What changed in this filing

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Item 1. Business

2024-03-13 compared with 2023-03-02 · 134 added, 233 removed, 32 unchanged (92% of the section changed)

Vroom, Inc., which was incorporated under the laws of the State of Delaware in 2012, is a holding company that conducts its operations through its subsidiaries.

completed its initial public offering (“IPO”) in June 2020 and its common stock trades on The Nasdaq Global Select Market (“Nasdaq”) under the symbol VRM.

Unless the context otherwise requires, references herein to “Vroom”, “the Company”, “we”, “us”

or “our”

refer to Vroom and its consolidated subsidiaries.

Vroom owns United Auto Credit Corporation (“UACC”), a leading automotive finance company, that offers vehicle financing through third party dealers under the UACC brand and to Vroom customers under the Vroom Financial Services brand.

Vroom also operates the Texas Direct Auto (“TDA”) and CarStory brands.

Vroom is an innovative, end-to-end ecommerce platform that is transforming the used vehicle industry by offering a better way to buy and a better way to sell used vehicles.

The Company's 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.

Vroom is deeply committed to creating an exceptional experience for its customers.

We take a vertically integrated, hybrid approach, which leverages the benefits of national scale and local efficiency.

We are driving enduring change in the industry by reinventing all phases of the vehicle buying and selling process, from discovery to delivery and everything in between.

Our platform encompasses:

We provide consumers with a personalized and intuitive ecommerce interface to research and select from thousands of fully reconditioned vehicles, with specific sorting, searching and filtering functionality.

Our platform is accessible at any time on any device and provides transparent haggle-free pricing, detailed vehicle information, real-time financing and nationwide contact-free delivery right to a buyer’s driveway.

For consumers looking to sell or trade in their vehicles, we provide attractive market-based pricing, real-time price quotes and convenient, at-home vehicle pick-up.

Vehicle Operations:

Our scalable and vertically integrated operations underpin our business model.

We strategically source inventory from consumers, auctions, rental car companies, original equipment manufacturers (“OEMs”) and dealers.

We improve our ability to acquire high-demand vehicles through enhanced supply science across all our sourcing channels and utilize national marketing to drive consumer sourcing.

In our reconditioning and logistics operations, we deploy a hybrid strategy that optimizes a combination of ownership and operation of assets by us with strategic third-party partnerships.

We continue to leverage our expanding last mile logistics operations and geographically dispersed network of reconditioning centers to further develop our regional operating model designed to improve our operating leverage, drive stronger unit economics and enhance our customer experience.

Data Science and Experimentation:

Data science and experimentation are at the core of everything we do.

We rely on data science, machine learning and A/B and multivariate testing to continually drive optimization and operating leverage across our ecommerce and vehicle operations.

We leverage data to increase the effectiveness of our national brand and performance marketing, enhance our customer experience, analyze market dynamics at scale, calibrate our vehicle pricing and optimize our overall inventory sales velocity.

In our vehicle operations, data science and experimentation enable us to fine tune our supply, sourcing and logistics models and to streamline our reconditioning processes.

Vehicle Financing:

A critical component of our value proposition is offering vehicle financing to our customers as a seamless component of the transaction process.

We currently offer integrated, real-time, individualized financing solutions through strategic partnerships with trusted lenders in automotive finance and through our subsidiary, UACC, which we acquired on February 1, 2022.

The acquisition of UACC accelerated Vroom’s

strategy to develop a captive financing arm and brought with it UACC’s financing expertise and extensive application processing, underwriting, securitization, and servicing capabilities.

Our Industry and Market Opportunity

used automotive market is the largest consumer product category.

Based on data from Cox Automotive, there were an estimated 36.2 million used vehicle transactions in 2022.

According to a 2022 NADA Auto Retailing market summary, the U.S.

automotive industry generated approximately $1.2 trillion in sales in 2021.

The industry benefits from entrenched vehicle ownership trends among American consumers, with approximately 283 million registered vehicles on the road in 2022, and approximately 91.9% of families in the United States owning at least one vehicle in 2021.

Additionally, the retail used vehicle market generally has shown resilience through recessionary markets and other challenging economic cycles.

used automotive market is ripe for disruption as an industry that is notorious for consumer dissatisfaction and has one of the lowest levels of ecommerce penetration.

Across all used vehicle sales in 2021, the largest U.S.

used vehicle dealer had a market-share of approximately 2%, with the top 100 used vehicle dealers collectively representing only approximately 11%, according to Automotive News.

Industry reports estimate that ecommerce penetration will grow to as much as half of all used vehicle sales by 2030.

Reflecting changing consumer behavior towards online purchases, in the Cox Automotive Digitization of End to End Retail Study 2021, 80% of consumers said that they want to make at least part of their vehicle purchase online and 64% of car buyers said that they want to handle more of their purchase online compared to the last time they purchased a vehicle.

Our platform, coupled with our national presence and brand, provides a significant competitive advantage versus local dealerships and regional players that lack nationwide reach and scalable technology, operations and logistics.

The traditional auto dealers and the peer-to-peer market do not offer consumers what we offer.

Our Strategy and Long-Term Roadmap

Following our IPO in 2020, we prioritized unit sales growth over unit economics and experienced triple digit growth in each of 2020 and 2021.

In light of operational challenges that arose in our business, the need to reduce our cash spend and changes in financial market sentiment, in May 2022 we adopted a business realignment plan (the “Realignment Plan”), pursuant to which we chose to slow down and improve both our operations and our customer experience, while also living within our means, prioritizing profitability and liquidity and driving unit economics.

