What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-11 compared with 2021-05-12 · 343 added, 134 removed, 412 unchanged (54% of the section changed)

Management’s Discussion and Analysis o f Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

30 unchanged sentences

We sell vehicles directly to consumers primarily through our Ecommerce segment.

As the largest segment in our business, Ecommerce revenue grew 81.1% from the three months ended March 31, 2020 to the three months ended March 31, 2021, and we expect Ecommerce to continue to outgrow our other segments as it is the core focus of our growth strategy.

As the largest segment in our business, Ecommerce revenue grew 230.2% from the three months ended June 30, 2020 to the three months ended June 30, 2021 and 145.1% from the six months ended June 30, 2020 to the six months ended June 30, 2021, and we expect Ecommerce to continue to outgrow our other segments as it is the core focus of our growth strategy.

We also sell vehicles through wholesale channels, which provide a revenue source for vehicles that do not meet our Vroom retail sales criteria.

Additionally, we generate revenue through the retail sale of used vehicles and value-added products at Houston-based Texas Direct Auto, or TDA.

For the three months ended March 31, 2021, our Ecommerce, Wholesale and TDA segments represented 71.4%, 20.0% and 8.1% of our total revenue, respectively.

Our Ecommerce, Wholesale and TDA segments represented 76.1%, 16.8%, and 6.7%, respectively, of our total revenue for the three months ended June 30, 2021 and represented 74.1%, 18.2%, and 7.3%, respectively, of our total revenue for the six months ended June 30, 2021.

Our retail gross profit consists of two components:

7 unchanged sentences

We deploy an asset-light strategy that optimizes a combination of ownership and operation of assets by us with strategic third-party partnerships.

Our hybrid approach also applies to the third-party value-added products we sell to customers, which enables us to generate additional revenue streams without taking on the risk associated with underwriting vehicle financing or protection products.

Our hybrid approach also applies to the third-party value-added products we sell to customers, which currently enables us to generate additional revenue streams without taking on the risk associated with underwriting vehicle financing or protection products, however in the future may include proprietary finance products.

As we scale, we expect to benefit from efficiencies and operating leverage across our business, including our marketing and technology investments, and our inventory procurement, logistics, reconditioning and sales processes.

3 unchanged sentences

We continually evaluate the optimal mix of sourcing channels to generate the highest sales margins and shortest inventory turns, both of which contribute to increased gross profit per unit.

We generate a vast set of predictive data derived from market demand, pricing dynamics, vehicle acquisitions and subsequent sales, and we leverage that data to optimize future vehicle acquisitions, which we believe will be enhanced by the acquisition of CarStory.

See “—Recent Events—CarStory Acquisition.” As we scale, we expect to continue to leverage the data at our disposal to optimize and enhance the volume and selection of vehicles in our inventory and, in turn, drive revenue growth and profitability.

We are also exploring third party inventory strategies, which offers the possibility of

expand ing our sourcing channels thro ugh third party sellers while offering us attractive revenue models in an asset light, debt free structure.

See “— Other Key Factors and Trends Affecting our Operating Results—Ability to drive growth by cost effectively increasing the volume and selection o f vehicles in our inventory.”

As we scale, we expect to continue to leverage the data at our disposal to optimize and enhance the volume and selection of vehicles in our inventory and, in turn, drive revenue growth and profitability.

We are also exploring and testing third-party inventory strategies, which offers the possibility of expanding our sourcing channels through third-party sellers while offering us attractive revenue models in an asset light, debt free structure.

See “—Other Key Factors and Trends Affecting our Operating Results—Ability to drive growth by cost effectively increasing the volume and selection of vehicles in our inventory.”

Vehicle Reconditioning

1 unchanged sentence

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

To recondition vehicles, we rely on a combination of our Vroom VRC along with a network of VRCs owned and operated by third parties, and we intend to continue to expand our network of third-party VRCs.

Utilizing this hybrid approach, we have increased our total reconditioning capacity to approximately 2,300 units per week as of March 31, 2021, with approximately two-thirds from our twenty-three third-party VRCs.

As we increase the number of vehicles in our inventory and expand our reconditioning capacity, we expect that reconditioning costs and inbound shipping costs per unit will decrease as we benefit from economies of scale and operating leverage in reconditioning costs.

Utilizing this hybrid approach, we have increased our total reconditioning capacity to approximately 2,800 units per week as of June 30, 2021, with approximately three-fourths from our twenty-eight third-party VRCs.

