Vroom, Inc.

Thank you for standing by and welcome to Vroom's second quarter 2023 earnings call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. To remove yourself from the question queue, you may press star one one again. I would now like to hand the call over to John Sanderson, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good morning, everyone, and welcome to Vroom's second quarter 2023 earnings call. Joining us on the call today are Tom Short, Chief Executive Officer, and Bob Krogat, Chief Financial Officer. Please note this call will be simultaneously webcast on the Investor Relations section of the company's corporate website at ir.vroom.com. The second quarter 2023 earnings release and earnings presentation are also posted to the Investor Relations 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 Broom's operations and future financial performance. These and other forward-looking statements are based on management's current assumptions and are neither promises nor guarantees and are subject to a number of risks, uncertainties, and other important factors that may cause actual results to differ materially. We direct you to the company's most recent SEC filings, including the risk factors section of VRM's most recent Form 10-K for the year ended December 31st, 2022, as updated by our quarterly report of Form 10-Q for the three months ended June 30th, 2023, for additional discussion on 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 the room assumes no obligation to update such statements based on 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 the second quarter 2023 earnings release and earnings presentation. I'd like to now hand the conference over to Tom Short, Chief Executive Officer.

Thank you, John, and thank you to all of our investors, analysts, roommates, UACC colleagues, and third-party partners who are joining us today. Let's start on slide three. We introduced our long-term roadmap at our May 26, 2022 Investor Day, where we highlighted our mid-term goal of a break-even EBITDA business and our long-term goal of a 5% to 10% adjusted EBITDA margin business. We remain committed to our long-term roadmap, and I am pleased with the progress we've made as we work toward these goals. As we indicated on Investor Day during 2022, we strategically slowed down the business while we improved our customer experience, improved our processes across titling and registration, pricing, marketing, reconditioning, and logistics, and in-source our sales function from our primary third-party resource. As we execute our strategy in 2023, we are resuming responsible growth, selling through aged inventory, improving variable cost per unit, continuing to reduce fixed costs, and converting balance sheet items into cash. Our long-term roadmap remains unchanged. During 2023, we are continuing to focus on our three key objectives and four focused strategic initiatives. On slide four, our second quarter highlights. During the second quarter, we recognized an adjusted EBITDA loss of $56.3 million, an $8.5 million, or 13% sequential improvement, which was within the range of our expectations. E-commerce units grew approximately 5% sequentially. This quarter is the first quarter with sequential growth since we realigned the business and introduced our long-term roadmap in the second quarter of 2022. As we pivot the business towards responsible growth, we remain focused on reducing variable and fixed costs per unit, while driving the right mix of marketing investment, unit growth rate, and GPPU. E-commerce GPPU increased from $2,552 to $2,954 sequentially, benefiting from GPPU on un-aged units, which was in excess of $5,000. During the second quarter, as a result of legacy title issues, 80% of our units sold were held greater than 180 days compared to 77% in the first quarter, 75% in the fourth quarter of 2022, and 49% in the third quarter of 2022. We expect sequential reduction in our mix of aged units, with the third quarter mix expected to be less than 40% from aged units, and we expect the fourth quarter age mix to be sequentially better than the third quarter. As we work through the remaining aged inventory, we expect to have normalized aged inventory levels, which we expect to produce higher overall GPPU. We are making progress on our long-term roadmap and our four strategic initiatives. We reduced our adjusted SG&A $2.2 million sequentially on higher unit volume. Excluding increased marketing investment, we reduced adjusted SG&A $5.7 million sequentially. We repurchased $18 million base value of our convertible notes for $7 million, reducing our leverage at a substantial discount. We are narrowing the range and improving the midpoint of our full year 2023 guidance to an adjusted EBITDA loss of $200 million to $225 million, and adjusting our cash and cash equivalents to reflect the convertible note repurchases. On slide five, during Investor Day, we outlined the unit economic drivers behind our four strategic initiatives that we believe are key to building a profitable business, and we've been providing quarterly updates on our progress on each driver. This slide is an update to our second quarter progress by economic drivers. GPPU was $2,954, a $402 sequential improvement driven primarily by strong GPPU on unaged units. 80% of units sold in the second quarter were aged. As I mentioned, our GPPU for unaged units was in excess of $5,000. We expect sequential reduction in our mix of aged units and expect improved GPPU with the mix improvement. We expect our third quarter mix to be less than 40% from aged units, and we expect the fourth quarter aged mix to be sequentially better than the third quarter. We continue to see strong product GPP-U as we develop and grow our captive financing capabilities. We reduced our all-in logistics costs per unit by 17% sequentially. Our improved titling and registration processes resulted in a 43% improvement in inventory turns sequentially. We reduced our selling costs per unit 26% sequentially. We reduced our titling, registration, and support costs per unit 29% sequentially. We increased our marketing spend $3.5 million sequentially in order to facilitate unit growth by ramping up unit acquisitions to grow inventory in the second half of the year. Our unit acquisitions had essentially been on idle since we pivoted the business in the second quarter of 2022. Our increased marketing spend was required to restart the unit acquisition engine. We continue to source primarily from consumers. We reduced our fixed cost per unit 12% sequentially. Lastly, our advanced analytics team, functional business teams, and tech teams continue to build data assets, analytical assets, and tech assets that we believe in the long term will provide a competitive advantage across titling and registration, pricing, conversion, unit and product margin, and supply chain costs. Slide six. I'm very proud of what our roommates and UACC colleagues have delivered over the past year. Excluding securitization gain and non-recurring costs, we continue to reduce our losses despite absorbing significant GPPU pressure caused by our legacy titling and registration issues in 2022. We have improved e-commerce GPPU the last three quarters as we sell through our aged inventory. We continue to make progress on our long-term roadmaps. We are at the turn where we are beginning to resume responsible growth while we continue down the road of improving our operations and reducing our fixed and variable costs. We expect GPPU to normalize in the back half of the year when the majority of our sales are expected to be on unaged vehicles. Now I'll turn it over to Bob to discuss second quarter results in greater detail. Bob?