits initially anticipated from the long-term roadmap, and the future costs may be greater than expected.

Depreciation and amortization expenses ~~decreased $1.0~~increased $4.1 million, or ~~32.5%~~14.8%, from ~~$3.0~~$27.7 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~$2.0~~$31.8 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2023. The ~~decrease~~increase was primarily due to ~~reduced~~an additional month of amortization expense ~~as certain~~of intangible assets ~~were fully amortized.~~acquired as part of the UACC Acquisition for the nine months ended September 30, 2023 and amortization related to our capitalized internal use software costs incurred in the development of our platform and website applications.

~~Interest expense decreased $2.0 million, or 32.5%, from $6.1~~Impairment Charges

Impairment charges of $1.4 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2023 represent lease impairment charges related to ~~$4.1~~closing a physical office location. Impairment charges of $206.1 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020. The decrease was primarily attributable~~2022 represent an impairment charge to write down the carrying amount of the goodwill to fair value and lease impairment charges related to closing physical office locations and Sell Us Your Car® centers as part of the Realignment Plan.

Gain on debt extinguishment represents a gain of $19.6 million and $37.9 million for the nine months ended September 30, 2023 and 2022, respectively, related to the ~~repayment~~repurchase of ~~our term loan facility~~$32.8 million and $56.4 million in ~~December 2019~~aggregate principal balance of the Notes, net of deferred issuance costs, for $13.2 million and $18.5 million, respectively.

Interest expense increased $2.3 million, or 8.0%, from $28.6 million for the nine months ended September 30, 2022 to $30.9 million for the nine months ended September 30, 2023. Interest expense incurred on UACC's Warehouse Credit Facilities increased, which was offset by a decrease in interest expense related to a lower outstanding balance on the 2022 Vehicle Floorplan Facility, as well as a decrease in interest expense on the ~~lower outstanding balance of the Vehicle Floorplan Facility~~Notes due to the ~~reduction in vehicle inventory levels as~~repurchase of a ~~result~~portion of ~~our initial response to~~ the ~~COVID-19 pandemic.~~Notes during the second half of 2022 and first half of 2023.

Interest income ~~decreased $0.6~~increased $3.4 million, or ~~18.2%~~26.0%, from ~~$3.3~~$13.0 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2022 to ~~$2.7~~$16.4 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020.~~2023. The ~~decrease~~increase in interest income was primarily driven by ~~lower~~higher interest rates earned on cash ~~deposits maintained with Ally Bank as~~and cash equivalents.

Other loss, net increased $38.1 million, or 141.7%, from $26.9 million for the ~~results of~~nine months ended September 30, 2022 to $65.0 million for the ~~lower outstanding balance of the Vehicle Floorplan Facility.~~

nine months ended September 30, 2023. The increase in ~~revaluation~~other loss was primarily driven by an increase in realized and unrealized losses on finance receivables as a result of ~~preferred stock warrant~~a larger loan portfolio as well higher loss rates on our overall portfolio as of ~~$20.3 million for the six months ended June~~September 30, ~~2020~~2023 as compared to September 30, 2022.

The following tables set forth our quarterly financial information for the ~~six months ended June 30, 2019 was related to the revaluation~~third quarter and second quarter of ~~the warrant to purchase Series F preferred stock which was converted to the warrant to purchase common stock upon the IPO and subsequently exercised in June 2020.~~2023:

Our operations historically have been financed primarily from the sale of redeemable convertible preferred stock and borrowings under our Vehicle Floorplan Facility. On June 11, 2020, we completed our IPO in which we sold 24,437,500 shares of our common stock, which included 3,187,500 shares sold pursuant to the exercise by the underwriters of an option to purchase additional shares, for proceeds of $504.0 million, net of the underwriting discount and before deducting offering expenses of $7.5 million.

As of ~~June~~September 30, ~~2020,~~2023, we had cash and cash equivalents of ~~$651.0 million.~~

~~For the six months ended June 30, 2020, we had positive cash flow from operations of approximately $4 thousand. We generated a net loss of approximately $63.2~~$208.6 million and ~~$104.3 million for the three and six months ended June 30, 2020, respectively. We have not been profitable since~~restricted cash of $80.5 million. Restricted cash primarily includes cash deposits required under our ~~inception in 2012 and had an accumulated deficit of approximately $679.4 million as of June 30, 2020. We expect to incur additional losses in the future.~~

Pursuant to a stock purchase agreement between us and certain accredited investors, (i) in November and December 2019 we sold an aggregate of 8,371,664 shares of Series H Preferred Stock at a purchase price of $27.19 per share, for aggregate proceeds of $227.7 million and (ii) in January 2020, we sold an aggregate of 982,383 shares of Series H Preferred Stock in exchange for gross proceeds of $26.7 million, in each case without giving effect to the Stock Split.

~~We historically have funded vehicle inventory purchases primarily through our~~2022 Vehicle Floorplan Facility of $31.9 million and restricted cash required under UACC’s securitization transactions and Warehouse Credit Facilities of $47.2 million. Our primary source of liquidity is cash generated through financing activities. Additionally, we had excess borrowing capacity of $72.5 million under UACC's Warehouse Credit Facilities as of ~~June~~September 30, ~~2020,~~2023.

Since inception, we ~~had approximately $90.2 million available~~have relied on borrowings under ~~such facility~~our vehicle floorplan facilities to ~~fund future vehicle inventory purchases. In March 2020, we entered into a new~~finance our inventory. The term of the vehicle floorplan facility ~~(the “2020~~generally matures within one to two years and we typically renew those facilities at least annually. Our 2022 Vehicle Floorplan ~~Facility”)~~Facility expires on March 31, 2024, and we have commenced discussions with our floorplan lender, Ally Bank and Ally Financial (together “Ally”), regarding an amended floorplan facility that ~~provides~~would

extend the term beyond the current expiration date. Ally has indicated its willingness to extend the floorplan facility beyond June 2024 would be contingent upon Vroom raising additional capital. The 2022 Vehicle Floorplan Facility remains a committed ~~credit line~~facility through March 31, 2024. Prior to that date, we intend to continue our discussions with Ally over the terms of upan amended facility and may engage with other lenders over the terms of an alternative facility. There can be no assurance that Ally would agree to ~~$450.0 million. The commitment~~extend the 2022 Vehicle Floorplan Facility on ~~the new facility expires in March 2021. We believe that, upon expiration, we will be able to renew this facility or obtain alternative sources of financing on~~ terms ~~that are~~ acceptable to us, ~~as well as leverage our cash~~or that alternative floorplan financing would be available on ~~hand to continue to fund our vehicle purchases. However,~~acceptable terms from another lender. In the event that a capital raise is required by Ally or another lender, there can be no assurance ~~we will~~that such additional capital would be ~~able~~available in an amount or on terms acceptable to ~~do so.~~us, if at all. Failure to secure floorplan financing beyond the expiration of the 2022 Vehicle Floorplan Facility would have a material adverse effect on our ability to finance our inventory and operate our core used automotive sales business.

Our cash flows from operations may differ substantially from our net loss due to non-cash charges or due to changes in balance sheet accounts. The timing of our cash flows from operating activities can also vary among periods due to the timing of payments made or received. We anticipate that our existing cash and cash equivalents and the vehicle floorplan facility will be sufficient to support our working capital and capital expenditure requirements for at least the next twelve months from the filing of this Form 10-Q.

Our future capital requirements will depend on many factors, including our ~~rate of revenue growth, our~~ efforts to increase sales volume, optimize our sales margin, GPPU and marketing costs, as well as reduce ~~costs per unit,~~fixed and variable expenses; scale our internal sales force to support sales volume growth; invest in our website and mobile applications; continue automation of our selling experience; and increase inventory as we resume growth. We have no significant debt maturities due until 2026 and the ~~expansion of~~payments on our securitization debt are funded by cashflows on the finance receivables within the securitization trusts.

We expect to use our cash and cash equivalents to finance our future capital requirements, borrowings under the 2022 Vehicle Floorplan Facility and any amended or alternative vehicle floorplan facility to finance our inventory, and UACC’s Warehouse Credit Facilities to fund our finance receivables. Certain advance rates available to UACC on borrowings from the Warehouse Credit Facilities have decreased as a result of the increasing credit losses in UACC's portfolio and overall rising interest rates. Any future decreases on available advance rates may have an adverse impact on our liquidity. In addition, our projected capital requirements are subject to various assumptions, including our growth rate, sales margin, GPPU, marketing costs, and ~~marketing activities, investment~~reductions in fixed and variable expenses, as well as market conditions.

If we are unable to enter into an amended or alternative floorplan facility, we will pursue strategies to adjust our ~~reconditioning and logistics~~core used automotive sales operations and ~~enhancements~~reduce variable and fixed costs. We anticipate that (i) our existing cash and cash equivalents, (ii) 2022 Vehicle Floorplan Facility, and (iii) UACC's Warehouse Credit Facilities will be sufficient to ~~our ecommerce platform.~~ support the Company for at least the next twelve months from the date of this Quarterly Report on Form 10-Q.

We ~~may be required~~intend to seek additional equity or debt financing ~~in the future~~ to fund our current operations ~~or to fund~~and support the extension of our ~~needs for capital expenditures. In the event that~~vehicle floorplan financing. Such additional financing ~~is required, we may not~~could take the form of a private investment in equity securities, convertible debt securities or other debt financing, an at-the-market offering of our common stock, rights offering or other public offering of equity or debt securities. The availability of additional equity or debt financing will depend on the continued execution of our long-term roadmap, our ability to demonstrate a path to long-term profitable growth, as well as market conditions. The sale of additional equity would result in significant dilution to our stockholders. The incurrence of debt financing would result in additional debt service obligations and the instruments governing such debt could provide for restrictive operating and financial covenants, security interests on our assets, and other terms that could be ~~able~~adverse to ~~raise it~~our current stakeholders. There can be no assurance that such equity or debt financing will be available in amounts or on terms acceptable to us, orif at all. ~~If we are unable~~Failure to raise additional capital through equity or ~~generate cash flows necessary~~debt financing would have a material adverse effect on our ability to ~~expand~~meet our ~~operations,~~short and long-term liquidity needs and achieve our business ~~results~~objectives.

On June 18, 2021, we issued $625.0 million aggregate principal amount of ~~operations~~the Notes pursuant to an indenture between us and U.S. Bank National Association, as trustee (the “Indenture”).

The Notes bear interest at a rate of 0.75% per annum, payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2022. The Notes will mature on July 1, 2026, subject to earlier repurchase, redemption or conversion. The total net proceeds from the offering, after deducting commissions paid to the initial purchasers and debt issuance costs, were approximately $608.9 million. During the three months ended September 30, 2023, the conditions allowing holders of the Notes to convert were not met.

During the nine months ended September 30, 2023, we repurchased $32.8 million in aggregate principal amount of the Notes, net of deferred issuance costs, for $13.2 million, respectively, in open-market transactions. We recognized a gain on extinguishment of debt of $19.6 million for the nine months ended September 30, 2023. As a result of these repurchases and repurchases made in 2022, as of September 30, 2023, $327.8 million aggregate principal amount of the

Notes remain outstanding, net of deferred issuance costs of $4.7 million. Subject to market conditions and availability, we may continue to opportunistically repurchase Notes from time to time to reduce our outstanding indebtedness at a discount. Refer to Note 12 — Long Term Debt to our condensed consolidated financial ~~condition could be adversely affected.~~statements included elsewhere in this Quarterly Report on Form 10-Q, for further discussion.

In November 2022, we amended our floorplan facility ~~in April 2016, as subsequently amended,~~ with Ally Bank and Ally Financial ~~which we refer to as our 2016~~(the “2022 Vehicle Floorplan Facility. As of December 31, 2019, the Vehicle Floorplan Facility consisted of a revolving line of credit with a borrowing capacity of up to $220.0 million that could be used to finance our vehicle inventory.

~~In March 2020, we entered into the 2020 Vehicle Floorplan Facility, which replaces the 2016 Vehicle Floorplan Facility.~~Facility”). The ~~2020~~2022 Vehicle Floorplan Facility provides a committed credit line of up to ~~$450.0~~$500.0 million which ~~expires in~~is scheduled to mature on March ~~2021.~~31, 2024.

The amount of credit available to us ~~under the 2020 Vehicle Floorplan Facility is determined~~ on a monthly basis ~~based on a calculation that considers~~equals the product of (1) the greater of five times the aggregate number of retail units sold during the most recent month for which information is available or the aggregate number of retail units sold during the five most recent months for which information is available and (2) the greater of the average outstanding ~~borrowings and vehicle units paid off by us within~~floorplan balance of all vehicles on the ~~three~~floorplan as of the immediately preceding ~~months. Approximately $90.2 million was available under this facility~~month-end or the average monthly outstanding floorplan balance of all vehicles on the floorplan as of ~~June 30, 2020. We~~month-end for the immediately preceding five months. The amendment also provides that we may elect to increase our monthly credit line availability by an additional $25.0 million during any ~~three~~four months in the period from November 1, 2022 through March 31, 2024, subject to the maximum $500.0 million credit limit. Consistent with the terms of ~~each year. Outstanding borrowings are due~~the 2020 Vehicle Floorplan Facility, we have provided Ally with a guaranty of payment of all amounts owed under the 2022 Vehicle Floorplan Facility as well as a security interest in all or substantially all tangible, intangible, and other personal property of Vroom, Inc., to secure obligations under the ~~vehicles financed are sold, or in any event, on the maturity date.~~ 2022 Vehicle Floorplan Facility.

The ~~2020~~2022 Vehicle Floorplan Facility bears interest at a rate equal to the ~~1-Month LIBOR rate applicable in the immediately preceding month~~Prime Rate, announced per annum by Ally Bank, plus ~~a spread of 425~~175 basis points. ~~Under the 2020 Vehicle Floorplan Facility,~~Additionally, we are subject to ~~financial~~amended covenants ~~that require us~~and events of default. We are required to maintain a certain level of equity in the vehicles that are financed, to maintain at least ~~10%~~20.0% of the ~~outstanding borrowings~~credit line in cash and cash equivalents, ~~to maintain 10% of the monthly credit line availability on deposit with Ally Bank~~ and to maintain a minimum ~~tangible adjusted net worth~~required balance with Ally of ~~$167.0~~at least 12.5% of the daily floorplan principal balance outstanding through December 31, 2022 and 15.0% effective January 1, 2023. We were required to pay a commitment fee upon execution of the 2022 Vehicle Floorplan Facility.

In August 2023, the Company amended its 2022 Vehicle Floorplan Facility to modify certain terms, and also amended the credit balance agreements to modify the minimum required credit balance calculation.

Subject to market conditions, we plan to sell finance receivables originated by UACC through asset-backed securitization transactions and forward flow arrangements. In January 2023, UACC sold approximately $238.7 million of investment grade rated asset-backed securities in an auto loan securitization transaction from a securitization trust, established and sponsored by UACC for proceeds of $237.8 million. On April 19, 2023, UACC sold the non-investment grade rated securities related to the 2023-1 securitization transaction for $23.1 million. The trust is collateralized by finance receivables with an aggregate principal balance of $326.4 million. As a result of current market conditions, which led to unfavorable pricing, UACC retained the residual interests, and we accounted for the 2023-1 securitization transaction as secured borrowings.

In the nine months ended September 30, 2022, UACC sold $523.7 million of rated asset-backed securities and $49.6 million of residual certificates in auto loan securitization offerings from securitization trusts, established and sponsored by UACC, for proceeds of $582.9 million. The trusts are collateralized by finance receivables with an aggregate principal balance of $603.5 million and has a carrying value of $534.6 million at the time of sale.

Finance receivables are serviced by UACC. UACC retains at least 5% of the notes and residual certificates sold as required by applicable risk retention rules and generally uses the proceeds of the securitization transactions to pay down outstanding debt under its Warehouse Credit Facilities.

Although our long-term strategy is ~~defined~~to structure future securitization transactions similar to the 2022-1 securitization transaction and account for them as ~~shareholder (deficit) equity plus redeemable convertible preferred stock~~sales, market conditions may impact our ability to achieve sales accounting treatment. Depending on market conditions, future securitization transactions may be accounted for as ~~determined~~secured borrowings and remain on balance sheet.

As a result of increasing interest rates, the current inflationary environment and vehicle depreciation in the used automotive industry, UACC is experiencing higher loss severity and higher losses in a soft securitization market. The increased loss severity could lead to reduced servicing income if UACC elects to waive monthly servicing fees going forward as it did in the first quarter of 2023. The waiver of monthly servicing fees related to the 2022-2 securitization transaction resulted in consolidation of the related finance receivables and securitization debt on our financial statements.

Refer to Note 4 — Variable Interest Entities and Securitizations to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, for further discussion.

UACC has four senior secured warehouse facility agreements the (“Warehouse Credit Facilities”) with banking institutions. The Warehouse Credit Facilities are collateralized by eligible finance receivables and available borrowings are computed based on a percentage of eligible finance receivables. The aggregate borrowing limit is $825.0 million with maturities between July 2024 and September 2025. As of September 30, 2023, outstanding borrowings related to the Warehouse Credit Facilities were $294.7 million and we were in compliance with all covenants related to the Warehouse Credit Facilities. Failure to satisfy these and or any other requirements contained within the agreements would restrict access to the Warehouse Credit Facilities and could have a material adverse effect on our financial condition, results of operations and liquidity. Certain breaches of covenants may also result in acceleration of the repayment of borrowings prior to the scheduled maturity. Refer to Note 11 — Warehouse Credit Facilities of Consolidated VIEs to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, for further discussion.

The following table summarizes our cash flows for the ~~six~~nine months ended ~~June~~September 30, ~~2019~~2023 and ~~2020:~~2022:

Net cash flows ~~from~~used in operating activities ~~changed~~increased by $402.5 million, from $23.1 million for the nine months ended September 30, 2022 to $425.6 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2022, the cash used in operating activities was partially offset by the proceeds from the sale of finance receivables held for sale related to the 2022-1 and 2022-2 securitization transactions of $509.6 million. The remaining increase in net cash used in operating activities ~~of $127.9 million for the six months ended June 30, 2019 to net cash provided by operating activities of $4 thousand for the six months ended June 30, 2020. The increase~~ is ~~primarily attributable~~due to a ~~decrease~~change in working capital ~~requirements,~~of $132.6 million primarily related to ~~lower~~the change in inventory ~~levels in response to the COVID-19 pandemic, resulting in a decrease in use of cash of $142.5 million. Additionally, this increase was~~levels. The increases were partially offset by ~~$24.8~~a $138.6 million decrease in ~~incremental~~ net loss after reconciling adjustments for the ~~six~~nine months ended ~~June~~September 30, ~~2020,~~2023, as compared to the nine months ended September 30, 2022, a decrease of originations of finance receivables held for sale of $62.4 million, and an increase in principal payments received on finance receivables held for sale of $33.6 million.

As the 2023-1 securitization transaction was accounted for as secured borrowings, the proceeds are included as a financing activity in our condensed consolidated statement of cash flows.

We finance a majority of our inventory with the ~~six months ended June 30, 2019.~~2022 Vehicle Floorplan Facility. In accordance with U.S. GAAP, we report all cash flows arising in connection with the 2022 Vehicle Floorplan Facility, as a financing activity in our condensed consolidated statement of cash flows.

Net cash flows from investing activities changed $318.7 million, from net cash used in investing activities ~~increased $2.3 million, to $3.1~~of $181.3 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020, as compared~~2022 to net cash provided by investing activities of $137.4 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019,~~2023, primarily as a result of the UACC Acquisition in February 2022 which resulted in cash outflow of $267.5 million during the nine months ended September 30, 2022, a decrease in purchases of finance receivables at fair value of $46.1 million, an increase in ~~capitalization~~principal payments received on finance receivables at fair value of ~~software development costs.~~$29.8 million, and the consolidation of the 2022-2 securitization transaction which resulted in a cash inflow of $11.4 million during the nine months ended September 30, 2023. The increases were partially offset by a decrease in proceeds from the sale of finance receivables at fair value for the 2022-1 and 2022-2 securitization transactions of $43.3 million during the nine months ended September 30, 2022.

