Vroom Inc

Previous wording

On January 22, 2024, we announced that our Board had approved the Value Maximization Plan, pursuant to which we discontinued our ecommerce operations and wound down our used vehicle dealership business in order to preserve liquidity and enable us to maximize stakeholder value through our remaining businesses. We have ceased transacting 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 2022 Vehicle Floorplan Facility. We continue to take other actions to maximize the value by seeking to monetize our legacy ecommerce platform, reduce our outstanding commitments and preserve our liquidity, and have been executing a reduction-in-force commensurate with our reduced operations. On March 29, 2024, we substantially completed the wind-down of our ecommerce operations and used vehicle dealership business, however, we may incur additional wind-down costs through the end of 2024 (the "Ecommerce Wind-Down").

Current wording

On January 22, 2024, we announced that our Board had approved the Value Maximization Plan, pursuant to which we discontinued our ecommerce operations and wound down our used vehicle dealership business in order to preserve liquidity and enable us to maximize stakeholder value through our remaining businesses. We have ceased transacting 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 2022 Vehicle Floorplan Facility. We continue to take other actions to maximize stakeholder value by seeking to monetize our legacy ecommerce platform, reduce our outstanding commitments and preserve our liquidity, and have executed a reduction-in-force commensurate with our reduced operations. On March 29, 2024, we substantially completed the wind-down of our ecommerce operations and used vehicle dealership business(the "Ecommerce Wind-Down"), however, we may incur additional wind-down costs through the end of 2024.

Previous wording

We also own and operate UACC, a leading automotive finance company that offers vehicle financing to its customers through third-party dealers under the UACC brand, and CarStory, an artificial intelligence-powered analytics and digital services platform for automotive retail. The UACC and CarStory businesses continue to serve their third-party customers, with their operations substantially unaffected by the Ecommerce Wind-Down. We will seek to grow and enhance the profitability of the UACC and CarStory businesses going forward.

Current wording

We also own and operate UACC, a leading automotive finance company that offers vehicle financing to consumers through third-party dealers under the UACC brand, and CarStory, an artificial intelligence ("AI")-powered analytics and digital services platform for automotive retail. The UACC and CarStory businesses continue to serve their third-party customers, with their operations substantially unaffected by the Ecommerce Wind-Down. We will seek to grow and enhance the profitability of the UACC and CarStory businesses going forward.

Previous wording

As a result of the Value Maximization Plan, we estimate that we will incur total cash charges during 2024 of approximately $16.4 million for severance and other personnel-related costs, with $14.7 million incurred during the three months ended March 31, 2024, and approximately $14.3 million in contract and lease termination costs, with $11.9 million settled during the three months ended March 31, 2024. As part of a planned reduction-in-force under the Value Maximization Plan, approximately 800 employees were impacted by the wind-down, resulting in a reduction of approximately 93% of the employees not engaged in UACC’s or CarStory’s ongoing operations.

Current wording

As a result of the Value Maximization Plan, we estimate that we will incur total cash charges during 2024 of approximately $15.8 million for severance and other personnel-related costs, with $15.6 million incurred during the six months ended June 30, 2024, and approximately $13.7 million in contract and lease termination costs, with $13.5 million settled during the six months ended June 30, 2024. As part of a planned reduction-in-force under the Value Maximization Plan, approximately 800 employees were impacted by the wind-down, resulting in a reduction of approximately 93% of the employees not engaged in UACC’s or CarStory’s ongoing operations.

Previous wording

In April 2024, UACC sold approximately $262.5 million of rated asset-backed securities in an auto loan securitization transaction from a securitization trust, established and sponsored by UACC for proceeds of $261.3 million. The trust is collateralized by finance receivables with an aggregate principal balance of $380.1 million. These finance receivables are serviced by UACC. As a result of market conditions, which led to unfavorable pricing, UACC retained the Class E non-investment grade securities and residual interests, which will require us to account for the 2024-1 securitization as secured borrowings and remain on balance sheet pending the sale of such retained interests. In May 2024, UACC sold approximately $37.5 million of Class E non-investment grade securities that were initially retained for proceeds of $35.9 million. UACC continues to retain the residual interest and 5% or $15.8 million of the rated notes.

