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What changed in Vroom, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Vroom, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+656 added−919 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-02)

Top changes in Vroom, Inc.'s 2023 10-K

656 paragraphs added · 919 removed · 378 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

223 edited+187 added−360 removed147 unchanged
Biggest changeMany factors, some of which are outside our control, may cause the market price of our common stock to fluctuate significantly, including those described in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, as well as the following: • our operating and financial performance and prospects, including as a result of operational changes and initiatives we have and continue to undertake as part of our long-term roadmap; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • our guidance regarding future quarterly or annual earnings, and our financial results in relation to previously issued guidance; • our ability to achieve the benefits of any cost saving measures; • conditions that impact demand for our offerings and platform, including demand in the automotive industry generally and the performance of the third parties through whom we conduct significant parts of our business; • future announcements concerning our business or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our business strategy; • changes in market sentiment regarding growth companies that are not yet profitable; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect our industry or us; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in senior management or key personnel and the impact of reductions in our workforce; • issuances, exchanges or sales, or expected issuances, exchanges or sales of our capital stock; • changes in our dividend policy; • new, or adverse resolution of pending, litigation or other claims against us; • political unrest and wars, such as the current war in Ukraine, which could delay and disrupt our business, and if such political unrest further escalates or leads to disruptions in the financial markets or puts further pressure on global supply chains, it could heighten many of the other risk factors included in this Item 1A; and • the current inflationary environment in the United States and in other global economies, the impact of rising interest rates and the impact of any recession or general economic downturn; and 44 Table of Contents • other changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, global pandemics, and responses to such events.
Biggest changeMany factors, some of which are outside our control, may cause the market price of our common stock to fluctuate significantly, including those described in this “Risk Factors” section and the "Risk Factors" section in our Annual Report, as well as the following: • our operating and financial performance and prospects, including as a result of operational changes and initiatives we are taking as part of our Value Maximization Plan; • the discontinuation of our ecommerce operations and wind-down of our used vehicle dealership business and our ability to reduce the related costs; • potential delisting of our common stock, as described below; • our ability to grow and develop the UACC and CarStory businesses; 30 Table of Contents • our liquidity and ability to raise capital; • our quarterly or annual earnings or those of other companies in our industry compared to market expectations; • our guidance regarding future quarterly or annual earnings, and our financial results in relation to previously issued guidance; • our ability to achieve the benefits of any cost saving measures; • future announcements concerning our businesses or our competitors’ businesses; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; • market and industry perception of our success, or lack thereof, in pursuing our business strategy; • changes in market sentiment regarding growth companies that are not yet profitable; • strategic actions by us or our competitors, such as acquisitions or restructurings; • changes in laws or regulations which adversely affect our industry or us; • changes in accounting standards, policies, guidance, interpretations or principles; • changes in senior management or key personnel and the impact of reductions in our workforce; • issuances, exchanges or sales, or expected issuances, exchanges or sales of our capital stock; • changes in our dividend policy; • new, or adverse resolution of pending, litigation or other claims against us; • global political unrest and wars, including geopolitical conflicts and war in Europe and the Middle East, which could delay and disrupt our business, and if such political unrest further escalates or leads to disruptions in the financial markets or puts further pressure on global supply chains, it could heighten many of the other risk factors included in this Item 1A; • the current inflationary environment in the United States and in other global economies, the impact of high interest rates and the impact of any recession or general economic downturn; • potential volatility in the banking industry; and • other changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from the federal government's ongoing negotiations regarding the federal debt limit, natural disasters, terrorist attacks, global pandemics, and responses to such events As a result, volatility in the market price of our common stock may prevent investors from being able to sell their common stock at or above the price which they paid for them.
In addition, we issue equity awards to certain of our employees as part our hiring and retention efforts, and job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment.
In addition, we issue equity awards to certain of our employees as part of our hiring and retention efforts, and job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment.
We also are subject to laws and regulations involving taxes, tariffs, privacy and data security, anti-spam, pricing, content protection, electronic contracts and communications, mobile communications, consumer protection, information reporting requirements, unencumbered internet access to our platform, the design and operation of websites and internet neutrality.
We also are subject to laws and regulations involving taxes, tariffs, privacy and data security, anti-spam, pricing, content protection, electronic contracts and communications, mobile communications, consumer protection, information reporting requirements, unencumbered internet access to our platform, the design and operation of websites and internet neutrality.
The enactment of new laws and regulations or the interpretation of existing laws and regulations in an unfavorable way may affect the operation of our business, directly or indirectly, which could result in substantial regulatory compliance costs, civil or criminal penalties, including fines, adverse publicity, decreased revenues and increased expenses.
The enactment of new laws and regulations or the interpretation of existing laws and regulations in an unfavorable way may affect the operation of our business, directly or indirectly, which could result in substantial regulatory compliance costs, civil or criminal penalties, including fines, adverse publicity, decreased revenues and increased expenses.
If we experience additional material weaknesses or otherwise fail to maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or report them in a timely manner, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
If we experience material weaknesses or otherwise fail to maintain effective internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or report them in a timely manner, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
Other than shares held by our affiliates, stockholders who held our capital stock prior to completion of our IPO now hold freely tradable shares of our common stock without restriction or further registration requirements under the Securities Act, and therefore they may take steps to sell their shares or otherwise secure the unrecognized gains on those shares.
Other than shares held by our affiliates, stockholders who held our capital stock prior to completion of our IPO now hold freely tradable shares of our common stock without restriction or further registration requirements under the Securities Act, and therefore they may take steps to sell their shares or otherwise secure any unrecognized gains on those shares.
In the event that we or our service providers are unable to prevent, detect, and remediate the foregoing security threats and risks, our operations could be disrupted or we could incur financial, legal or reputational losses arising from misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in our information systems and networks, including personal information of our employees and our customers. 31 Table of Contents Failure to comply with federal, state and local laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current or the enactment of new laws or regulations relating to privacy, data protection and consumer protection, as well as our actual or perceived failure to protect such information could harm our reputation and could adversely affect our business, financial condition and results of operations.
In the event that we or our service providers are unable to prevent, detect, and remediate the foregoing security threats and risks, our operations could be disrupted or we could incur financial, legal or reputational losses arising from misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in our information systems and networks, including personal information of our employees and our customers. 21 Table of Contents Failure to comply with federal, state and local laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current or the enactment of new laws or regulations relating to privacy, data protection and consumer protection, as well as our actual or perceived failure to protect such information could harm our reputation and could adversely affect our business, financial condition and results of operations.
Among others, our amended and restated certificate of incorporation and amended and restated bylaws include the following provisions: • limitations on convening special stockholder meetings, which could make it difficult for our stockholders to adopt desired governance changes; 49 Table of Contents • advance notice procedures, which apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; • a prohibition on stockholder action by written consent, which means that our stockholders will only be able to take action at a meeting of stockholders; • a forum selection clause, which means certain litigation against us can only be brought in Delaware; • no authorization of cumulative voting, which limits the ability of minority stockholders to elect director candidates; • certain amendments to our certificate of incorporation require the approval of two-thirds of the then outstanding voting power of our capital stock; • our bylaws provide that the affirmative vote of two-thirds of the then-outstanding voting power of our capital stock, voting as a single class, is required for stockholders to amend or adopt any provision of our bylaws; and • the authorization of undesignated or “blank check” preferred stock, the terms of which may be established and shares of which may be issued without further action by our stockholders.
Among others, our amended and restated certificate of incorporation and amended and restated bylaws include the following provisions: • limitations on convening special stockholder meetings, which could make it difficult for our stockholders to adopt desired governance changes; • advance notice procedures, which apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders; • a prohibition on stockholder action by written consent, which means that our stockholders will only be able to take action at a meeting of stockholders; • a forum selection clause, which means certain litigation against us can only be brought in Delaware; • no authorization of cumulative voting, which limits the ability of minority stockholders to elect director candidates; • certain amendments to our certificate of incorporation require the approval of two-thirds of the then outstanding voting power of our capital stock; • our bylaws provide that the affirmative vote of two-thirds of the then-outstanding voting power of our capital stock, voting as a single class, is required for stockholders to amend or adopt any provision of our bylaws; and • the authorization of undesignated or “blank check” preferred stock, the terms of which may be established and shares of which may be issued without further action by our stockholders.
If we issue additional shares of our common stock or rights to acquire shares of our common stock, if any of our existing stockholders sells a substantial amount of our common stock, or if the market perceives that such issuances or sales may occur, then the trading price of our common stock, and, accordingly, our Notes may significantly decline.
If we issue or sell additional shares of our common stock or rights to acquire shares of our common stock, if any of our existing stockholders sells a substantial amount of our common stock, or if the market perceives that such issuances or sales may occur, then the trading price of our common stock, and, accordingly, our Notes may significantly decline.
Additionally, stockholder activism could give rise to perceived uncertainties as to our long-term business, financial forecasts, future operations and strategic planning, harm our reputation, adversely affect our relationships with our business partners, and make it more difficult to attract and retain qualified personnel.
Additionally, stockholder activism could give rise to perceived uncertainties as to our long-term businesses, financial forecasts, future operations and strategic planning, harm our reputation, adversely affect our relationships with our business partners, and make it more difficult to attract and retain qualified personnel.
Although management may establish a valuation allowance and value beneficial ownership interests based on analysis it believes is appropriate, this may not be adequate, particularly in periods of increased industry-wide vehicle depreciation rates, which we are currently experiencing. For example, if economic conditions were to deteriorate unexpectedly, additional loan losses not incorporated in the existing valuation may occur.
Although management may establish a valuation allowance and value beneficial ownership interests based on analysis it believes is appropriate, this may not be adequate, particularly in periods of increased industry-wide vehicle depreciation rates, which we are currently experiencing. For example, if economic conditions were to deteriorate unexpectedly, additional credit losses not incorporated in the existing valuation may occur.
We expect that industry standards, laws and regulations will continue to develop regarding privacy, data protection and information security in many jurisdictions. Complying with these evolving obligations is costly. For instance, expanding definitions and interpretations of what constitutes “personal data” (or the equivalent) within the United States may increase our compliance costs and legal liability.
We expect that industry standards, laws and regulations will continue to develop regarding privacy, data protection, information security and artificial intelligence in many jurisdictions. Complying with these evolving obligations is costly. For instance, expanding definitions and interpretations of what constitutes “personal data” (or the equivalent) within the United States may increase our compliance costs and legal liability.
If we identify additional material weaknesses in our internal control over financial reporting, our management will be unable to assert that our disclosure controls and procedures and our internal control over financial reporting is effective.
If we identify material weaknesses in our internal control over financial reporting, our management will be unable to assert that our disclosure controls and procedures and our internal control over financial reporting is effective.
Several variables have historically affected UACC’s recent loss and delinquency rates, including general economic conditions and market interest rates, and such variables are likely to differ in the future.
Several variables have affected UACC’s recent loss and delinquency rates, including general economic conditions and market interest rates, and such variables are likely to differ in the future.
If UACC is not able to sell receivables under these current or future arrangements for a variety of reasons, including increased credit losses or because it has reached its capacity under the arrangements, its financing partners exercise termination rights before it reaches capacity, general economic or credit market conditions, market disruption or it reaches the scheduled expiration date of the commitment, and it is not able to enter into new arrangements on similar terms, it may not have adequate liquidity and our business, financial condition and results of operations may be adversely affected.
If UACC is not able to sell receivables under these current or future arrangements for a variety of reasons, including increased credit losses or 17 Table of Contents because it has reached its capacity under the arrangements, its financing partners exercise termination rights before it reaches capacity, general economic or credit market conditions, market disruption or it reaches the scheduled expiration date of the commitment, and it is not able to enter into new arrangements on similar terms, it may not have adequate liquidity and our business, financial condition and results of operations may be adversely affected.
We generally enter into confidentiality agreements and invention assignment agreements with our employees and consultants to control access to, and clarify ownership of, our proprietary information.
We generally enter into confidentiality agreements and invention assignment agreements with our employees and consultants to control access to, and clarify ownership of, our proprietary rights and information.
If UACC holds receivables that it originates on its balance sheet until it sells them in securitization transactions or, in the future, through loan sales to its financing partners or other arrangements, and to the extent those receivables fail to perform during its holding period, they may become ineligible for sale.
If UACC holds receivables that it originates on its balance sheet until it sells them in securitization transactions or, in the future, through loan sales to its financing partners or other arrangements, then to the extent those receivables fail to perform during its holding period, they may become ineligible for sale.
In addition, the value of any securities that UACC may retain in its securitizations, including securities retained to comply with applicable risk retention rules, might be reduced or, in some cases, eliminated as a result of an adverse change in economic conditions or the financial markets.
In addition, the value of any securities that UACC may retain in its securitizations, including securities retained to comply with applicable risk retention rules, might be reduced or, in some cases, eliminated as a result of an adverse change in economic conditions, the financial markets or credit performance.
Our investment in compliance with existing and evolving regulatory requirements has and will continue to result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on our business, financial condition and results of operations.
Our investment in compliance with existing and evolving regulatory requirements has and will continue to result in increased administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on our businesses, financial condition and results of operations.
