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Vroom, Inc. (NASDAQ:VRM)
Q1 2021 Earnings Call
May 12, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day. Thank you for standing by, and welcome to the Vroom first-quarter 2021 earnings conference call. [Operator instructions] I would now like to hand the conference over to your speaker today, Mr. Allen Miller, investor relations officer.

The floor is yours.

Allen Miller -- Investor Relations

Thank you, Alex. Good afternoon, and thank you for joining us on Vroom's first-quarter 2021 earnings conference call. Joining us on the call today are Paul Hennessy, chief executive officer; and Dave Jones, chief financial officer. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website at ir.vroom.com.

The first-quarter earnings release is also posted on the IR 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 Vroom's operations and future financial performance. These and other forward-looking statements are subject to a number of risks, uncertainties and other important factors that may cause actual results to differ materially from those in such statements. 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, 2020, as updated by our quarterly report on Form 10-Q for the three months ended March 31, 2021, for additional discussion of 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 Vroom assumes no obligation to update such statements based upon 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 reconciliation of those measures in today's press release. And with that, I'll kick it over to Paul.

Paul?

Paul Hennessy -- Chief Executive Officer

Thanks, Allen, and thanks, everyone, for joining Vroom's first-quarter 2021 earnings call. I'd like to start by thanking all of our employees, investors and board members for all of their hard work and support in building a great customer-centric public company. Vroom executed well in the first quarter. Our e-commerce units exceeded our expectations and were up 96% year over year.

Our e-commerce gross profit also exceeded our expectations and was up 123% year over year. But executing well means not only delivering great growth in units and gross profit. It also means strong execution across our four key pillars of demand and marketing, supply and reconditioning, logistics and sales and sales operations. By focusing on these four key pillars, we're building a strong foundation for sustainable scale.

From a demand and marketing perspective, we continue to be enthusiastic about the level of demand that exists in the marketplace, as well as our ability to generate demand for our business model. Demand for both buying cars from Vroom and selling cars to Vroom remains high. We are building a nationwide brand that is increasingly known for buying and selling used vehicles, and we're pleased at our continued upward trend in brand awareness. We're confident that as increased demand flows into our business, we are well-positioned to convert that demand as evidenced by our growth in Q1 and guidance for accelerating growth in Q2.

From a supply and reconditioning perspective, I'm also pleased with our performance. We believe our current inventory level is sized appropriately and is healthy for the market. We not only generated e-commerce gross profit per unit beyond our expectations in Q1. We also see continued improvement in our unit economics going into Q2.

We are currently experiencing unprecedented market conditions caused in part by shortage of microchips and delays in new car manufacturing, which increases demand for used vehicles, putting downward pressure on supply and upward pressure on pricing. In this market, we're particularly pleased to be in a position to integrate and leverage the data and data science teams at CarStory along with its AI-powered analytics. As used vehicle supply is constrained and wholesale pricing is high in traditional channels, we're very well-positioned to acquire vehicles from consumers, and I'm bullish on our trajectory for consumer sourcing. Over the past three quarters, we have experienced strong sequential improvement in acquiring inventory from consumers, increasing as a percentage of retail sales from 31% in Q3 of 2020 to 41% in Q4 of 2020 to 54% in Q1 of 2021.

While historically, Vroom has always had a strong mix of vehicles acquired from consumers, we are demonstrating that we have executed well in scaling our consumer acquisitions platform. Supply will continue to be a focus and area of investment for Vroom, particularly given the uncertainty over the duration of the current supply and pricing market. We continue to increase both the number of our reconditioning facilities and our overall capacity. In Q1, we added five third-party reconditioning facilities for a total of 24 and expanded our capacity at many of our existing facilities.

Our hybrid asset-light approach to reconditioning continues to provide us with capacity and agility. We believe that we are well-positioned to not only handle our projected 2021 volume but are also scaling our capacity to handle sales growth and volume in advance of needing it for 2022. I'm pleased with all of the improvements we've made in terms of capacity, quality and cost, and we'll continue to invest to build scaled capacity. With regards to logistics, we executed well on our rollout of last-mile locations.

In Q1, we added 10 locations and delivered over 16% of e-commerce units via our last-mile service. We remain on track to achieve our goal of delivering a run rate of 50% of our e-commerce units via our last mile service by year-end. It's rewarding for our customers and our company to see our brand displayed nationally on television in places like the Super Bowl, but it's even more rewarding when we see our brand displayed locally on trucks, delivering customers a great vehicle and a great driveway experience. We've mentioned our investments in sales and sales support operations, which include investments in people, process and tech.

