Q1 2023 Vroom Inc Earnings Call
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Thank you for standing by and welcome to the room first quarter 2023 earnings conference call at.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one to one on your telephone.
Now I'd like to hand, the call over to John Sanderson, Vice President Investor Relations. Please go ahead.
Thank you operator, good morning, everyone and welcome to the group's first quarter 2023 earnings call.
Joining us on the call today are Tom <unk>, Chief Executive Officer, and Bob Krakowiak, Chief Financial Officer.
Please note this call will be simultaneously webcast on the Investor Relations section of the company's corporate website at IR Dot group Dot com.
The first quarter of 2023 earnings release and earnings presentation are also posted to the Investor Relations 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 Bruce operations and future financial performance.
These and other forward looking statements are based on management's current assumptions and are neither promises or guarantees and are subject to a number of risks uncertainties and other important factors that may cause actual results to differ materially.
We direct you to the company's most recent SEC filings, including the risk factors section of the firm's most recent Form 10-K for the year ended December 31, 2022 as updated by our quarterly report on Form 10-Q for the three months ended March 31, 2023 for additional discussion of factors that.
Could cause actual results to differ materially from those in the forward looking statements.
Please note further that todays discussion, including the forward looking statements speak only as of the date of this call and room assumes no obligation to update such statements based on 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 a reconciliation of those measures in the first quarter of 2023 earnings release and earnings presentation.
I'd like to now hand, the conference over to Thomas <unk>, Chief Executive Officer, Tom.
Thank you John and thank you to all the investors analysts roommate UAC colleagues and third party partners, who are joining us today.
Starting on slide three.
We introduced our long term roadmap at our May 26, 2022, Investor day, where we highlighted our mid term goal of a breakeven EBITDA business and our long term goal of a 5% to 10% adjusted EBITDA margin business.
I am pleased with the progress we have made as we work towards these goals.
As we indicated on Investor day, we strategically slowed down the business in 2022, while we focus on improving our customer experience improving our processes across titling and registration pricey, Marketi reconditioning and logistics.
And we in sourced our sales function from our primary third party resource.
We execute our strategy in 2023, we intend to resume growth sell through aged inventory improved variable cost per unit continue to reduce fixed costs and continue to convert balance sheet items into cash all while living within our means.
Our long term road map remains unchanged. During 2023, we will continue to focus on our three key objectives and for strategic initiatives.
On slide four.
Our first quarter highlights.
Before I discuss first quarter performance. Please note a change we have made in the presentation of adjusted EBITDA and other non-GAAP measures.
Previous quarters, we added back the movements related to fair value adjustments of finance receivables.
We continue to hold the residual certificates from our 2023 dash one securitization.
Order to better reflect the current state of our finance receivables and the economic impact of those receivables to the company, we are including fair value adjustments of finance receivables and all adjusted EBITDA metrics, Bob will speak more to this during his section.
During the first quarter, we recognized an adjusted EBITDA loss of $65 million.
Within the range of our expectations we.
We improved adjusted EBITDA, excluding nonrecurring costs by approximately $10 million or 14% sequentially.
During the quarter UAC sold approximately $239 million of rated asset backed securities for proceeds of $238 million and retain the non investment grade securities and residual certificates.
In April as a result of an improved securitization market and portfolio performance of our 2023 Dash one securitization we sold the non investment grade securities at 99% of par value generating approximately $23 million of additional liquidity.
The current market condition, we continue to hold the residual certificate.
I'd like to comment on our strategy with regard to UAC C securitization.
On the right terms, we intend to sell the residual certificates recognize a gain on sale and have the transaction off balance sheet.
If the market conditions are not favorable we expect to hold the residual certificates keeps the transaction on balance sheet and realize the return on these residual certificates overtime.
During the quarter, we booked $5 million of upfront expenses related to UAC securitization given that we held the residual certificate and the securitization remains on balance sheet have we sold the residual certificates. These upfront expenses would've been reflected in the gain on sale from the secure.
<unk>.
Excluding these upfront expenses relating to the securitization our adjusted EBITDA, excluding nonrecurring costs for the quarter would have improved by $5 million.
