Vroom, Inc. · NASDAQ:VRM
Vroom — Investor Presentation (September 2024)
44 slides from Vroom's investor presentation, Sep 23, 2024
Slide 1: Long-Term Strategic Plan
Financing and Contract Servicing Full eCommerce Platform Assets Industry Leading Data, AI and Technology Long-Term Strategic Plan September 23, 2024
Slide 2: Disclaimer
Disclaimer Forward Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this presentation that do not relate to matters of historical fact should be considered forward-looking
Slide 3: Presenters
Presenters A seasoned leadership team with diverse experience Tom Shortt CEO Tom is CEO of Vroom, Inc. which now consists of UACC, Car Story and Vroom’s ecommerce platform assets. He is a transformational leader and change agent with experience delivering order of magnitude operating improvements in
Slide 4: Agenda
Vroom Overview Strategic Plan Overview Strategic Initiatives Build a World Class Lending Program Build a World Class Sales and Marketing Program Build Operational Excellence in Originations Build Operational Excellence in Servicing Strategic Plan Indicative Models Agenda 4
Slide 5: Vroom Overview
Vroom Overview 5 Financing and Contract Servicing Full eCommerce Platform Assets Industry Leading Data, AI and Technology
Slide 6: Vroom, Inc. Overview
Following the wind-down of our ecommerce operations, Vroom’s business is comprised of UACC, Car Story and the Vroom Automotive eCommerce Platform UACC is a national indirect lender that offers vehicle financing to consumers through third-party dealers under the UACC brand, focusing primarily on the
Slide 7: UACC has operated in the subprime auto finance industry since 1996
UACC has operated in the subprime auto finance industry since 1996 UACC 28 Year History 7 YTD 16 securitization transactions Over $3 billion in issued notes (Bar Chart) Vroom acquires UACC, transaction closed on February 1, 2022 Vrooms 2022- 2024 THE FASTLANE Initiated consolidation of the decentral
Slide 8: Large and fragmented market
Large and fragmented market (1) Source: Experian State of the Automotive Finance Market Q4 2023 report; February 2024 and Automotive Market Trends Q4 2023 report; March 2024 (2) Source: Experian Velocity data; July 2024 YTD Note that dataset excludes Buy Here Pay Here dealers, unassigned lienholders
Slide 9: Our large VIN database is intended to enable more accurate vehicle valuations
Our large VIN database is intended to enable more accurate vehicle valuations CarStory VIN Database 3.8B Vehicle Photos 360M Sales Cycles 180M Window Stickers 240M Unique VINs Leveraging big data, computer vision and AI, CarStory has curated a comprehensive used vehicle information database 9
Slide 10: CarStory has VIN Data for 90% of US Consumer Vehicles
Our large VIN database is intended to enable more accurate vehicle valuations CarStory has VIN Data for 90% of US Consumer Vehicles VIN Database Coverage by Model Year VIN Database Coverage = Unique VINS in CarStory database / FRED Light Weight Vehicle Sales FRED Sales data available at: https://fre
Slide 11: Valuations based on market averages can over or understate market value
Valuations based on market averages can over or understate the vehicle’s market value 11 Average Market Prices Can Be Misleading Why the discrepancy? Today’s pricing tools often oversimplify the vehicle There may not be enough similar vehicles Averages typically do not account for local supply, dema
Slide 12: CarStory patented algorithm accounts for factors that averages often miss
CarStory patented algorithm accounts for factors that averages often miss local market & dealer performance 12 CarStory Real Market Price Unlike simple averages, CarStory’s patented neural-net algorithm provides more accurate market price, regardless of “exact” matches. CarStory Real Market Price ac
Slide 13: Culmination of years of data collection and analytics; patents or pending patents
Culmination of 15 years of data collection and analytics; 39 patents or pending patents 13 CarStory VIN Database and Pricing Models Price Elasticity VIN Data, Pricing Models and AI are used in CarStory, were used at Vroom and are starting to be used at UACC Instant Cash Offer VINspect Week of Year P
Slide 14: Strategic Plan Overview
Strategic Plan Overview14
Slide 15: Focused on objectives and strategic initiatives
