RumbleON, Inc. Price & Performance (RMBL)

Good morning, everyone, and thank you for joining us on this conference call to discuss RumbleOn's fourth quarter and full year 2024 financial results. Joining me on the call today are Mike Cortieri, RumbleOn's Chief Executive Officer and Tiffany Tice, RumbleOn's Chief Financial Officer. Our Q4 and full year results are detailed in the press release issued this morning. And supplemental information will be available in our Form 10 ks once filed. Before we start, I would like to remind you that the following discussion contains forward looking statements. Including, but not limited to, RumbleOn's market opportunities and future financial results, and involves risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ forward looking statements can be found in RumbleOn's periodic and other SEC filings. The forward looking statements and risks in this conference call including responses to your questions, are based on current expectations as of today. And RumbleOn assumes no obligation to update, revise them whether as a result of new developments or otherwise. Except as required by law. Also, the following discussion contains non GAAP financial measures. For a reconciliation of those non GAAP financial measures, please see our earnings release issued earlier this morning.

Now, I'll turn the call over to Mike Quateri, RumbleOn's CEO. Mike? Good morning, everyone, and thank you for joining us for RumbleOn's fourth quarter and full year earnings call. It's great to be here with you on my first earnings call with the company. I'm very excited to have taken over the reins of RumbleOn and honored at the award has placed its trust in me to lead the company. As CEO of the leading consolidator of Power sports dealerships in the country, I'm drawing on my experiences within publicly traded companies such as Dave and Buster's, Las Vegas Sands and Scientific Games. My roles within these companies gave me hands on experience managing multiunit consumer facing operations, value creating M and A, and balance sheet optimization. As well as on overall financial rigor and discipline focused on driving free cash flow and delivering shareholder value. When I joined the Board back in April, I developed a high level view of the business and recognized that while there were challenges, there were also a large opportunity to improve our overall Over the last two months, I've had the opportunity to visit a number of our dealerships and meet with the teams that drive the business on a daily basis.

We have identified key work streams and efficiency opportunities and are prioritizing specific initiatives.

All with a focus on delivering improved results driving free cash flow and creating value. It is my goal to foster a high performance culture within our company. To that end, I'm excited to be partnering with KamTac, our newly appointed Chief Operating Officer. Ken grew up in the powersports dealership business and has a lifetime of hands on experience in all aspects of our frontline operation. In the short term, I believe there are immediate right size the organization and grow EBITDA and free cash flow. It is critical we build a strong foundation for future growth by streamlining our cost structure and further standardizing our systems and processes. Over time, I expect to accelerate our growth both via acquisitions and organic avenues and we will allocate our capital to the highest return opportunity. It is no secret we are operating in a difficult environment from a macro and industry perspective. That being said, I am proud of the team's performance. Especially our frontline teams in our stores. And I believe the actions we are taking during this difficult time for our industry will enable us to emerge a much stronger company. As we mentioned on previous calls, we set a goal to reduce new inventories by $50,000,000 for the full year 2024.

We have exceeded that inventory reduction goal reducing new inventories by over $80,000,000 and believe we are going into 2025 with the appropriate level of new Regarding cost and efficiency, while the company took steps last year to lower our expense structure, having been in the seat for two months now, I believe there is further opportunity to lower our costs. Our asset light vehicle transportation brokerage business Wholesale Express, was able to deliver growth in units transported in 2024. However, a change in leadership in this segment and the subsequent exiting of nearly all of our sales teams known as brokers, in the first quarter of twenty twenty five will likely result in a significant reduction in volumes in 2025. We've taken immediate and decisive actions to mitigate the effect of this turnover. We've recruited a new experienced management team to lead the operation and they are moving forward with solid traction in attracting new brokers. Although we expect 2025 results from this segment to take a large step back from 'twenty four, we are expecting to achieve positive EBITDA from this segment in and believe that the operation is far better positioned for more sustainable long term growth and potential further integration into our powersports division.