E Commerce gross profit per unit or GPU increased from $1233 to $2552 sequentially.
<unk> from GPP, you on an H unit and electric vehicle inventory reserves taken in Q4.
During the first quarter, 77% of our units sold were held greater than 180 days compared to 75% in the fourth quarter of last year and 49% in the third quarter of last year.
During our Q4 earnings call I mentioned that we expect to sell through the vast majority of our aged inventory in the first half of 2023.
As we sell through aged inventory, we have tightened our definition of aged units are greater than 180 days from greater than 270 days.
We expect a significant portion of our sales in the second quarter to be from aged units, which will put significant pressure on GPU in the second quarter. We expect the back half of the year to show improved GPU as we sell a higher mix of NIH units.
We are making progress on our long term road map and our four strategic initiatives. We are in the process of ramping up acquisitions and marketing expenditure resumed growth while simultaneously continuing to drive operational efficiencies and cost reductions throughout the organization.
We continue to make improvements in transaction processing, including title and registration.
We've mentioned our goal is to become best in class entitling in registration.
We have and will continue to be very focused on reducing variable and fixed costs. As a result of the operational improvements we've made across all aspects of the organization, we're able to operate with significantly fewer resources in.
In January and April we completed a reduction in force that we expect will result in approximately $42 million of annualized cost savings.
Finally, we repurchased $15 million face value of our convertible notes for $6 million, reducing our leverage at a substantial discount.
Moving to slide five.
During Investor Day, we outlined the unit economic drivers behind our four strategic initiatives that we believe are key to building a profitable business model and we've been providing quarterly updates on our progress on those areas.
This slide is an update on our first quarter progress by financial lever.
First product and vehicle GPU.
<unk> was $2552 a $1319 sequential improvement primarily driven by the inventory reserve in Q4, 77% of units sold in the first quarter were aged and we expect a similar mix of units sold in the second quarter as I mentioned, we expect.
A significant reduction in the midst of age units in the second half of the year relieving pressure on GPP.
Our GPU for an aged units or units, we've owned less than 180 days was comparable to our Q3, 2022, GPU, which was $4206.
<unk> units continue to generate GPU in line with our expectation.
We also continue to invest in improvements in our pricing engine, which we expect to unlock increased GPU.
We continue to see strong product GPU as we develop and grow our UHC captive financing operations.
Our logistics costs consistent with our long term road map in 2023 objective to reduce cost per unit, we have reduced our normalized all in logistics cost per unit by 7% sequentially for comparison purposes, we have excluded certain accruals related to third party logistics that were really.
<unk> in the fourth quarter.
Our inventory.
Our improved titling and registration process has resulted in a 21% improvement in inventory turns sequentially. As mentioned previously we are ramping unit vehicle acquisitions to facilitate unit growth and sequential quarters, and we expect to continue to improve our inventory turns are.
Our sales costs.
We fully transition from our third party sales provider as of the end of January of this year consistent with our long term roadmap in 2023 objectives to reduce cost per unit, we have reduced our selling cost per unit, 11% sequentially.
Our title and registration and support costs.
In the fourth quarter, we mentioned significant progress in our title and registration processes.
At the end of Q1 over 94% of our units were available for sale or pending sale compared to 87% in the fourth quarter and 52% in the third quarter of last year.
Consistent with our long term road map in 2023 objective to reduce cost per unit, we reduced our Thailand registration and support costs per unit, 20% sequentially.
Additionally, $12 million of restricted cash that was previously trapped on the balance sheet was released within the quarter as a result of our continued improvement.
For marketing costs, we increased our marketing spend $1 $6 million sequentially to facilitate unit growth going forward.
For fixed costs in January and April of this year, we completed reductions in force that are expected to deliver an additional $22 million on an annualized fixed cost savings.
<unk> with our long term road map in 2023 objective to reduce cost per unit, we reduced our fixed cost per unit or 11% sequentially Lastly, our advanced analytics team functional business teams and tech teams continue to build data assets analytical assets and tech assets.