We're continuing to invest in people to mitigate bottlenecks in our processes to remove friction and increase sales flow and in technology to automate, improve customer experience and drive conversion. We executed well across all three of these areas in Q1. We hired, trained and coached hundreds of new people. We streamlined our processes and expanded our sales capacity, and we deployed technology to reduce manual efforts and drive customer experience.

But we still have more to do. I'm pleased with our current improvements but not yet satisfied. We will continue to invest in sales and sales operations for the foreseeable future. I'm appreciative of all of the outstanding work from our employees and our valued third-party partners who enabled us to execute well across our platform.

In short, we are experiencing strong demand, record e-commerce sales, improving inventory health and unit economics, increasing reconditioning capacity, expanded last-mile deliveries, growing sales and sales support resources. We are well-positioned to deliver triple-digit e-commerce unit growth and over 200% aggregate gross profit growth in 2021. And with that, I'll hand over to Dave for further remarks on our financials and our guidance. Dave?

Dave Jones -- Chief Financial Officer

Thanks, Paul. We reached a new record in e-commerce units this quarter with over 15,500 units, delivering 41% sequential acceleration and 96% year-over-year growth. Our unit growth was driven by robust consumer demand and improved inventory position and positive response to our increased marketing. We had over 11,000 listed vehicles at the end of the quarter with 35% of those available for immediate sale.

Our inventory is in a much better position than it was in the fourth quarter. We feel good about driving inventory efficiency in the quarter, and we're now increasing our inventory buys to continue to meet demand. As Paul mentioned, during the quarter, we purchased 54% of the vehicles we retailed from consumers. This was up from 31% in Q3 of '20 and 41% in Q4 of 2020.

Our days to sale expanded from 77 last quarter to 83 this quarter due to a few factors. First, we continued to work on the Q4 bottlenecks, and we continued to move this Q4 aged inventory through the system during this quarter. In addition, the ramping of consumer purchases added some time to the acquisition process, but we're making improvements as we scale. Importantly, each of the months in the quarter saw sequential improvements in days to sale, and we expect continued improvement in Q2.

As a reminder, we currently target 60 to 70 days to sale. In Q2, we expect 17,500 to 18,000 e-commerce units sold, implying over 160% year-over-year growth at the midpoint of that guidance. We anticipate about 15% sequential growth in units as we grow reconditioning capacity to meet consumer demand while remaining nimble to adjust to a dynamic environment. Our reconditioning capacity continues to build.

As Paul said, we added five new third-party VRCs in the quarter, bringing us to 24 total VRCs, compared to 19 at the end of 2020. At the end of Q1, we had capacity of about 2,300 units per week, implying about 120,000-unit capacity annually. We believe we're tracking well against our 2021 target of 25 to 30 VRCs, which would enable us to reach over 50% of U.S. households within 100 miles of one of our VRCs.

E-commerce revenue grew 81% year over year and 48% sequentially in the first quarter to over $422 million. E-commerce gross profit per unit was $2,054 in the first quarter of 2021, demonstrating 14% year-over-year growth and 13% sequential improvement. Within e-commerce gross profit per unit, our vehicle gross profit improved due to further reconditioning cost improvements and a decline in inventory reserve balances compared to the prior-year quarter, which was affected by higher-than-normal inventory reserves at the onset of the pandemic. Total gross profit was ahead of our expectations at $36 million, up 97% year over year and 80% sequentially.

We expect average e-commerce gross profit per unit in the range of $2,500 to $2,600 in the second quarter, which at the midpoint would imply over 24% sequential growth from Q1. We have good line of sight into our unit profitability in Q2 and expect ongoing tailwinds from the favorable demand environment, as well as our previously mentioned profitability drivers. Wholesale units increased 84% year over year and 24% sequentially to 8,641 units. Wholesale loss per unit of $33 improved significantly from $420 in the fourth quarter of last year as the wholesale market was very strong in Q1.

Looking ahead to the second quarter, we expect wholesale units of 7,500 to 8,000 and gross profit per unit of $800 to $900 as we believe the wholesale market will continue to be strong through Q2. Looking at TDA, units were flat sequentially as our e-commerce business continues to demand fast-turning inventory. We expect inventory for TDA to continue to be lean in the near term as we focus on scaling our e-commerce operations in a competitive inventory-buying environment. However, in the long term, we remain committed to building a dedicated inventory for TDA to service the local demand.

In the second quarter, we anticipate 1,400 to 1,500 TDA units and an average gross profit per unit of $2,000 to $2,100. So if we put it all together, we expect total revenue of $618 million to $640 million and total gross profit of $54 million to $59 million for Q2, implying over 56% sequential gross profit growth and over 600% growth from Q2 of last year, which was obviously affected by the pandemic. Moving on to operating expenses. First-quarter operating expenses of $109 million represented about 18.5% of total revenue as our higher-than-expected revenue gave us some leverage.