Focused on 3 objectives and 4 strategic initiatives15Build a world class lending programBuild a world class sales & marketing programBuild operational excellence in originationsBuild operational excellence in servicingAchieve pre-COVID CumulativeNet Losses (CNL) or lowerGrow origination with pre-COV
Slide 16: Long-Term Strategic Plan Indicative Models
Base Model Growth Model Aggressive Growth ModelSubprime Cumulative Net Loss (CNL) Low 20’s% (Pre-COVID Level) High Teens (%) Mid Teens (%)Nearprime Cumulative Net Loss (CNL) N/A ~10% ~10%Origination Cost Per Funded Contract Pre-COVID LevelServicing Cost Per Serviced Account Pre-COVID Level ~10% belo
Slide 17: Strategic Initiative: Build a World Class Lending Program
Strategic Initiative:Build a World ClassLending Program17
Slide 18: Goal: pre-COVID subprime cumulative net loss (CNL)
Goal: pre-COVID subprime cumulative net loss (CNL)Multivariate 12 mo CNL Model (Orange) correlates to Actual 12 mo CNL (Gray) [Left Axis], which correlates to Actual 48 mo CNL (Yellow) [Right Axis]Portfolio Performance2017 2018 2019 2020 2021 2022 2023 YTD-2024Avg. FICO 579 581 577 584 578 567 584 5
Slide 19: Focus on using advanced models/analytics to predict losses and drive profitable growth
Focus on using advanced models/analytics - aim to predict losses and drive profitable growthRisk initiatives aimed at reducing CNL and achieving profitable growthIn Process: Expand toNear-Prime and RefineSubprime programShort-Term: Modernizecredit programLonger-Term: Build aWorld Class LendingProgra
Slide 20: Near-Prime Expansion
DeepSubprimeLender ADeepSubprimeLender BRegional Subprime LenderDeep Subprime Subprime Near-Prime Prime Super PrimeDistributionof OriginationOpportunitiesWith the Near-Prime program, UACC aims to become a more significant partner to the dealerCredit Spectrum of Through-the-Door Sales OpportunitiesNa
Slide 21: Active review of credit risk models and strategies
Goal: Active review of Credit Risk models and strategies while adapting to changing market conditionsVirtuous Cycle – Combining Disciplined RiskManagement with Market-Sensing Program ExpansionRisk Modeling &Program ChangesImproved CreditPerformanceBetter CreditPerformanceIncreased DealerAdoption & M
Slide 22: Opportunity to improve CNL within current FICO range
Opportunity to improve CNL within current FICO rangeSubprime CNL Opportunity Source: S&P Global Ratings research reports for Auto Receivable Trusts for the periods of 2022-2024 22Average Expected CNL35302022-2024 Securitizations: FICO by Expected CNL25UACC2015101050500550600650 FICO700750800Average
Slide 23: Early near-prime results are positive
Early results are positive and reflect better customer and vehicle mix relative to our traditional subprime program In 2023, developed a Near-Prime programfor Vroom applicants (7/23-2/24) 235 Vroom customer funded deals - wehave yet to experience a loss (Avg FICO: 671) Modified Vroom program to laun
Slide 24: Goal: Competitive expected CNLs
Goal: Competitive expected CNL’sNear-prime CNL Opportunity Source: S&P Global Ratings research reports for Auto Receivable Trusts for the periods of 2022-2024 24 Average Expected CNL35302022-2024 Securitizations:FICO by Expected CNL25UACC2015101052022-2024 Securitizations: FICO 580-700 by Expected C
Slide 25: Strategic Initiative: Build a World Class Sales and Marketing Program
Strategic Initiative:Build a World Class Salesand Marketing Program25
Slide 26: Aligning resources with density optimizes efficiency and allows for scalability
Aligning resources with density optimizes efficiency and allows for scalability National Presence:licensed in 49 states External sales teamaligned withhigh-density markets Internal sales teamfocused on less densemarketsNational Presence with Local FocusTotal Available Subprime Deals 2024 YTDUACC Dea
Slide 27: Building a World Class Sales & Marketing Program
In Process / Enabled Short TermSalesCompensation& PerformanceMarketingProgramDealer Loyalty& engagementMarketAlignmentNew market definitions and teamalignmentBalance current and longer termperformanceUtilize market data to drive growthand provide focusIncreased data utilization intargeted marketing
Slide 28: The Fast Lane dealer portal
A portal built to provide the dealer with everything they need from application through contractingThe Fast Lane 24/7 access for dealers to view andwork applications Instant approvals after submittingcustomer and vehicle information Populate, print, and sign/e-signcontract documents Track contract p
Slide 29: Dealer Inventory in The Fast Lane