We believe in the long term will provide a competitive advantage across title and registration pricing conversion unit in product margin and supply chain costs moving to slide six I want to take a moment to recognize the significant improvement that our roommates in UAC colleagues have delivered over the past year.
Excluding securitization gain and nonrecurring costs, we continue to reduce our losses, despite absorbing significant GPU pressure caused by our legacy titling and registration issues in 2022.
We expect to see continued improvement as we sell through the aged inventory that is pressuring GPU and continue to focus on cost per unit reductions.
We have reduced our annualized adjusted SG&A from $684 million in Q1 of 2022.
$264 million in Q1 of 2023.
Reduction of over $400 million annualized in only 12 months.
While we continue to make progress on our long term roadmap, whereas the turn where we are beginning to resume growth. While we continue down the road of improving our operations and reducing fixed and variable costs. While our route is upheld for GPU in Q1, and Q2 as we sell through aged inventory we.
<unk> GPU to normalize in the back half of the year when the majority of our sales are expected to be from an aged vehicles, which are currently delivering GPU consistent with our long term roadmap.
Now I'll turn it over to Bob to discuss our first quarter results in greater detail.
Bob.
Next time I'll start with a summary of our financial performance on slide eight <unk>.
All comparisons are against the prior quarter unless otherwise noted as Tom mentioned at the start of the call. We have recast our adjusted EBITDA metrics to include fair value adjustments on finance receivables by holding the residual certificates of the <unk>.
<unk> completed in January we're accounting for those finance receivables under fair value accounting as opposed to held for sale accounting due to this we felt there was no longer appropriate to exclude fair value adjustments from adjusted EBITDA as a significant share of our portfolio would be subject to such adjustments were they previously only primarily apply to the pre acquisition port.
Folio we.
We have included a reconciliation of the change in the appendix of this presentation.
Revenue of $197 million decreased 6% as E Commerce units declined 5% consistent with our strategy, we intentionally slowed transactions to focus on operational execution ecommerce GPU increased 107% to $2552.
As we expected and discussed during the Q4 2022 earnings call, we realized the negative impact of selling through aged vehicles as we freed up inventory previously not listed for sale. This impact was offset by a benefit of inventory reserves taken in the fourth quarter that were released as we sold through aged inventory adjusted <unk>.
EBITDA loss, excluding nonrecurring costs improved $10 million to $64 million improvement was driven by reduced operating costs higher gross profit in both e-commerce and wholesale channels, partially offset by lower unit volume and $5 million of securitization related expenses at ACC for our January.
<unk> 2023 securitization.
Expense side, we further reduced our fixed and variable operating cost as we continue to pursue our three key objectives and for focused strategic initiatives.
Turning to you ACC first I would like to provide an update on the status and performance of our off balance sheet securitization completed in the third quarter of 2020 to.
As mentioned during our fourth quarter 2022 earnings call consistent with increasing default rates across the market you ACC is experiencing higher than anticipated losses on the portfolio in order to support the transaction, we elected to waive our servicing fees each month in the first quarter.
Due to this decision.
Accounting purposes, we now consolidate the securitization on the group's financial statements. There was no retroactive adjustment and this change in accounting treatment does not have a material impact on cash liquidity or our risk profile.
In January of this year, we completed another securitization and use the proceeds of selling the rated notes to pay down our warehouse facilities and provide liquidity to continued portfolio growth at ACC due to market conditions, we elected to initially hold the double b notes and residual certificates during April .
We sold the non investment grade securities and improved liquidity by $23 million, we continue to hold the residual certificates as a result, the securitization remains on our balance sheet as we hold the residual credit risk we recognize the income and expense from the finance receivables and related debt on the P&L.
If market conditions improve and we decided to sell the residual portion of the securitization, we anticipated an improvement to our year end liquidity by up to $25 million. We will continue to closely monitor the securitization markets and make the best economic decision in the interest of our stakeholders.
We remain focused on maximizing our liquidity and strengthening our balance sheet in the first quarter, we repurchased $15 million face value of our convertible notes for $6 million further reducing our leverage. Additionally, we released over $12 million in restricted cash on the balance sheet as a result of improved titling and registration processes.
