Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Nasdaq  >  Vroom, Inc.    VRM

VROOM, INC.

(VRM)
  Report
SummaryQuotesChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
SummaryMost relevantAll NewsPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

VROOM : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

share with twitter share with LinkedIn share with facebook
08/13/2020 | 06:05am EDT
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 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.

                                    Overview

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. We are deeply committed to creating an exceptional experience for
our customers.

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

• Ecommerce: We offer an exceptional ecommerce experience for our

customers. In contrast to legacy dealerships and the peer-to-peer market,

we provide consumers with a personalized and intuitive ecommerce interface

to research and select from thousands of fully reconditioned vehicles. Our

platform is accessible at any time on any device and provides transparent

pricing, real-time financing and nationwide contact-free delivery right to

a buyer's driveway. For consumers looking to sell or trade in their

vehicles, we provide attractive market-based pricing, real-time,

guaranteed purchase offers and convenient, contact-free at-home vehicle

pick-up.

• Vehicle Operations: Our scalable and vertically integrated operations

underpin our business model. We strategically source inventory from

auctions, consumers, rental car companies, Original Equipment

Manufacturers ("OEMs") and dealers. We improve our ability to acquire

high-demand vehicles through enhanced supply science across all our

sourcing channels and we are expanding our national marketing efforts to

drive consumer sourcing. In our reconditioning and logistics operations,

we deploy an asset-light strategy that optimizes a combination of

ownership and operation of assets by us with strategic third-party

partnerships. This hybrid approach provides flexibility, agility and speed

        without taking on unnecessary risk and capital investment, and drives
        improved unit economics and operating leverage.

• Data Science and Experimentation: Data science and experimentation are at

the core of everything we do. We rely on data science, machine learning

        and A/B and multivariate testing to continually drive optimization and
        operating leverage across our ecommerce and vehicle operations. We
        leverage data to increase the effectiveness of our national brand and

performance marketing, enhance the customer experience, analyze market

dynamics at scale, calibrate our vehicle pricing and optimize our overall

inventory sales velocity. On the operations side, data science and

experimentation enables us to fine tune our supply, sourcing and logistics

models and to streamline our reconditioning processes.



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%. 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, we acquired Houston-based Texas Direct Auto, or TDA, which
included our proprietary vehicle reconditioning center, or Vroom VRC, our sole
physical retail location and our Sell Us Your Car® centers. From the launch of
our combined operations in January 2016, our business has grown significantly as
we have scaled our operations, developed our ecommerce platform and leveraged
the network effects inherent in our model.

                                       27

--------------------------------------------------------------------------------


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 intend to continue to invest in
growth to scale our company responsibly and drive towards profitability.

                                   Our Model

We generate revenue through the sale of used vehicles and value-added products.
We sell vehicles directly to consumers primarily through our Ecommerce segment.
As the largest segment in our business, Ecommerce revenue grew 45.2% from the
three months ended June 30, 2019 to the three months ended June 30, 2020 and
93.9% from the six months ended June 30, 2019 to the six months ended June 30,
2020, and we expect Ecommerce to continue to outgrow our other segments as it is
the core focus of our growth strategy.

We also sell vehicles through wholesale auctions, 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 30, 2020, our Ecommerce, TDA and Wholesale segments represented 69.4%, 10.5% and 20.1% of our total revenue, respectively. For the six months ended June 30, 2020, our Ecommerce, TDA and Wholesale segments represented 65.0%, 18.1% and 16.9% 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 any value-added products sold as part of a vehicle sale. Because
we are paid fees on the value-added products we sell, our gross profit on such
products is equal to the revenue we generate. 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:



                               [[Image Removed]]



Our profitability depends primarily on increasing unit sales and operating
leverage, as well as improving unit economics. We deploy an asset-light 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 additional revenue streams without taking on the risk associated with
underwriting vehicle financing or protection products. As we scale, 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.

                                       28

--------------------------------------------------------------------------------

Inventory Sourcing


We source our vehicle inventory from a variety of channels, including auctions,
consumers, rental car companies, OEMs and dealers. Because the quality of
vehicles and associated gross margin 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 to generate the highest sales margins and
shortest inventory turns, both of which contribute to increased gross profit per
unit. We generate a vast set of data derived from market demand, pricing
dynamics, vehicle acquisitions and subsequent sales, and we leverage that data
to optimize future vehicle acquisitions. As we scale, we expect to continue to
leverage the data at our disposal to optimize and enhance the volume and
selection of vehicles in our inventory and, in turn, drive revenue growth and
profitability. We also have begun to offer 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. See "-Key
Factors and Trends Affecting our Operating Results-Ability to drive growth by
cost effectively increasing the volume and selection of vehicles in our
inventory."

Vehicle Reconditioning


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."

Logistics Network

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."

Value-Added Products


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."

                                  Our Segments

We manage and report operating results through three reportable segments:

• Ecommerce (69.4% and 65.0% of revenue for the three and six months ended

June 30, 2020, respectively): The Ecommerce segment represents retail

sales of used vehicles through our ecommerce platform and fees earned on

sales of value-added products associated with those vehicle sales.

• TDA (10.5% and 18.1% of revenue for the three and six months ended

June 30, 2020, respectively): The TDA segment represents retail sales of

used vehicles from TDA and fees earned on sales of value-added products

associated with those vehicle sales.

• Wholesale (20.1% and 16.9% of revenue for the three and six months ended

June 30, 2020, respectively): The Wholesale segment represents sales of

        used vehicles through wholesale auctions.