The Realignment Plan included several elements, such as reducing the rate of unit sales to focus on lowering costs and expanding gross profit per unit;

reducing marketing expense by focusing on the highest-ROI channels while aligning with volume trajectory;

reducing the number of physical office locations;

right sizing our organization through headcount reductions to align with unit volume;

and further developing our regional operating model.

In furtherance of the Realignment Plan, in 2022 we continued to take measures to reduce fixed and variable costs, including further headcount reductions.

In 2022, we developed a long-term road map designed to achieve three key objectives:

prioritizing unit economics over growth, significantly reducing operating expenses, and maximizing liquidity.

In 2023, we have refined these three key objectives to prioritize unit economics and growth , improve costs per unit and maximize liquidity.

To achieve these three key objectives , we are focused on four strategic initiatives :

Building a well-oiled transaction machine:

Optimize our sales channels using internal and outsourced resources and digitization;

streamline and digitize the title and registration process;

and optimize our marketing strategies by building brand awareness, growing organic search traffic and fine-tuning paid media campaigns to improve direct traffic and drive conversion.

Building a well-oiled metal machine:

Optimize pricing and assortment of vehicles through predictive data and analytics and regionalization, as well as synchronize our end-to-end supply chain to increase velocity and improve flow.

Building a regional operating model:

Build a regional operating model to improve the customer experience;

increase the speed of the supply chain;

lower logistics costs;

and reduce markdowns.

Building a captive finance offering:

Accelerate the development of UACC as a captive financing operation, giving us the ability to better serve our customers across the credit spectrum, drive enhanced unit economics and improve our overall customer experience.

These four initiatives are designed to further our progress in building a profitable business model, enable us to build a well-oiled machine across our operations and position us to resume growth.

Ecommerce Operations

Vroom’s end-to-end ecommerce platform streamlines all aspects of the automotive buying and selling experience for consumers.

We offer an inventory of thousands of vehicles that have passed our detailed inspections, meet our proprietary Vroom Reconditioning Standards and are backed by our free Vroom 90-Day Limited Warranty.

Our platform provides comprehensive and transparent information on each of the vehicles we sell, including high-resolution photography and detailed product descriptions, which show our customers our vehicles from all angles, highlight imperfections and provide third-party vehicle history reports.

In addition to the size and diversity of our inventory selection, we provide buyers with a personalized, intuitive interface with specific sorting, searching and filtering functionality.

This enables our customers to research and discover the right car for their unique needs.

We price our vehicles using data science and proprietary algorithms, ensuring that buyers receive attractive, market-based, no-haggle pricing.

We provide seamlessly integrated, real-time, individualized financing solutions through UACC and our strategic partnerships with trusted leaders in automotive finance and give our customers access to competitive market rates.

We also offer third-party protection products, such as vehicle service contracts, GAP protection and tire and wheel coverage, all with transparent pricing.

For added assurance, our Vroom 7-Day Return Program offers customers seven days or 250 miles to test drive their purchase and return their vehicle for any reason.

For consumers looking to sell their vehicles, our Sell Us Your Car® proposition offers the ease of online submission of basic vehicle information to receive an on-demand appraisal for vehicles being sold in a direct-buy transaction or traded in on a vehicle purchase.

We utilize our extensive data insights and experience across thousands of transactions to generate a quote that reflects a competitive market-based price.

Price quotes are valid for seven days or 250 miles.

This process allows customers to shop, compare and analyze the sale of their vehicle from the convenience of their home.

We offer customers national, at-home, vehicle pick-up free of charge within days of accepting our price.

As an added convenience, we offer hassle-free customer payment and/or pay-off of any loans on the vehicle being sold, saving the customer time and paperwork.

Sales Operations

We use a combination of in-house customer support personnel and third-party customer service providers to operate our call centers and provide sales support to our customers.

Our professional customer experience team accompanies the buyer through the process to answer their questions and address their concerns.

As part of our long-term roadmap and in response to a significant staff reduction by one of our third-party telephone sales support providers, we are building our in-house sales team, have ceased using such third-party telephone sales provider and have meaningfully increased the level of sales supported internally, which we believe will improve our customer experience, and lower our selling costs.

As part of our initiative to build a well-oiled transaction machine, we also are focused on optimizing the end-to-end paper supply chain by automating and streamlining processes from initial documentation to vehicle registration.

A critical component of this initiative is our Digital Title Vault, utilizing digital scanning and OCR to remove time consuming and error-prone manual processes and ensure all for-sale vehicles have quality-assured titles in Vroom’s name that can be readily transferred to customers.

These enhancements are designed to improve the customer experience while also lowering transaction costs.

Reconditioning

Before a vehicle is listed for retail sale on our platform, it undergoes a thorough reconditioning process in order to meet our Vroom retail sales criteria.

The efficiency of this reconditioning process is a key element in our ability to grow profitably.

To recondition vehicles, we rely on a combination of our Vroom-owned vehicle reconditioning center ("VRC")

along with a network of VRCs owned and operated by a third party.

We combine the use of our proprietary reconditioning center (“Vroom VRC”) and third-party vehicle reconditioning centers (“third-party VRCs”) to best meet our reconditioning needs.

We leverage our partnerships with this third party to recondition approximately three-fourths of the vehicles in our inventory to our Vroom Reconditioning Standards, which creates capacity to quickly and efficiently scale or contract as business needs dictate, while simultaneously reducing our capital commitments.

