VRM - Earnings call 3 2023

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Operator

Good day, and thank you for standing by. Welcome to the Vroom Third Quarter 2023 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jon Sandison, VP of Investor Relations. Jon, please go ahead.

Jon Sandison

Thank you, operator. welcome Third and Call. XXXX everyone, morning, to Quarter Vroom's Earnings Good

note be us are Relations ir.vroom.com. Krakowiak, and Please today the section Chief call Shortt, Officer. Joining corporate call Officer; of Tom the on website the webcast simultaneously on Chief company's Executive Financial this Investor will at Bob

to Relations website. third earnings and release Investor The earnings presentation the quarter XXXX are also posted

future call. may laws, call, of on further measures during These Vroom including, based assumes financial the future for today begin, not the year discussion, direct as to includes report also or discussion the forward-looking this forward-looking filings, including and as forward-looking quarterly factors additional the our subject please company's such for discuss including date federal based neither XXXX, the company a that Vroom's within may cause statements of XX-K other and risks, financial Form SEC forward-looking number could cause results we to nor XX, you from most statements XX, non-GAAP to securities today's Before actual to, materially recent those December Factors of that in no note statements otherwise. of Risk XX-Q September that by X on assumptions most updated the and of are XXXX, discussion meaning today's but speak for actual materially. differ statements. Please and limited the differ months to certain only management's about and update The ended note statements ended recent Form obligation the developments and are operations results promises the We are of current on statements section that Vroom's to uncertainties other the factors guarantees performance. important

XXXX Shortt, Executive earnings presentation now conference and those like presentation. I'd in release measures quarter to the to Tom? a most and directly hand can measures Chief You Tom the Officer. of of reconciliation third earnings find the the comparable GAAP over

Thomas Shortt

and you, investors, Starting are thank our of X. joining Vroommates, Jon, colleagues all partners Thank UACC you who us today. on and to Slide analysts,

of through initiatives. On work inventory During the towards third and Slide in goal our improving quarter, aged continued growth, fixed cost unit selling we variable to X, our and alignment objectives X our resuming strategic X and third quarter highlights. per key with

$XX.X the increased During quarter, adjusted million, we sequential third EBITDA of $X.X recognized loss. million an loss an

late of improved XXXX due made sequentially. impacted year portfolio higher this net originated receivables negatively approximately in and delinquency to expect were earlier units finance negative trends. E-commerce lead results to by XXXX at realized early criteria in underwriting mark-to-market grew performance. Our and we UACC changes XX% We losses a that unfavorable to

and we of remain $X,XXX cost spend, growth while the towards growth, quarter. GPPU. unaged the per pivot to we benefiting on $X,XXX rate reducing within of increase As marketing the an driving unit sold business E-commerce fixed unit variable increased from focused from GPPU right in units sequentially, mix and mix

long-term $X.X our X We adjusted strategic on our reduced and million road on making We SG&A increase map XX% progress are volume. unit an our in sequentially initiatives.

UACC, losses million full XXXX as by guidance to an updating EBITDA our year range of negative loss million, and We mark-to-market realized higher to the the discussed. adjusted are of previously driven $XXX primarily $XXX at

and cash million. of updating our range year-end cash $XXX guidance million a are to equivalents to we Additionally, $XXX

Moving to Slide X.

each providing the initiatives our quarterly in and X on unit updates economic progress Investor May strategic we drivers driver. of building behind are outlined have During we on key to believe business, we 'XX, a that the Day profitable been

$X,XXX, an mix aged improved by sequential of units. driven For unaged a and $XXX QX, primarily GPPU was improvement,

units sold XX% greater quarter of in XX% our result a as the 'XX to than in During second days of quarter, compared XXX the quarter, third were XX% in quarter XX% first XX% and quarter, 'XX. third legacy held the of the of fourth issues, the title in

mix as in and a reduction expect aged sequential of GPPU improved our result. units expect We

We be less units. fourth than to our mix XX% expect aged quarter from

GPPU Our quarter or owned XXXX XXX less $X,XXX. units unaged of GPPU of to days comparable our units was than third we've of

and We sequentially. grow logistics the all-in by inventory continue financing We aged quarter by develop selling third of GPPU to percentage through facility. and plan unit recovered our our floor units as reduced captive inventory and under see $XX strong we of X% a per our products in cost our million capabilities. We cash financing higher in

in-sourcing per per we registration cost unit by marketing X% unit selling We by our function. sales cost reduced increased of as unit reduced reduced per XX% by sequentially. We sequentially. per sequentially. and unit XX% our We XX% support full Our our titling, completed fixed by the cost cost our