                                       29
--------------------------------------------------------------------------------


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 months ended June 30, 2019 and 2020:



                                  Three Months Ended           Six Months Ended
                                       June 30,                    June 30,
                                  2019          2020          2019          2020
                                    (in thousands)              (in thousands)
           Revenue:
           Ecommerce            $ 120,953$ 175,568$ 210,808$ 408,740
           TDA                     85,413        26,604       178,497       113,628
           Wholesale               54,531        50,921       106,651       106,497
           Total revenue        $ 260,897$ 253,093$ 495,956$ 628,865
           Gross profit:
           Ecommerce            $   7,295$   7,219$  13,049$  21,486
           TDA                      6,101           931        12,179         6,346
           Wholesale                  449          (543 )         629        (1,838 )
           Total gross profit   $  13,845$   7,607$  25,857$  25,994




                      Key Operating and Financial Metrics

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.



                                               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




Ecommerce Units Sold

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. Ecommerce units sold excludes sales of vehicles 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 vehicle sale through our ecommerce platform also
creates the opportunity to leverage such sale to sell value-added products.
Continued ecommerce growth will also increase the number of trade-in vehicles
acquired from our customers, which we can either recondition and add to our
inventory or sell at wholesale auctions.

                                       30

--------------------------------------------------------------------------------

Vehicle Gross Profit per Ecommerce Unit


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 believe Vehicle GPPU will be a key
driver of our long-term profitability.

Product Gross Profit per Ecommerce Unit


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 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 value-added products we sell, our gross profit
is equal to the revenue we generate from the sale of value added products. We
plan to introduce initiatives to increase the attachment rates of value-added
products and expand our offerings of value-added products which will grow our
Product GPPU.

Total Gross Profit per Ecommerce Unit


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


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.

Listed Vehicles

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.

Ecommerce Average Days to Sale


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 days to sale excludes vehicles sold through the TDA and
Wholesale segments. 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.

                          Non-GAAP Financial Measures

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, Adjusted loss from operations, Non-GAAP
net loss, Non-GAAP net loss per share and Non-GAAP net loss per share, as
adjusted. 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.

                                       31
--------------------------------------------------------------------------------

EBITDA and Adjusted EBITDA


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 are
supplemental performance measures that our management uses to assess our
operating performance and the operating leverage in our business. Because EBITDA
and Adjusted EBITDA facilitate internal comparisons of our historical operating
performance on a more consistent basis, we use these measures for business
planning purposes. The following table presents a reconciliation of EBITDA and
Adjusted EBITDA to net loss, which is the most directly comparable U.S. GAAP
measure:



                                           Three Months Ended            Six Months Ended
                                                June 30,                     June 30,
                                           2019          2020          2019           2020
                                             (in thousands)               (in thousands)
 Net loss                                $ (33,340 )$ (63,228 )$ (60,479 )$ (104,287 )

Adjusted to exclude the following:

 Interest expense                            3,388         1,297         

6,106 4,123

 Interest income                            (1,415 )        (715 )      

(3,264 ) (2,671 )

 Provision (benefit) for income taxes          (29 )          52            74            105

Depreciation and amortization expense 1,557 1,089 3,146 2,059

 EBITDA                                  $ (29,839 )$ (61,505 )   $ 

(54,417 ) $ (100,671 )

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
 Adjusted EBITDA                         $ (29,839 )$ (38,983 )$ (54,417 )$  (78,939 )


Adjusted loss from operations

We calculate Adjusted loss from operations as loss from operations adjusted to
exclude the one-time, IPO related acceleration of non-cash stock-based
compensation expense. The following table presents a reconciliation of Adjusted
loss from operations to loss from operations, which is the most directly
comparable U.S. GAAP measure:



                                             Three Months Ended           Six Months Ended
                                                  June 30,                    June 30,
                                             2019          2020          2019          2020
                                               (in thousands)              (in thousands)
Loss from operations                       $ (31,348 )$ (41,387 )$ (57,452 )$ (82,346 )
Add: One-time IPO related acceleration
of non-cash stock
  based compensation                               -         1,262             -         1,262
Adjusted loss from operations              $ (31,348 )$ (40,125 )$ (57,452 )$ (81,084 )


                                       32
--------------------------------------------------------------------------------

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                 Six Months Ended
                                                      June 30,                          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:



                                                 Three Months Ended                   Six Months Ended
                                                      June 30,                            June 30,
                                               2019              2020              2019              2020
                                                   (in thousands, except share and per share amounts)
Non-GAAP net loss                          $     (59,219 )$     (40,706 )$    (104,322 )$     (82,555 )
Add: Accretion of redeemable convertible
preferred stock                                   25,879                 -            43,843                 -
Non-GAAP net loss, as adjusted             $     (33,340 )   $     (40,706 

) $ (60,479 )$ (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
Add: unweighted adjustment for common
stock issued in
  connection with IPO                         24,437,500        24,437,500        24,437,500        24,437,500
Add: unweighted adjustment for
conversion of
  redeemable convertible preferred stock
in connection
  with IPO                                    85,533,394        85,533,394        85,533,394        85,533,394
Less: Adjustment for the impact of the
above items
  already included in weighted-average
number of
  shares outstanding for the periods
presented                                              -       (22,960,956 )               -       (11,480,478 )
Weighted-average number of shares
outstanding used to
  compute net loss per share, as
adjusted, basic and
  diluted                                    118,551,044       118,609,435  

118,550,433 118,525,892


Non-GAAP net loss per share, as
adjusted, basic and diluted                $       (0.28 )$       (0.34 )$       (0.51 )$       (0.70 )


                                       33
--------------------------------------------------------------------------------

                                 Recent Events

Initial Public Offering

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.

