RumbleOn, Inc. — Q2 2022 Form 10-Q
Period: Quarter and six months ended June 30, 2022. The filing identifies the registrant as RumbleOn, Inc. (Nasdaq: RMBL), not “Ridenow Group, Inc.” as stated in the request metadata. Dollar amounts below are in millions unless noted.
Business context and reporting period
RumbleOn operates powersports retail, automotive wholesale and vehicle logistics businesses. Results include RideNow, acquired in August 2021, and Freedom Powersports, acquired in February 2022. Accordingly, much of the year-over-year growth reflects acquisitions and is not a like-for-like comparison. The company reported 55+ retail locations at June 30, 2022.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $546.1 | $168.3 | $1,006.0 | $272.6 |
| Gross profit | $138.0 | $19.5 | $243.2 | $30.7 |
| Operating income (loss) | $31.9 | $0.8 | $54.6 | $(2.1) |
| Net income (loss) | $14.0 | $(3.4) | $23.2 | $(7.8) |
| Adjusted EBITDA (non-GAAP) | $44.3 | $3.0 | $75.7 | $3.1 |
| Operating cash flow | Not separately shown for quarter | $50.0 | $(17.5) |
Gross margin was approximately 25.3% in Q2 and 24.2% for the first half; operating margin was approximately 5.8% and 5.4%, respectively. Revenue rose about 224% in Q2 and 269% for the first half, largely due to acquired businesses and newly included powersports, finance-and-insurance, and parts/service/accessories revenue. Q2 diluted EPS was $0.87; first-half diluted EPS was $1.46.
Automotive wholesale gross profit fell year over year: Q2 revenue declined to $115.7 million from $127.3 million, while gross profit fell to $4.7 million from $10.2 million. Management said it deliberately bought fewer automotive units amid market concerns and high wholesale costs. Vehicle logistics revenue and gross profit increased.
Liquidity, debt and balance sheet
- Cash was $68.2 million and restricted cash $9.5 million at June 30. Current assets were $384.1 million and current liabilities $247.7 million.
- Management reported $270.0 million of committed liquidity resources, including cash and restricted cash plus $192.4 million of availability under short-term revolving facilities.
- Total debt, net of discounts and issuance costs, was $521.1 million; reported gross debt before those deductions was $555.9 million. Debt increased from $384.6 million net at December 31, 2021. Vehicle floor-plan borrowings were $139.0 million.
- The senior secured term loan had a 9.25% interest rate at quarter-end and is secured by substantially all company and subsidiary assets, subject to stated exceptions. The company also had $13.7 million drawn on a $25 million finance-loan facility.
- First-half investing cash use was $69.1 million, including $64.2 million for acquisitions. Financing provided $44.8 million; cash and restricted cash increased $25.7 million.
Outlook, risks and unusual items
- No quantified earnings or revenue guidance is provided. Management expects elevated pre-owned vehicle sales and prices over the next several quarters, while noting dependence on OEM allocations, manufacturing and logistics conditions, used-inventory sourcing, and consumer demand. Technology, inventory integration and customer-experience investments are expected to continue through 2022 and beyond.
- Management cites inflation, interest rates, recession risk, consumer credit availability and demand/supply imbalances as risks that could affect demand, financing, inventory values and results.
- RideNow acquisition purchase accounting and the final purchase-price adjustment remained unresolved. The disputed adjustment could range from approximately $34.1 million payable by the company to approximately $29.4 million payable by sellers. Related litigation and competing indemnification claims were pending; the company said it would defend the claims but could not assure the outcome.
- Purchase accounting for RideNow and Freedom remained provisional. The company reported second-quarter adjustments reducing RideNow goodwill by $19.1 million and Freedom goodwill by $76.9 million. Management had concluded no impairment-triggering event had occurred by June 30.
- The remaining $2.5 million PPP loan balance was under SBA review; the company could not assure forgiveness. Related-party RideNow leases cover 24 properties, with initial aggregate rent of about $1.2 million monthly and 2% annual increases.
- Disclosure controls were not effective at June 30 because previously identified material weaknesses remained under remediation. The weaknesses covered IT controls, period-end close, inventory controls, acquisition accounting estimates and the broader control environment. Management said the statements fairly present results after additional procedures, but gave no assurance on when remediation would be complete.
- After quarter-end, the company sold a Baton Rouge store on July 19 for approximately $5.0 million, with no material gain or loss.
Important facts for investors to verify
- Confirm the registrant identity: this filing is for RumbleOn, Inc. (RMBL), despite the request metadata naming Ridenow Group, Inc.
- Assess how much reported growth and profitability is attributable to acquisitions, and whether margins and cash generation are sustainable on a comparable basis.
- Review debt maturities, covenant terms, variable-rate exposure, floor-plan availability and the company’s capacity to service its debt.
- Track resolution of the RideNow purchase-price dispute and litigation, and final purchase-price allocations for both acquisitions.
- Monitor remediation and testing of the disclosed material weaknesses in internal control and disclosure controls.
- Evaluate the risks of elevated inventory costs, demand changes, consumer credit conditions, and the company’s substantial related-party lease commitments.