RIDENOW GROUP, INC.
10-Ks and 10-Qs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended
March 31, 2024
or
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from
to
Commission file number:
001-38248
|
(Exact name of registrant as specified in its charter)
|
||||||||||||||
|
|
|
|||||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||||||||
|
|
|
|||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||||||||
|
(
|
||
| (Registrant's telephone number, including area code) | ||
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
|
|
|
|
||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
x
Yes
o
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files)
.
x
Yes
o
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "a smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o |
|
x | ||||||||
| Non-accelerated filer | o | Smaller reporting company |
|
||||||||
| Emerging growth company |
|
||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o
Yes
x
No
The number of shares of Class B Common Stock, $0.001 par value, outstanding on May 6, 2024 was
35,207,240
shares. In addition,
50,000
shares of Class A Common Stock, $0.001 par value, were outstanding on May 6, 2024.
QUARTERLY PERIOD ENDED MARCH 31, 2024
Table of Contents to Report on Form 10-Q
| FINANCIAL INFORMATION | ||||||||
| Financial Statements | ||||||||
| Management's Discussion and Analysis of Financial Condition and Results of Operations | ||||||||
| Quantitative and Qualitative Disclosures About Market Risk | ||||||||
| Controls and Procedures | ||||||||
| OTHER INFORMATION | ||||||||
| Legal Proceedings | ||||||||
| Risk Factors | ||||||||
| Other Information | ||||||||
| Exhibits | ||||||||
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
RumbleOn, Inc.
Condensed Consolidated Balance Sheets
($ in millions, except per share amounts)
| March 31, 2024 | December 31, 2023 | ||||||||||
| ASSETS | (Unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash | $ |
|
$ |
|
|||||||
| Restricted cash |
|
|
|||||||||
| Accounts receivable, net |
|
|
|||||||||
| Inventory, net |
|
|
|||||||||
| Prepaid expense and other current assets |
|
|
|||||||||
| Total current assets |
|
|
|||||||||
| Property and equipment, net |
|
|
|||||||||
| Right-of-use assets |
|
|
|||||||||
| Franchise rights and other intangible assets |
|
|
|||||||||
| Other assets |
|
|
|||||||||
| Total assets | $ |
|
$ |
|
|||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and other current liabilities | $ |
|
$ |
|
|||||||
| Vehicle floor plan notes payable |
|
|
|||||||||
| Current portion of long-term debt |
|
|
|||||||||
| Total current liabilities |
|
|
|||||||||
| Long-term liabilities: | |||||||||||
| Long-term debt, net of current maturities |
|
|
|||||||||
| Operating lease liabilities |
|
|
|||||||||
| Other long-term liabilities, including finance lease obligation |
|
|
|||||||||
| Total long-term liabilities |
|
|
|||||||||
| Total liabilities |
|
|
|||||||||
| Commitments and contingencies |
|
|
|||||||||
| Stockholders' equity: | |||||||||||
|
Class A common stock, $
|
|
|
|||||||||
|
Class B common stock, $
|
|
|
|||||||||
| Additional paid-in capital |
|
|
|||||||||
| Accumulated deficit |
(
|
(
|
|||||||||
|
Class B common stock in treasury, at cost,
|
(
|
(
|
|||||||||
| Total stockholders' equity |
|
|
|||||||||
| Total liabilities and stockholders' equity | $ |
|
$ |
|
|||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
1
RumbleOn, Inc.
Condensed Consolidated Statements of Operations
($ in millions, except per share amounts)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenue: | |||||||||||
| Powersports vehicles | $ |
|
$ |
|
|||||||
| Parts, service and accessories |
|
|
|||||||||
| Finance and insurance, net |
|
|
|||||||||
| Vehicle transportation services |
|
|
|||||||||
| Total revenue |
|
|
|||||||||
| Cost of revenue: | |||||||||||
| Powersports vehicles |
|
|
|||||||||
| Parts, service and accessories |
|
|
|||||||||
| Vehicle transportation services |
|
|
|||||||||
| Total cost of revenue |
|
|
|||||||||
| Gross profit |
|
|
|||||||||
| Selling, general and administrative |
|
|
|||||||||
| Depreciation and amortization |
|
|
|||||||||
| Operating income (loss) |
|
(
|
|||||||||
| Floor plan interest expense |
(
|
(
|
|||||||||
| Other interest expense |
(
|
(
|
|||||||||
| Other income |
|
|
|||||||||
| Loss from continuing operations before income taxes |
(
|
(
|
|||||||||
| Income tax provision (benefit) |
(
|
(
|
|||||||||
| Loss from continuing operations |
(
|
(
|
|||||||||
| Loss from discontinued operations |
|
(
|
|||||||||
| Net loss | $ |
(
|
$ |
(
|
|||||||
| Weighted average shares - basic and diluted |
|
|
|||||||||
| Loss from continuing operations per share - basic and diluted | $ |
(
|
$ |
(
|
|||||||
| Loss from discontinued operations per share - basic and diluted | $ |
|
$ |
(
|
|||||||
| Net loss per share - basic and diluted | $ |
(
|
$ |
(
|
|||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
2
RumbleOn, Inc.
Consolidated Statements of Stockholders' Equity
($ in millions)
(Unaudited)
| Common Shares | Additional Paid-in Capital | Accumulated Deficit | Treasury Shares | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||
| Class A | Class B | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
| December 31, 2023 |
|
|
$ |
|
$ |
(
|
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||
| — | — |
(
|
|
— | — |
(
|
|||||||||||||||||||||||||||||||||||
| Stock-based compensation | — |
|
|
— | — | — |
|
||||||||||||||||||||||||||||||||||
| Other | — | — |
(
|
— | — | — |
(
|
||||||||||||||||||||||||||||||||||
| Net loss | — | — | — |
(
|
— | — |
(
|
||||||||||||||||||||||||||||||||||
| March 31, 2024 |
|
|
$ |
|
$ |
(
|
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||
| Common Shares | Additional Paid in Capital | Accumulated Deficit | Treasury Shares | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||
| Class A | Class B | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
| December 31, 2022 |
|
|
$ |
|
$ |
(
|
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||
| Stock-based compensation | — |
|
|
— | — | — |
|
||||||||||||||||||||||||||||||||||
| Net loss | — | — | — |
(
|
— | — |
(
|
||||||||||||||||||||||||||||||||||
| March 31, 2023 |
|
|
$ |
|
$ |
(
|
|
$ |
(
|
$ |
|
||||||||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
3
RumbleOn, Inc.
