Vroom, Inc. misses on earnings expectations. Reported EPS is $-0.76 EPS, expectations were $-0.62.
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 the year ended December 31, 2021, as updated by our quarterly report on Form 10-Q for the 3 months ending September 30, 2022, for additional discussion of factors that could cause actual results to differ materially. 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. 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 third quarter 2022 earnings release and management presentation.
I'd like to now hand the conference over to Tom Shortt, Chief Executive Officer. Tom?
First, build a well-oiled transaction machine. Our transaction machine includes titling and registration, selling, e-commerce and marketing. During Q3, we made improvements toward our goal of building a well-oiled titling and registration machine, and we began building a well-oiled sales machine. Second, build a well-oiled metal machine. How we buy, move, recondition, sell, deliver and price vehicles. Our goal is to optimize the end-to-end supply chain by synchronizing how we buy, move, recondition and deliver vehicles to reduce cycle times, reduce supply chain costs, improve inventory turns and improve customer delivery times. During Q3, we continue to make improvements in building our well-oiled metal machine, and we began transitioning our Stafford reconditioning center to the TDA service center location.
Third, build a regional operating model, leveraging our national brand. We intend to sell nationally, but operate more regionally around our reconditioning centers and transportation hubs. We expect to build density in regions to drive marketing and supply chain economics, while improving customer delivery time. We have a significant opportunity to reduce the number of miles of vehicle travel and reduce inbound and outbound transportation costs. From Q1 to Q3, we have reduced the average number of miles or vehicles travel by 18%. Fourth, build our captive finance offering. We intend to expand our captive finance offering for Vroom customers which we believe will improve conversion rates and improve unit economics, while also improving the customer experience.
We also intend to continue to grow the UACC third-party dealer business, which contributes to our consolidated EBITDA. On Slide 4, our third quarter highlights. We improved adjusted EBITDA, excluding non-recurring expenses, by $20 million or 26% sequentially. Our Ecommerce gross profit per unit or GPPU was $4,206, reflecting progress toward our long-term goal. We reduced adjusted SG&A by $21 million sequentially as we continue to reduce variable and fixed costs. We realized a $16 million securitization gain at UACC despite a challenging market. We reduced our restricted cash by $59 million, primarily driven by the improvements in titling and registration. We are making progress on our long-term roadmap and our 4 strategic initiatives. We continue to make improvements in transaction processing, including titling and registration.
As we've mentioned, our goal is to become best-in-class in titling and registration. 98% of customers received their registrations before the expiration of their initial temporary tag in the month of October. I'm really proud of the improvement our Vroommates and UACC colleagues have made to registration. We began the transition of our Stafford reconditioning center to the TDA service center location, which will lower our fixed costs. Our long-term roadmap plan to slowly insource the sales function over time. In Q2, we started insourcing with a small sales class to build our internal capabilities, and that initial class has met our expectations. In the back half of August, we experienced a large, unexpected staff reduction at one of our third-party sales partners.
We reacted quickly to accelerate hiring additional classes of internal sales staff. It takes time to hire and train new selling resources and additional time for them to reach peak effectiveness. We've been successful in hiring additional classes and expect to be fully staffed in Q1 2023. While we had planned a slower and smoother transition to insource our sales function, we believe this transition will reduce our selling cost per unit earlier than initially planned. We have been focused on reducing variable and fixed cost and will continue this focus. We repurchased $56 million base value of our convertible notes for $18 million reducing our leverage. Given our focus on profitability and liquidity over growth, the unexpected reduction in selling resources during the quarter and the macroeconomic environment, we currently expect to be below our forecasted Ecommerce unit range for the year, better than the midpoint of our forecasted adjusted EBITDA loss range and near the midpoint of our previously forecasted liquidity range.
On Slide 5, during Investor Day, we outlined these key unit economic drivers behind our 4 strategic initiatives that we believe will build a profitable business model. This slide is an update to our Q3 operational progress on our 4 strategic initiatives by financial lever. For the Product and Vehicle GPPU, we achieved $4,206 Ecommerce GPPU, driven by our pricing initiatives and captive financing operations. UACC completed its second securitization since our acquisition and UACC's 14th securitization overall, demonstrating UACC's ability to leverage its substantial capital market experience to opportunistically deploy securitization transactions and maintain capital flexibility even in a challenging market. Logistics, we reduced our all-in logistics cost by $5 million sequentially.