Let's move to slide nine.
Which provides a bridge from fourth quarter 2020 to the first quarter 2023, adjusted EBITDA, excluding nonrecurring costs as well as cash and liquidity.
E Commerce gross profit improved sequentially by approximately $5 million the impact of selling through aged inventory as well as significantly reducing our inventory on hand allowed us to release inventory reserves by approximately $6 million.
I think that was the negative impact of reduced sales margins on the aged inventory we sold within the quarter.
An estimated $9 million headwind.
As mentioned previously we expect these impacts to abate as we sell through these aged vehicles and improved inventory turns.
Wholesale gross profit improved approximately $4 million sequentially, primarily driven by improvements in the overall wholesale market and reduce losses related to typhoon issues from prior periods. In addition to our improvements in ecommerce and wholesale gross profit.
We continue to reduce our variable and fixed cost structure as we drive efficiencies throughout the organization.
In total for the quarter, we improved adjusted EBITDA, excluding nonrecurring costs by approximately $10 million I would like to note that our first quarter results do not include the full quarterly benefit of a reduction in force announced in late January or the recently announced reduction in late April .
Moving to liquidity.
As outlined in the fourth quarter 2022 earnings call as a retail inventory aged over six months. Our floor plan facility does not provide the ability to borrow against the full value of those vehicles, requiring us to temporarily invest cash and inventory we anticipated a dip in our cash balance during the first quarter due to higher cash and inventory balances we expect to recover.
Cash during the first half of the year as we sell through the aged inventory offsetting this headwind, we released $15 million of cash trapped on the balance sheet, primarily related to initiatives to resolve legacy titling and registration issues.
Next we repurchased $15 million face value of our convertible notes for $6 million, reducing our leverage we may continue to opportunistically repurchase notes from time to time to reduce our outstanding indebtedness as discount subject to market conditions and availability. These.
These factors resulted in $370 million of cash and cash equivalents on the balance sheet at quarter end.
Which was within the range of our expectations.
Finally, it is important to understand that earnings from the ACC business have been used to pay down warehouse lines. We can draw against these lines as a source of liquidity at the end of the first quarter. There was approximately $60 million of available liquidity at ACC.
Which when combined with our cash balance will give us greater than $375 million of total available liquidity.
I would like to mention two additional transactions. We recently completed in April to create incremental liquidity you ACC first despite challenging market conditions, we sold the non investment grade securities from the January securitization for $23 million.
Actually we completed a repo financing on the vertical risk retention portion of our securitizations, resulting in approximately $24 million of incremental liquidity. Both of these transactions, which totaled $47 million and proceeds are not included in the $377 million of available liquidity on March 31.
We remain focused on capturing balance sheet opportunities to improve our available liquidity.
Next.
Let's turn to our full year cash and cash equivalents to outlook on slide 10.
As discussed during our fourth quarter 2022 call.
We expect a 2023, ending cash and cash equivalents balance of $150 million to $200 million.
This is primarily driven by our expected EBITDA loss for 2023, plus modest interest expense continued progress on titling and registration along with other cash initiatives are expected to free up approximately $30 million in cash currently trapped on the balance sheet we.
We remain on track with our expectations for year end cash and cash equivalents.
With respect to overall liquidity, we generated an additional $24 million from the repo financing with a potential for an incremental $25 million from selling the residuals certificates. Additionally, if we were to complete another securitization later in the year or any liquidity would improve as a result.
Thank you for your time and attention. This morning with that I'll turn it back to Tom for a few closing remarks Tom.
Thanks, Bob turning to slide 11.
Yesterday marks one year since we pivoted the business and announced leadership changes as well as our three key objectives and for focused strategic initiatives.
Additionally, last May 26, we introduced our long term roadmap, our long term road map and for strategic initiatives remain unchanged and I anticipate that they will remain unchanged as we pursue building a profitable business.
I'm incredibly proud of what our team has accomplished over the last 12 months, we have transform virtually every aspect of the business to improve our customer experience improve our processes drive operational efficiencies reduced variable and fixed costs decrease our cash burn rate and reduce our debt.