As part of our long-term roadmap, we intend to maintain third-party partners while also pursuing low capital in-house opportunities for reconditioning to ensure adequate capacity, optimize our end-to-end supply chain and support our regional operating model.

As we identify potential VRC locations, leveraging our data science and deep industry experience, we take into account a combination of factors, including proximity to customers, transportation costs, access to inbound inventory and the ability to expand capacity at any current or future third-party partners’

specific locations.

Our goal is to improve the speed of our reconditioning centers through optimized capacity scheduling, integrated end-to-end inventory management, and predictive analytics.

These initiatives are designed to lower reconditioning costs and inbound shipping costs per unit, and thereby improve per unit economics while enhancing the customer experience.

We have built our national third-party logistics network through the development of strategic carrier arrangements with national haulers and consolidation of our carrier base into dedicated operating regions, while also developing our proprietary logistics capabilities.

This combination of proprietary and third-party service allows us to focus on improving the quality and reliability of our logistics operations.

Specifically, we have prioritized investment in our last-mile hub delivery operations, where we can have the greatest impact on the customer experience, including by investing in short-haul vehicles to make regional deliveries from our last mile hubs and line-haul vehicles for hub-to-hub shipments on high-volume routes.

We are also continuing to invest in our processes and technology to remove inefficiencies and increase automation.

Consistent with our long-term roadmap and the continued development of our regional operating model, we intend to continue to strategically combine the operation of our proprietary fleet with the use of third-party carriers, as well as synchronize our end-to-end supply chain to increase sales velocity and optimize flow of our inventory.

We plan to reduce the number of miles our vehicles travel and lower our inbound and outbound transportation costs using our regional operating model.

We believe these initiatives will enable us to reduce logistics costs per mile, improve our inventory turnover and provide the highest level of customer service.

Vroom Financial Services

We offer our customers seamlessly integrated, real-time financing for their vehicle purchases, which we regard as a critical component of our value proposition.

We currently arrange reliable vehicle financing at competitive rates for our customers through UACC and by partnering with trusted leaders in automotive finance, including Chase, Ally Financial and Capital One.

Strategic partnerships with such lenders offer convenience, assurance and efficiency for our customers, while providing enhanced revenue streams for us.

The acquisition of UACC in February 2022 has enabled us to expand our offerings across the credit spectrum and accelerate the development of our captive financing operation, Vroom Financial Services, which is one of the key strategic initiatives under our long-term roadmap.

As of December 31, 2022, UACC funded approximately $133 million in loans to Vroom's customers.

As we make further investments in UACC and continue our integration efforts, we expect to develop UACC into a full captive financing arm with disciplined lending expertise, which would enable us to increase our ecommerce unit sales, expand our penetration into sales to customers across the credit spectrum and improve our unit economics.

In addition to its financing expertise, the UACC platform brings with it extensive application processing, underwriting, servicing, and securitization capabilities.

We expect UACC to continue to service most of the auto loans it originates.

Further, we intend that all loans made by UACC will be funded via existing warehouse lines and sold to third-party investors via securitization transactions or forward flow arrangements.

Subject to market conditions and overall economics, we intend to structure UACC’s future securitizations as off-balance sheet transactions.

Third Party Financial Services

While serving as a captive lender for Vroom, UACC also will continue to provide lending and servicing services to its existing dealer network and will seek to expand that network over time.

UACC provides funding that allows manufacturer-franchised and independent motor vehicle dealers to finance their customers' purchases of new and used automobiles, light duty trucks and vans.

Currently, UACC serves a nationwide network of over 10,000 dealers in 49

UACC's lending programs are primarily designed to serve consumers who have limited access to traditional motor vehicle financing.

UACC services all of the retail installment sale contracts that it purchases or originates from third party dealers.

As of December 31, 2022, and separately from the services it provides through Vroom Financial Services, UACC serviced a portfolio of approximately 72,000 motor vehicle contracts with an aggregate principal outstanding balance of $800.5 million.

We operate a multi-channel marketing strategy that includes both national brand and digital performance marketing.

As part of our long-term roadmap, we intend to optimize our marketing investment towards the most efficient channels, including by continuing to build brand awareness, growing organic search traffic and optimizing paid media campaigns to improve direct traffic to vroom.com.

Our national presence provides a significant competitive advantage versus local dealerships and regional players that lack scalable technology, operations and logistics, and are unable to take advantage of the efficiencies and lower costs of national brand advertising and must typically rely on costly local or regional advertising campaigns.

Increasing our brand awareness leads to consumers coming directly to our website and creates an opportunity for increased conversion of our existing lead base, in particular as we expand our offerings across the credit spectrum with the development of our captive financing operations, build additional transactional functionality into our ecommerce platform and build our customer relationship management database.

We leverage various digital performance channels to generate demand among consumers actively in-market to buy or sell a vehicle.

This includes aggregator listing sites where we manage the distribution footprint of each VIN by continually optimizing its placement to maximize consumer demand and achieve planned conversion, sales velocity and profitability.

Because brand leads convert at a higher rate than all other marketing channels, we believe that a strategic mix of national brand leads and targeted performance marketing leads will improve our marketing efficiency.

We also utilize our national marketing efforts to feature our Sell Us Your Car® proposition to drive consumer sourcing of vehicles, which typically generate higher gross profit per unit when sold compared to other inventory sources.