Inventory. As we continue to improve the titling process, we expect this to increase the number of vehicles we list for sale and reduce the number of vehicles listed as coming soon. We expect this will improve our inventory turns. Sales. We reduced our sales costs by $1.3 million sequentially. We began our sales pilot and launched new Ecommerce initiatives. Titling and registration. We've seen significant improvement in our titling and registration process with 98% of customers receiving their registration before the expiration of their initial temporary tag in the month of October. As we continue to improve our titling process, we are receiving titles of aged vehicles that had not been listed for sale due to the delay in obtaining the title.
As we receive these titles of aged vehicles and list them for sale, we expect pressure on Q4 GPPU. We reduced our titling registration and support cost by $5.9 million sequentially. Marketing. We reduced our marketing costs $4 million sequentially and continue to focus on improving marketing return on investment and conversion. Fixed costs. We reduced our fixed cost $4 million sequentially, and we continue to focus on additional fixed cost reductions. These variable and fixed cost sequential changes represent the $21 million sequential reduction in adjusted SG&A mentioned earlier. 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, vehicle and product margin and supply chain costs.
Slide 6, unit trends. While we don't plan to share monthly unit numbers going forward, we felt it was important to share how the events impacted our monthly unit volume. In July, as registrations and our customer experience continued to improve, we took steps to normalize unit sales, which increased unit sales from July to August by 36%. As mentioned earlier, in the back half of August, we experienced a large unexpected staff reduction at one of our third-party sales partners. Customer contracts were down 32% during the 4 weeks after the sales force reduction compared to the prior 4 weeks. We expect the transition of our sales function as well as challenging economic conditions to impact units in Q4. We expect our sales function to be fully staffed in Q1 2023.
I'll turn it over to Bob now to go through our financial performance in the third quarter and our forward outlook. Bob?
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Robert Krakowiak: Thanks, Tom. I'll start with a summary of our financial performance on Slide 8. All comparisons are against the prior quarter, unless otherwise noted. Total revenues of $341 million decreased 28% as Ecommerce units declined 30%. Consistent with our strategy, we intentionally slowed transactions to focus on operational execution and unit economics. As Tom mentioned earlier, unit volumes were also impacted by a reduction in third-party sales resources, beginning in the back half of August as well as overall macroeconomic conditions. Ecommerce GPPU increased 16% to $4,206. During the third quarter, we realized further pricing optimization, which contributed to the increase in vehicle GPPU as well as increased product GPPU as we scale UACC-originated loans.
Adjusted EBITDA loss, excluding non-recurring costs, improved $20 million to $57.5 million. The improvement was driven by higher gross profit dollars and reduced SG&A spending. A $16 million securitization gain was the primary driver of increased gross profit. On the expense side, we further reduced our fixed and variable operating costs as we continue to pursue our 3 key objectives. These costs exclude $16 million of non-recurring costs to address operational and customer experience issues, consisting primarily of $12 million of rental car expense during the quarter. We are expecting a significant reduction in non-recurring rental car expense in the fourth quarter and going forward as a result of our improvements in the titling and registration process.
Our net loss for the quarter of $51 million improved $64 million. The 3 primary drivers of improvement were a $38 million gain on debt extinguishment due to our repurchase of convertible debt, the $16 million securitization gain I referenced earlier and improved operational results. Let's turn to our financial highlights on Slide 9. Starting with adjusted EBITDA performance. Excluding non-recurring costs, adjusted EBITDA improved $20 million quarter-over-quarter. As discussed earlier, improvements in adjusted EBITDA were driven by higher GPPU, reduced operating costs and the gain on our third quarter securitization at UACC. Ecommerce units decreased 30%. One key driver of our low unit sales volume continues to be a focus on operational improvement, as we intentionally slowed transactions to improve unit economics and the customer experience.