Condensed Consolidated Statements of Cash Flows
($ in millions)
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||||
| Net loss | $ |
(
|
$ |
(
|
|||||||
| Less: Loss from discontinued operations |
|
(
|
|||||||||
| Loss from continuing operations |
(
|
(
|
|||||||||
| Adjustments to reconcile loss from continuing operations to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization |
|
|
|||||||||
| Amortization of debt issuance costs |
|
|
|||||||||
| Stock-based compensation |
|
|
|||||||||
| Deferred taxes |
(
|
(
|
|||||||||
|
Changes in operating assets and liabilities, net of acquisitions:
|
|||||||||||
| Accounts receivable |
|
(
|
|||||||||
| Inventory |
(
|
|
|||||||||
| Prepaid expenses and other current assets |
|
|
|||||||||
| Other liabilities |
|
|
|||||||||
| Accounts payable and accrued liabilities |
|
|
|||||||||
| Floor plan trade note borrowings |
(
|
|
|||||||||
| Net cash provided by operating activities |
|
|
|||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||||
| Acquisitions, net of cash received |
|
(
|
|||||||||
| Purchase of property and equipment |
(
|
(
|
|||||||||
| Technology development |
(
|
(
|
|||||||||
| Net cash used in investing activities |
(
|
(
|
|||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||||
| Repayments of debt |
(
|
(
|
|||||||||
|
Increase (decrease) in borrowings from non-trade floor plans
|
|
|
|||||||||
| Proceeds from debt |
|
|
|||||||||
|
Other financing
|
(
|
|
|||||||||
| Net cash provided by (used in) financing activities |
(
|
|
|||||||||
| CASH FLOWS FROM DISCONTINUED OPERATIONS | |||||||||||
| Net cash used in discontinued operations |
|
(
|
|||||||||
| NET CHANGE IN CASH AND RESTRICTED CASH |
(
|
|
|||||||||
| Cash and restricted cash at beginning of period |
|
|
|||||||||
| Cash and restricted cash at end of period | $ |
|
$ |
|
|||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 –
DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Unless the context requires otherwise, references in these financial statements to “RumbleOn,” the “Company,” “we,” “us,” and “our” refer to RumbleOn, Inc. and its consolidated subsidiaries.
RumbleOn, Inc. is headquartered in the Dallas Metroplex and completed its initial public offering in 2017.
We operate primarily through
two
operating segments, which are also our reportable segments for segment reporting: our powersports dealership group and Wholesale Express, LLC (“Express”), a transportation services provider. We were incorporated in 2013. We have grown primarily through acquisition, the largest to date being our 2021 acquisition of the RideNow business followed by our 2022 acquisition of the Freedom Powersports business. These acquisitions added
54
powersports dealerships to our Company.
We offer a wide selection of new and pre-owned motorcycles, all-terrain vehicles (“ATV”), utility terrain or side-by-side vehicles (“SXS”), personal watercraft (“PWC”), snowmobiles, and other powersports products, including parts, apparel, accessories, finance & insurance products and services ("F&I"), and aftermarket products from a wide range of manufacturers. Additionally, we offer a full suite of repair and maintenance services.
As of March 31, 2024, we operated
54
retail locations with powersports franchises (motorcycles, ATVs, SXSs, PWCs, snowmobiles, and other powersports products) in Alabama, Arizona, California, Florida, Georgia, Kansas, Nevada, North Carolina, Ohio, Oklahoma, South Dakota, Texas, and Washington.
We source high quality pre-owned inventory via our proprietary Cash Offer technology, which allows us to purchase pre-owned units directly from consumers.
Express provides asset-light brokerage services facilitating automobile transportation primarily between and among dealers. We provide services focused on pre-owned vehicles to clients in all 50 states through our established network of pre-qualified carriers.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim information and with the instructions on Form 10-Q and Rule 8-03 of Regulation S-X pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for smaller reporting companies. The condensed consolidated financial statements include the accounts of RumbleOn, Inc. and its subsidiaries, which are all wholly owned. In accordance with those rules and regulations, the Company has omitted certain information and notes required by GAAP for annual consolidated financial statements. In the opinion of management, these condensed consolidated financial statements contain all normal, recurring adjustments necessary for the fair presentation of the Company’s financial position and results of operations for the periods presented. The year-end balance sheet data was derived from audited financial statements. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”). The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results expected for the entire fiscal year. Intercompany accounts and material intercompany transactions have been eliminated.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year's presentation. In particular, the financing lease obligation was reclassified from debt to other long-term liabilities on the consolidated balance sheet.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. These estimates are based on management's best knowledge of current events, historical experience, actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As
5
Adoption of New Accounting Standards
Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)
On January 1, 2024, the Company adopted ASU 2020-06,
Debt - Debt with Conversion and Other Options and Derivatives and Hedging - Contracts in Entity’s Own Equity
, using the modified retrospective method. As a result of this adoption, the Company de-recognized the remaining unamortized debt discount of $
3.7
million on its
6.75
% convertible secured senior notes and therefore no longer recognizes any amortization of such debt discount as interest expense. Upon adoption of ASU 2020-06, the Company reclassified the $
3.7
million unamortized debt discount from additional paid-in-capital to long-term debt and also recorded a $
9.8
million cumulative adjustment credit to retained earnings for amortization from the issuance date through January 1, 2024 with an offset to additional paid-in-capital. The impact of our adoption of this standard was $
0.02
per share for the three months ended March 31, 2024, which reflected the reduction of non-cash interest expense. The prior period consolidated financial statements have not been retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods.
Recent Pronouncements Not Yet Adopted
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
Issued in November 2023, ASU 2023-07,
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
, requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (“CODM”). The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for us for fiscal year 2024 and interim periods beginning in 2025, with early adoption permitted. We will adopt this standard beginning with our 2024 Annual Report on Form 10-K. We expect this ASU to only impact our disclosures, which will be made on a retrospective basis, with no impacts to our results of operations, cash flows and financial condition.
Income Taxes (Topic 740): Improvements to Income Tax Disclosures
Issued in December 2023, ASU 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures
, focuses on the rate reconciliation and income taxes paid. This ASU requires disclosure, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, the ASU requires disclosure of income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. The new standard is effective for the Company for 2025, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all periods presented. We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows, and financial condition.
6
NOTE 2 –
REVENUE
The significant majority of the Company’s revenue is from contracts with customers.