Net cash flows from financing activities changed $511.7 million, from net cash used in financing activities of $406.4 million for the nine months ended September 30, 2022 to net cash provided by financing activities ~~increased $388.7 million, or 574.1%, to $456.4~~of $105.3 million for the ~~six~~nine months ended ~~June~~September 30, ~~2020, as compared to the six months ended June 30, 2019.~~2023. The ~~increase~~change was primarily related to ~~$502.3~~proceeds from borrowings under secured financing arrangements of $262.0 million, an increase in net cash inflow of ~~net proceeds received upon completion of the IPO net of cash paid for transaction costs related to the IPO, partially offset by a net decrease in cash of $134.7~~$104.6 million related to ~~lower balances~~our Warehouse Credit Facilities, a decrease in net repayments of $103.0 million related to our Vehicle Floorplan Facility, ~~for the six months ended June 30, 2020 as compared to the six months ended June 30, 2019. Proceeds~~proceeds from ~~and payments for our Vehicle Floorplan Facility changed from a net cash inflow~~financing beneficial interests in securitizations of ~~$71.0~~$24.5 million for the ~~six~~nine months ended ~~June~~September 30, ~~2019 to a net cash outflow of $63.7 million for the six months ended June 30, 2020 primarily due to~~2023, and a decrease in our working capital requirements related to the decreases in our inventory levels in order to respond to the COVID-19 disruptions. Additionally, for the six months ended June 30, 2020, net cash flow provided byprincipal repayments under secured financing ~~activities included a $1.1 million payment~~agreements of issuance costs related to the 2020 Vehicle Floorplan Facility and $1.7 million of payments related to planned IPO costs. These decreases were partially offset by the issuance of $21.7 million of Series H preferred stock, net of issuance costs paid, for the six months ended June 30, 2020.

~~There have been no material changes to our obligations under operating leases as compared to those described in the Prospectus.~~

We do not have any off balance sheet arrangements, as defined by applicable regulations of the SEC, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Our ~~discussion and analysis of our financial condition and results of operations are based upon our~~ condensed consolidated financial statements ~~which have been~~are prepared in accordance with ~~U.S.~~ GAAP. ~~In preparing the~~The preparation of condensed consolidated financial statements werequires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosures. On an ongoing basis, we evaluate our estimates, including, among others, those related to income taxes, the realizability of inventory, stock-based compensation, revenue-related reserves, as well as impairment of goodwill and long-lived assets. We base our estimates on historical experience, market conditions and on various other assumptions that are believed to be reasonable. Actual results may differ from these estimates.

The critical accounting policies that reflect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements include those described in ~~“Note~~Note 2—Summary of Significant Accounting ~~Policies”~~Policies and ~~“Note~~Note 3—Revenue ~~Recognition” of the notes~~Recognition to our condensed consolidated financial statements included elsewhere in ~~the section titled “—Summary of Significant Accounting Policies” in Part I, Item 1 of~~ this Quarterly Report on Form ~~10-Q and in the Prospectus.~~10-Q.

~~Except as described in Note 2 to our condensed consolidated financial statements, there~~There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the ~~Prospectus.~~year ended December 31, 2022.

Refer to “Note 2—Summary of Significant Accounting ~~Policies—Adoption of New Accounting Standards”~~Policies” to our condensed consolidated financial statements included elsewhere in ~~Part I, Item 1 of~~ this Quarterly Report on Form 10-Q for a discussion about new accounting pronouncements adopted and not yet adopted as of the date of this report.

Market risk is the risk of economic losses due to adverse changes in financial market prices and rates. Our primary market risk has been interest rate risk. We do not have material exposure to commodity risk.

As of ~~June~~September 30, ~~2020,~~2023, we had an outstanding balance under the ~~vehicle floorplan facility~~2020 Vehicle Floorplan Facility of ~~$109.8~~$212.5 million and an outstanding balance under our Warehouse Credit Facilities of $294.7 million. The ~~vehicle floorplan facility~~2020 Vehicle Floorplan Facility bears interest at a rate equal to the ~~1-Month LIBOR~~Prime Rate, announced per annum by Ally Bank, plus 105 basis points. The Warehouse Credit Facilities bear interest at a rate ~~applicable in the immediately preceding month,~~equal to SOFR plus a ~~spread of 425 basis points.~~fixed percentage based on the agreement with the banking institution. A hypothetical 10% change in interest rates during the ~~periods presented~~three and nine months ended September 30, 2023 would result in a change to interest expense of ~~$0.1~~$0.8 million and ~~$0.4~~$1.9 million, ~~for~~respectively.

As of September 30, 2023, we had $718.4 million of long-term debt including the ~~three and six months ended June 30, 2020, respectively.~~current portion of long term debt of $197.0 million. As the interest rate on the long term debt is fixed, we do not have exposure to interest rate risk.

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Our management, with the participation of our ~~principal executive officer~~Principal Executive Officer and ~~principal financial officer,~~Principal Financial Officer, evaluated ~~as of the end of the period covered by this Quarterly Report on Form 10-Q,~~ the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). as of September 30, 2023.

Based on that evaluation, our Principal Executive Officer and ~~as a result of the material weaknesses described below, our principal executive officer and principal financial officer~~Principal Financial Officer have concluded that, as of ~~June~~September 30, ~~2020,~~2023, our disclosure controls and procedures were ~~not effective. In light of this fact, our management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding~~effective at the material weaknesses in our internal control over financial reporting, the unaudited interim condensed consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly state, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Under standards established by the United States Public Company Accounting Oversight Board, a material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. In connection with our audit of consolidated financial statements for the year ended December 31, 2018, we identified material weaknesses in our internal control over financial reporting. We did not design or maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient complement of personnel with (i) an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately, and (ii) an appropriate level of knowledge and experience to establish effective information technology processes and controls. ~~This material weakness contributed to the following material weaknesses:~~

The control deficiencies described above did not result in a misstatement to our annual consolidated financial statements. However, each of the material weaknesses described above, if not remediated, could result in a misstatement of one or more account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected, and, accordingly, we determined that these control deficiencies constitute material weaknesses.

We have concluded that these material weaknesses arose because, as a private company, we did not have the necessary business processes, systems, personnel and related internal controls. In the year ended December 31, 2019, we undertook measures to address material weaknesses in our internal controls. In particular, we (i) hired additional finance and accounting personnel with expertise in preparation of financial statements and account reconciliations; (ii) further developed and documented our accounting policies; and (iii) hired a director responsible for implementation of information technology general controls. In addition, we will continue to take steps to remediate these material weaknesses, including:

~~We are taking actions to remediate the material weaknesses relating to our internal control over financial reporting. Except as otherwise described herein, there~~

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the ~~three months~~quarterly period ended ~~June~~September 30, ~~2020~~2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

From time to time, we are subject to ~~routine~~ legal proceedings in the normal course of operating our business. ~~Although~~The outcome of litigation, regardless of the merits, is inherently uncertain. Beginning in March 2021, multiple putative class actions were filed in the U.S. District Court for the Southern District of New York by certain of the Company’s stockholders against the Company and certain of the Company’s officers alleging violations of federal securities laws. The lawsuits were captioned Zawatsky et al. v. Vroom, Inc. et al., Case No. 21-cv-2477; Holbrook v. Vroom, Inc. et al., Case No. 21-cv-2551; and Hudda v. Vroom, Inc. et al., Case No. 21-cv-3296. All three of the lawsuits asserted similar claims under Sections 10(b) and 20(a) of the Exchange Act, and SEC Rule 10b-5. In each case, the named plaintiff(s) sought to represent a proposed class of all persons who purchased or otherwise acquired the Company’s securities during a period from June 9, 2020 to March 3, 2021 (in the case of Holbrook and Hudda), or November 11, 2020 to March 3, 2021 (in the case of Zawatsky). In August 2021, the Court consolidated the cases under the new name In re: Vroom, Inc. Securities Litigation, Case No. 21-cv-2477, appointed a lead plaintiff and lead counsel and ordered a consolidated amended complaint to be filed. The court-appointed lead plaintiff subsequently filed a consolidated amended complaint that reasserts claims under Sections 10(b) and 20(a) of the Exchange Act, and SEC Rule 10b-5 against the Company and certain of the Company’s officers, and added new claims under Sections 11, 12 and 15 of the Securities Act against the Company, certain of its officers, certain of its directors, and the underwriters of the Company’s September 2020 secondary offering. The Company filed a motion to dismiss all claims, and briefing of this motion is complete. The Company believes this lawsuit is without merit and intends to vigorously contest these claims. While the outcome of ~~litigation~~any complex legal proceeding is inherently ~~difficult~~unpredictable and subject to ~~predict, we are~~significant uncertainties, based upon information presently known to management, the Company believes that the potential liability, if any, will not ~~involved in any legal proceedings that we believe could reasonably be expected to~~ have a material adverse effect on ~~our business,~~the Company’s financial condition, cash flows, or results of operations.

In August 2021, November 2021, January 2022, and February 2022, various Company stockholders filed purported shareholder derivative lawsuits on behalf of the Company in the U.S. District Court for the Southern District of New York against certain of the Company’s officers and directors, and nominally against the Company, alleging violations of the federal securities laws and breaches of fiduciary duty to the Company and/or related violations of Delaware law based on the same general course of conduct alleged in In re: Vroom, Inc. Securities Litigation. All four lawsuits have been consolidated under the case caption In re Vroom, Inc. Shareholder Derivative Litigation, Case No. 21-cv-6933, and the court has approved the parties’ stipulation that the cases would remain stayed pending final resolution of In re: Vroom, Inc. Securities Litigation. All four derivative suits remain in preliminary stages and there have been no substantive developments in any matter.

The Attorney General of Texas, on behalf of the State of Texas, filed a petition in April 2022 and an amended petition in October 2023, in the District Court of Travis County Texas against the Company, alleging violation of the Texas Deceptive Trade Practices − Consumer Protection Act, Texas Business and Commerce Code § 17.41 et seq (Texas v. Vroom Automotive LLC, and Vroom Inc., Case No. D-1-GN-001809). The purported violations are based on alleged deficiencies and other issues in the Company’s marketing of used vehicles and fulfilment of customer orders, including the titling and registration of sold vehicles. Vroom Automotive, LLC and the Attorney General of the State of Texas have agreed to a temporary injunction in which Vroom Automotive, LLC agrees to adhere to its existing practice of possessing title for all vehicles it sells or advertises as available for sale on its ecommerce platform. The parties are engaged in discovery and Vroom continues to work cooperatively with the office of the Attorney General of the State of Texas towards a resolution. Because the case is at an early stage and the outcome of any complex legal proceeding is inherently unpredictable and subject to significant uncertainties, the Company cannot determine at present whether any potential liability would have a material adverse effect on the Company’s financial condition, cash flows, or results of operations.

In July 2022 and August 2022, respectively, certain plaintiffs filed two putative class action lawsuits in the District Court of Cleveland County, Oklahoma and the New York State Supreme Court, respectively, against Vroom, Inc., and Vroom Automotive LLC as defendants, alleging, among other things, deficiencies in Vroom’s titling and registration of sold vehicles: Blake Sonne, individually and on behalf of all others similar situated, v. Vroom Automotive, LLC and Vroom, Inc., No. CJ-2022-822 and Emely Reyes Martinez, on behalf of all others similarly situated, v. Vroom Automotive, LLC and Vroom Inc., No. 652684/2022. The Company removed the cases to the U.S. District Court for the Western District of Oklahoma (Case No. 22-cv-761) and the U.S. District Court for the Southern District of New York (Case No. 22-cv-7631), respectively, and filed motions to compel arbitration of all claims in both cases. In September 2023, Vroom’s motions to compel arbitration were granted in both cases, and the court actions are stayed pending the outcome of any arbitration proceeding over the respective plaintiffs’ individual claims.

As previously disclosed, we have been subject to audits, requests for information, investigations and other inquiries from our regulators relating to increased customer complaints concerning the same or similar matters alleged in the State of Texas petition. These regulatory matters could continue to progress into legal proceedings as well as enforcement actions. We have incurred fines in certain states and could continue to incur fines, penalties, restitution, or alterations in our business practices, which in turn, could lead to increased business expenses, additional limitations on our business activities and further reputational damage, although to date such expenses have not had a material adverse effect on the Company’s financial condition, cash flows, or results of operations.

Our operations and financial results are subject to various risks and uncertainties including those disclosed under “Item 1A. Risk Factors” in our Annual Report. We provide below the material changes to our risk factors described ~~below. You should consider carefully the risks and uncertainties described below,~~ in ~~addition to other information contained in this Quarterly~~our Annual Report on Form 10-Q, including our condensed consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. . If any of ~~the following~~these risks or others not specified ~~below~~ materialize, our business, financial condition and results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline and you could lose all or part of your investment in our common ~~stock.~~stock:

Despite the cost saving measures, reduced growth rates and increased focus on liquidity and profitability contemplated by our long-term roadmap, we intend to ~~Our Business~~

~~The COVID-19 pandemic caused by the novel coronavirus has had and is expected~~raise additional capital through equity or debt financings to ~~continue to have an adverse effect on~~achieve our business ~~financial condition~~objectives and ~~results~~there can be no assurance that such financings will be available in amounts or on terms acceptable to us, if at all.

September 30, 2023, we had cash and cash equivalents of $208.6 million. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and governmental authorities around the world have implemented measures to reduce the spread of COVID-19. These measures have adversely affected workforces, customers, supply chains, consumer sentiment, economies, and financial markets, and, along with decreased consumer spending, have led to an economic downturn across many global economies.

The COVID-19 pandemic has rapidly escalated in the United States, creating significant uncertainty and economic disruption, and leading to record levels of unemployment nationally. Numerous state and local jurisdictions have imposed, and others in the future may impose, shelter-in-place orders, quarantines, shut-downs of non-essential businesses, and similar government orders and restrictions on their residents to control the spread of COVID-19. While some such orders or restrictions have been lifted in certain jurisdictions, certain of those orders have been re-instated, new orders have been imposed in other jurisdictions and future orders may be imposed as the COVID-19 pandemic continues. Such orders or restrictions have resulted in temporary facility closures (including certain of2022 we adopted our third-party VRCs), work stoppages, slowdowns and travel restrictions, among other effects, thereby adversely impacting our operations. There is significant uncertainty as to how the continued spread of the virus will affect various state and local jurisdictions and, therefore, our operations. In addition, we expect to be impacted by a downturn in the United States economy,long-term roadmap, which ~~could have an adverse impact on discretionary consumer spending.~~

~~In response to the COVID-19 disruptions, we implemented a number of measures~~was designed to ~~protect the health and safety of our workforce, proactively~~prioritize unit economics, reduce operating ~~costs, conserve liquidity~~expenses and position Vroom to emerge from the current crisis in a healthy financial position. These measures include restrictions on non-essential business travel, the institution of work-from-home policies wherever feasible and the implementation of strategies for workplace safety atmaximize liquidity. Nevertheless, our facilities that remain open. We are following the guidance from public health officials and government agencies, including implementation of enhanced cleaning measures, social distancing guidelines, wearing of masks, eliminating non-essential vendor / guest visitation, and requiring health attestations and temperature checks prior to entering facilities, in each case subject to local healthfuture capital requirements in that location. Seating, signage, and cleaning materials have been added to ensure adherence to best practices for employee health and safety during this pandemic. Where feasible, we operate on a rotating team schedule to reduce exposure and also require. any diagnosed or exposed employees to self-isolate for up to two weeks before returning to work. In addition, effective May 3, 2020, approximately one-third of our workforce was placed on furlough. The majority of employees furloughed were in reconditioning, logistics, acquisitions and TDA sales, which were the positions most affected by the reduction in unit volume. However, since we restarted vehicle acquisitions and increased our Vroom VRC operations, as of June 30, 2020, most of the previously furloughed employees have returned to work, primarily those employed in reconditioning, logistics and acquisitions positions. Additionally, we instituted an across-the-board salary reduction for our non-furloughed salaried employees, with our CEO forgoing 30% of his salary, each member of our senior leadership team taking a 20% salary reduction, and the balance of the employees experiencing reductions of 5-15% based upon salary levels. All salaries were reinstated to pre-COVID-19 levels by July 2020. We also modified our capital allocation plan for the remainder of 2020, including reducing our planned capital expenditures, strategically reducing exposure to inventory and floorplan liabilities and moderating our marketing expenditures.

While our ecommerce platform continues to operate, we experienced a significant reduction in foot traffic in TDA beginning in the second half of March due to the COVID-19 disruptions that caused us to experience an approximate 63.4% decrease in unit sales for the second quarter 2020 as compared to the first quarter of 2020. These conditions continue in the Houston area and as a result we are unsure when TDA will return to normal operations. We will continue to incur costs for our operations, and our revenues during this pandemic are difficult to predict with certainty. As a result of any of the above developments, our business, results of operations, cash flows or financial condition for the full fiscal year of 2020 have been and will be significantly affected by the COVID-19 disruptions and could continue to be adversely impacted in the future. There is no assurance the measures we have taken or may take in the future will be successful in managing the uncertainties caused by COVID-19.

~~The extent to which COVID-19 ultimately impacts our business, financial condition and results of operations~~ will depend on ~~future developments, which are highly uncertain~~many factors, including our efforts to increase sales volume; optimize our sales margin, GPPU and ~~unpredictable, including new information which may emerge concerning the severity~~marketing costs, as well as reduce fixed and ~~duration of the COVID-19 outbreak~~variable expenses; scale our internal sales force to support sales volume growth; invest in our website and the effectiveness of actions taken to contain the COVID-19 outbreak or treat its impact, among others. Additionally, while the extent to which COVID-19 ultimately impacts the wholesale market will depend on a number of factors, the potential impact of the influx of vehicles from rental car companies could cause downward pressure on the value of used vehicles, which could have an adverse impact on our ability to liquidate our inventory in a timely manner or at all. The COVID-19 outbreak is evolving and new information emerges daily; accordingly, the ultimate consequences of the COVID-19 outbreak cannot be predicted with certainty.

In addition to the COVID-19 disruptions adversely impacting our business and financial results, they may also have the effect of heightening many of the other risks described in “Risk Factors,” including risks relating to changes in consumer demand; our limited operating history; our ability to generate sufficient revenue to generate positive cash flow; the operation of, and concentrationmobile applications; continue automation of our ~~revenues~~selling experience; and ~~gross profit from TDA;~~increase inventory as we resume growth. We rely on borrowings under our relationships with third party customer experience teams; the operation of our VRCs by us and our third party service providers; the current geographic concentration of reconditioning services and store inventory; our level of indebtedness; our agreement with a single lender2022 Vehicle Floorplan Facility to finance our ~~vehicle~~ inventory ~~purchases and the expiration of such agreement; our access to desirable vehicle inventory; regulatory restrictions; and the shift by traditional dealers to online sales and deliveries.~~

~~We have a history of losses~~ and we ~~may not achieve or maintain profitability in~~have commenced discussions with our floorplan lender, Ally Bank and Ally Financial (together, "Ally") regarding an amended floorplan facility that would extend the ~~future.~~

Weterm beyond the current expiration date. While we have ~~not been profitable since~~typically extended our ~~inception in 2012 and had an accumulated deficit of approximately $679.4 million as of~~floorplan facility annually, Ally has indicated its willingness to extend the floorplan facility beyond June ~~30, 2020. We incurred net losses of $60.5 million for the six months ended June 30, 2019 compared~~2024 would be contingent upon Vroom raising additional capital. The 2022 Vehicle Floorplan Facility remains a committed facility through March 31, 2024. Prior to $104.3 million for the six months ended June 30, 2020, and $85.2 million for the year ended December 31, 2018 compared to $143.0 million for the year ended December 31, 2019. We may incur significant losses in the future for a number of reasons, including our inability to reduce costs, acquire and appropriately price vehicle inventory, attract customers or identify and respond to emerging trends in the used car industry; slowing demand for used vehicles and our related value-added products; weakness in the automotive retail industry generally; general economic conditions; global pandemics; and increasing competition, as well as other risks described in this Quarterly Report on Form 10-Q, andthat date, we ~~may encounter unforeseen expenses, difficulties, complications and delays in achieving profitability.~~

~~Additionally, we expect~~intend to continue ~~to incur losses as we invest in and strive to grow~~ our business. We expect our operating expenses to increase in the future as we increase our advertising and marketing efforts to build our brand, continue to invest in technology development and expand our operating infrastructure. In addition, as a public company, we now have significant legal, accounting and other expenses that we did not incur as a private company. As a result of these increased expenditures, we will have to generate and sustain increased revenue to offset our operating expenses and achieve and maintain profitability. In addition, if we reduce variable costs to respond to losses, this may limit our ability to acquire customers and grow our revenues. Our ecommerce gross profit per unit declined by $386, or 20.8%, from the six months ended June 30, 2019 to the six months ended June 30, 2020 and by $546, or 24.4%, from the year ended December 31, 2018 to December 31, 2019. To reduce our losses, we will need to increase our gross profit per unit by lowering our costs per unit by, among other things, increasing efficiencies in reconditioning and logistics, which we may be unable to do. Accordingly, we may not achieve or maintain profitability and we may continue to incur significant losses in the future.