Current wording

During the three months ended June 30, 2024, UACC sold approximately $300.0 million of rated asset-backed securities in an auto finance receivable securitization transaction from a securitization trust established and sponsored by UACC for proceeds of $297.2 million. The trust is collateralized by finance receivables with an aggregate principal balance of $380.1 million as of April 30, 2024. These finance receivables are serviced by UACC. As a result of market conditions, UACC retained the residual interests, which required us to account for the 2024-1 securitization as secured borrowings and remain on balance sheet pending the sale of such retained interests. We also pledged an additional $15.8 million of our retained beneficial interest in the 2024-1 securitization transaction as collateral under the Risk Retention Financing Facility, and received proceeds of $15.6 million, with expected repurchase dates ranging from August 2026 to November 2030 at the initial closing date.

Previous wording

UACC, which has been engaged in automotive finance since 1996, currently offers financing services to a nationwide network of thousands of independent motor vehicle dealers and manufacturer-franchised 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.

Current wording

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

Previous wording

We calculate Adjusted EBITDA as EBITDA adjusted to exclude stock compensation expense, gain on debt extinguishment and long-lived asset impairment charges.

Current wording

We calculate Adjusted EBITDA as EBITDA adjusted to exclude stock compensation expense, severance expense related to the continuing operations, gain on debt extinguishment and long-lived asset impairment charges.

Previous wording

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

Current wording

The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net loss from continuing operations, which is the most directly comparable U.S. GAAP measure:

Previous wording

While credit losses are inherent in the automotive finance receivables business, several variables have affected UACC’s recent loss and delinquency rates, including rising interest rates, the current inflationary environment and vehicle depreciation. UACC is currently experiencing higher loss severity and higher losses on its finance receivables, which has negatively impacted the fair value of our finance receivables and the losses recognized for the three months ended March 31, 2024 and are expected to continue to negatively impact our business for the remainder of 2024. UACC primarily operates in the non-prime sector of the market which tends to have more volatility. In 2020 and 2021, COVID related stimulus and used vehicle appreciation resulted in significantly lower delinquencies and subsequent losses. In late 2022 and 2023, delinquencies and loss rates rose as a result of the aforementioned factors and, in response, we implemented changes to our credit program, such as tightening credit, which is starting to return our delinquencies and expected portfolio performance on those vintages to normalized levels. Certain advance rates available to UACC on borrowings from the Warehouse Credit Facilities have decreased as a result of the increasing credit losses in UACC's portfolio and overall rising interest rates. Any future decreases on available advance rates may have an adverse impact on our liquidity.

Current wording

While credit losses are inherent in the automotive finance receivables business, several variables have affected UACC’s recent loss and delinquency rates, including rising interest rates, the current inflationary environment and vehicle depreciation. UACC is currently experiencing higher loss severity and higher losses on its finance receivables, which has negatively impacted the fair value of our finance receivables and the losses recognized for the six months ended June 30, 2024 and are expected to continue to negatively impact our business for the remainder of 2024. UACC primarily operates in the non-prime sector of the market which tends to have more volatility. In 2020 and 2021, COVID related stimulus and used vehicle appreciation resulted in significantly lower delinquencies and subsequent losses. In late 2022 and 2023, delinquencies and loss rates rose as a result of the aforementioned factors and, in response, we implemented changes to our credit program, such as tightening credit, which is starting to return our delinquencies and expected portfolio performance on those vintages to normalized levels. We also intend to leverage CarStory data to improve VIN-level valuations to support underwriting decisions and servicing operations. Certain advance rates available to UACC on borrowings from the Warehouse Credit Facilities have decreased as a result of the increasing credit losses in UACC's portfolio and overall rising interest rates. Any future decreases on available advance rates may have an adverse impact on our liquidity.

Previous wording

UACC has four senior secured warehouse credit facilities, which are primarily used to finance the origination of finance receivables as well as to provide funding for general operating activities. UACC has also developed a securitization program that involves selling finance receivables to securitization trusts through the private issuance of asset-backed securities which are collateralized by the finance receivables.

Current wording

UACC has four Warehouse Credit Facilities, which are primarily used to finance the origination of finance receivables as well as to provide funding for general operating activities. UACC has also developed a securitization program that involves selling finance receivables to securitization trusts through the private issuance of asset-backed securities which are collateralized by the finance receivables.