Rocket Agreement


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.

                               Impact of COVID-19

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.

Impact on our operations


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:

      • uncertainties regarding the duration of the COVID-19 pandemic and the
        length of time over which the disruptions caused by COVID-19 will
        continue;

• the impact of governmental orders and regulations that have been, and may

in the future be, imposed in response to the pandemic;

• the impact of COVID-19 on VRCs, wholesale auctions, state DMV titling and

        registration services, third party vehicle carriers and other third
        parties on which we rely;

• uncertainty as to the impact future increases in transmission could have

on our ability to fully staff portions of our business;

• the deterioration of economic conditions in the United States, as well as

        record high unemployment levels, which could have an adverse impact on
        discretionary consumer spending; and

• uncertainty regarding the potential for and timing of a "second wave" of

the COVID-19 crisis to occur in the future.

Impact on ecommerce operations


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.

                                       34

--------------------------------------------------------------------------------


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.

Impact on our vehicle reconditioning and our logistics network


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.

Impact on TDA

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.

Impact on our administrative functions


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.

Management actions in response to the COVID-19 disruptions


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

                                       35

--------------------------------------------------------------------------------


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.









          Other Key Factors and Trends Affecting our Operating Results

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.

                                       36

--------------------------------------------------------------------------------

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.

Ability to convert visitors to our platform into customers


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 and experimentation drive decision making across all of our
conversion 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
we continue to invest in our brand and improve the customer experience, we
expect that we will attract more visitors, improve conversion and drive greater
sales.

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


We strategically source inventory from auctions, consumers, rental car
companies, OEMs and dealers. Auctions, consumers, and rental car companies
represent the vast majority of our inventory sources, accounting for
approximately 55%, 28%, and 15% of our retail inventory sold for the three
months ended June 30, 2020, respectively, and 51%, 34%, and 14% for the six
months ended June 30, 2020, respectively. Because the quality of vehicles and
associated gross margin 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 auctions is competitive and, consequently,
vehicle prices at third-party auctions tend to be higher than vehicle prices for
vehicles sourced directly from consumers. Accordingly, as part of our sourcing
strategy, we seek to increase 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 of our ecommerce platform.
In order to continue to increase the percentage 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, which we believe will result
in more customers gaining familiarity with 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.

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.

Ability to expand and optimize our reconditioning capacity to satisfy increasing demand


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 optimize our reconditioning capacity to
satisfy increasing customer demand. We employ a hybrid approach that combines
the use of our Vroom VRC and third-party VRCs to best meet our reconditioning
needs.

                                       37
--------------------------------------------------------------------------------


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 intend to continue to invest in increased reconditioning capacity
and operational efficiency through 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
use of third-party VRCs to recondition vehicles allows us to avoid additional
capital expenditures, quickly increase capacity, maintain greater operational
flexibility and broaden our geographic footprint to drive lower logistics costs.
In 2019 and through early August 2020, we expanded our third-party VRC
operations by adding fifteen additional VRCs across the nation for a current
total of sixteen. See "-Liquidity and Capital Resources."

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

Ability to expand and develop our logistics network


We primarily use third-party carriers and are developing a hybrid strategy to
build out our proprietary logistics network. We are in the process of optimizing
our third-party logistics network nationally through the development of
strategic carrier arrangements with national haulers. As we continue to grow, we
plan to significantly consolidate our carrier base into dedicated operating
regions. We expect that these enhanced logistics operations, combined with the
expansion of strategically located VRCs, will drive lower inbound and outbound
logistics costs, thus lowering costs per unit. Our VRCs also serve as pooling
points to aggregate acquired vehicles 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. 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 will result in improved unit economics,
increased profitability and an enhanced customer experience.

Ability to increase and better monetize value-added products


Our offering of value-added products is an integral part of providing a seamless
vehicle-buying experience to our customers. These products provide added revenue
streams for us as well as offering convenience, assurance and efficiency for our
customers. We sell our third-party value-added products through our strategic
relationships with multiple lenders and other third parties who bear the
incremental risks associated with the underwriting of finance and 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.

Seasonality


Used vehicle sales are 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 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 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. See "Risk Factors-Risks Related to Our Business-We may
experience seasonal and other fluctuations in our quarterly results of
operations, which may not fully reflect the underlying performance of our
business."

                                       38

--------------------------------------------------------------------------------

                      Components of Results of Operations

Revenue

Retail vehicle revenue


We sell vehicles through both our ecommerce platform and TDA. Revenue from
vehicle sales, including any delivery charges, are 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 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 customers,
our brand awareness and our ability to expand our reconditioning operations and
logistics network.

Average selling price per unit sold depends primarily on our pricing strategy,
retail used car market prices, our average days to sale and our reconditioning
and logistics costs.

Historically, we have focused our inventory on low-mileage, high-demand vehicles
with average selling prices of approximately $30,000. As we ramp up 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".

Wholesale vehicle revenue


We sell vehicles that do not meet our Vroom retail sales criteria through
third-party wholesale auctions. Vehicles sold at auction 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. The
number of wholesale vehicles sold and the average selling price per unit are the
primary drivers of wholesale revenue. The average selling price per unit is
affected by the mix of the vehicles we acquire and general supply and demand
conditions in the wholesale market.