We analyze visitor traffic and customer interaction with our platform to identify and correlate visitor behavior with sales conversion.

Our analytics enable us to measure and monitor the ROI generated by our marketing placements, which we then use to optimize placement and spend across marketing channels to balance sales velocity and profitability.

Data Science and Technology

Technology and data science are at the core of everything we do, and all aspects of our business are enhanced by data science.

We continuously experiment using A/B and multivariate testing methodologies to drive conversion, innovation and improved unit economics.

As part of our long-term roadmap, we are expanding and continuously improving our access to data, using data science and machine learning across our business to achieve our four strategic initiatives.

We use our proprietary technology, machine learning and data science models to optimize our vehicle pricing and assortment, improve vehicle gross profit per unit, optimize our marketing investments and conversion funnel, fine-tune our supply, sourcing and logistics models, streamline our reconditioning processes and optimize our overall inventory sales velocity.

Our team of data scientists and engineers continuously extract and analyze additional information, processing millions of data points daily to create models that inform purchasing, pricing and market decisions, allowing us to understand price elasticity, and also allowing us to price a significant majority of the vehicles we acquire from consumers in just a few seconds.

We adjust price as a function of overall market value trend, taking into account competitor inventory, market price fluctuations, and relative inventory advantages.

Core to our underlying technology is the real-time collection of customer and inventory data.

We analyze and act on the data in real time.

As our systems collect new or updated incoming data signals, those signals are immediately available to downstream systems to trigger parallel event processes.

Our technology supports multi-channel engagement with our customers, delivering consistent messaging via the web, in native apps and via email.

In cases where customers need attention outside of our ecommerce experience, we provide customer assistance via phone.

In addition, CarStory drives automotive retail innovation by aggregating, optimizing, and distributing current market data from thousands of automotive sources.

CarStory tracks over three and a half million unique VINs listed for sale every day.

This data is aggregated with demand insights from dealers and enterprise brands to generate accurate

price and sales predictions.

These predictions are further enhanced by CarStory's proprietary enhanced VIN database, ensuring a comprehensive and accurate view of a vehicle.

We have also integrated UACC's underwriting platform into our ecommerce experience.

The platform delivers instantaneous risk-adjusted pricing decisions by combining over 25 years of lending and servicing performance data.

used vehicle market is highly fragmented.

We face competition from a variety of sources, including the following:

dealerships, including traditional new and used car dealerships, large, national car dealers, such as CarMax and AutoNation, which have expanded into online sales, including “omni-channel”

offerings, and used car dealers or marketplaces that have ecommerce business models or online platforms, such as Carvana, Shift or CarBravo;

automotive finance companies with online ecommerce businesses, such as Chase Auto Preferred and CapitalOne Auto Navigator;

the peer-to-peer market, utilizing sites such as Facebook, Craigslist.com, eBay Motors and Nextdoor.com and consignment websites such as CarLotz;

sales by rental car companies directly to consumers of used vehicles which were previously utilized in rental fleets, such as Enterprise Car Sales.

Internet and online automotive sites could change their models to sell used vehicles and compete with us, such as Google, Amazon, AutoTrader.com, Edmunds.com, KBB.com, Autobytel.com, TrueCar.com, CarGurus and Cars.com.

In addition, automobile manufacturers such as Ford and Volkswagen could change their sales models in a fashion similar to General Motors (with their platform CarBravo, a used-vehicle marketplace for General Motors-branded vehicles aimed at competing with online dealerships) or otherwise to better compete with our model through technology and infrastructure investments.

While such enterprises may change their business models and endeavor to compete with us, the sale of used vehicles through ecommerce presents unique operational and technical challenges.

We view our main competitors to be the traditional auto dealers, who make up the significant portion of U.S.

used vehicle sales and are still operating under an outdated business model that is ripe for disruption.

We believe the primary competitive factors in the used automotive retail industry include price, selection, transparency, convenience, quality and competitive financing and that our model provides a competitive advantage with respect to these and other factors.

completed its initial public offering (“IPO”) in June 2020 and its common stock trades on The Nasdaq Global Select Market (“Nasdaq”) under the symbol VRM.

Unless the context otherwise requires, references herein to “Vroom”, the "Company”, “we”, “us” or “our” refer to Vroom and its consolidated subsidiaries.

During the fiscal year ended December 31, 2023, the period covered by this Annual Report on Form 10-K, Vroom operated an end-to-end ecommerce platform to buy and sell used vehicles.

On January 22, 2024, we announced that the Board of Directors (the “Board”) of Vroom had approved a value maximization plan, pursuant to which the Company has discontinued its ecommerce operations and is in the process of winding down its used vehicle dealership business in order to preserve liquidity and enable the Company to maximize stakeholder value through its remaining businesses (the “Value Maximization Plan”).

Vroom owns United Auto Credit Corporation (“UACC”), a leading automotive finance company that offers vehicle financing to its customers through third party dealers under the UACC brand, and CarStory (“CarStory”), a leader in AI-powered analytics and digital services for automotive retail.

The UACC and CarStory businesses will continue to serve their third-party customers, with their operations substantially unaffected by Vroom’s ecommerce wind-down .

The Company will seek to grow and enhance the profitability of the UACC and CarStory businesses going forward.

Prior to the adoption of the Value Maximization Plan, the Company’s 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.

Pursuant to the Value Maximization Plan, we are conducting an orderly wind-down of our ecommerce business.