Previous wording

The success of UACC's business is highly dependent on the ability to continue to access capital through both its warehousing arrangements and securitization program. As a result of high interest rates, the current inflationary environment and vehicle depreciation in the used automotive industry, UACC is experiencing higher loss severity. Certain advance rates available to UACC on borrowings from the Warehouse Credit Facilities have decreased as a result of the increasing credit losses in UACC's portfolio and overall rising interest rates. Any future decreases on available advance rates may have an adverse impact on our liquidity.

Current wording

The success of UACC's business is highly dependent on the ability to continue to access capital through both its warehousing arrangements and securitization program. As a result of high interest rates, the current inflationary environment and vehicle depreciation in the used automotive industry, UACC is experiencing higher loss severity. Certain advance rates available to UACC on borrowings from UACC’s four senior secured warehouse credit facility agreements (the “Warehouse Credit Facilities”) have decreased as a result of the increasing credit losses in UACC's portfolio and overall rising interest rates. Any future decreases on available advance rates may have an adverse impact on our liquidity. Currently, all four Warehouse Credit Facilities expire in 2025. We have commenced discussions with our lenders to extend the terms beyond the current expiration dates and, consistent with prior periods, expect those facilities to be amended and renewed. See Part II, Item 1A Risk Factors—We may not generate sufficient liquidity to operate our business, and, UACC may be unable to continue to access or renew funding sources and obtain capital needed to maintain and grow its business.

Previous wording

In addition, due to UACC's increased credit losses, UACC may not be able to securitize its loan portfolio on favorable terms, or may not be able to sell the subordinate notes or residual certificates issued in its securitizations at a favorable price or at all. As a result of market conditions at the time, which led to unfavorable pricing, UACC retained the residual interests for the 2023-1 securitization transaction.

Current wording

In addition, due to UACC's increased credit losses, UACC may not be able to securitize its loan portfolio on favorable terms, or may not be able to sell the subordinate notes or residual certificates issued in its securitizations at a favorable price or at all. As a result of market conditions at the time, UACC retained the residual interests for the 2023-1 and 2024-1 securitization transactions.

Previous wording

Ability to expand our dealer network to increase vehicle finance offerings and expand the size of our serviced loan portfolio

Current wording

Ability to optimize our dealer network to increase vehicle finance offerings

Previous wording

We intend to moderately grow our automotive financing business while focusing on enhancing profitability. UACC will continue to provide financing services to its existing dealer network and will seek to expand its network over time. UACC provides funding that allows independent motor vehicle dealers and manufacturer-franchised dealers to finance new and used vehicles. Currently, UACC serves a nationwide network of thousands of dealers in 49 states. UACC's credit programs are primarily designed to serve consumers in the non-prime market, who have limited access to traditional vehicle financing, although UACC intends to expand its offerings across a broader range of the credit spectrum going forward.

Current wording

We intend to moderately grow our automotive financing business while focusing on achieving profitability. UACC will seek to optimize its dealer network over time. UACC provides funding that allows independent motor vehicle dealers and manufacturer-franchised dealers to finance vehicles for their customers. Currently, UACC serves a nationwide network of thousands of dealers in 49 states. UACC's credit programs are primarily designed to serve consumers in the non-prime market, who have limited access to traditional vehicle financing, although UACC intends to expand its offerings across a broader range of the credit spectrum going forward and has launched a pilot program for near-prime consumers. We also intend to drive dealer and customer engagement through technology innovations.

Previous wording

Both the United States and global economies are experiencing a sustained inflationary environment and the Federal Reserve’s efforts to tame inflation have led to increased interest rates, which affects automotive finance rates and our borrowing rates, reducing discretionary spending and making vehicle financing more costly and less accessible to many consumers. In December 2023, the Federal Reserve announced that it expects to cut interest rates in 2024; however, based on the April 2024 meeting, they announced they are holding the rates steady until inflation retreats. It is too soon to know when and to what degree rates may be cut and the impact it may have on the economy. Moreover, geopolitical conflicts and war, including those in Europe and the Middle East, have increased global economic and political uncertainty, which has caused dramatic fluctuations in global financial markets. A significant escalation or expansion of economic disruption could continue to impact consumer spending, broaden inflationary costs, and could have a material adverse effect on our results of operations. We will continue to actively monitor and develop responses to these disruptions, but depending on duration and severity, these trends could continue to negatively impact our business in 2024.

