Vroom (VRMMQ) 8 Nov 222022 Q3 Earnings call transcript

Thank you for standing by, and welcome to Vroom's Third Quarter 2022 Earnings Call. [Operator Instructions].

I would now like to hand the call over to Liam Harrington, Vice President of Investor Relations. Please go ahead.

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

note, be to us are Relations ir.vroom.com. Krakowiak, Third are and Please today the section Presentation Chief and Earnings Quarter Investor call Shortt, Officer. Joining Relations corporate call website. The Officer; of Tom the on website the webcast simultaneously on Chief the company's Executive Financial XXXX posted this Investor Release will at also Bob Earnings

number discussion that assumptions results today including, Before statements forward-looking please are are to, nor materially. neither we of other that the the based future may to laws, begin, the within and differ securities promises statements and a of and and risks, but important includes other cause meaning management's forward-looking uncertainties performance. are actual factors current operations note statements and guarantees to limited on These financial about subject federal Vroom's not

filings, most discussion as updated XXXX, XX-K We for could months for XXXX, X ended XX, direct quarterly Form you December materially. Factors actual SEC additional differ that the XX, recent company's to ending to the year recent by for of including most Risk September of the on Vroom's factors XX-Q Form report section cause our the results

such of that measures company discussion, The financial date Vroom call. further call, this speak certain to statements. the including discuss today's of and update note no only today's Please the forward-looking may as statements, during non-GAAP assumes also obligation

management those the XXXX third measures and find GAAP reconciliation presentation earnings presentation. of measures quarter of can comparable the directly a You release and most in a

Tom? the Shortt, to hand Tom Chief over Executive Officer. I'd like to now conference

the to you Vroom's colleague Third Earnings. Thank to Vroommates, today who partners Quarter investors, Liam, UACC you, discuss are joining us thank analysts, and third-party and all

our long-term our a XX our goal EBITDA Slide business. adjusted on and X. to X% which breakeven mid-term where is goal, in a Investor introduced roadmap highlighted XX% long-term Day business We margin May Starting our we of

the As choice experience. to to slowed prioritize we growth. continue liquidity means, with down We made the and customer our mentioned We profitability our within economics, down. slow we we've while live to on unit over Investor intent plan Day, improving

announced, X on focused our roadmap previously As relies initiatives. strategic

a machine. build transaction First, well-oiled

includes Our transaction machine marketing. registration, e-commerce titling selling, and and

During QX, we and our machine, of a titling we well-oiled registration goal made sales began building improvements a building toward machine. and well-oiled

Second, deliver build machine. sell, vehicles. metal and a we well-oiled buy, How recondition, move, price

times, deliver optimize is synchronizing to reduce chain the cycle chain Our customer costs, improve turns delivery we inventory vehicles supply goal reduce by recondition times. how move, end-to-end improve supply and to buy, and

we and QX, we in improvements the our TDA During Stafford service to center machine, metal our building reconditioning well-oiled to transitioning location. began make center continue

sell We to nationally, build national Third, operate model, centers our our hubs. regionally leveraging regional brand. intend around operating but reconditioning transportation more and a

We to chain and expect to build drive supply time. marketing customer improving economics, density delivery in regions while

of miles miles outbound number travel a have XX%. and to have significant or number the and travel reduce vehicles From reduce inbound QX, opportunity reduced the we QX of of transportation We vehicle costs. to average by

to and rates finance customer improve will also improving improve Fourth, unit intend we while which offering. the captive build expand customers believe finance our Vroom captive for conversion We economics, offering our experience.

intend to contributes the also consolidated business, grow our We continue which to dealer third-party UACC to EBITDA.

quarter by $XX third non-recurring excluding or highlights. improved We sequentially. XX% expenses, On Slide adjusted million X, EBITDA, our

challenging million sequentially UACC by securitization GPPU $XX toward $X,XXX, a million gain reduced despite unit Our a Ecommerce as adjusted market. SG&A long-term to progress gross our We profit reduce at variable goal. realized fixed continue we per We and was costs. or reflecting $XX

cash improvements titling in the million, and by We registration. by $XX reduced driven our restricted primarily

our X progress We our making roadmap and on initiatives. long-term are strategic

titling including and We continue processing, to registration. in make improvements transaction

the As goal before registrations initial October. in the tag to is of expiration best-in-class in we've and their of our XX% temporary customers registration. mentioned, their received month titling become of

I'm began to really our TDA which improvement UACC transition proud of Stafford costs. the We the fixed to our location, center the reconditioning our service of center made Vroommates will colleagues and have lower registration.