The SEC maintains a website at www.sec.gov that contains reports, proxy statements, and other information regarding SEC registrants, including Vroom Inc. 14 Table of Contents Item 1A . Risk Factors An investment in our common stock involves a high degree of risk.
The SEC maintains a website at www.sec.gov that contains reports, proxy statements, and other information regarding SEC registrants, including Vroom, Inc. 11 Table of Contents Item 1A . Risk Factors An investment in our common stock involves a high degree of risk.
In exchange for the transfer of finance receivables to the special purpose vehicle, UACC typically receives the cash proceeds from the sale of the securities. There can be no assurance that UACC will be able to complete additional securitizations in the future, particularly if the securitization markets become increasingly constrained.
In exchange for the transfer of finance receivables to the special purpose vehicle, UACC receives the cash proceeds from the sale of the securities. There can be no assurance that UACC will be able to complete additional securitizations in the future, particularly if the securitization markets become constrained.
We also cannot guarantee that others will not independently develop technology that has the same or similar functionality as our technology. Unauthorized parties may also attempt to copy or obtain and use our technology to develop competing solutions, and policing unauthorized use of our technology and intellectual property rights may be difficult and may not be effective.
We also cannot guarantee that others will not independently develop technology that has the same or similar functionality as our technology. Unauthorized parties may also attempt to copy or obtain and use our technology to develop competing solutions, and policing unauthorized use of our technology and intellectual property rights may be difficult and ineffective.
As of December 31, 2022 we had substantial U.S. federal net operating loss (“NOL”) carryforwards, the utilization of which may be limited annually due to certain change in ownership provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).
As of December 31, 2023, we had substantial U.S. federal net operating loss (“NOL”) carryforwards, the utilization of which may be limited annually due to certain change in ownership provisions of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”).
As we encountered operational challenges in keeping up with our rapid growth from 2020 through the first quarter of 2022, we experienced an increase in customer complaints, leading to an increase in such regulatory inquiries. We endeavor to promptly respond to any such inquiries and cooperate with our regulators.
As we encountered operational challenges in keeping up with our rapid growth from 2020 through the first quarter of 2022, we experienced an increase in customer complaints, leading to an increase in such regulatory inquiries. We endeavored to promptly respond to any such inquiries and cooperate with our regulators.
We filed a registration statement on Form S-8 to register shares of our common stock issued or reserved for issuance under our 2020 Incentive Award Plan and Second Amended and Restated 2014 Equity Incentive Plan, as well as a registration statement on Form S-8 to register shares of our common stock issued or reserved for issuance under our 2022 Inducement Award Plan.
In addition, we filed a registration statement on Form S-8 to register shares of our common stock issued or reserved for issuance under our 2020 Incentive Award Plan and Second Amended and Restated 2014 Equity Incentive Plan, as well as a registration statement on Form S-8 to register shares of our common stock issued or reserved for issuance under our 2022 Inducement Award Plan.
In addition, we may periodically change our equity compensation practices, which may include reducing the number of employees eligible for equity awards or reducing the size or value of equity awards granted per employee or undertaking other efforts that may prove an unsuccessful retention mechanism.
In addition, we may periodically change our equity compensation practices, which may include reducing the number of employees eligible for equity awards or reducing the size or value of equity awards granted per employee or undertaking other efforts that may prove to be an unsuccessful retention mechanism.
As we rely heavily on our computer and communications systems and the internet to conduct our business and provide high-quality customer service, any disruptions could negatively affect our ability to run our business, which could have an adverse effect on our business, financial condition, and operating results.
As we rely heavily on our computer and communications systems and the internet to conduct our businesses and provide high-quality customer service, any disruptions could negatively affect our ability to run our businesses, which could have an adverse effect on our businesses, financial condition, and operating results.
While we have implemented processes and procedures to comply with the TCPA, if we or the third parties on which we rely fail to adhere to or successfully implement appropriate processes and procedures in response to existing or future regulations, it could result in legal and monetary liability, fines, penalties or damage to our reputation in the marketplace, any of which could have a material adverse effect on our business, financial condition and results of operations.
While we have implemented processes and procedures to comply with the TCPA and state equivalents, if we or the third parties on which we rely fail to adhere to such processes and procedures or fail or successfully implement appropriate processes and procedures in response to existing or future regulations, it could result in legal and monetary liability, fines, penalties or damage to our reputation in the marketplace, any of which could have a material adverse effect on our business, financial condition and results of operations.
Interruptions in these systems, whether due to system failures, programming or configuration errors, computer viruses or physical or electronic break-ins, could affect the availability of our inventory on our platform and prevent or inhibit the ability of customers to access our platform.
Interruptions in these systems, whether due to system failures or lack of upgrades, programming or configuration errors, computer viruses or physical or electronic break-ins, could affect the availability of our inventory on our platform and prevent or inhibit the ability of customers to access our platform.
As a public company, we are required to, among other things: • prepare, file and distribute annual, quarterly and current reports with respect to our business and financial condition; • prepare, file and distribute proxy statements and other stockholder communications; 46 Table of Contents • hire financial and accounting personnel and other experienced accounting and finance staff with the expertise to address complex accounting matters applicable to public companies; • institute comprehensive financial reporting and disclosure compliance procedures; • involve and retain outside counsel and accountants to assist us with the activities listed above; • enhance our investor relations function; • enforce new internal policies, including those relating to trading in our securities and disclosure controls and procedures; • comply with Nasdaq’s listing standards; and • comply with the Sarbanes-Oxley Act.
As a public company, we are required to, among other things: • prepare, file and distribute annual, quarterly and current reports with respect to our business and financial condition; • prepare, file and distribute proxy statements and other stockholder communications; • retain financial and accounting personnel and other experienced accounting and finance staff with the expertise to address complex accounting matters applicable to public companies; • institute comprehensive financial reporting and disclosure compliance procedures; • involve and retain outside counsel and accountants to assist us with the activities listed above; • enhance our investor relations function; • enforce new internal policies, including those relating to trading in our securities and disclosure controls and procedures; • comply with Nasdaq’s listing standards; and • comply with the Sarbanes-Oxley Act.
As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. We are a “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.
As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. 34 Table of Contents We are a “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.
Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our 37 Table of Contents stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Some of our U.S. federal NOL carryforwards will begin to expire in 2028, with the remaining losses having no expiration. Please refer to Note 20 of our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a further discussion of the carryforward of our NOLs.
Some of our U.S. federal NOL carryforwards will begin to expire in 2028, with the remaining losses having no expiration. Please refer to Note 20 of our consolidated financial statements appearing 38 Table of Contents elsewhere in this Annual Report on Form 10-K for a further discussion of the carryforward of our NOLs.
Potential customers can submit their contact information, including phone number, via our website or third-party listing sites to express their interest in purchasing a vehicle, selling a vehicle, or obtaining financing terms.
Potential customers could submit their contact information, including phone number, via our website or third-party listing sites to express their interest in purchasing a vehicle, selling a vehicle, or obtaining financing terms.
For example, the delisting of our common stock from the Nasdaq Global Select Market would constitute a fundamental change under the terms of our Indenture and make our Notes redeemable at par upon delisting.
The delisting of our common stock from the Nasdaq Global Select Market would constitute a fundamental change under the terms of our Indenture and make our Notes redeemable at par upon delisting.
Similar to most IT systems and companies, there is a consistent threat from cyber-attacks, viruses, malicious software, physical break-ins, theft, ransomware, phishing, social engineering, unintentional employee error or malfeasance, system availability, and other security breaches. Further, third-party hosts or service providers are also a source of security concerns as it relates to failures of their own security systems and infrastructure.
Similar to most IT systems and companies, we face a consistent threat from cyber-attacks, viruses, malicious software, physical break-ins, theft, ransomware, phishing, social engineering, unintentional employee error or malfeasance, system availability, and other security breaches. Further, third-party hosts or service providers are also a source of security concerns as it relates to failures of their own security systems and infrastructure.
If we do not succeed in retaining and motivating existing employees or attracting well-qualified employees in the future, our business, financial condition and results of operations could be materially and adversely affected. We are, and may in the future be, subject to legal proceedings in the ordinary course of our business.
If we do not succeed in retaining and motivating existing employees or attracting well-qualified employees in the future, our business, financial condition and results of operations could be materially and adversely affected. 16 Table of Contents We are, and may in the future be, subject to legal proceedings in the ordinary course of our business.
In addition, we are subject to regulations and laws specifically governing the internet and ecommerce and the collection, storage and use of personal information and other customer data. We are also subject to federal and state consumer protection laws, including prohibitions 36 Table of Contents against unfair or deceptive acts or practices.
In addition, we are subject to regulations and laws specifically governing the internet and ecommerce and the collection, storage and use of personal information and other customer data. We are also subject to federal and state consumer protection laws, including prohibitions against unfair or deceptive acts or practices.
To the extent that our platform depends upon the successful operation of open-source software, any undetected errors or defects in this open-source software could prevent the deployment or impair the functionality of our platform, delay the introduction of new solutions, result in a failure of our platform and injure our reputation.
To the extent that our platform depends upon the successful operation of open-source software, any undetected errors or defects 25 Table of Contents in this open-source software could prevent the deployment or impair the functionality of our platform, delay the introduction of new solutions, result in a failure of our platform and injure our reputation.
If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders would suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our commons stock.
War and acts of terrorism in the United States and abroad could also cause disruptions in our business, consumer demand or the economy as a whole.
War and acts of terrorism in the United States and abroad could also cause disruptions in our businesses, consumer demand or the economy as a whole.
Any such guidance is prepared by our management and is qualified by, and subject to, the assumptions and the other information contained or referred to in the relevant release and the factors described under “Special Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K and our current and periodic reports filed with the SEC.
Any such guidance is prepared by our 40 Table of Contents management and is qualified by, and subject to, the assumptions and the other information contained or referred to in the relevant release and the factors described under “Special Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K and our current and periodic reports filed with the SEC.
If we fail to comply with the Telephone Consumer Protection Act, we may face significant damages, which could harm our business, financial condition and results of operations. We utilize telephone calls as a means of responding to and communicating with customers interested in purchasing, trading in and/or selling vehicles and value-added products.
If we fail to comply with the Telephone Consumer Protection Act, we may face significant damages, which could harm our business, financial condition and results of operations. We utilized telephone calls as a means of responding to and communicating with our Vroom ecommerce customers interested in purchasing, trading in and/or selling vehicles and value-added products.
The issuance by us of additional shares of our common 45 Table of Contents stock or securities convertible into our common stock would dilute your ownership of us and the sale of a significant amount of such shares in the public market could adversely affect prevailing market prices of our common stock.
The issuance by us of additional shares of our common stock or securities convertible into our common stock would dilute your ownership of us and the sale of a significant amount of such shares in the public market could adversely affect prevailing market prices of our common stock.
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.
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.
UACC provides indirect financing by drawing on its Warehouse Credit Facilities to purchase motor vehicle retail installment sales contracts and pledging eligible finance receivables as collateral, then typically selling the receivables related to the financing contract.
UACC provides indirect financing by drawing on its Warehouse Credit Facilities to purchase retail installment sales contracts and pledging eligible finance receivables as collateral, then typically selling the receivables related to the retail installment sales contracts.
While credit losses are inherent in the automotive finance receivables business, these conditions can increase loss frequency, decrease consumer demand for motor vehicles and weaken collateral values on certain types of motor vehicles in any period of extended economic slowdown or recession and could have a material adverse effect on our results of operations.
While credit losses are inherent in the automotive finance receivables market, these conditions can increase loss frequency and severity, decrease consumer demand for motor vehicles and weaken collateral values on certain types of motor vehicles in any period of extended economic slowdown or recession and could have a material adverse effect on our results of operations and financial condition.
These claims could be asserted under a variety of laws, including but not limited to consumer finance laws, consumer protection laws, intellectual property laws, privacy 25 Table of Contents laws, labor and employment laws, securities laws and employee benefit laws.
These claims could be asserted under a variety of laws, including but not limited to consumer finance laws, consumer protection laws, intellectual property laws, privacy laws, labor and employment laws, securities laws and employee benefit laws.
While we are actively seeking, and have secured registration of several of our trademarks in the U.S. and other jurisdictions (including Canada and Europe), it is possible that others may assert senior rights to similar trademarks, in the U.S. and internationally, and seek to prevent our use and registration of our trademarks in certain jurisdictions.
While we are seeking, and have secured registration of several of our trademarks in the U.S. and other foreign jurisdictions (including Canada and Europe), it is possible that others may assert senior rights to similar trademarks and seek to prevent our use and further registration of our trademarks in certain jurisdictions.
As of December 31, 2022, we are a “smaller reporting company” as defined under the rules promulgated under the Exchange Act.
As of December 31, 2023, we are a “smaller reporting company” as defined under the rules promulgated under the Exchange Act.
Provisions in the Indenture governing our outstanding convertible notes could delay or prevent an otherwise beneficial takeover of us. On June 18, 2021, we issued $625.0 million aggregate principal amount of Notes, of which $365.8 million aggregate principal amount are still outstanding.
Provisions in the Indenture governing our outstanding convertible notes could delay or prevent an otherwise beneficial takeover of us. On June 18, 2021, we issued $625.0 million aggregate principal amount of Notes, of which $290.5 million aggregate principal amount are still outstanding.