In the following tables, revenue is disaggregated by major lines of goods and services and timing of transfer of goods and services. We have determined that these categories depict how the nature, amount, timing, and uncertainty of our revenue and cash flows are affected by economic factors.
| ($ in millions) | Three Months Ended March 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| Revenue | |||||||||||
| New vehicles | $ |
|
$ |
|
|||||||
| Pre-owned vehicles |
|
|
|||||||||
| Total powersports vehicles |
|
|
|||||||||
| Parts, service and accessories |
|
|
|||||||||
| Finance and insurance, net |
|
|
|||||||||
| Vehicle transportation services |
|
|
|||||||||
| Total revenue | $ |
|
$ |
|
|||||||
| Timing of revenue recognition | |||||||||||
| Goods and services transferred at a point in time | $ |
|
$ |
|
|||||||
| Good and services transferred over time |
|
|
|||||||||
| Total revenue | $ |
|
$ |
|
|||||||
NOTE 3 –
DEBT
Long-term debt consisted of the following as of March 31, 2024 and December 31, 2023:
| ($ in millions) | March 31, 2024 | December 31, 2023 | ||||||||||||
| Term Loan Credit Agreement due August 2026 | $ |
|
$ |
|
||||||||||
|
Convertible senior
|
|
|
||||||||||||
|
RumbleOn Finance line of credit
(1)
|
|
|
||||||||||||
| Fleet notes and other |
|
|
||||||||||||
| Total principal amount |
|
|
||||||||||||
|
Less: unamortized debt issuance costs
(2)
|
(
|
(
|
||||||||||||
| Total long-term debt |
|
|
||||||||||||
| Less: Current portion of long-term debt |
(
|
(
|
||||||||||||
| Long-term debt, net of current portion | $ |
|
$ |
|
||||||||||
(1) Terminated after it was paid in full.
(2) Amount at December 31, 2023 included $
3.7
million of unamortized debt discount associated with the convertible senior
6.75
% promissory notes that was derecognized in conjunction with the Company's adoption of ASU 2020-06 as of January 1, 2024. See Note 1.
Vehicle floor plan notes payable as of March 31, 2024 and December 31, 2023 were as follows:
| ($ in millions) | March 31, 2024 | December 31, 2023 | |||||||||
| Floor plan notes payable - trade | $ |
|
$ |
|
|||||||
| Floor plan notes payable - non-trade |
|
|
|||||||||
| Floor plan notes payable | $ |
|
$ |
|
|||||||
7
Term Loan Credit Agreement
The Company has a term loan credit agreement (as amended, the “Credit Agreement”) among the Company, as borrower, the lenders party thereto, and Oaktree Fund Administration, LLC, as administrative agent and collateral agent. Other than certain interest that is payable in kind ("PIK") at the Company's option, no additional amounts are available to be borrowed under the Credit Agreement.
Borrowings under the Credit Agreement bear interest at a rate per annum equal, at the Company’s option, to either (a) SOFR (with a floor of
1.00
%), plus an applicable margin of
8.25
% or (b) a fluctuating adjusted base rate in effect from time to time, plus an applicable margin of
7.25
%, provided that an additional
0.5
% of PIK interest will accrue through June 30, 2024. At the Company’s option, one percent (
1.00
%) of such interest may be payable in kind. The interest rate on March 31, 2024, was
14.19
%, including the additional
0.5
% of PIK interest.
Obligations under the Credit Agreement are secured by a first-priority lien on substantially all of the assets of the Company and its wholly owned subsidiaries (the “Subsidiary Guarantors”), although certain assets of the Company and Subsidiary Guarantors are subject to a first-priority lien in favor of floor plan lenders, and such liens and priority are subject to certain other exceptions. The Subsidiary Guarantors also guarantee the obligations of the Company under the Credit Agreement.
During the quarter ended March 31, 2024, the Company repaid $
23.0
million in principal under the Credit Agreement and incurred $
10.4
million of interest expense, $
2.2
million of which represented amortization of the debt discount and deferred financing costs, and $
0.3
million that was paid in kind. Interest expense for the quarter ended March 31, 2023 was $
12.9
million, including amortization of the debt discount and deferred financing costs of $
1.6
million. The Company provided customary representations and covenants under the Credit Agreement, which include financial covenants and collateral performance covenants. The Company was in compliance with the covenants under the Credit Agreement as of March 31, 2024.
Convertible Senior
6.75
% Promissory Notes
The Company incurred interest expense related to the convertible notes of $
0.7
million and $
1.4
million for the three months ended March 31, 2024 and 2023, respectively, including amortization of the debt discount of $
0.7
million for the 2023 period. There was
no
such amortization in 2024. See Note 1 for discussion of the adoption of ASU 2020-06.
RumbleOn Finance Line of Credit
As disclosed in the consolidated financial statements in our 2023 10-K, on January 2, 2024, the Company repaid the entire balance due under this loan from cash proceeds from the 2023 sale of the loan portfolio held at RumbleOn Finance. This line of credit was then terminated.
Vehicle Floor Plan Notes Payable
Vehicle floor plan notes payable are classified as current liabilities. Floor plan notes payable (trade) reflects amounts borrowed to finance the purchase of specific new and, to a lesser extent, pre-owned powersports vehicle inventory with corresponding manufacturers' captive finance subsidiaries (“trade lenders”). Floor plan notes payable (non-trade) represents amounts borrowed to finance the purchase of specific new and
pre-owned powersports vehicle inventories with non-trade lenders. Changes in vehicle floor plan notes payable (trade) are reported as operating cash flows, and changes in floor plan notes payable (non-trade) are reported as financing cash flows in the accompanying Consolidated Statements of Cash Flows. Inventory serves as collateral under vehicle floor plan notes payable borrowings.
New inventory costs are generally reduced by manufacturer holdbacks, incentives, floor plan assistance, and non-reimbursement-based manufacturer advertising rebates, while the related vehicle floor plan payables are reflective of the gross cost of the powersports vehicle. The vehicle floor plan payables will generally also be higher than the inventory cost due to the timing of the sale of a vehicle and payment of the related liability. Vehicle floor plan facilities are due on demand, but in the case of new vehicle inventories, are generally paid within a few business days after the related vehicles are sold.
New vehicle floor plan facilities generally utilize SOFR or ADB (Average Daily Balance)-based interest rates while pre-owned vehicle floor plan facilities are based on prime or SOFR. The aggregate capacity to finance our inventory under the new and pre-owned vehicle floor plan facilities as of March 31, 2024 was $
449.5
million, of which $
300.2
million was used.
8
NOTE 4 –
STOCK-BASED COMPENSATION
The following table reflects the Company's stock-based compensation expense:
| ($ in millions) | Three Months Ended March 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| Restricted Stock Units | $ |
|
$ |
|
|||||||
| Stock Options |
|
|
|||||||||
| Total stock-based compensation | $ |
|
$ |
|
|||||||
On March 19, 2024, the Company made its annual grant with a total fair value of $
2.3
million to eligible employees consisting of
238,577
time-based RSUs and
228,042
performance-based RSUs. The time-based RSU vest annually over a
three-year
period and were valued at the prior day's closing price of RMBL Class B Common Stock of $
5.71
per share. The performance-based RSUs vest if and when certain target stock prices are reached and maintained for a minimum
30
trading days within
three years
from the grant date. The $
3.91
average per-share fair value of the performance-based RSUs was determined using a Monte Carlo model.
NOTE 5 –
INCOME TAXES
The Company recognized a tax benefit of $
0.3
million for the three months ended March 31, 2024, representing an effective income tax rate of
2.8
%. The difference between the U.S. federal income tax rate of 21.0% and the Company's overall income tax rate was primarily due to state income tax, the tax effect of non-deductible executive compensation and a change in the valuation allowance for federal and state tax purposes.