Lastly, tech supply assets our pricing, assets, team term a competitive believe long will product costs. across and the advanced analytics titling chain team, assets build analytical and functional we registration, that unit and and and advantage margin business continue data teams in tech conversion, provide to

X. have Vroommates delivered pleased UACC past the to I'm and very Slide over colleagues year. Turning We with our what

as lead As tightening criteria quarter is delinquency made year mentioned to this headwinds the to this improved experienced expected trends. previously, to we related and to expect portfolio ease earlier UACC the performance in underwriting

our GPPU the sell we inventory. e-commerce aged last X improved through quarters as have We

road We continue progress to on make our map. long-term

resuming reducing variable growth operations and we continue fixed costs. our are improving We and while

we our to normalize of the when through We expect GPPU remainder inventory. aged sell

turn Bob to I in Bob? Now it will discuss third results to quarter over greater detail.

Robert Krakowiak

X. prior financial unless $XXX million the revenue noted. Total units of performance summary against otherwise a quarter e-commerce increased Thanks, X% as increased XX%. All Tom. I'll start on Slide our with are comparisons of

we to the economics. As mentioned remaining increased are last E-commerce in ramping unit call quarter, early focused stages our on up GPPU while X% the $X,XXX. on positive of business

losses million. during This being quarter less impact units higher $X and within approximately impact we loss or call, unaged of earnings XXX a As selling of the sold which offset held quarter the we vehicles, than aged by was days. Adjusted EBITDA expected the second was realized through discussed was by portion negative driven higher of This $X.X and gross loss higher UACC. headwind unit higher realized by a e-commerce result improvement. unfavorable volume increased profit $XX.X loss XX% on million net offset and or mark-to-market at a as of to receivables GPPU partially finance is This an increased million.

On remain the balance expense our operating we initiatives. reduced X as and fixed X liquidity pursue and our key objectives our variable and on costs side, strengthening we higher strategic maximizing sheet. further volumes We focused focus unit our continue despite to

and during recovery significantly cash million to inventory and $XX.X As equivalents the cash burn we continue quarter reduced quarter-over-quarter. aged remaining ramp as quarter. unit recovered were of acquisitions, inventory the for third This our cash million sell began the to we and up by sequentially approximately through cash reduced $XX

improved to sold liquidity. as million. a bridge profit which mix E-commerce move gross quarter within with cash Slide adjusted Sequential by growth, Let's from higher approximately XXXX as second this well quarter the $X drove quarter and X, unit of to unaged provides third units EBITDA sequentially XXXX improvement. a along

unit. sequentially. Additionally, despite by spending in higher improvements SG&A unit was cost million volume, marketing we our continued reduced This per our by driven primarily adjusted $X

performance and As at mentioned approximately for In mark-to-market an increased by unfavorable total, portfolio higher experienced the previously, loan the headwind to losses adjusted $X.X million net million. a quarter. EBITDA for UACC, quarter, $XX.X we resulting in loss related

Moving to liquidity.

utilization the expense interest EBITDA and adjusted are within net of loss primary the quarter quarter. drivers Third cash

a and in by we of cash cash range of recover was inventory aged restricted to sheet growth. This discussed We increase in $XX at sold on inventory As of of equivalents and balance the resulted These and our which quarter. quarter within end, released million million cash quarter factors as cash expectations. the was second due the through offset partially million $XXX the call, to within cash units. we $XX expected inventory

is warehouse against been to was that UACC at Additionally, sheet our of earnings from of to on lines in which these important third million of source there improve a business combined draw opportunities the million liquidity. the cash lines. liquidity. resulted liquidity total balance, At We it as end with balance available down We understand pay the used our capturing $XXX quarter, liquidity. have available when focused to approximately of approximately remain $XX UACC, available could

year XX. our million. XXXX turn This cash we updating and to a to $XXX cash full Slide million and equivalents are cash year-end equivalents Next, morning, outlook liquidity forecast cash range to and $XXX on our let's of

$XX approximately expect of end at we of available million UACC the Additionally, at fourth quarter. liquidity the

residual the fourth to continue certificates If those the an with we We this hold could the to of liquidity. proceeds estimate we up additional in transaction earlier certificates completed $XX from to that securitization million decide year. contribute quarter, associated sell our

Tom attention that, for for this liquidity could be up I'll result, it $XXX few back turn to our time midpoint remarks. a your closing million. Thank With morning. and Tom? As year-end a you to