From time to time, we have been subject to audits, requests for information, investigations and other inquiries from our regulators related to customer complaints. As we encountered operational challenges in keeping up with our rapid growth from 2020 through the first quarter of 2022, we experienced an increase in customer complaints, leading to an increase in such regulatory inquiries.
From time to time, our ecommerce business was subject to audits, requests for information, investigations and other inquiries from our regulators related to customer complaints. As we encountered operational challenges in keeping up with our rapid growth from 2020 through the first quarter of 2022, we experienced an increase in customer complaints, leading to an increase in such regulatory inquiries.
As a public entity, we may be the subject of concerted efforts by short sellers to spread negative information in order to gain a market advantage. In addition, the publication of misinformation may also result in lawsuits, the uncertainty 53 Table of Contents and expense of which could adversely impact our business, financial condition, and reputation.
As a public entity, we may be the subject of concerted efforts by short sellers to spread negative information in order to gain a market advantage. In addition, the publication of misinformation may also result in lawsuits, the uncertainty and expense of which could adversely impact our businesses, financial condition, and reputation.
Because UACC focuses predominately on sub-prime borrowers, the actual rates of delinquencies, defaults, repossessions and losses on its receivables are higher than those experienced in the general motor vehicle finance industry and may be affected to a greater extent during an economic downturn.
Because UACC focuses predominately on non-prime borrowers, the actual rates of delinquencies, defaults, repossessions and losses on its receivables are higher and more volatile than those experienced in the general motor vehicle finance industry and may be adversely affected to a greater extent during an economic downturn.
We have obtained a motor vehicle sales finance license in Texas in connection with our Texas dealer license, a retail installment seller license in Florida in connection with our Florida dealer license, and filed the required notice in Arizona in connection with our Arizona dealer license.
We also have a motor vehicle sales finance license in Texas in connection with our Texas dealer license, a retail installment seller license in Florida in connection with our Florida dealer license, a retail installment seller license in Pennsylvania, and filed the required notice in Arizona in connection with our Arizona dealer license.
As of December 31, 2022, we maintain a full valuation allowance for our net deferred tax assets.
As of December 31, 2023, we maintain a full valuation allowance for our net deferred tax assets.
UACC's financing operations are subject to U.S. federal, state, and local laws and regulations regarding loan origination, acquiring motor vehicle installment sales contracts from retail sellers, credit bureau reporting, servicing, debt collection practices, and securitization transactions. Certain states require UACC to have a sales finance license, consumer credit license, or similar applicable license.
UACC's financing operations are subject to U.S. federal, state, and local laws and regulations regarding contract origination, acquiring motor vehicle installment sales contracts from retail sellers, furnishing data to credit reporting agencies, servicing, debt collection practices, and securitization transactions. Certain states require UACC to have a sales finance license, consumer credit license, or similar applicable license.
If the receivables it sells experience higher loss rates than forecasted, it may obtain less favorable pricing on the receivables it sells to those parties in the future and suffer reputational harm in the marketplace for the receivables it sells and its business, results of operations, and financial condition may be adversely affected.
If the receivables it sells experience higher loss rates than forecasted, it may be unable to sell those receivables or may obtain less favorable pricing on the receivables it sells in the future and suffer reputational harm in the marketplace for the receivables it sells and its results of operations and financial condition may be adversely affected.
The Indenture for our Notes does not restrict our ability to issue additional equity securities in the future.
The Indenture for our Notes does not restrict our ability to issue additional equity securities.
Any failure to renew or maintain or any revocation of any of the foregoing licenses would materially and adversely affect our business, financial condition and results of operations.
Any failure to renew or maintain or any revocation of any of UACC's licenses would materially and adversely affect our business, financial condition and results of operations.
If securities or industry analysts do not publish research or reports about our business, delay publishing reports about our business, or publish negative reports about our business, regardless of accuracy, our common stock price and trading volume could decline.
If securities or industry analysts continue not to publish research or reports about our business, delay publishing reports about our business, or publish negative reports about our businesses, regardless of accuracy, our common stock price and trading volume could decline.
Furthermore, although our intent is to sell loans originated by UACC using off-balance sheet securitization transactions, even if UACC is able to complete its securitizations, those securitizations may not qualify for sales accounting if market conditions do not allow for the sale of residual certificates.
Furthermore, although our intent is to sell receivables originated by UACC using off-balance sheet securitization transactions, even if UACC is able to complete its securitizations, those securitizations may not qualify for sales accounting if market conditions do not allow for the sale of lower-rated securities or residual certificates.
The risks we face in connection with acquisitions include: • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • coordination of technology, research and development and sales and marketing functions; • transition of the acquired company’s users to our platform; 22 Table of Contents • retention of employees from the acquired company; • potential adverse reactions to the acquisition by an acquired company’s customers; • cultural challenges associated with integrating employees from the acquired company into our organization; • integration of the acquired company’s accounting, management information, human resources and other administrative systems; • the need to implement or improve controls, policies and procedures at a business that, prior to the acquisition, may have lacked effective controls, policies and procedures; • potential write-offs of intangibles or other assets acquired in such transactions that may have an adverse effect our results of operations; • liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and • litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties.
The risks we face in connection with acquisitions include: • use of capital that could be used to improve our operations instead, and additional strain on our liquidity; • diversion of management time and focus from operating our business to addressing acquisition integration challenges; • coordination of technology, research and development and sales and marketing functions; • retention of employees from the acquired company; • potential adverse reactions to the acquisition by an acquired company’s customers; • cultural challenges associated with integrating employees from the acquired company into our organization; • integration of the acquired company’s accounting, management information, human resources and other administrative systems; • the need to implement or improve controls, policies and procedures at a business that, prior to the acquisition, may have lacked effective controls, policies and procedures; • potential write-offs of intangibles or other assets acquired in such transactions that may have an adverse effect our results of operations; • liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities; and • litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties.
Any litigation to enforce our intellectual property rights or defend ourselves against claims of infringement of third-party intellectual 42 Table of Contents property rights could be costly, divert attention of management and may not ultimately be resolved in our favor.
Any litigation to enforce our intellectual property rights or defend ourselves against claims of infringement of third-party intellectual property rights, regardless of merit, could be costly, divert attention of management and may not ultimately be resolved in our favor.
We may in the future be subject to stockholder activism, which can arise in a variety of predictable or unpredictable situations, and can result in substantial costs and divert management’s and our board’s attention and resources from our business.
We may in the future be subject to stockholder activism, which can arise in a variety of predictable or unpredictable situations, and can result in substantial costs and divert management’s and our Board of Director’s attention and resources from our businesses.
Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our debt obligations. As of December 31, 2022, we, including our subsidiaries, had approximately $955.9 million principal amount of consolidated indebtedness.
Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our debt obligations. As of December 31, 2023, we, including our subsidiaries, had approximately $1,199.0 million principal amount of consolidated indebtedness.
Until UACC sells automotive finance receivables, and to the extent it retains interests in automotive finance receivables after it sells them, whether pursuant to securitization transactions or otherwise, UACC is exposed to the risk that applicable customers will be unable or unwilling to repay their loans according to their terms and that the vehicle collateral securing the payment of their loans may not be sufficient to ensure full repayment.
Until UACC sells automotive finance receivables, and to the extent it retains interests in those receivables after it sells them, whether pursuant to securitization transactions or otherwise, UACC is exposed to the risk that certain customers will be unable or unwilling to repay their retail installment sales contracts according to their terms and that the vehicle collateral securing the payment of those retail installment sales contracts may not be sufficient to ensure full repayment.
The extent and duration of the 52 Table of Contents military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time.
The extent and duration of the military actions, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time.
Any failure or perceived failure to maintain the security of personal and other data that is provided to us by customers, employees and vendors could harm our reputation and brand and expose us to a risk of loss or litigation and possible liability, any of which could adversely affect our business, financial condition, and results of operations.
Any failure or perceived failure by us or by third parties who access our IT Systems and/or Confidential Information to maintain the security of personal and other data that is provided to us by customers, employees and vendors could harm our reputation and brand and expose us to a risk of loss or litigation and possible liability, any of which could adversely affect our business, financial condition, and results of operations.
In addition, the need to continue to develop the corporate infrastructure demanded of a public company may also divert management’s attention from implementing our business strategy, including our long-term roadmap, which could prevent us from improving our business, financial condition and results of operations.
In addition, the need to continue to develop the corporate infrastructure demanded of a public company may also divert management’s attention from implementing our business strategy, including our Value Maximization Plan, which could prevent us from improving our businesses, financial condition and results of operations.
“Legal Proceedings.” We do not intend to pay dividends on our common stock for the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a result, we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future.
We currently intend to retain all available funds and any future earnings to fund the development and growth of our businesses. As a result, we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future.
Occupational Health and Safety Administration, the U.S. Department of Justice and the U.S. Federal Communications Commission. Additionally, we are subject to regulation by individual state dealer licensing authorities, state consumer protection agencies and state financial regulatory agencies.
Occupational Health and Safety Administration, the U.S. Department of Justice and the U.S. Federal Communications Commission. Additionally, our ecommerce business was subject to regulation by individual state dealer licensing authorities, state consumer protection agencies and state financial regulatory agencies.
We may require additional capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If such capital is not available to us, our business, financial condition and results of operations may be materially and adversely affected.
We may need to seek or raise additional debt or equity capital to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances. If such capital is not available to us, our business, financial condition and results of operations would be materially and adversely affected.
The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions.
The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not be able to successfully complete identified acquisitions or realize their intended benefits.
UACC has obtained licenses in all states as required. In addition, UACC is subject to enforcement by the Consumer Financial Protection Bureau (“CFPB”) and state consumer protection agencies, including state attorney general offices and state financial regulatory agencies.
UACC has obtained licenses in all states where licensing is required. In addition, UACC is subject to enforcement by the CFPB and state consumer protection agencies, including state attorney general offices and state financial regulatory agencies.
The federal governmental agencies that regulate our business and have the authority to enforce such regulations and laws against us include agencies such as the U.S. Federal Trade Commission, the U.S. Department of Transportation (“DOT”), the U.S. Occupational Health and Safety Administration, the U.S. Department of Justice and the U.S. Federal Communications Commission ("FCC").
The federal governmental agencies that regulate our business and have the authority to enforce such regulations and laws against us include agencies such as the U.S. Federal Trade Commission ("FTC"), the U.S. Consumer Financial Protection Bureau ("CFPB"), the U.S. Occupational Health and Safety Administration, the U.S. Department of Justice and the U.S. Federal Communications Commission ("FCC").
Our goodwill was fully impaired as of December 31, 2022. However, if our amortizable intangible assets or long lived assets become impaired in the future, we would incur additional impairment charges, which would negatively affect our results of operations. There is significant judgment required in the analysis of a potential impairment of identified intangible assets and other long-lived assets.
If our amortizable intangible assets or remaining long-lived assets become impaired in the future, we would incur additional impairment charges, which would negatively affect our results of operations. There is significant judgment required in the analysis of a potential impairment of identified intangible assets and other long-lived assets.
Advance rates available to UACC on borrowings from the Warehouse Credit Facilities may decrease as a result of the increasing credit losses in UACC's portfolio and overall rising interest rates, which may in turn have an adverse impact on our liquidity.
Certain advance rates available to UACC on borrowings from the Warehouse Credit Facilities have decreased as a result of the increasing credit losses in UACC's portfolio and overall rising interest rates. Any future decreases on available advance rates may have an adverse impact on our liquidity.
Effective protection of patents is expensive and difficult to maintain, both in terms of application and registration costs as well as the costs of defending and enforcing those rights. For example, the U.S.
Effective protection of patents is complex, expensive and difficult to maintain, both in terms of filing costs as well as the costs of defending and enforcing our rights in our patents. For example, the U.S.
Violations of the TCPA may be enforced by the FCC or by individuals through litigation, including class actions. Statutory penalties for TCPA violations range from $500 to $1,500 per violation, which has been interpreted to mean per phone call or text message.
Violations of the TCPA may be enforced by the FCC or by individuals through litigation, including class actions. Statutory penalties for TCPA violations range from $500 to $1,500 per violation, which has been interpreted to mean per phone call or text message. In addition, several states have enacted their own versions of the TCPA.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeItem 1A. Risk Factors 15 Item 1B. Unresolved Staff Comments 54 Item 2. Properties 55 Item 3. Legal Proceedings 55 Item 4. Mine Safety Disclosures 56 Part II 60 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 60 Item 6. Reserved 61 Item 7.
Biggest changeItem 1A. Risk Factors 12 Item 1B. Unresolved Staff Comments 41 Item 1C. Cybersecurity 42 Item 2. Properties 43 Item 3. Legal Proceedings 43 Item 4. Mine Safety Disclosures 45 Part II 49 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 49 Item 6. Reserved 50 Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations 62 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 90 Item 8. Financial Statements and Supplementary Data 91
Management’s Discussion and Analysis of Financial Condition and Results of Operations 51 Item 7A. Quantitative and Qualitative Disclosure About Market Risk 72 Item 8. Financial Statements and Supplementary Data 73

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeUACC leases office space in Newport Beach, California, consisting of approximately 20,058 square feet of space under a lease that expires in March 2024.
