RumbleOn, Inc. — Form 10-Q summary
Reporting period: Quarter ended September 30, 2020; filed November 16, 2020. The filing identifies the registrant as RumbleOn, Inc. (NASDAQ: RMBL), not Ridenow Group, Inc. The company operates an online marketplace and vehicle distribution business, spanning pre-owned powersports and automotive sales plus vehicle logistics and transportation.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $117.3 million | $220.3 million | $345.7 million | $713.7 million |
| Gross profit | $16.8 million | $12.0 million | $23.9 million | $41.6 million |
| Operating income (loss) | $3.0 million | ($7.5 million) | ($14.5 million) | ($24.1 million) |
| Net income (loss) | $1.5 million | ($8.9 million) | ($19.5 million) | ($30.1 million) |
| Adjusted EBITDA (non-GAAP) | $4.7 million | ($4.8 million) | ($3.1 million) | ($16.4 million) |
- Q3 gross margin was 14.3%, versus 5.5% a year earlier. Nine-month gross margin was 6.9%, including the tornado-related inventory impairment; before that impairment it was 10.3%.
- Q3 diluted earnings per share were $0.67, versus a loss of $7.66 per share in Q3 2019. Nine-month loss per share was $9.01, versus $27.44.
- For the nine months, operating cash flow was positive $26.2 million, compared with negative $25.8 million in 2019. The company attributed the improvement principally to lower inventory, with inventory decreasing $34.2 million. Investing cash use was $1.8 million; financing cash use was $22.2 million.
- At September 30, cash was $3.4 million and restricted cash was $5.5 million. Total assets were $73.7 million, current assets $34.2 million, and current liabilities $30.1 million.
- Reported debt principal was $58.8 million, with $12.6 million of unamortized discounts and issuance costs and net carrying debt of $47.3 million. The balance sheet also reports $64.2 million in total liabilities. Convertible senior notes had $38.75 million principal outstanding and mature in 2025 at 6.75% interest.
- Management reported $43.0 million of availability under short-term revolving facilities and $52.0 million of committed liquidity resources, including cash and restricted cash. These figures include inventory-backed facilities, not solely unrestricted cash.
Material changes versus comparable periods
- Q3 revenue fell about 47% year over year; nine-month revenue fell about 52%. The decline was driven largely by lower vehicle volumes, COVID-19 disruptions, reduced inventory availability, and the March Nashville tornado.
- Q3 vehicle sales totaled 4,263, versus 10,894 a year earlier. Automotive and powersports unit sales both fell sharply, while higher average selling prices and gross profit per vehicle supported stronger margins. Logistics revenue increased in Q3.
- SG&A declined to $13.3 million in Q3 from $19.0 million and to $42.5 million for nine months from $64.5 million, reflecting lower staffing, marketing, and other spending. Headcount was 159 at September 30, versus 329 a year earlier.
- Inventory declined to $11.4 million from $57.4 million at year-end 2019. Floor-plan debt fell substantially, from $59.2 million to $12.0 million. Total debt principal decreased from $93.1 million at year-end to $58.8 million, while equity offerings and a convertible-note financing added capital.
Outlook, risks, contingencies, and unusual items
- No formal numerical revenue or earnings guidance is provided. Management expected vehicle purchasing and sales to recover toward or above Q1 2020 levels as COVID-19 effects eased, but gave no assurance on timing. It warned that supply constraints, renewed COVID-19 impacts, and the typically weaker fourth quarter could pressure volumes.
- The filing states that COVID-19-related uncertainty raises substantial doubt about the company’s ability to continue as a going concern, despite management’s belief that liquidity measures may be sufficient. The statements contain no adjustments for the outcome of this uncertainty.
- The March 3 Nashville tornado caused an $11.7 million inventory impairment in the first nine months. The company recorded a $5.6 million insurance advance as a recovery. The inventory claim is disputed over policy limits; building and property and business-interruption claims remain subject to settlement or negotiation. Management cautioned that final recoveries and timing are uncertain.
- The $5.2 million PPP loan bears 1% interest and may qualify for forgiveness, but forgiveness is not assured. The NextGear floor-plan line was reduced to $55 million; advances were capped at $25 million through March 31, 2021, when the line was to be repaid in full. NextGear debt is payable on demand.
- Other stated risks include ongoing losses, potential need for additional capital, seasonal and market volatility, dependence on third-party auctions and transporters, and possible dilution from convertible debt and equity awards. Management reported no material legal proceedings, no defaults on senior securities, and effective disclosure controls as of quarter-end.
Important facts for investors to verify
- Whether operating cash generation can continue without further inventory reductions, and how much of reported liquidity is unrestricted and immediately available.
- Repayment, renewal, or replacement of the NextGear facility by its March 31, 2021 deadline, and the terms of other demand facilities and near-term notes.
- Final insurance proceeds for the tornado, especially the disputed inventory claim and business-interruption claim, and whether recoveries exceed amounts already recorded or advanced.
- PPP loan forgiveness status and any resulting repayment obligations.
- Subsequent vehicle volumes, inventory sourcing, gross margins, and cash needs, given management’s recovery expectations and stated uncertainty.
- Potential dilution and debt-service exposure from the convertible notes, stock awards, and additional financing needs.