As we are increasing the number of vehicles in our inventory and expanding our reconditioning capacity, we expect that reconditioning costs and inbound shipping costs per unit will continue to decrease as we benefit from economies of scale and operating leverage in reconditioning costs.

See “—Other Key Factors and Trends Affecting our Operating Results—Ability to expand and optimize our reconditioning capacity to satisfy increasing demand.”

6 unchanged sentences

Initially we have been prioritizing investment in our last-mile delivery operations where we can have the greatest impact on the customer experience.

We also have invested in short-haul trucks to make regional deliveries from our last mile hubs, and have begun to invest in long-haul vehicles for hub-to-hub shipments.

We also have invested in short-haul trucks to make regional deliveries from our last mile hubs, and are investing in long-haul vehicles for hub-to-hub shipments.

Consistent with our hybrid approach, as we scale our business, we continue to strategically combine the operation of our expanded proprietary fleet with the use of third-party carriers, which we expect will enable us to both accommodate our growth and provide the highest level of customer service.

5 unchanged sentences

We expect that both expanded product offerings and increased attachment rates in value-added product sales will have a positive impact on our profitability.

Consistent with our hybrid approach, we also are exploring a variety of options to expand our finance product offering to include Vroom proprietary finance products.

See “—Other Key Factors and Trends Affecting our Operating Results—Ability to increase and better monetize value-added products.”

We manage and report operating results through three reportable segments:

Ecommerce (71.4% of total revenue for the three months ended March 31, 2021):

Ecommerce (76.1% and 74.1% of total revenue for the three and six months ended June 30, 2021, respectively):

The Ecommerce segment represents retail sales of used vehicles through our ecommerce platform and fees earned on sales of value-added products associated with those vehicle sales.

Wholesale (20.0% of total revenue for the three months ended March 31, 2021):

Wholesale (16.8% and 18.2% of total revenue for the three and six months ended June 30, 2021, respectively):

The Wholesale segment represents sales of used vehicles through wholesale channels.

TDA (8.1% of total revenue for the three months ended March 31, 2021):

TDA (6.7% and 7.3% of total revenue for the three and six months ended June 30, 2021, respectively):

The TDA segment represents retail sales of used vehicles from TDA and fees earned on sales of value-added products associated with those vehicle sales.

Gross profit is defined as revenue less cost of sales for each segment.

Reflected below is a summary of segment revenue and segment gross profit for the three months ended March 31, 202 1 and 20 20:

Reflected below is a summary of segment revenue and segment gross profit for the three and six months ended June 30, 2021 and 2020:

Three Months Ended

Six Months Ended

(in thousands)

Total revenue

13 unchanged sentences

Three Months Ended

Six Months Ended

Ecommerce units sold

8 unchanged sentences

Ecommerce units sold excludes sales of vehicles through the TDA and Wholesale segments.

As we continue to expand our ecommerce business, we expect that

ecommerce units sold will be the primary driver of our revenue growth.

As we continue to expand our ecommerce business, we expect that ecommerce units sold will be the primary driver of our revenue growth.

Additionally, each vehicle sale through our ecommerce platform also creates the opportunity to leverage such sale to sell value-added products.

7 unchanged sentences

We plan to continue to introduce initiatives to increase the attachment rates of value-added products and expand our offerings of value-added products which will grow our Product GPPU.

We also are exploring a variety of options to expand our finance product offering to include Vroom proprietary finance products, which we believe would increase our Product GPPU.

Total Gross Profit per Ecommerce Unit

20 unchanged sentences

In addition to our results determined in accordance with U.S.

GAAP, we believe EBITDA and Non-GAAP net loss per share, as adjusted, which are non-GAAP financial measures, are useful in evaluating our operating performance.

GAAP, we believe the following non-GAAP financial measures are useful in evaluating our operating performance:

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

These non-GAAP financial measures have limitations as analytical tools in that they do not reflect all of the amounts associated with our results of operations as determined in accordance with U.S.

3 unchanged sentences

GAAP financial measures.

EBITDA and Non-GAAP net loss per share, as adjusted are supplemental performance measures that our management uses to assess our operating performance and the operating leverage in our business.

Because EBITDA and Non-GAAP net loss per share, as adjusted facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes.

We are not presenting Adjusted EBITDA, Adjusted loss from operations, Non-GAAP net loss, and Non-GAAP net loss per share as there were no relevant adjustments for the three months ended March 31, 2021 and 2020.

We calculate EBITDA as net loss before interest expense, interest income, income tax expense and depreciation and amortization expense.