Biggest changeIn connection with the Value Maximization Plan and the wind-down of the ecommerce business, we intend to cease using both facilities. UACC leases office space in Newport Beach, California, consisting of approximately 20,058 square feet of space under a lease that expires on March 31, 2029.
Item 2. Properties We lease office space outside Houston, Texas, consisting of approximately 102,492 square feet of space under a lease that expires in November 2024.
Item 2. Properties We lease office space in Houston, Texas, consisting of approximately 102,492 square feet of space under a lease that expires in November 2024.
We use this space as our corporate headquarters and to support our administrative functions, including finance, human resources, information technology, engineering, sales and marketing and other administrative functions, all of which support our Ecommerce and Wholesale segments.
We have used this space as our corporate headquarters and to support our administrative functions, including finance, human resources, information technology, engineering, sales and marketing and other administrative functions, all of which supported our Ecommerce and Wholesale segments.
UACC also leases office space outside of Buffalo, NY, consisting of approximately 12,000 square feet of space under a lease that expires in December 2027. UACC uses this space as its buyer center and to conduct credit underwriting operations in support of its indirect retail financing. The Fort Worth and Buffalo spaces support our Retail Financing segment.
UACC also leases office space outside of Buffalo, New York, consisting of approximately 12,000 square feet of space under a lease that expires in June 2031. UACC uses this space as its buyer center and to conduct credit underwriting operations in support of its indirect retail financing. The Fort Worth and Buffalo spaces support our Retail Financing segment.
In addition, we operate the TDA dealership outside Houston, Texas, consisting of approximately 58,000 square feet under a lease that expires in September 2024. This space includes our Vroom VRC, and supports reconditioning and sales operations for our Ecommerce segment.
In addition, we operated the TDA dealership outside Houston, Texas, consisting of approximately 58,000 square feet under a lease that expires in September 2024. This space included our Vroom VRC, and supported reconditioning and sales operations for our Ecommerce segment.
We believe our existing and planned facilities are sufficient for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.
We have been negotiating early terminations of leases that are no longer needed for our ecommerce business. We believe our existing and planned facilities are sufficient for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeBecause these cases are at early stages and the outcome of any complex legal proceeding is inherently unpredictable and subject to significant uncertainties, the Company cannot determine at present whether any potential liability would have a material adverse effect on the Company’s financial condition, cash flows, or results of operations As previously disclosed, we have been subject to audits, requests for information, investigations and other inquiries from our regulators relating to increased customer complaints concerning the same or similar matters alleged in the State of Texas petition.
Biggest changeOn February 9, 2024, the parties filed a joint stipulation to dismiss the Sonne matter with prejudice. As previously disclosed, we have been subject to audits, requests for information, investigations and other inquiries from our regulators relating to increased customer complaints concerning the same or similar matters alleged in the State of Texas petition.
Because the case is at an early stage and the outcome of any complex legal proceeding is inherently unpredictable and subject to significant uncertainties, the Company cannot determine at present whether any potential liability would have a material adverse effect on the Company’s financial condition, cash flows, or results of operations.
Because the matter is at an early stage and the outcome of any complex legal proceeding is inherently unpredictable and subject to significant uncertainties, the Company cannot determine at present whether any potential liability would have a material adverse effect on the Company’s financial condition, cash flows, or results of operations.
All four lawsuits have been consolidated under the case caption In re Vroom, Inc. Shareholder Derivative Litigation, Case No. 21-cv-6933, and the court has approved the parties’ stipulation that the cases would remain stayed pending final resolution of In re: Vroom, 55 Table of Contents Inc. Securities Litigation.
All four lawsuits have been consolidated under the case caption In re Vroom, Inc. Shareholder Derivative Litigation, Case No. 21-cv-6933, and the court has approved the parties’ stipulation that the cases would remain stayed pending final resolution of In re: Vroom, Inc. Securities Litigation.
Vroom, Inc. et al., Case No. 21-cv-3296. All three of the lawsuits asserted similar claims under Sections 10(b) and 20(a) of the Exchange Act, and SEC Rule 10b-5.
Vroom, Inc. et al., Case No. 21-cv-2551; and Hudda v. Vroom, Inc. et al., Case No. 21-cv-3296. All three of the lawsuits asserted similar claims under Sections 10(b) and 20(a) of the Exchange Act, and SEC Rule 10b-5.
District Court for the Southern District of New York by certain of the Company’s stockholders against the Company and certain of the Company’s officers alleging violations of federal securities laws. The lawsuits were captioned Zawatsky et al. v. Vroom, Inc. et al., Case No. 21-cv-2477; Holbrook v. Vroom, Inc. et al., Case No. 21-cv-2551; and Hudda v.
District Court for the Southern District of New York by certain of the Company’s stockholders against the Company and certain of the Company’s officers alleging violations of federal securities laws. The lawsuits 43 Table of Contents were captioned Zawatsky et al. v. Vroom, Inc. et al., Case No. 21-cv-2477; Holbrook v.
Vroom Automotive, LLC and the Attorney General of the State of Texas have agreed to a temporary injunction in which Vroom Automotive, LLC agrees to adhere to its existing practice of possessing title for all vehicles it sells or advertises as available for sale on its ecommerce platform.
In May 2022, Vroom Automotive, LLC the Attorney General of the State of Texas agreed to a temporary injunction in which Vroom Automotive, LLC agreed to adhere to its existing practice of possessing title for all vehicles it sells or advertises as available for sale on its ecommerce platform.
District Court for the Southern District of New York (Case No. 22-cv-7631), respectively, and has filed motions to compel arbitration of all claims in both cases.
District Court for the Southern District of New York (Case No. 22-cv-7631), respectively, and filed motions to compel arbitration of all claims in both cases. In September 2023, Vroom’s motions to compel arbitration were granted in both cases, and the court actions stayed pending the outcome of any arbitration proceeding over the respective plaintiffs’ individual claims.
Removed
Vroom continues to work cooperatively with the office of the Attorney General of the State of Texas towards a resolution.
Added
In January 2022, the Company received a non-public civil investigative demand from the Federal Trade Commission (“FTC”), seeking the production of information related to certain of the Company's business practices and the Company responded to those information requests.
Added
On February 23, 2024, the FTC notified the Company that it has reason to believe that the Company violated Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a); the FTC's Mail, Internet, or Telephone Order Merchandise Rule, 16 C.F.R. Part 435; the FTC’s Used Motor Vehicle Trade Regulation Rule,16 C.F.R.
Added
Part 455; and the FTC’s Pre-Sale Availability Rule, 16 C.F.R. Part 702. The FTC advised the Company that it is authorized to negotiate a stipulated order and the Company intends to work cooperatively with the FTC towards a resolution.
Added
In December 2023, Vroom, Inc., Vroom Automotive, 44 Table of Contents LLC and the Attorney General of the State of Texas reached a final agreement to resolve all claims in the petition, without any admission of wrongdoing by either Vroom entity.
Added
Under the agreement, the Company will pay a total of $2 million in civil penalties and $1 million in attorneys' fees, with the first half due in September 2024 and the remaining half due in September 2025, and abide permanently by an injunction of certain operational practices that were previously implemented.
Added
The agreement was approved by the District Court of Travis County on December 13, 2023.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeShortt has served as the Company's Chief Executive Officer since May 2022 and previously served as the Company's Chief Operating Officer from January 2022. Prior to joining Vroom, Mr. Shortt served as Senior Vice President at Walmart Inc. ("Walmart") starting in 2018, where he developed a comprehensive ecommerce supply chain strategy and led improvements through advanced analytics, processes, and systems.
Biggest change("Walmart") starting in 2018, where he developed a comprehensive ecommerce supply chain strategy and led improvements through advanced analytics, processes, and systems. Prior to his time at Walmart, Mr.
Crow previously served as a director of Milacron Holdings, Corp., a global leader in the plastic technology and processing industry, where he chaired its Leadership Development and Compensation Committee, and currently serves on a director of a number of private companies. Mr. Crow earned a Bachelor of Arts degree from California State University at Northridge. We believe that Mr.
Crow previously served as a director of Milacron Holdings, Corp., a global leader in the plastic technology and processing industry, where he chaired its Leadership Development and Compensation Committee, and currently serves as a director of a number of private companies. Mr. Crow earned a Bachelor of Arts degree from California State University at Northridge. We believe that Mr.
O’Shaughnessy holds a Bachelor of Arts in Economics from the University of Chicago and a Master of Business Administration from the MIT Sloan School of Management. We believe Ms. O’Shaughnessy’s leadership experience, including serving in a chief executive officer role, and digital and technology expertise, qualifies her to serve on our board of directors. Paula B.
O’Shaughnessy holds a Bachelor of Arts in Economics from the University of Chicago and a Master of Business Administration from the MIT Sloan School of Management. We believe Ms. O’Shaughnessy’s extensive leadership experience, including serving in a chief executive officer role, and digital and technology expertise, qualifies her to serve on our Board of Directors . Paula B.
Previously, Ms. Moran was a Managing Director, Chief Legal Officer and Secretary of Greenhill & Co. Inc., a publicly traded, global independent investment bank, from April 2014 to October 2016, and a Senior Advisor from November 2016 to April 2017. Prior to joining Greenhill, Ms.
Moran was a Managing Director, Chief Legal Officer and Secretary of Greenhill & Co. Inc., a publicly traded, global independent investment bank, from April 2014 to October 2016, and a Senior Advisor from November 2016 to April 2017. Prior to joining Greenhill, Ms.
Farello holds a Bachelor of Science from Stanford University and a Master of Business Administration from Harvard Business School. We believe Mr. Farello’s experience in 57 Table of Contents private equity investments and expertise in the consumer sector, along with his service as a director at numerous companies, qualifies him to serve on our board of directors. Laura W.
Farello holds a Bachelor of Science from Stanford University and a Master of Business Administration from Harvard Business School. We believe Mr. Farello’s experience in 46 Table of Contents private equity investments and expertise in the consumer sector, along with his service as a director at numerous companies, qualifies him to serve on our Board of Directors. Laura W.
We believe Ms. Lang’s extensive leadership experience, digital and media expertise and service on the board of directors of other public companies qualifies her to serve on our board of directors. Laura G. O’Shaughnessy has served on our board of directors since May 2020. Ms.
We believe Ms. Lang’s extensive leadership experience, digital and media expertise and service on the board of directors of other public companies qualifies her to serve on our Board of Directors. Laura G. O’Shaughnessy has served on our Board of Directors since May 2020. Since December 2022, Ms.
Pretlow holds a Bachelor of Arts in Political Science and a Master of Business Administration, both from Northwestern University, and is a 2017 Fellow of Stanford’s Distinguished Careers Institute. We believe Ms. Pretlow’s leadership experience, including roles in finance and business development, along with her experience as a director, qualify her to serve on our board of directors. Thomas H.
Pretlow holds a Bachelor of Arts in Political Science and a Master of Business Administration, both from Northwestern University, and is a 2017 Fellow of Stanford’s Distinguished Careers Institute. We believe Ms. Pretlow’s extensive leadership experience, including roles in finance and business development, along with her experience as a director, qualify her to serve on our Board of Directors.
Prior to that he served as Chief Financial Officer and Treasurer of Stoneridge Corporation since August 2016 and was appointed as Executive Vice President in October 2018. Prior to joining Stoneridge, Mr. Krakowiak served as Vice President, Treasurer 58 Table of Contents and Investor Relations at Visteon Corporation from 2012 until August 2016. Prior to that, Mr.
Prior to that he served as Chief Financial Officer and Treasurer of Stoneridge Corporation since August 2016 and was appointed as Executive Vice President in October 2018. Prior to joining Stoneridge, Mr. Krakowiak served as Vice President, Treasurer and Investor Relations at Visteon Corporation from 2012 until August 2016. Prior to that, Mr.
Stott holds a Bachelor of Science in Mathematical Economics from Tulane University and a Master of Business Administration from Vanderbilt University. 59 Table of Contents PART II
Stott holds a Bachelor of Science in Mathematical Economics from Tulane University and a Master of Business Administration from Vanderbilt University. 48 Table of Contents PART II
Item 4. Mine Safety Disclosures Not applicable. 56 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth information regarding our executive officers and directors as of the date of this Annual Report on Form 10-K. Name Age Position(s) Robert J. Mylod, Jr. 56 Chairperson of the Board Timothy M. Crow 67 Director Michael J.
Item 4. Mine Safety Disclosures Not applicable. 45 Table of Contents INFORMATION ABOUT OUR EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth information regarding our executive officers and directors as of the date of this Annual Report on Form 10-K. Name Age Position(s) Robert J. Mylod, Jr. 57 Chairperson of the Board Timothy M. Crow 68 Director Michael J.
Prior to his time at Walmart, Mr. Shortt served as Senior Vice President of Supply Chain at The Home Depot, Inc. starting in 2013, and previously held senior leadership roles overseeing supply chain, fulfillment and logistics, with an emphasis on change management and business transformation, at ACCO Brands Corporation, Unisource Worldwide, Inc., Fisher Scientific International, Inc. and Office Depot, Inc.
Shortt served as Senior Vice President of Supply Chain at The Home Depot, Inc. starting in 2013, and previously held senior leadership roles overseeing supply chain, fulfillment and logistics, with an emphasis on change management and business transformation, at ACCO Brands Corporation, Unisource Worldwide, Inc., Fisher Scientific International, Inc. and Office Depot, Inc. Mr.