The Company recognized a tax benefit of $
1.6
million for the three months ended March 31, 2023, representing an effective income tax rate of
8.8
%. The difference between the U.S. federal income tax rate of 21.0% and the Company’s overall income tax rate for the three months ended March 31, 2023 was primarily due to the tax effect of non-deductible executive compensation, non-deductible interest expense, and discrete tax impacts of stock compensation vesting in the quarter.
NOTE 6 –
LOSS PER SHARE
The following common stock equivalents were anti-dilutive and were excluded from the calculations of loss per share for the respective periods:
| Three Months Ended March 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Unvested restricted stock units |
|
|
||||||||||||
| Warrants to purchase shares of Class B Common Stock |
|
|
||||||||||||
|
Shares issuable in connection with
|
|
|
||||||||||||
| Vested stock options |
|
|
||||||||||||
| Performance stock options |
|
|
||||||||||||
9
NOTE 7 –
SUPPLEMENTAL CASH FLOW INFORMATION
The following table includes supplemental cash flow information, including noncash investing and financing activity for the three months ended March 31, 2024 and 2023:
| Three Months Ended March 31, | |||||||||||
| ($ in millions) | 2024 | 2023 | |||||||||
| Cash paid for interest | $ |
|
$ |
|
|||||||
| Cash paid for (refunds from) taxes |
(
|
|
|||||||||
| Cash payments for operating leases |
|
|
|||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities |
|
|
|||||||||
| Capital expenditures and technology development costs included in accounts payable and other current liabilities |
|
|
|||||||||
| Capital expenditures included in debt |
|
|
|||||||||
The following table shows the cash and restricted cash balances for the Statements of Cash Flows:
| (S in millions) | March 31, 2024 | December 31, 2023 | March 31, 2023 | ||||||||||||||
| Cash | $ |
|
$ |
|
$ |
|
|||||||||||
|
Restricted cash
(1)
|
|
|
|
||||||||||||||
| Total cash, cash equivalents, and restricted cash | $ |
|
$ |
|
$ |
|
|||||||||||
(1) Amounts included in restricted cash are primarily comprised of the deposits required under the Company's various floor plan lines of credit.
NOTE 8 –
RELATED-PARTY TRANSACTIONS
Leases
The Company has operating leases from related parties for
25
properties consisting of dealerships and offices,
one
of which contains an option to purchase a property at or above its fair market value subject to the terms of the lease. Each of these related-party leases is with a wholly owned subsidiary of the Company as the tenant and an entity controlled by William Coulter and/or Mark Tkach, as the landlord. Mr. Coulter and Mr. Tkach are directors and former executive officers of the Company. These leases have an initial
20-year
term and contain annual
2
% increases on base rent. Rent expense associated with these related-party operating leases was $
4.7
million and $
4.6
million during the three months ended March 31, 2024 and 2023, respectively, and is included in selling, general and administrative expenses in the consolidated statements of operations.
The following table provides the amounts for related party leases that are included on the balance sheets:
| ($ in millions) | March 31, 2024 | December 31, 2023 | |||||||||
| Right-of-use assets | $ |
|
$ |
|
|||||||
|
Current portion of operating lease liabilities
(1)
|
|
|
|||||||||
| Long-term portion of operating lease liabilities |
|
|
|||||||||
(1) Included in accounts payable and other current liabilities.
Employment of Immediate Family Members
10
NOTE 9 -
SEGMENT INFORMATION
| ($ in millions) | Powersports | Vehicle Transportation Services |
Eliminations
(1)
|
Total | |||||||||||||||||||
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||
| Revenue from external customers | $ |
|
$ |
|
$ |
|
$ |
|
|||||||||||||||
| Operating income (loss) |
|
|
|
|
|||||||||||||||||||
| Depreciation and amortization |
|
|
|
|
|||||||||||||||||||
|
Interest expense
(2)
|
|
|
|
|
|||||||||||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| Revenue from external customers |
|
|
|
|
|||||||||||||||||||
|
Revenue from other operating segments
(1)
|
|
|
(
|
— | |||||||||||||||||||
| Operating income (loss) |
(
|
|
|
(
|
|||||||||||||||||||
| Depreciation and amortization |
|
|
|
|
|||||||||||||||||||
|
Interest expense
(2)
|
|
|
|
|
|||||||||||||||||||
| Total Assets by Segment | |||||||||||||||||||||||
| March 31, 2024 |
|
|
(
|
|
|||||||||||||||||||
| December 31, 2023 |
|
|
(
|
|
|||||||||||||||||||
(1) Primarily revenue from the automotive segment, which is reported as discontinued operations.
(2) Includes floor plan interest and other interest expense.
NOTE 10 –
COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, the Company is involved in various claims and legal actions that arise in the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, as of March 31, 2024, the Company does not believe that the ultimate resolution of any legal actions, either individually or in the aggregate, will have a material adverse effect on its financial position, results of operations, liquidity, and capital resources.
Future litigation may be necessary to defend the Company by determining the scope, enforceability and validity of third-party proprietary rights or to establish its own proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors.
As previously disclosed, the Company is conducting an investigation of certain allegations surrounding Marshall Chesrown’s use of Company resources. The investigation remains ongoing and as of the date of this filing, the Company has made no final determination as to what action to take. On July 7, 2023, Mr. Chesrown provided the Board a letter of resignation (the “Resignation Letter”) describing Mr. Chesrown’s disagreement with several recent corporate governance, disclosure and other actions taken by the Company, the Board and certain of its members, and indicated his intent to pursue legal claims. The Company disagrees with the characterization of the allegations and assertions described in the Resignation Letter. The Company and Mr. Chesrown conducted a pre-suit mediation in October 2023, as required in his employment agreement, but did not resolve the matter. On March 13, 2024, Mr. Chesrown filed suit against the Company in Delaware Superior Court for the claims asserted in his Resignation Letter. Mr. Chesrown is seeking a declaratory judgment that he resigned with good reason, termination compensation damages in the amount of $
7.5
million, general and reputational damages in the amount of $
50
million, punitive damages, attorney's fees and litigation costs. We intend to defend these claims vigorously; however, we can provide no assurance regarding the outcome of this matter.
Letters of Credit
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (
“
MD&A
”
) is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes, and the MD&A included in our 2023 Form 10-K, as well as our unaudited condensed consolidated financial statements and the accompanying notes included in Item 1 of this Quarterly Report on Form 10-Q. Terms not defined in this MD&A have the meanings ascribed to them in the condensed consolidated financial statements. Unless otherwise noted, comparisons are of results for the quarter ended March 31, 2024 to the quarter ended March 31, 2023.