Former Ecommerce Operations

Vroom’s ecommerce platform offered thousands of vehicles that had undergone detailed inspections, met proprietary reconditioning standards and were backed by a Vroom 90-day limited warranty.

The platform provided comprehensive and transparent information on each of the vehicles we sold and provided buyers with a personalized, intuitive interface with specific sorting, searching and filtering functionality.

The platform offered integrated, real-time financing solutions through strategic partnerships with automotive finance lenders and through our subsidiary, UACC.

For consumers looking to sell their vehicles, the platform offered the ease of online submission of basic vehicle information to receive an on-demand appraisal.

Vroom’s vehicle operations encompassed a vertically integrated approach to sourcing, transporting, reconditioning, delivering, and picking up vehicles.

Data science and experimentation was at the core of Vrooms operations, and we relied on data science, machine learning and A/B and multivariate testing to continually drive optimization and operating leverage across our ecommerce and vehicle operations.

Pursuant to the Value Maximization Plan, we are conducting an orderly wind-down of our ecommerce business.

We have suspended transactions through vroom.com, completed transactions for customers who had previously contracted with us to purchase or sell a vehicle, halted purchases of additional vehicles , sold substantially all of our used vehicle inventory through wholesale channels and paid off our vehicle floorplan financing facility dated November 4, 2022 ("2022 Vehicle Floorplan Facility") with Ally Bank and Ally Financial Inc.

We continue to take other actions to maximize the value of our remaining ecommerce assets, reduce our outstanding commitments and preserve our liquidity, and have been executing a reduction-in-force commensurate with our reduced operations .

Although we expect the ecommerce wind down to be substantially complete by the end of the first quarter of 2024, we may incur additional wind-down costs through the end of 2024.

The UACC and CarStory businesses will continue to serve their third-party customers, with their operations substantially unaffected by Vroom’s ecommerce wind-down .

The Company will seek to grow and enhance the profitability of the UACC and CarStory businesses going forward.

For more information about our former ecommerce operations, please refer to “Part I, Item 1.

Business” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 2, 2023.

UACC, which Vroom acquired in February 2022, is an indirect lender that offers vehicle financing to consumers through third-party dealers under the UACC brand, focusing primarily on the non-prime market.

Prior to Vroom’s wind-down of its ecommerce operations, UACC also offered vehicle financing to Vroom’s customers through its ecommerce platform.

Effective March 1, 2024, Tom Shortt, the Company’s Chief Executive Officer, serves as UACC’s President and Chief Executive Officer and Jon Sandison, the Company’s VP, Investor Relations and FP&A, serves as UACC’s Chief Financial Officer.

UACC, which has been engaged in automotive finance since 1996, currently offers financing services to a nationwide network of thousands of manufacturer-franchised and independent motor vehicle dealers in 49 states, and we seek to expand that network over time.

UACC enables these dealers to finance their customers' purchases of new and used automobiles, medium and light duty trucks and vans with competitive financing terms.

The credit programs offered by UACC are primarily designed to serve consumers who have limited access to traditional motor vehicle financing.

In addition to its financing expertise, the UACC platform brings with it extensive application processing, underwriting, and servicing capabilities.

UACC’s underwriting process begins when UACC accepts a consumer credit application from one of its approved dealerships.

Upon receipt, required information is entered into UACC's underwriting system for review and disposition by UACC's automated underwriting decisioning engine in accordance with UACC’s established underwriting guidelines.

Because UACC serves consumers who are typically unable to meet the credit standards imposed by most traditional motor vehicle financing sources, it may charge higher interest rates than most traditional motor vehicle financing sources.

UACC verifies the accuracy of information submitted through credit applications and retail installment sales contracts.

Verifications are assigned based on risk modeling and completed via a combination of first-party verifications and third-party data sources.

Verifications may include customer identity, customer interviews, proof of residence, verification of employment, proof of income, collateral/vehicle valuation, verification of insurance, and other stipulated requirements resulting from risk factors inherent within each credit application.

UACC services the retail installment sales contracts it originates or purchases and will continue to service the contracts it originated or purchased for customers of Vroom’s former ecommerce business.

Servicing activities consist primarily of collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent in payment of an installment, maintaining the security interests in the financed vehicles and, when necessary, arranging for the repossession and liquidation of the financed vehicles and pursuit of deficiencies.

Because UACC focuses primarily on the non-prime market, it generally sustains a higher level of delinquencies and credit losses than that experienced by traditional motor vehicle financing sources.

As of December 31, 2023, UACC serviced a portfolio of approximately 79,000 retail installment sales contracts with an aggregate principal outstanding balance of $1.1 billion.

To fund UACC’s automotive finance operations, eligible retail installment sales contracts that UACC originates or purchases are pledged to lenders under warehouse credit facilities and typically sold to third-party investors via securitization transactions, with UACC continuing to service the finance receivables underlying those contracts.

In such securitization transactions, UACC conveys a pool of automotive finance receivables to a special purpose vehicle, typically a trust that, in turn, issues certain securities.

The securities issued by the special purpose vehicle are collateralized by the pool of automotive finance receivables.

In exchange for the transfer of finance receivables to the special purpose vehicle, UACC receives the cash proceeds from the sale of the securities.

CarStory is a leader in AI-powered analytics and digital services for automotive retail.

CarStory offers its digital retailing services to dealers, automotive financial services companies and others in the automotive industry, which use CarStory’s solutions to enhance their customer experience and drive increased vehicle purchases.

