Q3 2021 RumbleOn Inc Earnings Call
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Greetings and welcome to <unk> third quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host William.
Thank you well maybe.
Thank you operator, good morning, ladies and gentlemen, thank you for joining US on this conference call to discuss Rumble launched third quarter 2021 financial results.
Joining me on the call today are Marshall Chaz round Rumble on chairman and Chief Executive Officer and P.
The early rumblings president.
Full details of our results and additional management commentary are available in our earnings release, which can be found on the Investor Relations section of the website at investors Dot Rumble on dotcom.
Before we start I would like to remind you that the following discussion contains forward looking statements, including but not limited to <unk> market opportunities and future financial results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here.
Actual information that could cause actual results to differ from forward looking statements can be found rumble on periodic and other SEC filings.
The forward looking statements and risks in this conference call, including responses to your questions are based on current expectations as of today and Rumble on assumes no obligation to update or revise them.
As a result of new developments or otherwise, except as required by law.
Also the following discussion contains non-GAAP financial measures.
For a reconciliation of non-GAAP financial measures. Please see our earnings release issued earlier this morning.
Our earnings release, and supplemental financial results highlight our financial results on an as reported or GAAP basis, and on a combined or pro forma basis, and our comments today, we will discuss certain pro forma results and all comparisons will be on a year over year basis, assuming the business combination as of January one 2020, now I will turn the call over to Marshall.
Marshall.
Thank you will and thank you everyone for joining us this morning.
Rumble on is the nation's first technology based omni channel marketplace and power sports transforming the power sports industry.
Our vision is to use technology to drive lifetime engagement by offering a best in class customer experience with unmatched omni channel capabilities, giving consumers a destination for all things power sports.
In the third quarter, we closed our business combination with right now and delivered strong results demonstrating broad based strength across our business.
In addition to delivering $392 million in revenue record GPU and adjusted EBITDA of $23 6 million, we are increasing our prior guidance ranges.
We are pleased with our strong third quarter results and the progress we have made but this is just the beginning.
Our aggressive approach to strategic acquisitions translates to long term market share as we march towards the objective of transforming and dominating the industry over time.
Our full results can be found in the press release and supplemental tables, we issued today. So instead of walking through the P&L I'd like to focus on the drivers and trends we're seeing.
Then Peter will come on to talk about our operational progress and I will walk through our outlook before we take questions.
You've heard everyone talking about the supply and demand imbalances in the market for several quarters now and it's our view that this is not going to correct itself in the next 12 or likely even 24 months. We've said all along that the key to our Omnichannel growth strategy is used unit sales and that Insulates us in this <unk>.
<unk> and its evident in our results new.
New vehicle sales were down 7% year over year in Q3, but used retail unit sales were up 53%.
September alone, we drove a 65% increase in used retail unit sales continuing the momentum.
Year over year, our new to used sales mix went from three to one in Q3 2020 218 to one in Q3 2021.
After only one month in Q3 as a merged company. We can clearly see that our goal of one to one ratio of new to used over time is more than achievable.
Current inbound new supply is trending positive and current showroom inventories remained basically flat.
The net effect short supply is driving GPU increases on new and unit growth in used which will more than offset the volume decline in new.
Please also keep in mind, we have yet to see the benefits of our full omnichannel capabilities components of the process and infrastructure to accomplish our consumer sales objectives.
Over the coming quarters, and we anticipate being nearly fully functional by late 2022.
We anticipate that everything we are building into our Omnichannel strategy will be incremental to the already stellar performance of the current physical locations.
We have a superior technology, driven and proven used vehicle acquisition strategy that we've been optimizing since day one.
Queen or over 40, physical locations and fast growing online platform, we are converting more cash offers than ever before.
Deepening our presence in existing markets and expanding into new markets through strategic acquisitions, we have set the flywheel in motion.
Our cash offer technology brings and high quality used inventory, which attracts more riders and drive more volume and used unit sales. This model enables us to quickly and effectively gain market share.
Dealer groups around the country are meeting us with tremendous enthusiasm as they recognize the value of what Rumble on is bringing to the power sports industry. Our recent announcements demonstrate this positive reception and we will continue to strategically evaluate opportunities to realize synergies across the ecosystem.
Our vision is to drive lifetime engagement by offering a best in class customer experience with unmatched omni channel capabilities, giving customers more control in the sales process.
We are pleased that not only are we increasing the outlook that we provided back in March we are exiting the year with strong momentum and I'm excited to share our preliminary expectations for our financial performance in 2022.