Looking forward, we are going to plan laid out by our prior management. In my experience, while it's good to have aspirational goals in mind, our focus needs to remain on driving profitability, growing the company and creating shareholder value day in and day out. Over time, our results will speak for themselves. Furthermore, the global tariff landscape is dynamic and rapidly changing. Assuming currently contemplated tariffs are enacted and persist, affordability of certain products we sell could be hampered. Negatively impacting customer demand. I'll conclude by saying again that I'm very excited to be here. I'm focused on instilling a high performance winning culture and building a strong foundation for growth while improving profitability.

Two of our largest shareholders, Mark Tack and Bill Coulter, founded the core of RumbleOn over thirty years ago through their company right now, which was acquired by RumbleOn a few years ago. Under Mark and Bill, RightNow was a well run and profitable business. As I take over the helm as CEO, my overarching goal is to return the company to operational excellence and reinstill that winning culture that existed for so many 55% of outstanding shares owned by members of the Board, rest assured, we and the Board will continue to make decisions in the best interest of long term per share value creation. Now I'd like to turn the call over to Tiffany to walk us through the fourth quarter financial performance in detail.

Thank you, Mike, and good morning, everyone. I will start by reviewing our financial results for the fourth quarter of twenty twenty four followed by an overview of our balance sheet. We generated revenue of $269,600,000 and adjusted EBITDA of $2,200,000 in the fourth quarter of twenty twenty four. Revenue was down 13.4% year over year Adjusted EBITDA was up year over year as compared to a slight loss in the same quarter last year. Total company adjusted SG and A expenses were $62,300,000 dollars or 92.3% of gross profit compared to the same quarter last year of $80,800,000 or 113.5% of gross profit. We continue to target adjusted SG and A to be 75% of gross profit in the long term. Adjusted SG and A expenses were 22.9% lower than the same quarter last year. Moving on to our segmented performance. The Powersports dealership group retailed approximately 14,100 total powersports major units during the quarter, which is down 9.3% from the same quarter last year. Total new powersports major unit sales were approximately 10,200 down 9.5% to the same quarter last year. While pre owned unit sales totaled approximately 3,900 down 8.8%. As Mike mentioned earlier, we have made great progress in working down our new inventory over $80,000,000 from 2023 to 2024.

Our team is working closely with our OEM partners to ensure new inventory levels are aligned to the current market environment going forward. Gross margins for major unit sales continued to be challenged on new and pre owned inventory in the fourth quarter. New unit gross margins for the quarter were 10.8 driven by overstocking in the industry, compounded by our decision to exit non core product lines and over assorted brands.

Pre owned gross margins of 9.8% for the quarter compared to negative 10.3% in the same quarter last year. Which may not be comparable due to an inventory write down in the fourth quarter of twenty twenty three. We continue to leverage RideNow's cash offer technology our purchasing scale and our industry relationships to improve the pre owned business. Our parts, service and accessories fixed operations business delivered $47,200,000 of revenue and $22,000,000 of gross profit or GPU of fifteen fifty four down $91 or 5.6%. The decrease comes primarily from accessories and service.

Our financing and insurance teams delivered $22,600,000 in revenue, a GPU of 1,600 down 8.9% year over year.

The decrease was driven by a decline in unit volume. So all in, revenue from our Power Sports dealership group was $256,200,000 down 14.1% to the same quarter last year.

The decrease in revenue was attributed to lower major unit volume, Total GPU for the group was 4,547, up $197 or 4.5% to the same quarter last year.

Turning now to our asset light vehicle transportation services operating group. For the fourth quarter, wholesale express revenue was up 3.1% as compared to the same quarter in the prior year. While gross profit decreased 2.9% to $3,300,000 The increase was driven by an increase in the number of vehicles transported. Looking at the full year total company revenue and adjusted $32,900,000 respectively. [indiscernible] as compared to $1,400,000,000 and $37,400,000 in the prior year. Revenue was down 11.5% year over year Total PowerSport units retails for the year were approximately 564,500 for new and pre owned, which as compared to 772,000 for new and pre owned in the prior year.

New unit sales were down 7.1% for the year, while pre owned units were down 16.4%. Turning now to our balance sheet.