Current wording

Both the United States and global economies are experiencing a sustained inflationary environment and the Federal Reserve’s efforts to tame inflation have led to increased interest rates, which affects automotive finance rates and our borrowing rates, reducing discretionary spending and making vehicle financing more costly and less accessible to many consumers. In December 2023, the Federal Reserve announced that it expects to cut interest rates in 2024; however, based on the July 2024 meeting, they announced they are holding the rates steady until inflation retreats. It is too soon to know when and to what degree rates may be cut and the impact it may have on the economy. Moreover, geopolitical conflicts and war, including those in Europe and the Middle East, have increased global economic and political uncertainty, which has caused dramatic fluctuations in global financial markets. A significant escalation or expansion of economic disruption could continue to impact consumer spending, broaden inflationary costs, and could have a material adverse effect on our results of operations. We will continue to actively monitor and develop responses to these disruptions, but depending on duration and severity, these trends could continue to negatively impact our business for the remainder of 2024.

Previous wording

For securitization transactions that are accounted as a sale of finance receivables in accordance with ASC Topic 860, Transfers and Servicing of Financial Assets ("ASC 860"). We recognized gain on sale of finance receivables. There were no securitizations which were accounted for as sales in the periods presented.

Current wording

For securitization transactions that are accounted as a sale of finance receivables in accordance with ASC Topic 860, Transfers and Servicing of Financial Assets ("ASC 860"), we recognize a gain on sale of finance receivables. There were no securitizations which were accounted for as sales in the periods presented.

Previous wording

Realized and unrealized losses, net of recoveries, primarily represents charge-offs of finance receivables held-for-sale, changes in the fair value of finance receivables for which the fair value option was selected under ASC 825, changes in the valuation allowance on the held-for-sale portfolio, changes in the fair value of securitization debt accounted in accordance with the measurement alternative under ASU 2014-13, changes in the fair value of beneficial interest, as well as collection expenses related to servicing finance receivables.

Current wording

Realized and unrealized losses, net of recoveries, primarily represents charge-offs of finance receivables held-for-sale, changes in the fair value of finance receivables for which the fair value option was selected under ASC 825, changes in the valuation allowance on the held-for-sale portfolio, changes in the fair value of securitization debt accounted in accordance with the measurement alternative under ASC 810-30, changes in the fair value of beneficial interest, as well as collection expenses related to servicing finance receivables.

Previous wording

Other income increased $1.4 million or 134.3% to $2.5 million for the three months ended March 31, 2024 from $1.1 million for the three months ended March 31, 2023, primarily driven by higher income related to acquisition fees for originations of finance receivables at fair value, which is recognized in the period the finance receivable is originated.

Current wording

Other income increased $1.1 million or 114.7% to $2.1 million for the three months ended June 30, 2024 from $1.0 million for the three months ended June 30, 2023, primarily driven by higher income related to acquisition fees for originations of finance receivables at fair value, which is recognized in the period the finance receivable is originated.

Previous wording

Professional fees decreased $1.6 million or 64.3% to $0.9 million for the three months ended March 31, 2024 from $2.5 million for the three months ended March 31, 2023, primarily as a result of additional professional fees incurred during the first quarter of 2023 as a result of the completion of the 2023-1 securitization transaction.

Current wording

Professional fees decreased $0.5 million or 44.1% to $0.6 million for the three months ended June 30, 2024 from $1.0 million for the three months ended June 30, 2023, primarily as a result of higher professional fees incurred during the first quarter of 2023 as a result of the completion of the 2023-1 securitization transaction, as the 2023-1 securitization debt is carried at fair value the associated debt issuance costs were expensed as incurred. As the 2024-1 securitization debt is carried at amortized costs, the associated debt issuance costs are capitalized and amortized over the life of the debt.

Previous wording

CarStory revenue decreased $0.2 million or 6.0% to $3.0 million for the three months ended March 31, 2024 from $3.2 million for the three months ended March 31, 2023, primarily as a result of a change in the scope of service and data provided to our customers.

Current wording

CarStory revenue decreased $0.3 million or 9.6% to $2.9 million for the three months ended June 30, 2024 from $3.2 million for the three months ended June 30, 2023, primarily as a result of a change in the scope of service and data provided to our customers.