~~We may not be able to generate sufficient revenue to generate positive cash flow on a sustained basis, and our revenue growth rate may decline.~~

We cannot assure you that we will generate sufficient revenue to offset the cost of maintaining our platform and maintaining and growing our business. Although our revenue grew from $496.0 million for the six months ended June 30, 2019 to $628.9 million for the six months ended June 30, 2020 and from $855.4 million for the year ended December 31, 2018 to $1.2 billion for the year ended December 31, 2019, our revenue growth rate may decline in the future because of a variety of factors, including our inability to reduce costs, acquire and appropriately price vehicle inventory, attract customers or identify and respond to emerging trends in the used car industry; slowing demand for used vehicles and our related value-added products; weakness in the automotive retail industry generally; general economic conditions; and increasing competition. We cannot assure you that our revenue will continue to grow or will not decline. You should not consider our historical revenue growth or operating expenses as indicative of our future performance. If our revenue growth rate declines or our operating expenses exceed our expectations, our business, financial condition and results of operations will be materially and adversely affected.

Further, going forward we expect to make significant investments to further develop and expand our business, and these investments may not result in increased revenue or growth on a timely basis or at all. For example, we expect to continue to expend substantial financial and other resources on acquiring and retaining customers, development of our technology and data analytics capabilities, adding new features and functionality to our website, mobile application development and expansion of our reconditioning and logistics network. These investments may not result in increased revenue or growth in our business. If we cannot successfully earn revenue at a rate that exceeds the costs associateddiscussions with our business, we will not be able to generate positive cash flow on a sustained basis and our revenue growth rate may decline. Additionally, we base our expenses and investment plans on our estimates of revenue and gross profit. If our assumptions prove to be wrong, we may spend more than we anticipate or may generate less revenue than anticipated. If we fail to continue to grow our revenue, our business, financial condition and results of operations could be materially and adversely affected.

~~We have a limited operating history and are still building out our foundational systems.~~

~~We commenced operations in 2012 and acquired TDA in 2015 and, as a result, have a limited operating history. Moreover,~~Ally over the ~~past three years, we brought in a new senior leadership team that has refocused our strategy, accelerated our growth~~terms of an amended facility and committed us to pursue a path to profitability. To execute this strategy, we have invested, and continue to invest, in enhancing our foundational systems as we scale our business, including design and expansionmay engage with other lenders over the terms of website functionality and features, mobile application development, advancement and deployment of sophisticated data analytics, lean manufacturing technology and logistics network management, and work on all such foundational systems is ongoing. These types of activities subject us to various costs and risks, including increased capital expenditures, additional administration and operating expenses, potential disruption of our internal control structure, acquisition and retention of sufficiently skilled personnel, demands on management time, the introduction of errors or vulnerabilities and other risks and costs of delays or difficulties in transitioning to or integrating new systems into our foundational systems.an alternative facility. There can be no assurance that ~~we will succeed in successfully developing our capabilities in each of these areas,~~Ally would agree to extend the 2022 Vehicle Floorplan Facility on terms acceptable to us, or that ~~a desirable return~~alternative floorplan financing would be available on ~~investment will be achieved on~~acceptable terms from another lender. We intend to seek additional equity or debt financing to fund our current operations and support the ~~investments made in these areas. A failure to successfully execute on the development of our foundational systems would adversely affect our business, financial condition and results of operations.~~

~~Our recent, rapid growth may not be indicative of our future growth and, if we continue to grow rapidly, we may not be able to manage our growth effectively.~~

Our revenue grew from $496.0 million for the six months ended June 30, 2019 to $628.9 million for the six months ended June 30, 2020 and from $855.4 million for the year ended December 31, 2018 to $1.2 billion for the year ended December 31, 2019. We expect that, in the future, even if our revenue continues to increase, our rate of growth may decline. In any event, we will not be able to grow as fast or at all if we do not:

Our business has grown rapidly as new customers have purchased vehicles and value-added products from us. However, our business is relatively new and has operated at substantial scale for only a limited period of time. Given this limited history, it is difficult to predict whether wefloorplan financing, however, there can be no assurance that such financing will be ~~able~~available in amounts or on terms acceptable to ~~maintain~~us, if at all. Failure to raise additional capital through equity or grow our business. Our historical revenue growth should not be considered indicative of our future performance. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including difficulties in our ability to achieve market acceptance of our platform and attract customers, as well as increasing competition and increasing expenses as we continue to grow our business. We also expect that our business will evolve in ways that may be difficult to predict. For example, over time our investments that are intended to drive new customer traffic to our website may be less productive than expected. In the event of this or any other adverse developments, our continued success will depend on our ability to successfully adjust our strategy to meet changing market dynamics. If we are unable to do so, our business, financial condition and results of operations could be materially and adversely affected.

Our recent, rapid growth has placed and may continue to place significant demands on our management and our operational and financial resources. We have experienced significant growth in the number of customers on our platform as well as the amount of data that we analyze. We have hired and expect to continue hiring additional personnel to support our rapid growth. Our organizational structure is becoming more complex as we add staff, and we will need to continue to improve our operational, financial and management controls as well as our reporting systems and procedures. This will require significant capital expenditures and the allocation of valuable management resources to grow and adapt in these areas without undermining our corporate culture of teamwork. If we cannot manage our growth effectively to maintain the quality and efficiency of our customers’ experience and/or the quality of the vehicles we sell, our business, financial condition and results of operations could be materially and adversely affected.

~~Our business is subject to certain risks related to the operation of, and concentration of our revenues and gross profits from, TDA.~~

For the six months ended June 30, 2019 and 2020, $178.5 million and $113.6 million, respectively, of our revenues were related to sales at TDA, representing approximately 36.0% and 18.1%, respectively, of our total revenue for those periods. In the years ended December 31, 2018 and 2019, $379.7 million and $390.2 million, respectively, of our revenues were related to sales at TDA, representing approximately 44.4% and 32.8% of our total revenues for those years. For the six months ended June 30, 2019 and 2020, TDA gross profit was $12.2 million and $6.3 million, respectively, and in the years ended December 31, 2018 and 2019, TDA gross profit was $35.1 million and $25.4 million, respectively. As a result of COVID-19 related stay-at-home and shelter-in-place orders in the Houston area, we saw a significant decline in foot traffic at TDA that caused us to experience an approximate 63.4% decrease in unit sales for the second quarter of 2020 as compared to the first quarter of 2020. Vehicle sales at TDA also could be adversely affected for a variety of other reasons, including severe weather conditions or other catastrophic events in the Houston area that could damage our facilities and/or our inventory and keep customers from coming onsite, or economic downturns or other factors affecting the Houston area that could lead to reduced demand. Although revenues and gross profit from TDA are expected to decline as a percentage of total revenues over time as we scale our ecommerce business, a material decline in vehicle sales at TDA in the near termdebt financings would adversely affect our results of operations. In addition, we acquired TDA in 2015, and, in connection with this acquisition, we could continue to be subject to risks and liabilities from the operation of TDA under its prior ownership, and the indemnities that we negotiated as part of the transaction may not adequately protect us.

We have entered into outsourcing arrangements with a third party 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.

Currently, the substantial majority of inquiries, sales, purchases and financings of our vehicles in our ecommerce business are conducted through a third-party customer experience center located in Detroit, Michigan, and customers who wish to trade in a vehicle currently must interact with our customer experience team in order to complete their transaction. Thus, the customer experience center is fundamental to the success of our business. As a result, the success of our business and our customer experience is partially dependent on a third party over which we have limited control. If the third party’s systems and operations fail or if the third party is otherwise unable to perform its sales function, we would be limited in our ability to complete customer transactions, which would make it more difficult to sell vehicles and value-added products through our platform. In addition, if such third party is unable to perform to our standards or to provide the level of service required or expected by our customers, or we are unable to renegotiate the agreement with the third party on attractive terms or at all, or if we are unable to contract with an alternative third-party provider, our business, financial condition and results of operations may be harmed and we may be forced to pursue alternatives to provide these services, which could result in delays, interruptions, additional expenses and loss of potential and existing customers and related revenues.

We face a variety of risks associated with the operation of our VRCs by us and our third-party service providers, any of which could materially and adversely affect our business, financial condition and results of operations.

We and third-party service providers operate our VRCs. If we are unable to maintain our relationship with our third-party service providers, such service providers cease to provide the services we need, or such service providers are unable to effectively deliver our services to our standards on timelines and at the prices we have negotiated, and we are unable to contract with alternative vendors or replace such service providers with a Vroom VRC (which may require significant time and investment), we could experience delivery delays, a decrease in the quality of our reconditioning services, delays in listing our inventory, additional expenses and loss of potential and existing customers and related revenues, which may materially and adversely affect our business, financial condition and results of operations. These risks are exacerbated by the fact that our current third-party VRCs are primarily operated by one third-party provider.

Moreover, our future growth depends in part on scaling and expanding our reconditioning operations. We are expanding our reconditioning capacity through third-party VRC locations and going forward we expect to continue to invest in additional proprietary reconditioning capacity to provide added scale with reduced lead-time and greater flexibility. If for any reason we are unable to expand our reconditioning operations as planned, this could lead to operational delays and a decrease in planned inventory. Any operational delays or delays in our planned expansion could have a material adverse effect on our ~~business, financial condition and results of operations.~~

Additionally, we and our third-party vendors are required to obtain approvals, permits and licenses from state regulators and local municipalities to operate our VRCs. We may face delays in obtaining the requisite approvals, permits, financing and licenses to operate our VRCs or we may not be able to obtain them at all. If we encounter delays in obtaining or cannot obtain the requisite approvals, permits, financing and licenses to operate our VRCs in desirable locations, our business, financial condition and results of operations may be materially and adversely affected.

We rely primarily 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 rely primarily on third-party carriers to transport vehicles from auctions or individual sellers to VRCs, and then from our VRCs to our customers. As a result, we are exposed to risks associated with the transportation industry such as weather, traffic patterns, local and federal regulations, vehicular crashes, gasoline prices and lack of reliability of many independent carriers. Our third-party carriers’ failure to successfully manage our logistics and fulfilment process could cause a disruption in our inventory supply chain and decrease our inventory sales velocity, which may materially and adversely affect our business, financial condition and results of operations. In addition, third-party carriers who deliver vehicles to our customers could adversely affect the customer experience if they do not perform to our standards of professionalism and courtesy, which could adversely impact our business, financial condition and results of operations.

~~We are expanding our proprietary logistics operations, which will further expose us to increased risks related to ownership of infrastructure and the transportation of vehicles.~~

We are investing in our business to expand our proprietary logistics operations, including expanding our owned vehicle fleet. This expansion will increase our current risks and expose us to new risks, such as local and federal regulations, vehicular crashes, insufficient internal capacity, taxes, license and registration fees, insurance premiums, self-insurance levels, difficulty in recruiting and retaining qualified drivers, disruption of our technology systems, equipment supply, equipment quality, and increasing equipment and operational and overhead costs. Our failure to successfully manage the expansion of our logistics operations could cause delays and increase costs in our inbound and outbound shipping, which may adversely affect our operating results and financial condition.

The current geographic concentration where we provide reconditioning services and store inventory 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.

We currently conduct our business through multiple VRCs, including our Vroom VRC located outside Houston, Texas where we hold a substantial amount of our inventory. In addition, a majority of our third-party reconditioning services are conducted through a single provider, with facilities located in California, Florida, Arizona and other states. Any unforeseen events or circumstances that negatively affect these areas, particularly our facilities near Houston, which have experienced flooding and other damage in recent years as a result of severe weather conditions, including hurricanes, could materially and adversely affect our revenues and results of operations. Changes in demographics and population or severe weather conditions and other catastrophic occurrences in areas in which we operate or from which we obtain inventory may materially and adversely affect our results of operations. Such conditions may result in physical damage to our properties, loss of inventory and delays in the delivery of vehicles to our customers.

If we 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.

Our information technology may be subject to cyber-attacks, viruses, malicious software, break-ins, theft, ransomware attacks, computer hacking, phishing, employee error or malfeasance or other security breaches. Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks. Experienced computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise sensitive personal, proprietary or confidential information, create system disruptions or cause shutdowns. They also may be able to develop and deploy malicious software programs that attack our systems or otherwise exploit any security vulnerabilities. Our systems and the data stored on those systems also may be vulnerable to security incidents or security attacks, acts of vandalism or theft, coordinated attacks by activist entities, misplaced or lost data, human errors, or other similar events that could negatively affect our systems and the data stored on or transmitted by those systems, including the data of our customers or business partners. Further, third parties, such as hosted solution providers, that provide services to us, also could be a source of security risks in the event of a failure of their own security systems and infrastructure. Our technology infrastructure may be subject to increased risk of slowdown or interruption as a result of integration with third-party services, including cloud services, and/or failures by such third parties, which may be out of our control.

The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cyber-incident could be significant. Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service and loss of existing or potential suppliers or players. As threats related to cyber-attacks develop and grow, we may also find it necessary to make further investments to protect our data and infrastructure, which may impact our results of operations. Although we have insurance coverage for losses associated with cyber-attacks, as with all insurance policies, there are coverage exclusions and limitations, and our coverage may not be sufficient to cover all possible claims, and we may still suffer losses that could have a material adverse effect on our business (including reputational damage). We could also be negatively impacted by existing and proposed U.S. laws and regulations, and government policies and practices related to cybersecurity, data privacy, data localization and data protection. In the event that we or our service providers are unable to prevent, detect, and remediate the foregoing security threats and vulnerabilities in a timely manner, our operations could be disrupted or we could incur financial, legal or reputational losses arising from misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in our information systems and networks, including personal information of our employees and our customers. In addition, outside parties may attempt to fraudulently induce our employees or employees of our vendors to disclose sensitive information in order to gain access to our data. The number and complexity of these threats continue to increase over time. Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls, and processes require ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated. Despite our efforts, the possibility of these events occurring cannot be eliminated entirely.

~~We rely on third-party service providers to provide financing, as well as value-added products to our customers, and we cannot control the quality or fulfillment of these products.~~

We rely on third-party lenders to finance our customers’ vehicle purchases. We also offer value-added products to our customers through third-party service providers, including extended warranty contracts, GAP protection and wheel and tire coverage. Because we utilize third-party service providers, we cannot control all of the factors that might affect the quality and fulfillment of these services and products, including (i) lack of day-to-day control over the activities of third-party service providers, (ii) that such service providers may not fulfill their obligations to us or our customers or may otherwise fail to meet expectations and (iii) that such service providers may terminate their arrangements with us on limited or no notice or may change the terms of these arrangements in a manner unfavorable to us for reasons outside of our control. Such providers also are subject to state and federal regulations and any failure by such third-party service providers to comply with applicable legal requirements could cause us financial or reputational harm.

Our revenues and results of operations are partially dependent on the actions of these third parties. If one or more of these third-party service providers cease to provide these services or products to our customers, tighten their credit standards or otherwise provide services to fewer customers or are no longer able to provide them on competitive terms, it could have a material adverse effect on our business, revenues and results of operations. If we were unable to replace the current third-party providers upon the occurrence of one or more of the foregoing events, it could also have a material adverse effect on our business, revenues and results of operations. In addition, disagreements with such third-party service providers could require or result in costly and time-consuming litigation or arbitration.

Moreover, we receive fees from these third-party service providers in connection with finance, service and protection products purchased by our customers. A portion of the fees we receive on such products is subject to chargebacks in the event of early termination, default or prepayment of the contracts by end-customers, which could adversely affect our business, revenues and results of operations.

~~If the quality of our customer experience, our reputation or our brand were negatively affected, our business, sales and results of operations could be materially and adversely affected.~~

~~Our business model is primarily based on our~~ ability to enable consumers to buy and sell used vehicles through our ecommerce platform in a seamless, transparent and hassle-free transaction. If consumers fail to perceive us as a trusted brand with a strong reputation and high standards, or if an event occurs that damages our reputation, it could adversely affect customer demand and have a material adverse effect on our business, revenues and results of operations. Even the perception of a decrease in the quality of our customer experience or brand could impact results. Our high rate of growth makes maintaining the quality of our customer experience more difficult.

Complaints or negative publicity about our business practices, marketing and advertising campaigns, vehicle quality, customer service, delivery experience, compliance with applicable laws and regulations, data privacy and security or other aspects of our business, especially on blogs and social media websites, could diminish consumer confidence in our platform and adversely affect our brand, irrespective of their validity. The growing use of social media increases the speed with which information and opinions can be shared and thus the speed with which our reputation can be damaged. If we fail to correct or mitigate misinformation or negative information about us, our platform, our vehicle inventory, our customer experience, our brand or any aspect of our business, including information spread through social media or traditional media channels, it could materially and adversely affect our business, financial condition and results of operations.

~~Our business is sensitive to changes in the prices of new and used vehicles.~~

Any significant changes in retail prices for new or used vehicles could have a material adverse effect on our business, financial condition and results of operations. For example, if retail prices for used vehicles rise relative to retail prices for new vehicles, it could make buying a new vehicle more attractive to our customers than buying a used vehicle, which could have a material adverse effect on our business, financial condition and results of operations and could result in reduced vehicle sales and lower revenue. Additionally, manufacturer incentives, including financing, could contribute to narrowing the price gap between new and used vehicles.

Used vehicle prices also may decline due to an increased number of new vehicle lease returns over the next several years. In addition, rental car company bankruptcies may cause a broader disruption in the used vehicle market and adversely impact used vehicle prices. While lower used vehicle prices reduce our cost of acquiring new inventory, lower prices could also lead to reductions in the value of inventory we currently hold, which could have a negative impact on gross profit. Moreover, any significant changes in retail prices due to scarcity or competition for used vehicles could impact our ability to source desirable inventory for our customers, which could have a material adverse effect on our results of operations and could result in fewer used-car sales and lower revenue. Furthermore, any significant changes in wholesale prices for used vehicles could have a negative impact on our results of operations by reducing wholesale margins.

~~Our business and inventory is dependent on our ability to correctly appraise and price vehicles we buy and sell.~~

When purchasing a vehicle from us, our customers sometimes trade in their current vehicle and apply the trade-in value towards their purchase. We also acquire vehicles from consumers independent of any purchase of a vehicle from us and purchase vehicles from auctions, rental car companies and dealers. We appraise and price vehicles we buy and sell using data science and proprietary algorithms based on a number of factors, including mechanical soundness, consumer desirability, vehicle history, market prices and relative value as prospective inventory. If we are unable to correctly appraise and price both the vehicles we buy and the vehicles we sell, we may be unable to acquire or sell inventory at attractive prices or to manage inventory effectively, and accordingly our revenue, gross margins and results of operations would be affected, which could have a material adverse effect on our business, financial condition and results of operations.

Our business is dependent upon access to desirable vehicle inventory. Obstacles to acquiring attractive inventory, whether because of supply, competition or other factors, may have a material adverse effect on our business, financial condition and results of operations.

~~We acquire vehicles for sale from auctions, consumers, rental car companies and dealers. There can be no assurance that the supply of desirable used vehicles will be sufficient~~ to meet our ~~needs. In addition, we purchase a significant amount of our inventory from one third-party auction source, which accounted for approximately 37% of our inventory sourcing for the first half of 2020~~short and ~~20% of our inventory sourcing in 2019. If this third party is unable to fulfill our inventory~~long-term liquidity needs ~~or if we are unable to source desirable used vehicles from alternative third-party providers, we may lack sufficient inventory~~ and as a result, may lose potential and existing customers and related revenues. Moreover, we sell consumer-sourced vehicles that do not meet our retail standards to auctions, which may result in lower revenues and also could lead to reductions in our available inventory.

Additionally, we appraise thousands of consumer vehicles daily and evaluate potential purchases based on mechanical soundness, consumer desirability and relative value in relation to retail inventory or wholesale disposition. If we fail to adjust appraisal offers to stay in line with broader market trade-in offer trends or fail to recognize those trends, it could adversely affect our ability to acquire inventory. Our ability to source vehicles through our appraisal process also could be affected by competition, both from new and used vehicle dealers directly and through third-party websites driving appraisal traffic to those dealers. In addition, we remain dependent on third parties to sell us used vehicles, and there can be no assurance of an adequate supply of desirable vehicles on terms that are attractive to us. A reduction in the availability of or access to sources of inventory for any reason could have a material adverse effect onachieve our business ~~financial condition and results of operations.~~

~~Our business is dependent upon our ability~~objectives. See “We intend to ~~expeditiously sell inventory. Failure to expeditiously sell our inventory could have a material adverse effect on our business, financial condition and results of operations.~~

Sourcing of our used vehicle inventory is based in large part on projected demand. If actual sales are materially less than our forecasts, we would experience an over-supply of used vehicle inventory. An over-supply of used vehicle inventory will generally cause downward pressure on our vehicle sales prices and margins and decrease inventory sales velocity. Vehicles depreciate rapidly, so a failure to expeditiously sell our inventory or to efficiently recondition and deliver vehicles to customers could hurt our gross profit per unit and materially and adversely affect our business, financial condition and results of operations. Historically, the rate at which customers return vehicles has been relatively low. In the six months ended June 30, 2019 and June 30, 2020, we had approximately 4.3% and 5.4%, respectively, in total vehicle returns and approximately 3.3% and 4.4%, respectively, in vehicle returns net of vehicle swaps. However, there is no assurance these rates will remain similar to our historical levels. If we have higher than expected return rates, such inventory would continue to depreciate in value and our revenue, business, financial condition and results of operations could be materially and adversely affected.