One quick housekeeping update we've met with several extremely qualified CFO candidates over the past few months since the unfortunate passing of Steve Berrard. Our CFO search is a top priority for us and we will of course provide an update as soon as the person has been appointed in the meantime, the role of interim CFO is in <unk>.
Every capable hands with Beverly RAF.
Now I'll pass the call over to our President Peter Levy to discuss our operational progress.
Thank you Marshall and good morning, everyone. This has been a transformational year for Romblon underpinned with our long term commitment and leveraging best in class technology.
You've seen a lot of announcements recently, including acquiring dealership groups, adding physical locations to our portfolio and launching our newest fulfillment center concept, we recently announced that we signed definitive agreements to acquire dealership groups in our existing Florida, and Texas markets. Our most recent acquisition announcements freedom power.
Sports includes 13 locations, including in Georgia and Alabama.
Adding freedoms founder, Kevin Lackey and his team brings further professionalism energy and excitement to our entire effort Kevin as a self made entrepreneur who sees joining rumble on at this point of time, it's an opportunity for him and his team to accelerate their already impressive success and reputation and power sports.
Our mission is to provide the best Omnichannel customer experience no matter what portion of the transaction is online or in store.
Recently, we opened our first fulfillment center in Orlando focused on used inventory processing and doing so we ended up proprietary technology recreating how we inspect recondition and process used inventory from cataloging inventory with detailed descriptions to capturing high definition photos and video.
There are state of the art and fully automated media capture system.
This allows us to effectively standardize the online presentation of inventory for risk free transactions.
Since our closing of the combination with right now we've already more than doubled use showroom inventory available at the stores and now we will deploy inventory management systems to accurately utilize our data for future stocking in distribution.
Making sure our vehicles are in the right location at the <unk>.
Todd is a clear opportunity for us to grow and maximize market share across the country.
Leveraging multiple platforms and associated sales channels is key and we will begin to integrate improve and standardize our websites to allow for effective sharing of inventory.
Giving consumers the ability to access and purchased used power sports from us regardless of its physical location.
Upon purchase we will offer the choice of delivery at home or in one of our facilities.
And the back office, we are rolling out a standardized technology platform. So all of our retail locations will be operating on the same platform, enabling more synchronization and reducing redundant work streams, we will have shared inventory and integrated website across the entire enterprise in 2022.
We are presently rolling out Rumble on finance to all our locations, we anticipate that offering flexible financing solutions will help capture incremental sales in the near future.
Much like some of the newest online sellers of automobiles, the ability that preapproved credit online.
Real time and friction free is what we believe to be a game changer in power sports setting the bar even higher.
Our new Chief Marketing Officer, Matthew Mccartin, spearheading, our branding and marketing efforts as we enter in to the next chapter of our evolution, we plan to evolve our brands and already are working closely with several of our 17 manufacturing partners to accomplish our mutual initiatives for a win win combination.
Many C. The first entrance of public capital to the industry has the potential to be extremely beneficial as they consider the same consumer behavior changes in front of all business today.
Building, a United National brand extends beyond marketing efforts, we have acquired a wide breadth of facilities and we intend to standardize the experience. We're all locations are representative of our family of brands.
As we look forward down the road, our omni channel vision would not be complete without the last touch we are making investments to support our omni channel strategy and are in early phases of developing the technology and processes to support a last touch logistics network for home pickup and delivery, which we will begin testing in 2020.
Chip.
We want to earn a lifetime relationship with our customers that starts with the right team right technology and an overall culture that shows our customers. We are unique in all we do.
We've been hard at work centralizing processes and integration across our entire business and there is no doubt we have a well thought out plan to dominate the power sports industry and revolutionize the future customer experience.
Marshall.
Thanks Peter.
As you can see we're moving fast, but we're moving with well guided discipline. We are confident in our ability to exceed the milestones and financial targets. We set for the year and are increasing our prior full year 2021 revenue and adjusted EBITDA guidance ranges by approximately 5%, we now expect pro forma combined company.
Revenue to be in the range of 1.55 billion to $1 6 billion and adjusted EBITDA in the range of $115 million to $120 million.
Our well positioned heading into the final days of 2021, but as a reminder, the fourth quarter is typically the tightest quarter in regards to new inventory industry wide due to manufacturer shutdowns during the holidays.
This dynamic is assumed in our guidance.
We are executing on our strategic objectives and are excited to share our preliminary expectations for 2022.
