Business context and reporting period
The filing is RumbleOn, Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2023—not a filing under the name “Ridenow Group, Inc.” RumbleOn operates powersports dealerships and a vehicle-logistics business; its automotive business is reported as discontinued operations. Amounts below are in millions of dollars unless stated otherwise.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $338.1 | $380.7 | $1,055.2 | $1,127.4 |
| Gross profit | $91.9 | $114.4 | $288.6 | $349.3 |
| Gross margin | 27.2% | 30.1% | 27.4% | 31.0% |
| Operating income (loss) | $(0.3) | $14.1 | $(0.2) | $68.0 |
| Net income (loss) | $(16.5) | $3.0 | $(47.0) | $26.2 |
| Adjusted EBITDA | $13.2 | $26.1 | $47.6 | $101.1 |
- Q3 revenue fell 11.2% year over year; nine-month revenue declined 6.4%. Powersports vehicle revenue was the main drag, particularly retail used vehicles. New retail unit sales increased, but average prices and per-vehicle gross profit declined.
- Q3 gross profit fell 19.7%; nine-month gross profit fell 17.4%. Operating results also reflected higher SG&A over the nine-month period and substantially higher interest costs.
- Interest expense was $19.8 million in Q3 and $55.8 million for nine months, versus $12.2 million and $35.6 million, respectively, in 2022. The filing attributes the increase mainly to higher rates and average borrowings.
- Continuing-operations operating cash use was $19.3 million for nine months, compared with $29.6 million used in 2022. Investing cash use was $12.9 million versus $76.5 million; financing provided $34.9 million versus $105.3 million.
- At September 30, cash was $41.4 million and restricted cash $18.0 million. Reported committed liquidity resources were $73.6 million, including $32.2 million of current availability under floorplan facilities.
- Total debt principal, including floorplan borrowings, was $687.6 million; debt net of unamortized discount and issuance costs was $657.1 million. Floorplan debt was $287.1 million. Total liabilities were $883.9 million and stockholders’ equity $175.1 million.
Material changes, outlook and risks
- Management cited softer demand, post-pandemic normalization, lower used-vehicle retail volumes and prices, and weaker vehicle gross profit per unit. It expects the full effect of identified annualized SG&A reductions of approximately $42 million to be realized in 2024. No earnings or revenue guidance is provided.
- RumbleOn amended its Oaktree loan terms after covenant noncompliance at June 30, 2023. The amendment waived leverage tests for Q2 and Q3 and relaxed them through Q2 2024, but requires at least $100 million of net equity proceeds by December 1, 2023, asset/loan-portfolio monetizations, and lender warrants. Failure to complete the equity raise by the deadline could trigger covenant noncompliance and Oaktree’s right to demand repayment.
- A proposed $100 million shareholder rights offering was expected to run November 13–28, 2023, with standby purchasers committed to purchase unsubscribed shares, subject to the agreement. Proceeds are intended partly for Oaktree debt repayment. The company completed a sale-leaseback of eight properties, generating $48.2 million net proceeds used to reduce Oaktree debt; it is accounted for as a financing obligation, not a sale.
- Management stated its plans were sufficient to meet obligations for at least 12 months and believed they alleviated substantial doubt about going concern. That assessment depends in part on the offering, asset sales, and covenant compliance.
- RumbleOn classified $21.6 million of consumer loans as held for sale and recorded a $6.0 million valuation charge. It intended to sell the portfolio and repay the related $14.6 million credit facility in Q4 2023; the company also reported it did not meet that facility’s interest-rate-spread requirement.
- Disclosure controls were deemed ineffective because of an ongoing material weakness in internal control over financial reporting, including insufficient accounting resources and deficiencies in intercompany eliminations, reconciliations, estimates, and management review. Remediation was underway but not yet considered complete.
- Other notable items include a $2.6 million impairment related to terminating a software license, the wind-down of discontinued automotive operations, and an ongoing investigation into allegations concerning a former CEO’s use of company resources. A pre-suit mediation did not resolve a potential dispute; no lawsuit had been filed as of the report.
- Michael W. Kennedy became CEO effective November 1, 2023. The filing also reports material related-party leases for 24 properties and other related-party arrangements.
Important facts for investors to verify
- Confirm completion and net proceeds of the rights offering by the Oaktree deadline, and whether any resulting dilution or additional financing terms apply.
- Track covenant compliance, debt repayment requirements, interest expense, and remaining liquidity; distinguish restricted cash and inventory-backed floorplan availability from freely available cash.
- Verify completion and realized proceeds from the consumer-loan portfolio sale and any further asset disposals.
- Assess whether 2024 cost reductions materialize and whether powersports unit economics and gross margins stabilize.
- Monitor remediation and testing of the material weakness, as well as developments in the former CEO investigation and potential claims.