Our SG&A dollars grew as expected as we built the organization for scale. To be clear, we are intentionally currently deploying human capital, which is less efficient from an opex point of view as we provide for an enhanced customer experience and efficient sales processing times while, at the same time, we're investing in technology, which will lead to operating leverage as we scale the business longer term. Breaking it down a little further, comp and benefits expense grew 40% sequentially to $39.9 million as we bolstered sales and sales support functions, as well as engineering teams. As I mentioned, we've continued to prioritize building our customer support teams to help process ever-increasing vehicle unit volumes quickly.

We continue to capitalize on our hybrid asset-light model, leveraging outsourced parties as an additional resource. We have made substantial progress on the bottlenecks identified in Q4, but we are continuing to invest in our sales support functions to provide the exceptional customer experience that we want for all of our valued consumers. We know that, over time, technology and automation are the solution to a frictionless customer experience, and we continue to make progress in that regard. Marketing expense was $29.6 million in the quarter, growing 65% year over year and 68% quarter over quarter.

As a reminder, Q1 included the financial effect of our very well-received Super Bowl commercial. We are pleased with the response to our marketing strategies as average monthly unique website visitors has grown in lockstep with our marketing year over year. On a sequential basis, unique visitor growth accelerated significantly at 54% and year over year at 64%. Through the rest of the year, we expect marketing investments to remain higher than 2020 levels in dollar terms as we scale our business and drive increasing national brand awareness.

Finally, our outbound logistics expense grew 46% sequentially, in line with e-commerce unit growth and at a similar per cost -- per unit cost to last quarter of almost $1,000. We expect a similar carrier environment in Q2. We continue to rapidly build out our proprietary logistics network. At the end of the quarter, we had 18 logistics hubs up and running, up from eight in Q4, and we delivered over 16% of our Q1 deliveries with our proprietary last-mile service.

Customer satisfaction with the experience is high, and we remain on track to build out 30 last-mile hubs and obtain a run rate of 50% of our total deliveries with our proprietary last-mile service by the end of the year. Our first line of haul trucks and trailers are arriving this quarter, and we're busy planning the launch of our line haul operations. As mentioned last quarter, we think logistics capex will be up to approximately $10 million for the year. So overall, we expect $61 million to $70 million of EBITDA loss in the second quarter as we anticipate operating expenses at 19% to 20% of total revenue.

We remain on track to deliver triple-digit e-commerce unit sales growth and more than 200% year-over-year growth in aggregate gross profit for 2021. Finally, touching on our balance sheet. We ended the first quarter with over $950 million of cash on the balance sheet and $162 million of availability on our floor plan facility. As always, we've provided comprehensive Q2 guidance in our earnings release.

I'll now turn it back to the operator for questions.

Questions & Answers:


Operator

[Operator instructions] Your first question comes from the line of Rajat Gupta from J.P. Morgan. Your line is now open.

Rajat Gupta -- J.P. Morgan -- Analyst

Great. Good afternoon, and good evening. Thanks for taking the question. I just had a multipart question on the e-commerce GPU.

Firstly, could you help us bridge either sequentially or versus your initial guidance versus what you reported? Like what changed during the last three to four weeks of March? And then going from the first quarter to the second quarter, could you help us unpack the drivers of the sequential uptake? Like how much is seasonality? How much is just the inventory quality getting better or reconditioning efficiencies or customer sourcing mix, etc.? And then just lastly, like what percentage of your inventory today is -- would you say is greater than 60 days old? And how -- what was that number at the beginning of the year? Thanks.

Dave Jones -- Chief Financial Officer

Hi, Rajat. Thanks. Thanks for the question. Yeah.

I think when we look at e-commerce GPU, the big story there is sales margin, right? It's a great environment. I think that when we look at the skill set that we have now with the CarStory acquisition and obviously our internal data teams and data analysts, we feel like we've got a lot of horsepower behind acquiring vehicles. Obviously, in the first quarter, we did a really good job acquiring vehicles from consumers at 54%. So I think there isn't one thing in particular that I would point to in the quarter.

I think we continued solid product gross profit per unit. And so I guess where we saw the most upside from guidance was probably in sales margin as it was a good quarter, and we continued to acquire vehicles well. And I think when we think about Q1 going into Q2, it's similar. We -- in terms of -- if we break it down between vehicle gross profit per unit and product gross profit per unit, we continue to make progress in our efforts to reduce reconditioning costs.