Our long-term time. roadmap sales slowly plan to the function insource over

reach expectations. third-party We started been sales unexpected of and additional expect accelerate QX, to with back QX XXXX. to initial classes hiring we takes a In hiring reacted and large, fully to internal of we for effectiveness. of has selling staff. insourcing additional to build to time time internal met half in staff and that at We've small be class staffed successful one sales It quickly capabilities, new August, resources peak sales a our them class partners. experienced and our hire the our classes reduction In train additional in

While we a will initially smoother transition unit believe this selling transition reduce per to function, planned we our had earlier than slower and insource sales cost planned. our

We reducing will focus. of base million $XX on focused $XX this convertible cost for and fixed and We value variable our leverage. continue repurchased notes million our have reducing been

and and liquidity adjusted loss we range growth, forecasted currently and to be expect midpoint focus selling previously macroeconomic reduction midpoint resources below our the year, better near than the EBITDA our the in of range our the our during Ecommerce the of environment, Given over unexpected profitability for forecasted liquidity range. on forecasted unit the quarter

Slide these Day, is profitable initiatives on slide operational Investor our a to during model. progress business build unit QX outlined strategic key X economic drivers behind believe initiatives financial update strategic an we This we our X On will lever. X, that our by

$X,XXX achieved Vehicle financing by initiatives captive and Product our the driven For operations. we pricing and Ecommerce GPPU, GPPU,

UACC's capital its since deploy its leverage opportunistically ability second capital experience securitization market maintain market. and a to even securitization overall, to substantial XXth transactions our acquisition demonstrating securitization and completed in UACC challenging UACC's flexibility

sequentially. our logistics all-in reduced by we million cost Logistics, $X Inventory.

of we vehicles of number expect the listed to this vehicles titling we we the and coming improve to the sale for soon. as continue As reduce increase list process, number

improve will expect We this our turns. inventory

$X.X with XX% sales Ecommerce of million We expiration new sales titling pilot seen tag Sales. their their our began process registration significant our our launched the and month in of Titling initial We customers by sequentially. of receiving improvement and registration October. the initiatives. before in temporary We've registration. and reduced costs

As of vehicles to process, our improve titles sale that not we the continue aged obtaining listed title. had for been receiving the in are titling we to delay due

As these our million by receive list we for cost we and them reduced sequentially. GPPU. support We pressure aged on registration $X.X titles of QX and vehicles expect titling sale,

reduced and we on continue reduced adjusted the additional fixed sequential fixed We mentioned represent changes focus our to sequentially, our focus sequentially and return marketing million $X fixed million in SG&A reductions. Fixed to cost variable and and marketing million costs. sequential $X reduction on conversion. We investment Marketing. earlier. continue on These costs $XX improving cost cost

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

Slide trends. X, unit

unit July, While to and continued July our was to volume. unit from how forward, monthly numbers to we share August registrations customer normalize monthly by to impacted it plan don't took improve, In experience unit XX%. increased going sales important steps events share we we sales, as the which our unit to felt

XX% experienced large the sales third-party mentioned to one the down at a unexpected of partners. staff As our contracts reduction in X X force the reduction earlier, August, of were weeks the Customer compared prior sales we during back half after weeks.

to expect economic units challenging the transition of conditions as sales impact in function We our QX. well as

staffed in fully be to function sales QX our expect We XXXX.

quarter I'll turn it to to our Bob? our the outlook. Bob third through go performance over and in now forward financial

Thanks, revenues execution decreased comparisons Tom. on to declined as against our of we on $XXX intentionally otherwise million focus economics. a our XX% slowed start Ecommerce X. the Slide units Total of are quarter, Consistent transactions I'll unit prior financial noted. unless with and XX%. operational summary with performance strategy, All

volumes also mentioned sales Tom macroeconomic August half well by as in resources, reduction beginning impacted overall unit as conditions. back a in of third-party As the were earlier,

increased to $X,XXX. GPPU XX% Ecommerce

as increase we product the UACC-originated GPPU realized contributed optimization, increased During quarter, as the GPPU pricing we to vehicle scale third as further in well which loans.

