Business context and reporting period
RumbleOn, Inc. filed this unaudited Form 10-Q for the quarter ended March 31, 2024. The request metadata names Ridenow Group, Inc., but the filing identifies the registrant as RumbleOn, Inc. The company operates a powersports dealership business and Wholesale Express, an asset-light vehicle transportation brokerage. It reported 54 powersports retail locations.
Financial performance and position
| Metric ($ millions, except per-share data) | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | 307.8 | 334.4 |
| Gross profit / gross margin | 82.6 / 26.8% | 90.3 / 27.0% |
| Operating income (loss) / margin | 5.2 / 1.7% | (0.7) / (0.2)% |
| Net loss / diluted loss per share | (10.3) / (0.29) | (16.9) / (1.04) |
| Operating cash flow | 3.0 | 9.0 |
| Investing cash flow | (1.1) | (5.7) |
| Financing cash flow | (15.5) | — |
Revenue fell 8.0% year over year. Powersports revenue was $293.5 million, down 8.2%; transportation revenue was $14.3 million, down 3.4%. The company ended March 31 with cash of $50.3 million and restricted cash of $13.1 million, down from combined cash and restricted cash of $77.0 million at year-end. Total assets were $898.7 million and total liabilities were $806.0 million; stockholders’ equity was $92.7 million.
Total debt, including vehicle floor plan notes, was $545.4 million: $300.2 million of floor plan debt and $245.2 million of long-term debt at carrying value. Long-term debt principal was $266.8 million before $21.6 million of unamortized issuance costs. Committed liquidity resources were $212.7 million, including cash, restricted cash and $149.3 million available under inventory financing facilities. The term loan rate was 14.19% at quarter-end; it is secured by substantially all company and subsidiary assets. Management said working capital, operating results and financing arrangements should fund operations for at least one year from the financial statement date.
Material changes versus the prior comparable period
- Revenue declined $26.6 million. Powersports vehicle revenue fell $18.5 million, with pre-owned vehicle revenue down 22.2%; parts, service and accessories revenue declined 10.5%.
- Total powersports units sold decreased 3.7% to 16,585. Retail pre-owned unit sales declined 13.4%, while new retail unit sales increased 0.6%. Competitive conditions and broad new-vehicle availability weighed on pre-owned demand and pricing.
- Total gross profit declined $7.7 million. New-vehicle gross profit fell $4.6 million, partly offset by a $1.9 million improvement in pre-owned gross profit. Gross profit per retail powersports unit declined 4.7% to $5,099.
- SG&A declined $12.4 million to $73.9 million, mainly reflecting cost-saving initiatives, including workforce reductions and bringing some outside services in-house. SG&A was 89.5% of gross profit versus 95.6% a year earlier.
- Operating income improved to $5.2 million from an operating loss of $0.7 million, but higher floor plan interest expense partially offset the improvement. Other interest expense decreased $3.0 million to $12.1 million, reflecting lower borrowings, repayment of the RumbleOn Finance facility and the accounting change for convertible-note discount amortization.
- Operating cash flow fell to $3.0 million from $9.0 million. Cash used in financing was $15.5 million, including $35.3 million of debt repayments partly offset by $19.6 million of increased non-trade floor plan borrowings.
Outlook, risks, contingencies and unusual items
- No formal revenue or earnings guidance is provided in the supplied filing text. Management’s liquidity statement is its principal near-term outlook; quarterly results are not necessarily indicative of full-year results.
- The company repaid and terminated its RumbleOn Finance line of credit in January 2024. It repaid $23.0 million of term-loan principal during the quarter. The JPMorgan floor plan line, with advances limited to $47.5 million as of March 31, 2024, terminates October 25, 2024; floor plan facilities are generally due on demand.
- The company adopted ASU 2020-06 on January 1, 2024. Adoption reduced Q1 non-cash interest expense and, according to the filing, improved earnings by $0.02 per share. Prior-year statements were not retrospectively adjusted.
- Disclosure controls and procedures were concluded to be ineffective at March 31, 2024 because previously disclosed material weaknesses remained under remediation. Weaknesses involved accounting resources and process-level controls, as well as IT access and segregation of duties. Management says it performed additional procedures to support the financial statements, but gives no assurance as to when remediation will be complete.
- Former executive Marshall Chesrown sued the company on March 13, 2024. His claims include $7.5 million in termination compensation, $50 million in general and reputational damages, and punitive damages, fees and costs. The company disputes the allegations and intends to defend the claims; the outcome is uncertain. An investigation into allegations concerning his use of company resources remains ongoing.
- Outstanding letters of credit were $10.5 million; management does not believe they are likely to be drawn. Related-party operating leases covered 25 properties and generated $4.7 million of rent expense in Q1 2024. The filing says there were no material changes to the previously reported risk factors.
Important facts for investors to verify
- Confirm the identity of the intended issuer: the supplied filing is for RumbleOn, Inc., despite the request metadata naming Ridenow Group, Inc.
- Monitor powersports unit volumes, particularly pre-owned retail sales, and whether competitive pricing continues to pressure new-vehicle margins.
- Track cash, floor plan availability, debt repayment, the 14.19% term-loan rate and the October 2024 JPMorgan floor plan line termination.
- Review progress and testing of internal-control remediation, including whether the material weaknesses are formally concluded to be remediated.
- Follow the Chesrown litigation and investigation, including any change in the company’s assessment of potential exposure.