We continue to build out the network, which, as you know, naturally reduces our inbound miles. So it helps us with inbound cost and obviously sales margin as we continue to get better and better at acquiring vehicles, we continue to acquire more vehicles from consumers. And then on the product side, we continue to implement our initiatives and we expect to have stability in product gross profit per unit going forward. And so I think when you put all those things together, it's what allows us to now raise our target for Q2 to the $2,500 to $2,600 of gross profit per unit that we're guiding to.

In terms of inventory, like we said, we're much healthier than we were. We had an objective in the quarter to work our way through the problem inventory that we had. We are now -- we feel like we've got very healthy inventory, which means we've got a good mix of aging across the board, and we don't have any concerns at this point about aged inventory. So hopefully, that helps you understand.

Rajat Gupta -- J.P. Morgan -- Analyst

Got it. Just a follow-up on the -- just the pricing move you've seen, particularly on the wholesale side. You've obviously done a great job improving the customer source mix, but you still -- I mean there's still like a good 45% of your inventory that comes from auction or wholesale. So with this kind of move that we have seen in wholesale pricing, do you think you can pass through all of that into retail? Or do you -- I mean -- or have you baked in -- I mean what happens like if retail pricing may not catch up like later in the quarter? Is that kind of like considered in the guidance? Or are you assuming that you're able to make up that spread at some point in the quarter? Thanks.

Dave Jones -- Chief Financial Officer

Yeah. So any consideration of that, you're right, would be in the guidance. The way we think about it, though, is obviously inventory management and turn. There's no reason to believe that there's going to be a dramatic change in retail pricing.

So I think, look, we're in the business of buying vehicles and selling vehicles. I think if we can hit our turn targets and do that efficiently, there shouldn't be any undue risk in the current inventory.

Rajat Gupta -- J.P. Morgan -- Analyst

Great. Thanks. I will pass it on, and thanks for taking the question.

Dave Jones -- Chief Financial Officer

Thanks, Rajat.

Operator

Your next question comes from the line of Zach Fadem from Wells Fargo. Your line is now open.

Zach Fadem -- Wells Fargo Securities -- Analyst

Hey, good afternoon. So with the rollout of concierge delivery in markets like L.A. and Chicago, can you talk about expected impact to customer conversion and satisfaction? And as in-house delivery works its way to 50%, what improvements do you anticipate to things like days to sell and GPU, as well as lower logistics costs?

Paul Hennessy -- Chief Executive Officer

Yeah. I'll take that, Zach. I think first and foremost, we're getting good control over our logistics network because it just fundamentally allows us to deliver a better experience to our customers, full stop. And so that's the strategy and our reason for getting to 50%.

And then that satisfaction ultimately leads to better NPS and, we believe, over time, better conversion and lower cost per acquisition over time because customers have a great experience and they talk about it and they come back. And so that's all the strategic thinking behind the logistics network broadly. In terms of cost per acquisition or, I should say, a cost of running the logistics network, as we deploy closer and closer to customers, as Dave mentioned in his script, as we add more of our facilities in close proximity to customers and as we remove network miles, as we deliver both inbound and outbound, the cost structure improves. And that's how we think about it, and that's why we're pursuing that.

So fundamentally, you get a better customer experience. You get a better unit economic benefit for the company. And then we believe that you get better cost of acquisition and better conversion because you're delivering an outstanding service.

Zach Fadem -- Wells Fargo Securities -- Analyst

Got it. And then with the 200% gross profit growth still on the table for the year, and I think you actually said at least 200% gross profit growth, is this more a continuation of the upward trends you're seeing in Q2? Or do you see incremental second-half benefits from things like customer sourcing, days to sell? You called out reconditioning. I'm curious if you could talk about the drivers there. And then any other internal/external dynamics we should keep in mind?

Paul Hennessy -- Chief Executive Officer

Yeah. We don't give out the underlying pieces, but what I will tell you is we have a good trend that we saw in Q1. That trend continued into Q2. Our acceleration of e-commerce unit growth is up and to the right.

And so the number that we forecasted in our fourth-quarter earnings call and now in our first-quarter earnings call, those numbers are the same triple-digit growth in e-commerce and 200% in aggregate gross profit dollars. That's what we believe is going to happen because that's what our models are telling us as we execute on all of the areas of our business from all the pillars that I mentioned on the marketing side, certainly on the acquisition side of vehicles. Consumers obviously plays a large role in that, good reconditioning execution, as well as scaling and then the same on logistics. So it's all of the contributing factors, and I'll add in -- and the sales ops that I mentioned in my opening remarks.

As we invest in sales operations, again, the business can process greater scale, and that's why we feel good about the guidance that we've given.

Zach Fadem -- Wells Fargo Securities -- Analyst

Appreciate the time today.

Paul Hennessy -- Chief Executive Officer

Yup. Sure.

Operator

Next question is from Alex Potter from Piper Sandler. Your line is now open.

