RumbleOn, Inc. — Q1 2021 Form 10-Q
Entity note: The supplied filing is for RumbleOn, Inc. (NASDAQ: RMBL), not a company named Ridenow Group, Inc. It covers the three months ended March 31, 2021; financial statements are unaudited.
Business context and results
RumbleOn operates an online marketplace and vehicle distribution business, with powersports, automotive, and vehicle logistics and transportation segments. It sold 3,500 vehicles in Q1 2021, versus 7,420 a year earlier. Management attributed lower sales volume mainly to COVID-related disruption, constrained inventory availability and liquidity, and reduced purchasing; higher average vehicle prices partly offset the volume decline.
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $104.3 million | $144.4 million |
| Gross profit (loss) | $11.2 million | ($1.3 million) |
| Gross margin | 10.7% | (0.9%) |
| Operating loss | ($2.8 million) | ($19.9 million) |
| Net loss | ($4.5 million); ($1.93) per share | ($22.0 million); ($10.77) per share |
| Adjusted EBITDA (non-GAAP) | $21,239 | ($6.5 million) |
| Cash used in operating activities | ($12.9 million) | ($19.5 million) |
Financial position, liquidity, and material changes
- At March 31, cash was $80,049 and restricted cash was $2.05 million, compared with cash of $1.47 million and restricted cash of $2.05 million at year-end 2020. Cash and restricted cash together declined from $3.52 million to $2.13 million.
- Current assets were $51.6 million and current liabilities $51.7 million. Total assets were $101.3 million; total liabilities were $99.4 million; stockholders’ equity was $1.9 million.
- Debt principal was reported at $77.1 million gross and $65.6 million net of unamortized discounts and issuance costs, excluding operating lease and derivative liabilities. Net debt was $53.1 million at December 31, 2020. Much of the notes payable and floor-plan borrowing was classified as current; the NextGear floor-plan balance was $27.0 million and payable on demand.
- Operating cash use improved year over year, but cash at quarter-end was low. Financing activities provided $11.9 million in Q1, including increased line-of-credit borrowing and a $2.5 million bridge loan. Investing cash use was $0.4 million, primarily technology development.
- Revenue fell 27.8% year over year, while gross profit improved substantially, in part because Q1 2020 included an $11.7 million inventory impairment from the Nashville tornado. SG&A declined to $13.4 million from $18.1 million; interest expense declined to $1.6 million from $2.2 million.
Outlook, transactions, and risks
- Management gave no quantitative earnings or revenue guidance. It said higher market prices and lower days to sale continued through March and were expected to persist through Q2 and possibly beyond. It expects vehicle purchasing and revenue to recover to or exceed pre-pandemic levels as COVID-19 impacts abate, but cautioned that timing is uncertain and inventory purchasing had been constrained.
- On March 12, 2021, RumbleOn agreed to acquire up to 46 RideNow entities for $400.4 million cash plus $175 million of RumbleOn Class B shares, subject to adjustments and conditions. The filing expected closing in Q2 or Q3 2021, subject to financing, shareholder, regulatory, manufacturer, and other approvals; minority-owner participation and rights of first refusal also posed uncertainty.
- Oaktree committed, subject to conditions, to senior secured facilities of up to $400 million, including an initial $280 million and a delayed-draw facility of up to $120 million. The proposed facility carries interest at an applicable base rate plus a substantial spread, includes cash-pay and payment-in-kind components, and is secured. The filing also records a $10.95 million warrant liability related to the financing commitment.
- After quarter-end, the company sold 1,048,998 shares at $38 per share, receiving approximately $36.7 million net proceeds for working capital and general corporate purposes. Management said available working capital, operations, financing arrangements, and this offering were expected to fund operations for at least one year from issuance of the statements.
- COVID-19, supply and inventory constraints, transportation disruptions, seasonality, liquidity needs, and the proposed acquisition’s execution and financing are key risks. The Nashville tornado insurance claims remained partly disputed or under negotiation; the company provided no assurance of ultimate recovery or timing. Management reported no material legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether the RideNow transaction closed, on what final terms, and how much debt and equity financing it required.
- Post-quarter cash, availability under credit facilities, floor-plan terms and demand rights, and the impact of the equity offering on liquidity and dilution.
- Whether vehicle sourcing and sales volumes recovered, and whether improved gross margins can be sustained as inventory availability and market prices change.
- Final outcomes and cash timing for the tornado-related inventory, property, and business-interruption insurance claims.
- The reconciliation and sustainability of the near-break-even adjusted EBITDA measure, which is non-GAAP, against continued GAAP net losses and operating cash outflows.