RumbleOn, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2018; filed November 14, 2018. The request metadata names Ridenow Group, Inc., but the filing identifies the registrant as RumbleOn, Inc.
Business context
RumbleOn operates an online marketplace for buying and selling pre-owned vehicles, initially focused on motorcycles and other powersports vehicles. It also earns fees from financing, service contracts, dealer subscriptions, and related products. The company reported rapid expansion from a small 2017 operating base and continued investing in inventory, marketing, technology, and infrastructure.
Financial performance
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $19.26 million | $3.71 million | $41.25 million | $3.86 million |
| Gross profit | $2.01 million | $0.23 million | $3.83 million | $0.23 million |
| Operating loss | $6.67 million | $2.23 million | $14.70 million | $4.76 million |
| Net loss | $7.01 million | $2.32 million | $15.36 million | $5.13 million |
| Operating cash flow | Not separately stated for quarter | Not separately stated for quarter | $(14.89) million | $(4.39) million |
- Q3 gross margin on total revenue was approximately 10.4%; nine-month gross margin was approximately 9.3%. The company’s vehicle-only gross margin metric was 12.0% for Q3 and 11.1% year to date, up from 6.5% and 6.3%, respectively.
- Q3 vehicles sold increased to 2,875 from 313; nine-month sales rose to 5,766 from 323. Average selling price declined to $6,788 for Q3 and $7,274 year to date, reflecting a broader mix that included lower-priced non-Harley-Davidson vehicles. Average days to sale improved to 32 from 39 in Q3.
- Marketing expense rose to $4.10 million in Q3 and $7.45 million year to date, versus $0.75 million and $1.06 million. Management attributed higher SG&A to expansion, headcount, marketing, logistics, and public-company costs.
- At September 30, cash was $11.83 million and restricted cash was $0.35 million. Total cash and restricted cash was $12.18 million. Inventory was $5.63 million.
- Total debt carrying value was $9.00 million, including $4.35 million classified as current and $4.65 million long-term. Total liabilities were $10.94 million. The Ally floorplan facility had up to $25 million available, with $2.83 million outstanding; advances are secured by inventory and subject to demand and repayment terms.
- For the first nine months, financing provided $19.36 million, including $13.02 million net proceeds from a July stock offering. Cash increased by $3.01 million, despite operating and investing outflows.
Changes, outlook, and risks
- Revenue growth reflected sharply higher vehicle volumes, expansion of inventory and marketing, and launch of the Dealer Direct platform. Gross profit per vehicle and vehicle-only margins improved, but substantial operating losses and cash burn continued.
- Management said existing liquidity was expected to fund operations for at least 12 months, while also warning that planned investments could increase operating losses and negative operating cash flow. It expected SG&A, marketing, and technology costs to continue rising in absolute dollars.
- Management expected a consumer classified listing site to launch in Q4 2018. It anticipated average selling prices could decline further with the broader vehicle mix, partly offset by higher volume, and stated gross margin percentage could remain stable or improve. These are forward-looking expectations, not reported results.
- After quarter-end, on October 30, 2018, RumbleOn acquired Wholesale Holdings and Wholesale Express for $16 million cash, subject to adjustments, plus 1,317,329 shares of Series B convertible preferred stock. It also received a $5 million Hercules loan advance, arranged a NextGear floorplan line initially capped at $63 million, and raised approximately $21.6 million gross through a private placement. These transactions materially expanded the company and its financing needs.
- Disclosed risks include integration and synergy execution, retention of key employees and business partners, acquired-company liabilities, increased debt, regulatory and licensing compliance, transportation costs and disruptions, and the company’s early-stage business model. Management reported no known material litigation, and stated disclosure controls were effective as of September 30, 2018.
Important facts for investors to verify
- Whether the Wholesale acquisitions integrate successfully and deliver the anticipated benefits, while accounting for acquisition costs and any undiscovered liabilities.
- Post-acquisition liquidity, debt service, collateral and demand features, and the availability and terms of floorplan financing.
- Whether vehicle-level margins and inventory turnover can support the elevated marketing, logistics, technology, and overhead costs.
- How the dealer-heavy sales mix, lower average selling prices, vehicle returns, and inventory valuation affect realized profitability and cash conversion.
- Whether operating cash burn moderates as volume scales and whether management’s stated 12-month liquidity expectation remains supportable after the acquisitions.