The following table presents a reconciliation of EBITDA to net loss, which is the most directly comparable U.S.

EBITDA, Adjusted EBITDA, Adjusted loss from operations, Non-GAAP net loss, Non-GAAP net loss per share and Non-GAAP net loss per share, as adjusted are supplemental performance measures that our management uses to assess our operating performance and the operating leverage in our business.

Because EBITDA, Adjusted EBITDA, Adjusted loss from operations, Non-GAAP net loss, Non-GAAP net loss per share and Non-GAAP net loss per share, as adjusted facilitate internal comparisons of our historical operating performance on a more consistent basis, we use these measures for business planning purposes.

EBITDA and Adjusted EBITDA

We calculate EBITDA as net loss before interest expense, interest income, income tax expense and depreciation and amortization expense and we calculate Adjusted EBITDA as EBITDA adjusted to exclude the one-time, IPO related acceleration of non-cash stock-based compensation expense and the one-time, IPO related non-cash revaluation of a preferred stock warrant .

The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net loss, which is the most directly comparable U.S.

GAAP measure:

Three Months Ended

Six Months Ended

(in thousands)

Adjusted to exclude the following:

3 unchanged sentences

Depreciation and amortization expense

N on-GAAP n et loss per share, as adjusted

Non-GAAP net loss per share, as adjusted has been computed to give effect to, as of the beginning of each period presented, (i) the shares of common stock issued in connection with our IPO (ii) the automatic conversion of all outstanding shares of redeemable convertible preferred stock into shares of common stock that occurred upon the consummation of our IPO and (iii) the shares of common stock issued in connection with our follow-on public offering, all of which occurred in 2020.

The following table presents a reconciliation of Non-GAAP net loss per share, as adjusted to net loss per share, which is the most directly comparable U.S.

One-time IPO related acceleration of non-cash stock-based compensation

One-time IPO related non-cash revaluation of preferred stock warrant

Adjusted EBITDA

Adjusted loss from operations

We calculate Adjusted loss from operations as loss from operations adjusted to exclude the one-time, IPO related acceleration of non-cash stock-based compensation expense.

The following table presents a reconciliation of Adjusted loss from operations to loss from operations, which is the most directly comparable U.S.

GAAP measure :

Three Months Ended

Six Months Ended

(in thousands)

Loss from operations

One-time IPO related acceleration of non-cash stock based compensation

Adjusted loss from operations

Non-GAAP net loss, Non-GAAP net loss per share and Non-GAAP net loss per share, as adjusted

We calculate Non-GAAP net loss as net loss adjusted to exclude the one-time, IPO related acceleration of non-cash stock-based compensation expense and the one-time, IPO related non-cash revaluation of a preferred stock warrant.

We calculate Non-GAAP net loss per share as Non-GAAP net loss divided by weighted average number of shares outstanding.

The following table presents a reconciliation of Non-GAAP net loss and Non-GAAP net loss per share to net loss and net loss per share, which are the most directly comparable U.S.

GAAP measures:

Three Months Ended

Six Months Ended

(in thousands, except share and per share amounts)

Net loss attributable to common stockholders

One-time IPO related acceleration of non-cash stock based compensation

One-time IPO related non-cash revaluation of preferred stock warrant

Non-GAAP net loss

Weighted-average number of shares outstanding used to compute net loss per share, basic and diluted

Net loss per share, basic and diluted

Impact of one-time IPO related acceleration of non-cash stock based compensation

Impact of one-time IPO related non-cash revaluation of preferred stock warrant

Non-GAAP net loss per share, basic and diluted

Non-GAAP net loss per share, as adjusted, basic and diluted (a)

(a ) Non-GAAP net loss per share, as adjusted has been computed to give effect to, as of the beginning of each period presented, (i) the shares of common stock issued in connection with our IPO and (ii) the automatic conversion of all outstanding shares of redeemable convertible preferred stock into shares of common stock that occurred upon the consummation of our IPO.

The computation of Non-GAAP net loss per share, as adjusted is as follows:

Three Months Ended

Six Months Ended

(in thousands, except share and per share amounts)

Non-GAAP net loss

Non-GAAP net loss, as adjusted

Weighted-average number of shares outstanding used to compute net loss per

2 unchanged sentences

unweighted adjustment for conversion of redeemable convertible preferred stock in connection with IPO

unweighted adjustment for common stock issued in connection with follow-on public offering

Adjustment for the impact of the above items already included in weighted-average number of shares outstanding for the periods presented

2 unchanged sentences

Recent Events

CarStory Acquisition

On January 7, 2021, we completed the acquisition of 100% of Vast Holdings, Inc.

