RumbleOn, Inc. — FY2020 Form 10-K
Registrant clarification: The supplied filing is for RumbleOn, Inc. (Nasdaq: RMBL), not an issuer identified as Ridenow Group, Inc. RideNow was a proposed acquisition announced after the reporting year. This is an annual report for the year ended December 31, 2020, not a standalone fourth-quarter report.
Business context
RumbleOn operated an online marketplace and vehicle-distribution business for pre-owned powersports and automotive vehicles, plus a vehicle logistics and transportation segment. It reported three segments: powersports, automotive, and transportation. In August 2020 it launched RumbleOn 3.0, an online dealer marketplace; management reported more than 50,000 listings from over 300 dealer locations at filing time.
Financial results and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Total revenue | $416.4 million | $840.6 million |
| Gross profit | $31.6 million | $50.6 million |
| Gross margin | 7.6% | 6.0% |
| Operating loss | $18.6 million | $37.8 million |
| Net loss | $25.0 million | $45.2 million |
| Net cash from (used in) operating activities | $17.1 million | $(39.7) million |
| Net cash used in investing activities | $2.3 million | $3.9 million |
| Net cash used in (provided by) financing activities | $18.1 million | $(34.6) million |
- Sales and segment mix: The company sold 18,024 vehicles, versus 43,143 in 2019. Automotive revenue was $337.1 million, powersports revenue $47.5 million, and transportation revenue $31.8 million after intercompany eliminations.
- Margins and pricing: Vehicle revenue fell substantially as unit sales declined, partly offset by higher average selling prices. Powersports gross margin rose to 15.7% from 12.2%, and automotive gross margin to 8.4% from 4.4% before the separately identified tornado inventory impairment. Transportation gross margin was 21.2%, versus 20.5%.
- Cash flow: Operating cash flow improved to positive $17.1 million, primarily reflecting lower inventory, reduced operating expenses, and a $5.6 million tornado-related insurance advance. Inventory declined to $21.4 million from $57.4 million.
- Liquidity: At year-end, cash and cash equivalents were $1.5 million and restricted cash was $2.0 million. Availability under short-term revolving facilities was $2.2 million; the filing reports total committed liquidity resources of $5.7 million, down from $42.6 million in 2019. Current assets were $37.7 million and current liabilities $35.4 million.
- Debt: Reported debt, net of $12.0 million of unamortized discount and issuance costs, was $53.1 million at year-end, compared with $82.6 million in 2019. This included $17.8 million of inventory-backed financing, $39.8 million face amount of senior convertible notes, and $5.2 million of PPP loans. The 6.75% convertible notes mature in 2025 and have a $40 initial conversion price.
- Non-GAAP measure: Adjusted EBITDA was a loss of $5.8 million, versus a loss of $26.4 million in 2019. The filing cautions that Adjusted EBITDA is not a substitute for GAAP results or cash flow.
Material changes versus 2019
- Revenue decreased 50%, principally as vehicle units sold dropped from 43,143 to 18,024. Management cited COVID-19 disruption, reduced inventory availability, the Nashville tornado, lower advertising, and a deliberate focus on margins and profitability.
- Gross margin increased despite lower gross profit, reflecting higher selling prices and improved per-vehicle economics. Average days to sale increased to 43 from 34 for powersports and to 46 from 23 for automotive.
- Selling, general and administrative expense fell to $53.7 million from $86.6 million, including lower compensation, marketing, and general costs. Year-end staffing was 157 full-time and two part-time employees, versus 300 full-time employees a year earlier; 169 associates were laid off in April 2020.
- The company recorded an $11.7 million automotive inventory impairment and a $0.2 million property and equipment impairment related to the March 2020 tornado. It recognized a $5.6 million insurance advance separately; final inventory and business-interruption recoveries remained uncertain.
- Gross debt declined, but year-end available revolving credit fell sharply as the company reduced inventory and repaid floor-plan balances. Operating cash flow turned positive, while cash and total committed liquidity remained limited.
Outlook, transactions, and risks
- Management said that, as COVID-19 effects abated, vehicle purchasing and sales could return to or exceed first-quarter 2020 levels through increased market penetration and dealer additions. It gave no timing assurance or quantitative financial guidance and warned that the pandemic and supply-demand imbalance could continue to affect results.
- As a subsequent event, RumbleOn agreed on March 12, 2021 to acquire up to 46 RideNow entities for $400.4 million in cash and $175 million in Class B shares, subject to adjustments and closing conditions. The company expected closing in the second or third quarter of 2021. The transaction required financing, shareholder and manufacturer approvals, regulatory clearances, and other conditions.
- Oaktree committed, subject to conditions, to provide up to $400 million of senior secured financing, including an initial $280 million advance and a delayed-draw facility of up to $120 million. The proposed financing carries high interest spreads and security interests. A separate $2.5 million bridge loan bore 12% annual interest and was secured by certain subsidiary intellectual property.
- Key risks include continued COVID-19 impacts, limited liquidity and recurring losses, inventory sourcing and resale price volatility, dependence on third-party logistics and data providers, competition, regulatory compliance, and the cost, leverage, dilution, and execution risks of the RideNow transaction. PPP loan forgiveness was not assured.
- The auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Confirm the intended issuer: this filing is RumbleOn, Inc., and the RideNow combination was proposed after FY2020, not a completed 2020 transaction.
- Review the audited statements and reconcile reported powersports segment gross profit measures, which differ across the filing’s segment and operating-metric tables.
- Track unrestricted cash, revolving-credit availability, floor-plan limits and repayment requirements, and the maturity and terms of debt.
- Check final tornado insurance settlements, particularly the disputed inventory claim and pending business-interruption claim, against the recorded impairments and advances.
- Confirm RideNow transaction completion, final purchase consideration, financing terms, equity issuance and dilution, and any required approvals or changes to closing conditions.
- Assess whether unit volumes, inventory availability, days to sale, and margins recover as management anticipated, and whether PPP loans were forgiven.