Business Overview

RumbleOn, Inc. is the largest powersports retailer in North America, offering a diverse selection of new and pre-owned motorcycles, ATVs, UTVs, personal watercraft, and snowmobiles. Headquartered in Irving, Texas, the company has grown primarily through strategic acquisitions, including the transformative purchases of RideNow in 2021 and Freedom Powersports in 2022. These acquisitions added 54 powersports dealerships to RumbleOn's expanding network, solidifying its position as an industry leader.

RumbleOn's business model is centered on leveraging its national scale to operate the best-performing dealerships in the powersports industry. The company, which was incorporated in 2013, operates primarily through two segments: its powersports dealership group and its vehicle transportation services provider, Wholesale Express, LLC. As of 2023, RumbleOn operated 56 retail locations with powersports franchises across 14 states, offering a wide selection of new and pre-owned powersports products, as well as parts, apparel, accessories, finance and insurance products, and aftermarket products. The company sources high-quality pre-owned inventory through its proprietary Cash Offer technology, which allows it to purchase directly from consumers. This approach, combined with its robust parts, service, and accessories offerings, as well as its finance and insurance products, has enabled RumbleOn to establish a diversified revenue stream. Additionally, the Wholesale Express segment has provided another source of diversified revenue and profitability for the company.

The powersports industry has experienced mixed growth trends in recent years, with the COVID-19 pandemic driving a surge in demand that has since moderated. Industry analysts expect low to mid single-digit CAGR over the next 5 years.

It's worth noting that RumbleOn received a subpoena from the SEC in June 2024 related to an internal investigation into the use of company resources by a former executive, Marshall Chesrown. Chesrown later resigned and filed a lawsuit against the company. RumbleOn is cooperating with the SEC investigation but cannot predict the outcome or timing.

Financials

In the third quarter of 2024, RumbleOn reported revenue of $295 million, a 12.7% decrease compared to the same period in the prior year. This decline was primarily driven by lower sales volumes of both new and pre-owned powersports vehicles. Gross profit for the quarter was $74.3 million, down 19.2% year-over-year, as the company faced margin compression amid industrywide inventory challenges and its strategic decision to exit non-core product lines.

Despite the challenging macroeconomic environment, RumbleOn has remained focused on improving operational efficiency and strengthening its financial position. The company reported adjusted SG&A expenses of $64.3 million in the third quarter, a 21.7% reduction from the same period in 2023. This improvement was driven by the successful execution of $30 million in annualized cost savings initiatives announced earlier this year.

Furthermore, RumbleOn's cash flow generation has been a bright spot, with the company reporting $68.6 million in operating cash flow for the first nine months of 2024, compared to just $18.5 million in the prior-year period. This significant improvement can be attributed to the company's focus on inventory optimization and working capital management.

For the most recent fiscal year (2023), RumbleOn reported revenue of $1.37 billion, net income of -$215.5 million, operating cash flow of -$38.9 million, and free cash flow of -$54.7 million. In the most recent quarter (Q3 2024), the company saw improvements in several key metrics despite the revenue decline. Net income improved to -$11.2 million from -$16.5 million in Q3 2023, operating cash flow increased to $41.4 million from $18.5 million, and free cash flow improved to $41.2 million from -$8.5 million in the same period last year.

Segment Performance

RumbleOn's powersports dealership segment, which is the largest powersports retail group in the United States, experienced some challenges in the third quarter of 2024. Powersports vehicle revenue was $206.4 million, down 28.7% year-over-year, primarily due to lower sales volume of both new and pre-owned vehicles. However, the impact on revenue from the lower sales volumes was partially offset by a $397 increase in average revenue per new vehicle sold. Finance and insurance (F&I) revenue decreased by $5.0 million year-over-year to $24.3 million, and parts, service, and accessories (PSA) revenue declined by $10.5 million to $49.2 million, also due to the lower sales volumes.

Gross profit for the powersports dealership segment was $70.8 million in the third quarter, a decrease of $17.8 million compared to the prior year period. The lower gross profit was driven by the decline in sales volumes, which was partially offset by improvements in gross profit per unit. Total gross profit per retail vehicle was $4,960, down from $5,380 in the prior year quarter.

The vehicle transportation services segment, operated through Wholesale Express, LLC, showed resilience in the challenging environment. In the third quarter of 2024, this segment generated $15.1 million in revenue, up $1.1 million or 7.9% year-over-year. Gross profit for the segment was $3.5 million, a $0.1 million or 2.9% increase compared to the prior year quarter. The segment transported 25,080 vehicles during the quarter, up 2,150 or 9.4% from the same period in 2023. Revenue per vehicle transported decreased slightly to $602 from $611, while gross profit per vehicle transported declined to $140 from $148.

Liquidity

Looking ahead, RumbleOn is taking proactive steps to enhance its financial flexibility and position the company for long-term success. In November 2024, the company announced a $30 million incremental capital commitment from its three largest shareholders, which includes a $10 million fully backstopped equity rights offering. This additional capital, along with a recently executed amendment to RumbleOn's credit agreement, provides the company with improved liquidity and revised financial covenants through June 2026.

As of the most recent reporting period, RumbleOn's liquidity position includes $50.1 million in cash, $16.6 million in restricted cash, and $121.5 million available under powersports inventory financing credit facilities. The company's debt-to-equity ratio stands at 8.127, while its current ratio is 1.121 and quick ratio is 0.287.

RumbleOn's commitment to its Vision 2026 strategic plan remains unwavering. The company is laser-focused on achieving its long-term targets of over $1.7 billion in annual revenue, more than $150 million in adjusted EBITDA, and at least $90 million in annual adjusted free cash flow. To support this vision, RumbleOn continues to explore strategic acquisitions and greenfield expansion opportunities, while maintaining a disciplined approach to capital deployment.

The company has also made significant progress in reducing inventory levels, with a 53.8% reduction in total inventory compared to the prior year. RumbleOn stated they are on track to meet their year-end new inventory reduction target of $50 million. Additionally, the company expects their adjusted SG&A as a percentage of gross profit to improve further in 2025, with a long-term target of 75%.

Despite the current macroeconomic headwinds, RumbleOn has demonstrated its ability to navigate challenging conditions through operational excellence, cost optimization, and proactive financial management. The company's strong liquidity position, coupled with the support of its largest shareholders, positions RumbleOn well to weather the storm and emerge as an even stronger industry leader in the powersports market. The $30 million in incremental capital commitments is expected to enable full repayment of the convertible notes due in January 2025 and help position the company for successful refinancing.