Previous wording

Corporate activities do not constitute a reportable segment. These activities include costs not directly attributable to the segments and are primarily related to costs associated with corporate and governance functions, including executive functions, corporate finance, legal, human resources, information technology, cyber security and other shared costs. Certain shared costs, including corporate administration, are allocated to segments based upon a specific allocation of expenses. Corporate activities also include the runoff of legacy Vroom warranty and GAP policies sold prior to the Ecommerce Wind-Down as well as certain Vroom contracts, primarily Software and IT related, that are continuing to be renegotiated and right-sized to account for reduced headcount following the Ecommerce Wind-down. We expect these costs to decrease in the future. Adjusted EBITDA loss of $22.6 million for the three months ended March 31, 2024 is comprised of a loss of $21.6 million related to runoff of the legacy Vroom related items and ongoing contracts, and a loss of $1.0 million related to public company expenses.

Current wording

Corporate activities do not constitute a reportable segment. These activities include costs not directly attributable to the segments and are primarily related to costs associated with corporate and governance functions, including executive functions, corporate finance, legal, human resources, information technology, cyber security and other shared costs. Certain shared costs, including corporate administration, are allocated to segments based upon a specific allocation of expenses. Corporate activities also include the runoff of legacy Vroom warranty and GAP policies sold prior to the Ecommerce Wind-Down as well as certain Vroom contracts, primarily Software and IT related, that are continuing to be renegotiated and right-sized to account for reduced headcount following the Ecommerce Wind-down. We expect these costs to decrease in the future. Adjusted EBITDA loss of $5.1 million for the three months ended June 30, 2024 is comprised of a loss of $2.5 million related to runoff of the legacy Vroom related items and ongoing contracts, and a loss of $2.6 million related to public company expenses.

Previous wording

Gain on debt extinguishment represents a gain of $8.7 million for the three months ended March 31, 2023, related to the repurchase of $14.6 million in aggregate principal balance of the Notes, net of deferred issuance costs, for $5.9 million.

Current wording

Gain on debt extinguishment represents a gain of $10.9 million for the three months ended June 30, 2023, related to the repurchase of $18.2 million in aggregate principal balance of the Notes, net of deferred issuance costs, for $7.3 million.

Previous wording

Other income primarily represents interest earned on cash and cash equivalents. Other income decreased $1.8 million or 92.7% to $0.1 million for the three months ended March 31, 2024 from $1.9 million for the three months ended March 31, 2023, primarily driven by lower cash and cash equivalent balances and lower interest rates earned on cash and cash equivalents.

Current wording

Other income primarily represents interest earned on cash and cash equivalents. Other income decreased $1.1 million or 57.4% to $0.9 million for the three months ended June 30, 2024 from $2.0 million for the three months ended June 30, 2023, primarily driven by lower cash and cash equivalent balances and lower interest rates earned on cash and cash equivalents.

Previous wording

Compensation and benefits expense increased $0.8 million or 36.1% to $3.1 million for the three months ended March 31, 2024 from $2.3 million for the three months ended March 31, 2023, primarily as a result of annual salary increases during 2023 and retention bonuses granted to retain key employees subsequent to the Ecommerce Wind-Down.

Current wording

Compensation and benefits expense increased $1.6 million or 65.1% to $4.2 million for the three months ended June 30, 2024 from $2.5 million for the three months ended June 30, 2023, primarily as a result of severance expense related to the departure of certain executives and retention bonuses granted to retain key employees subsequent to the Ecommerce Wind-Down.

Previous wording

Other expenses decreased $0.8 million or 31.1% to $1.8 million for the three months ended March 31, 2024 from $2.6 million for the three months ended March 31, 2023, primarily related to a decrease in public company related insurance costs as we renegotiated our insurance policies during the third quarter of 2023 as a result of the reduced scale of business.

Current wording

Other expenses decreased $0.7 million or 28.2% to $1.9 million for the three months ended June 30, 2024 from $2.6 million for the three months ended June 30, 2023, primarily related to a decrease in public company related insurance costs as we renegotiated our insurance policies during the third quarter of 2023 as a result of the reduced scale of the business.

Previous wording

Interest income increased $16.2 million, or 46.0%, to $51.5 million for the three months ended March 31, 2024 from $35.3 million for the three months ended March 31, 2023. This increase was primarily a result of new originations and the consolidation of our 2022-2 securitization, which increased the loan portfolio to $875.5 million as of March 31, 2024 from $723.1 million as of March 31, 2023. Due to the timing of the consolidation, which occurred at the end of the quarter, the average outstanding balance of finance receivables was $869.9 million for the three months ended March 31, 2024, as compared to $579.9 million for the three months ended March 31, 2023. The increase in interest income is also attributable to higher discount income during the three months ended March 31, 2024 as a result of a larger balance of finances receivables held for investment measured at fair value, with discount being amortized, as compared to finance receivables held for sale with discount deferred until receivables are sold. The average outstanding balance of finance receivables held for investment at fair value was $315.3 million for the three months ended March 31, 2024, as compared to $273.4 million for the three months ended March 31, 2023.