Product revenue


We generate revenue by earning fees on sales of value-added products to our
customers in connection with vehicle sales, including fees earned on customer
vehicle financing from third-party lenders and fees earned on sales of other
value-added products, such as extended warranty contracts, GAP products and
wheel and tire coverage. We earn fees on these 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.

Other revenue

Other revenue consists of labor and parts revenue earned by us for vehicle repair services at TDA.

See "Note 3-Revenue Recognition" to our condensed consolidated interim financial statements included elsewhere in this Quarterly Report on Form 10-Q.

                                       39

--------------------------------------------------------------------------------

Cost of sales


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.

Total gross profit

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

Selling, general and administrative expenses


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.

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.

Depreciation and amortization


Our depreciation and amortization expense primarily includes depreciation
related to our leasehold improvements, as well as amortization related to
intangible assets acquired in the TDA acquisition and capitalized internal use
software costs incurred in the development of our platform and website
applications. Depreciation expense related to our Vroom VRC is included in cost
of sales in the consolidated statements of operations.

Interest expense


Our interest expense includes interest expense related to our Vehicle Floorplan
Facility, which is used to finance our inventory, as well as interest expense on
our term loan facility, which was repaid in full in December 2019.

Interest Income

Interest income primarily represents interest credits earned on cash deposits maintained in relation to our Vehicle Floorplan Facility.

                                       40

--------------------------------------------------------------------------------


                             Results of Operations

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




                           Three Months Ended                               

Six Months Ended

                                June 30,                                        June 30,
                          2019            2020         % Change           2019             2020         % Change
                             (in thousands)                                   (in thousands)
Revenue:
Retail vehicle, net   $   200,402$   196,150           (2.1 )%   $   379,152$    504,862           33.2 %
Wholesale vehicle          54,531          50,921           (6.6 )%       106,651          106,497           (0.1 )%
Product, net                5,491           5,736            4.5 %          9,236           16,780           81.7 %
Other                         473             286          (39.5 )%           917              726          (20.8 )%
Total revenue             260,897         253,093           (3.0 )%       495,956          628,865           26.8 %
Cost of sales             247,052         245,486           (0.6 )%       470,099          602,871           28.2 %
Total gross profit         13,845           7,607          (45.1 )%        25,857           25,994            0.5 %

Selling, general and

administrative

expenses                   43,692          47,911            9.7 %         80,275          106,291           32.4 %
Depreciation and
amortization                1,501           1,083          (27.8 )%         3,034            2,049          (32.5 )%

Loss from operations (31,348 ) (41,387 ) 32.0 % (57,452 ) (82,346 ) 43.3 % Interest expense

            3,388           1,297          (61.7 )%         6,106            4,123          (32.5 )%
Interest income            (1,415 )          (715 )        (49.5 )%        (3,264 )         (2,671 )        (18.2 )%
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 %
Loss before provision
(benefit) for income
taxes                     (33,369 )       (63,176 )         89.3 %        (60,405 )       (104,182 )         72.5 %
Provision (benefit)
for income taxes              (29 )            52         (279.3 )%            74              105           41.9 %
Net loss              $   (33,340 )$   (63,228 )         89.6 %    $   (60,479 )$   (104,287 )         72.4 %




Segments

We manage and report operating results through three reportable segments:

• Ecommerce (69.4% and 65.0% of revenue for the three and six months ended

June 30, 2020, respectively): The Ecommerce segment represents retail

sales of used vehicles through our ecommerce platform and fees earned on

sales of value-added products associated with those vehicle sales.

• TDA (10.5% and 18.1% of revenue for the three and six months ended

June 30, 2020, respectively): The TDA segment represents retail sales of

used vehicles from TDA and fees earned on sales of value-added products

associated with those vehicle sales.

• Wholesale (20.1% and 16.9% of revenue for the three and six months ended

June 30, 2020, respectively): The Wholesale segment represents sales of

        used vehicles through wholesale auctions.




                                       41
--------------------------------------------------------------------------------

Three Months Ended June 30, 2019 and 2020

Ecommerce


The following table presents our Ecommerce 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)
Ecommerce units sold                                  3,856               6,713          2,857           74.1 %
Ecommerce revenue:
Vehicle revenue                           $         118,569       $     170,460$   51,891           43.8 %
Product revenue                                       2,384               5,108          2,724          114.3 %
Total ecommerce revenue                   $         120,953       $     175,568$   54,615           45.2 %
Ecommerce gross profit:
Vehicle gross profit                      $           4,911       $       2,111$   (2,800 )        (57.0 )%
Product gross profit                                  2,384               5,108          2,724          114.3 %
Total ecommerce gross profit              $           7,295       $       7,219$      (76 )         (1.0 )%
Average vehicle selling price per
ecommerce unit                            $          30,749       $      25,393$   (5,356 )        (17.4 )%
Gross profit per ecommerce unit:
Vehicle gross profit per ecommerce unit   $           1,274       $         314     $     (960 )        (75.4 )%
Product gross profit per ecommerce unit                 618                 761            143           23.1 %
Total gross profit per ecommerce unit     $           1,892       $       1,075$     (817 )        (43.2 )%
Ecommerce average days to sale                           64                  66              2            3.1 %




Ecommerce units

Ecommerce units sold increased 2,857, or 74.1%, from 3,856 for the three months
ended June 30, 2019 to 6,713 for the three months ended June 30, 2020. This
increase was driven by process improvements in our ecommerce platform, our
national advertising campaign which continues to strengthen our national brand
awareness as well as greater consumer acceptance of our business model as a
result of disruptions caused by the COVID-19 pandemic. Average monthly unique
visitors to our website grew from 628,659 for the three months ended June 30,
2019 to 999,899 for the three months ended June 30, 2020, representing year over
year growth of 59.1%. We expect ecommerce units sold to continue to grow in the
future as we increase our inventory selection and marketing efforts and improve
conversion.