Overview
RumbleOn, Inc. operates primarily through two operating segments: our powersports dealership group and Wholesale Express, LLC (“Express”), a vehicle transportation services provider. We were incorporated in 2013. We have grown primarily through acquisitions, the largest to date being our 2021 acquisition of the RideNow business followed by our 2022 acquisition of the Freedom Powersports business. These acquisitions added 54 powersports dealerships to our Company.
Powersports Segment
Our powersports segment is the largest powersports retail group in the United States (as measured by reported revenue, major unit sales and dealership locations), offering a wide selection of new and pre-owned motorcycles, all-terrain vehicles (“ATV”), utility terrain or side-by-side vehicles (“SXS”), personal watercraft (“PWC”), snowmobiles, and other powersports products. We also offer parts, apparel, accessories, finance & insurance products and services (“F&I”), and aftermarket products from a wide range of manufacturers. Additionally, we offer a full suite of repair and maintenance services.
As of March 31, 2024, we operated 54 retail locations consisting of hundreds of powersports franchises (representing various brands of motorcycles, ATVs, SXSs, PWCs, snowmobiles, and other powersports products) in Alabama, Arizona, California, Florida, Georgia, Kansas, Nevada, North Carolina, Ohio, Oklahoma, South Dakota, Texas, and Washington.
We source high quality pre-owned inventory online via our proprietary Cash Offer technology, which allows us to purchase pre-owned units directly from consumers.
Our powersports retail distribution locations represent all major manufacturers, or OEMs, and their representative brands, including those listed below.
| Powersports’ Representative Brands | ||||||||
| Benelli | Indian Motorcycles | Segway Powersports | ||||||
| BMW | Karavan Trailers | Ski-Doo | ||||||
| Can-Am | Kawasaki | Speed/UTV | ||||||
| CF Moto | Kayo | SSR | ||||||
| Club Car | KTM | Suzuki | ||||||
| Continental Trailers | Lynx (Snowmobiles) | Tidewater Boats | ||||||
| Cub Cadet | MAGICTILT Trailers | Timbersled (snow bikes) | ||||||
| Ducati | Manitou | Triton Trailers | ||||||
| Gas-Gas | Mercury (boat engines) | Yamaha | ||||||
| Harley-Davidson | Polaris | Yamaha Marine | ||||||
| Honda | Royal Enfield | Zieman Trailers | ||||||
| Husqvarna | Sea-Doo | |||||||
Vehicle Transportation Services Segment
Express provides asset-light transportation brokerage services facilitating automobile transportation primarily between and among dealers.
12
Key Operating Metrics
We regularly review a number of key operating metrics to evaluate our segments, measure our progress, and make operating decisions. Our key operating metrics reflect what we believe will be the primary drivers of our business, including increasing brand awareness, maximizing the opportunity to source vehicles from consumers and dealers, and enhancing the selection and timing of vehicles we make available for sale to our customers.
Powersports Segment
Revenue
Revenue is comprised of powersports vehicle sales, finance and insurance products bundled with retail vehicle sales (“F&I”), and parts, service and accessories/merchandise (“PSA”). We sell both new and pre-owned powersports vehicles through retail and wholesale channels. F&I and PSA revenue is earned through retail channels. Retail channels provide the opportunity to maximize profitability by increased sales volume and lower average days to sale and are impacted by customer demand, market conditions and inventory availability. The wholesale channel provides the opportunity to move excess inventory or inventory that does not meet our needs for retail. The number of vehicles sold varies from period to period due to these factors. Factors primarily affecting pre-owned vehicle sales include inventory levels and the availability of inventory, as well as the number of retail pre-owned vehicles sold and the average selling price of these vehicles.
Gross Profit
Gross profit generated on vehicle sales reflects the difference between the vehicle selling price and the cost of revenue associated with acquiring the vehicle and preparing it for sale. Cost of revenue includes the vehicle acquisition cost, inbound transportation cost, and particularly for pre-owned vehicles, reconditioning costs. The aggregate gross profit and gross profit per vehicle vary across vehicle type, make, model, etc. as well as through retail and wholesale channels, and with regard to gross profit per vehicle, are not necessarily correlated with the sale price. Vehicles sold through retail channels generally have the highest dollar gross profit per vehicle given the vehicle is sold directly to the consumer. Pre-owned vehicles sold through wholesale channels, including directly to other dealers or through auction channels, including our dealer-to-dealer auction market, generally have lower margins and do not enable any other ancillary gross profit attributable to financing and accessories. Factors affecting gross profit from period to period include the mix of new versus pre-owned vehicles sold, the distribution channel through which they are sold, the sources from which we acquired such inventory, retail market prices, our average days to sale, and our pricing strategy. We may opportunistically choose to shift our inventory mix to higher or lower cost vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of demand/supply imbalances in our sales channels, which could temporarily lead to gross profits increasing or decreasing in any given channel.
Vehicles Sold
We define vehicles sold as the number of vehicles sold through retail and wholesale channels in each period. Vehicles sold is the primary driver of our revenue and gross profit. Vehicles sold also impacts complementary revenue streams, such as F&I and PSA. Vehicles sold increases our base of customers and improves brand awareness, which can lead to future sales.
Total Gross Profit per Unit
Total gross profit per unit is the aggregate gross profit of the powersports segment in a given period, divided by retail powersports units sold in that period. The aggregate gross profit of the powersports segment includes gross profit generated from the sale of new and pre-owned vehicles, any income related to loans originated to finance the vehicle, revenue earned from the sale of F&I products including extended service contracts, maintenance programs, guaranteed auto protection, tire and wheel protection, and theft protection products, gross profit on the sale of PSA products, and gross profit generated from wholesale sales of vehicles.
Vehicle Transportation Services Segment
Revenue
Revenue is derived from freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The freight brokerage agreements are fulfilled by independent third-party transporters who must meet our performance obligations and standards. Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service.
13
Vehicles Delivered
We define vehicles delivered as the number of vehicles delivered from a point of origin to a designated destination under freight brokerage agreements with dealers, distributors, or private parties. Vehicles delivered are the primary driver of revenue and, in turn, profitability in the vehicle transportation services segment.
Total Gross Profit Per Unit
Total gross profit per vehicle transported represents the difference between the price received from non-affiliated customers and our cost to contract an independent third-party transporter divided by the number of third-party vehicles transported.
