Business context and reporting period
The supplied filing is RumbleOn, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2020, not a filing identified as Ridenow Group, Inc. RumbleOn operates an online marketplace and vehicle-distribution business across powersports, automotive, and vehicle logistics and transportation. Comparisons below are with Q1 2019 unless otherwise stated.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | $144.4 million | $223.2 million; down 35.3% |
| Gross profit (loss) | $(1.3) million; (0.9)% margin | $14.0 million; 6.3% margin |
| Operating loss | $(19.9) million | $(6.8) million |
| Net loss | $(22.0) million; $(10.77) per share | $(8.3) million; $(8.08) per share |
| Operating cash flow | $(19.5) million | $(6.5) million |
| Cash used in investing | $(0.4) million | $(1.7) million |
| Cash provided by financing | $21.2 million | $3.3 million |
- Revenue declined primarily with lower vehicle volumes: 7,420 vehicles sold versus 12,103. Automotive sales were $114.2 million, powersports $23.1 million, and logistics revenue after eliminations $7.1 million.
- Gross results were hit by a $11.7 million inventory impairment following the March 3 Nashville tornado. Excluding that impairment, gross profit was approximately $10.4 million, or 7.2% of revenue.
- SG&A was $18.1 million, down from $20.4 million; interest expense rose to $2.2 million from $1.4 million. Adjusted EBITDA, a non-GAAP measure, was a loss of $6.5 million versus a loss of $4.7 million.
- At March 31, cash was $2.5 million and restricted cash $5.5 million. Reported availability under short-term revolving facilities was $8.7 million, for total committed liquidity resources of $16.7 million. Current liabilities of $75.4 million exceeded current assets of $73.0 million by $2.4 million.
- Debt was reported at $90.0 million net of unamortized discounts and issuance costs ($103.5 million gross); $62.8 million of notes payable and floor-plan borrowings was classified current. Total liabilities were $106.6 million and stockholders’ equity $5.4 million.
Material changes and unusual items
- Compared with Q1 2019, revenue fell sharply and net loss widened. Lower unit sales reflected management’s stated disciplined-volume approach, COVID-19 disruption, reduced advertising, and tornado-related damage to Nashville facilities and inventory. Transportation revenue increased, as did transportation gross profit.
- The tornado inventory write-down comprised $4.5 million for totaled vehicles and $7.3 million for damaged vehicles. A further $0.2 million of property and equipment was written off. No insurance recovery for these losses was recognized at quarter-end.
- In January 2020, the company issued 1.035 million Class B shares in a public offering, generating $10.8 million net proceeds, and exchanged $30 million of prior convertible notes for new notes due 2025, alongside additional note issuance. The new notes bear 6.75% interest and have an initial $40 conversion price.
- Subsequent events: the company received $5.2 million in PPP loans in May; forgiveness was not assured. A one-for-twenty reverse stock split became effective May 20, 2020. In June, a subsidiary obtained a facility of up to $1.5 million, bearing an initial 4% rate and payable on demand.
Outlook, management commentary, and risks
- Management did not provide formal earnings or revenue guidance. It reported that March revenue was 51.7% below February, April unit sales were 66% below January, and May unit sales rose more than 22% from April. Preliminary June commentary anticipated at least 26% growth in unit sales versus April and cited record gross margin on units sold, while cautioning that those margins were not expected to persist.
- Management said it would prioritize liquidity, temporarily reduce discretionary spending, align vehicle purchases with demand, and use available cash, floor-plan capacity, PPP proceeds, retail-loan portfolio monetization, and cost reductions. It reported laying off 169 employees in early April.
- The company disclosed that COVID-19 uncertainty, recurring losses, and negative operating cash flow raised substantial doubt about its ability to continue as a going concern, despite management’s expectation that liquidity measures would be sufficient.
- Insurance recovery remains uncertain: the inventory claim is disputed over policy limits; the insurer agreed to $2.8 million for building and personal-property losses and had advanced $2.3 million, with a further $0.5 million tied to replacement work. A $0.25 million advance was made against the unresolved business-interruption claim.
- Other material risks include demand and used-vehicle price volatility, reliance on third-party auction and logistics providers, access to financing and inventory credit, substantial debt and demand-payable floor-plan facilities, possible dilution from equity and convertible debt, and the uncertainty of PPP loan forgiveness. Management stated disclosure controls were effective and reported no material legal proceedings.
Important facts for investors to verify
- Confirm issuer identity: the supplied 10-Q names RumbleOn, Inc., whereas the request metadata names Ridenow Group, Inc.
- Track unrestricted cash, restricted cash, floor-plan availability and terms, debt maturities, and the company’s ability to meet obligations given its going-concern warning.
- Monitor the insurer’s resolution of the disputed inventory claim, final business-interruption recovery, and timing and conditions for remaining building proceeds.
- Compare subsequent operating results with management’s preliminary April–June rebound commentary; June figures were preliminary, not formal guidance.
- Verify PPP forgiveness status and assess the effect of the 2020 share issuance, convertible-note terms, and reverse split on fully diluted ownership.