Alex Potter -- Piper Sandler -- Analyst

Great. Thanks. So the first question was you mentioned the sort of four areas of execution that you're focused on. And the fourth one is that sales and operations step, which in recent quarters has been sort of the bottleneck for you.

So I'm interested. It sounds like you're making some progress there. What inning would you say you're in, in terms of getting that issue completely addressed? And as an external analyst looking at a specific metric to gauge your progress there, I mean would it primarily be manifesting itself in GPU, in days sales and inventory or what?

Paul Hennessy -- Chief Executive Officer

Yeah. It's -- I can't point to one because it's -- quite literally, we use the word bottleneck. It blocks both sales flow and you block sales flow. Inventory can age.

Customer experience can decline. Cancellations can increase. So improving that lifts all boats, if you will. There's not a single metric.

In terms of the inning answer, in my opening remarks, I said, look, we've made improvements. You see it in our sales velocity, but we're not satisfied. And the commitment to an outstanding customer experience and end-to-end e-commerce platform experience, there's no finish line on that. So we are -- we're very committed to getting it right for the customers, and we're making good progress.

So I think what I'd say is we believe we're in a good spot with room for improvement.

Alex Potter -- Piper Sandler -- Analyst

OK. Great. And then one more on logistics, doing more and more in-house. I hear you on the 50% target.

Assuming everything goes well, this gives you more control both on the cost side, on the logistics cost side, as you mentioned, but also on the customer experience side, conversion. Everything is better in theory, assuming all goes well. Is there any reason to think that assuming it does play out that way, you would necessarily want to stop at 50% rather than gunning eventually for 100%? Thanks.

Paul Hennessy -- Chief Executive Officer

Yeah. We're not slamming on the brakes. We're just giving guidance as far out as we could see on that. And we believe that giving our customers an outstanding driveway experience, that number will likely go north in 2022.

And when appropriate, we'll kind of give some insight and guidance to that. But we're just -- as you can tell by our first-quarter location adds, we're just starting to jog on that front.

Alex Potter -- Piper Sandler -- Analyst

OK. Perfect. Thanks, guys.

Paul Hennessy -- Chief Executive Officer

Sure.

Operator

Next question is from Sharon Zackfia from William Blair. Your line is now open.

Sharon Zackfia -- William Blair -- Analyst

Hi. Good afternoon. I guess to follow up on the logistics question, I mean, obviously, you've had some -- as everyone has had, some stress in the system from a third-party network standpoint over the past few quarters, and now you've got the internal initiatives. Over time, where do you think you can drive logistics per car? I mean if I look back a few years ago, it was sub-$300.

Is that a level that you can see again in the next five, 10 years? Or is there something that will be sustainably elevated now with your own network coming into play?

Dave Jones -- Chief Financial Officer

Yeah, hey, Sharon. Thanks for the question. I think -- obviously, we don't give guidance that far out. We think we can get leverage in logistics with the model that we have today.

We've literally just started in the past few months, and I've personally been amazed at how well the team is rolling it out. So congratulations to them. Look, I think it's -- the key components are really customer experience, control over the experience, And that's what we're after. But I definitely do think that there's leverage over time.

We'll give guidance on that as we get to quarters where we think we'll see some of that leverage. But obviously, to get any leverage, it needs some scale. And so we're at 16% at the end of the quarter, on our way to 50%. We'll have a much clearer view of that as we move through the months here.

Sharon Zackfia -- William Blair -- Analyst

Thanks for that. And if I could follow up with a finance question. Within the expectation for the 200% increase or more than that in gross profit, are there embedded expectations that GPU on the finance side kind of go up as the year progresses? And can you talk about what caused kind of the bit of pressure that you saw in the first quarter year over year?

Dave Jones -- Chief Financial Officer

Yeah. So in the guidance, we don't break out the product versus vehicle. I would say we've talked a lot about initiatives that we have around product, obviously. I think we've -- the team has done a great job improving attachment rates.

We've seen very consistent improvement in attachment rates over the past couple of quarters, which is great. I think that the variability that we saw this quarter is a couple of percentage -- a few percentage points, so not significant. There's a lot that goes into product gross profit per unit. We've got chargebacks.

We've got profit sharing. There's estimates on reserves. So there's quite a bit that goes in there, and then you've got attachment rates and individual product pricing and mix. And so I think that we have seen, and we'll continue to see, an ascending product gross profit per unit.

And there'll be some variability along the way but it shouldn't be significant. So that's how we think about it.

Sharon Zackfia -- William Blair -- Analyst

That's great color. Thank you.

Dave Jones -- Chief Financial Officer

Thanks, Sharon.

Operator

Next question is from Ron Josey from JMP Securities. Your line is now open.

