Vroom, Inc. Q4 FY2021 earnings call

Management Statement and Operational Highlights

• 2021 Accomplishments: Achieved triple-digit ecommerce unit growth, revenue grew nearly $2 billion y-o-y. Ecommerce GPPU increased 25%. Doubled reconditioning centers to 38. Exited 2021 with over 60% of ecommerce deliveries via last mile. 76% of Q4 retail units came from consumers. Acquired CarStory for AI analytics and UACC for captive lending. Raised over $600 million in June and ended 2021 with over $1 billion in cash.
• 2022 Plan: Focus on holistic transaction improvement, including streamlined customer experience, in-house financing, and scaling logistics. Expect sequential profitability improvement. Stabilizing and improving from December exit rate levels in Q1, anticipating tailwinds from captive financing and alleviating capacity constraints.
• Supply Chain: Exceeded reconditioning targets with 38 centers. Last mile deliveries at over 60% in Q4 2021, planning to expand to 85% by 2022.
• Acquisitions: CarStory integration drove pricing strategy, UACC acquisition begins transition to captive lending, and capital raised supports growth.

Segment Performance

• Ecommerce Business: In 2021, over 74,000 units sold, more than double the prior year. Ecommerce revenues surged 167% y-o-y to $2.4 billion. Ecommerce gross profit per unit (GPPU) grew 25%. In Q4 2021, ecommerce units were 21,243, up 93% y-o-y, and revenues reached $739 million, a 159% y-o-y increase. Ecommerce Vehicle GPPU was $473, while Ecommerce Product GPPU was $1,075, up 14% y-o-y.
• Wholesale Business: Wholesale units sold in Q4 2021 were 8,742, up 25% y-o-y. Wholesale GPPU was $890, a sharp increase from a loss in 2020, driven by favorable market conditions and improved pricing.

Guidance

• Q1 2022: Expect revenue ~$875 million, 18,000-19,000 ecommerce units, ecommerce GPPU ~$1,500, and adjusted EBITDA loss ~$130 million. Q1 is seen as the trough for EBITDA burn rate, with expectations of sequential improvement throughout 2022. Not providing full year 2022 guidance yet, but expect GPPU to improve each quarter, SG&A leverage to improve, and sequential EBITDA improvement after Q1.

Risks

• Reconditioning Constraints: Labor shortages, Omicron impact on staffing, and incremental reconditioning costs due to pandemic-related issues.
• Pricing Dynamics: Premium vehicle depreciation and impact of inventory purchases on GPPU due to rapid price changes.
• ADESA Acquisition Impact: Uncertainty regarding reconditioning capacity and strategy, needing to assess the effect on reconditioning centers and logistics.
• Economic Conditions: Volatility in the used car market and impact of interest rate changes on consumer affordability.

Question and Answer

• Q: Contingency planning and cash burn A: Ended 2021 with over $1.1 billion in cash. Q1 is seen as the trough for EBITDA burn rate, with opportunities to improve liquidity through working capital efficiencies and UACC leverage. More details at Analyst Day.
• Q: ADESA impact on reconditioning A: ~20-24% of capacity with ADESA, confident in third-party and own facilities, with assessment of impact to be detailed at Analyst Day.
• Q: Inventory management and GPPU A: Different from prior year issues, safeguards in place. Q1 unit decline due to reconditioning constraints and margin focus, with GPPU expected to improve gradually.
• Q: UACC impact on cars bought A: UACC opens opportunity for less expensive vehicles, drives conversion, unit economics improvement, and streamlined customer process.