Current wording

Interest income increased $21.1 million, or 25.5%, to $103.9 million for the six months ended June 30, 2024 from $82.8 million for the six months ended June 30, 2023. This increase was primarily a result of new originations and the consolidation of our 2022-2 securitization, which increased the loan portfolio to $880.6 million as of June 30, 2024 from $757.7 million as of June 30, 2023. The increase in interest income was partially offset by lower discount income during the six months ended June 30, 2024 as a result of a smaller balance of finances receivables held for investment measured at fair value, with discount being amortized, as compared to finance receivables held for sale with discount deferred until receivables are sold. The outstanding balance of finance receivables held for investment at fair value was $254.5 million as of June 30, 2024, as compared to $467.7 million as of June 30, 2023. The outstanding balance of finance receivables held for sale was $626.1 million as of June 30, 2024, as compared to $290.0 million as of June 30, 2023.

Previous wording

Interest expense increased $6.9 million or 92.6% to $14.3 million for the three months ended March 31, 2024 from $7.4 million for the three months ended March 31, 2023, primarily as a result of higher interest expense incurred on the Warehouse Credit Facilities, which increased $6.4 million to $9.5 million for the three months ended March 31, 2024 from $3.1 million for the three months ended March 31, 2023. The increase is attributable to a higher outstanding balance of $516.3 million as of March 31, 2024 as compared to $124.2 million as of March 31, 2023, due to financing the larger finance receivable portfolio and an increase in the weighted average interest rates, which increased from 6.70% to 7.22%.

Current wording

Warehouse Credit Facilities, which increased $9.7 million to $16.5 million for the six months ended June 30, 2024 from $6.8 million for the six months ended June 30, 2023. The increase is attributable to a higher outstanding balance of $270.8 million as of June 30, 2024 as compared to $177.9 million as of June 30, 2023, due to financing the larger finance receivable portfolio and an increase in the weighted average interest rates, which increased from 7.00% to 7.19%. The increase in interest expense is also partially attributable to higher interest expense incurred on securitization debt, which increased $2.5 million to $12.9 million for the six months ended June 30, 2024 from $10.3 million for the six months ended June 30, 2023, as a result of a higher outstanding balance for securitization debt of $472.1 million as of June 30, 2024 as compared to $417.0 million as of June 30, 2023, as well as overall higher interest rates.

Previous wording

Realized and unrealized losses, net of recoveries, increased $15.5 million or 126.2% to $27.8 million for the three months ended March 31, 2024 from $12.3 million for the three months ended March 31, 2023. This increase was primarily driven by an increase in realized and unrealized losses on finance receivables as a result of alarger finance receivable portfolio, due to new originations as well as the consolidation of the 2022-2 securitization, which was previously off- balance sheet, as well as higher credit losses as of March 31, 2024 as compared to March 31, 2023.

Current wording

Realized and unrealized losses, net of recoveries, increased $14.7 million or 45.0% to $47.3 million for the six months ended June 30, 2024 from $32.7 million for the six months ended June 30, 2023. This increase was primarily driven by an increase in realized and unrealized losses on finance receivables as a result of alarger finance receivable portfolio, due to new originations as well as the consolidation of the 2022-2 securitization, which was previously off- balance sheet, as well as higher credit losses as of June 30, 2024 as compared to June 30, 2023.

Previous wording

Servicing income decreased by $0.9 million or 29.3% to $2.0 million for the three months ended March 31, 2024 from $2.9 million for the three months ended March 31, 2023, primarily driven by a lower balance of the 2022-1 securitization, which is off-balance sheet.

Current wording

Servicing income decreased by $1.8 million or 33.3% to $3.6 million for the six months ended June 30, 2024 from $5.4 million for the six months ended June 30, 2023, primarily driven by a lower balance of the 2022-1 securitization, which is off-balance sheet.

Previous wording

Warranties and GAP income decreased by $0.6 million or 26.9% to $1.6 million for the three months ended March 31, 2024 from $2.2 million for the three months ended March 31, 2023, primarily due to higher losses incurred on the GAP debt waiver product.