Andrew Boone -- JMP Securities -- Analyst

Hi, guys. This is Andrew Boone on for Ron. Thanks for taking our questions. I wanted to kind of click into marketing.

Can you talk about your learnings from the Super Bowl ad? And just with your plans to increase brand investments, are you seeing the type of calls into your call centers change? In other words, are you moving from more of kind of a transactional kind of component versus kind of what was historically more educational? And then I have a follow-up.

Paul Hennessy -- Chief Executive Officer

Yeah. We don't -- we didn't give out specific details about the performance of the Super Bowl. But I think we said we're pleased. And when I think about composition, direct traffic that comes seeking the Vroom brand typically converts significantly higher when customers are saying, hey, I know what Vroom offers, and I'm seeking to get that service.

And so conversion is just fundamentally higher versus when they might see one of our cars listed on a performance marketing channel or on a third-party listing site or something like that, where they're looking for the car, not necessarily the service. So we continue to spend on brand. We will, for the foreseeable future, build a super brand so that customers understand exactly what we're offering, both on the buy side and on the sell side. So that customers can transact with us.

And when they come -- after seeing the brand, they just convert way better. So yes, that's how we think about it. And so we'll look for those opportunities to showcase the brand and explain exactly what we have to offer.

Andrew Boone -- JMP Securities -- Analyst

That makes sense. And then just on the consumer-sourced vehicle, just a consistent step-up over the last couple of quarters. Can you guys just kind of double-click into that and kind of help us understand the drivers there? Thank you.

Paul Hennessy -- Chief Executive Officer

Yeah. I mean, look, we don't give away the whole playbook. But what I can tell you is that we're skilled marketers, and we've built a really good technology platform, a data-driven technology platform that converts the customers that come in from the strong marketing. So when you fire on kind of all cylinders that way, give customers the right price, a good price for their vehicle and because we're making them aware that Vroom is a great place to go do that, we get a lot of appraisals and, therefore, a lot of transactions.

And that's why you see the ascending move as we increase our consumer acquisitions platform. So we're just -- the truth is we're just executing really well there.

Andrew Boone -- JMP Securities -- Analyst

Fair enough. Thank you.

Operator

Next question is from Seth Basham from Wedbush Securities. Your line is now open.

Seth Basham -- Wedbush Securities -- Analyst

Thanks a lot, and good afternoon. My first question is just clicking in on the sales margin strength in the first quarter that drove the upside to your gross profit e-commerce expectations. How much of that was from strong retail market pricing above your expectations in March relative to better acquisition costs than you anticipated?

Dave Jones -- Chief Financial Officer

Thanks, Seth. Yeah, I think it's a tough question, right, because it's the difference between the two. So look, I guess what I would say is we -- obviously, with the guidance that we gave coming out of Q4 for the full-year view, which was triple-digit units and 200% or more in aggregate gross profit, we had planned, obviously, on improvements across the board in vehicle gross profit and product gross profit. And what I would say is now through the first quarter, we've obviously started to execute on those well.

I think it's obviously a good market for all automotive retailers today. But it's difficult to say how much of it is this great market, which, by the way, we didn't necessarily know how good it was when we gave that guidance originally. So I think we're pretty happy that we've been executing on the plan, and we think we can continue to do that. And that's obviously reflected in the Q2 guidance where we've got further step-up in terms of gross profit per unit.

And so we'll just get to work executing on that as we do every day.

Seth Basham -- Wedbush Securities -- Analyst

Got it. Helpful color. Obviously, strong 2Q guidance. You didn't officially raise your full-year guidance.

Obviously, it's open ended at the top. And should we be thinking about something a little bit better than you guys were forecasting just in early March?

Paul Hennessy -- Chief Executive Officer

I think you should be thinking -- sorry, I was going to say I think you should be thinking about it exactly as we've articulated, Seth.

Seth Basham -- Wedbush Securities -- Analyst

All right. Fair enough. And then lastly, just thinking about some of the operational challenges you guys faced last fall and into the winter, particularly as it relates to sales and sales support and extended delivery times. Could you give us an update on whether or not you've been able to reduce average delivery times and improve Net Promoter Scores over the course of the past six months?

Paul Hennessy -- Chief Executive Officer

Yeah. I mean, we don't share those numbers specifically, but you can imagine when you create a bottleneck and it causes all of the downstream problems with inventory, with delivery, with customer experience and then you start to remove those bottlenecks, fundamentally, we believe that the system improves. And again, you see that in both the sales velocity and the unit economics in the performance of Q1 and the guidance of Q2. So we believe that that's headed in the right direction.

Seth Basham -- Wedbush Securities -- Analyst

Wonderful. Thank you very much, and good luck.