Results of Operations
| Three Months Ended March 31, | |||||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | $ Change | % Change | |||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Powersports vehicles | $ | 214.8 | $ | 233.3 | $ | (18.5) | (7.9) | % | |||||||||||||||
| Parts, services, and accessories | 52.9 | 59.1 | (6.2) | (10.5) | % | ||||||||||||||||||
| Finance and insurance, net | 25.8 | 27.2 | (1.4) | (5.1) | % | ||||||||||||||||||
| Vehicle transportation services | 14.3 | 14.8 | (0.5) | (3.4) | % | ||||||||||||||||||
| Total Revenue | 307.8 | 334.4 | (26.6) | (8.0) | % | ||||||||||||||||||
| Gross Profit | |||||||||||||||||||||||
| Powersports | 29.7 | 32.2 | (2.5) | (7.8) | % | ||||||||||||||||||
| Parts, services, and accessories | 23.6 | 27.3 | (3.7) | (13.6) | % | ||||||||||||||||||
| Finance and insurance, net | 25.8 | 27.2 | (1.4) | (5.1) | % | ||||||||||||||||||
| Vehicle transportation services | 3.5 | 3.6 | (0.1) | (2.8) | % | ||||||||||||||||||
|
Total Gross Profit
|
82.6 | 90.3 | (7.7) | (8.5) | % | ||||||||||||||||||
| SG&A Expenses | 73.9 | 86.3 | (12.4) | (14.4) | % | ||||||||||||||||||
| Depreciation and amortization | 3.5 | 4.7 | (1.2) | (25.5) | % | ||||||||||||||||||
| Operating Income (Loss) | 5.2 | (0.7) | 5.9 | NM | |||||||||||||||||||
| Floor plan interest expense | 4.0 | 2.5 | 1.5 | 60.0 | % | ||||||||||||||||||
| Other interest expense | 12.1 | 15.1 | (3.0) | (19.9) | % | ||||||||||||||||||
| Other income (expense) | 0.3 | — | 0.3 | NM | |||||||||||||||||||
| Loss from continuing operations before income taxes | (10.6) | (18.3) | 7.7 | (42.1) | % | ||||||||||||||||||
| Income tax provision (benefit) | $ | (0.3) | (1.6) | 1.3 | (81.3) | % | |||||||||||||||||
| Income (loss) from continuing operations | $ | (10.3) | $ | (16.7) | $ | 6.4 | (38.3) | % | |||||||||||||||
_________________________
NM = not meaningful
14
Powersports ($ in millions except per unit)
|
Three Months Ended March 31,
|
||||||||||||||||||||||||||
| 2024 | 2023 |
$ Change |
% Change | |||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||
| New retail vehicles | $ | 155.0 | $ | 156.4 | $ | (1.4) | (0.9) | % | ||||||||||||||||||
| Pre-owned vehicles: | ||||||||||||||||||||||||||
| Retail | 54.0 | 70.2 | (16.2) | (23.1) | % | |||||||||||||||||||||
| Wholesale | 5.8 | 6.7 | (0.9) | (13.4) | % | |||||||||||||||||||||
| Total pre-owned vehicles | 59.8 | 76.9 | (17.1) | (22.2) | % | |||||||||||||||||||||
| Finance and insurance, net | 25.8 | 27.2 | (1.4) | (5.1) | % | |||||||||||||||||||||
| Parts, service, accessories | 52.9 | 59.1 | (6.2) | (10.5) | % | |||||||||||||||||||||
| Total revenue | $ | 293.5 | $ | 319.6 | $ | (26.1) | (8.2) | % | ||||||||||||||||||
| Gross Profit | ||||||||||||||||||||||||||
| New retail vehicles | $ | 19.2 | $ | 23.8 | $ | (4.6) | (19.3) | % | ||||||||||||||||||
| Pre-owned vehicles: | ||||||||||||||||||||||||||
| Retail | 10.5 | 9.3 | 1.2 | 12.9 | % | |||||||||||||||||||||
| Wholesale | (0.1) | (0.8) | 0.7 | (87.5) | % | |||||||||||||||||||||
| Total pre-owned vehicles | 10.4 | 8.5 | 1.9 | 22.4 | % | |||||||||||||||||||||
| Finance and insurance | 25.8 | 27.2 | (1.4) | (5.1) | % | |||||||||||||||||||||
| Parts, service, accessories | 23.6 | 27.3 | (3.7) | (13.6) | % | |||||||||||||||||||||
| Total gross profit | $ | 79.1 | $ | 86.7 | $ | (7.6) | (8.8) | % | ||||||||||||||||||
| Vehicle Unit Sales | ||||||||||||||||||||||||||
| New retail vehicles | 10,503 | 10,436 | 67 | 0.6 | % | |||||||||||||||||||||
| Pre-owned vehicles: | ||||||||||||||||||||||||||
| Retail | 5,005 | 5,781 | (776) | (13.4) | % | |||||||||||||||||||||
| Wholesale | 1,077 | 1,004 | 73 | 7.3 | % | |||||||||||||||||||||
| Total pre-owned vehicles | 6,082 | 6,785 | (703) | (10.4) | % | |||||||||||||||||||||
| Total vehicles sold | 16,585 | 17,221 | (636) | (3.7) | % | |||||||||||||||||||||
| Total retail vehicles sold | 15,508 | 16,217 | (709) | (4.4) | % | |||||||||||||||||||||
| Revenue per vehicle | ||||||||||||||||||||||||||
| New retail vehicles | $ | 14,754 | $ | 14,982 | $ | (228) | (1.5) | % | ||||||||||||||||||
| Pre-owned vehicles: | ||||||||||||||||||||||||||
| Retail | 10,784 | 12,152 | (1,368) | (11.3) | % | |||||||||||||||||||||
| Wholesale | 5,418 | 6,657 | (1,239) | (18.6) | % | |||||||||||||||||||||
| Total pre-owned vehicles | 9,834 | 11,339 | (1,505) | (13.3) | % | |||||||||||||||||||||
| Finance and insurance, net | 1,664 | 1,679 | (15) | (0.9) | % | |||||||||||||||||||||
| Parts, service, accessories | 3,411 | 3,642 | (231) | (6.3) | % | |||||||||||||||||||||
| Total revenue per retail vehicle | $ | 18,547 | $ | 19,294 | $ | (747) | (3.9) | % | ||||||||||||||||||
| Gross Profit per vehicle | ||||||||||||||||||||||||||
| New vehicles | $ | 1,831 | $ | 2,278 | $ | (447) | (19.6) | % | ||||||||||||||||||
| Pre-owned vehicles | 1,716 | 1,249 | 467 | 37.4 | % | |||||||||||||||||||||
| Finance and insurance, net | 1,664 | 1,679 | (15) | (0.9) | % | |||||||||||||||||||||
| Parts, service, accessories | 1,522 | 1,682 | (160) | (9.5) | % | |||||||||||||||||||||
|
Total gross profit per vehicle
(1)
|
5,099 | 5,349 | (250) | (4.7) | % | |||||||||||||||||||||
(1) Calculated as total gross profit divided by new and pre-owned retail powersports units sold.
15
Revenue
Total Powersports revenue decreased by $26.1 million in the first quarter of 2024, with the majority of the decrease coming from sales of pre-owned retail vehicles and PSA. Pre-owned retail unit sales were down 13.4%, and revenue per pre-owned retail vehicles sold was down 11.3%. Demand for pre-owned units was impacted by the broad availability of new retail vehicles, with unit sales of new retail vehicles increasing slightly.