Used vehicle inventory has typically represented a significant portion of our total assets. Having such a large portion of our total assets in the form of used vehicle inventory for an extended period of time subjects us to write-downs and other risks that affect our results of operations. Accordingly, if we have excess inventory, if we are unable to ship and deliver vehicles efficiently or if our inventory sales velocity decreases, we may be unable to liquidate such inventory at prices that would allow us to meet unit economics targets or to recover our costs, which could have a material adverse effect on our business, financial condition and results of operations.

~~Our ability to expand value-added product offerings and introduce~~seek additional ~~products and services may be limited, which could have a material adverse effect on our business, financial condition and results of operations.~~

Currently, our third-party value-added products consist of finance and protection products, which includes third-party financing of customers’ vehicle purchases, as well as other value-added products, such as extended warranty contracts, GAP protection and wheel and tire coverage. If we introduce new value-added products or expand existing offerings on our platform, such as insurance referral services, music services and vehicle diagnostic and tracking services, we may incur losses or otherwise fail to enter these markets successfully. Our expansion into these markets may place us in competitive and regulatory environments with which we are unfamiliar and involve various risks, including the need to invest significant resources to familiarize ourselves with such frameworks and the possibility that returns on such investments may not be achieved for several years, if at all. In attempting to establish new offerings, we expect to incur significant expenses and face various other challenges, such as expanding our customer experience team and management personnel to cover these markets and complying with complicated regulations that apply to these markets. In addition, we may not successfully demonstrate the value of these value-added products to customers, and failure to do so would compromise our ability to successfully expand into these additional revenue streams. Any of these risks, if realized, could materially and adversely affect our business, financial condition and results of operations.

Failure to comply with federal, state and local laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current or the enactment of new laws or regulations relating to privacy, data protection and consumer protection, as well as our actual or perceived failure to protect such information could harm our reputation and could adversely affect our business, financial condition and results of operations.

We collect, store, process and use personal information and other customer data, and we rely in part on third parties that are not directly under our control, including our third-party customer experience team, to manage certain of these operations. For example, we rely on encryption, storage and processing technology developed by third parties to securely transmit, operate on and store such information. Due to the volume and sensitivity of the personal information and data we and these third parties manage and expect to manage in the future, as well as the nature of our customer base, the security features of our information systems are critical. We expend significant resources to protect against security breaches and may need to expend more resources in the event we need to address problems caused by potential breaches. Any failure or perceived failure to maintain the security of personal and other data that is provided to us by customers and vendors could harm our reputation and brand and expose us to a risk of loss or litigation and possible liability, any of which could adversely affect our business, financial condition and results of operations. Additionally, concerns about our practices with regard to the collection, use or disclosure of personal information or other privacy-related matters, even if unfounded, could harm our business, financial condition and results of operations. We have in the past experienced security vulnerabilities, though such vulnerabilities have not had a material impact on our operations. While we have implemented security procedures and virus protection software, intrusion prevention systems, access control and emergency recovery processes to mitigate such risks like these with respect to information systems that are under our control, they are not fail-safe and may be subject to breaches. Further, we cannot ensure that third parties upon whom we rely for various services will maintain sufficient vigilance and controls over their systems. Our inability to use or access those information systems at critical points in time, or unauthorized releases of personal or confidential information, could unfavorably impact the timely and efficient operation of our business, including our results of operations, and our reputation, as well as our relationships with our employees or other individuals whose information may have been affected by such cybersecurity incidents.

There are numerous federal, state and local laws regarding privacy and the collection, processing, storing, sharing, disclosing, using and protecting of personal information and other data, the scope of which are changing, subject to differing interpretations, and which may be costly to comply with, inconsistent between jurisdictions or conflicting with other rules. We are also subject to specific contractual requirements contained in third-party agreements governing our use and protection of personal information and other data. We generally comply with industry standards and are subject to the terms of our privacy policies and the privacy- and security-related obligations to third parties. We strive to comply with applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection, to the extent possible. However, it is possible that these obligations may be interpreted and applied in new ways or in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Additionally, new regulations could be enacted with which we are not familiar. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to customers or other third parties, or our privacy-related legal obligations or any compromise of security that results in the unauthorized release or transfer of sensitive information, which may include personally identifiable information or other customer data, may result in governmental enforcement actions, litigation or public statements against us by consumer advocacy groups or others and could cause customers, vendors and third-party business partners to lose trust in us, which could have a material adverse effect on our business, financial condition and results of operations. Additionally, if vendors, developers or other third parties that we work with violate applicable laws or our policies, such violations may also put customers’, vendors’ or receivables-purchasers’ information at risk and could in turn harm our business, financial condition and results of operations.

We expect that new industry standards, laws and regulations will continue to be proposed regarding privacy, data protection and information security in many jurisdictions, including the California Consumer Privacy Act (the “CCPA”), which went into effect on January 1, 2020. We cannot yet determine the impact of the CCPA or such future laws, regulations and standards may have on our business. Complying with these evolving obligations is costly. For instance, expanding definitions and interpretations of what constitutes “personal data” (or the equivalent) within the United States may increase our compliance costs and legal liability.

A significant data breach or any failure, or perceived failure, by us to comply with any federal, state or local privacy or consumer protection-related laws, regulations or other principles or orders to which we may be subject or other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in claims, investigations, proceedings or actions against us by governmental entities or others or other penalties or liabilities or require us to change our operations and/or cease using certain data sets. Depending on the nature of the information compromised, we may also have obligations to notify users, law enforcement or payment companies about the incident and may need to provide some form of remedy, such as refunds, for the individuals affected by the incident.

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

Our business is and will continue to be subject to extensive U.S. federal, state and local laws and regulations. The advertising, sale, purchase, financing and transportation of used vehicles are regulated by every state in which we operate and by the U.S. federal government. We also are subject to state laws related to titling and registration and wholesale vehicle sales, and our sale of value-added products is subject to state licensing requirements, as well as federal and state consumer protection laws. These laws can vary significantly from state to state. In addition, we are subject to regulations and laws specifically governing the internet and ecommerce and the collection, storage and use of personal information and other customer data. We are also subject to federal and state consumer protection laws, including the Equal Credit Opportunity Act and prohibitions against unfair or deceptive acts or practices. The federal governmental agencies that regulate our business and have the authority to enforce such regulations and laws against us include the U.S. Federal Trade Commission (the “FTC”), the U.S. Department of Transportation, the U.S. Occupational Health and Safety Administration, the U.S. Department of Justice and the U.S. Federal Communications Commission. For example, the FTC has jurisdiction to investigate and enforce our compliance with certain consumer protection laws and has brought enforcement actions against auto dealers relating to a broad range of practices, including the sale and financing of value-added or add-on products. Additionally, we are subject to regulation by individual state dealer licensing authorities, state consumer protection agencies and state financial regulatory agencies. We also are subject to audit by such state regulatory authorities.

State dealer licensing authorities regulate the purchase and sale of used vehicles by dealers within their respective states. The applicability of these regulatory and legal compliance obligations to our ecommerce business is dependent on evolving interpretations of these laws and regulations and how our operations are, or are not, subject to them. We are licensed as a dealer in the State of Texas and all of our vehicle transactions are conducted under our Texas license. We believe that our activities in other states are not subject to their vehicle dealer licensing laws. State regulators in such states could, however, seek to require us to maintain a used vehicle dealer license in order to engage in activities in that state.

Most states regulate retail installment sales, including setting a maximum interest rate, caps on certain fees or maximum amounts financed. In addition, certain states require that retail installment sellers file a notice of intent or have a sales finance license or an installment sellers license in order to solicit or originate installment sales in that state. We have obtained a motor vehicle sales finance license in Texas, which is the state in which our vehicle sale transactions are conducted under our Texas dealer license. The financial regulatory agency in Pennsylvania determined that we need to obtain an installment seller license in order to enter into retail installment sales with residents of Pennsylvania, and, as a result, we currently do not offer third-party financing to our customers in Pennsylvania. Accordingly, our customers located in Pennsylvania must obtain independent financing to the extent needed to fund any vehicle purchases on our platform.

Any failure to renew or maintain any of the foregoing licenses would materially and adversely affect our business, financial condition and results of operations. Many aspects of our business are subject to regulatory regimes at the state and local level, and we may not have all licenses required to conduct business in every jurisdiction in which we operate. Despite our belief that we are not subject to certain licensing requirements of those state and local jurisdictions, regulators may seek to impose punitive fines for operating without a license or demand we seek a license in those state and local jurisdictions, any of which may inhibit our ability to do business in those state and local jurisdictions, increase our operating expenses and adversely affect our business, financial condition and results of operations.

In addition to these laws and regulations that apply specifically to the sale and financing of used vehicles, our facilities and business operations are subject to laws and regulations relating to environmental protection, occupational health and safety, and other broadly applicable business regulations. We also are subject to laws and regulations involving taxes, tariffs, privacy and data security, anti-spam, pricing, content protection, electronic contracts and communications, mobile communications, consumer protection, information reporting requirements, unencumbered internet access to our platform, the design and operation of websites and internet neutrality.

Following our IPO, we are also subject to laws and regulations affecting public companies, including securities laws and exchange listing rules. The violation of any of these laws or regulations could result in administrative, civil or criminal penalties or in a cease-and-desist order against our business operations, any of which could damage our reputation and have a material adverse effect on our business, financial condition and results of operations. We have incurred and will continue to incur capital and operating expenses and other costs to comply with these laws and regulations.

The foregoing description of laws and regulations to which we are or may be subject is not exhaustive, and the regulatory framework governing our operations is subject to evolving interpretations and continuous change.

~~We may require additional debt and equity~~ capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If such capital is not available to us, our business, financial condition and results of operations ~~may~~would be materially and adversely affected."

We currently rely on an agreement with a single lender to finance our vehicle inventory purchases under our 2022 Vehicle Floorplan Facility. If we fail to extend our current floorplan facility and our relationship with this lender were to terminate, and we fail to acquire alternative sources of funding to finance our vehicle inventory purchases, we may ~~require~~be unable to maintain sufficient inventory, which would adversely affect our business, financial condition and results of operations.

We rely on a revolving credit agreement with a single lender, Ally, to finance our vehicle inventory purchases under our 2022 Vehicle Floorplan Facility. Outstanding borrowings are due as financed vehicles are sold, and the 2022 Vehicle Floorplan Facility is secured by our vehicle inventory and certain other assets. Our 2022 Vehicle Floorplan Facility expires on March 31, 2024, and we have commenced discussions with Ally regarding an amended floorplan facility that would extend the term beyond the current expiration date. Ally has indicated that its willingness to extend the floorplan facility beyond June 2024 would be contingent upon Vroom raising additional capital. The 2022 Vehicle Floorplan Facility remains a committed facility through March 31, 2024. Prior to that date, we intend to continue our discussions with Ally over the terms of an amended facility and may engage with other lenders over the terms of an alternative facility. There can be no assurance that Ally would agree to extend the 2022 Vehicle Floorplan Facility on acceptable terms to us, or that alternative floorplan financing would be available on acceptable terms from another lender. In the event that a capital raise is required by Ally or another lender, there can be no assurance that such additional capital would be available in an amount or on terms acceptable to us, if at all. If we are unable to extend the 2022 Vehicle Floorplan Facility, or we are unable to find a satisfactory replacement, our inventory supply may decline, resulting in fewer vehicles available for sale on our website. Failure to secure floorplan financing beyond the expiration of the 2022 Vehicle Floorplan Facility would have a material adverse effect on our ability to finance our inventory and operate our core used automotive sales business. These financing risks, in addition to potential rising interest rates, inflation, and changes in market conditions, if realized, could negatively impact our business, financial condition and results of operations. See “Management’s

Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Vehicle Financing”.

We intend to seek additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If such capital is not available to us, our business, financial condition and results of operations would be materially and adversely affected.

We intend to seek additional capital to fund our operations and support the extension of our vehicle floorplan financing. In addition, we may raise additional capital in the future to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, including to ~~increase~~successfully execute on our long-term roadmap, make certain marketing expenditures to improve our brand awareness, build and maintain our inventory of used vehicles, develop our captive finance operation, expand our internal sales force, improve our customer experience operations, develop new products or services or further improve existing products and services, expand and enhance our operating and proprietary logistics and reconditioning infrastructure and acquire complementary businesses and technologies. ~~Accordingly, we may need to engage in~~However, there can be no assurance that additional funds, including any additional equity or debt financings, ~~to secure additional funds. However, additional funds may not~~will be available ~~when we need them,~~in amounts or on terms ~~that are~~ acceptable to us, orif at all. Moreover, any debt financing that we secure would result in additional debt service obligations and the ~~future~~instruments governing such debt could ~~involve~~provide for restrictive operating and financial covenants, security interests on our assets, and other terms that could be adverse to our current stakeholders, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. Volatility in the credit markets may also have an adverse effect on our ability to obtain debt financing. If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders ~~could~~would suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms or conditions satisfactory to us, ~~when we require it,~~ we may be forced to obtain financing on undesirable terms or our ability to continue to pursue our business objectives, including to support the extension of our vehicle floorplan financing, successfully execute our long-term roadmap and to respond to business opportunities, challenges or unforeseen circumstances, ~~could~~would be significantly limited, and our business, financial condition and results of operations ~~could~~would be materially and adversely affected.

~~If we fail to comply with the Telephone Consumer Protection Act, we may face significant damages, which could harm our business, financial condition and results of operations.~~

We utilize telephone calls as a means of responding to and marketing to customers interested in purchasing, trading in and/or selling vehicles and value-added products, and intend to implement the use of texting as a means of communication with our customers. We generate leads from our website and online advertising by prompting potential customers to provide their phone numbers so that we can contact them in response to their interest in selling a vehicle, purchasing a vehicle, trading in a vehicle or obtaining financing terms. We currently engage a third-party customer experience center to facilitate substantially all telephone inquiries, sales, purchases and financings of our vehicles through our platform.

The Telephone Consumer Protection Act (the “TCPA”), as interpreted and implemented by the Federal Communication Commission (the “FCC”) and U.S. courts, imposes significant restrictions on the use of telephone calls to residential and mobile telephone numbers as a means of communication when prior consent of the person being contacted has not been obtained. Currently, our third-party customer experience center utilizes automated telephone dialing systems to dial phone numbers of potential customers who have requested that we contact them by providing their phone number to us through our website and through third-party aggregation websites. Our telephone marketing activities, such as these, must comply with the TCPA, the Telephone Sales Rule (the “TSR”) and the FCC’s declaratory ruling issued on July 10, 2015 (the “July Declaratory Ruling”). The TCPA prohibits the use of automatic telephone dialing systems for communications with wireless phone numbers without express consent of the consumer, and the TSR established the Do Not Call Registry. Based on a recent decision from the United States Court of Appeals for the District of Columbia, issued on March 16, 2018 (the “ACA Ruling”) much of the July Declaratory Ruling has been vacated. Although it is possible that decisions of other appellate courts could further change the standards of conduct applicable to the use of automated telephone dialing systems, at present obtaining appropriate consent for auto-dialed calls and properly managing revocations of consent comply with the standard of conduct announced in the ACA Ruling. Violations of the TCPA may be enforced by the FCC or by individuals through litigation, including class actions. Statutory penalties for TCPA violations range from $500 to $1,500 per violation, which has been interpreted to mean per phone call.

In September 2016, an individual brought a putative class action against us under the TCPA alleging we violated the TCPA by sending him a single text message expressing interest in purchasing a vehicle he listed for sale online. The court granted summary judgment in our favor and, following the plaintiff’s appeal, the parties resolved the lawsuit. While we have implemented processes and procedures to comply with the TCPA, if we or the third parties on which we rely for data fail to adhere to or successfully implement appropriate processes and procedures in response to existing or future regulations, it could result in legal and monetary liability, fines, penalties or damage to our reputation in the marketplace, any of which could have a material adverse effect on our business, financial condition and results of operations. Additionally, any changes to the TCPA, its interpretation, or enforcement of it by the government or private parties that further restrict the way we contact and communicate with our potential customers or generate leads could adversely affect our ability to attract customers and could harm our business, financial condition and results of operations.

Government regulation of the internet and ecommerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business, financial condition and results of operations.

We are subject to general business regulations and laws, as well as regulations and laws specifically governing the internet and ecommerce. Existing and future regulations and laws could impede the growth of the internet, ecommerce or mobile commerce. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, pricing, content protection, electronic contracts and communications, mobile communications, consumer protection, information reporting requirements, unencumbered internet access to our platform, the design and operation of websites and internet neutrality. It is not clear how existing laws governing issues such as property ownership, sales and other taxes and consumer privacy apply to the internet as the vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or ecommerce. It is possible that general business regulations and laws, or those specifically governing the internet or ecommerce, may be interpreted and applied in a manner that is inconsistent from one market segment to another and may conflict with other rules or our practices. For example, federal, state and local regulation regarding privacy, data protection and information security has become more significant, and proposed regulations such as the CCPA may increase our costs of compliance. We cannot be sure that our practices have complied, comply or will comply fully with all such laws and regulations. The enactment of new laws and regulations or the interpretation of existing laws and regulations in an unfavorable way may affect the operation of our business, directly or indirectly, which could result in substantial regulatory compliance costs, civil or criminal penalties, including fines, adverse publicity, decreased revenues and increased expenses.

We actively use anonymous online data for targeting ads online and if ad networks are compelled by regulatory bodies to limit use of this data, it could materially affect our ability to do effective performance marketing. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, a loss in business and proceedings or actions against us by governmental entities or others. Any such proceeding or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase our costs of doing business, decrease the use of our sites by customers and suppliers and result in the imposition of monetary liability. We also may be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations. Adverse legal or regulatory developments could substantially harm our business, our ability to attract new customers may be adversely affected, and we may not be able to maintain or grow our revenue and expand our business as anticipated.

We accept payments for deposits on our vehicles through a variety of methods, including credit card and debit card. As we offer new payment options to customers, we may be subject to additional regulations, compliance requirements and fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs. We are also subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. As our business changes, we also may be subject to different rules under existing standards, which may require new assessments that involve costs above what we currently pay for compliance. If we fail to comply with the rules or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card and debit card payments from customers or facilitate other types of online payments. If any of these events were to occur, our business, financial condition and results of operations could be materially adversely affected.

We occasionally receive orders placed with fraudulent credit card data, including stolen credit card numbers, or from clients who have closed bank accounts or have insufficient funds in open bank accounts to satisfy payment obligations. We may suffer losses as a result of orders placed with fraudulent credit card data even if the associated financial institution approved payment of the orders. Under current credit card practices, we may be liable for fraudulent credit card transactions. If we are unable to detect or control credit card or other fraud, our liability for these transactions could harm our business, financial condition and results of operations.

~~If we do not adequately address our customers’ reliance on mobile device technology, our results of operations could be harmed and our growth could be negatively affected.~~

Vroom.com is a mobile website that consumers can access and utilize from their mobile devices. In addition, we have designed and launched mobile apps (iOS and android) to enhance customers’ mobile experience. In light of consumers’ shift to mobile technology, our future success depends in part on our ability to provide enhanced functionality for customers who use mobile devices to shop for used vehicles and increase the number of transactions with us that are completed by those users. In the year ended December 31, 2018, approximately 62% of unique visitors to our website were attributable to mobile devices and in the year ended December 31, 2019 and six months ended June 30, 2020, this figure grew to approximately 68% and 71%, respectively. The shift to mobile technology by our users may harm our business in the following ways:

~~If we do not develop suitable functionality for users who visit our website using a mobile device, our business, financial condition and results of operations could be harmed.~~

~~Our future growth and profitability relies heavily on the effectiveness and efficiency of our marketing and branding efforts, and these efforts may not be successful.~~

Because we are a consumer brand, we rely heavily on marketing and advertising to increase brand visibility and attract potential customers. Advertising expenditures are and will continue to be a significant component of our operating expenses, and there can be no assurance that we will achieve a meaningful return on investment on such expenditures. We continue to evolve our marketing strategies, adjusting our messages, the amount we spend on advertising and where we spend it, and no assurance can be given that we will be successful in developing effective messages and in achieving efficiency in our marketing and advertising expenditures. As a result, our future growth and profitability will depend in part on:

We currently advertise through a blend of brand and direct advertising channels with the goal of increasing the strength, recognition and trust in the Vroom brand and driving more unique visitors to our platform. Our marketing strategy includes national television campaigns, which we launched in February 2019, and performance marketing through digital platforms, including both auto-centric lead generation platforms and broader consumer-facing platforms. We also strategically use targeted radio campaigns and billboards and other local advertising in key markets, and we are expanding our national marketing efforts featuring Sell Us Your Car^®. As such, a significant component of our marketing spend involves the use of various marketing techniques, including programmatic ad-buying, interest targeting, retargeting and email nurturing. Future growth and profitability will depend in part on the cost and efficiency of our promotional advertising and marketing programs and related expenditures, including our ability to create greater awareness of our platform and brand name, to appropriately plan for future expenditures and to drive the promotion of our platform.