driven $XX gain SG&A loss, and profit. gross excluding EBITDA million to improvement costs, securitization non-recurring driver dollars $XX was higher the increased primary A profit reduced $XX.X was by The of Adjusted spending. million million. improved gross

our On $XX the operating side, and exclude reduced These objectives. non-recurring key million costs X we rental quarter. our experience expense pursue the of costs during customer further car variable costs operational of fixed consisting to and as expense million of primarily address we $XX continue to issues,

and reduction going as forward are result in the quarter fourth of improvements in a expense and registration significant expecting non-recurring the process. in car our We a titling rental

on gain results. of The the of $XX of debt net $XX our Our securitization referenced to improvement drivers were due and million for X earlier primary convertible million million. gain a operational million improved loss quarter $XX extinguishment I debt, $XX the repurchase improved

financial X. to our Let's highlights Slide adjusted EBITDA turn performance. Starting on with

non-recurring Excluding $XX EBITDA adjusted million costs, quarter-over-quarter. improved

discussed GPPU, on adjusted operational driver low third customer focus intentionally higher key a securitization unit at to quarter decreased transactions driven improvements by costs XX%. gain slowed Ecommerce experience. the of economics improvement, as in UACC. As and and reduced unit One be we on operating our EBITDA were continues improve earlier, our sales to units the volume

half unit reduced the of also beginning third-party back volumes by quarter were support staffing impacted sales significantly Third in August.

consistent from the our up productivity. transition, this quarter we expect our roadmap, with expect lower-cost to ongoing full we impact While resources, long-term as an in members we unit don't as long-term team do sales new unit fourth the impact ramp scale

units previously third addition macroeconomic In factors quarter to conditions. also by the mentioned, impacted were current

additional by profit was This like Vehicle optimized we vehicle sales margin gross on per further starting unit detail driven profit. some increase to would X% unit gross $X,XXX. our pricing. with to as increased gross performance, I profit primarily provide higher Ecommerce per

October. year. in receiving before expiration significant process is mentioned for increasing titling available improvement our earlier, tag registration inventory sale Tom process we've As of website their temporary customers earlier and improvement the of seen with in on from our This the in XX% purchases registration the

the a our from to titles process, this as with we sale. impact we balance aged higher portion our Coupled margin a used obtain of expect in sales inventory fourth we to expect negatively As listed cars, the be market, this for unit the previously for over prices of the result not across of quarter. vehicle sales year declining

to UACC-sourced $X,XXX, increased in GPPU. perform Moving line to as Product product continues XX% our financing on with expectations. GPPU to

vehicle GPPU sequential and a higher GPPU of ultimately increase. product Ecommerce delivered $X,XXX, XX% total Our

adjusted benefit $X Let's second from This costs. Ecommerce approximately higher profit Sequential our non-recurring by comparison unit Ecommerce was Slide $XX million. third performance, excluding quarter by a partially in impacted for million to GPPU. volumes offset gross to move of XX Ecommerce EBITDA declines

gross non-Ecommerce of lower profit, primarily contributed the was by finance profit million finance gross $X dealership Next, decrease securitization $XX offset to This third-party retail partially from the receivables. in by a income driven UACC interest million segment.

not in since with a As quarters these quarter, reminder, we into and volatility income in a enter securitization a we are this decrease interest securitizations quarters every buildup in the non-securitization amounts expect we yet in transaction. quarter-to-quarter performing

was million in approximately cost a variable Overall, improvement. non-recurring $XX decline to non-recurring decreased benefit compensation lower excluding by improved focus million. expenses, excluding half $XX also continue primarily costs, reductions, costs driven costs, $X cost Total and as we this delivered by in of we unit additional volume. to logistics lower Approximately adjusted EBITDA, marketing due an million, on reductions. XX% decreased approximately expenses We and and

continue actions to Moving we liquidity quarter number a maximize took of third We on XX. during to as Slide liquidity. the

on cash became First, of sheet sequentially. registration. restricted transaction result and and available titling This we processing balance $XX inventory improved reduced as cash levels a lower primarily in the million, by

cash million by improvements inventory $XX process reduced during the and Our also quarter.

