RumbleOn, Inc. Form 10-Q Summary
Company identification: The supplied filing identifies the registrant as RumbleOn, Inc., not Ridenow Group, Inc. Verify that this is the intended filing. Reporting period: quarter ended March 31, 2019; figures are unaudited.
Business context and reporting period
RumbleOn operates an online marketplace and vehicle distribution business, alongside vehicle logistics and transportation services. The quarter included automotive distribution acquired through Wholesale in October 2018 and Autosport in February 2019, as well as logistics operations acquired with Wholesale Express. Consequently, the sharp year-over-year growth is not a like-for-like comparison: the 2018 quarter largely reflects the earlier powersports business.
Financial performance and position
- Revenue: $223.2 million, versus $8.1 million in Q1 2018. Automotive sales contributed $190.9 million; powersports $26.9 million; and transportation revenue after intercompany eliminations $5.3 million.
- Gross profit and margin: $14.0 million and approximately 6.3%, compared with $0.6 million and approximately 6.9% a year earlier. Automotive gross profit was $9.4 million at a 4.9% margin; powersports gross profit was $3.2 million at an 11.8% margin.
- Operating results: Operating loss was $6.8 million, compared with $3.5 million. Net loss was $8.3 million, compared with $3.6 million; diluted loss per share was $0.40, versus $0.28.
- Expenses: Selling, general and administrative expense rose to $20.4 million from $3.9 million, reflecting expansion, acquisitions, increased staffing and marketing. Interest expense increased to $1.4 million from $0.1 million.
- Cash flow: Operating cash use was $6.5 million; investing cash use was $1.7 million; and financing provided $3.3 million. Cash declined by $4.9 million during the quarter. The cash-flow statement reports $10.9 million at quarter-end, including $6.65 million of restricted cash; balance-sheet unrestricted cash was $4.3 million.
- Liquidity: Current assets were $77.7 million and current liabilities $81.2 million, a $3.5 million working-capital deficit. Inventory was $52.9 million.
- Debt and leases: Notes payable totaled $66.1 million, of which $64.5 million was classified current; this includes floor-plan financing. The company also reported operating lease liabilities, including $2.4 million long term.
Material changes versus the prior comparable period
- Vehicles sold rose to 12,103 from 878, with the increase driven substantially by acquisitions and broader automotive distribution. Automotive sales and transportation operations had no comparable Q1 2018 contribution.
- Powersports gross margin improved to 11.8% from 8.7%, while average selling price declined to $8,165 from $9,185, which management attributed mainly to a broader mix of lower-priced vehicles.
- Transportation operations delivered 20,471 vehicles and reported $1.6 million gross profit for the quarter.
- In February, the company issued 1,276,500 Class B shares at $5.55 per share, generating approximately $6.5 million in net proceeds. Class B shares outstanding increased to 20,087,120 at March 31.
Outlook, commentary, risks and unusual items
- Management said existing liquidity was expected to fund operations for at least 12 months, while also warning that planned investment in inventory, marketing, technology and infrastructure would likely increase operating losses and negative operating cash flow in the near term. No quantified earnings or revenue guidance was provided.
- Management expects SG&A and marketing spending to rise in dollars as the business expands, though it anticipates these costs will decline as a percentage of revenue over time. Vehicle sales are seasonal, with demand generally strongest in the first half and lowest in the fourth quarter.
- Floor-plan balances are secured by inventory and related assets, and certain facilities are payable on demand. The NextGear facility was scheduled to reduce to zero after October 31, 2019. Restricted cash includes collateral requirements and a $5.5 million NextGear reserve.
- Autosport acquisition consideration included seller notes and potential earn-out payments of up to $787,500, subject to performance thresholds. Its preliminary purchase-price allocation included $2.7 million of goodwill and remained subject to adjustment.
- Subsequent to quarter-end, the company issued $30 million of 6.75% convertible senior notes due 2024, with approximately $27.3 million net proceeds, and agreed to a private placement of 1.9 million shares at $5 per share, expected to yield approximately $8.8 million net. On May 14, 2019, it used part of the note proceeds to repay $11.1 million of Hercules indebtedness and terminate that loan.
- The company adopted the new lease standard on January 1, 2019, recognizing an initial operating lease liability of $3.1 million and right-of-use asset of $3.1 million. It reported no material pending litigation and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Confirm the registrant identity: the filing is for RumbleOn, Inc., despite the request naming Ridenow Group, Inc.
- Assess how much reported growth reflects acquired businesses versus organic growth, and compare results using pro forma or subsequent-period disclosures.
- Review vehicle-level gross margins, particularly automotive’s 4.9% margin, and whether margins and inventory turns can support the company’s expansion costs.
- Check liquidity and refinancing exposure, including restricted cash, demand features on floor-plan debt, and the scheduled reduction of the NextGear facility.
- Review the terms, dilution potential and use of proceeds for the May 2019 convertible-note and equity offerings, as well as the Hercules payoff.