Current wording

Warranties and GAP income decreased by $0.4 million or 11.7% to $3.3 million for the six months ended June 30, 2024 from $3.7 million for the six months ended June 30, 2023, primarily due to higher losses incurred on the GAP debt waiver product.

Previous wording

Adjusted EBITDA loss increased $5.6 million to $10.1 million for the three months ended March 31, 2024 from $4.5 million for the three months ended March 31, 2023, primarily as a result of the $4.3 million decrease in net interest income after losses and recoveries as discuss above.

Current wording

Adjusted EBITDA loss increased $8.8 million to $13.0 million for the six months ended June 30, 2024 from $4.2 million for the six months ended June 30, 2023, primarily as a result of the $5.8 million decrease in net interest income after losses and recoveries and the $7.3 million increase in expenses, including compensation and benefits, professional fees, impairment charges, and other expenses, as discussed above.

Previous wording

Warranties and GAP income, net, decreased $11.9 million to a loss of $11.3 million for the three months ended March 31, 2024 from income of $0.6 million for the three months ended March 31, 2023, primarily as a result of a revised estimate of proceeds we expect to recover.

Current wording

Warranties and GAP income, net, decreased $11.4 million to a loss of $11.5 million for the six months ended June 30, 2024 from a loss of $0.1 million for the six months ended June 30, 2023, primarily as a result of a revised estimate of proceeds we expect to recover.

Previous wording

Software and IT costs decreased $1.0 million or 42.6% to $1.4 million for the three months ended March 31, 2024 from $2.4 million for the three months ended March 31, 2023, primarily related to volume-based fees as a result of reduced headcount and more efficient targeted software use. We are continuing to renegotiate and right-size our Software and IT contracts to account for reduced headcount following the Ecommerce Wind-down and expect these costs to decrease in the future.

Current wording

Software and IT costs decreased $1.3 million or 31.2% to $2.8 million for the six months ended June 30, 2024 from $4.0 million for the six months ended June 30, 2023, primarily related to volume-based fees as a result of reduced headcount and more efficient targeted software use. We are continuing to renegotiate and right-size our Software and IT contracts to account for reduced headcount following the Ecommerce Wind-down and expect these costs to decrease in the future.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $91.0 million and restricted cash of $49.5 million. Restricted cash primarily includes restricted cash required under UACC's securitization transactions and Warehouse Credit Facilities of $48.1 million. Prior to the Ecommerce Wind-Down, our primary source of liquidity was cash generated through financing activities. Additionally, we had excess borrowing capacity of $53.9 million under UACC's Warehouse Credit Facilities as of March 31, 2024.

Current wording

As of June 30, 2024, we had cash and cash equivalents of $63.4 million and restricted cash of $48.2 million. Restricted cash primarily includes restricted cash required under UACC's securitization transactions and Warehouse Credit Facilities of $47.3 million. Prior to the Ecommerce Wind-Down, our primary source of liquidity was cash generated through financing activities. Additionally, we had excess borrowing capacity of $34.4 million under UACC's Warehouse Credit Facilities as of June 30, 2024.

Previous wording

We anticipate that our existing cash and cash equivalents and UACC's Warehouse Credit Facilities will be sufficient to support the Company for at least the next twelve months from the date of this Quarterly Report on Form 10-Q.

Current wording

We anticipate that our existing cash and cash equivalents and UACC's Warehouse Credit Facilities will be sufficient to support the Company for at least the next twelve months from the issuance date of this Quarterly Report on Form 10-Q.

Previous wording

Our future capital requirements will depend on many factors, including our ability to successfully implement the Value Maximization Plan and realize its benefits, available advance rates on our Warehouse Credit Facilities, our ability to complete additional securitization transactions on terms favorable to us, and our future credit losses. We have no significant debt maturities due until July 2026 and the payments on our securitization debt are funded by cashflows on the finance receivables within the securitization trusts.

Current wording

Our future liquidity and capital requirements will depend on many factors, including our ability to successfully implement the Value Maximization Plan and realize its benefits, available advance rates on and the amendment and renewal of our Warehouse Credit Facilities, our ability to continue to meet the requirements of Nasdaq for continued listing on the Nasdaq Global Select Market, our ability to complete additional securitization transactions on terms favorable to us, and our future credit losses.