Krakowiak held various financial positions at Owens Corning from 2005 to 2012. Mr. Krakowiak holds Bachelor of Science and Master of Science degrees in Electrical Engineering from the University of Michigan and a Master of Business Administration from the University of Chicago Booth School of Business. Patricia Moran has served as our Chief Legal Officer and Secretary since January 2019.
Krakowiak held various financial positions at Owens Corning from 2005 to 2012. Mr. Krakowiak holds Bachelor of Science and Master of Science degrees in Electrical Engineering from the University of Michigan and an M.B.A. from the University of Chicago Booth School of Business. Patricia Moran has served as our Chief Legal Officer and Secretary since January 2019. Previously, Ms.
O’Shaughnessy currently serves as a member of the board of directors and of the audit committee and governance committee of Acuity Brands, and on the board of directors of a nonprofit in Washington, D.C. Ms.
O’Shaughnessy currently serves as a member of the board of directors and of the audit committee and governance committee of Acuity Brands, and on the boards of directors of two nonprofits in Washington, D.C. Ms.
Mylod, Jr. has served as a member of our board of directors since September 2015. Mr. Mylod is the Managing Partner of Annox Capital Management, a private investment firm that he founded in 2013. Previously, Mr.
Mylod, Jr. has served as a member of our Board of Directors since September 2015 and Independent Executive Chair of the Board since May 2022. Mr. Mylod is the Managing Partner of Annox Capital Management, a private investment firm that he founded in 2013. Previously, Mr.
O'Shaughnessy is currently the Chief Marketing Officer and Co-Founder of Picnic Group, a data-driven consumer packaged goods company where she oversees the scaling of founder-created consumer packaged goods brands. Ms. O’Shaughnessy is a strategic growth and operations consultant for a number of direct to consumer brands.
O'Shaughnessy has served as the Chief Marketing Officer and Co-Founder of Picnic Group, a data-driven consumer packaged goods company where she oversees the scaling of founder-created consumer packaged food brands. Prior to The Picnic Group, Ms. O’Shaughnessy was a strategic growth and operations consultant for a number of direct to consumer brands.
Prior to joining The Capital Group, she worked for Montgomery Asset Management and Blackrock (formerly Barclays Global Investors). She is a member of the board of directors and is the audit and finance committee chair of Williams-Sonoma, Inc.
Prior to joining The Capital Group, she worked for Montgomery Asset Management and Blackrock (formerly Barclays Global Investors). She is a member of the board of directors and serves on the audit and finance committee of Williams-Sonoma, Inc. She is also a member of the board of directors of Greenlight Financial Technology, Inc., where she serves on the audit committee.
He is also a member of the board of directors of several private companies. Mr. Mylod holds a Bachelor of Arts in English from the University of Michigan and a Master of Business Administration from the University of Chicago Booth School. We believe that Mr.
Mylod holds a Bachelor of Arts in English from the University of Michigan and a Master of Business Administration from the University of Chicago Booth School. We believe that Mr.
Farello 58 Director Laura W. Lang 67 Director Laura G. O’Shaughnessy 45 Director Paula B. Pretlow 67 Director Thomas H. Shortt 54 Chief Executive Officer, Director Robert R. Krakowiak 52 Chief Financial Officer Patricia Moran 63 Chief Legal Officer and Secretary C. Denise Stott 55 Chief People and Culture Officer Robert J.
Farello 59 Director Laura W. Lang 68 Director Laura G. O’Shaughnessy 46 Director Paula B. Pretlow 68 Director Thomas H. Shortt 55 Chief Executive Officer, Director, and President and Chief Executive Officer of UACC Robert R. Krakowiak 53 Chief Financial Officer Patricia Moran 64 Chief Legal Officer and Secretary C. Denise Stott 56 Chief People and Culture Officer Robert J.
Mr. Shortt holds a Bachelor’s degree in Accounting from the University of Akron. We believe that Mr. Shortt’s expertise in supply chain, logistics, data analytics and change management qualifies him to serve on our Board of Directors. Robert R. Krakowiak has served as Chief Financial Officer and Treasurer of Vroom since September 2021.
Shortt’s service as our chief executive officer and his expertise in supply chain, logistics, data analytics and change management qualifies him to serve on our Board of Directors. 47 Table of Contents Robert R. Krakowiak has served as Chief Financial Officer and Treasurer of Vroom since September, 2021.
He currently serves as the Chair of the board of directors and a member of the compensation committee of Booking Holdings, Inc. Mr. Mylod also currently serves as a member of the board of directors and of the audit committee of Redfin Corporation, an online real estate company.
He currently serves as the Chair of the board of directors and a member of the compensation committee of Booking Holdings, Inc. Mr. Mylod is also a member of the board of directors of several private companies. Mr.
Previously she was the Chief Executive Officer of SocialCode, LLC, a technology company that manages digital and social advertising for leading consumer brands, which she co-founded in 2009. In addition, Ms. O’Shaughnessy oversaw business development and product strategy for the Slate Group, an online publisher, where she specialized in advertising product development and strategic partnerships. Ms.
Previously she was the Chief Executive Officer of SocialCode, LLC (now named Code3), a technology company that manages digital and social advertising for leading consumer brands, which she co-founded in 2009 and led until August 2020. Ms.
She is also a member of the board of directors of Bitwise Industries and a member of the board of directors of Greenlight Financial Technology, Inc., where she serves on the audit committee. In addition, she currently serves as a member of the Board of Trustees of The Kresge Foundation, The Harry and Jeannette Weinberg Foundation and Northwestern University. Ms.
In addition, she currently serves as chair of the board of The Harry and Jeanette Weinberg Foundation, is a member of the board of trustees of The Kresge Foundation, and she is a charter board trustee of Northwestern University. Ms.
Added
Thomas H. Shortt has served as the Company's Chief Executive Officer since May 2022 and previously served as the Company's Chief Operating Officer from January 2022. Since March 1, 2024, Mr. Shortt has also served as President and Chief Executive Officer of UACC. Prior to joining Vroom, Mr. Shortt served as Senior Vice President at Walmart Inc.
Added
Shortt holds a Bachelor’s degree in Accounting from the University of Akron and is a graduate of the Harvard Business School Advanced Management Program. We believe that Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed4 unchanged
Biggest changeThere has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on June 9, 2020 pursuant to Rule 424(b)(4). 60 Table of Contents
Biggest changeThere has been no material change in the planned use of proceeds from our IPO as described in our final prospectus filed with the SEC on June 9, 2020 pursuant to Rule 424(b)(4). As of December 31, 2023, we had fully utilized the net proceeds from our IPO. 49 Table of Contents
Holders of Record We are authorized to issue up to 500,000,000 shares of common stock and up to 10,000,000 shares of preferred stock. As of February 28, 2023, there were 25 stockholders of record of our common stock.
Holders of Record We are authorized to issue up to 500,000,000 shares of common stock and up to 10,000,000 shares of preferred stock. As of March 7, 2024, there were 20 stockholders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

116 edited+82 added−176 removed23 unchanged
Biggest changeResults of Operations The following table presents our consolidated results of operations for the periods indicated: Year Ended December 31, Year Ended December 31, 2022 2021 % Change 2021 2020 % Change (in thousands) (in thousands) Revenue: Retail vehicle, net $ 1,425,842 $ 2,583,417 (44.8 )% $ 2,583,417 $ 1,072,551 140.9 % Wholesale vehicle 293,528 498,981 (41.2 )% 498,981 245,580 103.2 % Product, net 62,747 88,824 (29.4 )% 88,824 38,195 132.6 % Finance 152,542 — 100.0 % — — 0.0 % Other 14,242 13,033 9.3 % 13,033 1,374 848.5 % Total revenue 1,948,901 3,184,255 (38.8 )% 3,184,255 1,357,700 134.5 % Cost of sales: Retail vehicle 1,382,005 2,495,587 (44.6 )% 2,495,587 1,038,209 140.4 % Wholesale vehicle 304,148 480,861 (36.7 )% 480,861 247,012 100.0 % Finance 14,161 — 100.0 % — — 0.0 % Other 3,800 5,708 (33.4 )% 5,708 934 100.0 % Total cost of sales 1,704,114 2,982,156 (42.9 )% 2,982,156 1,286,155 131.9 % Total gross profit 244,787 202,099 21.1 % 202,099 71,545 182.5 % Selling, general and administrative expenses 566,387 547,823 3.4 % 547,823 245,546 123.1 % Depreciation and amortization 38,290 12,891 197.0 % 12,891 4,598 180.4 % Impairment charges 211,873 — 100.0 % — — 100.0 % Loss from operations (571,763 ) (358,615 ) 59.4 % (358,615 ) (178,599 ) 100.8 % Gain on debt extinguishment (164,684 ) — 100.0 % — — 0.0 % Interest expense 40,693 21,948 85.4 % 21,948 9,656 127.3 % Interest income (19,363 ) (10,341 ) 87.2 % (10,341 ) (5,896 ) 75.4 % Revaluation of stock warrant — — 0.0 % — 20,470 (100.0 )% Other loss (income), net 43,181 (65 ) (66,532.3 )% (65 ) (114 ) (43.0 )% Loss before provision for income taxes (471,590 ) (370,157 ) 27.4 % (370,157 ) (202,715 ) 82.6 % (Benefit) provision for income taxes (19,680 ) 754 (2,710.1 )% 754 84 797.6 % Net loss $ (451,910 ) $ (370,911 ) 21.8 % $ (370,911 ) $ (202,799 ) 82.9 % Segments We manage and report operating results through three reportable segments: • Ecommerce (70.0% of 2022 revenue; 76.7% of 2021 revenue): 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.
Biggest changeResults of Operations The following table presents our consolidated results of operations for the periods indicated: Year Ended December 31, 2023 2022 % Change (in thousands) Revenue: Retail vehicle, net $ 565,972 $ 1,425,842 (60.3 )% Wholesale vehicle 104,119 293,528 (64.5 )% Product, net 52,253 62,747 (16.7 )% Finance 156,938 152,542 2.9 % Other 13,921 14,242 (2.3 )% Total revenue 893,203 1,948,901 (54.2 )% Cost of sales: Retail vehicle 553,565 1,382,005 (59.9 )% Wholesale vehicle 138,472 304,148 (54.5 )% Product 3,337 — 100.0 % Finance 31,328 14,161 121.2 % Other 4,554 3,800 19.8 % Total cost of sales 731,256 1,704,114 (57.1 )% Total gross profit 161,947 244,787 (33.8 )% Selling, general and administrative expenses 340,657 566,387 (39.9 )% Depreciation and amortization 42,769 38,290 11.7 % Impairment charges 48,748 211,873 (77.0 )% Loss from operations (270,227 ) (571,763 ) 52.7 % Gain on debt extinguishment (37,878 ) (164,684 ) 77.0 % Interest expense 45,445 40,693 11.7 % Interest income (21,158 ) (19,363 ) 9.3 % Other loss (income), net 108,289 43,181 150.8 % Loss before provision (benefit) for income taxes (364,925 ) (471,590 ) 22.6 % Provision (benefit) for income taxes 615 (19,680 ) 103.1 % Net loss $ (365,540 ) $ (451,910 ) 19.1 % 62 Table of Contents Segments We have historically managed and reported operating results through three reportable segments: • Ecommerce (64.5% of 2023 revenue; 70.0% of 2022 revenue): The Ecommerce segment represents retail sales of used vehicles through our ecommerce platform, revenue earned on vehicle financing originated by UACC or our third-party financing sources and sales of value-added products associated with those vehicles sales. • Wholesale (11.7% of 2023 revenue; 15.1% of 2022 revenue): The Wholesale segment represents sales of used vehicles through wholesale channels. • Retail Financing (17.6% of 2023 revenue; 7.8% of 2022 revenue): The Retail Financing segment represents UACC’s operations with its network of third-party dealership customers.
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.
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 vehicle reconditioning centers ("VRCs") and the aggregate costs of reconditioning those vehicles in that period, divided by the number of ecommerce units sold in that period.
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.
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 typically 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.
Recently Issued and Adopted Accounting Pronouncements Refer to “Note 2—Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a discussion about new accounting pronouncements adopted and not yet adopted as of the date of this report. 89 Table of Contents
Recently Issued and Adopted Accounting Pronouncements Refer to “Note 2—Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a discussion about new accounting pronouncements adopted and not yet adopted as of the date of this report. 71 Table of Contents
The total net proceeds from the offering, after deducting commissions paid to the initial purchasers and debt issuance costs, were approximately $608.9 million. During the year ended December 31, 2022, the conditions allowing holders of the Notes to convert were not met.
The total net proceeds from the offering, after deducting commissions paid to the initial purchasers and debt issuance costs, were approximately $608.9 million. During the year ended December 31, 2023, the conditions allowing holders of the Notes to convert were not met.
We finance a majority of our inventory with the 2022 Vehicle Floorplan Facility. In accordance with U.S. GAAP, we report all cash flows arising in connection with the 2022 Vehicle Floorplan Facility, as a financing activity in our consolidated statement of cash flows.