Paul Hennessy -- Chief Executive Officer

Yup. Thanks.

Operator

Your next question comes from the line of Edward Yruma from KeyBanc Capital. Your line is now open.

Edward Yruma -- KeyBanc Capital Markets -- Analyst

Hey, guys. Thanks for taking the questions. I guess, first, now that you've had some time under your belt with CarStory, just trying to understand kind of how it's changed now that you have it in-house versus being a customer of theirs. Were you able to kind of also keep some of your external customers? And then as it relates to customer service, I know you guys indicated you made some real progress behind it and will continue to invest against it.

I guess when should we assume that you start to get kind of to a more normalized customer service level versus where you were last quarter? Thank you.

Paul Hennessy -- Chief Executive Officer

Yeah. On the CarStory integration, we officially closed the deal in early January and got to work on integration. So what I'd say is it's early days, but outlook is great and performance in the immediate term has been strong. Again, I won't get into the playbook of what we do or how we do it, but we're very pleased with the results.

And I think there was a question on their existing client list. And we continue to maintain and grow their client list, as you would expect. So yes, we're -- as I mentioned, we're very pleased, especially in a time of unprecedented kind of market conditions, we're glad to have now the combined team of really, really strong data folks. As far as the customer experience, again, we work on that every day, and there is no finish line.

So speed is in our DNA. And the faster we can get customers their transaction completed, the faster we can get their car picked up, the faster we can get their new car delivered to them, those are all drivers of positive customer experience. And we're working hard at that. And again, as I said, we're making really strong improvements in that and still have a long way to go.

So there's not a date when we'll call that behind us because we'll always want to go faster and better.

Edward Yruma -- KeyBanc Capital Markets -- Analyst

Thank you.

Paul Hennessy -- Chief Executive Officer

Yup. Sure.

Operator

Next question is from John Colantuoni from Jefferies. Your line is now open.

John Colantuoni -- Jefferies -- Analyst

Thanks for taking my questions. So first, I know you're still guiding to triple-digit growth in the e-comm units for the full year. But I was curious if it makes sense to think about growth on a two-year stacked basis for the remaining quarters. And in other words, should we expect to see unit growth in the back half that's above the first quarter rate given easier comparisons? And I have a follow-up.

Dave Jones -- Chief Financial Officer

Thanks, John. Yeah. Look, we guide one quarter at a time. I think what I would say is you now have Q1 actual and Q2 guidance.

So you've got half the year. And so I think if you just -- you guys are obviously going to make assumptions on how to extrapolate that. But I don't think -- it shouldn't be too difficult to see a path forward to the triple-digit number. As you can imagine, we just don't want to give guidance past Q2.

John Colantuoni -- Jefferies -- Analyst

OK. And just a quick one. You provided Q1 guidance with more than two months of the quarter already complete. So I'm just curious, what caused the trajectory of e-comm unit growth to inflect so much in the last few weeks of the quarter? Was this a function of being conservative? Or was there some other dynamic going on? And assuming the last month was better than expected, are you seeing continued improvements in e-comm unit growth so far in Q2? Maybe you could just talk about the trajectory there.

Thanks.

Dave Jones -- Chief Financial Officer

Yeah. I think we always try to be transparent and logical in the guidance that we give. I think what you saw in the industry has been an accelerating rate of growth in the retail market. So I think there was some -- there was more growth than we had obviously expected.

I think what you can expect from us in terms of guidance is we give you a range and we expect to hit that range. And that's really as simply as we think about it. So hopefully, that answers the question.

John Colantuoni -- Jefferies -- Analyst

Thanks so much.

Operator

Your next question comes from the line of Nick Bacchus from Raymond James. Your line is now open.

Nick Bacchus -- Raymond James -- Analyst

Yeah, hey, guys. Thanks for taking my question. Just on inventory availability, clearly, there's a lot of tightness in the market, in the used market. So how is that impacting your sourcing strategy currently? And is the tight supply an inhibitor of capacity at this point? And then I had a follow-up question after that.

Paul Hennessy -- Chief Executive Officer

Yeah. I guess here's the way we see it. 15 consecutive weeks of ascending wholesale pricing and a fundamental reduction in supply in traditional channels, and by the way, unprecedented demand for those vehicles up to and including the rental car companies, historically large sellers of used cars are now actually large buyers of used cars. So you've got this massive market situation that's unfamiliar.

And that's why I think in my opening remarks, I said how great I feel about being able to buy cars from consumers at the rate that we're buying cars from consumers for all of those reasons. And there -- yes, it's constrained, and we think we're well-positioned to deliver the second quarter that we've guided, as well as the annual numbers that we've given. Yeah. We believe we're well-positioned to execute.