We ended the quarter with $96,700,000 in total cash, inclusive of restricted cash and non vehicle debt was $182,100,000 Our cash balance at fiscal year end was benefited by the completion of our previously announced $30,000,000 capital raise in the form of a $10,000,000 rights offering, dollars 4,000,000 related party property sale and leaseback, and $16,000,000 related party pre owned floor plan facility. Availability under our short term revolving floor plan credit facility totaled approximately $146,200,000 as of December 31. Total available liquidity defined as total cash plus availability under four plant credit facilities on December 31 totaled $242,900,000 Cash inflows from operating activities were $99,400,000 for the twelve months ended December 31, as compared to cash outflows of $38,900,000 for the same period in 2023. I am also pleased to announce that shortly after the close of fiscal twenty twenty four, we repaid all of our outstanding 38.8 which matured on 01/01/2025. From our $85,300,000 of unrestricted cash as of twelvethirty one, twenty twenty four.

As we look ahead, we continue to actively evaluate different opportunities optimize our capital structure.

Lower our cost of capital and extend the debt maturity profile of the company. As we mentioned last quarter, we've engaged an investment bank to help explore refinancing of the company's debt and those conversations continue to be ongoing. With that, we would like to begin the question and answer session. I will turn the call back to the operator now to open the line. We will now begin the question and answer session. The first question today comes from Jeff Basham with Wedbush Securities. Please go ahead.

Hi, this is Matt McCarthy on for Seth. Just a couple of questions for you. I guess let's just get the tariff sort of question out of the way here. Sure it's on everyone's mind. If you could give some more color on your exposure there, the sort of key OEMs that have the largest exposure and how you think about sort of handling the cost increase that might come through? Yes. Look, obviously, it's a question that's on top of mind for a lot of people. But I think the best way to answer that we look at our top three OEMs it's Polaris, BRP and Harley Davidson. Historically, they basically run, call it, 60% to 65% of our sales. So given their background and where their distribution is from a manufacturing perspective, I think it's difficult at our time to really gauge the magnitude of the impact. Given the level of uncertainty and the fact that it changes just about every day. Obviously, when we look at it in the short run, there's two ends to the extreme. They're either the OEMs are going to accept 100% of the tariff or they're going to pass 100% on to the consumer.

And so we're going to be sandwiched in the middle of that. So there's going to be a push and pull that just takes place and I think that push and pull is going to be dynamic basically be ever changing. So at this point to quantify any type of impact of that, I think it's just way too early to tell. Okay.

Fair enough. I guess though just we've seen a lot of consumer issues crop up here in the last couple of months. And consumer confidence and sort of the thought of tariffs having impact on the consumer. Wondering if there's anything quarter to date that you could kind of share if you're seeing a similar sort of slowdown in the business or anything you can add to us understand how things are going so far this year?

Yes. Look, I think I'll comment on one, we don't give inter quarter commentary on results since we don't give out guidance. But we're not any different than anybody else from a consumer perspective. There's a multitude of factors that are impacting their overall health from a spending perspective, obviously, the potential impact of tariffs, any other impact from any other new policy or potential policy changes from the new administration. So the one thing we can do is control what takes place within our four walls and that's what we're doing.

The next question comes from Craig Kennison with Baird. Please go ahead. [indiscernible] Good morning. Thanks for taking my questions. I think you mentioned that you feel comfortable now with your the level of inventory in your dealerships. Curious how you feel about the rest of the inventory? Or the industry on inventory? Yes, I think from an overall inventory perspective, like we said, we're very comfortable with the measures we've took place a year ago to get the new inventory in line with where we thought expectations should be. So we're very happy and confident with where we're sitting there. I think from a parts inventory perspective, it's probably a little still too high. But that's not a material component of our operation from a balance sheet perspective today.

Do you feel like the rest of the industry is at your level or will there will there continue to be promotional activity that depresses gross margin?

I think there will always be that factor sitting out there. One of the offsets of that is what the impact of tariffs are going to be on that as well. So it's going to be an ever evolving operation of what we're seeing from not only our competitors, but what our OEMs are going to be providing us to help move product depending on what the impact of all of this will be.

This concludes our question and answer session. And concludes the conference call.

Thank you for attending today's presentation.