value subject conditions from market outstanding our face We million, $XX a for notes and repurchase discount, we at Next, time continue million to to of $XX indebtedness reduce leverage. availability. may notes reducing time convertible opportunistically our repurchased to our to

addition, vehicle recently which XXXX. floor our extends March plan end amended now we In through of the facility,

we completed Finally, more quarter third conditions. market subprime at our challenging UACC, securitization despite

million on liquidity in third liquidity. on lending guidance XX. track. to the fully-captive with We turn our ended $XXX update quarter remains Slide to transition Please Our

define chart to show provided is as liquidity in purpose cash based liquidity components we this the the previously a The change quarter. on of last reminder, cash guidance As we equivalents. and of simply that our

range. million continue be the anticipate liquidity $XXX year-end our $XXX midpoint our We to million to of to near

that, back With closing to for few Tom? remarks. turn Tom a it I'll

Bob. Thanks,

of to their quarter. the XX% registrations becoming tag received in continue of expiration registration. to titling before customers the Turning focus best-in-class XX Slide temporary summarize on in as we the to their initial and October,

million We EBITDA, improved costs, XX% non-recurring sequentially. by adjusted excluding $XX or

improvements. SG&A adjusted million reflects by million. registration titling primarily notes $XX our by reduced value by towards repurchased of $X,XXX We restricted $XX goal. $XX GPPU face long-term sequentially, progress Ecommerce and of our Our convertible million reduced million We $XX sequentially. cash driven for We

our you forward We are X initiatives forecasting of our midpoint on each liquidity I strategic look we progress roadmap. year-end as our long-term near quarter, guidance. the on to pursue updating our

and time today, questions. Thanks for we operator, ready your are for

Instructions]. [Operator

question Our comes first of the Gupta Rajat JPMorgan. from of line

vehicle better most selective. Obviously, a first than on being of Very Maybe you're one strong just your peers. numbers, GPPU.

follow-up. manage of GPPU is much So fee, staffed, when level a can to about to volumes that vehicle a is better up a GPPU from the And couple that questions. what How you help back I normalized think then around? start clarify you you're of shipping And if to have that? want just ramp as would good

long of quarter-over-quarter, little bit actually to GPPU the would balance volume. experiment overall the think as continue is what target with delivery term. be we -- to I a in the I fees our to where were we and you, want the tell optimize down we're right range

So I think to where in be we the long want run.

in some pressure cars current we But of that think have as is in around through as not this going plan. I once quarter. I we we being cause $X,XXX the kind staying I our term, sale, get long-term for what put in think the on titles short that's we these to we range all for think listed current or get titles, on maintaining titles, mentioned,

continue why volume. call really pointed over unit decision this when August, of focused that and demand, to out GPPU, to still quarter, were even the And We're we context on in economics optimizing in that's we would July would we normalized And during to growth. $X,XXX at from we the deck made moderate going doing the be what to GPPU. I grow

backdrop. predict what's especially hard to it's certainly in to macroeconomic happen with XXXX, So going the

outlined long the that several initiatives scratching Day have the term, is we're just And that directionally on this we But I would around we think, still we range. say on. surface Investor

the we're where of So GPPU about at good we like run. numbers, pretty long the in all feel for

Got it. when we give around how business level at I on front. can SG&A fixed you're managing then how being If and of about with if volumes a mean us much selective think that GPPU should careful versus leverage? come down to is variable And that the component of sense your of start expense SG&A should your see focus get we GPPU today? the And profitability can to given that you SG&A lower volumes, at a where on to volume? you

Thanks, Yes. Rajat.