Additionally, our business model relies on our ability to grow rapidly and to decrease incremental customer acquisition costs as we grow. If we are unable to recover our marketing costs through increases in customer traffic and incremental sales, if our advertising partners refuse to work with us at competitive rates or at all, or if our broad marketing campaigns are not successful or are terminated, our growth may suffer and our business, financial condition and results of operations could be materially and adversely affected.

We rely on internet search engines, vehicle listing sites and social networking sites to help drive traffic to our website, and if we fail to appear prominently in the search results or fail to drive traffic through paid advertising, our traffic would decline and our business, financial condition and results of operations could be materially and adversely affected.

We depend in part on internet search engines, such as Google, Bing and Yahoo!, vehicle listing sites and social networking sites such as Facebook and Instagram to drive traffic to our website. Our ability to maintain and increase the number of visitors directed to our platform is not entirely within our control. Our competitors may increase their search engine marketing efforts and outbid us for placement on various vehicle listing sites or for search terms on various search engines, resulting in their websites receiving a higher search result page ranking than ours. Additionally, internet search engines could revise their methodologies in a way that would adversely affect our search result rankings. If internet search engines modify their search algorithms in ways that are detrimental to us, if vehicle listing sites refuse to display any or all of our inventory in certain geographic locations, or if our competitors’ efforts are more successful than ours, overall growth in our customer base could slow or our customer base could decline. Internet search engine providers could provide automotive dealer and pricing information directly in search results, align with our competitors or choose to develop competing services. Our platform has experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. We could reach a point of inventory saturation at third-party aggregation websites whereby we will exceed the maximum allowable inventory that will require us to spend greater than market rates to list our inventory. Any reduction in the number of users directed to our platform through internet search engines, vehicle listings sites or social networking sites could harm our business, financial condition and results of operations.

Our business relies on email and other messaging services, and any restrictions on the sending of emails or messages or an inability to timely deliver such communications could materially and adversely affect our business, financial condition and results of operations.

Our business is dependent upon email and other messaging services for promoting our platform and vehicles available for purchase. Promotions offered through email and other messages sent by us are an important part of our marketing strategy. We provide emails to customers and other visitors informing them of the convenience and value of using our platform, as well as updates on new inventory and price updates on listed inventory, and we believe these emails, coupled with our general marketing efforts, are an important part of our customer experience and help generate revenue. If we are unable to successfully deliver emails or other messages to our subscribers, or if subscribers decline to open our emails or other messages, our revenues could be materially and adversely affected. Any changes in how webmail applications organize and prioritize email may reduce the number of subscribers opening our emails. For example, Google’s Gmail service has a feature that organizes incoming emails into categories (such as primary, social and promotions). Such categorization or similar inbox organizational features may result in our emails being delivered in a less prominent location in a subscriber’s inbox or viewed as “spam” by our subscribers and may reduce the likelihood of that subscriber opening our emails.

In addition, actions by third parties to block, impose restrictions on or charge for the delivery of emails or other messages could also adversely impact our business. From time to time, internet service providers or other third parties may block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver email or other messages to third parties. Changes in the laws or regulations that limit our ability to send such communications or impose additional requirements upon us in connection with sending such communications could also materially and adversely affect our business, financial condition and results of operations. Our use of email and other messaging services to send communications about our sites or other matters may also result in legal claims against us, which may cause us to incur increased expenses, and if successful might result in fines and orders with costly reporting and compliance obligations or might limit or prohibit our ability to send emails or other messages. We also rely on social networking messaging services to send communications and to encourage customers to send communications. Changes to the terms of these social networking services to limit promotional communications, any restrictions that would limit our ability or our customers’ ability to send communications through their services, disruptions or downtime experienced by these social networking services or decline in the use of or engagement with social networking services by customers and potential customers could materially and adversely affect our business, financial condition and results of operations.

~~We may experience seasonal and other fluctuations in our quarterly results of operations, which may not fully reflect the underlying performance of our business.~~

We expect our quarterly results of operations, including our revenue, gross profit and cash flow to vary significantly in the future based in part on, among other things, vehicle-buying patterns. Vehicle sales generally exhibit seasonality with an increase in sales early in the year that reaches its highest point late in the first quarter and early in the second quarter, which then levels off through the rest of the year with the lowest level of sales in the fourth quarter. This seasonality historically corresponds with the timing of income tax refunds, which can provide a primary source of funds for customers’ payments on used vehicle purchases. Used vehicle prices also exhibit seasonality, with used vehicles depreciating at a faster rate in the last two quarters of each year and a slower rate in the first two quarters of each year.

~~Other factors that may cause our quarterly results to fluctuate include, without limitation:~~

In addition, a significant portion of our expenses are fixed and do not vary proportionately with fluctuations in revenues. As a result of these seasonal fluctuations, our results in any quarter may not be indicative of the results we may achieve in any subsequent quarter or for the full year, and period-to-period comparisons of our results of operations may not be meaningful.

~~We participate in a highly competitive industry, and pressure from existing and new companies may adversely affect our business and results of operations.~~

Internet and online automotive sites could change their models to directly compete with us, such as Google, Amazon, AutoTrader.com, Edmunds.com, KBB.com, Autobytel.com, TrueCar.com, CarGurus and Cars.com. In addition, automobile manufacturers such as General Motors, Ford and Volkswagen could change their sales models to better compete with our model through technology and infrastructure investments. While such enterprises may change their business models and endeavor to compete with us, the purchase and sale of used vehicles through ecommerce presents unique challenges.

Our competitors also compete in the online market through companies that provide listings, information, lead generation and car buying services designed to reach customers and enable dealers to reach these customers and providers of offline, membership-based car buying services such as the Costco Auto Program.

We also expect that new competitors will continue to enter the traditional and ecommerce automotive retail industry with competing brands, business models and products and services, which could have an adverse effect on our revenue, business and financial results. For example, traditional car dealers could transition their selling efforts to the internet, allowing them to sell vehicles across state lines and compete directly with our online offering and no-negotiating pricing model.

Our current and potential competitors may have significantly greater financial, technical, marketing and other resources than we have, and the ability to devote greater resources to the development, promotion and support of their businesses, platforms, and related products and services. Additionally, they may have more extensive automotive industry relationships, longer operating histories and greater name recognition than we have. As a result, these competitors may be able to respond more quickly to consumer needs with new technologies and to undertake more extensive marketing or promotional campaigns. If we are unable to compete with these companies, the demand for our used vehicles and value-added products could substantially decline.

In addition, if one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our ability to compete effectively. We may not be able to compete successfully against current or future competitors, and competitive pressures may harm our business, financial condition and results of operations. Furthermore, if our competitors develop business models, products or services with similar or superior functionality to our platform, it may adversely affect our business. Additionally, our competitors could use their political influence and increase lobbying efforts to encourage new regulations or interpretations of existing regulations that would prevent us from operating in certain markets.

~~Changes in the auto industry may threaten our business model if we are unable to adapt.~~

The market for used vehicles may be impacted by the significant, and likely accelerating, changes to the broader automotive industry, which may render our existing or future business model or our ability to sell vehicles, products and services less competitive, unmarketable or obsolete. For example, technology is currently being developed to produce automated, driverless vehicles that could reduce the demand for, or replace, traditional vehicles, including the used vehicles that we acquire and sell. Additionally, ride-hailing and ride-sharing services are becoming increasingly popular as a means of transportation and may decrease consumer demand for the used vehicles we sell, particularly as urbanization increases. Furthermore, new technologies such as autonomous driving software have the potential to change the dynamics of car ownership in the future. If we are unable to or otherwise fail to successfully adapt to such industry changes, our business, financial condition and results of operations could be materially and adversely affected.

~~Prospective purchasers of vehicles may choose not to shop online, which would prevent us from growing our business.~~

Our success will depend, in part, on our ability to attract additional customers who have historically purchased vehicles through traditional dealers. The online market for vehicles is significantly less developed than the online market for other goods and services such as books, music, travel and other consumer products. If this market does not gain widespread acceptance, our business may suffer. Furthermore, we may have to incur significantly higher and more sustained advertising and promotional expenditures or offer more incentives than we currently anticipate in order to attract additional consumers to our platform and convert them into purchasing customers. Specific factors that could prevent consumers from purchasing vehicles through our ecommerce platform include:

If the online market for vehicles does not continue to develop and grow, our business will not grow and our business, financial condition and results of operations could be materially and adversely affected.

General business and economic conditions, and risks related to the larger automotive ecosystem, including consumer demand, could reduce our sales and profitability, which could have a material adverse effect on our business, financial condition and results of operations.

Our business is affected by general business and economic conditions. The global economy often experiences periods of instability, and this volatility may result in reduced demand for our vehicles and value-added products, reduced spending on vehicles, inability of customers to obtain credit to finance purchases of vehicles and decreased consumer confidence to make discretionary purchases. Consumer purchases of new and used vehicles generally decline during recessionary periods and other periods in which disposable income is adversely affected.

Purchases of new and used vehicles are typically discretionary for consumers and have been, and may continue to be, affected by negative trends in the economy and other factors, including rising interest rates, the cost of energy and gasoline, the availability and cost of consumer credit, reductions in consumer confidence and fears of recession, stock market volatility, increased regulation and increased unemployment. Increased environmental regulation has made, and may in the future make, used vehicles more expensive and less desirable for consumers.

In addition, changing trends in consumer tastes, negative business and economic conditions and market volatility may make it difficult for us to accurately forecast vehicle demand trends, which could cause us to increase our inventory carrying costs and could materially and adversely affect our business, financial condition and results of operations.

~~Our business is sensitive to conditions affecting automotive manufacturers, including manufacturer recalls.~~

Adverse conditions affecting one or more automotive manufacturers could have a material adverse effect on our business, financial condition and results of operations and could impact our supply of used vehicles. In addition, manufacturer recalls are a common occurrence that have accelerated in frequency and scope in recent years. In the instance of an open recall, we may have to temporarily remove vehicles from inventory and may be unable to liquidate such inventory in a timely manner or at all. Because we do not have manufacturer authorization to complete recall-related repairs, some vehicles we sell may have unrepaired safety recalls. Such recalls, and our lack of authorization to make recall-related repairs or potential unavailability of parts needed to make such repairs, could (i) adversely affect used vehicle sales or valuations, (ii) cause us to temporarily remove vehicles from inventory, (iii) cause us to sell any affected vehicles at a loss, (iv) force us to incur increased costs and (v) expose us to litigation and adverse publicity related to the sale of recalled vehicles, which could have a material adverse effect on our business, financial condition and results of operations.

~~Our business is subject to the risk of natural disasters, adverse weather events and other catastrophic events, and to interruption by manmade problems such as terrorism.~~

Our business is vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, global pandemics, human errors and similar events. The third-party systems and operations on which we rely are subject to similar risks. For example, a significant natural disaster, such as an earthquake, fire or flood, could have an adverse effect on our business, financial condition and operating results, and our insurance coverage may be insufficient to compensate us for losses that may occur. Acts of terrorism could also cause disruptions in our businesses, consumer demand or the economy as a whole. We may not have sufficient protection or recovery plans in some circumstances, such as if a natural disaster affects locations that store a significant amount of our inventory vehicles. As we rely heavily on our computer and communications systems and the internet to conduct our business and provide high-quality customer service, any disruptions could negatively affect our ability to run our business, which could have an adverse effect on our business, financial condition, and operating results.

We believe that we maintain insurance customary for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure. Moreover, any loss incurred could exceed policy limits and policy payments made to us may not be made on a timely basis. For example, insurance we maintain against liability claims may not continue to be available on terms acceptable to us and such coverage may not be adequate to cover the types of liabilities actually incurred. A successful claim brought against us, if not fully covered by available insurance coverage, could materially and adversely affect our business, financial condition and results of operations.

We may acquire other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our results of operations.

Our success will depend, in part, on our ability to grow our business in response to the demands of consumers and other constituents within the automotive industry, as well as competitive pressures. Although we have no plans to do so currently, in some circumstances, we may determine to grow our business through the acquisition of complementary businesses and technologies rather than through internal development. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions. The risks we face in connection with acquisitions include:

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions and investments could cause us to fail to realize the anticipated benefits of these acquisitions or investments, cause us to incur unanticipated liabilities and otherwise harm our business. Future acquisitions also could result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, any of which could harm our financial condition. Also, the anticipated benefits of any acquisitions may not materialize. Any of these risks, if realized, could materially and adversely affect our business, financial condition and results of operations.

We depend on key personnel to operate our business, and if we are unable to retain, attract and integrate qualified personnel, our ability to develop and successfully grow our business could be harmed.

We believe our success has depended, and continues to depend, on the efforts and talents of our executives and employees. Our future success depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. In addition, the loss of any of our key employees or senior management, including our Chief Executive Officer, Paul J. Hennessy, could materially and adversely affect our ability to execute our business plan and strategy, and we may not be able to find adequate replacements on a timely basis, or at all. Our executive officers and other employees are at-will employees, which means they may terminate their employment relationship with us at any time, and their knowledge of our business and industry would be extremely difficult to replace. We may not be able to retain the services of any members of our senior management or other key employees. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business, financial condition and results of operations could be materially and adversely affected.

We rely on third-party technology and information systems to complete critical business functions. If that technology fails to adequately serve our needs, and we cannot find alternatives, it may negatively impact our business, financial condition and results of operations.

We rely on third-party technology for certain of our critical business functions, including customer identity verification for financing, transportation fleet telemetry, network infrastructure for hosting our website and inventory data, software libraries, development environments and tools, services to allow customers to digitally sign contracts and customer experience center management. Our business is dependent on the integrity, security and efficient operation of these systems and technologies. Our systems and operations or those of our third-party vendors and partners could be exposed to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications failure, unauthorized entry, computer viruses, denial-of-service attacks, acts of terrorism, human error, vandalism or sabotage, financial insolvency, bankruptcy and similar events. The failure of these systems to perform as designed, the failure to maintain or update these systems as necessary, the vulnerability of these systems to security breaches or attacks or the inability to enhance our information technology capabilities, and our inability to find suitable alternatives could disrupt our operations and have a material adverse effect on our business, financial condition and results of operations.

~~Our platform utilizes open-source software, and any defects or security vulnerabilities in the open-source software could negatively affect our business.~~

Our platform employs open-source software, and we expect to use open-source software in the future. To the extent that our platform depends upon the successful operation of open-source software, any undetected errors or defects in this open-source software could prevent the deployment or impair the functionality of our platform, delay the introduction of new solutions, result in a failure of our platform and injure our reputation. For example, undetected errors or defects in open-source software could render it vulnerable to breaches or security attacks, and, in conjunction, make our systems more vulnerable to data breaches.

In addition, the terms of various open-source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our platform. Some open-source licenses might require us to make our source code available at no cost or require us to make our source code publicly available for modifications or derivative works if our source code is based upon, incorporates, or was created using the open-source software to license such source code under the terms of the particular open-source license. While we try to insulate our proprietary code from the effects of such open-source license provisions, we cannot guarantee we will be successful. In addition to risks related to open-source license requirements, usage of open-source software can lead to greater risks than use of third-party commercial software, as open-source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with usage of open-source software cannot be eliminated and could materially and adversely affect our business, financial condition and results of operations.

~~Failure to adequately protect our intellectual property, technology and confidential information could harm our business, financial condition and results of operations.~~

The protection of intellectual property, technology and confidential information is crucial to the success of our business. We rely on a combination of trademark, trade secret and copyright law, as well as contractual restrictions, to protect our intellectual property (including our brand, technology and confidential information). While it is our policy to protect and defend our rights to our intellectual property, we cannot predict whether steps taken by us to protect our intellectual property will be adequate to prevent infringement, misappropriation, dilution or other violations of our intellectual property rights. We also cannot guarantee that others will not independently develop technology that has the same or similar functionality as our technology. Unauthorized parties may also attempt to copy or obtain and use our technology to develop competing solutions, and policing unauthorized use of our technology and intellectual property rights may be difficult and may not be effective. Furthermore, we may face claims of infringement of third-party intellectual property that could interfere with our ability to market, promote and sell our brands, products and services. Any litigation to enforce our intellectual property rights or defend ourselves against claims of infringement of third-party intellectual property rights could be costly, divert attention of management and may not ultimately be resolved in our favor. Moreover, if we are unable to successfully defend against claims that we have infringed the intellectual property rights of others, we may be prevented from using certain intellectual property and may be liable for damages, which in turn could materially adversely affect our business, financial condition or results of operations.

As part of our efforts to protect our intellectual property, technology and confidential information, we require certain of our employees and consultants to enter into confidentiality and assignment of inventions agreements, and we also require certain third parties to enter into nondisclosure agreements. These agreements may not effectively grant all necessary rights to any inventions that may have been developed by our employees and consultants. In addition, these agreements may not effectively prevent unauthorized use or disclosure of our confidential information, intellectual property or technology and may not provide an adequate remedy in the event of unauthorized use or disclosure of our confidential information, intellectual property or technology. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our website features, software and functionality or obtain and use information that we consider proprietary. Changes in the law or adverse court rulings may also negatively affect our ability to prevent others from using our technology.

We are currently the registrant of the vroom.com and texasdirectauto.com internet domain names and various other related domain names. The regulation of domain names in the United States is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may not be able to acquire or maintain domain names that are important for our business.

~~In addition, we have certain trademarks that are important to our business, such as the Vroom~~^® ~~and Sell Us Your Car~~^® trademarks. If we fail to adequately protect or enforce our rights under these trademarks, we may lose the ability to use those trademarks or to prevent others from using them, which could adversely harm our reputation and our business, financial condition and results of operations. While we are actively seeking, and have secured registration of several of our trademarks in the U.S. and other jurisdictions, it is possible that others may assert senior rights to similar trademarks, in the U.S. and internationally, and seek to prevent our use and registration of our trademarks in certain jurisdictions. Our pending trademark or service mark applications may not result in such marks being registered.

While software can be protected under copyright law, we have chosen not to register any copyrights in these works, and instead, primarily rely on trade secret law to protect our proprietary software. In order to bring a copyright infringement lawsuit in the United States, the copyright must be registered. Accordingly, the remedies and damages available to us for unauthorized use of our software may be limited. Our trade secrets, know-how and other proprietary materials may be revealed to the public or our competitors or independently developed by our competitors and no longer provide protection for the related intellectual property. Furthermore, our trade secrets, know-how and other proprietary materials may be revealed to the public or our competitors or independently developed by our competitors and no longer provide protection for the related intellectual property.

We may be subject to claims asserting that our employees, consultants or advisors have wrongfully used or disclosed alleged trade secrets of their current or former employers or claims asserting ownership of what we regard as our own intellectual property.

Although we try to ensure that our employees, consultants and advisors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

In addition, while it is our policy to require our employees and contractors who may be involved in the creation or development of intellectual property on our behalf to execute agreements assigning such intellectual property to us, we may be unsuccessful in having all such employees and contractors execute such an agreement. The assignment of intellectual property may not be self-executing or the assignment agreement may be breached, and we may be forced to bring claims against third parties or defend claims that they may bring against us to determine the ownership of what we regard as our intellectual property.

A significant disruption in service on our platform could damage our reputation and result in a loss of customers, which could harm our brand or our business, financial condition and results of operations.

Our brand, reputation and ability to attract customers depend on the reliable performance of our platform and the supporting systems, technology and infrastructure. We may experience significant interruptions to our systems in the future. Interruptions in these systems, whether due to system failures, programming or configuration errors, computer viruses or physical or electronic break-ins, could affect the availability of our inventory on our platform and prevent or inhibit the ability of customers to access our platform. Problems with the reliability or security of our systems could harm our reputation, result in a loss of customers and result in additional costs.

Our data center is located at a facility in Houston, Texas, which connects all of our offices and our Vroom VRC. Our data center is vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, acts of war, electronic and physical break-ins, computer viruses, earthquakes and similar events. The occurrence of any of these events could render communications between Vroom offices inoperable and impact our ability to list and sell vehicles through our platform.