(d/b/a CarStory), a leader in AI-powered analytics and digital services for automotive retail.

Leveraging its machine learning, informed by more than 7 million listings per day and more than 18 million consumer sessions per month, CarStory brings the industry’s most complete and accurate view of predictive market data to our national ecommerce and vehicle operations platform.

We expect CarStory to continue to drive automotive retail innovation by aggregating, optimizing and distributing current market data from thousands of automotive sources and offering its digital retailing services to dealers, top automotive financial services companies and household names in automotive industry research and retailing.

The acquisition date fair value of the consideration transferred was approximately $117.1 million, comprised of $77.0 million in cash, $39.1 million of common stock issued, and $1.0 million of unvested stock options assumed.

Issuance of Convertible Senior Notes

On June 18, 2021, we issued $625.0 million aggregate principal amount of 0.75% Convertible Senior Notes due 2026 (the “Notes”).

The total net proceeds from the offering, after deducting debt issuance costs, were approximately $608.8 million.

See “—Liquidity and Capital Resources.”

Update on the Impact of the COVID-19 Pandemic

Measures implemented by governmental authorities around the world to reduce the spread of COVID-19 disrupted our operations and adversely affected our financial performance beginning late in the first quarter of 2020.

After the initial disruption in our ecommerce operations, the used vehicle market began to recover and consumer demand for used vehicles increased and now exceeds pre-pandemic levels.

After the initial disruption, the used vehicle market began to recover and consumer demand for used vehicles increased and now exceeds pre-pandemic levels.

This recovery has been bolstered by the introduction of COVID-19 vaccines nationwide.

We believe the COVID-19 pandemic has reinforced our business model and we have been able to navigate the impact of COVID-19 on our business to date.

the availability, adoption and effectiveness of vaccines;

the imposition of protective public safety measures;

and the impact of the pandemic on the global economy and demand for used vehicles.

We believe the COVID-19 pandemic has reinforced our business model.

However, the full extent of the future impact of the COVID-19 pandemic on our operational and financial performance is currently uncertain and will depend on many factors outside our control, including, without limitation, the severity and duration of the COVID-19 pandemic and the effectiveness of actions taken to contain the spread of COVID-19 or treat its impact, including the efficacy of vaccines and other treatments for COVID-19, including with respect to the success of vaccination efforts, and the resistance of new variants of the virus to vaccines, among others.

We have begun modifying our policies and practice regarding in-person work and intend to begin re-opening additional offices and instituting return-to-office policies on a modified basis for some employees who have been working remotely throughout the pandemic.

All actions will be taken in accordance with updated state and local health and safety guidance and requirements for in-office work.

Nevertheless, the unpredictable nature of the virus, its treatment and worker sentiment may further delay routine in-person work and reduce the effectiveness of efforts aimed at improving employee retention;

there can be no assurance that there will not be future material disruptions in our workforce.

The various workforce health and safety measures we have taken have led to increased operating expenses and future health and safety measures may lead to further increases.

We will continue to monitor and assess the impact of the COVID-19 pandemic on our business and our results of operations and financial condition as the pandemic continues to evolve.

See Pa rt I, Item 1A of our Annual Report under the heading “Risk Factors” for more information.

See Part II, Item 1A of this Quarterly Report on Form 10-Q under the heading “Risk Factors” for more information.

Other Key Factors and Trends Affecting our Operating Results

7 unchanged sentences

This ability is enabled by our data science capabilities that leverage the growing amount of data at our disposal and generate predictive data analytics that fine-tune our supply and sourcing models.

The acquisition of CarStory will enhance our predictive market data capabilities.

We believe the acquisition of CarStory has enhanced our predictive market data capabilities.

As we continue to invest in our operational efficiency and data analytics, we expect that we will continue to cost effectively increase the volume and optimize the selection of our ecommerce inventory.

15 unchanged sentences

Data analytics and experimentation drive decision making across all of our conversion efforts.

By analyzing the data generated by the millions of visitors and tens of thousands of transactions on our platform, and continually testing strategies to maximize conversion rates, we form a better understanding of consumer preferenc es and try to create a more tailored ecommerce experience.

By analyzing the data generated by the millions of visitors and tens of thousands of transactions on our platform, and continually testing strategies to maximize conversion rates, we form a better understanding of consumer preferences and try to create a more tailored ecommerce experience.

