Vroom, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the room fourth quarter 2020 earnings call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. If you require any further assistance, please press star zero. Thank you. I'll now turn the conference over to Alan Miller. You may begin.

Thank you, Sunidra. Good afternoon, and thank you for joining us on Vroom's fourth quarter and full year 2020 earnings conference call. Joining us on the call today are Paul Hennessy, Chief Executive Officer, and Dave Jones, Chief Financial Officer. Please note that this call will be simultaneously webcast on the investor relations section of the company's corporate website at ir.vroom.com. The fourth quarter earnings release is also posted on the IR website. Before we begin, please note that the discussion today includes forward-looking statements within the meaning of the federal securities laws, including but not limited to statements about rooms, operations, and future financial performance. These and other forward-looking statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those in such statements. We direct you to the company's most recent SEC filings, including the risk factors section of Vroom's most recent form 10-K, for additional discussion of factors that could cause actual results to differ materially from those in the forward-looking statements. Please note further that today's discussion, including the forward-looking statements, speak only as of the date of this call, and Vroom assumes no obligation to update such statements based upon future developments or otherwise. The company may also discuss certain non-GAAP financial measures during today's call. You can find a presentation of the most directly comparable GAAP measures and a reconciliation of those measures in today's press release. With that, I'll now turn the call over to Paul Hennessey, our CEO.

Paul? Thanks, Alan, and thanks, everyone, for joining Vroom's fourth quarter and full year 2020 earnings calls. I'd like to start by thanking all of our employees, investors, and board members for all of their hard work and support in building a great customer-centric public company. I could not be prouder of our team and all that we accomplished in 2020. First and foremost, we had a very successful initial public offering and follow-on raise, adding capital to our balance sheet so that we can continue to build an outstanding company. We doubled and extended our floor plan financing with Ally Financial, enabling us to scale our supply and meet our increasing demand. We also launched a series of preferred lending agreements with JPMorgan Chase, Ally Financial, and Santander Bank, providing attractive lending alternatives to our customers across the credit spectrum. Operationally, we added a new reconditioning partner to expand and diversify our resources, and also added a total of 14 strategic reconditioning facilities in the year, providing Vroom with quality reconditioning capacity for 2021 and beyond. We also started investing in and scaling our last-mile delivery services to enhance our customer experience, and we laid the groundwork to develop our own long-haul operation in 2021 to drive quality, speed, and efficiency to our national logistics network. We brought technology and data science to our customer experience, improving our e-commerce platform by removing friction and enhancing the end-to-end experience for our customers. We grew our workforce in all areas of the company and expanded our third-party providers to add critical resources to scale our business. We ended 2020 with the acquisition of Car Story to enhance our ability to buy better, price better, and optimize better, while also enhancing our overall digital retailing capabilities. And as we're all painfully aware, we realized all of those achievements while operating in the middle of a global pandemic. As I said, I could not be prouder of what the team accomplished. I point out our accomplishments because many are foundational in nature, financing for the company, for vehicles, and for customers. Reconditioning and logistics capacity and improvements to deliver quality and scale. Technology and data science enhancements to drive e-commerce conversion and improve customer experience. 2020 was a year in which we built our business into a very stable platform that scales. And that's exactly what we're doing. We're scaling. E-commerce units were up 82% year-over-year for full year 2020. And e-commerce gross profit was up 89% year over year for full year 2020. Looking back on the fourth quarter specifically, I'm also very pleased with our performance. Vroom delivered a record number of e-commerce units and achieved record gross profit. In the fourth quarter, e-commerce units were up 74% year over year. E-commerce gross profit was up 95% year over year. As we move ahead after the unprecedented year that we experienced in 2020, here is how I think about where we are currently and where we're headed in 2021. There are four key areas of our business, demand and marketing, supply and reconditioning, logistics, sales and sales operations. These four areas are highly integrated and have direct impact on the performance of our business in terms of both revenue and gross profit, as well as cost structure of our business and the experience that we deliver to our customers. I'll provide transparent commentary on each of these key areas. Demand for the Vroom model is strong, as evidenced by our continued record-breaking e-commerce unit sales, and the demand is broad-based across our single nationwide market. Brand awareness is growing for the Vroom brand, and as you know, we took a large step towards making much of the country aware of the Vroom brand by our participation in this year's Super Bowl. Now, one 30-second advertisement does not make a brand, but we're very pleased with the early read and results from that decision, which has longer-term brand-building benefits. We are very confident in our ability to engage customers, bring them into the Vroom business, and