Problems faced by our third-party web-hosting providers, including AWS and Google Cloud, could inhibit the functionality of our platform. For example, our third-party web-hosting providers could close their facilities without adequate notice or suffer interruptions in service caused by cyber-attacks, natural disasters or other phenomena. Disruption of their services could cause our website to be inoperable and could have a material adverse effect on our business, financial condition and results of operations. Any financial difficulties, up to and including bankruptcy, faced by our third-party web-hosting providers or any of the service providers with whom they contract may have negative effects on our business, the nature and extent of which are difficult to predict. In addition, if our third-party web-hosting providers are unable to keep up with our growing capacity needs, our business, financial condition and results of operations could be harmed.

Any errors, defects, disruptions, or other performance or reliability problems with our platform could interrupt our customers’ access to our inventory and our access to data that drives our inventory purchase operations, which could harm our reputation or 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.

We are subject to various litigation matters from time to time, the outcome of which could have a material adverse effect on our business, financial condition and results of operations. Claims arising out of actual or alleged violations of law could be asserted against us by individuals, either individually or through class actions, by governmental entities in civil or criminal investigations and proceedings or by other entities. These claims could be asserted under a variety of laws, including but not limited to consumer finance laws, consumer protection laws, intellectual property laws, privacy laws, labor and employment laws, securities laws and employee benefit laws. These actions could expose us to adverse publicity and to substantial monetary damages and legal defense costs, injunctive relief and criminal and civil fines and penalties, including but not limited to suspension or revocation of licenses to conduct business. See “Item 1. Legal Proceedings” elsewhere in Part II of this Quarterly Report on Form 10-Q.

~~We may be limited in our ability to utilize, or may not be able to utilize, net operating loss carryforwards to reduce our future tax liability.~~

As of December 31, 2019 we had U.S. federal net operating loss (“NOL”) carryforwards of $312.8 million, the utilization of which may be limited annually due to certain change in ownership provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Some of our U.S. federal NOL carryforwards will begin to expire in 2034, with the remaining losses having no expiration. As of December 31, 2019, we maintain a full valuation allowance of $75.0 million for our net deferred tax assets.

An “ownership change” (generally defined as greater than 50-percentage-point cumulative changes in the equity ownership of certain stockholders over a rolling three-year period) under Section 382 of the Code may limit our ability to utilize fully our pre-change NOL carryforwards to reduce our taxable income in periods following the ownership change. In general, an ownership change would limit our ability to utilize U.S. federal NOL carryforwards to an amount equal to the aggregate value of our equity at the time of the ownership change multiplied by a specified tax-exempt interest rate, subject to increase by certain built-in gains. Similar provisions of state tax law may also apply to our state NOL carryforwards. We believe we have undergone an ownership change for purposes of Section 382 of the Code in each of 2013, 2014 and 2015, which substantially limits our ability to use U.S. federal NOL carryforwards generated prior to each such ownership change. In addition, future changes in our stock ownership, some of which may be beyond our control, could result in additional ownership changes under Section 382 of the Code.

~~We may need to recognize impairment charges related to goodwill, identified intangible assets and fixed assets.~~

We are required to test goodwill and any other intangible asset with an indefinite life for possible impairment on the same date each year and on an interim basis if there are indicators of a possible impairment. There is significant judgment required in the analysis of a potential impairment of goodwill, identified intangible assets and other long-lived assets. If, as a result of a general economic slowdown or deterioration in one or more of the markets in which we operate or in our financial performance or future outlook, or if the estimated fair value of our long-lived assets decreases, we may determine that one or more of our long-lived assets is impaired. An impairment charge would be determined based on the estimated fair value of the assets and any such impairment charge could have a material adverse effect on our business, financial condition and results of operations.

We are subject to U.S. federal income tax, as well as income tax in certain states. Our provision for income taxes and cash tax liability in the future could be adversely affected by numerous factors including, changes in tax laws, regulations, accounting principles or interpretations thereof, which could materially and adversely impact our cash flows and our business, financial condition and results of operations in future periods. Increases in our effective tax rate could also materially affect our net results. The Tax Cuts and Jobs Act (the “TCJA”), which was enacted in 2017, significantly reformed the Code. The TCJA, among other things, contained significant changes to corporate taxation, including a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitations on the deduction for NOL carryforwards and the elimination of NOL carrybacks, in each case, for losses generated after December 31, 2017 (though any such NOLs may be carried forward indefinitely), and limitations on deductions for interest expense. The consolidated financial statements contained herein reflect the effects of the TCJA based on current guidance. However, there remain uncertainties and ambiguities in the application of certain provisions of the TCJA, and, as a result, we made certain judgments and assumptions in the interpretation thereof. The U.S. Treasury Department and the Internal Revenue Service (the “IRS”), may issue further guidance on how the provisions of the TCJA will be applied or otherwise administered that differs from our current interpretation. In addition, the TCJA could be subject to potential amendments and technical corrections, any of which could materially lessen or increase certain adverse impacts of the legislation on us. Further, we are subject to the examination of our income and other tax returns by the IRS and state and local tax authorities, which could have an impact on our business, financial condition and results of operations.

Our level of indebtedness could have a material adverse effect on our ability to generate sufficient cash to ~~fulfil~~fulfill our obligations under such indebtedness, to react to changes in our business and to incur additional indebtedness to fund future needs.

As of ~~June~~September 30, ~~2020,~~2023, we had outstanding ~~$109.8~~$212.5 million aggregate principal amount of borrowings under our ~~2020~~2022 Vehicle Floorplan Facility ~~(as defined in “Management’s Discussion~~ and ~~Analysis~~$332.5 million aggregate principal amount of ~~Financial Condition and Results of Operations—Liquidity and Capital Resources—Vehicle Financing”~~our 0.75% Convertible Senior Notes due 2026 (the "Notes"). Our interest expense was ~~$1.3~~$4.9 million and ~~$4.1~~$14.1 million for the three and ~~six~~nine months ended ~~June~~September 30, ~~2020, respectively.~~2023, respectively, related to the 2022 Vehicle Floorplan Facility. In addition, as of September 30, 2023, UACC had $361.9 million of securitization indebtedness as well as four senior secured warehouse facility agreements the (“Warehouse Credit Facilities”) with banking institutions, with an aggregate borrowing limit of $825.0 million. As of September 30, 2023, there was $294.7 million in outstanding borrowings related to the Warehouse Credit Facilities. In the nine months ended September 30, 2023, we repurchased $32.8 million in aggregate principal amount of our Notes, net of deferred issuance costs, in open market transactions for $13.2 million. Subject to market conditions and availability, we may continue to opportunistically repurchase Notes from time to time to reduce our outstanding indebtedness at a discount. However, we may be unable to repay, restructure or refinance the remaining Notes.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets ~~seek additional capital~~ or restructure or refinance our indebtedness. We intend to seek additional equity or debt financing to fund our operations and support the extension of our vehicle floorplan financing with Ally, which could include a restructuring of some or all of our outstanding debt. Our ability to restructure or refinance our current or future debt or obtain additional debt financing will depend on the condition of the capital markets and our financial condition at such ~~time.~~time, including the continued execution of our long-term roadmap and our ability to demonstrate a path to long-term profitable growth. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. Any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis or failure to comply with certain restrictions in our debt instruments would result in a default under our debt instruments. In the event of a default under any of our current or future debt instruments, the lenders could elect to declare all amounts outstanding under such debt instruments to be due and payable. Furthermore, our ~~2020 Vehicle Floorplan Facility, which replaced our prior~~2022 Vehicle Floorplan Facility restricts our ability to dispose of assets and/or use the proceeds from the ~~disposition.~~disposition, and any amended or alternative vehicle floorplan facility may include similar

restrictions. We may not be able to consummate any such dispositions or to obtain the proceeds that we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.

In addition, our indebtedness under our ~~2020~~2022 Vehicle Floorplan Facility bears interest at variable ~~rates. Because we have~~rates, and any amended or alternative floorplan facility may bear interest at variable ~~rate debt,~~rates as well. As a result, fluctuations in interest rates may affect our cash flows or business, financial condition and results of operations. In addition, any future funding arrangements may be at higher interest rates or subject to other less favorable terms. We may attempt to minimize interest rate risk and lower our overall borrowing costs through the utilization of derivative financial instruments, primarily interest rate swaps.

The issuance by us of additional shares of common stock or convertible securities would significantly dilute your ownership of us and could adversely affect our stock price.

We ~~currently rely on an agreement with~~intend to seek additional equity or debt financing. The issuance of any additional capital stock would result in significant dilution to our stockholders. We also expect to continue to grant equity awards to employees, directors and consultants under our equity incentive plans. From time to time in the future, we may also issue additional shares of our common stock or securities convertible into common stock pursuant to a ~~single lender~~variety of transactions, including acquisitions. The issuance by us of additional shares of our common stock or securities convertible into our common stock would dilute your ownership of us and the sale of a significant amount of such shares in the public market could adversely affect prevailing market prices of our common stock.

The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, could depress the trading price of our common stock and our notes, and would significantly dilute existing stockholders.

We intend to seek additional equity or debt financing to fund our current operations and support the extension of our vehicle floorplan financing, which may include offerings of our common stock, preferred stock or other securities that are convertible into or exercisable for our common stock to finance our operations or fund acquisitions, or for other purposes. In addition, as of September 30, 2023, we had reserved 4,074,751 shares of our common stock for issuance under our equity incentive plans. The Indenture for our Notes does not restrict our ability to issue additional equity securities. If we issue or sell additional shares of our common stock or rights to acquire shares of our common stock, if any of our existing stockholders sells a substantial amount of our common stock, or if the market perceives that such issuances or sales may occur, then the trading price of our common stock, and, accordingly, our Notes may significantly decline. In addition, our issuance or sale of additional shares of common stock would significantly dilute the ownership interests of our existing common stockholders, including noteholders who receive shares of our common stock upon conversion of their Notes.

Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our common stock to decline.

We intend to seek additional equity or debt financing to fund our current operations and support the extension of our vehicle ~~inventory purchases~~floorplan financing, which may include the sale of substantial amounts of shares of our common stock in the public or private markets. Such sales of shares or the perception that such sales could occur could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. Other than shares held by our affiliates, stockholders who held our capital stock prior to completion of our IPO now hold freely tradable shares of our common stock without restriction or further registration requirements under the Securities Act, and therefore they may take steps to sell their shares or otherwise secure any unrecognized gains on those shares. Additionally, any shares of common stock held by our affiliates are eligible for resale pursuant to Rule 144 under the Securities Act, subject to the volume, manner of sale, holding period and other limitations of Rule 144.

We filed a registration statement on Form S-8 to register shares of our common stock issued or reserved for issuance under our 2020 ~~Vehicle Floorplan Facility. If~~Incentive Award Plan and Second Amended and Restated 2014 Equity Incentive Plan, as well as a registration statement on Form S-8 to register shares of our ~~relationship with this lender were~~common stock issued or reserved for issuance under our 2022 Inducement Award Plan. Subject to ~~terminate, and~~the satisfaction of vesting conditions, shares registered under these registration statements on Form S-8 became available for resale immediately in the public market without restriction.

Further, certain holders of our common stock have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we ~~fail~~may file on our behalf or for other stockholders.

We are unable to ~~acquire alternative sources~~predict the timing of ~~funding to finance~~or the effect that such sales may have on the prevailing market price of our ~~vehicle inventory purchases, we~~common stock, which in turn may impact our continued listing on Nasdaq. See “We may be unable to ~~maintain sufficient inventory,~~satisfy a continued listing rule from the Nasdaq”.

The Nasdaq Stock Market LLC ("Nasdaq") maintains several requirements for continued listing of our common stock, one of which is the maintenance of a minimum closing bid price of $1.00. On April 14, 2023, we received written notice from Nasdaq notifying us that, for the last 30 consecutive business days, the bid price for our common stock had closed below the $1.00 minimum bid price requirement for continued inclusion on the Nasdaq Global Select Market. The notice had no immediate effect on the listing of our common stock, which continues to trade on the Nasdaq Global Select Market under the symbol "VRM". Pursuant to the Nasdaq listing rules, we were provided a period of 180 calendar days, or until October 11, 2023, to regain compliance with the minimum closing bid price requirement of at least $1.00 per share for a minimum of 10 consecutive business days. On June 23, 2023, we received written notice from Nasdaq informing us that, from June 8, 2023 to June 22, 2023, our minimum bid price had been $1.00 per share or higher and, accordingly, we had regained compliance with Nasdaq Listing Rule 5450(a)(1) and that the matter was now closed. However, there can be no assurance that our common stock will continue to close at or above the $1.00 per share minimum bid price as required by Nasdaq, or that we will otherwise meet the requirements of Nasdaq for continued inclusion for trading on Nasdaq Global Select Market.

If our common stock again closes below the $1.00 per share minimum bid price required by Nasdaq for 30 consecutive business days, we would receive another written notice of non-compliance with Nasdaq’s listing standards and be provided a period of 180 calendar days from the date of such notice to regain compliance with the minimum closing bid price requirement of at least $1.00 per share for a minimum of 10 consecutive business days.

We intend to actively monitor the closing bid price of our common stock and, if we lose compliance with Nasdaq’s minimum bid price closing requirements, will consider all available options to regain compliance.

If our common stock is delisted in the future, it is unlikely that we will be able to list our common stock on another national securities exchange and, as a result, we expect our securities would be quoted on an over-the-counter market. If this were to occur, we and our stockholders could face significant material adverse consequences, including limited availability of market quotations and analyst coverage for our common stock, and reduced liquidity for the trading of our securities. In addition, a delisting would constitute a fundamental change under the terms of our Indenture and make our Notes redeemable at par upon delisting (as described further below), and we could also experience a decreased ability to issue additional securities and obtain additional financing in the future. Delisting also could result in, among other things, a loss of investor confidence or interest in strategic transactions or opportunities, us being subject to regulation in each state in which we offer our securities, and difficulty in recruiting and retaining personnel through equity incentive awards.

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.~~operations and impair our ability to satisfy our debt obligations.

As of September 30, 2023, we, including our subsidiaries, had approximately $1,225.5 million principal amount of consolidated indebtedness. We ~~rely on a revolving credit agreement with a single lender~~intend to ~~finance~~seek additional equity or debt financing to fund our current operations and support the extension of our vehicle ~~inventory purchases under~~floorplan financing. Our indebtedness could have significant negative consequences for our ~~2020 Vehicle Floorplan Facility. Outstanding borrowings~~security holders and our business, results of operations and financial condition by, among other things:

Our business may not generate sufficient funds, and ~~the 2020 Vehicle Floorplan Facility is secured by our vehicle inventory and certain other assets. If~~ we ~~are~~may otherwise be unable to maintain sufficient cash reserves, or to pay amounts due under our ~~2020 Vehicle Floorplan Facility, which expires~~indebtedness, and our cash needs may increase in ~~March 2021 absent renewal, on favorable terms or at all, or if~~ the ~~agreement is terminated or expires and is not renewed with~~future. In addition, our existing ~~third-party lender~~indebtedness contains, and any future indebtedness that we may incur may contain, financial and other restrictive covenants that may limit our ability to operate our business, raise capital or make payments under our other indebtedness. For example, on April 14, 2023, we ~~are unable~~received written notice from Nasdaq notifying us that, for the prior 30 consecutive business days, the bid price for our common stock had closed below the $1.00 minimum bid price requirement for continued inclusion on the Nasdaq Global Select Market. On June 23, 2023, we received written notice from Nasdaq informing us that, from June 8, 2023 to ~~find a satisfactory replacement,~~June 22, 2023, our ~~inventory supply may decline, resulting in fewer vehicles available~~minimum bid price had been $1.00 per share or higher and, accordingly, we had regained compliance with the Nasdaq listing rules. If our common stock again closes below the $1.00 per share minimum bid price required by Nasdaq for ~~sale on our website. Moreover, new funding arrangements~~30 consecutive business days, we would receive another notice of non-compliance with Nasdaq's listing standards and may be provided a period of 180 calendar days from the date of such notice to regain compliance with the minimum bid closing price requirement of at ~~higher interest rates~~least $1.00 per share for a minimum of 10 consecutive business days. However, there can be no assurance that our common stock will continue to close at or ~~subject~~above the $1.00 per share minimum bid price as required by Nasdaq, or that we will otherwise meet the requirements of Nasdaq for continued inclusion for trading on Nasdaq Global Select Market. The delisting of our common stock from the Nasdaq Global Select Market would constitute a fundamental change under the terms of our Indenture and make our Notes redeemable at par upon delisting. If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other ~~less favorable terms. These financing risks,~~indebtedness becoming immediately payable in addition to potential rising interest rates and changes in market conditions, if realized, could negatively impact our business, financial condition and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Vehicle Financing.”

Our common stock price may be volatile and the value of our common stock has declined since our initial public offering and may continue to decline regardless of our operating performance, and you may not be able to resell your shares at or above the price which you paid for them.

It is possible that an active trading market for shares of our common stock will not be sustained, which could make it difficult for you to sell your shares of common stock at an attractive price or at all.

Many factors, some of which are outside our control, may cause the market price of our common stock to fluctuate significantly, including those described ~~elsewhere~~ in this “Risk Factors” section and ~~this Quarterly~~the "Risk Factors" section in our Annual Report, ~~on Form 10-Q,~~ as well as the following:

As a result, volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the price which they paid for them. These broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock is low. As a result, you may suffer a loss on your investment. Broad market and industry fluctuations, as well as general economic, political, regulatory, and market conditions, may negatively impact the market price of our common stock.

We have recently experienced significant declines in the market price of our common stock, and it could continue to decline in the future, including as a result of the execution, and implementation of our long-term roadmap. Based upon the decline in our stock price, we recorded a goodwill impairment charge in our condensed consolidated statement of operations for the quarter ended March 31, 2022. See Note 8 to our Consolidated Financial Statements in our Annual Report. Further declines in our stock price could, among other things, make it more difficult to raise capital on terms acceptable to us, or at all, and make it difficult for our investors to sell their shares of common stock. If our stock price continues to close below $1.00 per share minimum bid price for 30 consecutive business days we would be out of compliance with the $1.00 per share minimum bid price requirement for continued inclusion on the Nasdaq Global Select Market and our stock would be at risk of delisting. See "Risk Factors—We may be unable to satisfy a continued listing rule from the Nasdaq" and "Risk Factors—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" for more information on the risk of delisting from the Nasdaq Global Select Market. In ~~the past,~~addition, companies that ~~have experienced~~experience volatility in the market price of their securities ~~have been~~often are the subject toof securities class action litigation. For example, a consolidated class action is pending in the U.S. District Court for the Southern District of New York against us, certain of our officers, and certain of our directors, among others, alleging violations of the federal securities laws. See Part II, Item 1. “Legal Proceedings.”

We may not realize the anticipated benefits of the UACC Acquisition or realization of those benefits could take longer than anticipated.

We acquired UACC with the expectation that the transaction would result in benefits to our business over time, including the benefits of a captive finance arm that would enable us to increase ecommerce unit sales, expand our penetration into non-prime sales, accelerate total revenue growth, enhance aggregate gross profit and GPPU, and leverage our fixed cost base. We expect that the development of our captive financing capabilities through the UACC Acquisition will be a significant element of our path to profitability and help position us for long-term growth in accordance with our long-term roadmap. Achieving these benefits will require the ~~target~~successful integration, development and operation of ~~this type~~the combined businesses and it is not certain that we will succeed in those efforts. If we fail to fully integrate, develop

and operate the combined businesses, we may not realize the benefits we expect to receive from the transaction or realization of those benefits may take substantially longer than anticipated. In addition to these operational risks, ownership of a captive lender will subject us to increased legal and regulatory scrutiny of our lending operations, including credit bureau reporting, credit underwriting practices and debt collection practices.