Vehicle Revenue

Ecommerce vehicle revenue increased $51.9 million, or 43.8%, from $118.6 million
for the three months ended June 30, 2019 to $170.5 million for the three months
ended June 30, 2020. The increase in ecommerce vehicle revenue was primarily
attributable to the 2,857 increase in ecommerce units sold, which increased
vehicle revenue by $87.9 million, partially offset by a lower average selling
price per unit, which decreased from $30,749 for the three months ended June 30,
2019 to $25,393 for the three months ended June 30, 2020 and decreased vehicle
revenue by $36.0 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.

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 of ecommerce units sold at pre-COVID levels, through April
30, 2020. The significant reduction in our inventory and pause in vehicle
acquisitions negatively impacted our unit sales for the remainder of the three
months ended June 30, 2020. In late April 2020, we started gradually rebuilding
our inventory levels. Due to greater customer acceptance of our business model
and focus on contact-free delivery, we expect sales to return to pre-COVID
levels in the near future.

Product Revenue


Ecommerce product revenue increased $2.7 million, or 114.3%, from $2.4 million
for the three months ended June 30, 2019 to $5.1 million for the three months
ended June 30, 2020. 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

                                       42

--------------------------------------------------------------------------------


$143 increase in product revenue per unit which increased product revenue by
$0.9 million. Product revenue per unit increased by $143 from $618 for the three
months ended June 30, 2019 to $761 for the three 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.

Vehicle Gross Profit


Ecommerce vehicle gross profit decreased $2.8 million, or 57.0%, from $4.9
million for the three months ended June 30, 2019 to $2.1 million for the three
months ended June 30, 2020. The decrease in vehicle gross profit was primarily
attributable to a $960 decrease in vehicle gross profit per unit, which
decreased vehicle gross profit by $6.4 million, partially offset by the 2,857
increase in ecommerce units sold, which increased 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
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
to increase in the future driven by reduced costs across acquisitions, logistics
and reconditioning.

Product Gross Profit

Ecommerce product gross profit increased $2.7 million, or 114.3%, from $2.4
million for the three months ended June 30, 2019 to $5.1 million for the three
months ended June 30, 2020. The increase in ecommerce product gross profit was
primarily attributable to the 2,857 increase in ecommerce units sold which
increased product gross profit by $1.8 million and a $143 increase in product
gross profit per unit which increased product gross profit by $0.9 million . The
increase in 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.

TDA


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 )%


                                       43
--------------------------------------------------------------------------------



TDA units

TDA units sold decreased 1,682, or 60.2%, from 2,792 for the three months ended
June 30, 2019 to 1,110 for the three 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-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.

Vehicle Revenue


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 was primarily due to the
1,682 decrease in TDA units sold which decreased TDA vehicle revenue by $49.3
million and a lower average selling price per unit, which decreased 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 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.

Product Revenue


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, 2020 as compared to the three months ended June 30, 2019
which decreased revenue by $0.6 million .

Other Revenue

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.

Vehicle Gross Profit


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.

Product Gross Profit


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 .

Other gross profit

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.

                                       44
--------------------------------------------------------------------------------

Wholesale


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



                                                        Three Months Ended
                                                             June 30,
                                                 2019                     2020               Change       % Change
                                               (in thousands, except unit data)
Wholesale units sold                                    5,396                   3,259         (2,137 )        (39.6 )%
Wholesale revenue                         $            54,531       $          50,921     $   (3,610 )         (6.6 )%
Wholesale gross profit (loss)             $               449       $            (543 )   $     (992 )       (220.9 )%
Average selling price per unit            $            10,106       $          15,625     $    5,519           54.6 %
Wholesale gross profit (loss) per unit    $                83       $            (167 )   $     (250 )       (301.2 )%




Units

Wholesale units sold decreased 2,137, or 39.6%, from 5,396 for the three months
ended June 30, 2019 to 3,259 for the three months ended June 30, 2020, primarily
driven by a reduction in wholesale units purchased from customers as a result of
the COVID-19 pandemic.

Revenue

Wholesale revenue decreased $3.6 million, or 6.6%, from $54.5 million for the
three months ended June 30, 2019 to $50.9 million for the three months ended
June 30, 2020. The decrease was primarily attributable to the 2,137 decrease in
wholesale units sold which decreased wholesale revenue by $21.6 million,
partially offset by a higher average selling price per wholesale units 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 wholesale revenue by $18.0
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.

Gross Profit (Loss)


Wholesale vehicle gross profit decreased $1.0 million, or 220.9% from gross
profit of $0.5 million for the three months ended June 30, 2019 to a loss of
$0.5 million for the three months ended June 30, 2020.  The decrease was
primarily attributable to a $250 decrease in wholesale gross profit per unit 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.