The total number of vehicles sold decreased by 636 to 16,585. Overall, the average revenue per retail vehicle sold decreased $747, primarily driven by more competitive macroeconomic conditions.
Gross Profit
Total powersports gross profit decreased $7.6 million. Lower gross profit for new retail vehicles, F&I and PSA drove the decline in gross profit, and was partially offset by improved gross profit for pre-owned vehicles. Competitive pressures resulted in lower pricing and compressed gross profit for new units.
Gross profit per vehicle decreased by $250 to $5,099. The decrease is primarily attributable to the competitive pressures of new vehicles, particularly with the mix skewed toward new vehicles.
Vehicle Transportation Services
|
Three Months Ended March 31,
|
||||||||||||||||||||||||||
|
2024
|
2023
|
$ Change |
% Change | |||||||||||||||||||||||
|
Revenue
($ in millions)
|
$ | 14.3 | $ | 14.8 | $ | (0.5) | (3.4) | % | ||||||||||||||||||
|
Gross Profit
($ in millions)
|
$ | 3.5 | $ | 3.5 | $ | — | — | % | ||||||||||||||||||
| Vehicles transported | 24,637 | 23,608 | 1,029 | 4.4 | % | |||||||||||||||||||||
| Revenue per vehicle transported | $ | 580 | $ | 629 | $ | (49) | (7.8) | % | ||||||||||||||||||
| Gross Profit per vehicle transported | $ | 142 | $ | 152 | $ | (10) | (6.6) | % | ||||||||||||||||||
Vehicles transported grew 4.4% with 3.4% lower revenue and gross profit flat with first quarter last year, as we focused on gaining volume and leveraging our costs.
Selling, General and Administrative Expenses
| Three Months Ended March 31, | ||||||||||||||||||||
| ($ in millions) | 2024 | 2023 | Change | |||||||||||||||||
| Compensation and related costs | $ | 42.0 | $ | 51.0 | $ | (9.0) | ||||||||||||||
| Facilities | 11.4 | 11.6 | (0.2) | |||||||||||||||||
| General and administrative | 9.4 | 9.8 | (0.4) | |||||||||||||||||
| Advertising, marketing and selling | 5.9 | 5.8 | 0.1 | |||||||||||||||||
| Professional fees | 3.3 | 3.8 | (0.5) | |||||||||||||||||
| Stock-based compensation | 1.4 | 2.9 | (1.5) | |||||||||||||||||
| Technology and software | 0.5 | 1.4 | (0.9) | |||||||||||||||||
| Total SG&A expenses | $ | 73.9 | $ | 86.3 | $ | (12.4) | ||||||||||||||
| Total SG&A as a % of gross profit | 89.5 | % | 95.6 | % | (610) | bps | ||||||||||||||
Selling, general and administrative (“SG&A”) expenses decreased $12.4 million primarily due to our cost savings initiatives that were implemented in 2023, including a workforce reduction and the absorption of certain outside services by our internal team. As a percentage of gross profit, SG&A improved 610 basis points.
16
Depreciation and Amortization
Depreciation and amortization decreased by $1.2 million for the three months ended March 31, 2024, as compared to the same period in 2023. The overall decrease is primarily driven by lower amortization of the various non-compete agreements resulting from prior acquisitions.
Other Interest Expense
Other interest expense consists of interest and deferred financing costs on the: (i) term loan facility; (ii) finance lease entered into in September 2023; (iii) convertible senior notes; and in 2023, (iv) the ROF Consumer Finance Facility. Interest expense decreased $3.0 million as our overall borrowings were lower, including the pay down of principal on the term loan facility and the pay-off of the RumbleOn Finance consumer finance facility in early January 2024. Other interest expense was also lower due to our adoption of ASU 2020-06, as we are no longer amortizing the debt discount associated with our convertible senior notes. See Note 1 -
Description of Business and Significant Accounting Policies
, included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for more details on our adoption.
Liquidity and Capital Resources
Our primary sources of liquidity are available cash and amounts available under our floor plan lines of credit.
Our financial statements reflect estimates and assumptions made by management that affect the carrying values of the Company’s assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company’s assets and liabilities and the results of operations.
Management believes that current working capital, results of operations, and existing financing arrangements are sufficient to fund operations for at least one year from the financial statement date.
We had the following liquidity resources available as of March 31, 2024 and December 31, 2023:
| ($ in millions) | March 31, 2024 | December 31, 2023 | ||||||||||||
| Cash | $ | 50.3 | $ | 58.9 | ||||||||||
|
Restricted cash
(1)
|
13.1 | 18.1 | ||||||||||||
| Total cash and restricted cash | 63.4 | 77.0 | ||||||||||||
|
Availability under powersports inventory financing credit facilities
(1)
|
149.3 | 165.0 | ||||||||||||
| Committed liquidity resources available | $ | 212.7 | $ | 242.0 | ||||||||||
(1)
Amounts included in restricted cash are primarily comprised of the deposits required under the Company's various floor plan lines of credit.
Our outstanding principal amount of indebtedness is summarized in the table below:
17
| ($ in millions) | March 31, 2024 | December 31, 2023 | |||||||||
|
Asset-based Short-term Financing:
|
|||||||||||
| Floor plan notes (financing for inventory) | $ | 300.2 | $ | 291.3 | |||||||
| Long-term Debt: | |||||||||||
| Term loan facility | 226.0 | 248.7 | |||||||||
| 6.75% convertible senior notes | 38.8 | 38.8 | |||||||||
| Fleet notes and other | 2.0 | 2.1 | |||||||||
|
RumbleOn Finance secured loan facility
(1)
|
— | 12.2 | |||||||||
| Principal amount of long-term debt | 266.8 | 301.8 | |||||||||
| Less: unamortized debt issuance costs | (21.6) | (27.5) | |||||||||
| Total long-term debt, including current maturities | 245.2 | 274.3 | |||||||||
|
Total debt
(2)
|
$ | 545.4 | $ | 565.6 | |||||||
(1) Amount was repaid on January 2, 2024 and facility was terminated.
(2) Excludes finance lease obligations, which are included in other long-term liabilities.
The following table sets forth a summary of our cash flows for the three months ended March 31, 2024 and 2023:
| Three Months Ended March 31, | |||||||||||
| ($ in millions) | 2024 | 2023 | |||||||||
|
Net cash provided by operating activities
|
$ | 3.0 | $ | 9.0 | |||||||
|
Net cash used in investing activities
|
(1.1) | (5.7) | |||||||||
|
Net cash used in financing activities
|
(15.5) | — | |||||||||
| Net cash used by discontinued operations | — | (0.1) | |||||||||
|
Net change in cash
|
$ | (13.6) | $ | 3.2 | |||||||
Operating Activities
Our primary sources of operating cash flows result from the sales of powersports vehicles and ancillary products. Our primary use of cash from operating activities are purchases of inventory, parts and merchandise; marketing costs; interest payments on trade floor plans, long-term debt, and finance lease obligations; rental costs for facilities; and personnel-related expenses. Lower operating cash in the first quarter from lower revenue, higher inventory purchases and the net pay down of trade floor plan borrowings was partially offset by the receipt of cash from the settlement in early 2024 from the sale of the RumbleOn Finance loan portfolio and the benefits of our cost savings initiatives.