Thomas Shortt

Bob. Thanks,

map introduced XXXX breakeven EBITDA goal Day, at a our turning May of our midterm our XX. adjusted margin Slide our to road and XX% Now we X% EBITDA We of business. of long-term business goal Investor to highlighted long-term a where

direct it a order-of-magnitude to have on time in the on specifics captive made the finance time building rarely day, machine We is metal that a machine, building As route building route. so pursuit offering. we indicated believe this Day, Investor long-term progress well-oiled from do we and adjust well-oiled profitability. Since significant a we of our implementing to of change makes when sense transaction

full dramatically improved points. our our Net We percentage Score customer have XX improved and sales-to-customers' significantly by experience Promoter

We headwinds any, Investor virtually scale aspect business. Since few, we not every are pursue ready if the now we transformed raising have have Day, we did and business, capital the and anticipate of to tailwinds. to had

significant First, from has concessions, our and resulted significant rental in car customer costs. buybacks, registration and GPPU customer which customer inventory, aged and regulatory legal legacy costs, including impacted titling issues expenses, losses

greater of than old, units days significant on pressure XXXX. XXXX spent old, that days were GPPU selling in XXXX. vehicles portion XXX We ended XXXX our inventory greater We in a XXX most significant depreciated causing of with while down used than aged

securitization purchased transaction. Second, selling recognizing transaction, with XXXX a executing each residual early on sale of the on and the certificates UACC we gain in strategy

Interest rates vehicle UACC, of sale the in residual XXXX in Fed's XXXX, inflation, following: X factors, and in since including ahead on several impacting power. During adverse have and affordable less impact increased all-time in and we which used purchasing it February car high XXXX, This consumer interest in had XX Fed and was macroeconomic are rate increased we up was $XX impacted sold bought is the XXXX, credit than interest currently In valuations X.XX%. last Fed April from less points, million. Since at securitization rate at XX of significantly used The UACC. volatility of basis we performance that certificates funds continues funds our significantly gain sizable cars rates, highs. on including inflation of May higher basis recognized XXXX. performance are executed increase The payments transactions business. Used points high since at XXXX, degraded rates was target asset an in the time the UACC's XXXX. of

recoveries rates increased cost and to certificates. hold XXXX book its then and used investors' market rates as our interest impacted we in map. our warehouse points, vehicle significant progress funds and increase losses in these headwinds, in UACC road were significantly default values return XXXX-X long-term to residual to and approximately spreads. current XXX basis these increased conditions elected vehicle increase Volatility expectations, Our Despite have This adversely compressing made on in increased. Due has have caused vehicle credit decrease XXXX. our valuations of

loan second has over Over the improved $X,XXX. the GPPU from the of to We customer and increased quarter is originations 'XX UACC 'XX, currently quarter originating Vroom XX% last loans. product third approximately of by months Vroom of its XX

XX units our on XXXX Leveraging CarStory unaged for GPU and days. generated engine invested we or We our held developing through aged caused months year-to-date, assets, the issues. by titling greater registration less of majority have units XXX than than legacy units $X,XXX pricing sold

XX% logistics logistics all-in We by $XX reduced all-in our have cost by unit and million reduced cost annualized. per

cash and $XXX We for notes We percent price by the of of and repurchasing We by the face on reduced We at XX% reduced million. improved accrued by fleet. turns increased and deliveries million. average convertible inventory Vroom repurchase the on of leverage approximately $XXX.X including our $XXX.X weighted inventory pickups inventory reduced value interest, million, approximately $X.XX with dollar. a million approximately $XX our

We percentage XX function. improved completed Net sales by points. Promoter our sales customers for our We in-sourcing full to Score

titling September on of progress to goal XXXX. XXXX, registration, and be digital for our in registration and our their vault registration and on customers and including during temporary support in reduced initial by annualized significant made focused introduced have our title improving expiration XX% $XX we significantly registrations title unit best-in-class costs tag We and per titling XX.X% our million. of costs by the received before reduced their our customers. We

launch with Virginia We West of Title Digital Clearinghouse. to state the its National partnered

new Vroom to retailer by optimize transfer reduced significantly reduced out-of-state cost $XX and will to the unit annualized be the worked by spend. reduce and name time fixed million. growth, digital company's this access processing with them. We titles line marketing to only the costs As annualized for million of we able marketing mix our pricing system, We into while the $XX

ahead time colleagues our I and long-term today, annualized quarter Vroommates proud long-term executing in $XXX and have you operator, of are since reduced excited XXXX. I'm cost the our million us. continue for map, second and we achieved about questions. be ready by your first of opportunity road have to for of rate run by Thank of since the our We what 'XX million UACC quarter and the very $XXX

Operator

from Rajat of JPMorgan. question [Operator Instructions] Our Gupta first comes

Rajat Gupta

on other loss million million at to year Great. in -- income last I $XX from million. a quarter quarter it's I first had the the gone the question third look to -- last item statement, If UACC. $X $X in

You higher that versus And progress item quick term? million, the the third-party seems realized big it a unrealized to understand of the how like number. Could loss is or $XX was help but $XX should follow-up. like Vroom we sequential portfolio much due also us of have And in within move you very expect million the other how near that it I from to mentioned XQ still the tied to losses, a UACC portfolio?