Selling, general and administrative expenses



                                             Three Months Ended
                                                  June 30,
                                              2019          2020        Change       % Change
                                               (in thousands)
Compensation & benefits                  $     17,476$ 20,618$  3,142           18.0 %
Marketing expense                              12,736       11,573       (1,163 )         (9.1 )%
Outbound logistics                              2,650        5,470        2,820          106.4 %
Occupancy and related costs                     2,985        2,267         (718 )        (24.1 )%
Professional fees                               3,227        1,465       (1,762 )        (54.6 )%
Other                                           4,618        6,518        1,900           41.1 %
Total selling, general &
administrative expenses                  $     43,692$ 47,911$  4,219            9.7 %




Selling, general and administrative expenses increased $4.2 million, or 9.7%,
from $43.7 million for the three months ended June 30, 2019 to $47.9 million for
the three months ended June 30, 2020. The increase was primarily due to a $3.4
million increase in stock-based compensation included within compensation and
benefits, and a $2.8 million increase in outbound logistics costs attributable
to the growth in ecommerce units sold and increases in market rates of logistics
providers. These increases were offset by a $1.8 million decrease in
professional services due to higher accounting assistance costs incurred in the
prior period and a $1.2 million decrease in advertising and marketing costs due
to the reduction of marketing spend during our initial response to the COVID-19
pandemic.

                                       45
--------------------------------------------------------------------------------

Depreciation and amortization


Depreciation and amortization expenses decreased $0.4 million, or 27.8%, from
$1.5 million for the three months ended June 30, 2019 to $1.1 million for the
three months ended June 30, 2020. The decrease was primarily due to reduced
amortization expense as certain intangible assets were fully amortized.

Interest expense


Interest expense decreased $2.1 million, or 61.7%, from $3.4 million for the
three months ended June 30, 2019 to $1.3 million for the three months ended
June 30, 2020.  The decrease was primarily attributable to the lower outstanding
balance of the Vehicle Floorplan Facility due to reduction in vehicles inventory
levels as a result of our initial response to the COVID-19 pandemic as well as
the repayment of our term loan facility in December 2019.

Interest income


Interest income decreased $0.7 million, or 49.5%, from $1.4 million for the
three months ended June 30, 2019 to $0.7 million for the three months ended
June 30, 2020.  The decrease in interest income was primarily driven by lower
interest earned on cash deposits maintained with Ally Bank as a result of the
lower outstanding balance of the Vehicle Floorplan Facility.

Revaluation of preferred stock warrant


The increase in revaluation of preferred stock warrant of $21.2 million for the
three months ended June 30, 2020 as compared to the three months ended June 30,
2019 was related 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.

Six Months Ended June 30, 2019 and 2020

Ecommerce


The following table presents our Ecommerce 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)
Ecommerce units sold                                  7,043              14,643           7,600          107.9 %
Ecommerce revenue:
Vehicle revenue                           $         207,199       $     396,065$   188,866           91.2 %
Product revenue                                       3,609              12,675           9,066          251.2 %
Total ecommerce revenue                   $         210,808       $     408,740$   197,932           93.9 %
Ecommerce gross profit:
Vehicle gross profit                      $           9,440       $       8,811$      (629 )         (6.7 )%
Product gross profit                                  3,609              12,675           9,066          251.2 %
Total ecommerce gross profit              $          13,049       $      21,486$     8,437           64.7 %
Average vehicle selling price per
ecommerce unit                            $          29,419       $      27,048$    (2,371 )         (8.1 )%
Gross profit per ecommerce unit:
Vehicle gross profit per ecommerce unit   $           1,340       $         602     $      (738 )        (55.1 )%
Product gross profit per ecommerce unit                 512                 866             354           69.1 %
Total gross profit per ecommerce unit     $           1,852       $       1,468$      (384 )        (20.7 )%
Ecommerce average days to sale                           64                  67               3            4.7 %




                                       46
--------------------------------------------------------------------------------

Ecommerce units


Ecommerce units sold increased 7,600, or 107.9%, from 7,043 for the six months
ended June 30, 2019 to 14,643 for the six months ended June 30, 2020, driven by
our increased inventory levels, process improvements in 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 as a
result of the COVID-19 pandemic. Average monthly unique visitors to our website
increased from 520,074 for the six months ended June 30, 2019 to 973,457 for the
six months ended June 30, 2020. We expect ecommerce units sold to continue to
grow in the future as we increase our inventory selection and marketing efforts
and improve conversion.

Vehicle Revenue

Ecommerce vehicle revenue increased $188.9 million, or 91.2%, from $207.2
million for the six months ended June 30, 2019 to $396.1 million for the six
months ended June 30, 2020. The increase in ecommerce vehicle revenue was
primarily attributable to the 7,600 increase 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.

Product Revenue

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.

Vehicle Gross 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.

Product Gross Profit

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.

                                       47

--------------------------------------------------------------------------------

TDA


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

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.

Vehicle Revenue


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 million and the lower average selling
price per unit, which decreased from $27,905 for the six months ended June 30,
2019 to $26,248 for the six months ended June 30, 2020 and decreased vehicle
revenue by $6.9 million.

Product Revenue

TDA product revenue decreased $1.5 million, or 27.1% from $5.6 million for the
six months ended June 30, 2019 to $4.1 million for the six months ended June 30,
2020. The decrease was primarily driven by the 2,017 decrease in TDA units sold
in the six months ended June 30, 2020 as compared to the six months ended June
30, 2019.

Other Revenue

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.

Vehicle Gross Profit

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 to a decrease in TDA vehicle gross
profit per unit of $507, which decreased vehicle gross profit by $2.1 million
and the 2,017 decrease in TDA units sold in the six months ended June 30, 2020
as compared to June 30, 2019, which decreased vehicle gross profit by $2.0
million. We expect our 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.

