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Summary of Significant Accounting Policies | 6 Months Ended
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Jun. 30, 2023
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Use of Estimates The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosures. On an ongoing basis, the Company evaluates its estimates, including, among others, those related to income taxes, the realizability of inventory, stock-based compensation, contingencies, revenue-related reserves, fair value measurements, and useful lives of property and equipment and intangible assets. The Company bases its estimates on historical experience, market conditions, and on various other assumptions that are believed to be reasonable. Actual results may differ from these estimates. Comprehensive Loss The Company did no t have any other comprehensive income or loss for the three and six months ended June 30, 2023 and 2022. Accordingly, net loss and comprehensive loss are the same for the periods presented. Restricted Cash Restricted cash includes cash deposits required under the Company’s 2022 Vehicle Floorplan Facility as explained in Note 10 – Vehicle Floorplan Facility and UACC restricted cash. UACC collects and services receivables under the securitization transactions and warehouse credit facilities. These collections are restricted for use until properly remitted each month under the terms of the servicing agreement. Refer to Note 11 — Warehouse Credit Facilities of Consolidated VIEs and Note 12 — Long Term Debt for further detail. Finance Receivables Finance receivables consist of installment contracts the Company originates through UACC to finance the vehicles it sells, as well as installment contracts acquired by UACC from its existing network of third-party dealership customers. The Company's finance receivables are generally secured by the vehicles being financed. Finance receivables over 90 days delinquent are considered nonaccrual finance receivables. Interest income is subsequently recognized only to the extent cash payments are received. Finance receivables may be restored to accrual status when a customer settles all delinquency balances and future interest and principal payments are reasonably assured. Finance Receivables Held for Sale, Net Finance receivables that the Company intends to sell and not hold to maturity are classified as held-for-sale. The Company intends to sell finance receivables either through securitization transactions or forward flow arrangements. Finance receivables classified as held for sale are recorded at the lower of cost or fair value. Deferred acquisition costs and any discounts or premiums are deferred until the finance receivables are sold and are then recognized as part of the total gain or loss on sale and recorded in “Finance Revenue” and "Product, net" in the condensed consolidated statements of operations. Refer to Note 3 – Revenue Recognition. The Company records a valuation allowance to report finance receivables at the lower of amortized cost basis or fair value. To determine the valuation allowance, finance receivables are evaluated collectively as they represent a large group of smaller-balance homogeneous loans. To the extent that actual experience differs from estimates, significant adjustments to the Company's valuation allowance may be needed. Fair value adjustments are recorded in "Other loss, net" in the condensed consolidated statements of operations. Principal balances of finance receivables are charged-off when the Company is unable to sell the finance receivable and the related vehicle has been repossessed and liquidated or the receivable has otherwise been deemed uncollectible. As of June 30, 2023 and December 31, 2022, the valuation allowance for finance receivables classified as held for sale was $10.2 million and $10.5 million, respectively. Refer to No te 16 – Financial Instruments and Fair Value Measurements. Finance Receivables at Fair Value Finance receivables at fair value represent finance receivables that the Company does not intend to sell in the immediate future and for which the fair value option was elected. Fair value adjustments are recorded in "Other loss, net" in the condensed consolidated statements of operations. Refer to Note 16 – Financial Instruments and Fair Value Measurements. Consolidated CFEs The Company elected the fair value option upon consolidation of the assets and liabilities of its variable interest entities ("VIEs") related to the 2021-1, 2022-2, and 2023-1 securitization transactions. Refer to Note 4 – Variable Interest Entities and Securitizations. These VIEs are consolidated collateralized financing entities (CFEs) and are accounted for using the measurement alternative in accordance with ASU 2014-13, Measuring the Financial Assets and Liabilities of a Consolidated Collateralized Financing Entity (“ASU 2014-13"). During the three and six months ended June 30, 2023 and 2022, the Company recognized the following revenue and expenses associated with these CFEs in the condensed consolidated statements of operations:
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Finance revenue |  | $ | 24,849 |  |  | $ | 14,156 |  |  | $ | 39,768 |  |  | $ | 25,040 |
Product revenue |  | $ | 3,644 |  |  | $ | — |  |  | $ | 5,975 |  |  | $ | — |
Finance cost of sales |  | $ | (5,330 | ) |  | $ | (1,159 | ) |  | $ | (8,829 | ) |  | $ | (2,005 | )
Product cost of sales |  | $ | (703 | ) |  | $ | — |  |  | $ | (1,601 | ) |  | $ | — |
Other loss, net |  | $ | (15,534 | ) |  | $ | (311 | ) |  | $ | (24,209 | ) |  | $ | (12,319 | )
