RumbleOn, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2022; unaudited. The filing identifies the registrant as RumbleOn, Inc. (Nasdaq: RMBL), although the request metadata says “Ridenow Group, Inc.”
Business context and comparability
RumbleOn operates a powersports retail and marketplace business, an automotive wholesale business, and vehicle logistics. It reported more than 55 locations. Results include RideNow from its August 31, 2021 acquisition and Freedom Powersports from February 18, 2022; consequently, much of the year-over-year growth reflects acquisitions rather than comparable organic growth.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $470.3 million | $221.2 million | $1,476.3 million | $493.8 million |
| Gross profit | $116.3 million | $37.4 million | $359.5 million | $68.1 million |
| Operating income (loss) | $13.6 million | $(22.7) million | $68.2 million | $(24.8) million |
| Net income (loss) | $3.0 million | $(22.5) million | $26.2 million | $(30.4) million |
| Adjusted EBITDA (non-GAAP) | $25.7 million | $3.6 million | $101.4 million | $6.7 million |
Gross margin was approximately 24.7% in Q3 and 24.4% for the first nine months, versus 16.9% and 13.8% in the respective 2021 periods. Operating margin was approximately 2.9% and 4.6%, compared with negative 10.3% and 5.0%; net margin was approximately 0.6% and 1.8%, compared with negative 10.2% and 6.2%. These comparisons are substantially affected by the acquisitions and the different business mix. Adjusted EBITDA is a company-defined non-GAAP measure, not a substitute for GAAP results or cash flow.
Powersports drove the expansion, including new and used vehicle retail, finance and insurance, and parts and service. In Q3, powersports gross profit per retail vehicle was $4,681, down from $5,542; for the nine months it was $4,777, down from $8,142. Automotive revenue and gross profit fell as the company deliberately bought fewer units amid concerns about market conditions and high wholesale costs. Vehicle logistics revenue and gross profit increased.
Cash flow, balance sheet, and debt
- Cash flow, nine months: Operating cash flow was $4.7 million, versus cash used of $29.8 million in 2021. Investing used $76.5 million, mainly reflecting the Freedom acquisition, technology investment, and capital spending. Financing provided $69.1 million. Cash and restricted cash decreased $2.8 million to $49.2 million.
- Liquidity: September 30 cash was $39.7 million and restricted cash was $9.5 million. The company reported $193.8 million of committed liquidity resources, including $144.6 million available under short-term revolving facilities. Availability may be subject to facility terms and conditions.
- Assets and working capital: Total assets were $1.305 billion, including $323.8 million of inventory, up from $201.7 million at December 31, 2021. Current liabilities were $278.5 million and current assets $415.5 million.
- Debt: Reported debt, net of unamortized discounts and issuance costs, was $563.8 million; the company’s debt table reports $598.0 million before those deductions. This includes $175.3 million of floor-plan borrowings, a $361.1 million Oaktree term-loan principal balance, $38.8 million of convertible notes, and a $22.9 million finance-loan facility. The Oaktree rate was 10.77% at quarter-end and the facility is secured by substantially all company and subsidiary assets, subject to exceptions. Interest expense was $12.6 million in Q3 and $37.1 million year to date.
Outlook, risks, and unusual items
- Management expected elevated pre-owned vehicle sales over the next several quarters, subject to manufacturing, supply-chain, and demand conditions. It also described continued investment in technology, inventory integration, and retail operations; the filing provides no quantified earnings or revenue guidance.
- Management cited inflation, interest rates, recession risk, consumer sentiment and discretionary spending, credit availability and delinquencies, and vehicle supply and transportation challenges as potential pressures on demand, financing, inventory values, and results.
- The board decided on November 2, 2022 to explore strategic alternatives for the automotive segment. The company said it would continue operating the segment during the review and could not estimate the effect of a potential transaction.
- On November 8, 2022, RumbleOn reached a global settlement with former primary RideNow owners, resolving pending claims and certain potential claims without incremental consideration changing hands.
- The Freedom acquisition purchase-price allocation remained provisional, with finalization required by February 18, 2023. Management reported no impairment-triggering event as of September 30, but its October 1 annual goodwill and indefinite-lived intangible impairment review was incomplete at filing time.
- Management concluded disclosure controls and procedures were not effective as of September 30 due to ongoing remediation of material weaknesses, including IT access and change controls, period-end close, inventory controls, acquisition accounting estimates, and the broader control environment. Management stated additional analyses supported the financial statements’ fair presentation, but gave no assurance on when remediation would be complete.
- Other notable items include forgiveness of $2.5 million of PPP loans in Q3, significant acquisition-related changes to goodwill and intangible-asset valuations, and related-party leases on 24 properties acquired with RideNow.
Most important facts for investors to verify
- How much of reported growth and profitability reflects acquisition effects versus sustained comparable-store or organic performance.
- Inventory growth, vehicle margins and turnover, and the impact of demand, pricing, and supply conditions.
- Debt costs, collateral and covenant terms, facility availability, and cash generation relative to interest and inventory funding needs.
- The outcome and timing of the automotive strategic review and the final Freedom purchase-price allocation and impairment assessment.
- Progress and independent testing of the disclosed material-weakness remediation, along with any subsequent control or reporting developments.