Robert Krakowiak

your so for thank question. Rajat, you Yes.

So is of things. -- a combination really that two number it's

in portfolio year. what So -- since this it's, in had XXXX-X, but it's losses mentioned been residual Tom first of well for the the increased mark-to-market on the all, it's before, portfolio UACC XXXX-X the of on originated loans as it's also that the the -- additional have January the

of in So breakout that's the detail. terms and Vroom And UACC, that then the don't out primary we driver. between break

Rajat Gupta

Got it.

GPPU is the flowing interest on what's income so product those through And loans? the basically just

Robert Krakowiak

That's correct.

Rajat Gupta

at navigate to X, $XX I it. choppier Got look Got losses, liquidity navigate X CapEx around plan still material. -- to any million mean bandwidth. How cash of quarter mean, U.S. and the we you we've that million if it. like And some I do mean quarter and quarter I it's of $XX you the like in case a Like more near you you like do or losses on cash per your some the rate question, interest, are dial $XX quarters give broader pretty some how $XX of like would exit U.K.? and peers seen EBITDA both follow-up in of at as profile, balance and of you burn, -- backdrop, per the million-ish sheet in have recapitalization max, term? the do a backdrop? current maybe more credit the in other considering options restructuring fourth million-ish a at guidance at which

Thomas Shortt

we Thanks Rajat, capital going business. are today to it's we pursue to for actually the scale Tom. the that raising question. announced Yes,

we are year of the going with all customer very this positions been really very we that, to our the registration a delivering. like the at for well XXXX experience top then We're all strong to going We that just grow well the that faster want we operating pleased Relative and remaining a us we forward impacted on on business got think really focused do the really XXXX. And feel improving we're rate. we've economics, year. But GPPU business. we're work that a has business, of unit into performance as And issues. our and pursue and through we titling to so challenging It's positioned that. ongoing

And the are pursuing additional announce now we capital. that of stages just so did we beginning at

Rajat Gupta

And what details that? Got it. that form disclosed you any more around would take? Have

Thomas Shortt

stages, the could be could information. very rights you It have at Yes. debt, Not private we we're update it more beginning the we'll and could be as at this road at-the-market additional time. it offering. Obviously, again, convertible investment. But down be a offering,

Robert Krakowiak

our the one you at made has question, thing, And of to so -- will UACC XXXX-X. asked to those in Yes. end -- through. take obviously, -- materialize made, of for initial Rajat. since the we time had last number about of changes in to of it seen we're a add had wanted terms to results. made but But takes more tail what number issued your underwriting seeing based cycle they've so And they've upon we've that portfolio, those changes I changes in we just their have far, the standards time underwriting a to improvement --

Operator

of comes Baird. question Colin next from Our Sebastian Instructions] [Operator

Unknown Analyst

right This I that. touch just you're on capital going maybe guys where the address Reese finish to the Colin. QX end year, for by guys in at aged not and QX. detail to the you did down to the I in units inventory know further you're you that you now. is plans any aged versus of [ ] be is process and were could on hoping on going of guess amount the provide most But of

do into that or more is does mostly headwind? less Are that's more going the how Or tailwind next shape through So potentially to there going XXXX? aged heading be work just you to inventory? year, to up still and worked be

Thomas Shortt

that month this that Yes. we're mix. the improve a to said, continued say down just I aged. we've we less would we And few as year, to cars hundred consider or each

We of little the quarter, at nothing will but So less in we would that end quarter go left said while for each XXXX. material we the we view think down. year, a may going month the bit than the sequentially XX% into as have

Operator

it I Shortt time. this for Tom closing would now back at questions to further Tom? to no turn showing remarks. I'm like

Thomas Shortt

your a appreciate and We day. fantastic time today, everyone. have Thanks,

Operator

today's conclude the conference. your does program. Thank participation in This you for

disconnect. now may You

Vroom (VRMMQ) 8 Nov 232023 Q3 Earnings call transcript