In addition, with regard to UACC’s financing, subject to market conditions, we intend to maintain a hybrid funding approach through the use of off-balance sheet securitization transactions and forward flow arrangements. Achievement of off-balance sheet accounting treatment requires the Company to sell all of the rated notes and residual certificates in the securitization, subject to holding 5% vertical risk retention. Execution of securitization transactions, including achievement of off-balance sheet accounting treatment for those transactions, is subject to market conditions. Even if UACC is able to complete its securitizations, it may not be able to sell its lower-rated securities or residual interests and those securitizations may not qualify for off-balance sheet accounting treatment, resulting in retention of the underlying loans (or residual interests) on our consolidated balance sheet, which could have an adverse impact on our liquidity. For example, as a result of current market conditions, which led to unfavorable pricing, we retained the non-investment grade securities and residual interests in UACC's 2023-1 securitization, requiring that the transaction remain on balance sheet pending the sale of the additional retained interests. Although we subsequently sold the non-investment grade securities, we continue to hold the residual interests. There can be no assurance that these residual interests will be sold and off-balance sheet treatment will be achieved in the future ~~which~~for this transaction. In addition, as a result of increasing interest rates, the current inflationary environment and vehicle depreciation in the used automotive industry, UACC is experiencing higher losses in a soft securitization market. Due to the increased losses, UACC elected to waive monthly servicing fees related to the 2022-2 securitization transaction in the first quarter of 2023. The waiver of monthly servicing fees related to the 2022-2 securitization transaction resulted in consolidation of the related finance receivables and securitization debt on our financial statements. Waiver of monthly servicing fees also results in reduced servicing income. Any future waivers of monthly servicing fees on other prior off-balance sheet securitization transactions could result in ~~substantial costs~~consolidation of such transactions. Such future consolidations could increase our indebtedness and ~~divert our management’s attention.~~

~~We do not intend to pay dividends~~may have a material adverse effect on our ~~common stock for the foreseeable future.~~

We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a result, we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our business prospects, results of operations, financial condition and liquidity.

UACC may be unable to sell automotive finance receivables and generate gains on sales of those finance receivables, which could harm our business, results of operations, and financial condition.

UACC provides indirect financing by drawing on its Warehouse Credit Facilities to purchase motor vehicle retail installment sales contracts and pledging eligible finance receivables as collateral, then typically selling the receivables related to the financing contract. Certain advance rates available to UACC on borrowings from the Warehouse Credit Facilities have decreased as a result of the increasing credit losses in UACC's portfolio and overall rising interest rates. Any future decreases on available advance rates may have an adverse impact on our liquidity. In addition, UACC has entered into arrangements to sell automotive finance receivables that it purchases, such as securitizations, and we expect UACC to enter into additional securitizations, loan sales to financing partners and other new arrangements in the future, subject to market conditions. If UACC is not able to sell receivables under these current or future arrangements for a variety of reasons, including increased credit losses or because it has reached its capacity under the arrangements, its financing partners exercise termination rights before it reaches capacity, general economic or credit market conditions, market disruption or it reaches the scheduled expiration date of the commitment, and it is not able to enter into new arrangements on similar terms, it may not have adequate liquidity and our business, financial condition and results of operations may be adversely affected. For example, as a result of current market conditions, which led to unfavorable pricing, we retained the non-investment grade securities and residual interests in UACC's 2023-1 securitization, requiring that the transaction remain on balance sheet pending the sale of the additional retained interests. Although we subsequently sold the non-investment grade securities, we continue to hold the residual interests. There can be no assurance that these residual interests will be sold and off-balance sheet treatment will be achieved in the future for this transaction. Furthermore, if its financing partners do not purchase these receivables, we could be subject to the risk that some of these receivables are not paid when due and be forced to incur unexpected asset write-offs and bad-debt expense. In addition, as a result of increasing interest rates, the current inflationary environment and vehicle depreciation in the used automotive industry, UACC is experiencing higher loss severity in a soft securitization market. Due to the increased loss severity, UACC elected to waive monthly servicing fees related to the 2022-2 securitization transaction in the first quarter of 2023. The waiver of monthly servicing fees related to the 2022-2 securitization transaction resulted in consolidation of the related finance receivables and securitization debt on our financial statements. Waiver of monthly servicing fees also results in reduced servicing income. Any future waivers of monthly servicing fees on other prior off-balance sheet securitization transactions could result in consolidation of such transactions. Such future consolidations could increase our indebtedness and may have a material adverse effect on our results of operations, financial condition and liquidity.

UACC's securitizations may expose it to financing and other risks, and there can be no assurance that it will be able to access the securitization market in the future, which may require it to seek more costly financing.

UACC has securitized, and we expect will in the future securitize, certain of its automotive finance receivables to generate cash. In such transactions, it conveys a pool of automotive finance receivables to a special purpose vehicle, typically a trust that, in turn, issues certain securities. The securities issued by the special purpose vehicle are collateralized by the pool of automotive finance receivables. In exchange for the transfer of finance receivables to the special purpose vehicle, UACC typically receives the cash ~~requirements~~proceeds from the sale of the securities.

There can be no assurance that UACC will be able to complete additional securitizations in the future, particularly if the securitization markets become increasingly constrained. In addition, the value of any securities that UACC may retain in its securitizations, including securities retained to comply with applicable risk retention rules, might be reduced or, in some cases, eliminated as a result of an adverse change in economic conditions or the financial markets. For example, on April 18, 2023, UACC's BB-rated securities from the 2022-2 securitization transaction were downgraded by one ratings agency to a single-B rating. UACC's other rated securities may also be downgraded or put on negative credit watch. Furthermore, although our intent is to sell receivables originated by UACC using off-balance sheet securitization transactions, even if UACC is able to complete its securitizations, those securitizations may not qualify for sales accounting if market conditions do not allow for the sale of lower-rated securities or residual certificates. For example, as a result of current market conditions, which led to unfavorable pricing, we retained the non-investment grade securities and ~~availability,~~residual interests in UACC's 2023-1 securitization, requiring that the transaction remain on balance sheet pending the sale of the additional retained interests. Although we subsequently sold the non-investment grade securities, we continue to hold the residual interests. There can be no assurance that these residual interests will be sold and off-balance sheet treatment will be achieved in the future for this transaction. In addition, as a result of increasing interest rates, the current inflationary environment and vehicle depreciation in the used automotive industry, ~~trends~~UACC is experiencing higher losses in a soft securitization market. The increased losses could lead to reduced servicing income if UACC elects to waive monthly servicing fees going forward as it did in the first quarter of 2023 on the 2022-2 securitization transaction. The waiver of monthly servicing fees on the 2022-2 securitization transaction resulted in consolidation of the related finance receivables and securitization debt on Vroom’s financial statements. If it is not possible or economical for UACC to securitize its automotive finance receivables in the future, it would need to seek alternative financing to support its operations and to meet its existing debt obligations, which may be less efficient and more expensive than raising capital via securitizations and may have a material adverse effect on our results of operations, financial condition, and liquidity.

UACC is currently experiencing increasing credit losses in interests it holds in automotive finance receivables and its credit scoring systems may not effectively forecast its automotive receivables loss rates. Higher than anticipated credit losses or prepayments or the inability to effectively forecast loss rates have and may continue to negatively impact its operating results.

UACC is currently experiencing increasing credit losses on its finance receivables, which has negatively impacted the fair value of our financial receivables and the losses recognized during 2022 and 2023. Increasing credit losses may continue to negatively impact our business during 2023, especially due to the fact that UACC primarily operates in the sub-prime sector of the market. As UACC has become and will continue to be an increasingly significant part of our consolidated operations, our business, results of operations, and financial condition is increasingly vulnerable to adverse developments in UACC's business.

Until UACC sells automotive finance receivables, and to the extent it retains interests in automotive finance receivables after it sells them, whether pursuant to securitization transactions or otherwise, UACC is exposed to the risk that applicable customers will be unable or unwilling to repay their loans according to their terms and that the vehicle collateral securing the payment of their loans may not be sufficient to ensure full repayment. Additionally, higher energy prices (including the price of gasoline) and other consumer prices, unstable real estate values, reset of adjustable-rate mortgages to higher interest rates, geopolitical tensions (including outbreaks of military hostilities such as the ongoing geopolitical conflicts and war in Europe and the Middle East), interest rate increases, regional bank failures, inflation and other factors ~~that our board of directors may deem relevant. Any such decision also will be subject to compliance with contractual restrictions~~can affect consumer confidence and ~~covenants~~disposable income. While credit losses are inherent in the ~~agreements governing~~automotive finance receivables business, these conditions can increase loss frequency and severity, decrease consumer demand for motor vehicles and weaken collateral values on certain types of motor vehicles in any period of extended economic slowdown or recession and could have a material adverse effect on our ~~current indebtedness.~~results of operations. Because UACC focuses predominately on sub-prime borrowers, the actual rates of delinquencies, defaults, repossessions and losses on its receivables are higher than those experienced in the general motor vehicle finance industry and may be affected to a

greater extent during an economic downturn. In addition, wecaps on interest rates by individual states may ~~incur additional indebtedness,~~limit UACC's ability to offset rising interest rates against automotive financing rates it offers to dealers.

In addition, the ~~terms~~success of ~~which may further restrict or prevent us from paying dividends~~UACC's business is highly dependent on ~~our common stock.~~the ability to securitize and sell the automotive finance receivables that it underwrites. As a result ~~you may have to sell some or all~~ of ~~your common stock after price appreciation~~increasing interest rates, the current inflationary environment and vehicle depreciation in ~~order to generate cash flow from your investment, which you~~the used automotive industry, UACC is experiencing higher losses in a soft securitization market. As a result, UACC may not be able to ~~do. Our inability~~sell the subordinate notes or ~~decision not to pay dividends could also adversely affect the market price of our common stock.~~

~~We may issue shares of preferred stock~~residual certificates issued in the ~~future, which could make it difficult for another company~~securitizations at a favorable price or at all. Due to ~~acquire us or could otherwise adversely affect holders~~the increased losses, UACC elected to waive monthly servicing fees related to the 2022-2 securitization transaction in the first quarter of ~~our common stock, which could depress~~2023. The waiver of monthly servicing fees related to the ~~price of our common stock.~~

Our amended and restated certificate of incorporation authorizes us to issue one or more series of preferred stock. Our board of directors has the authority to determine the preferences, limitations and relative rights2022-2 securitization transaction resulted in consolidation of the ~~shares of preferred stock~~related finance receivables and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium to the market price, and materially and adversely affect the market price and the voting and other rights of the holders of our common stock.

~~The issuance by us of additional shares of common stock or convertible securities~~ ~~may dilute your ownership of us~~ ~~and could adversely affect our stock price.~~

We may issue additional capital stock in the future that will result in dilution to all other stockholders. We also expect to grant equity awards to employees, directors and consultants under our equity incentive plans. From time to time in the future, we may also issue additional shares of our common stock or securities convertible into common stock pursuant to a variety of transactions, including acquisitions. The issuance by us of additional shares of our common stock or securities convertible into our common stock would dilute your ownership of us and the sale of a significant amount of such shares in the public market could adversely affect prevailing market prices of our common stock.

~~Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our common stock to decline.~~

The sale of substantial amounts of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. Many of our stockholders who held our capital stock prior to the completion of our IPO have substantial unrecognized gains on the value of the equity they hold based upon the price at which shares were sold in our IPO, and therefore they may take steps to sell their shares or otherwise secure the unrecognized gains on those shares. We are unable to predict the timing of or the effect that such sales may have on the prevailing market price of our common stock.

Our executive officers, directors and the holders of substantially all of our outstanding stock who held our common stock prior to the completion of our IPO are subject to lock-up agreements that, subject to certain customary exceptions, restrict the sale of the shares of our common stock and certain other securities held by them during the period ending on, and including, the 180th day following the date of our IPO. Goldman Sachs & Co. LLC may, in their sole discretion and at any time without notice, release all or any portion of the shares or securities subject to any such lock-up agreements. If not earlier released, such shares will become eligible for sale upon expiration of the 180-day lockup period, subject to the requirements of Rule 144 under the Securities Act.

As restrictions on resale end, the market price of our shares of common stock could drop significantly if the holders of such restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of common stock or other securities.

In addition, as of June 30, 2020, there were 3,093,498 shares of common stock issuable upon the exercise of options outstanding. In connection with our IPO, we registered shares of our common stock issued or reserved for issuance under our 2020 Incentive Award Plan and Second Amended and Restated 2014 Equity Incentive Plan. Subject to the satisfaction of vesting conditions and the expiration of lockup agreements, shares registered under the registration statement on Form S-8 will be available for resale immediately in the public market without restriction.

Further, certain holders of approximately 85,533,394 shares of our common stock have rights, subject to some conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may filesecuritization debt on our ~~behalf or for~~financial statements. Waiver of monthly servicing fees also results in reduced servicing income. Any future waivers of monthly servicing fees on other ~~stockholders.~~

The obligations associated with being a public company require significant resources and management attention, and we have and will continue to incur increased costs as a result of becoming a public company.

As a public company, we face increased legal, accounting, administrative and other costs and expenses that we did not incur as a private company. We expect to continue to incur significant costs related to operating as a public company. We are subject to the Exchange Act, the rules and regulations implemented by the SEC, the Sarbanes-Oxley Act, the Wall Street Reform and Consumer Protection Act of 2020 (the “Dodd-Frank Act”), the Public Company Accounting Oversight Board (“PCAOB”) and the rules and standards of the exchange upon which our securities are listed, each of which imposes additional reporting and other obligations on public companies. As a public company, we are required to, among other things:

These rules and regulations and changes in laws, regulations and standards relating to corporate governance and public disclosure, which have created uncertainty for public companies, have and will continue to increase our legal and financial compliance costs and make some activities more time consuming and costly. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. Thisprior off-balance sheet securitization transactions could result in ~~continuing uncertainty regarding compliance matters~~consolidation of such transactions. Such future consolidations could increase our indebtedness and ~~higher costs necessitated by ongoing revisions~~may have a material adverse effect on our results of operations, financial condition and liquidity.

UACC makes various assumptions and judgments about the automotive finance receivables it originates and may establish a valuation allowance and value beneficial ownership interests based on a number of factors. Although management may establish a valuation allowance and value beneficial ownership interests based on analysis it believes is appropriate, this may not be adequate, particularly in periods of increased industry-wide vehicle depreciation rates, which we are currently experiencing. For example, if economic conditions were to ~~disclosure~~deteriorate unexpectedly, additional loan losses not incorporated in the existing valuation may occur. Several variables have affected UACC’s recent loss and ~~governance practices. Our investment~~delinquency rates, including general economic conditions and market interest rates, and such variables are likely to differ in ~~compliance with existing~~the future. In particular, given the impact the COVID-19 pandemic had on the economy and ~~evolving regulatory requirements has~~individuals, historical loss and ~~will continue~~delinquency expectations may not accurately predict the performance of UACC's receivables and impact its ability to ~~result~~effectively forecast loss rates. Losses in ~~increased administrative expenses and a diversion~~excess of ~~management’s time and attention from revenue-generating activities to compliance activities, which~~expectations could have a material adverse effect on our business, ~~financial condition and results of operations.~~

In addition, the need to establish the corporate infrastructure demanded of a public company may also divert management’s attention from implementing our business strategy, which could prevent us from improving our business, financial condition and results of operations. If we do not continue to develop and implement the right processes and tools to manage our changing enterprise and maintain our culture, our ability to compete successfully and achieve our business objectives could be impaired, which could negatively impact our business, financial condition and results of operations. In addition, we cannot predict or estimate the amount of additional costs we may incur to comply with these requirements. We anticipate that these costs will materially increase our general and administrative expenses.

Being a public company and complying with applicable rules and regulations could also make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers.

~~As a public reporting company, we are subject to rules and regulations established from time to time by the SEC and Nasdaq regarding our internal control over financial reporting.~~ If we fail to establish and maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results, or report them in a timely manner.

We are a public reporting company subject to the rules and regulations established from time to time by the SEC and Nasdaq. These rules and regulations will require, among other things, that we establish and periodically evaluate procedures with respect to our internal control over financial reporting. Reporting obligations as a public company place a considerable strain on our financial and management systems, processes and controls, as well as on our personnel.

In addition, as a public company, we will be required to document and test our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act so that our management can certify as to the effectiveness of our internal control over financial reporting. Section 404(a) of the Sarbanes-Oxley Act (“Section 404(a)”) requires that, beginning with our second annual report following our IPO, management assess and report annually on the effectiveness of our internal control over financial reporting and identify any material weaknesses in our internal control over financial reporting. Additionally, Section 404(b) requires our independent registered public accounting firm to issue an annual report that addresses the effectiveness of our internal control over financial reporting. We expect our first Section 404(a) assessment will take place for our annual report for the year ending December 31, 2021. We also expect to comply with Section 404(b) at that time. We have not yet commenced the costly and challenging process of compiling the system and process documentation necessary to perform the evaluation needed to comply with Section 404(a), and we may not be able to complete our evaluation, testing and any required remediation in a timely fashion once initiated. Our compliance with Section 404(a) will require that we incur substantial expenses and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404(a).

If our senior management is unable to conclude that we have effective internal control over financial reporting, or to certify the effectiveness of such controls, and our independent registered public accounting firm cannot render an unqualified opinion on management’s assessment and the effectiveness of our internal control over financial reporting at such time as it is required to do so, and material weaknesses in our internal control over financial reporting are identified, we could be subject to regulatory scrutiny, a loss of public and investor confidence, and to litigation from investors and stockholders, which could have a material adverse effect on our business and our stock price. In addition, if we do not maintain adequate financial and management personnel, processes and controls, we may not be able to manage our business effectively or accurately report our financial performance on a timely basis, which could cause a decline in our common stock price and adversely affect our business, financial condition and results of operations. Failure to comply with the Sarbanes-Oxley Act could potentially subject us to sanctions or investigations by the SEC, the exchange upon which our securities are listed or other regulatory authorities, which would require additional financial and management resources.

We have identified material weaknesses in our internal control over financial reporting. If our remediation of such material weaknesses is not effective, or if we experience additional material weaknesses or otherwise fail to design and maintain effective internal control over financial reporting, our ability to timely and accurately report our financial condition and results of operations, ~~or comply with applicable laws~~ and ~~regulations could~~financial condition. Further, the rate of prepayments cannot be ~~impaired, which~~predicted and may ~~adversely affect investor confidence~~be influenced by a variety of factors, including changes in usthe economic and ~~as a result, the value~~social conditions of our ~~common stock.~~borrowers.

UACC relies on its internally developed credit scoring systems to ~~maintain internal control over financial reporting and will be required~~forecast loss rates of the automotive finance receivables it originates. If it relies on systems that fail to ~~evaluate and determine the effectiveness of our internal control over financial reporting. Beginning with our second annual report~~effectively forecast loss rates on Form 10-K following our IPO, we will be required to provide a management report on internal control over financial reporting, as well as an attestation of our independent registered public accounting firm.

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2018, we identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

We did not design or maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient complement of personnel with (i) an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately, and (ii) an appropriate level of knowledge and experience to establish effective information technology processes and controls. This material weakness contributedreceivables it originates, those receivables may suffer higher losses than expected. UACC’s credit scoring systems were developed prior to the ~~following material weaknesses:~~

~~The control deficiencies described above did not result in a misstatement to our annual consolidated financial statements. However, each~~take into account the effect of the ~~material weaknesses described above, if not remediated, could result in a misstatement of one or more account balances or disclosures that would result in a material misstatement~~economic, financial and social disruptions resulting from the pandemic. UACC generally seeks to ~~the annual or interim consolidated financial statements that would not be prevented or detected,~~sell these receivables through securitization transactions and ~~accordingly, we determined that these control deficiencies constitute material weaknesses.~~

~~We have concluded that these material weaknesses arose because, as a private company, we did not have the necessary business processes, systems, personnel~~expects to enter into loan sales to financing partners and related internal controls. In the year ended December 31, 2019, we undertook measures to address material weaknesses in our internal controls. In particular, we (i) hired additional finance and accounting personnel with expertise in preparation of financial statements and account reconciliations; (ii) further developed and documented our accounting policies; and (iii) hired a director responsible for implementation of information technology general controls. In addition, we will continue to take steps to remediate these material weaknesses, including:

We cannot assure you that the measures we have taken to date, and that we are continuing to implement, will be sufficient to remediate the material weaknesses we have identified or to avoid the identification of additional material weaknessesarrangements in the future. If the ~~steps we take do not remediate~~receivables it sells experience higher loss rates than forecasted, it may obtain less favorable pricing on the ~~material weaknesses in a timely manner, there could continue~~receivables it sells to be a reasonable possibility that these control deficiencies or others could result in a material misstatement of our annual or interim consolidated financial statements that would not be prevented or detected on a timely basis.

The process of designing and implementing internal control over financial reporting required to comply with the disclosure and attestation requirements of Section 404 of the Sarbanes-Oxley Act will be time consuming and costly. If during the evaluation and testing process we identify additional material weaknesses in our internal control over financial reporting or determine that existing material weaknesses have not been remediated, our management will be unable to assert that our internal control over financial reporting is effective. Even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal control over financial reporting. If we are unable to assert that our internal control over financial reporting is effective, or when requiredthose parties in the future ~~if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence~~and suffer reputational harm in the ~~accuracy~~marketplace for the receivables it sells and ~~completeness~~its business, results of ~~our~~operations, and financial ~~reports, the market price of our common stock could~~condition may be adversely affected and we could become subject to litigation or investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Anti-takeover provisions in our governing documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management, and depress the market price of our common stock.