Increased conversion also depends on our ability to provide the necessary customer service and sales support to respond to increased demand.

4 unchanged sentences

We have continued to expand our sales and sales support team and expect to continue expanding these capabilities commensurate with our expected sales growth throughout the remainder of 2021.

We also recently engaged two additional customer service providers to expand our customer service operations as we scale our business.

We also recently engaged two additional third-party customer service providers to expand our customer service operations as we scale our business.

As we continue to invest in our brand and improve the customer experience, we expect that we will attract more visitors, improve conversion and drive greater sales.

1 unchanged sentence

We strategically source inventory from auctions, consumers, rental car companies, OEMs and dealers.

Consumers and auctions represent the vast majority of our inventory sources, accounting for approximately 54% and 37% of our retail inventory sold for the three months ended March 31, 2021, respectively.

Consumers and auctions represent the vast majority of our inventory sources, accounting for approximately 65% and 23% of our retail inventory sold for the three months ended June 30, 2021, respectively, and 59% and 30% for the six months ended June 30, 2021, respectively.

Because the quality of vehicles and associated gross margin profile vary across each channel, the mix of inventory sources has an impact on our profitability.

1 unchanged sentence

For example, purchasing vehicles at third-party auctions is competitive and, consequently, vehicle prices at third-party auctions tend to be higher than vehicle prices for vehicles sourced directly from consumers.

Accordingly, as part of our sourcing strategy, we seek to increase the percentage of vehicle sales that we source from consumers.

Furthermore, we are currently experiencing unprecedented market conditions, caused in part by the shortage of microchips and delays in new car manufacturing, which increases demand for used vehicles, putting downward pressure on supply and upward pressure on wholesale pricing.

As used vehicle supply is constrained and wholesale pricing is high in traditional channels, we will continue to focus on acquiring vehicles from consumers.

Our ability to increase the percentage of inventory sourced directly from consumers will depend on the popularity and success of our ecommerce platform.

In order to continue to increase the percentage of vehicles that we source directly from consumers, we also have expanded our national marketing efforts that are focused on our Sell Us Your Car ® proposition, which we believe will result in more customers gaining familiarity with our platform.

We expect that, as consumers experience the convenience of our platform to sell or trade in their used vehicles, the percentage of inventory we source directly from consumers will continue to grow.

We are also exploring third-party inventory strategies, which offers the possibility of expanding our sourcing channels through third party sellers while offering us attractive revenue models in an asset light, debt free structure.

Accordingly, as part of our sourcing strategy, we have strategically increased the percentage of vehicle sales that we source from consumers.

During the first half of 2021, we experienced unprecedented market conditions, caused in part by the shortage of microchips and delays in new car manufacturing, which increased demand for used vehicles, putting downward pressure on supply and upward pressure on wholesale pricing.

Based on data from Cox Automotive, wholesale prices appear to have reached their peak in June and retail prices are expected to peak in the third quarter.

It is expected that we will begin to gradually return to normal market conditions and vehicle depreciation during the second half of 2021.

We also expect that our increased ability to inspect consumer sourced vehicles and make real time adjustments to acquisition pricing as a result of our scaling proprietary logistics operation will provide upside to our overall wholesale gross profit per unit over time.

In order to maintain the percentage of vehicles that we source directly from consumers, we continue to expand our national marketing efforts that are focused on our Sell Us Your Car ® proposition, which we believe will result in continued popularity of our business model.

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

2 unchanged sentences

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

As we continue to grow our business, we intend to continue to increase reconditioning capacity and operational efficiency through third-party VRC locations.

Additionally, our use of third-party VRCs to recondition vehicles allows us to avoid additional capital expenditures, quickly increase capacity, maintain greater operational flexibility and broaden our geographic footprint to drive lower logistics costs.

We have continued to expand our third-party VRC operations and, as of the date of this Quarterly Report on Form 10-Q, have a total of twenty-three third-party VRCs throughout the U.S.

As we continue to grow our business, we intend to continue to increase reconditioning capacity and operational efficiency through third-party VRC locations and additional Vroom VRCs.

Our use of third-party VRCs to recondition vehicles allows us to avoid additional capital expenditures, quickly increase capacity, maintain greater operational flexibility and broaden our geographic footprint to drive lower logistics costs.

Proprietary VRCs enable us to have increased control over our reconditioning operations, increase capacity as we scale, and introduce additional operating efficiencies.