So the we're really long-term of transforming taking a business. view

we drive variable need And so in long the run, to continue definitely and fixed to costs. SG&A down,

just we're around our is The down. making way initiated cost unit to projects about it variable new we've but conversion. also adjustments cost, way we And break clearly we per I'll So that, how drive marketing do too high. think

traffic from of historically, recall Investor into sub-prime in may converting sales. that amount a not You Day, significant we've been successful have we

marketing look at that key the is levers down conversion. in cost we on terms really unit focused one our of per So of driving

that on happening we a QX that really how be working conversion in in directionally projects per marketing Investor cost to what do taking next we're we're throughout outlined Day. our and year. have get we drive But unit view long-term will line And on around we on

and next Our titling is registration. biggest bucket

bring look keep to We're half what that costs that at on tech are We're titling now, registration out in focus believe continue on outlined focus that expect first our and cost While best-in-class huge the in made next can time, are improvements, the this in titling too continue to putting May, going we At process. rolling we goal. down. same down. roadmap got registration and registration our in we point high. costs still to we going That's we driving right to the first. customer year titling when assumptions in those we've and initiatives And we've we our at and made the of building that to QX this

The our shorter we the what decided, too I'll for tell on next right is But you right, lot in we're cost the would we've high. per consciously, term, to have that logistics things that got got hubs think bucket We a unit I we've begin logistics. today of, we've costs our do volume open future. semi-fixed place grow costs we network. in get and variable the where get keeping the titles call, when we've the in because is

very we're I that real and team cost. so And I resources operates the to And say feel for being the third we're confident improvements term, hub to our and trucking logistics how little between our a higher operates. have the internal optimize costs our really has in way made strategic linehaul huge last-mile short willing around would party.

are And we per those really we're our that clearly, transformation. the on lastly, again. really term, focused we more those value-added focusing headcount in fixed into believe highest as we in this and X I'm And becoming in assets drive more line into fixed projects. break so the And and costs a down we grow I'd say machine, that that will tech components. get to on I then unit costs. short our and build need resources One, efficient, I cost. have tech them how well-oiled do And

like the per in So our to you're unit higher going with see tech volume. long normalize that shorter expect the and we'll term, than in cost run, we'd to

got larger where company and I'd of frankly, the It's are have very And to call contracts we bucket when our mindset were across we into all contracts working like we we that company last I lot entered them. size we've of sized now. are those, need oriented growth than And efficiencies. a big the a other Rajat, in legal. you, out, are HR teams tell finance, then of And find costs we our is would the then

And our remember contracts. we're contracts, wonderful adjust and all and them we're we're those of and some us partners, going we're to working back we run, in with to some you, be have how through And work we to that I partners, do going trying really of favorable. tell with to those would the rightsize long work to trying

of have our and structure, even how But working look us. don't it variable to work going with memory those that's longer and we're a kind at fixed on daily basis. cost we for entire We're an that on holistically,

the from Wells Our line next Reid of of Sam comes question Fargo.

The quarterly you maybe I especially of unpack profitability decline sense guys quarter-to-date if that issues And kind macro? some sequential bit to versus breakout. the bucketing on is guess on you reflected drivers a wondering October trying more I unit was to in could I'm called detail. very the as commentary your mentioned say monthly you what was That's helpful, to trends give a of call how of efforts much versus what the unit focus the out those there. for third-party ongoing the X the us

it's as component parts this out our question, definitely a reported, so a to industry that we we business us have the daily at our just a Yes, look work the trying it's competitive hard move what have fantastic many business. and that's actually environment tease there we're basis. on macroeconomic in moving that in is numbers very because happening others transform if in It's to It's something and try for clear on, demand. to we environment, to we

after of in couple and the you weeks single that we had you metrics give we And a very it reduction we a large tell I that. and if reduction is mentioned and I I'll this it look -- around weeks can other XX% force my in sales week. it before at opening contracts. that, and a was X had What X in -- large, happened comments earlier you

rep. Our contracts per sales

for The down So flat, productivity the week week that's X%. kind metric of they a before versus after, us. basically were

So through really customers a process. having was matter get of transaction to it sales resources help the

going And very for to long time reduction force, us, we're realistic sales have third-party to our a -- one force. that the we -- it's We us partner of for in had take had that us and experienced that reap time a ramping unknowns that's been benefit. with been was the sales this

in in of mentioned, our radar long this was transition we for not I one it term, roadmap, As it expected long-term our priorities. to our just like wasn't over because cost the this selling year internally

So that. we on quickly move had to

of GPPU. So what right impact. around course, had different continue levers volume that test definitely a to versus material mix we then, of the And

hard it's is So very wanted acknowledge it, certainly the to it tease to environment. macroeconomic some we but of out, element