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. Among others, our amended and restated certificate of incorporation and amended and restated bylaws include the following provisions:

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law (the “DGCL”), which prevents interested stockholders, such as certain stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations unless (i) prior to the time such stockholder became an interested stockholder, the board approved the transaction that resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in such stockholder becoming an interested stockholder, the interested stockholder owned 85% of the common stock or (iii) following board approval, the business combination receives the approval of the holders of at least two-thirds of our outstanding common stock not held by such interested stockholder.

Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for substantially all disputes between us and our stockholders, and federal district courts will be the sole and exclusive forum for Securities Act claims, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for: (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees to us or to our stockholders; (c) any action asserting a claim arising pursuant to the DGCL, our amended and restated certificate of incorporation or amended bylaws, or as to which the DGCL confers exclusive jurisdiction on the Court of Chancery of the State of Delaware; or (d) any action asserting a claim governed by the internal affairs doctrine; provided that the exclusive forum provisions will not apply to suits brought to enforce any liability or duty created by Exchange Act or to any claim for which the federal courts have exclusive jurisdiction. Our amended and restated certificate of incorporation further provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts are the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, subject to a final adjudication in the State of Delaware of the enforceability of such exclusive forum provision. The choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forumaffected. If UACC holds receivables that it ~~finds favorable for disputes with us~~originates on its balance sheet until it sells them in securitization transactions or, our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition and results of operations.

An active trading market for our common stock may not be sustained. If an active trading market for our common stock is not maintained, the liquidity of our common stock, your ability to sell your shares of our common stock when desired and the prices that you may obtain for your shares of common stock will be adversely affected.

If securities analysts do not publish research or reports about our company, or if they issue unfavorable commentary about us or our industry or downgrade our common stock, the price of our common stock could decline.

Our stock price and trading volume are heavily influenced by the way analysts and investors interpret our financial information and other disclosures. If securities or industry analysts do not publish research or reports about our business, delay publishing reports about our business, or publish negative reports about our business, regardless of accuracy, our common stock price and trading volume could decline.

The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. Currently, ten analysts cover our company. If the number of analysts that cover us declines, demand for our common stock could decrease and our common stock price and trading volume may decline.

Even if our common stock is actively covered by analysts, we do not have any control over the analysts or the measures that analysts or investors may rely upon to forecast our future results. Over-reliance by analysts or investors on any particular metric to forecast our future results may result in forecasts that differ significantly from our own.

Regardless of accuracy, unfavorable interpretations of our financial information and other public disclosures could have a negative impact on our stock price. If our financial performance fails to meet analyst estimates, for any of the reasons discussed above or otherwise, or one or more of the analysts who cover us downgrade our common stock or change their opinion of our common stock, our stock price would likely decline.

~~If our operating and financial performance in any given period does not meet the guidance that we provide to the public, the market price of our common stock may decline.~~

We may, but are not obligated to, provide public guidance on our expected operating and financial results for future periods. Any such guidance will be comprised of forward-looking statements subject to the risks and uncertainties described in this Quarterly Report on Form 10-Q and in our other public filings and public statements. Our actual results may not always be in line with or exceed any guidance we have provided, especially in times of economic uncertainty. If, in the future, ~~our operating~~through loan sales to its financing partners or ~~financial results~~other arrangements, and to the extent those receivables fail to perform during its holding period, they may become ineligible for a particular period do not meet any guidance we provide or the expectations of investment analysts, or if we reduce our guidance for future periods, the market price of our common stock may decline. Even if we do issue public guidance, there can be no assurance that we will continue to do so in the future.sale.

The following sets forth information regarding all unregistered equity securities sold from April 1, 2020 to June 30, 2020 (share and per share amounts give effect to the 2-for-1 stock split of our common stock and preferred stock effected on June 11, 2020):

The offers, sales, and issuances of the securities described above were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering or pursuant to Rule 701 promulgated under the Securities Act of shares issued under benefit plans and contracts relating to compensation. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was either an accredited or sophisticated person, or in the case of securities exempt from registration under Rule 701 an employee, and had adequate access, through employment, business, or other relationships, to information about us.

On June 11, 2020, we completed our IPO, in which we sold 24,437,500 shares of common stock at a price to the public of $22.00 per share, including 3,187,500 shares sold in connection with the exercise of the underwriters’ option to purchase additional shares.IPO. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-238482), as amended, which was declared effective by the SEC on June 8, 2020. We raised proceeds of $504.0 million from the IPO, net of the underwriting discount and before deducting offering expenses of $7.5 million. No payments were made by us to directors, officers, or persons owning 10 percent or more of our capital stock or to their associates, or to our affiliates, other than payments in the ordinary course of business to officers for salaries. There has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on June 9, 2020 pursuant to Rule 424(b)(4). We invested the funds received in accordance with our board approved investment policy, which provides for investments in money market instruments and registered money market funds. The managing underwriters of our IPO were Goldman Sachs & Co. LLC, BofA Securities, Allen & Company LLC, and Wells Fargo Securities. Following the sale of the shares in connection with the IPO, the offering terminated.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


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


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


		Page

			~~Page~~
Part I - Financial Information		56
Item 1.	Financial Statements (unaudited)	56
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, ~~2019 and June 30, 2020~~2022 (unaudited)	56
	Condensed Consolidated Statements of Operations for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, ~~2019~~2023 and ~~2020~~2022 (unaudited)	67
	Condensed Consolidated Statements of Changes in ~~Redeemable Convertible Preferred Stock and~~ Stockholders' ~~(Deficit)~~ Equity for the Three and ~~Six~~Nine Months Ended ~~June~~September 30, ~~2019~~2023 and ~~2020~~2022 (unaudited)	78
	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Nine Months Ended ~~June~~September 30, ~~2019~~2023 and ~~2020~~2022 (unaudited)	89
	Notes to Condensed Consolidated Financial Statements (unaudited)	911
Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	2745
Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk	5374
Item 4.	Controls and Procedures	5374

Part II - Other ~~Information~~information		5675
Item 1.	Legal Proceedings	5675
Item 1A.	Risk Factors	5677
Item 2.	Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities	8485
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	8586
Item 6.	Exhibits	8687
	Signatures	8889


	As of September 30,			As of December 31,
	2023			2022
ASSETS
Current Assets:
Cash and cash equivalents	$	208,562		$	398,915
Restricted cash (including restricted cash of consolidated VIEs of $47.2 million and $24.7 million, respectively)		80,517			73,095
Accounts receivable, net of allowance of $8.9 million and $21.5 million, respectively		9,022			13,967
Finance receivables at fair value (including finance receivables of consolidated VIEs of $12.2 million and $11.5 million, respectively)		12,901			12,939
Finance receivables held for sale, net (including finance receivables of consolidated VIEs of $338.4 million and $305.9 million, respectively)		399,836			321,626
Inventory		240,676			320,648
Beneficial interests in securitizations		5,287			20,592
Prepaid expenses and other current assets (including other current assets of consolidated VIEs of $24.3 million and $11.7 million, respectively)		56,889			58,327
Total current assets		1,013,690			1,220,109
Finance receivables at fair value (including finance receivables of consolidated VIEs of $376.7 million and $119.6 million, respectively)		387,796			140,235
Property and equipment, net		49,220			50,201
Intangible assets, net		138,644			158,910
Operating lease right-of-use assets		30,836			23,568
Other assets (including other assets of consolidated VIEs of $2.0 million and $0 million, respectively)		26,525			26,004
Total assets	$	1,646,711		$	1,619,027
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	27,280		$	34,702
Accrued expenses (including accrued expenses of consolidated VIEs of $3.3 million and $1.5 million, respectively)		57,435			76,795
Vehicle floorplan		212,486			276,988
Warehouse credit facilities of consolidated VIEs		294,653			229,518
Current portion of long term debt (including current portion of securitization debt of consolidated VIEs at fair value of $186.6 million and $47.2 million, respectively)		197,045			47,239
Deferred revenue		12,487			10,655
Operating lease liabilities, current		9,511			9,730
Other current liabilities		12,284			17,693
Total current liabilities		823,181			703,320
Long term debt, net of current portion (including securitization debt of consolidated VIEs of $175.3 million and $32.6 million at fair value, respectively)		521,353			402,154
Operating lease liabilities, excluding current portion		26,938			20,129
Other long-term liabilities (including other long-term liabilities of consolidated VIEs of $9.5 million and $7.4 million, respectively)		16,969			18,183
Total liabilities		1,388,441			1,143,786
Commitments and contingencies (Note 13)
Stockholders’ equity:
Common stock, $0.001 par value; 500,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 139,752,858 and 138,201,903 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		135			135
Additional paid-in-capital		2,083,046			2,075,798
Accumulated deficit		(1,824,911	)		(1,600,692	)
Total stockholders’ equity		258,270			475,241
Total liabilities and stockholders’ equity	$	1,646,711		$	1,619,027


	Nine Months Ended September 30,
	2023			2022
Operating activities
Net loss	$	(224,219	)	$	(476,675	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment charges		1,353			206,127
Gain on debt extinguishment		(19,640	)		(37,917	)
Depreciation and amortization		32,421			28,005
Amortization of debt issuance costs		3,418			3,777
Realized gains on securitization transactions		—			(45,589	)
Deferred taxes		—			(23,855	)
Losses on finance receivables and securitization debt, net		80,246			39,464
Stock-based compensation expense		7,248			6,613
Provision to record inventory at lower of cost or net realizable value		(15,867	)		(5,033	)
Provision for bad debt		995			18,448
Provision to record finance receivables held for sale at lower of cost or fair value		4,375			3,831
Amortization of unearned discounts on finance receivables at fair value		(20,273	)		(12,121	)
Other, net		(11,792	)		(5,441	)
Changes in operating assets and liabilities:
Finance receivables, held for sale
Originations of finance receivables held for sale		(420,793	)		(483,167	)
Principal payments received on finance receivables held for sale		71,906			38,297
Proceeds from sale of finance receivables held for sale, net		—			509,612
Other		(868	)		(5,924	)
Accounts receivable		3,950			63,252
Inventory		95,839			293,589
Prepaid expenses and other current assets		17,316			12,420
Other assets		2,097			(2,678	)
Accounts payable		(7,422	)		(22,183	)
Accrued expenses		(19,914	)		(27,020	)
Deferred revenue		1,832			(59,490	)
Other liabilities		(7,839	)		(39,444	)
Net cash used in operating activities		(425,631	)		(23,102	)
Investing activities
Finance receivables at fair value
Purchases of finance receivables at fair value		(3,392	)		(49,475	)
Principal payments received on finance receivables at fair value		136,644			106,829
Proceeds from sale of finance receivables at fair value, net		—			43,262
Consolidation of VIEs		11,409			—
Principal payments received on beneficial interests		4,334			5,571
Purchase of property and equipment		(11,553	)		(19,968	)
Acquisition of business, net of cash acquired of $47.9 million		—			(267,488	)
Net cash provided by (used in) investing activities		137,442			(181,269	)
Financing activities
Proceeds from borrowings under secured financing agreements		261,991			—
Principal repayment under secured financing agreements		(159,384	)		(176,909	)
Proceeds from financing of beneficial interests in securitizations		24,506			—
Principal repayments of financing of beneficial interests in securitizations		(5,699	)		—
Proceeds from vehicle floorplan		436,586			1,286,000
Repayments of vehicle floorplan		(501,088	)		(1,453,529	)
Proceeds from warehouse credit facilities		332,700			419,000
Repayments of warehouse credit facilities		(269,698	)		(460,566	)
Repurchases of convertible senior notes		(13,194	)		(18,458	)
Other financing activities		(1,462	)		(1,977	)
Net cash provided by (used in) financing activities		105,258			(406,439	)
Net decrease in cash, cash equivalents and restricted cash		(182,931	)		(610,810	)
Cash, cash equivalents and restricted cash at the beginning of period		472,010			1,214,775
Cash, cash equivalents and restricted cash at the end of period	$	289,079		$	603,965

	Redeemable Convertible Preferred Stock				Common Stock					Additional Paid-in			Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital			Deficit			(Deficit) Equity
Balance at December 31, 2018		66,825,300	$	519,100		8,571,386		$	8	$	—		$	(296,874	)	$	(296,866	)
Stock-based compensation		—	$	—		—		$	—	$	869		$	—		$	869
Exercise of stock options		—		—		101,950			—		347			—			347
Repurchase of common stock		—		—		(93,186	)		—		(1,216	)		674			(542	)
Accretion of redeemable convertible preferred stock		—		17,964		—			—		—			(17,964	)		(17,964	)
Net loss		—		—		—			—		—			(27,139	)		(27,139	)
Balance at March 31, 2019		66,825,300	$	537,064		8,580,150		$	8	$	—		$	(341,303	)	$	(341,295	)
Stock-based compensation		—	$	—		—		$	—	$	667		$	—		$	667
Exercise of stock options		—		—		—			—		—			—			—
Repurchase of common stock		—		—		—			—		(667	)		667			—
Accretion of redeemable convertible preferred stock		—		25,879		—			—		—			(25,879	)		(25,879	)
Net loss		—		—		—			—		—			(33,340	)		(33,340	)
Balance at June 30, 2019		66,825,300	$	562,943		8,580,150		$	8	$	—		$	(399,855	)	$	(399,847	)


Supplemental disclosure of cash flow information:
Cash paid for interest	$	40,424	$	24,619
Cash paid for income taxes	$	5,153	$	2,062
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	$	—
Fair value of beneficial interests received in securitization transactions	$	—	$	30,082


	December 31,		June 30,		September 30,		December 31,
	2019		2020		2023		2022
Vehicles	$	203,290	$	140,111	$	239,481	$	317,994
Parts and accessories		2,456		952		1,195		2,654
Total inventory	$	205,746	$	141,063	$	240,676	$	320,648


	Facility One		Facility Two		Facility Three		Facility Four
Execution date	May 30, 2012		November 19, 2013		July 11, 2019		November 18, 2022
Maturity date	July 20, 2024		June 2, 2025		August 29, 2025		September 12, 2025
Aggregate borrowings limit (in thousands)	$	200,000	$	200,000	$	200,000	$	225,000
As of September 30, 2023
Aggregate principal balance of finance receivables pledged as collateral (in thousands)	$	147,533	$	72,255	$	142,389	$	37,408
Outstanding balance (in thousands)	$	115,014	$	53,215	$	114,224	$	12,200
Restricted cash (in thousands)	$	6,581	$	2,463	$	6,643	$	237
As of December 31, 2022
Aggregate principal balance of finance receivables pledged as collateral (in thousands)	$	143,919	$	142,503	$	126,636	$	—
Outstanding balance (in thousands)	$	110,602	$	19,615	$	101,435	$	—
Restricted cash (in thousands)	$	8,110	$	2,007	$	5,537	$	—


For remainder of 2020	$	2,591
2021		5,022
2022		3,291
2023		3,138
2024		2,858
Thereafter		724
Total lease payments		17,624
Less: interest		(1,234	)
Present value of lease liabilities	$	16,390

Operating lease liabilities, current	$	4,640
Operating lease liabilities, noncurrent		11,750
Total operating lease liabilities	$	16,390

Year Ending December 31,
2020	$	5,509
2021		4,909
2022		3,204
2023		3,026
2024		2,746
Thereafter		699
Total future minimum lease payments	$	20,093

	As of December 31, 2019
	(in thousands, except share and per share amounts)
	Shares authorized		Shares issued and outstanding		Issue price		Per share conversion price		Liquidation preference		Carrying value
Series A		3,983,996		3,983,996	$	1.61	$	1.61	$	6,419	$	6,167
Series B		4,716,484		4,716,484		2.48		2.48		11,709		42,425
Series C		9,134,242		9,134,242		5.93		5.93		54,209		88,739
Series D		14,431,136		14,431,136		6.58		6.58		95,000		142,724
Series E		6,163,792		6,163,792		8.11		8.11		50,000		64,042
Series F		12,705,580		12,115,610		8.53		8.53		103,346		127,820
Series G		16,280,040		16,280,040		8.98		8.98		146,113		174,764
Series H		18,708,094		16,743,328		13.60		13.60		227,651		227,651
		86,123,364		83,568,628					$	694,447	$	874,332

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Outstanding as of December 31, 2019		6,340,000		$	3.92		8.22
Granted		420,500			10.46
Exercised		(3,274	)		4.21
Forfeited / cancelled		(417,150	)		4.30
Outstanding as of June 30, 2020		6,340,076		$	4.33		7.79
Vested and exercisable as of December 31, 2019		2,684,160		$	3.58		7.41
Vested and exercisable as of June 30, 2020		3,451,864		$	3.63		7.05

	Six Months Ended June 30, 2020
Fair value of common stock (per share)	$	10.46
Expected term (in years)	5.9 — 6.3
Risk-free interest rate	1.7%
Expected volatility	36.3% — 36.6%
Dividend yield	—%

	Shares			Weighted Average Grant Date Fair Value per Share
Unvested and outstanding as of December 31, 2019		408,000		$	4.01
Granted		2,214,276			11.28
Vested		(133,334	)		3.60
Forfeited / cancelled		(540	)		11.57
Unvested and outstanding as of June 30, 2020		2,488,402		$	10.50


	December 31,			June 30,			September 30,			December 31,
	2019			2020			2023			2022
Equipment	$	930		$	991		$	4,226		$	3,357
Furniture and fixtures		1,725			1,725			1,898			1,896
Company vehicles		1,151			1,151
Logistics fleet								32,544			32,468
Leasehold improvements		6,556			6,584			7,633			6,577
Internal-use software		4,406			8,012			39,627			30,725
Other		2,580			2,624			8,311			8,081
		17,348			21,087			94,239			83,104
Accumulated depreciation and amortization		(9,520	)		(11,304	)		(45,019	)		(32,903	)
Property and equipment, net	$	7,828		$	9,783		$	49,220		$	50,201

	~~Shares~~
~~Unvested at December 31, 2019~~		~~272,868~~
~~Vested~~		~~(272,868~~	)
~~Unvested at June 30, 2020~~		—

	Series F Preferred Stock Warrant
	(in thousands)
Balance as of December 31, 2019	$	1,403
Change in fair value		20,470
Conversion to common stock warrant		(21,873	)
Balance as of June 30, 2020	$	—

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2020		2019		2020
Ecommerce units sold		3,856		6,713		7,043		14,643
Vehicle Gross Profit per ecommerce unit	$	1,274	$	314	$	1,340	$	602
Product Gross Profit per ecommerce unit		618		761		512		866
Total Gross Profit per ecommerce unit	$	1,892	$	1,075	$	1,852	$	1,468
Average monthly unique visitors		628,659		999,899		520,074		973,457
Listed Vehicles		4,550		5,745		4,550		5,745
Ecommerce average days to sale		64		66		64		67


Exhibit Number	Exhibit Description	Form	File No.	Exhibit	Filing Date	Filed Herewith	Furnished Herewith

2.1	Agreement and Plan of Merger, dated as of October 11, 2021, by and among Vroom, Inc., Vroom Finance Corporation, Unitas Holdings Corp. and Fortis Advisors LLC, solely in its capacity as the equityholders' representative	8-K	001-39315	2.1	October 12, 2021

3.1	Amended and Restated Certificate of Incorporation of Vroom, Inc.	10-Q	001-39315	3.1	August 13, 2020

3.2	Amended and Restated Bylaws of Vroom, Inc.	10-Q	001-39315	3.2	August 13, 2020

4.1	Specimen Stock Certificate evidencing the shares of common stock	S-1/A	333-238482	4.1	June 1, 2020

4.2	Indenture, dated as of June 18, 2021, between Vroom, Inc. and U.S. Bank National Association, as trustee	8-K	001-39315	4.1	June 21, 2021

4.3	Form of Global Note representing the 0.750% Convertible Senior Notes due 2026 (included in Exhibit 4.2)	8-K	001-39315	4.2	June 21, 2021

4.4	Eighth Amended and Restated Investors’ Rights Agreement, dated as of November 21, 2019, by and among Vroom, Inc. and certain holders of its capital stock	S-1/A	333-238482	4.2	May 18, 2020

31.1	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X


	Vroom, Inc.

Date: ~~August 12, 2020~~November 7, 2023	By:	/s/ ~~Paul J. Hennessy~~Thomas H. Shortt
		~~Paul J. Hennessy~~Thomas H. Shortt
		Chief Executive Officer
		(principal executive officer)


Date: ~~August 12, 2020~~November 7, 2023	By:	/s/ ~~Dave Jones~~Robert R. Krakowiak
		~~Dave Jones~~Robert R. Krakowiak
		Chief Financial Officer
		(principal financial ~~and accounting~~ officer)

Fair Value

Weighted Average Useful Life

Purchased technology

Customer relationships

Trade name