We still have a lot of work to do I do believe we are well positioned to resume growth and continue our business transformation in 2023, as we execute our long term roadmap and pursue our mid and long term goals and look forward to updating you on our progress on our four strategic initiatives each quarter as we pursue our long term roadmap. Thank you.
Your time today and operator, we are ready for questions.
Thank you as a reminder to ask a question you will need to press star one one on your telephone again Thats Star one one on your telephone SaaS question. Please standby, while we compile the Q&A roster.
Okay.
Okay.
Our first question comes from the line of Rajat Gupta of Jpmorgan Chase. Your question. Please Regina.
Great Good morning, and thanks for taking the questions.
Just firstly on like the EBITDA guidance.
The run rate here once you once you get through inventory looking at the one time factors that impacted first quarter.
And what's going to impact the second quarter as well as.
Some of the securitization expenses.
Counting for the risks that were announced recently.
I think thats, something close to 45% to $15 million EBITDA loss rate.
Quarterly EBITDA loss rate for the second half.
Is that is that a fair assumption just wanted to clarify that when I have a couple of follow ups.
Great. Thanks.
Question, Yes, your math is pretty much rate right in line with what we with what we've disclosed.
If you look at the.
Our first quarter adjusted EBITDA that we reported $65 million.
We did discuss in our comments that within that $65 million, we had $5 million.
Debt issuance costs in the first quarter.
And those costs.
The reason that we had to expense because that transaction. It's currently it's currently.
Alex sheet and a transaction that is off balance sheet that would be netted against the gain on the.
Sales. So that was a that was a 5 million dollar adjustment and then in addition to that some of the other things that we've talked about Tom talked about the January Rep, where we only had two months of the three month benefit and if you take the $27 million that we talked about.
Couple million dollar benefit per month, and we didn't get one of those months in the first quarter. So we expect that is not going benefit and then in April we announced an additional reduction in force and that was $50 million in annual savings and obviously, we'll see that see the benefit of that.
We will see a couple of months.
That benefit in.
In Q2, and then get the full benefit of that approximately three 5% to $4 million benefit.
Going forward.
And then the final item that you mentioned as well as the GPU and Tom talked about the <unk> hundred dollars Delta that we're seeing.
70, <unk> hundred dollars impact GPU, because 77% of what we're selling right now are our aged vehicles and if you take that.
Times are 4000 units, that's worth about $2 million and that gets you right in the range that youre that youre that youre thinking that's correct, that's correct way of looking at it.
Got it got it and on SG&A you mentioned.
Economics on a per unit basis going forward.
I'm curious.
After you're done with the reps.
Is there an opportunity to reduce absolute level of expenses like $50.
Further as well or is it going to be more about.
Just just growth lever.
Leveraging that growth beyond back.
Just curious like what's the message there.
The average out we're focused on both of those actually Theres kind of three levers are that we think the way we think about it as we resumed growth. If we keep operating cost. The same obviously cost per unit goes down will have natural attrition that happens and it's our goal with a few exceptions in our organization that.
When we do have attrition that we do everything possible not to replace those roles and we're going to continue to drive productivity throughout the business. We have several initiatives in place to do that as well as there are non people costs that we spent several months getting our arms around that we have a team folk.
Just on driving down a lot of our non people costs and contract I think we mentioned previously contracts we entered into a while back that we're still very focused on reducing those costs. So we think the combination of those three we said last quarter. Our plan is each quarter to sequentially reduce our cost per unit.
And so.
Theres kind of three or four levers there that we're very focused on to achieve that.
Got it and then just given where we are in terms of the dollar amount you said you kind of review of ground.
Now it seems to me.
The next leg of cost reduction.
Likely done with like the major chunk of <unk>.
Reductions.
Which were low hanging fruit.
Now with the remaining likely to come from well I can give you more slow or likely to come from attrition.
It seems like you need to be selling at least two X.
Or maybe even higher the number of units you're selling right now to get to to get close to EBITDA breakeven.
So curious like what's the what's the timeline to get there in <unk>.
Without having to add any more cost to get there.
And ultimately.