                                       48

--------------------------------------------------------------------------------

Product Gross Profit


TDA product gross profit decreased $1.5 million, or 27.1%, from $5.6 million for
the six months ended June 30, 2019 to $4.1 million for the six months ended June
30, 2020. The decrease was primarily attributable to the 2,017 decrease in TDA
units sold during the six months ended June 30, 2020 as compared to June 30,
2019. Product gross profit per unit slightly increased from $913 for the six
months ended June 30, 2019 to $990 for the six months ended June 30, 2020.

Other gross profit


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,
                                                 2019                     2020               Change       % Change
                                               (in thousands, except unit data)
Wholesale units sold                                  10,626                    7,944         (2,682 )        (25.2 )%
Wholesale revenue                         $          106,651       $          106,497     $     (154 )         (0.1 )%
Wholesale gross profit (loss)             $              629       $           (1,838 )   $   (2,467 )       (392.2 )%
Average selling price per unit            $           10,037       $           13,406     $    3,369           33.6 %
Wholesale gross profit (loss) per unit    $               59       $             (231 )   $     (290 )       (491.5 )%




Units

Wholesale units sold decreased 2,682, or 25.2%, from 10,626 for the six months
ended June 30, 2019 to 7,944 for the six months ended June 30, 2020, primarily
driven by a decrease in the number of trade-in vehicles as a result of the
decrease in number of TDA units sold for the six months ended June 30, 2020 as
compared to June 30, 2019.

Revenue

Wholesale revenue remained relatively flat for the six months ended June 30,
2020 as compared to the six months ended June 30, 2019. The decrease in
wholesale revenue was attributable to the 2,682 decrease in wholesale units sold
which decreased wholesale revenue by $26.9 million, offset by a higher average
selling price per unit which increased from $10,037 million for the six months
ended June 30, 2019 to $13,406 for the six months ended June 30, 2020 and
increased revenue by 26.7 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 decreased consumer demand due to the COVID-19 pandemic.

Gross Profit (Loss)


Wholesale vehicle gross profit decreased $2.4 million, or 392.2%, from gross
profit of $0.6 million for the six months ended June 30, 2019 to a loss of $1.8
million for the six months ended June 30, 2020. The decrease was primarily
attributable to a $290 decrease in wholesale gross profit per unit for the six
months ended June 30, 2020 as compared to the six months ended June 30, 2019.

                                       49

--------------------------------------------------------------------------------

Selling, general and administrative expenses



                                             Six Months Ended
                                                 June 30,
                                            2019          2020         Change       % Change
                                              (in thousands)
Compensation & benefits                  $   32,968$  40,940$  7,972           24.2 %
Marketing expense                            19,836        29,488        9,652           48.7 %
Outbound logistics                            4,944        11,261        6,317          127.8 %
Occupancy and related costs                   5,271         4,964         (307 )         (5.8 )%
Professional fees                             5,880         3,924       (1,956 )        (33.3 )%
Other                                        11,376        15,714        4,338           38.1 %
Total selling, general &
administrative expenses                  $   80,275$ 106,291$ 26,016           32.4 %




Selling, general and administrative expenses increased $26.0 million, or 32.4%,
from $80.3 million for the six months ended June 30, 2019 to $106.3 million for
the six months ended June 30, 2020. The increase was primarily due to a $9.7
million increase in advertising and marketing efforts as we expanded our
national broad-reach advertising, an $8.0 million increase in compensation and
benefits partially due to an increase in employee headcount throughout the
organization as our business scales as well as a $3.4 million increase in
stock-based compensation included within compensation and benefits, and a $6.3
million increase in outbound logistics costs attributable to the growth in our
ecommerce business.

Depreciation and amortization


Depreciation and amortization expenses decreased $1.0 million, or 32.5%, from
$3.0 million for the six months ended June 30, 2019 to $2.0 million for the six
months ended June 30, 2020. The decrease was primarily due to reduced
amortization expense as certain intangible assets were fully amortized.

Interest expense


Interest expense decreased $2.0 million, or 32.5%, from $6.1 million for the six
months ended June 30, 2019 to $4.1 million for the six months ended June 30,
2020. The decrease was primarily attributable to the repayment of our term loan
facility in December 2019 as well as the lower outstanding balance of the
Vehicle Floorplan Facility due to the reduction in vehicle inventory levels as a
result of our initial response to the COVID-19 pandemic.

Interest Income


Interest income decreased $0.6 million, or 18.2%, from $3.3 million for the six
months ended June 30, 2019 to $2.7 million for the six months ended June 30,
2020. The decrease in interest income was primarily driven by lower interest
earned on cash deposits maintained with Ally Bank as the results of the lower
outstanding balance of the Vehicle Floorplan Facility.

                                       50

--------------------------------------------------------------------------------

Revaluation of preferred stock warrant


The increase in revaluation of preferred stock warrant of $20.3 million for the
six months ended June 30, 2020 as compared to the six months ended June 30, 2019
was related to the revaluation 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.



                        Liquidity and Capital Resources

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 30, 2020, 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 million and $104.3 million for the three and six months ended June 30, 2020, respectively. We have not been profitable since 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
Vehicle Floorplan Facility and, as of June 30, 2020, we had approximately
$90.2 million available under such facility to fund future vehicle inventory
purchases. In March 2020, we entered into a new vehicle floorplan facility (the
"2020 Vehicle Floorplan Facility") with Ally Bank and Ally Financial, that
provides a committed credit line of up to $450.0 million. The commitment 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 on hand to continue to
fund our vehicle purchases. However, there can be no assurance we will be able
to do so.