Third quarter unit volumes were also significantly impacted by reduced third-party sales support staffing beginning in the back half of August. While we don't expect the long-term unit impact from this transition, as we scale lower-cost sales resources, consistent with our long-term roadmap, we do expect an ongoing unit impact in the fourth quarter as our new team members ramp up to full productivity. In addition to the factors previously mentioned, third quarter units were also impacted by current macroeconomic conditions. I would like to provide some additional detail on our Ecommerce gross profit per unit performance, starting with vehicle gross profit. Vehicle gross profit per unit increased 5% to $2,267. This increase was driven primarily by higher sales margin as we further optimized pricing.
As Tom mentioned earlier, we've seen significant improvement in our titling and registration process with 98% of customers receiving the registration before the expiration of their temporary tag in October. This process improvement is increasing inventory available for sale on our website from purchases earlier in the year. As a result of this process, we expect a higher portion of our unit sales over the balance of the year to be from aged inventory as we obtain titles for cars, previously not listed for sale. Coupled with declining used vehicle prices across the market, we expect this to negatively impact our sales margin in the fourth quarter. Moving on to product GPPU. Product GPPU increased 33% to $1,939, as UACC-sourced financing continues to perform in line with our expectations.
Our higher vehicle and product GPPU ultimately delivered total Ecommerce GPPU of $4,206, a 16% sequential increase. Let's move to Slide 10 for second to third quarter comparison of our adjusted EBITDA performance, excluding non-recurring costs. Sequential declines in Ecommerce unit volumes impacted Ecommerce gross profit by approximately $10 million. This was partially offset by a $4 million benefit from higher Ecommerce GPPU. Next, the UACC securitization contributed $16 million of gross profit to the retail finance segment. This was partially offset by a $9 million decrease in non-Ecommerce gross profit, primarily driven by lower interest income from third-party dealership finance receivables. As a reminder, since we are not yet performing securitizations every quarter, we expect quarter-to-quarter volatility in these amounts with a buildup in this interest income in non-securitization quarters and the decrease in quarters we enter into a securitization transaction.
Total expenses, excluding non-recurring costs, decreased approximately $19 million. Approximately half of this decline was driven by lower compensation and benefit expenses as we continue to focus on cost reductions. We delivered an additional $9 million in cost reductions, primarily in marketing and logistics and also decreased variable costs due to lower unit volume. Overall, we improved adjusted EBITDA, excluding non-recurring costs, by approximately $20 million, a 26% improvement. Moving to liquidity on Slide 11. We took a number of actions during the third quarter as we continue to maximize liquidity. First, we reduced restricted cash on the balance sheet by $59 million, sequentially. This cash became available primarily as a result of lower inventory levels and improved transaction processing in titling and registration.
Our process improvements also reduced cash and inventory by $21 million during the quarter. Next, we repurchased $56 million face value of our convertible notes for $18 million, reducing our leverage. We may continue to opportunistically repurchase notes from time to time to reduce our outstanding indebtedness at a discount, subject to market conditions and availability. In addition, we recently amended our vehicle floor plan facility, which now extends through the end of March 2024. Finally, at UACC, we completed our third quarter securitization despite more challenging subprime market conditions. Our transition to fully-captive lending remains on track. Please turn to our liquidity guidance update on Slide 12. We ended the third quarter with $510 million in liquidity.
As a reminder, we define liquidity as cash and cash equivalents. The purpose of this chart is to simply show the components of our change in liquidity based on the guidance that we previously provided last quarter. We continue to anticipate our year-end liquidity to be near the midpoint of our $450 million to $565 million range. With that, I'll turn it back to Tom for a few closing remarks. Tom?
Thomas Shortt: Thanks, Bob. Turning to Slide 13 to summarize the quarter. 98% of the customers received their registrations before the expiration of their initial temporary tag in October, as we continue to focus on becoming best-in-class in titling and registration. We improved adjusted EBITDA, excluding non-recurring costs, by $20 million or 26% sequentially. Our Ecommerce GPPU of $4,206 reflects progress towards our long-term goal. We reduced adjusted SG&A by $21 million sequentially. We reduced restricted cash by $59 million sequentially, driven primarily by titling and registration improvements. We repurchased $56 million face value of our convertible notes for $18 million. We are forecasting year-end liquidity near the midpoint of our guidance. I look forward to updating you on our progress on our 4 strategic initiatives each quarter, as we pursue our long-term roadmap. Thanks for your time today, and operator, we are ready for questions.
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