We financed a majority of our inventory with the 2022 Vehicle Floorplan Facility. In accordance with U.S. GAAP, we report all cash flows arising in connection with the 2022 Vehicle Floorplan Facility as a financing activity in our consolidated statement of cash flows.
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.
We believe these operational measures were 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.
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, professional fees for accounting, auditing, tax, legal and consulting services and software and IT costs.
Selling, general and administrative expenses Our selling, general, and administrative expenses, which we refer to as SG&A expenses, historically consisted primarily of advertising and marketing expenses, outbound transportation costs, employee compensation, occupancy costs of our facilities, professional fees for accounting, auditing, tax, legal and consulting services and software and IT costs.
Revenue from vehicle sales, including any delivery charges, is 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 (“ASP”) per unit are the primary factors impacting our retail revenue stream.
Revenue from vehicle sales, including any delivery charges, was recognized when vehicles were 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 (“ASP”) per unit were the primary factors impacting our retail revenue stream.
Cost of sales also includes any accounting adjustments to reflect vehicle inventory at the lower of cost or net realizable value. Wholesale cost of sales Wholesale cost of sales primarily includes costs to acquire vehicles sold through wholesale channels as well as any accounting adjustments to reflect vehicle inventory at the lower of cost or net realizable value.
Wholesale cost of sales Wholesale cost of sales primarily included costs to acquire vehicles sold through wholesale channels as well as any accounting adjustments to reflect vehicle inventory at the lower of cost or net realizable value.
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.
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 third-party vehicle financing and 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.
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.
Product revenue was 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 consisted of estimated profit-sharing amounts to which we were entitled based on the performance of third-party protection products once a required claims period has passed.
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.
For accounting purposes, we were an agent for these transactions and, as a result, we recognized fees on a net basis when the customer entered into an arrangement to purchase these products or obtain third-party financing, which was typically at the time of a vehicle sale. Our gross profit on product revenue is equal to the revenue we generate.
The Notes bear interest at a rate of 0.75% per annum, payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2022. The Notes will mature on July 1, 2026, subject to earlier repurchase, redemption or conversion.
Bank National Association, as trustee (the “Indenture”). The Notes bear interest at a rate of 0.75% per annum, payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2022. The Notes will mature on July 1, 2026, subject to earlier repurchase, redemption or conversion.
UACC acquires and services finance receivables from its network of third-party dealership customers and generates revenue through the sales of these financing receivables. We account for sales of finance receivables in accordance with ASC 860.
UACC acquires and services finance receivables from its network of third-party dealership customers and generates revenue through the sales of these financing receivables. We account for sales of finance receivables in accordance with ASC Topic 860, Transfers and Servicing of Financial Assets ("ASC 860").
Ecommerce average days to sale increased from 74 days for the year ended December 31, 2021 to 131 days for the year ended December 31, 2022. We have undertaken various initiatives to address the operational challenges created by our prior rapid growth from 2020 through the first quarter of 2022, in particular with titling and registration processes.
Ecommerce average days to sale increased from 131 days for the year ended December 31, 2022 to 217 days for the year ended December 31, 2023. We undertook various initiatives to address the operational challenges created by our prior rapid growth from 2020 through the first quarter of 2022, in particular with titling and registration processes.
Product revenue We generate revenue by earning fees on sales of third-party financing, financing vehicle sales through UACC, and sales of value-added products to our customers in connection with vehicle sales, such as vehicle service contracts, GAP protection and tire and wheel coverage.
Product revenue Historically, we generated revenue by financing vehicle sales through UACC, earning fees on sales of third-party financing, and sales of value-added products to our customers in connection with vehicle sales, such as vehicle service contracts, GAP protection and tire and wheel coverage. We generate ecommerce product revenue from receivables generated by financing provided to Vroom customers through UACC.
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.
A portion of the fees we received was subject to chargeback in the event of early termination, default, or prepayment of the contracts by our customers. We recognized product revenue net of reserves for estimated chargebacks.
A significant escalation or expansion of economic disruption could continue to impact consumer spending, disrupt our supply chain, broaden inflationary costs, and could have a material adverse effect on our results of operations.
A significant escalation or expansion of economic disruption 58 Table of Contents could continue to impact consumer spending, broaden inflationary costs, and could have a material adverse effect on our results of operations.
As a result of increasing interest rates, the current inflationary environment and vehicle depreciation in the used automotive industry, UACC is experiencing higher loss severity in a soft securitization market. The increased loss severity could lead to reduced servicing income if UACC elects to waive monthly servicing fees going forward as it did in January.
As a result of high interest rates, the current inflationary environment and vehicle depreciation in the used automotive industry, UACC is experiencing higher loss severity. The increased loss severity could lead to reduced servicing income if UACC elects to waive monthly servicing fees going forward as it did in the first quarter of 2023.
Impairment Charges Impairment charges represent an impairment charge in 2022 of $201.7 million to write down the carrying amount of the goodwill to fair value, lease impairment charges of $6.5 million, related to closing physical office locations, Stafford reconditioning facility and Sell Us Your Car® centers, and impairment of long-lived assets no longer in use of $3.7 million.
Impairment charges of $211.9 million for the year ended December 31, 2022 represent an impairment charge to write down the carrying amount of the goodwill to fair value, lease impairment charges related to closing physical office locations, Stafford reconditioning facility and Sell Us Your Car® centers, and impairment of long-lived assets no longer in use.
As a result of these repurchases, $359.3 million aggregate principal amount of the Notes remain outstanding, net of deferred issuance costs of $6.5 million. Subject to market conditions and availability, we may continue to opportunistically repurchase Notes from time to time to reduce our outstanding indebtedness at a discount.
As a result of these repurchases and repurchases made in 2022, as of December 31, 2023, $286.8 million aggregate principal amount of the Notes remain outstanding, net of deferred issuance costs of $3.7 million. Subject to market conditions and availability, we may continue to opportunistically repurchase Notes from time to time to reduce our outstanding indebtedness at a discount.
As we continue to make progress on our initiatives to address the operational challenges created by our prior rapid growth from 2020 through the first quarter of 2022, a higher portion of our unit sales in the fourth quarter of 2022 was from aged inventory as we obtained titles for vehicles not previously listed for sale, which negatively impacted our sales margin and GPPU.
As we made progress on our initiatives to address the operational challenges created by our prior rapid growth from 2020 through the first quarter of 2022, a higher portion of our unit sales in 2023 was from aged inventory, which negatively impacted our sales margin and GPPU.
Ecommerce units sold excludes sales of vehicles at TDA and through the Wholesale segment. Each vehicle sale through our ecommerce platform also creates the opportunity to leverage such sale to provide vehicle financing, sell value-added products and acquire trade-in vehicles from our customers, which we can either recondition and add to our inventory or sell through wholesale channels.
Each vehicle sale through our ecommerce platform also created the opportunity to leverage such sale to provide vehicle financing, sell value-added products and acquire trade-in vehicles from our customers, which we could either recondition and add to our inventory or sell through wholesale channels.
Changes in fair value of finance receivables can fluctuate significantly from period to period and relate primarily to historical loans and debt which have been securitized, and acquired on February 1, 2022 from UACC.
Changes in fair value of financial instruments can fluctuate significantly from period to period and were previously related primarily to historical finance receivables and debt that have been securitized, and were acquired on February 1, 2022 from UACC.
Because we are paid fees on the vehicle financing and value-added products we sell, our gross profit is equal to the revenue we generate from the sale of such products.
Because we were paid fees on the vehicle financing and value-added products we sold, our gross profit was equal to the revenue we generated from the sale of such products.
Finance cost of sales Finance cost of sales consists of interest expense incurred on securitization debt and collection expenses related to servicing finance receivables originated by UACC. Other cost of sales Other cost of sales consists of cost of sales from CarStory's third-party customers.
Product cost of sales Product cost of sales consists of interest expense incurred on securitization debt related to finance receivables originated by UACC for Vroom customers. Finance cost of sales Finance cost of sales consists of interest expense incurred on securitization debt originated by UACC for its network of third-party dealership customers and collection expenses related to servicing finance receivables.
The decrease was primarily attributable to the 16,287 decrease in wholesale units sold, which decreased wholesale revenue by $218.7 million, partially offset by a higher ASP per wholesale unit, which increased wholesale revenue by $13.2 million.
The decrease was primarily attributable to a 13,782 decrease in wholesale units sold, which decreased wholesale revenue by $193.8 million, partially offset by a higher ASP per wholesale unit, which increased wholesale revenue by $4.4 million.
Depending on market conditions, future 2023 securitizations may be accounted for as secured borrowings and remain on balance sheet. Servicing income represents the annual fees earned on the outstanding principal balance of the finance receivables serviced.
The related finance receivables and securitization debt remain on the balance sheet. We may account for future securitizations as on balance sheet transactions depending on the market conditions. Servicing income represents the annual fees earned on the outstanding principal balance of the finance receivables serviced.
Gain on debt extinguishment Gain on debt extinguishment represents a gain of $164.7 million recognized in 2022, related to the repurchase of $254.3 million in aggregate principal balance of the Notes, net of deferred issuance costs of $4.9 million, for $90.2 million.
Gain on debt extinguishment Gain on debt extinguishment represents a gain of $37.9 million and $164.7 million for the years ended December 31, 2023 and 2022, respectively, related to the repurchase of $74.2 million and $254.3 million in aggregate principal balance of the Notes, net of deferred issuance costs, for $36.5 million and $90.2 million, respectively.
We calculate Adjusted EBITDA excluding securitization gain as Adjusted EBITDA adjusted to exclude the securitization gain from the sale of UACC's finance receivables as it provides a useful perspective on the underlying operating results and trends as well as a means to compare our period-over-period results.
We calculate Adjusted EBITDA excluding securitization gain as Adjusted EBITDA adjusted to exclude the securitization gain from the sale of UACC's finance receivables as it provides a useful perspective on the underlying operating results and trends as well as a means to compare our period-over-period results. 56 Table of Contents The following table presents a reconciliation of EBITDA, Adjusted EBITDA, and Adjusted EBITDA excluding securitization gain to net loss, which is the most directly comparable U.S.
Product revenue per unit increased from $1,098 for the year ended December 31, 2021 to $1,512 for the year ended December 31, 2022, primarily due to interest income earned on finance receivables from Vroom customers originated or serviced by UACC.
The increase in product revenue per unit was primarily due to an increase in interest income earned on finance receivables from Vroom customers originated or serviced by UACC as compared to the year ended December 31, 2022.
Inbound transportation costs, from the point of acquisition to the relevant reconditioning facility, are included in cost of sales. SG&A expenses increased $18.6 million, or 3.4%, from $547.8 million for the year ended December 31, 2021 to $566.4 million for the year ended December 31, 2022.
Inbound transportation costs, from the point of acquisition to the relevant reconditioning facility, are included in cost of sales. SG&A expenses decreased $225.7 million, or 39.9%, from $566.4 million for the year ended December 31, 2022 to $340.7 million for the year ended December 31, 2023.
In 2022, we repurchased $254.3 million in aggregate principal amount of the Notes, net of deferred issuance costs of $4.9 million, for $90.2 million, in open-market transactions. We recognized a gain on extinguishment of debt of $164.7 million for the year ended December 31, 2022.
During the year ended December 31, 2023, we repurchased $74.2 million in aggregate principal amount of the Notes, net of deferred issuance costs, for $36.5 million, respectively, in open-market transactions. We recognized a gain on extinguishment of debt of $37.9 million for the year ended December 31, 2023.
While these initiatives are designed to improve our transaction processing, enhance our customer experience, and reduce our regulatory risk, they resulted in delays in listing vehicles for sale, which increased the number of days between our acquisition of vehicles and the final delivery of such vehicles to customers.
While these initiatives were designed to improve our transaction processing, enhance our customer experience, and 63 Table of Contents reduce our regulatory risk, they resulted in delays in listing vehicles for sale and caused a higher portion of our unit sales throughout 2023 to be from aged inventory, which increased the number of days between our acquisition of vehicles and the final delivery of such vehicles to customers.
As of December 31, 2022, we had additional operating leases that have not yet commenced with future lease payments of approximately $16.4 million. The leases are expected to commence over the next 12 months with initial lease terms of approximately 7 years.
As of December 31, 2023, UACC had an additional operating lease that has not yet commenced with future lease payments of approximately $1.2 million. The lease is expected to commence over the next 12 months with initial lease terms of approximately 7 years.
We intend to structure UACC's securitizations to achieve off-balance sheet treatment. However, if UACC fails to sell the residual interests, it will preclude us from recognizing the sale and result in the securitization trust being consolidated and remaining on balance sheet.
If UACC fails to sell the subordinate notes or the residual interests, it will preclude us from recognizing the sale and result in the securitization trust being consolidated and therefore remaining on balance sheet.
The increase was primarily due to amortization expense of intangible assets acquired as part of the UACC Acquisition, amortization related to our capitalized internal use software costs incurred in the development of our platform and website applications, and depreciation of short-haul and line-haul vehicles acquired for our proprietary logistics network.
The increase was primarily due to an additional month of amortization expense of intangible assets acquired as part of the UACC Acquisition for the year ended December 31, 2023 and amortization related to our capitalized internal use software costs incurred in the development of our platform and website applications.