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 reduce costs per unit, the expansion of our inventory and sales
and marketing activities, investment in our reconditioning and logistics
operations, and enhancements to our ecommerce platform. We may be required to
seek additional equity or debt financing in the future to fund our operations or
to fund our needs for capital expenditures. In the event that additional
financing is required, we may not be able to raise it on terms acceptable to us,
or at all. If we are unable to raise additional capital or generate cash flows
necessary to expand our operations, our business, results of operations and
financial condition could be adversely affected.

Vehicle Financing

We entered into a vehicle floorplan facility in April 2016, as subsequently amended, with Ally Bank and Ally Financial, which we refer to as our 2016 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. The 2020 Vehicle Floorplan Facility provides a committed credit line of up to $450.0 million which expires in March 2021.


                                       51

--------------------------------------------------------------------------------


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 average
outstanding borrowings and vehicle units paid off by us within the three
immediately preceding months. Approximately $90.2 million was available under
this facility as of June 30, 2020. We may elect to increase our monthly credit
line availability by an additional $25.0 million during any three months of each
year. Outstanding borrowings are due as the vehicles financed are sold, or in
any event, on the maturity date. The 2020 Vehicle Floorplan Facility bears
interest at a rate equal to the 1-Month LIBOR rate applicable in the immediately
preceding month plus a spread of 425 basis points. Under the 2020 Vehicle
Floorplan Facility, we are subject to financial covenants that require us to
maintain a certain level of equity in the vehicles that are financed, to
maintain at least 10% of the outstanding borrowings 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 of $167.0
million, which is defined as shareholder (deficit) equity plus redeemable
convertible preferred stock as determined under U.S. GAAP.

         Cash Flows from Operating, Investing, and Financing Activities

The following table summarizes our cash flows for the six months ended June 30,
2019 and 2020:



                                                 Six Months Ended
                                                     June 30,
                                               2019            2020           Change       % Change
                                                  (in thousands)
Net cash (used in) provided by
operating activities                      $   (127,897 )   $         4     $   127,901        (100.0 )%
Net cash used in investing activities             (794 )        (3,128 )        (2,334 )       294.0 %
Net cash provided by financing
activities                                      67,706         456,425         388,719         574.1 %
Net (decrease) increase in cash and
cash equivalents                               (60,985 )       453,301         514,286        (843.3 )%
Cash and cash equivalents at beginning
of period                                      163,509         219,587          56,078          34.3 %
Cash and cash equivalents at end of
period                                    $    102,524$   672,888$   570,364         556.3 %




Operating Activities

Net cash flows from operating activities changed from 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 to a decrease in working
capital requirements, primarily related to lower 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 partially offset by $24.8 million in incremental
net loss after reconciling adjustments for the six months ended June 30, 2020,
as compared with the six months ended June 30, 2019.

Investing Activities


Net cash flows used in investing activities increased $2.3 million, to $3.1
million for the six months ended June 30, 2020, as compared to the six months
ended June 30, 2019, primarily as a result of an increase in capitalization of
software development costs.

Financing Activities

Net cash flows provided by financing activities increased $388.7 million, or
574.1%, to $456.4 million for the six months ended June 30, 2020, as compared to
the six months ended June 30, 2019. The increase was primarily related to $502.3
million 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 million related to lower balances of our Vehicle Floorplan Facility
for the six months ended June 30, 2020 as compared to the six months ended June
30, 2019. Proceeds from and payments for our Vehicle Floorplan Facility changed
from a net cash inflow of $71.0 million for the six months ended June 30, 2019
to a net cash outflow of $63.7 million for the six months ended June 30, 2020
primarily due to 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 by financing activities included a $1.1 million payment 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.

                                       52

--------------------------------------------------------------------------------


                    Contractual Obligations and Commitments

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

                         Off Balance Sheet Arrangements

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.

                   Critical Accounting Policies and Estimates



Our discussion and analysis of our financial condition and results of operations
are based upon our condensed consolidated financial statements, which have been
prepared in accordance with U.S. GAAP. In preparing the condensed consolidated
financial statements, we 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 2-Summary of Significant Accounting
Policies" and "Note 3-Revenue Recognition" of the notes to our condensed
consolidated financial statements 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.


Except as described in Note 2 to our condensed consolidated financial statements, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in the Prospectus.

             Recently Issued and Adopted Accounting Pronouncements

See "Note 2-Summary of Significant Accounting Policies-Adoption of New
Accounting Standards" 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.

© Edgar Online, source Glimpses


share with twitter share with LinkedIn share with facebook
All news about VROOM, INC.
10/07DraftKings, eBay, NexTech AR, and Vroom CEO’s Discuss New Mega-Trends i..
AQ
10/06ALLY FINANCIAL : Online Automotive Retailer Vroom Announces Extension of Floorpl..
AQ
10/06VROOM, INC. : Entry into a Material Definitive Agreement, Regulation FD Disclosu..
AQ
10/06Online Automotive Retailer Vroom Announces Extension of Floorplan Commitment ..
GL
09/29AUTO1 starts preparations for stock market float -sources
RE
09/10VROOM : Announces Pricing of Follow-On Offering
BU
09/08VROOM : Announces Launch of Follow-On Offering
BU
09/08VROOM, INC. : Regulation FD Disclosure (form 8-K)
AQ
08/19Airbnb files for IPO as short-term rental market rebounds
RE
08/19Airbnb files for IPO as short-term rental market rebounds
RE
More news