convert them into buyers and sellers. As I said, demand is strong. Supply has been strong in buying cars both at auction and from consumers. As we built out our technological capabilities with integrated buying algorithms, we are now able to evaluate significantly more cars in real time, buy and price them appropriately, and grow our inventory. By combining our existing data-driven technology platform with the artificial intelligence-powered analytics provided by CarStory, we expect Broom to be well-positioned to acquire inventory and to meet our 2021 plans and beyond. Reconditioning is scaling very nicely. I am enthusiastic about our asset-light model for reconditioning, which leverages our own facility with those of our third-party partners. We are delivering high-quality reconditioning at costs that are in line with our expected near-term and long-term cost structure. As we add nodes to the network, we get closer and closer to our customers. which is constructive for both speed of delivery to customers and lower inbound and outbound shipping costs. Our asset-light models enables us to respond quickly to increases in demand and to avoid gridlock in our inventory supply. We are very confident that our reconditioning model will continue to deliver high-quality, attractive costs and needed capacity to continue to scale our business. Logistics is an area of increased investment for Vroom, and our logistics operations have been expanding rapidly. Our initial focus has been on last mile to ensure that our driveway delivery experience is outstanding. As mentioned on our last call, we will continue to add more owned vehicles, not only for last mile, but also for longer haul routes. These investments significantly enhance our overall Vroom customer experience and are efficient at scale in relation to our cost structure. We've added talented logistics leaders with specific experience in both the direct-to-consumer and automotive retail delivery verticals to build out and scale our nationwide network. We are confident that we are building a national logistics and transportation network that will deliver speed, efficiency, and an outstanding experience. Sales and sales support operations are in a significantly better place than they were at the end of Q3 2020. We've nearly tripled the amount of staffing in both our sales organizations and our sales support organizations, and they continue to be an area of investment in the first quarter. It is important to note that as we experienced exceptional growth in the second half of 2020, backlogs in our business formed as there was more volume to process than our capacity could deliver. The result meant that our customers had to wait. When customers have to wait for us to complete a transaction or deliver a car, pick up a car, complete financial arrangements or register their vehicle, their experience is degraded. As I mentioned, we've been invested in and will continue to invest in our sales and sales support organizations so that we remove any bottlenecks in our business as the business is scaling. We believe we are tracking against this objective and are confident in our ability to eliminate the backlogs and deliver an exceptional customer experience. I also want to make the point that our backlogs also contributed to a negative outcome on our retail and wholesale unit economics. As you saw in our fourth quarter result and in our first quarter guidance, we had lower gross profit per unit levels than we anticipated. In addition to greater depreciation than we expected, The lower gross profit per unit is also because we were buying inventory in anticipation of and aligned with our demand. The demand arrived as expected, but due to the constraints in sales personnel and sales support personnel, we were unable to convert and process the sales associated with that demand. The result is that our inventory aged. That aged inventory needed to be discounted to move through our retail channels or liquidated in our wholesale channel. Said another way, we bought more inventory than we could actually process and that excess inventory needed to be moved in Q4 and will continue to be moved in Q1. We are confident that as our throughput increases as a result of our investment and as we turn our inventory faster, both our unit economics and our customer experience improve. We are intentionally adding and deploying human capital in the coming quarters to remove friction from our process and ensure that our customers have an outstanding experience. But it's important to note that as an e-commerce company, we are committed to the goal of building a world-class end-to-end touchless transaction. With each software deploy, we move closer towards that goal. and the need for incremental human capital decreases significantly, while our consumer experience increases significantly. So here are the key takeaways. Demand and sales are strong sequentially and year over year, and we believe we will deliver triple-digit e-commerce growth this year. Gross profit per unit was under pressure in Q4 and will be in Q1, but we are expecting over 200% growth in aggregate gross profit for a full year, implying material improvements in each remaining quarter of 2021 as we right-size and turn inventory well. Supply is readily available, and our access to and acquisition of consumer inventory is increasing. Reconditioning quality, cost, and capacity is in an excellent place. and is well positioned to handle our anticipated sales growth. Our logistics network is scaling rapidly and improving the customer experience. Sales and sales support have been creating bottlenecks, but we've invested heavily in those areas and will continue to do so to remove friction throughout the entire sales funnel. And finally, our platform is stable and scalable and well positioned to deliver another record number of of units sold, record revenue with attractive gross profit, and many, many satisfied customers. And with that, I'll hand over to Dave for further remarks on our financials and our guidance. Dave?