Operating Leases We enter into various noncancelable operating lease agreements for office space, the Company’s reconditioning facility, the TDA retail location, the Company’s Sell Us Your Car centers, parking lots, other facilities, and equipment used 86 Table of Contents in the normal course of business. Operating lease obligations were $29.9 million, with $11.3 million payable within 12 months.
Operating Leases Prior to the wind-down of our ecommerce operations, we entered into various noncancelable operating lease agreements for office space, the Company’s reconditioning facility, the TDA retail location, the Company’s Sell Us Your Car centers, regional logistics hubs, parking lots, other facilities, and equipment used in the normal course of business, and, as of December 31, 2023 operating lease obligations were $33.9 million, with $10.7 million payable within 12 months.
The decrease in ecommerce product gross profit was primarily attributable to the 35,420 decrease in ecommerce units sold, which decreased product gross profit by $38.9 million, partially offset by a $414 increase in product gross profit per unit, which increased product gross profit by $16.3 million.
The decrease in ecommerce product gross profit was primarily attributable to the 21,877 decrease in ecommerce units sold, which decreased product gross profit by $33.1 million, partially offset by a $1,297 increase in product gross profit per unit, which increased product gross profit by $22.6 million.
Interest Income Interest income primarily represents interest credits earned on cash deposits maintained in relation to our 2022 Vehicle Floorplan Facility as well as interest earned on cash and cash equivalents. Other Loss (Income) Other loss (income) primarily represents unrealized losses (gains) on finance receivables at fair value and beneficial interests in securitizations.
Interest Income Interest income primarily represents interest credits earned on cash deposits maintained in relation to our 2022 Vehicle Floorplan Facility as well as interest earned on cash and cash equivalents.
Financing Activities Net cash flows from financing activities decreased $1,267.2 million from net cash provided by financing activities of $797.7 million for the year ended December 31, 2021 to net cash used in financing activities of $469.5 million for the year ended December 31, 2022.
Financing Activities Net cash flows from financing activities changed $566.8 million, from net cash used in financing activities of $469.5 million for the year ended December 31, 2022 to net cash provided by financing activities of $97.3 million for the year ended December 31, 2023.
Depreciation and amortization Depreciation and amortization expenses increased $25.4 million, or 197.0%, from $12.9 million for the year ended December 31, 2021 to $38.3 million for the year ended December 31, 2022.
Depreciation and amortization Depreciation and amortization expenses increased $4.5 million, or 11.7%, from $38.3 million for the year ended December 31, 2022 to $42.8 million for the year ended December 31, 2023.
In February and July 2022, UACC sold an aggregate of $523.7 million of rated asset-backed securities and $49.6 million of residual certificates in auto loan securitization transactions from securitization trusts, established and sponsored by UACC, for aggregate proceeds of $582.9 million.
In the year ended December 31, 2022, UACC sold $523.7 million of rated asset-backed securities and $49.6 million of residual certificates in 2022-1 and 2022-2 auto loan securitization transactions for proceeds of $582.9 million.
See “Risk Factors—Risks Related to Our Financial Condition and Results of Operations—We may experience seasonal and other fluctuations in our quarterly results of operations, which may not fully reflect the underlying performance of our business.” Macroeconomic Factors Both the United States and global economies are experiencing a sustained inflationary environment and the Federal Reserve’s efforts to tame inflation have led to, and may continue to lead to, increased interest rates, which affects automotive finance rates, reducing discretionary spending and making vehicle financing more costly and less accessible to many consumers.
Macroeconomic Factors Both the United States and global economies are experiencing a sustained inflationary environment and the Federal Reserve’s efforts to tame inflation have led to increased interest rates, which affects automotive finance rates, reducing discretionary spending and making vehicle financing more costly and less accessible to many consumers.
Year Ended December 31, 2022 2021 2020 Ecommerce units sold 39,278 74,698 34,488 Vehicle Gross Profit per ecommerce unit $ 1,033 $ 1,108 $ 869 Product Gross Profit per ecommerce unit 1,512 1,098 896 Total Gross Profit per ecommerce unit $ 2,545 $ 2,206 $ 1,765 Average monthly unique visitors 1,866,197 1,968,656 969,890 Ecommerce average days to sale 131 74 66 67 Table of Contents 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 Program.
Year Ended December 31, 2023 2022 Ecommerce units sold 17,401 39,278 Vehicle gross profit per ecommerce unit $ 594 $ 1,033 Product gross profit per ecommerce unit 2,809 1,512 Total gross profit per ecommerce unit $ 3,403 $ 2,545 Average monthly unique visitors 2,060,804 1,866,197 Ecommerce average days to sale 217 131 Inventory turnover 3.02 3.05 Inventory days to supply 121 120 54 Table of Contents 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 Program.
The trusts are collateralized by finance receivables with an aggregate principal balance of $603.5 million and had a carrying value of $534.6 million at the time of sale. These finance receivables are serviced by UACC. UACC retained 5% of the notes and residual certificates sold as required by applicable risk retention rules.
The securitization trusts are collateralized by finance receivables with an aggregate principal balance of $603.5 million and have a carrying value of $534.6 million at the time of sale. 68 Table of Contents Finance receivables are serviced by UACC.
Vehicle Gross Profit Ecommerce vehicle gross profit decreased $42.1 million, or 51.0%, from $82.7 million for the year ended December 31, 2021 to $40.6 million for the year ended December 31, 2022. The decrease in vehicle gross profit was primarily attributable to the 35,420 decrease in ecommerce units sold, which decreased vehicle gross profit by $39.2 million.
Vehicle Gross Profit Ecommerce vehicle gross profit decreased $30.3 million, or 74.5%, from $40.6 million for the year ended December 31, 2022 to $10.3 million for the year ended December 31, 2023. The decrease in vehicle gross profit was primarily attributable to the 21,877 decrease in ecommerce units sold, which decreased vehicle gross profit by $22.7 million.
We anticipate that our existing cash and cash equivalents, 2022 Vehicle Floorplan Facility, and UACC's Warehouse Credit Facilities will be sufficient to support our operations for at least the next twelve months from the date of this Annual Report on Form 10-K. Since inception, we experienced a continued increase in our cash usage as we scaled our business.
As of February 29, 2024, we had cash and cash equivalents of approximately $94.0 million. We anticipate that our existing cash and cash equivalents and UACC's Warehouse Credit Facilities will be sufficient to support the Company for at least the next twelve months from the date of this Annual Report on Form 10-K.
Product gross profit per unit increased from $1,098 for the year ended December 31, 2021 to $1,512 for the year ended December 31, 2022, primarily due to interest income earned on finance receivables from Vroom customers originated or serviced by UACC. 80 Table of Contents Wholesale The following table presents our Wholesale segment results of operations for the periods indicated: Year Ended December 31, 2022 2021 Change % Change (in thousands, except unit data) Wholesale units sold 20,876 37,163 (16,287 ) (43.8 )% Wholesale revenue $ 293,528 $ 498,981 $ (205,453 ) (41.2 )% Wholesale gross (loss) profit $ (10,620 ) $ 18,120 $ (28,740 ) (158.6 )% Average selling price per unit $ 14,061 $ 13,427 $ 634 4.7 % Wholesale gross (loss) profit per unit $ (509 ) $ 488 $ (997 ) (204.3 )% Wholesale Units Wholesale units sold decreased 16,287, or 43.8%, from 37,163 for the year ended December 31, 2021 to 20,876 for the year ended December 31, 2022, primarily driven by a decrease in wholesale units purchased from consumers and a lower number of trade-in vehicles associated with the decrease in the number of ecommerce units sold.
Product gross profit per unit increased from $1,512 for the year ended December 31, 2022 to $2,809 for the year ended December 31, 2023, primarily due to an increase in interest income earned, partially offset by interest expense on securitization debt related to Vroom customers' finance receivables originated or serviced by UACC. 64 Table of Contents Wholesale The following table presents our Wholesale segment results of operations for the periods indicated: Year Ended December 31, 2023 2022 Change % Change (in thousands, except unit data) Wholesale units sold 7,094 20,876 (13,782 ) (66.0 )% Wholesale revenue $ 104,119 $ 293,528 $ (189,409 ) (64.5 )% Wholesale gross loss $ (34,353 ) $ (10,620 ) $ (23,733 ) 223.5 % Average selling price per unit $ 14,677 $ 14,061 $ 616 4.4 % Wholesale gross loss per unit $ (4,843 ) $ (509 ) $ (4,334 ) 851.5 % Wholesale Units Wholesale units sold decreased 13,782, or 66.0%, from 20,876 for the year ended December 31, 2022 to 7,094 for the year ended December 31, 2023, primarily driven by a decrease in wholesale units purchased from consumers and a lower number of trade-in vehicles associated with the decrease in the number of ecommerce units sold.
Refer to Note 13 — Long Term Debt to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, for further discussion.
Refer to Note 13 — Long Term Debt of our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, for further discussion. Finance Receivables Subject to market conditions, we plan to sell finance receivables originated by UACC through asset-backed securitization transactions.
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.
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. 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.
Product Gross Profit Ecommerce product gross profit decreased $22.6 million, or 27.6%, from $82.0 million for the year ended December 31, 2021 to $59.4 million for the year ended December 31, 2022.
Product Gross Profit Ecommerce product gross profit decreased $10.5 million, or 17.7%, from $59.4 million for the year ended December 31, 2022 to $48.9 million for the year ended December 31, 2023.
This decrease was driven by our strategic decision to prioritize unit economics over unit sales volume, a reduction in third-party sales support staff, which put pressure on servicing our demand, as well as macroeconomic factors.
This decrease was driven by our strategic decision to prioritize unit economics over unit sales volume starting in the second quarter of 2022, our decision to reduce vehicle acquisitions during the fourth quarter of 2023, pressure on servicing our demand as a result of reducing third-party sales support staff and scaling our internal sales team, as well as macroeconomic factors.
The increase in interest income was primarily driven by higher interest credits earned by the Company related to the 2022 Vehicle Floorplan Facilities and higher interest rates earned on cash and cash equivalents. Other loss (income) Other loss (income) increased to $43.2 million for the year ended December 31, 2022.
Interest income Interest income increased $1.8 million, or 9.3%, from $19.4 million for the year ended December 31, 2022 to $21.2 million for the year ended December 31, 2023. The increase in interest income was primarily driven by higher interest rates earned on cash and cash equivalents.
Vehicles sold through wholesale channels are acquired from customers who trade-in their vehicles when making a purchase from us, from customers who sell their vehicle to us in direct-buy transactions, and from liquidation of vehicles previously listed for retail sale. The number of wholesale vehicles sold and the ASP per unit are the primary drivers of wholesale revenue.
Wholesale vehicle revenue Historically, we sold vehicles that do not meet our Vroom retail sales criteria through wholesale channels. Vehicles sold through wholesale channels were acquired from customers who traded-in their vehicles when making a purchase from us, from customers who sold their vehicle to us in direct-buy transactions, and from liquidation of vehicles previously listed for retail sale.
In February and July 2022, UACC completed the 2022-1 and 2022-2 securitization transactions, which qualified as sales, therefore we recorded a gain on the sale of the finance receivables. The amount of the gain is equal to the fair value of the net proceeds received less the carrying amount of the finance receivables.
The amount of the gain is equal to the fair value of the net proceeds received less the carrying amount of the finance receivables. In July 2022, UACC sold a pool of finance receivables in the 2022-2 securitization transaction.
Wholesale Revenue Wholesale revenue decreased $205.5 million, or 41.2%, from $499.0 million for the year ended December 31, 2021 to $293.5 million for the year ended December 31, 2022.
Wholesale Revenue Wholesale revenue decreased $189.4 million, or 64.5%, from $293.5 million for the year ended December 31, 2022 to $104.1 million for the year ended December 31, 2023.
The aggregate borrowing limit is $850.0 million with maturities between May 2024 and December 2024. As of December 31, 2022, outstanding borrowings related to the Warehouse Credit Facilities were $229.5 million and we were in compliance with all covenants related to the warehouse credit facilities.
As of December 31, 2023, outstanding borrowings related to the Warehouse Credit Facilities were $421.3 million and we were in compliance with all covenants related to the Warehouse Credit Facilities.
Refer to Note 4 — Variable Interest Entities and Securitizations to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, for further discussion regarding our transactions with unconsolidated variable interest entities.
The waiver of monthly servicing fees related to the 2022-2 securitization transaction resulted in consolidation of the related finance receivables and securitization debt on our financial statements. Refer to Note 4 — Variable Interest Entities and Securitizations to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, for further discussion.
We earn fees on third-party financing and value-added products pursuant to arrangements with the third parties that sell and administer these products.
Refer to "Finance revenue" below for further details. We also earned fees on third-party financing and value-added products pursuant to arrangements with the third parties that sold and administered these products.
Selling, general and administrative expenses Year Ended December 31, 2022 2021 Change % Change (in thousands) Compensation & benefits $ 251,153 $ 204,913 $ 46,240 22.6 % Marketing expense 79,670 125,481 (45,811 ) (36.5 )% Outbound logistics (1) 39,023 85,788 (46,765 ) (54.5 )% Occupancy and related costs 23,363 17,448 5,915 33.9 % Professional fees 33,455 24,386 9,069 37.2 % Software and IT costs 44,570 27,749 16,821 60.6 % Other 95,153 62,058 33,095 53.3 % Total selling, general & administrative expenses $ 566,387 $ 547,823 $ 18,564 3.4 % (1) Outbound logistics primarily includes third-party transportation fees as well as cost related to operating our proprietary logistics network, including fuel, tolls, and maintenance expenses associated with vehicle deliveries.