CarStory drives automotive retail innovation by aggregating, optimizing and distributing data from thousands of automotive sources.

CarStory tracks over three and a half million unique vehicle identification numbers (“VINs”) listed for sale every day.

This data is aggregated with demand insights from millions of consumer sessions and VIN data from CarStory's proprietary VIN database to generate accurate price and sales .

CarStory helps dealers optimize their pricing by leveraging data science models for retail pricing that provide predictive pricing for marketing, buying, selling and VIN-level features.

In addition to its data analytics and digital services, CarStory powers white labeled storefronts for automotive marketplaces and finance companies.

In developing its white label capabilities, CarStory also has developed a variety of consumer-focused functions designed to enhance the customer experience and drive conversion.

CarStory's data and data science assets create significant opportunity for automotive AI product development, with over 200 million VINs, over three billion photos and price and price elasticity models.

As an indirect lender, UACC's marketing efforts are focused on selling to dealerships, rather than consumers.

UACC utilizes a combination of internal and field sales managers to both solicit the enrollment of new dealerships and to market its financing programs and products to existing dealerships.

UACC's sales managers serve as the primary liaison with its dealerships.

Sales managers focus their efforts on educating dealership personnel on UACC's lending programs and how to combine specific consumer characteristics, collateral and deal structures to increase the probability of approval under UACC's underwriting guidelines.

Prior to establishing a business relationship with an automobile dealership, UACC completes a review of the dealership's operations, inventory, facilities, and owner’s credit history.

CarStory has not actively engaged in marketing activities since being acquired by Vroom in 2021.

As part of the wind-down of its ecommerce business, Vroom has ended all sales and marketing activities for its used vehicle operations.

The automotive financing industry is large and highly competitive.

UACC competes with a number of national, regional and local finance companies, banks, credit unions, fintech companies, and captive finance companies.

Many of these companies are larger and have greater financial resources than UACC, including greater access to capital markets for debt instruments or access to lower cost deposit bases.

These funding sources may be unavailable to UACC.

Many of these companies also have long-standing relationships with automobile dealers and may provide other financing to dealers, including floor plan financing for the dealers' purchases of automobiles from manufacturers and auctions, which we do not offer.

Credit applications may be sent simultaneously to multiple lenders for consideration.

As a result, UACC competes with other financing sources on the basis of the approved structure, minimum customer requirements and stipulations, types of vehicles financed, dealer fees, dealer incentives, levels of service, and distribution (accessibility to UACC’s program via credit application technology platforms).

We believe that we can obtain from our dealership network sufficient automobile contracts for purchase at attractive prices by consistently applying reasonable underwriting criteria and making timely purchases of qualifying automobile contracts, however, there can be no assurance that we will be able to do so.

The automotive data and service business is large and very competitive.

CarStory competes with a number of companies in the automotive industry, including valuation services, VIN data providers, website marketplaces, inventory aggregators, and retail e-commerce platforms.

Some of these companies are significantly larger with well-established sales and marketing teams.

We compete with other companies to attract customers to our marketplace and dealers to our digital solutions.

Human Capital Management

As of December 31, 2022, Vroom employed a total of 1,323 employees, of which 1,322 were full-time employees.

The total consisted of 1,157 employees across 29 states in the United States and 166 employees based in Belgrade, Serbia, and does not include employees of United Auto Credit Corporation ("UACC"), which we acquired on February 1, 2022.

Vroom employees are spread across reconditioning and logistics (23%), corporate functions (15%), transactional staff (34%), technical staff (including data and engineering) (16%) and sales and retail staff (12%).

As of December 31, 2022, UACC employed a total of 683 employees, of which 671 were full-time employees.

As of December 31, 2023, the Company employed a total of 1,682 employees, of which 1,675 were full-time employees.

The total consisted of 1,468 employees across 34 states in the United States and 214 employees based in Belgrade, Serbia.

UACC employed 683 workers, of which 677 were full-time.

CarStory employed 219 workers, 213 of which are based in Serbia, with the balance in the US.

The balance were employed as part of the Vroom ecommerce

None of our employees is represented by a labor union.

We consider our relationships with our employees to be good and have not experienced any interruptions of operations due to labor disagreements.

In May 2022, in connection with our Realignment Plan, and in January 2023, as part of our continued focus on reducing variable and fixed costs as we pursue our long-term roadmap, we conducted reductions in force across the Vroom business.

In 2022, we significantly improved our operations, specifically in our titling, registration and transaction processes, allowing us to now run these aspects of our business with fewer people.

We further reduced Vroom's headcount in January 2023 by approximately 275 employees in pursuit of our three key objectives of prioritizing unit economics, reducing operating expenses and maximizing liquidity, as outlined in our long-term roadmap and based on a careful assessment of our business needs, key initiatives, and long-term success and profitable growth.

These reductions

in force together reflected an approximately 50% reduction of Vroom employees and contractors (excluding UACC) since January 2022.

In January and April 2023, as part of our continued focus on reducing variable and fixed costs, we conducted reductions in force across the Vroom business.

During the year, we also undertook several smaller reductions to further streamline the business.

In January 2024, in connection with the wind-down of our ecommerce operations, we began a significant reduction in force across the entire Vroom business .

We anticipate that approximately 800 employees will be impacted upon substantial completion of the wind-down, resulting in a reduction of approximately 93% of the employees not engaged in UACC’s or CarStory’s ongoing operations.

