RumbleOn, Inc. — Form 10-Q summary
Entity note: The filing identifies the registrant as RumbleOn, Inc., not Ridenow Group, Inc. The reporting period ended September 30, 2019; the filing was signed November 12, 2019.
Business context and reporting period
RumbleOn operates an online marketplace and vehicle distribution business, alongside vehicle logistics and transportation services. The 2019 results include automotive distribution and logistics operations acquired in late 2018 and Autosport, acquired in February 2019. Consequently, comparisons with 2018 are not like-for-like; the filing does not provide comparable pre-acquisition results for those businesses.
Financial performance and liquidity
| Metric | Three months ended Sept. 30, 2019 | Three months ended Sept. 30, 2018 | Nine months ended Sept. 30, 2019 | Nine months ended Sept. 30, 2018 |
|---|---|---|---|---|
| Revenue | $220.3 million | $19.3 million | $713.7 million | $41.2 million |
| Gross profit | $12.0 million | $2.0 million | $41.6 million | $3.8 million |
| Gross margin | 5.5% | 10.4% | 5.8% | 9.3% |
| Operating loss | $(7.5) million | $(6.7) million | $(24.1) million | $(14.7) million |
| Net loss | $(8.9) million | $(7.0) million | $(30.1) million | $(15.4) million |
| Basic and diluted loss per share | $(0.38) | $(0.47) | $(1.37) | $(1.13) |
| Adjusted EBITDA (non-GAAP) | $(4.8) million | $(6.0) million | $(16.4) million | $(12.9) million |
For the nine months, operating cash use was $25.8 million, investing cash use was $3.4 million, and financing provided $26.8 million; cash decreased $2.4 million. At September 30, cash was $6.7 million and restricted cash was $6.7 million. Current assets were $77.5 million versus current liabilities of $66.6 million, or working capital of about $10.8 million.
Balance-sheet debt included $53.6 million of current notes and floor-plan debt and $21.0 million of convertible notes at carrying value. Total liabilities were $88.5 million and stockholders’ equity was $26.4 million. Inventory was $49.5 million. The filing reports cash of $13.4 million at the end of the cash-flow statement period, including restricted cash.
Material changes versus the prior comparable period
- Revenue rose sharply, chiefly reflecting the acquired automotive and logistics operations, as well as higher powersports volume. The company reported 10,894 vehicles sold in the quarter versus 2,875 a year earlier; this comparison is affected by acquisitions.
- Gross margin fell to 5.5% from 10.4%, reflecting the business mix, including automotive distribution’s relatively low reported margins. Automotive gross margin was 4.0% for the quarter; powersports gross margin was 10.7%.
- Quarterly SG&A increased to $19.0 million from $8.4 million. For the first nine months, SG&A was $64.5 million versus $17.9 million, as the company expanded staffing, marketing, technology, and operations.
- Interest expense increased to $2.0 million for the quarter and $5.4 million for the nine months, reflecting higher debt and noncash discount amortization. Nine-month results also included a $1.5 million loss on early extinguishment of Hercules debt.
- The company issued $30 million of 6.75% convertible senior notes due 2024, with approximately $27.3 million net proceeds, and raised equity through public and private offerings. It used proceeds in part to repay Hercules, whose loan was paid off in May 2019.
Outlook, commentary, and risks
- Management expected continued investment in inventory, marketing, technology, and infrastructure, and anticipated operating losses and negative operating cash flow could increase at least in the near term. It believed existing liquidity would fund operations for at least 12 months; this is management’s assessment, not formal financial guidance.
- Management expected vehicle sales growth from broader inventory selection, platform enhancements, marketing, dealer tools, and a loan-origination platform launched late in the quarter. It also expected SG&A and marketing to rise in dollars but decline as a percentage of revenue over time.
- Risks include ongoing losses and cash consumption, execution and integration of acquired businesses, vehicle pricing and inventory valuation, seasonal demand, customer returns and contract cancellations, and reliance on third-party auction and transport providers. Floor-plan facilities are secured by inventory and may be payable on demand; the Ally facility also requires restricted cash.
- The company reported no material pending litigation, no material changes to previously disclosed risk factors, and effective disclosure controls as of September 30, 2019. It adopted lease accounting in 2019, recognizing a right-of-use asset and lease liabilities.
Investor verification priorities
- Confirm the filing belongs to the intended company: the submitted filing is for RumbleOn, Inc.
- Assess organic growth and margins separately from acquired revenue; 2018 comparisons exclude pre-acquisition operations.
- Reconcile unrestricted cash, restricted cash, and cash-flow totals, and review availability and demand terms for floor-plan credit.
- Review the convertible notes’ interest, conversion terms, maturity, and potential dilution, alongside the effects of equity issuance and stock awards.
- Verify an apparent inconsistency in the filing: the primary statements report third-quarter net loss of $8.9 million, while a vehicle-distribution discussion table gives a different loss figure of $9.5 million.
- Track whether growth in vehicle volume translates into improved gross margins, lower cash burn, and progress toward management’s liquidity expectations.