Selling, general and administrative expenses Year Ended December 31, 2023 2022 Change % Change (in thousands) Compensation & benefits $ 166,056 $ 251,153 $ (85,097 ) (33.9 )% Marketing expense 48,440 79,670 (31,230 ) (39.2 )% Outbound logistics (1) 8,466 39,023 (30,557 ) (78.3 )% Occupancy and related costs 18,010 23,363 (5,353 ) (22.9 )% Professional fees 20,129 33,455 (13,326 ) (39.8 )% Software and IT costs 36,466 44,570 (8,104 ) (18.2 )% Other 43,090 95,153 (52,063 ) (54.7 )% Total selling, general & administrative expenses $ 340,657 $ 566,387 $ (225,730 ) (39.9 )% (1) Outbound logistics primarily includes third-party transportation fees as well as cost related to operating our proprietary logistics network, including fuel, tolls, and maintenance expenses associated with vehicle deliveries.
Interest expense Our interest expense primarily includes (i) interest expense related to our vehicle floorplan facility with Ally Bank and Ally Financial (the "2020 Vehicle Floorplan Facility"), as discussed below, which is used to finance our inventory, (ii) 77 Table of Contents interest expense on our Notes, and (iii) interest expense on UACC's Warehouse Credit Facilities, which is used to fund our finance receivables.
Interest expense Our interest expense primarily includes (i) interest expense related to our 2022 Vehicle Floorplan Facility, which was used to finance our inventory, (ii) interest expense on our Notes, (iii) interest expense on UACC's Warehouse Credit Facilities, which are used to fund our finance receivables, and (iv) interest expense on UACC's financing of beneficial interests in securitizations.
We will continue to actively monitor and develop responses to these disruptions, but depending on duration and severity, these trends could continue to negatively impact our business in 2023. 74 Table of Contents Components of Results of Operations Revenue Retail vehicle revenue We sell retail vehicles through both our ecommerce platform and TDA.
We will continue to actively monitor and develop responses to these disruptions, but depending on duration and severity, these trends could continue to negatively impact our business in 2024.
We expect to use our cash and cash equivalents to finance our future capital requirements, borrowings under our 2022 Vehicle Floorplan Facility to finance our inventory, and UACC’s Warehouse Credit Facilities to fund our finance receivables.
As a result of the 67 Table of Contents liquidation of our vehicle inventory, we repaid all amounts outstanding under the 2022 Vehicle Floorplan Facility in full and the agreement has been terminated. We expect to use our cash and cash equivalents to finance our future capital requirements and UACC’s Warehouse Credit Facilities to fund our finance receivables.
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.
The calculation of our key operating and financial metrics is straightforward and does not rely on significant projections, estimates or assumptions.
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 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. Average monthly unique visitors is calculated using data provided by Google Analytics.
Our scalable, data-driven technology brings all phases of the car buying and selling process to consumers wherever they are, and offers an extensive selection of used vehicles, transparent pricing, competitive financing, and at-home pick-up and delivery. We are deeply committed to creating an exceptional experience for our customers.
Former Ecommerce Operations Vroom's ecommerce platform combined automotive ecommerce, vehicle operations and data science and experimentation to bring all phases of the car buying and selling process to consumers wherever they are, offering an extensive selection of used vehicles, transparent pricing, competitive financing, and at-home pick-up and delivery.
Furthermore, advance rates available to UACC on borrowings from the Warehouse Credit Facilities may decrease as a result of the increasing credit losses in UACC's portfolio and overall rising interest rates, which may in turn have adverse impact on our liquidity. 73 Table of Contents Ability to securitize UACC's loan portfolio The success of UACC's business is highly dependent on the ability to securitize and sell the automotive finance receivables that it underwrites.
Certain advance rates available to UACC on borrowings from the Warehouse Credit Facilities have decreased as a result of the increasing credit losses in UACC's portfolio and overall rising interest rates. Any future decreases on available advance rates may have an adverse impact on our liquidity.
Fees are earned monthly at an annual rate of approximately 4% for the 2022-1 securitization and 3.25% for the 2022-2 securitization of the outstanding principal balance of the finance receivables serviced.
Fees are earned monthly at an annual rate of approximately 4% for the 2022-1 securitization transaction and 3.25% for the 2022-2 and 2023-1 securitization transactions of the outstanding principal balance of the finance receivables serviced. As a result of high interest rates, the current inflationary environment and vehicle depreciation in the used automotive industry, UACC is experiencing higher loss severity.
Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future. A discussion regarding our financial condition and results of operation for the year ended December 31, 2022 compared to the year ended December 31, 2021 is presented below.
Additionally, our historical results are not necessarily indicative of the results that may be expected for any period in the future.
The decrease in ecommerce product revenue was primarily attributable to the 35,420 decrease in ecommerce units sold, which decreased product revenue by $38.9 million, partially offset by a $414 increase in product revenue per unit, which increased product revenue by $16.3 million.
The decrease in ecommerce product revenue was primarily attributable to the 21,877 decrease in ecommerce units sold, which decreased product revenue by $33.1 million, partially offset by an increase in product revenue per unit, which increased from $1,512 for the year ended December 31, 2022 to $3,001 for the year ended December 31, 2023 and increased product revenue by $25.9 million.
As a result of current market conditions, which led to unfavorable pricing, we retained the non-investment grade securities and residual interests, which will require us to account for the 2023-1 securitization as secured borrowings and remain on balance sheet pending the sale of such retained interests.
In January 2023, UACC completed the 2023-1 securitization transaction, selling the investment grade rated asset-backed securities, and in April 2023, UACC sold the non-investment grade rated securities. As a result of market conditions at the time, which led to unfavorable pricing, UACC retained the residual interests and we accounted for the 2023-1 securitization transaction as secured borrowings.
As a result of current market conditions, which led to unfavorable pricing, we retained the non-investment grade securities and residual interests, which will require us to account for the 2023-1 securitization as secured borrowings and remain on balance sheet pending the sale of such retained interests.
In January 2023, UACC completed the 2023-1 securitization transaction, selling the investment grade rated asset-backed securities, and in April 2023, UACC sold the non-investment grade rated securities. As a result of market conditions at the time, which led to unfavorable pricing, UACC retained the residual interests and we accounted for the 2023-1 securitization transaction as secured borrowings.
The decrease was primarily attributable to a $997 change in wholesale gross loss per unit from gross profit per unit of $488 for the year ended December 31, 2021 to wholesale gross loss per unit of $509 for the year ended December 31, 2022, which increased wholesale gross loss by $20.8 million and was primarily driven by lower sales margins.
The change was primarily attributable to a $4,334 increase in wholesale gross loss per unit from $509 for the year ended December 31, 2022 to $4,843 for the year ended December 31, 2023, which increased wholesale gross loss by $30.8 million, partially offset by a 13,782 decrease in wholesale units sold, which decreased wholesale gross loss by $7.0 million.
Higher than anticipated credit losses may continue to negatively impact our business during 2023, especially due to the fact that UACC primarily operates in the sub-prime sector of the market which is expected to have more volatility.
Higher than anticipated credit losses contributed to a pre-tax net loss at UACC of approximately $41.2 million for the year ended December 31, 2023, and are expected to continue to negatively impact our business in 2024, especially because UACC primarily operates in the non-prime sector of the market which is expected to have more volatility.
In addition, the increased loss severity could lead to reduced servicing income if UACC elects to waive monthly servicing fees going forward as it did in January. The waiver of servicing fees on prior off-balance sheet securitizations could result in consolidation of the related finance receivables and securitization debt on Vroom’s financial statements.
The increased loss severity could lead to reduced servicing income if UACC elects to waive monthly servicing fees going forward as it did in the first quarter of 2023.
We account for sales of these finance receivables in accordance with ASC Topic 860, Transfers and Servicing of Financial Assets ("ASC 860") .
We earn interest income on such finance receivables before the contracts are sold, interest income on finance receivables held in consolidated VIEs, and, when applicable, gain on the sales of securitized finance receivables. We account for sales of finance receivables in accordance with ASC Topic 860, Transfers and Servicing of Financial Assets ("ASC 860") .
Convertible Senior Notes On June 18, 2021, we issued $625.0 million aggregate principal amount of the Notes pursuant to an indenture between us and U.S. Bank National Association, as trustee (the “Indenture”).
We have no significant debt maturities due until July 2026 and the payments on our securitization debt are funded by cashflows on the finance receivables within the securitization trusts. Convertible Senior Notes On June 18, 2021, we issued $625.0 million aggregate principal amount of the Notes pursuant to an indenture between us and U.S.
Years Ended December 31, 2022 and 2021 Ecommerce The following table presents our Ecommerce segment results of operations for the periods indicated: Year Ended December 31, 2022 2021 Change % Change (in thousands, except unit data and average days to sale) Ecommerce units sold 39,278 74,698 (35,420 ) (47.4 )% Ecommerce revenue: Vehicle revenue $ 1,304,797 $ 2,360,368 $ (1,055,571 ) (44.7 )% Product revenue 59,398 82,001 (22,603 ) (27.6 )% Total ecommerce revenue $ 1,364,195 $ 2,442,369 $ (1,078,174 ) (44.1 )% Ecommerce gross profit: Vehicle gross profit $ 40,575 $ 82,745 $ (42,170 ) (51.0 )% Product gross profit 59,398 82,001 (22,603 ) (27.6 )% Total ecommerce gross profit $ 99,973 $ 164,746 $ (64,773 ) (39.3 )% Average vehicle selling price per ecommerce unit $ 33,220 $ 31,599 $ 1,621 5.1 % Gross profit per ecommerce unit: Vehicle gross profit per ecommerce unit $ 1,033 $ 1,108 $ (75 ) (6.8 )% Product gross profit per ecommerce unit 1,512 1,098 414 37.7 % Total gross profit per ecommerce unit $ 2,545 $ 2,206 $ 339 15.4 % Ecommerce average days to sale 131 74 57 77.2 % Ecommerce units Ecommerce units sold decreased 35,420, or 47.4%, from 74,698 for the year ended December 31, 2021 to 39,278 for the year ended December 31, 2022.
Years Ended December 31, 2023 and 2022 Ecommerce The following table presents our Ecommerce segment results of operations for the periods indicated: Year Ended December 31, 2023 2022 Change % Change (in thousands, except unit data and average days to sale) Ecommerce units sold 17,401 39,278 (21,877 ) (55.7 )% Ecommerce revenue: Vehicle revenue $ 523,945 $ 1,304,797 $ (780,852 ) (59.8 )% Product revenue 52,225 59,398 (7,173 ) (12.1 )% Total ecommerce revenue $ 576,170 $ 1,364,195 $ (788,025 ) (57.8 )% Ecommerce gross profit: Vehicle gross profit $ 10,343 $ 40,575 $ (30,232 ) (74.5 )% Product gross profit 48,888 59,398 (10,510 ) (17.7 )% Total ecommerce gross profit $ 59,231 $ 99,973 $ (40,742 ) (40.8 )% Average vehicle selling price per ecommerce unit $ 30,110 $ 33,220 $ (3,110 ) (9.4 )% Product revenue per ecommerce unit 3,001 1,512 1,489 98.5 % Gross profit per ecommerce unit: Vehicle gross profit per ecommerce unit $ 594 $ 1,033 $ (439 ) (42.5 )% Product gross profit per ecommerce unit 2,809 1,512 1,297 85.8 % Total gross profit per ecommerce unit $ 3,403 $ 2,545 $ 858 33.7 % Ecommerce average days to sale 217 131 86 65.6 % Ecommerce units Ecommerce units sold decreased 21,877, or 55.7%, from 39,278 for the year ended December 31, 2022 to 17,401 for the year ended December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Removed
Item 7A. Quantitative and Qualitative Disclosure About Market Risk Market risk is the risk of economic losses due to adverse changes in financial market prices and rates. Our primary market risk has been interest rate risk. We do not have material exposure to commodity risk.
Added
Item 7A. Quantita tive and Qualitative Disclosure About Market Risk We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item 7A. 72 Table of Contents
Removed
Interest Rate Risk As of December 31, 2022, we had an outstanding balance under the 2020 Vehicle Floorplan Facility of $277.0 million and an outstanding balance under our Warehouse Credit Facilities of $229.5 million. The 2020 Vehicle Floorplan Facility bears interest at a rate equal to the Prime Rate, announced per annum by Ally Bank, plus 105 basis points.
Removed
The Warehouse Credit Facilities bear interest at a rate equal to LIBOR or SOFR plus a fixed percentage based on the agreement with the banking institution. A hypothetical 10% change in interest rates during the year ended December 31, 2022 would result in a change to interest expense of $2.7 million, respectively.
Removed
As of December 31, 2022, we had $449.4 million of long-term debt including the current portion of securitization debt of consolidated VIEs of $47.2 million. As the interest rate on the long term debt is fixed, we do not have exposure to interest rate risk. 90 Table of Contents

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