Given the liquidity that you have in the 45 to 50 million in EBITDA burn rate in the second half.
Yes, it's a great question Mers yacht and one we talk about literally every day. So here's how we think about it. Our first goal is to minimize cash burn while we continue to improve the operations of the business and the cost structure of the business.
And so we.
We had a very strong March.
To the point, where.
We were concerned if we continued at that rate we would.
It would put so much pressure pressure on our inventory, we would we would come to close to not having enough inventory. So we actually put the brakes on a little bit because our acquisition engine, but really the last year plus has been on almost idle, which was were only buying vehicle to keep our systems working.
Our reconditioning working et cetera.
And we paused a little bit because we wanted to really make sure. We had acquisitions right because we have to grow responsibly and we're not going to buy a lot of cars that we can't sell at the margins we need to make in our long term roadmap.
So we took April and throughout the month, we actually figured that part of the equation out faster than I expected and now we're kind of resuming growth again in <unk>.
May and June and so the way we think about it is we've got to get all of those levers right at.
At the same time.
Our plan would say based on the things that we're doing that we believe that we can continue to grow sequentially each quarter. This year, but we're going to do it very responsibly, while at the same time to your point, we have to continue to drive down our cost per unit and then there will be a point in the year.
Soon which I'm going to imagine it's Q1 of next year, we're really want to step up growth at a higher rate, but I think this year is really optimizing all those levers at the same time getting the cost structure right growing responsibly getting the whole model right and then I think in Q1 and into next year as well.
We think about real strong acceleration of growth, yes, and then reach out one thing I just wanted to add to on the liquidity side I think it's important as we talked about the repo financing today. So that was incremental to what we had talked about last quarter.
If you go to page 10, you'll see that we've improved our midpoint of potential liquidity by by the amount of the repo financing. That's $274 million also does not include if we are able to execute another securitization. If the markets are favorable in the second half of the year, we could see upwards of another $20 million to $25 million of liquidity that could come out of that come out of that as well.
So I just wanted to make sure that.
That youre thinking about that as well.
Yes.
Thank you.
Again to ask a question. Please press star one one on your Touchtone telephone again Thats Star one on your Touchtone telephone to ask a question.
Sure.
Our next question comes from the line of Sharon Zackfia William Blair. Your question. Please Sharon.
Good morning, I apologize for my voice.
Come down Thats, something Thats Lake Tahoe.
You can understand me.
But I wanted to ask about.
The GPU pressure that you alluded to in the second quarter.
I'm, assuming that GPU will worsen sequentially from the first quarter.
Given the reserve that benefited the first quarter, if you could kind of clarify that and whether there is any reserve benefit that we'll see in the second quarter that would be helpful.
Yes, good morning, Sharon sorry, you're not feeling well.
We would expect Q2 to be Directionally around where Q1 is as we work through the aged inventory and as I mentioned earlier, we're very pleased with the EU, we're getting on our on each unit and said, we really would like to.
Sell through of our H unit in Q2.
And <unk>.
We're expecting pretty similar <unk> in Q2 as Q1 and then we expect.
A pretty sizable increase in Q3, and Q4 and GPU as will just be selling primarily on H unit.
Okay, and then I wanted to touch base on what your customer demographic now looks like after the reset that you've done.
And unit volumes when the company went public it kind of skewed more prime higher income.
Obviously, you've done the acquisition of new ACC in your chain.
Changed the inventory composition somewhat over the past few years. So what does the customer program really look like today, if you could give us some idea of the time I graphics and Psycho graphic.
Yes, we're definitely seeing a.
Mix from a mix shift from primarily prime to a better mix across really the entire credit spectrum.
I think the combination with Dow ACC has really enabled us to do a much better job.
Converting that all the subprime traffic at your call from our <unk>.
Investor Day presentation a significant.
Predominant proportion of our of our traffic coming from subprime customers, but most of our business was Brian customers and consistent with our strategy back then we are seeing a better mix one of the other things that we sense was.
At the initial acceleration of interest rate increases.
And customers really slowed down from from the kind of the shocking right and now that the rates have kind of leveled off we're seeing the mix.
