Business context and reporting period
This is RumbleOn, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2022; the filing identifies RumbleOn, not “Ridenow Group, Inc.,” as the registrant. RumbleOn operates powersports retail, automotive wholesale, and vehicle logistics businesses. Results include RideNow, acquired in August 2021, and Freedom Powersports from its February 18, 2022 acquisition date. Accordingly, year-over-year comparisons are substantially affected by acquisitions.
Key financial metrics
Amounts below are in millions of dollars except per-share data and percentages.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $459.9 | $104.3 |
| Gross profit | $105.2 | $11.2 |
| Operating income (loss) | $22.7 | $(2.8) |
| Net income (loss) | $9.1 | $(4.5) |
| Diluted earnings (loss) per share | $0.58 | $(1.93) |
| Net cash from (used in) operations | $31.3 | $(12.9) |
| Net cash used in investing | $(68.0) | $(0.4) |
| Net cash from financing | $53.6 | $11.9 |
Gross margin was approximately 22.9% versus 10.7%; operating margin was approximately 4.9% versus negative 2.7%. Adjusted EBITDA, a non-GAAP measure, was approximately $31.4 million versus $0.02 million. The filing’s overview table and reconciliation differ by $0.001 million for 2022.
At March 31, 2022, cash was $59.4 million and restricted cash was $9.5 million. Current assets were $356.8 million and current liabilities $230.7 million. The company reported $503.3 million of debt net of unamortized discounts and issuance costs; stated debt principal was $536.8 million. The Oaktree term loan carried a 9.25% interest rate. Committed liquidity resources were $201.2 million, including cash and restricted cash and availability under short-term revolving facilities.
Material changes versus the prior comparable period
- Revenue increased $355.7 million, primarily reflecting the acquired RideNow and Freedom operations. Powersports revenue was $336.8 million; automotive revenue was $110.7 million; vehicle logistics revenue was $12.4 million.
- Management attributed most of the increase in powersports vehicle, finance and insurance, and parts/service revenue to acquisitions. Freedom contributed $29.4 million in revenue and $3.7 million in earnings after acquisition during the quarter.
- Automotive gross profit declined to $3.4 million from $6.2 million despite higher revenue; gross profit per vehicle fell to $1,310 from $2,490. Vehicle logistics revenue and gross profit increased.
- SG&A rose to $78.1 million from $13.4 million, largely due to acquired employees, locations, marketing, and administrative costs. Interest expense increased to $11.2 million from $1.6 million.
- Investing cash outflow included $64.9 million for acquisitions. Financing cash flow included $84.5 million of new secured debt proceeds.
Outlook, commentary, risks and unusual items
- No quantified revenue, earnings, or cash-flow guidance is provided. Management plans to expand inventory and retail presence, improve inventory fulfillment and virtual selling, and roll out technology initiatives throughout 2022 and beyond.
- Management cites dependence on manufacturer inventory allocations and the ability to source used vehicles. It also warns that inflation, interest rates, recession risk, fuel costs, consumer credit availability, and consumer sentiment could affect demand, financing, inventory values, and estimates.
- Acquisition purchase-price allocations for RideNow and Freedom remained provisional; management cautions that final adjustments could be material. The Freedom valuation was still in process.
- Disclosure controls were not effective at quarter-end. Previously identified material weaknesses remained under remediation, including deficiencies in IT controls, close and reconciliation procedures, inventory controls, acquisition accounting estimates, and the broader control environment. Management gave no assurance as to when remediation would be complete.
- The remaining $2.5 million PPP loan was under SBA review; the company said forgiveness was not assured. The Oaktree facility is secured by substantially all company and domestic subsidiary assets, subject to stated exceptions.
- Related-party matters include long-term leases for 24 RideNow properties, payments to affiliated entities, and a software license agreement with a company owned by a director. The filing reports no material legal proceedings beyond routine litigation and no material changes to previously disclosed risk factors.
Investor verification points
- Assess performance on a comparable basis, separating acquired-business contributions from organic growth; the quarter-to-quarter comparison is not like-for-like.
- Review debt terms, interest costs, collateral and covenant requirements, and the amount and conditions of remaining facility availability.
- Track final purchase-price allocations and any resulting changes to goodwill, intangible assets, leases, deferred taxes, or earnings.
- Monitor automotive per-vehicle gross profit, powersports inventory sourcing and margins, and operating cash conversion.
- Check subsequent disclosures on remediation and testing of the material weaknesses in financial reporting controls.