The assets and liabilities of the CFEs are presented as part of the current and noncurrent “Finance receivables at fair value”, “Current portion of securitization debt of consolidated VIEs at fair value”, and "Long term debt, net of current portion", respectively, on the condensed consolidated balance sheets. Refer to Note 4 – Variable Interest Entities and Securitizations and Note 16 – Financial Instruments and Fair Value Measurements for further details. Business Combinations The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. The Company will continue to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to the Company’s preliminary estimates to goodwill provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments will be recorded to the Company’s condensed consolidated statement of operations. Advertising Advertising costs are expensed as incurred and are included within “Selling, general and administrative expenses” in the condensed consolidated statements of operations. Advertising expenses were $15.0 million and $21.1 million for the three months ended June 30, 2023 and 2022, respectively, and $26.4 million and $54.9 million for the six months ended June 30, 2023 and 2022, respectively. Shipping and Handling Logistics costs related to inbound transportation from the point of acquisition to the relevant reconditioning facility are included in cost of sales when the related used vehicle is sold. Logistics costs not included in cost of sales are accounted for as costs to fulfill contracts with customers and are included in “Selling, general and administrative expenses” in the condensed consolidated statements of operations and were $2.0 million and $8.2 million for the three months ended June 30, 2023 and 2022, respectively, and $4.0 million and $35.0 million for the six months ended June 30, 2023 and 2022, respectively. Concentration of Credit Risk and Significant Customers The Company’s principal financial instruments subject to potential concentration of credit risk are cash and cash equivalents and accounts receivable, which are unsecured. The Company’s cash balances are maintained at various large, reputable financial institutions. Deposits held with financial institutions may at times exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and, therefore, management believes they bear minimal risk. The Company’s cash equivalents primarily consist of money market funds that hold investments in highly liquid U.S. treasury securities and commercial paper investments. Concentration of credit risk with respect to accounts receivable is generally mitigated by a large customer base. For the three and six months ended June 30, 2023 and 2022, no customer represented 10% or more of the Company’s revenues and no customer represented more than 10% of the Company’s accounts receivable as of June 30, 2023 and December 31, 2022. Liquidity The Company has had negative cash flows and generated losses from operations since inception and has historically had to rely on debt and equity financing to fund its operations. Further, the Company expects to incur additional losses in the future. On May 5, 2022, the Company approved the long-term roadmap, which was designed to position the Company for long-term profitable growth by prioritizing unit economics, reducing operating expenses and maximizing liquidity. On January 18, 2023, the Company executed a reduction in force as part of the continued focus on reducing variable and fixed costs. Additionally, on April 26, 2023, as part of the Company’s ongoing reexamination of all facets of the business, the Company implemented an organizational restructuring that included a reduction in force. Refer to Note 17 – Restructuring Activities for further discussion. As of June 30, 2023, the Company had cash and cash equivalents of $237.9 million and restricted cash of $66.3 million. The primary source of liquidity is cash generated through financing activities. In June 2021, the Company issued $625.0 million aggregate principal amount of 0.75% unsecured Convertible Senior Notes due 2026. For the three and six months ended June 30, 2023, the Company repurchased approximately $18.2 million and $32.8 million in aggregate principal amount of the Notes (as defined in Note 12), net of deferred issuance costs, for $7.3 million and $13.2 million, respectively, in open-market transactions. The Company recognized a gain on extinguishment of debt of $10.9 million and $19.6 million for the three and six months ended June 30, 2023, respectively. As of June 30, 2023, $327.4 million aggregate principal amount of the Notes remain outstanding, net of deferred issuance costs of $5.1 million. Refer to Note 12 – Long Term Debt for further discussion. The Company has a 2022 Vehicle Floorplan Facility (as defined in Note 10) with a borrowing capacity of $171.6 million as of June 30, 2023, of which $39.1 million was unutilized. The 2022 Vehicle Floorplan Facility provides a committed credit line of up to $500.0 million w hich is scheduled to mature on March 31, 2024. Refer to Note 10 – Vehicle Floorplan Facility for further discussion. In January 2023, UACC sold approximately $238.7 million of rated asset-backed securities in an auto loan securitization transaction from a securitization trust, established and sponsored by UACC, for proceeds of $237.8 million. I n April 2023, UACC sold the non-investment grade securities related to the 2023-1 securitization transaction for $23.1 million. UACC still retains the residual interests related to the 2023-1 securitization transaction. Refer to Note 4 – Variable Interest Entities and Securitizations for further discussion. UACC has four warehouse credit facilities with an aggregate borrowing limit of $850.0 million as of June 30, 2023. As of June 30, 2023, outstanding borrowings related to the Warehouse Credit Facilities were $177.9 million and excess borrowing capacity was $93.0 million. Refer to Note 11 – Warehouse Credit Facilities of Consolidated VIEs for further discussion. The Company anticipates that its existing cash and cash equivalents, the 2022 Vehicle Floorplan Facility and UACC credit facilities will be sufficient to support its operations for at least the next twelve months from the date of issuance of the condensed consolidated financial statements. Accounting Standards Adopted In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized in accordance with Topic 606 as if the acquirer had originated the contracts. The Company adopted the guidance on January 1, 2023, which did not have a material impact on the Company's condensed consolidated financial statements and related disclosures.

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