RumbleOn, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. The filing is for RumbleOn, Inc. (Nasdaq: RMBL), despite the request metadata naming Ridenow Group. RumbleOn operates powersports retail and related businesses, vehicle logistics, and a shrinking automotive wholesale business. It reported 55 retail locations at quarter-end.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 | Change / context |
|---|---|---|---|
| Revenue | $346.3 million | $445.2 million | Down $98.9 million, primarily reflecting the automotive business wind-down |
| Gross profit | $91.0 million | $105.2 million | Down $14.2 million; gross margin was approximately 26.3% versus 23.6% |
| Operating income (loss) | $(0.8) million | $22.7 million | Shifted to an operating loss |
| Net income (loss) | $(16.9) million | $9.1 million | Loss of $1.04 per diluted share, versus earnings of $0.58 |
| Adjusted EBITDA | $10.7 million | $31.4 million | Non-GAAP measure; decreased $20.7 million |
| Operating cash flow | $8.9 million | $31.3 million | Down $22.4 million |
| Cash and restricted cash | $61.8 million | $58.6 million at Dec. 31, 2022 | Includes $10.0 million restricted cash |
Revenue mix and operations: Powersports revenue was $319.6 million, down $2.5 million; gross profit declined $12.4 million to $86.7 million. Powersports units sold increased 2.8% to 17,221, but gross profit per vehicle fell to $5,349 from $6,284. Automotive revenue fell to $11.9 million from $110.7 million as units sold declined to 115 from 2,623. Vehicle logistics revenue increased to $14.8 million from $12.4 million, and segment gross profit rose to $3.6 million from $2.5 million.
Margins and expenses: SG&A rose to $87.1 million from $78.1 million, driven mainly by compensation, facilities, technology investment, and stock-based compensation. Interest expense increased to $17.7 million from $11.2 million. Cash interest paid was $15.8 million.
Debt and liquidity: Debt, net of unamortized discounts and issuance costs, was $621.8 million; reported principal debt was $651.3 million. The senior secured term loan principal was $346.1 million, with a 12.98% stated rate at quarter-end and a maturity date of August 2026. Vehicle floor-plan debt was $245.0 million. The RumbleOn Finance facility balance of $21.0 million was classified as current. Cash plus availability under floor-plan facilities totaled $97.4 million. Management said liquidity and financing arrangements should fund operations for at least one year from the financial statement date. The Oaktree facility had no remaining delayed-draw availability.
Total assets were $1.04 billion and stockholders’ equity was $192.0 million at March 31, 2023. The company generated $8.9 million from operations, used $5.7 million in investing, and received $0.03 million net from financing activities.
Material changes, outlook, and risks
- Automotive exit: The company continued winding down its wholesale automotive business, citing market concerns and elevated wholesale costs. It expected the wind-down to be completed in Q2 or Q3 2023.
- Expense actions: Beginning in Q2 2023, management planned approximately $15 million in annualized SG&A reductions, including about $8 million from compensation actions and $7 million from insurance savings. Further reductions were being considered; these are plans, not assured results.
- Consumer loan portfolio: RumbleOn Finance did not meet an interest-rate-spread requirement under its facility. The lender had indicated no current intention to demand early repayment. Management intended to sell the loan portfolio and repay the approximately $21.0 million facility balance in Q2 2023; loan receivables of approximately $30.5 million, net of allowance, were classified as held for sale.
- Business and market risks: Management cited inflation, interest rates, consumer credit availability and demand, consumer sentiment, and vehicle supply constraints as factors that could affect sales, inventory values, credit availability, and results. Powersports gross profit was pressured by softening demand, lower pricing, and sales mix.
- Accounting and controls: Disclosure controls were deemed ineffective as of March 31, 2023 because of an ongoing material weakness involving insufficient accounting resources and controls over intercompany eliminations, reconciliations, estimates, and management review. Remediation was underway, with no stated completion date. Management said additional procedures supported the fair presentation of the financial statements.
- Prior-period correction: The company corrected an immaterial Q1 2022 misstatement by reducing both revenue and cost of sales by $14.7 million; there was no effect on gross profit or net income.
- The company reported no material legal proceedings beyond routine litigation and no material changes to the risk factors disclosed in its 2022 Form 10-K. It also reported that no material off-balance-sheet arrangements existed.
Most important facts for investors to verify
- Whether planned SG&A savings are achieved and whether lower powersports gross profit per vehicle persists.
- Progress and completion of the automotive business wind-down and the stated Q2 2023 loan-portfolio sale and facility repayment.
- Liquidity, floor-plan borrowing availability, debt service costs, and compliance with debt covenants as market conditions change.
- Remediation and independent testing of the disclosed material weakness in internal controls.
- How demand, inventory availability, consumer financing conditions, and vehicle valuations affect future operating results and cash flow.