Vroom, Inc. Q4 FY2022 earnings call

Key Points

• Introduced long-term roadmap in May 2022 aiming for breakeven EBITDA and 5%-10% adjusted EBITDA margin.
• 2022: Strategically slowed business to improve customer experience across titling, registration, pricing, marketing, reconditioning, logistics, and insourced sales function.
• 2023 Objectives: Prioritize unit economics, growth, reduce cost per unit, and maximize liquidity.
• Four Strategic Initiatives:
  • Build transaction machine: Improve customer experience while reducing cost per unit.
  • Build metal machine: Optimize supply chain to reduce costs and improve customer delivery times.
  • Build regional operating model: Sell nationally but operate regionally to drive economics and improve delivery times.
  • Build captive finance offering: Expand financing to improve conversion rates and unit economics.
• 2022 Achievements: Improved titling and registration, reduced SG&A by $31 million sequentially, unlocked $70 million of cash and inventory, repurchased convertible notes.

Total revenue was $209 million, decreasing 39% as e-commerce units declined 36%. E-commerce gross profit per unit (GPPU) was $1,233, a 71% decrease quarter-over-quarter. Adjusted EBITDA loss excluding securitization gain and non-recurring costs improved to $70.5 million. Total revenue was $209 million, with e-commerce units contributing to the revenue decline. The e-commerce GPPU was $1,233, and adjusted EBITDA showed improvement due to reduced SG&A spending but was offset by lower unit volume and GPPU.

Forward-Looking Statements

• 2023 adjusted EBITDA loss: $200 million to $250 million if no securitization gain, $150 million to $225 million if gain is recognized.
• Liquidity: Expected ending cash balance of $150 million to $200 million, with midpoint potential liquidity of approximately $250 million.
• GPPU: First-half pressure from selling through aged units, back-half of 2023 expected to have GPPU consistent with 2022 Q2-Q3.

Risks

• Credit market dynamics affecting securitization gains, as 2023 guidance assumes no off-balance sheet treatment.
• Legacy operational issues contributing approximately $40 million in headwinds to 2023 EBITDA.
• Higher UACC delinquency and default rates potentially impacting financial performance.

Q: Could you help us break apart the product GPPU especially in the context of the securitization market?

A: Product GPPU in the fourth quarter was $2,600 with no gain on sale, and product GPPU going forward is expected to tick up early in the year and normalize as volumes ramp up.

Q: Any sense of at what level of units or what level of SG&A expenses are you expecting the company to hit EBITDA breakeven?

A: Our main focus is reducing variable and fixed cost per unit in 2023. We expect to see unit economics improve by Q4 2023, and directionally breakeven in 2024 with continued improvement into 2024.

Q: Should we think about the $21 million GPPU hit from older vehicles in the first-half as skewed more towards the first quarter versus second?

A: We're expecting a pretty equitable split across Q1 and Q2, with most of the impact behind us by the end of Q2.

Q: As you get through the transitional phase and embark upon growth again, where do you think you need to invest to move the top line forward in a more meaningful way?

A: We plan to continue reducing variable and fixed cost per unit each quarter. We don't expect significant capital investments for growth in 2024, as our cost per unit is expected to decrease sequentially in 2023, 2024, and 2025.