Investing Activities
Our investing activities support and expand our operations. Net cash used in investing activities decreased $4.6 million primarily because the prior year included the $3.3 million acquisition of a powersports dealership in Florida.
Financing Activities
Cash flows from financing activities primarily relate to our short and long-term debt activity and proceeds from any equity issuances which have been used to provide working capital and for general corporate purposes, including paying down our short-term revolving facilities. In the first quarter this year, cash used was higher primarily from debt repayments of $35.3 million that were partially offset by $19.6 million higher borrowings from non-trade floor plans. Last year's first quarter included the $4.0 million pay down of debt that was offset by increased borrowings from non-trade floor plans.
18
Critical Accounting Policies and Estimates
See Note 1 -
Description of Business and Significant Accounting Policies
, included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for accounting pronouncements and material changes to our critical accounting policies since December 31, 2023. There have been no other material changes to our critical accounting policies and use of estimates from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Form 10-K.
Forward-Looking and Cautionary Statements
This Quarterly Report on Form 10-Q, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. These forward-looking statements are based on our current, reasonable expectations and assumptions, which expectations and assumptions are subject to risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed in our 2023 Form 10-K and this Quarterly Report on Form 10-Q. Given these risks and uncertainties, readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise or any forward-looking statements, except as required by law.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
This item is not applicable as we are currently considered a smaller reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2024, based on the ongoing remediation of material weaknesses identified in the 2023 Form 10-K.
The material weaknesses existing in our internal control over financial reporting relate to:
•
As previously disclosed, there was an insufficient number of accounting resources to facilitate an effective control environment following the integration of the RideNow business and incorporation of the acquired business into the Company’s control environment. Consequently, the Company did not effectively operate
process-level control activities related to elimination of intercompany transactions; review and approval of account reconciliations, payroll, and journal entries; review and approval of accounting estimates; and execution and documentation of management review controls, including but not limited to evaluating debt covenants, and assumptions included in the Company’s annual indefinite-lived impairment assessment.
•
In the areas of user access and segregation of duties related to certain information technology systems that support the Company’s financial reporting processes, resulting in ineffective journal entry and other manual controls.
19
As set forth below, management has taken and will continue to take steps to remediate the identified material weakness. Notwithstanding the material weakness, we have performed additional analyses and procedures to enable management to conclude that our consolidated financial statements included in this Form 10-Q fairly present in all material respects our financial condition and results of operations as of and for the periods presented.
Management’s Remediation Plan
In response to the material weakness discussed above, we plan to continue efforts already underway to remediate internal control over financial reporting, which include the following:
•
We are committed to hiring additional accounting resources with the required technical expertise and clearly defined roles & responsibilities;
•
We continue to evaluate system enhancements to automate the consolidation and elimination of intercompany transactions;
•
We continue to enhance the overall review and approval process relating to elimination of intercompany transaction;
•
We continue to enhance the review and approval controls related to reconciling certain accruals and accounting estimates and assumptions;
•
We are in the process of conducting additional training on the Company's document retention policies;
•
We are enhancing our processes around reviewing privileged access to key financial systems and ensuring appropriate segregation of duties; and
•
We continue to enhance governance and reporting over the execution of these remediation action items, including expansion of mitigating controls where appropriate.
Management and our Audit Committee will monitor these specific remedial measures and the effectiveness of our overall control environment. A material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We can provide no assurance as to when the remediation of these material weaknesses will be completed to provide for an effective control environment.
Changes in Internal Control Over Financial Reporting
Other than described above, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints that require management to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to any material legal proceedings as set forth in Item 103 of Regulation S-K, other than ordinary routine litigation incidental to our business.
As previously disclosed, the Company is conducting an investigation of certain allegations surrounding Marshall Chesrown’s use of Company resources. The investigation remains ongoing and as of the date of this filing, the Company has made no final determination as to what action to take. On July 7, 2023, Mr. Chesrown provided the Board a letter of resignation (the “Resignation Letter”) describing Mr. Chesrown’s disagreement with several recent corporate governance, disclosure and other actions taken by the Company, the Board and certain of its members, and indicated his intent to pursue legal claims. The Company disagrees with the characterization of the allegations and assertions described in the Resignation Letter. The Company and Mr. Chesrown conducted a pre-suit mediation in October 2023, as required in his employment agreement, but did not resolve the matter. On March 13, 2024, Mr. Chesrown filed suit against the Company in Delaware Superior Court for the claims asserted in his Resignation Letter. Mr. Chesrown is seeking a declaratory judgment that he resigned with good reason, termination compensation damages in the amount of $7.5 million, general and reputational damages in the amount of $50 million, punitive damages, attorney's fees and litigation costs. We intend to defend these claims vigorously; however, we can provide no assurance regarding the outcome of this matter.
Item1A. Risk Factors.
Our business, financial condition, operating results, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our 2023 Form 10-K. There have been no material changes to the risk factors previously disclosed in our 2023 Form 10-K, the occurrence of any of which could have a material adverse effect on our actual results.
Item 5. Other Information.
During the three months ended March 31, 2024, no director or officer of the Company
adopted
or
terminated
a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as such terms are defined in Item 408(a) of Regulation S-K.
21
Item 6. Exhibits.
| Exhibit Number | Description | |||||||
| Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | ||||||||
| Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | ||||||||
| Certifications of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | ||||||||
| Certifications of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | ||||||||
| 101.INS | Inline XBRL Instance Document* | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema* | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase* | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase* | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase* | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase* | |||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)* | |||||||
* Filed herewith.
** Furnished herewith.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| RumbleOn, Inc. | ||||||||
| Date: May 8, 2024 | By: | /s/ Michael W. Kennedy | ||||||
|
Chief Executive Officer
(Principal Executive Officer) |
||||||||
| Date: May 8, 2024 | By: | /s/ Blake Lawson | ||||||
|
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer) |
||||||||
23
TABLE OF CONTENTS
Part I - Financial InformationItem 1. Financial StatementsNote 1 Description Of Business and Significant Accounting PoliciesNote 2 RevenueNote 3 DebtNote 4 Stock-based CompensationNote 5 Income TaxesNote 6 Loss Per ShareNote 7 Supplemental Cash Flow InformationNote 8 Related-party TransactionsNote 9 - Segment InformationNote 10 Commitments and ContingenciesItem 2. Management's Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II - Other InformationItem 1. Legal ProceedingsItem 5. Other InformationItem 6. Exhibits