Dealer Inventory in The Fast Lane Launched June 2024Increase credit app volume and drive dealer engagement with tools to improve their profitsInventory integration provides: Seamless dealer experience withstreamlined vehicle selection andbookouts Ability for dealers to improvetheir own profitability
Slide 30: Strategic Initiative: Build Operational Excellence in Originations
Strategic Initiative:Build OperationalExcellence inOriginations30
Slide 31: Origination cost per funded contract increased 72% from 2019 to 2023
Origination cost per funded contract increased 72% from 2019 to 202331Origination Cost per Funded Contract+72%-12% Note: Cost per funded contract represents origination cost as incurred in the period presented, assuming no capitalization of origination costFunded contracts exclude Vroom originations
Slide 32: Originations are highly manual
Originations are highly manualEnhance systemic capabilities and decisioning for a more efficient process~98% of applications aredecisioned automatically32~80% manuallyrestructured &redecisionedOpportunities to Streamline: Optimize automated credit decisions○ Expand straight approvals / turndowns○ Im
Slide 33: Reduce costs, improve accuracy, and reduce fraud
Reduce costs, improve accuracy, and reduce fraud33Integrating Vroom Patent-Pending Title and Registration Product intoUACC Funding Process Automated DocumentClassificationAutomated SignatureDetection State: New YorkLicense Nbr: 123 456 789Name: Motorist, Michael MDOB: 10/30/1972Expiration Date: 10/3
Slide 34: Building Pre-Verification Automated Engine
Building Pre-Verification Automated EnginePre-Verification improves dealer service, improves credit quality and increases capture ratesAutomated stipulation verification accelerates the funding process and gives dealersconfidence that the applicant's information is correctIdentityResidenceEmployment
Slide 35: Strategic Initiative: Build Operational Excellence in Servicing
Strategic Initiative:Build OperationalExcellence inServicing35
Slide 36: Servicing Cost per Serviced Account
Servicing Cost per Serviced AccountServicing cost per serviced account increased 60% from 2019 to February 2024+60%-13%* * Servicing headcount peaked in Feb 2024 36 Note: Cost per account includes compensation and operating expenses related to servicing activities Servicing Cost per Serviced Account
Slide 37: Build Operational Excellence in Servicing
Data ScienceDecisioningModelsBuild Operational Excellence in ServicingData Science, Advanced Analytics and Tech enable improved approach to Servicing effectivenessAutomated Decisioning Creating a Frictionless Experience Behavior Score(Account Treatment) Repossession Timing Customer Extensions Vehicl
Slide 38: Native Consumer Mobile App Launched September 2024
New channel for customer engagement and communication targeting on-time paymentsNative Consumer Mobile App Launched September 202438
Slide 39: Strategic Plan Indicative Models
Strategic Plan IndicativeModels39
Slide 40: Base, Growth and Aggressive Growth Models
Base Model Growth Model Aggressive Growth ModelSubprime Cumulative Net Loss (CNL) Low 20’s% (Pre-COVID Level) High Teens (%) Mid Teens (%)Nearprime Cumulative Net Loss (CNL) N/A ~10% ~10%Origination Cost Per Funded Contract Pre-COVID LevelServicing Cost Per Serviced Account Pre-COVID Level ~10% belo
Slide 41: Selling residuals and gain recognition result in time lag to normalize income
Selling residuals and gain recognition upon securitizations results in time lag to normalize income Selling residuals for 2022 securitizations pulled forward discount income via gain on sale recognition Expect discount income amortization to normalize by 2027/2028Indicative Base Model$45M of Gain on
Slide 42: Indicative models: Potential paths to profitability
Indicative models: Potential paths to profitabilityEach of the Base Model and Growth Model assumes the current interest rate environment (assuming no rate cuts or increases) and normal macroeconomic conditions (assuming no potential recession).EBITDA and Adjusted EBITDA are non-GAAP financial measur
Slide 43: The aggressive growth scenario would require raising additional operating capital
The aggressive growth scenario would require raising additional operating capitalWe define Excess Liquidity as cash that can be generated from the Warehouse Credit Facilities by pledging and borrowing against eligible finance receivables. Indicative potential unrestricted cash and Excess Liquidity o
Slide 44: Thank You
Thank You 44