Consistent with our hybrid model, as we scale, we will seek to optimize the combination of strategic geographically dispersed proprietary and third-party VRCs.

We have continued to expand our third-party VRC operations and, as of June 30, 2021, have a total of twenty-eight third-party VRCs throughout the U.S.

We leverage our data analytics and deep industry experience to strategically select VRC locations where we believe there is the highest supply and demand for our vehicles.

4 unchanged sentences

Our VRCs also serve as pooling points to aggregate acquired vehicles and we are using certain VRCs as hubs for staging vehicles for last-mile delivery to customers, which we expect to provide an improved experience for customers.

As of March 31, 2021, we had eighteen hubs and we delivered over 16% of our ecommerce units sold with our proprietary last-mile service.

As of June 30, 2021, we had twenty-five hubs and we delivered 26% of our ecommerce units sold with our proprietary last-mile service during the second quarter of 2021.

Recently, as a result of the continued prevalence of the COVID-19 pandemic, we have experienced a reduced supply of carriers combined with increased demand for carriers from competitors, resulting in increased shipping prices and delays.

1 unchanged sentence

Currently, we are prioritizing investment in our last-mile delivery operations where we can have the greatest impact on the customer experience.

We also have invested in short-haul trucks to make regional deliveries from our last mile hubs, and have begun to invest in long-haul vehicles for hub-to-hub shipments.

We also have invested in short-haul trucks to make regional deliveries from our last mile hubs, and are investing in long-haul vehicles for hub-to-hub shipments.

As we invest in our expanded logistics operations, we expect to incur increased operating expenses and capital expenditures associated with purchasing or leasing fleet vehicles, leasing space for delivery hubs, hiring qualified drivers, and operating and maintaining fleet vehicles, offset in part by reduced third-party logistics expense.

9 unchanged sentences

As a result, such sales help drive total gross profit per unit.

We expect that, as we scale our business, we will increase the breadth and variety of value-added products offered to customers and improve attachment rates to our vehicle sales, which in turn will grow revenue and drive profitability.

As we scale our business, we intend to increase the breadth and variety of value-added products offered to customers and improve attachment rates to our vehicle sales, while also exploring a variety of options related to Vroom proprietary finance products, which we believe in turn will grow revenue and drive profitability.

Used vehicle sales are seasonal.

10 unchanged sentences

The number of units sold and the average selling price (“ASP”) per unit are the primary factors impacting our retail revenue stream.

The number of units sold depends on the volume of inventory and the selection of vehicles listed on our ecommerce platform, our ability to a ttract new customers, our brand awareness and our ability to expand our reconditioning operations and logistics network.

The number of units sold depends on the volume of inventory and the selection of vehicles listed on our ecommerce platform, our ability to attract new customers, our brand awareness and our ability to expand our reconditioning operations and logistics network.

ASP depends primarily on our acquisition and pricing strategies, retail used vehicle market prices, our average days to sale and our reconditioning and logistics costs.

1 unchanged sentence

As a data-driven company, we acquire inventory based upon demand predicted by our data analytics.

Although we expect ASP to fluctuate in the short-term as a result of market conditions, our long-term strategy continues to move us towards lower-priced inventory, which we expect will result in a lower ASP.

Wholesale vehicle revenue

25 unchanged sentences

Our selling, general, and administrative expenses, which we refer to as SG&A expenses, consist primarily of advertising and marketing expenses, outbound transportation costs, employee compensation, occupancy costs of our facilities and professional fees for accounting, auditing, tax, legal and consulting services.

We expect that our SG&A expenses will increase in the future as we expand our operations, including our proprietary logistics operations, hire additional employees and continue to increase our marketing spend.

We expect that our SG&A expenses will increase in the future as we expand our operations, including our proprietary logistics operations, explore a variety of strategies for a proprietary lending operation, hire additional employees and continue to increase our marketing spend.

We have continued to expand our sales and sales support team, processes and technology and expect to continue to expand these capabilities commensurate with our expected sales growth throughout the remainder of 2021.

We also recently engaged two additional customer service providers to expand our customer service operations as we scale our business.

We also recently engaged two additional third-party customer service providers to expand our customer service operations as we scale our business.

We also will continue to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with SEC and Nasdaq requirements, director and officer insurance costs, and investor and public relations costs.

6 unchanged sentences

Interest expense

Our interest expense includes 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.

Interest Income

3 unchanged sentences

Three Months Ended

Six Months Ended

(in thousands)

Retail vehicle, net