Previous wording

On June 18, 2021, we issued $625.0 million aggregate principal amount of the Notes pursuant to an indenture between us and U.S. Bank National Association, as trustee (the “Indenture”).

Current wording

On June 18, 2021, we issued $625.0 million aggregate principal amount of the Convertible Senior Notes due 2026 (the “Notes”) pursuant to an indenture between us and U.S. Bank National Association, as trustee (the “Indenture”).

Previous wording

The Notes bear interest at a rate of 0.75% per annum, payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2022. The Notes will mature on July 1, 2026, subject to earlier repurchase, redemption or conversion. The total net proceeds from the offering, after deducting commissions paid to the initial purchasers and debt issuance costs, were approximately $608.9 million. During the three months ended March 31, 2024, the conditions allowing holders of the Notes to convert were not met.

Current wording

The Notes bear interest at a rate of 0.75% per annum, payable semiannually in arrears on January 1 and July 1 of each year, beginning on January 1, 2022. The Notes will mature on July 1, 2026, subject to earlier repurchase, redemption or conversion. The total net proceeds from the offering, after deducting commissions paid to the initial purchasers and debt issuance costs, were approximately $608.9 million. During the six months ended June 30, 2024, the conditions allowing holders of the Notes to convert were not met.

Previous wording

As of March 31, 2024, $287.2 million aggregate principal amount of the Notes remain outstanding, net of deferred issuance costs of $3.3 million. Subject to market conditions and availability, we may continue to opportunistically repurchase Notes from time to time to reduce our outstanding indebtedness at a discount. Refer to Note 10 — Long Term Debt of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, for further discussion.

Current wording

As of June 30, 2024, $287.6 million aggregate principal amount of the Notes remain outstanding, net of deferred issuance costs of $2.9 million. Subject to market conditions and availability, we may continue to opportunistically repurchase Notes from time to time to reduce our outstanding indebtedness at a discount. Refer to Note 10 — Long Term Debt of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, for further discussion.

Previous wording

Subject to market conditions, we plan to sell finance receivables originated by UACC through asset-backed securitization transactions. In April 2024, UACC sold approximately $262.5 million of rated asset-backed securities in an auto finance receivable securitization transaction from a securitization trust, established and sponsored by UACC for proceeds of $261.3 million. The trust is collateralized by finance receivables with an aggregate principal balance of $380.1 million. These finance receivables are serviced by UACC. As a result of market conditions, which led to unfavorable pricing, UACC retained the Class E non-investment grade securities and residual interests, which will require us to account for the 2024-1 securitization as secured borrowings and remain on balance sheet pending the sale of such retained interests. In May 2024, UACC sold approximately $37.5 million of Class E non-investment grade securities that were initially retained for proceeds of $35.9 million. UACC continues to retain the residual interest and 5% or $15.8 million of the rated notes.

Current wording

Subject to market conditions, we plan to sell finance receivables originated by UACC through asset-backed securitization transactions. During the second quarter of 2024, UACC completed the 2024-1 securitization transaction, in which it sold approximately $300.0 million of rated asset-backed securities in an auto finance receivable securitization transaction from a securitization trust, established and sponsored by UACC for proceeds of $297.2 million. The trust is collateralized by finance receivables with an aggregate principal balance of $380.1 million as of April 30, 2024. These finance receivables are serviced by UACC. As a result of market conditions, UACC retained the residual interests, which required us to account for the 2024-1 securitization as secured borrowings and remain on balance sheet pending the sale of such retained interests. We also repurchased $4.2 million of the non-investment grade securities related to the 2022-2 securitization transaction for $4.8 million.

Previous wording

In 2023, UACC sold investment and non-investment grade rated asset-backed securities in the 2023-1 auto loan securitization transaction for proceeds of $260.9 million. The securitization trust is collateralized by finance receivables with an aggregate principal balance of $326.4 million. As a result of market conditions at the time, which led to unfavorable pricing, UACC retained the residual interests, and we accounted for the 2023-1 securitization transaction as secured borrowings.

Current wording

In 2023, UACC sold investment and non-investment grade rated asset-backed securities in the 2023-1 securitization transaction for proceeds of $260.9 million. The securitization trust is collateralized by finance receivables with an aggregate principal balance of $326.4 million as of January 31, 2023. As a result of market conditions at the time, which led to unfavorable pricing, UACC retained the residual interests, and we accounted for the 2023-1 securitization transaction as secured borrowings.