Of our prime customers come back to more normalized levels, but we were really pleased with across the entire spectrum.
We have a better mix across the entire credit spectrum that we had a year ago.
And then last question as you think about it.
And it meaningfully accelerating sales next year and it sounds like in the first quarter are there any incremental.
Fixed costs that you need to bring into the business of anything you've cut that kind of will need to come back to drive growth and I know, we've talked a lot about liquidity in 2023.
Do you feel as if currently you have enough liquidity for 2020, Florida as well.
Yes, so I'll take the first one.
With regard to fixed Scott.
We still believe we have opportunity to continue to reduce fixed cost as I mentioned earlier.
That we have some legacy non people costs that we're working through that we think we can have pretty significant improvement in and then in terms of the people cost we truly have completely changed every aspect of the business the amount of information we get from our Quant team.
He's really helped us streamline all fixed function from HR to a county, the speed at which we close our books and so we've made structural changes to where we think our fixed costs, we can maintain relatively flat or even decline with the exception of some things that may go up like D&O ensure.
<unk> and other things, but generally we think we've got a fixed cost base that we can grow on and we'll continue to look to shrink it versus grow it.
Shared with your second question.
With respect to liquidity.
I talked about the range of 275 to upwards of $300 billion available at the at the end of the year then we're looking at.
We talked about <unk> question earlier around that $45 million to $50 million run.
Run rate when you just look at our second when you look at our first quarter performance.
What that could look like at the end of the year, but that gives you a little bit of an idea of how many quarters of liquidity we're looking at.
As we enter into the as we enter into the <unk>.
The end of 2023, so hopefully that was that additional disclosure was beneficial the other.
They're variable I'd add.
Darrin that we look at is just what are the securitization market together be because the way we think about the securitization when theyre healthy and we can generate a gain on sale, we pull cash forward and when they're not as favorable.
We earn that invest we earn that return over time.
So we've got a long time between now and 2024 to see what happens to the securitization markets, but obviously the more favorable they are better they are for our liquidity.
Okay. Thank you.
Thank you, yes sure.
Sure. There's one more thing I would like to add just in terms of our ability to.
To pull down the.
The warehouse facilities used to see it move that cash to room.
As these basis, that's fully available to us as well I want to make sure people understand that we have that we have that flexibility.
Thank you.
Our next question is a follow up question from Rajat Gupta of Jpmorgan. Your line is open.
Great. Thanks, Sorry, My line had dropped off middle of the previous question, but thanks for thanks for answering.
Anyways.
I was going to ask like.
At what point when you're scaling this business growing with both of them.
Would you realized.
That's about that's about to breakeven might end up being longer or you need to.
More expansions come in to get that crowd.
What would make you arrived at the decision to perhaps.
Liquidate and return the cash to shareholders sooner rather than later.
And wait for the market to recover or the credit backdrop to recover.
<unk>.
Yes, thanks for that where we focus literally every day on doing what's best for our stakeholders and.
We have a plan in place that you kind of did the math on what the Q1 run rate would be with normalized things then we're going to continue to focus on improving that number throughout the year and growth then we're going to be very responsible to all of our stakeholders to create the maximum return and so it's something that wed.
Got every day and right now our plan is really on plan and we're going to continue focus on that but obviously our goal is to maximize return for all of our stakeholders. Yes, one thing I would add to that is not under any scenario.
The way that we're looking at this as minimizing our cash burn living within our means of managing responsibly.
In the best interest of all of our stakeholders under any scenario, but we're fully committed we were really pleased with the progress that we've made with respect to getting our cost structure in line and now we've got we've got work to do in terms of.
Ramping up the growth engine, we're pleased with the progress that we've made so far with respect to ramp the business back up but it's still a lot of work to do on that front and we'll keep you posted on our progress.
Understood. Thanks for all the color.
Sure.
Thank you I would now like to turn the conference back to Tom Shaw for closing remarks, Sir.
Great. Thank you everyone I appreciate your time today and have a fantastic rest of your day and we'll talk to you next quarter.
This concludes today's conference call. Thank you for participating you may now disconnect.
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