Nick Bacchus -- Raymond James -- Analyst

Got it. And in terms of the customer source penetration, obviously, that's continuing to go up at 54%. Where do you think that can get to over time? Do you have a specific target there over time? And can you just remind us the incremental profitability on a customer-sourced vehicle versus one from auction or otherwise?

Paul Hennessy -- Chief Executive Officer

Yeah. On the first question, we haven't planted some number that we think is the right number like 70% or 75%. We think it's smart to be able to leverage buying cars from consumers. It's a large market.

It's massively fragmented, and we're pretty good at it. So we're going to continue to drive that number as appropriate, and yet we'll be opportunistic. Wherever we see the right car at the right price, we will buy those vehicles and make sure they're available for our customers. So broadly, that's how we think about -- we're not setting a target.

As far as the unit economics, the way that I'll answer that is it broadly depends on the market, and we're in a strange market. Typically, it's bounced between $500 and $1,000 in total value. That's an improvement of a car purchased from a consumer versus a wholesale car. But again, that's where the massive asterisk of what are the broad market conditions at the time.

Nick Bacchus -- Raymond James -- Analyst

Thanks very much.

Paul Hennessy -- Chief Executive Officer

Sure.

Operator

Your last question comes from the line of Naved Khan from Truist Securities. Your line is now open.

Naved Khan -- Truist Securities -- Analyst

Yeah, hi. Thanks a lot. Just a couple of questions. So just curious to know how you plan to ramp up the units from the 5,000 that you have to get to the midpoint of the unit sales that you have for the second quarter.

Do you think you are at the appropriate level or you need to ramp up significantly? And then I had a follow-up question on unit economics.

Paul Hennessy -- Chief Executive Officer

Sorry, I just wanted to make sure, when you said the 5,000 units that we have, I just want to make sure I understood that number.

Naved Khan -- Truist Securities -- Analyst

Yeah. So I think you gave out a readily available unit that's available for sale. And where do you think you need to be to get to the unit sale that you're targeting for second quarter?

Dave Jones -- Chief Financial Officer

Got it, Naved. Yeah. Yeah. So look, we've got the -- we're lucky in that our inventory turns very quickly, right? So as you know, we've got the components of inventory on our website.

Some of it is available immediately for someone to purchase. Some of it is allocated to a customer already, and then you've got a bunch that's coming soon, and that moves pretty rapidly each day. The way -- what I would say though is, yeah, we're very comfortable with the level of inventory today, and that's what allows us to give the guidance that we gave for Q2. So the numbers work.

Naved Khan -- Truist Securities -- Analyst

Got it. And then maybe quickly on the GPU, the gross profit per unit on the e-commerce unit in Q1. If I adjust both the fourth quarter and the first quarter for obsolescence reserve that you had in Q4 and the reversal you had in Q1, it looks like, sequentially, the vehicle's GPU per unit actually went down. Is that the right way to look at it? Or am I missing something? I just wanted to run it by you.

Dave Jones -- Chief Financial Officer

Yeah. I mean we don't break out the components of the unit economics. So like I said, there's more -- we had to take more of an inventory reserve in the first quarter of last year because of the onset of the pandemic. So that depressed the vehicle gross profit per e-commerce unit in the prior year.

And there was -- we obviously didn't have that in the current year. So that's one of the factors that go into it. And that, combined with some efficiencies in reconditioning, is what gave us the improvement And again, we don't break out all of the components of unit economics. We just try and give you a sense as to what's driving it.

Naved Khan -- Truist Securities -- Analyst

Got it. Thank you.

Dave Jones -- Chief Financial Officer

Thank you.

Operator

We don't have any more questions at this time, presenters. You may continue.

Paul Hennessy -- Chief Executive Officer

Great. Well, thanks again to all our Vroom employees around the country for doing such an outstanding job and excellence in execution in the first quarter. And thanks, everyone, for joining the call.

Operator

[Operator signoff]

Duration: 57 minutes

Call participants:

Allen Miller -- Investor Relations

Paul Hennessy -- Chief Executive Officer

Dave Jones -- Chief Financial Officer

Rajat Gupta -- J.P. Morgan -- Analyst

Zach Fadem -- Wells Fargo Securities -- Analyst

Alex Potter -- Piper Sandler -- Analyst

Sharon Zackfia -- William Blair -- Analyst

Andrew Boone -- JMP Securities -- Analyst

Seth Basham -- Wedbush Securities -- Analyst

Edward Yruma -- KeyBanc Capital Markets -- Analyst

John Colantuoni -- Jefferies -- Analyst

Nick Bacchus -- Raymond James -- Analyst

Naved Khan -- Truist Securities -- Analyst

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