But a like at we when it looked impact. sales the reduction our significant in had drastic force definitely initially

I small share fragmented it's and a have for the market, us, we think in So such market. such a

coming we we much Our learn And into the how staff gain question through. go that as we market inbound share can we we're a have actually when as selling XXXX. through year traffic is can go next that going manage to that's

answered that's And color. No, helpful basically my follow-up question. you

So to due -- sequential as in one maybe be if in site I might there's older another GPPU QX? your rate vehicles have here on but to of a in on live run could of what there per not going flow-through? It GPPU, just vehicle slip sounds Kind like topic. titling healthy magnitude some the versus a of slightly sense down QX different any issues that a the been step through

Yes.

some give you Sam. on that, me So let color

we strong it's vehicle cars And frankly, QX started we year as on. in we tracking been a have really very changed GPPUs XXX -- a aged I've that pricing that, actually been selling days, than So even quite the track. we're we've QX we've surprised metric greater We about than drastically had by, think we producing way vehicles, greater sales. and

long-term our down every inventory very our to being of reasonable. we're get focused optimizing inventory age. regardless -- been profitability and to something It's its on reduce So more drastically goal level on clearly vehicle,

tell we're that XXX And get see there. I going But days, when you yet. we days, whether to that's XX days, can't XX

are aged. and vehicles QX, QX during So of have been that we mix selling a

we're we've now want we're along. registrations really titles we've them, want all where on the registration, working worked throughout As we to titles. getting been think to that doubling we on got But where get down and we on to year

sitting see vehicles So quite titles coming what time. of have that these is expecting influx an for been we're to in some on

We expect those sales, lower profits. still that profitable just will be

So as the right go as or if low early to It's as as in bit I the the end we quarter do of I expect were be answer, quarter. GPPU as used rest QX see in quarter. the wouldn't a $X,XXX, Xs. of related now, increased surprised things cars for your get high especially a how go depending if to on that low the issue, could to to solely somewhere be rates We $X,XXX short-term this in the titling would the lately. depreciation process, to as the have delay number

So as recur. not issue once will we this transitory see behind that us, this we get a we

[Operator Instructions].

line from Baird. Colin comes the question of of next Sebastian Our

Sebastian. This on is Could of IRC TDA? the the to please you for Colin Lee from Stafford talk Colin the on impact about the model transition

million once reconditioning that We as to significant Thanks that impact. it's exit our question. fixed dollars provide Vroommates by It's going that in environment several the reduce see to work going a facility, don't we a better much center. cost Yes. for for current the

really remove current Stafford the the environment. fixed a we it's don't going it material. see significantly as to creating So but cost of We're better location, about something

of Jefferies. from Our Vincent Kardos comes next question

and cars? used spectrum the or the John. credit across thus for far, seen QX And to on consumer kind guys year? the to Vincent in of earlier This seen, trend you we've for same seem higher in like is demand in Kardos be the know for more what terms of have cars and lower-end what retail Curious

for be as of some us a then helpful. for you demand demand insight sort expectations would And pricing that into and get as car XXXX, Anything follow-up, forward would well. to in could if outlook great about expectations help used talk your be going

Vincent. Yes. Thanks,

competitors some clearly, for our Given what's proxy think to we've the probably various softness. on going actually -- we what's levers hard year, the happening it's car a used pulling know we're demand, in doing tell this industry. are been improve the the in Clearly, given all we other better And business. us for to transformation there's really

I to $XX,XXX year a how raise continues rates out think play depends going are to question, and with what inflation. the next -- that's happens on Fed what things as

out So year's just We also a related are not happening, We're great unfortunately, things color think having on sales of fully very see staffed the end how we are to view just QX us do I'd QX at terms we sales probably this the a of seeing used resources. better curious what share we demand. the plays in And when resources. majority internally, are lot on demand. car in have we're to of point, don't have say to next at that of

this closing Sir? I'd CEO, over to call like At to turn back for the time, Tom Shortt, remarks.

and everyone, have Thank you, fantastic Great. time today, day. your a for

concludes Thank This today's call. conference you for participating.

now You may disconnect.