Intellectual Property

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We seek to protect our intellectual property rights, including our intellectual property rights in our technology, through trademark, trade secret and copyright law, as well as confidentiality agreements, procedures and other contractual commitments and other legal rights.

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.

As of the date of this Annual Report on Form 10-K, our CarStory business has 29 U.S.

patents with expirations through 2039 and five pending U.S.

patent applications, and Vroom has one pending provisional patent and may obtain patents in the future.

We own 21 registrations for our trademarks in the United States for Vroom and UACC, collectively, with expirations through 2032, including Vroom®, V & Design®, Get In®, Sell Us Your Car®, VroomProtect®, TDA®, DealerLane®, Texas Direct®, and United Auto Credit®;

and we hold 50 registered trademarks in Colombia, Chile, Argentina, the European Union, the United Kingdom, Japan, Singapore, Mexico, Canada, South Korea and Peru for the Vroom® trademark with expirations through 2032 and have a number of pending applications to register Vroom trademarks in other foreign jurisdictions.

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.

As of the date of this Annual Report on Form 10-K, CarStory has 30 issued or allowed U.S.

patents with expirations through 2039 and seven pending U.S.

patent applications, and Vroom has one pending nonprovisional patent.

We own 25 registrations for trademarks in the United States owned by Vroom, Vast (CarStory's parent entity) and UACC, collectively, with renewal deadlines through 2033, including Vroom®, V & Design®, Get In®, Sell Us Your Car®, VroomProtect®, Texas Direct®, CarStory®, Vast® and United Auto Credit®;

and we hold 54 registered trademarks in Australia, Brazil, China, Colombia, Chile, Argentina, the European Union, the United Kingdom, Japan, Singapore, Mexico, Canada, South Korea and Peru, including for the Vroom® trademark with renewal deadlines through 2033 and we also have a number of pending trademark applications in the U.S.

and certain foreign jurisdictions.

We continually review our branding strategies and technology development efforts to assess the existence, registrability, and patentability of new intellectual property.

We will work to preserve the value of our Vroom® intellectual property rights where appropriate following the wind-down of our ecommerce operations.

Intellectual property laws, procedures and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated.

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Government Regulation

Our business is and will continue to be subject to extensive U.S.

Our businesses are and will continue to be subject to extensive U.S.

federal, state and local laws and regulations.

The advertising, sale, purchase, financing and transportation of used vehicles are regulated by every state in which we operate and by the U.S.

As an entity operating in the financial services sector, UACC is required to comply with a wide variety of laws and regulations.

Compliance with these laws and regulations requires that UACC maintain forms, processes, procedures, controls and the infrastructure to support these requirements, and these laws and regulations often create operational constraints both on UACC's ability to implement servicing procedures and on pricing.

UACC is subject to laws designed for the protection of consumers, including the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, prohibitions against unfair, deceptive, and abusive acts and practices, and various other state and federal laws and regulations.

These laws mandate certain disclosures with respect to finance charges on automobile contracts and impose certain other restrictions.

Most states regulate retail installment sales, including setting a maximum interest rate, caps on certain fees, or maximum amounts financed.

Certain states require UACC to have a sales finance license, consumer credit license, or similar applicable license.

UACC has obtained licenses in all states where licensing is required.

UACC's financing operations are also 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.

In addition, UACC is subject to supervision and examination by the Consumer Financial Protection Bureau (“CFPB”), a federal agency created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).

The CFPB has rulemaking, supervisory and enforcement authority over UACC and is specifically authorized, among other things, to take actions to prevent companies from engaging in “unfair, deceptive or abusive” acts or practices in connection with consumer financial

products and services, and to issue rules requiring enhanced disclosures for consumer financial products or services.

The CFPB also has authority to interpret, enforce and issue regulations implementing enumerated consumer laws, including certain laws that apply to UACC.

The Dodd-Frank Act and regulations promulgated thereunder may affect UACC's cost of doing business, may limit or expand its permissible activities, may affect the competitive balance within UACC's industry and market areas, and could have a material adverse effect on UACC.

In addition to the CFPB, other state and federal agencies have the ability to regulate aspects of our business.

For example, the Dodd-Frank Act provides a mechanism for state Attorneys General to investigate UACC.

In addition, the Federal Trade Commission has jurisdiction to investigate aspects of our business.

From time to time, we are subject to routine investigations by state and federal regulators.

We expect that regulatory investigations by both state and federal agencies will continue, and there can be no assurance that the results of such investigations will not have a material adverse effect on UACC.

The advertising, sale, purchase, financing and transportation of used vehicles are regulated by every state in which we previously operated our ecommerce business, and by the U.S.

federal government.

The titling and registration of vehicles and the sale of value-added products also are regulated by state laws, and such laws can vary significantly from state to state.

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.

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.

In addition, our ecommerce business was subject to regulations and laws specifically governing the internet and ecommerce and the collection, storage, use and other processing of personal information and other customer data.

Further, our ecommerce business was subject to current and future laws regarding the use of, training, testing, oversight and accuracy of AI.

Additionally, we are subject to industry-specific regulations and intellectual property laws regarding proprietary data, including motor vehicle records.

The federal governmental agencies that have regulated our ecommerce 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.

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Federal Communications Commission.

Additionally, we are subject to regulation by individual state dealer licensing authorities, state consumer protection agencies and state financial regulatory agencies.

From time to time, we have been subject to audits, requests for information, investigations and other inquiries from our regulators related to customer complaints.

