RumbleOn, Inc. — FY2019 Form 10-K Summary
Period and issuer: The filing covers the fiscal year ended December 31, 2019 and was signed May 29, 2020. Although the request metadata names Ridenow Group, Inc., the filing itself identifies the registrant as RumbleOn, Inc. The report presents full-year results, not a separate fourth-quarter summary. Share amounts and per-share data were retrospectively adjusted for the one-for-twenty reverse stock split effective May 20, 2020.
Business context
RumbleOn operates an online marketplace and vehicle distribution business for used cars, trucks, powersports vehicles and related logistics. It reported three segments: automotive, powersports, and vehicle logistics and transportation. The 2018 comparison is materially affected by the October 2018 Wholesale and Wholesale Express acquisitions; 2019 also includes Autosport from its February 2019 acquisition date. Accordingly, year-over-year growth is not directly comparable to organic growth.
Financial performance and liquidity
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | $840.6 million | $156.4 million |
| Gross profit | $50.6 million | $13.5 million |
| Gross margin | Approximately 6.0% | Approximately 8.7% |
| Operating loss | $37.8 million | $23.4 million |
| Net loss | $45.2 million | $25.2 million |
| Net cash used in operating activities | $39.7 million | $23.5 million |
| Net cash used in investing activities | $3.9 million | $17.6 million |
| Net cash provided by financing activities | $34.6 million | $47.6 million |
| Cash and restricted cash at year-end | $6.7 million, including $6.7 million restricted | $15.8 million |
| Total debt, net of discounts and issuance costs | $82.6 million | $67.3 million |
Automotive generated $717.0 million of 2019 revenue and $31.7 million of gross profit, with a 4.4% gross margin versus 6.1% for the 2018 acquisition-period comparison. Powersports revenue was $101.0 million and gross profit was $12.3 million; margin improved to 12.2% from 11.2%. Logistics revenue was $31.9 million before $9.4 million of intercompany eliminations; segment gross profit was $6.6 million and operating income was $1.9 million.
SG&A rose to $86.6 million from $36.0 million, exceeding gross profit and contributing to the operating loss. Interest expense was $7.2 million; the company also recorded a $1.5 million loss on early extinguishment of debt and a $1.3 million gain from a decrease in the convertible-note derivative liability. Adjusted EBITDA, a non-GAAP measure, was negative $26.4 million versus negative $20.8 million.
At year-end, current assets were $73.8 million and current liabilities were $73.7 million. Inventory was $57.4 million. The company reported $35.8 million of availability under short-term revolving facilities; committed liquidity resources, including restricted cash, totaled $42.6 million. Nearly all reported debt was current or inventory-backed: $59.2 million of asset-based financing was secured by inventory. The auditor included a going-concern paragraph citing recurring operating losses and negative operating cash flows, compounded by COVID-19 uncertainty.
Material changes and management commentary
- Vehicles sold increased to 43,143 from 12,529, with automotive accounting for 29,952 units in 2019. Management attributed expansion to acquisitions, increased inventory and sales activity, marketing, and its dealer platform.
- Automotive sales volume grew substantially, but automotive gross profit per vehicle fell to $1,059 from $1,400 in the partial-year comparison; dealer sales represented most automotive volume.
- Management described continued investment in marketing, technology, fulfillment centers, and operating capacity. It expected these costs to rise in absolute dollars, while potentially declining as a share of revenue; this is management commentary, not formal financial guidance.
- The company reported average days to sale of 34 for powersports and 23 for automotive in 2019, compared with 32 and 26, respectively, in 2018.
Outlook, risks, and unusual items
- COVID-19: Management said the pandemic disrupted operations and demand and expected a significant negative impact on sales, results, financial condition, and liquidity. It reduced inventory and costs and temporarily laid off 169 employees effective April 9, 2020.
- Financing after year-end: In January 2020, the company raised approximately $10.9 million net from a public stock offering and approximately $8.3 million net from a convertible-note offering. The exchanged/new notes bear 6.75% interest and mature in 2025, with an initial conversion price of $40 per share. The company also received $5.2 million in PPP loans in May 2020; forgiveness was not assured.
- Liquidity update: As of May 28, 2020, management reported $9.0 million of unrestricted cash and approximately $15.0 million of remaining NextGear availability. These later figures do not eliminate the filing’s stated substantial doubt about going concern.
- Nashville tornado: A March 2020 tornado caused claimed inventory losses assessed by the insurer at approximately $13.0 million, building and personal-property losses of $3.37 million, and business-income losses subject to coverage up to $6.0 million. The inventory claim was disputed over policy limits; business-income recovery remained under negotiation. Full recovery was management’s belief, not a guaranteed outcome.
- Other risks: The filing highlights high leverage and reliance on inventory floor-plan lenders, continued losses and capital needs, thin vehicle margins, acquisition integration and unknown liabilities, competition, seasonality and weather, third-party auction and logistics dependence, regulatory and licensing exposure, data security, and possible Nasdaq listing issues. The company reported a January 2020 minimum-bid-price notice and said it believed the reverse split restored compliance.
- Auditor and controls: Grant Thornton issued an unmodified opinion on the 2019 financial statements with a going-concern emphasis. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal-control effectiveness.
Most important facts for investors to verify
- How much revenue and gross profit growth was organic versus attributable to Wholesale, Wholesale Express, and Autosport, given the unequal comparison periods.
- Whether vehicle-level margins, especially automotive dealer margins, can stabilize while volume grows and SG&A remains high.
- Current unrestricted cash, borrowing availability, floor-plan terms and covenants, debt maturities, and the company’s ability to fund operations without further financing.
- Whether COVID-19 effects, workforce reductions, and subsequent operating trends materially changed demand, inventory turnover, or liquidity after the reporting date.
- Final insurance proceeds for the Nashville tornado, particularly the disputed inventory claim and the business-interruption settlement.
- The status and terms of the PPP loan forgiveness process, and the potential dilution and cash obligations from convertible and related-party notes.
- Progress on acquisition integration, goodwill and inventory valuations, and any material changes in internal controls or Nasdaq listing compliance.