Additionally, our ecommerce business was subject to regulation by individual state dealer licensing authorities, state consumer protection agencies and state financial regulatory agencies.

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.

We endeavor to promptly respond to any such inquiries and cooperate with our regulators.

State dealer licensing authorities regulate the purchase and sale of used vehicles by dealers within their respective states.

The applicability of these regulatory and legal compliance obligations to our ecommerce business is dependent on evolving interpretations of these laws and regulations and how our operations are, or are not, subject to them.

We are licensed as a dealer in the States of Texas, Florida, Arizona, California and Ohio and all of our vehicle transactions are conducted under our Texas, Florida and Arizona and Ohio licenses.

We believe that our activities in other states are not subject to such states’

vehicle dealer licensing laws;

however, regulators in such states could seek to require us to maintain a used vehicle dealer license in order to engage in activities in that state.

In addition, we may obtain a used vehicle dealer license in certain additional states to maximize operational flexibility and efficiency, enhance our customer experience and invest in relationships with state regulators.

Most states regulate retail installment sales, including setting a maximum interest rate and caps on certain fees or amounts financed.

In addition, certain states require that retail installment sellers file a notice or registration document or have a sales finance license or an installment sellers license in order to solicit or originate installment sales in that state.

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.

The financial regulatory agency in Pennsylvania determined that we need to obtain an installment seller license in order to enter into retail installment sales with residents of Pennsylvania.

As a result, we are not currently offering third-party financing to our customers in Pennsylvania, who must obtain independent financing to the extent needed to fund any vehicle purchases on our platform.

We have since obtained a Pennsylvania installment seller license and expect to resume offering financing to Pennsylvania customers in the future.

We also are registered with the Indiana Department of Financial Regulation as a non-lender credit seller.

We are not operating in the Commonwealth of Massachusetts due to its prohibition on the use of temporary tags, which we typically provide to our customers upon delivery.

In addition, the ongoing expansion of our proprietary logistics operations exposes us to greater regulation from the U.S.

Department of Transportation and state transportation regulators.

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 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.

In addition to these laws and regulations that apply specifically to the sale and financing of used vehicles, our facilities and business operations are subject to laws and regulations relating to environmental protection, occupational health and safety, and other broadly applicable business regulations.

We have endeavored to promptly respond to any such inquiries and cooperate with our regulators.

We previously held automotive dealer licenses and motor vehicle sales finance licenses or retail installment seller licenses in multiple states.

As a result of the wind-down of the ecommerce business and cessation of our used automotive dealer operations, we are in the process of terminating such licenses.

In addition to the laws and regulations described above, our facilities and business operations are subject to laws and regulations relating to environmental protection, occupational health and safety, and other broadly applicable business regulations.

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 affecting public companies, including securities laws and Nasdaq listing rules.

Additionally, we have in the past been subject to federal, state and local laws and regulations, and other government actions related to the COVID-19 pandemic, and may be subject to them in the future, including in.

the event of any resurgences or the emergence of new variants.

For a discussion of the various risks we face from regulation and compliance matters, see “Risk Factors—Risks Related to Cybersecurity and Privacy—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”;

“Risk Factors—Risks Related to Laws and Regulations——We operate in a highly regulated industry and are subject to a wide range of federal, state and local laws and regulations.

Failure to comply with these laws and regulations could have a material adverse effect on our business, financial condition and results of operations”;

“—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”;

“—Government regulation of the internet and ecommerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business, financial condition and results of operations”;

“Risk Factors—Risks Related to Our Use of Data and Technology—We are subject to risks related to online payment methods”;

“Risk Factors—Risks Related to Our Growth and Strategy—We are optimizing our proprietary logistics operations, including vehicle pick-ups and delivery from our last mile hubs and line haul transportation of vehicles between our last mile hubs, which will further expose us to increased risks related to ownership of infrastructure and the transportation of vehicles”

and “Risk Factors—General Risk Factors—The full extent of the impact of the COVID-19 pandemic, including the emergence of variants or any other resurgences, is uncertain.”

“Risk Factors—Risks Related to Cybersecurity and Privacy—Our CarStory business relies on artificial intelligence to facilitate the automotive retail experience.

If our use of artificial intelligence results in inaccurate data, regulatory scrutiny, privacy concerns or is otherwise unsuccessful, it could adversely affect our business, results of operations, and financial condition”;

“Risk Factors—Risks Related to Cybersecurity and Privacy—Any actual or perceived failure to comply with the evolving regulatory frameworks around the development and use of AI could adversely affect our business, results of operations, and financial condition”;

“Risk Factors—Risks Related to Laws and Regulations——We operate in a highly regulated industry and are subject to a wide range of federal, state and local laws and regulations.

Failure to comply with these laws and regulations could have a material adverse effect on our business, financial condition and results of operations”;

“—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”;

and “—Government regulation of

the internet and ecommerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business, financial condition and results of operations”.

Used vehicle sales are seasonal.

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Additionally, used vehicles depreciate at a faster rate in the last two quarters of each year and a slower rate in the first two quarters of each year.

In line with these macro trends, our gross profit per unit has historically been higher in the first half of the year when compared to the second half of the year.

See “Risk Factors—Risks Related to Our 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.”

However, the past few years have not followed typical depreciation trends and there remains continued uncertainty surrounding market trends.

Consistent with market trends, UACC generally experiences increased funding activity during the first quarter through tax season.

Delinquencies also tend to be lower during the first quarter through tax season and higher during the latter half of the year.

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business