For full year 2022, we expect to deliver year over year revenue and adjusted EBITDA growth in the range of 10% to 15% on an organic basis, driven largely by an increase in used power sport unit sales supported by Rumble on finance.
Milan has revenue and gross profit opportunities that our competitors and other vehicle segments simply do not for example, as we expand our physical footprint, we can gain meaningful market share nationwide in use sale parts service accessory apparel and power sports consumer financing these high margin.
<unk> offer significant upside to our long term GPU target over time, as we gained more market share.
As Peter mentioned, we are making a strategic yet prudent investments in our growth we will be investing in technology development marketing logistics and facilities in the coming quarters as we integrate the businesses, but are confident in our expectation that any SG&A increases will be outpaced by increases in <unk>.
Revenue and total gross profit.
Beyond our organic growth drivers, we anticipate incremental upside from both our pending and future acquisitions with over $100 million of cash and cash equivalents on our balance sheet as of September 30th strong free cash flow generation and $120 million term loan facility, we have available for future.
Acquisitions, we believe at this time that we have an appropriate capital structure in place and do not anticipate the need to raise equity capital to fund the cash consideration of our pending acquisitions.
We are focused on delivering on our strategic priorities and are committed to delivering sustainable long term value for our shareholders and with that operator, we're ready for questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue.
Press Star two if you would like to move your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Thank you. Our first question comes from Eric Wold with B Riley Securities. Please proceed with your question.
Thank you good morning, and congratulations to all you guys on that.
Great progress so far with the combination.
Couple of questions I guess I guess one.
Marshall.
No about the supply chain issues that have been impacting your availability of new vehicles in the market.
The level of used vehicles at your stores versus where you believe.
They need to be and how easy or difficult is to bring those vehicles into the mix.
Sure I think.
Obviously, there are some offsets with regards to supply chain issues on the new side.
With the pre owned.
The stores presently are as Peter mentioned significantly up then.
Inventory.
Some stores the D T facility constraints.
Probably.
Whether they need to be.
However, some of the larger stores still hubs still have room, and we're still shipping significant amount.
Think that.
Important part is as we evolve here is to get shared inventory on all the websites get consistency and photos pricing descriptions and so forth.
Really be a driver of our future performance on the pre owned side.
Got it.
And then.
It wasn't you didn't update since you're a few months back and how many dealers are on the platform right now from 530 that you had a few months back.
She gives you increased the number of used vehicles.
On the website it.
In recent months I'm trying to get a sense of how much of that is driven by more deals come on the platform versus.
More efficient vehicle flow of deals already on the platform.
Well there is well over 500 dealers on the platform presently.
The new vehicle inventories as I mentioned are flat at best.
The used vehicles, primarily because of the increase on the right now our websites keep in mind each of the stores not only is there.
Now dot com, but there's also individual stores with their inventories being higher it makes up a lot of the Delta I believe at the end of last quarter. We were in the 60000 range as far as listings and we're north of 80000 today and we see that continue to grow especially as of.
As new inventories start to come but more back into balance, but that as we said we're from what we're hearing and speaking to our.
Manufacturing partners.
It doesn't look like there's a lot of light at the end of the tunnel anytime soon and we certainly don't expect any normalization, but what it does to that I would say that really the processes have changed that need you're reading about it in the automobile space I think you're seeing it in power sports as well well.
Where the stores are getting significantly more efficient at pre selling.
In inbound inventory. So I think what we will first have to shake out as we will have to fill all of the current needs of pre sold inventory. Then we can obviously you start talking about the potential of feeding some type of pent up demand and we certainly don't have a crystal ball on what that pent up demand is but as long as the supply.
Imbalance has been in place.
I think it's reasonable to expect there's a there's a fairly sizable pent up demand.
Got it and then just final question for me.
How are you.
How should we reconcile the LTM pro forma adjusted EBITDA of $130 million.
At the end of June with the new guidance of 110 to 120, I'm assuming that the seasonality you talked about in the fourth quarter was there last year as well so.
Whats.
What's baked into that is that.
New vehicle supply chain concerns is it conservatism in your report into kind of a year and you think about those two numbers.
Well I think clearly we want to create a cadence of.
Beat and raise if possible.
But we do we are still in the midst of a very early on integration.
And so you know theres always the potential of hiccups I guess in that we haven't determined any or seen any of any size at this time, but.
But certainly it's always possible second thing is the holidays are always kind of unknown.
On the new vehicle side, yes, as you're probably aware.
New vehicle deliveries will slow the ability for truckers to picks up keep in mind, we buy the lion's share of our inventory direct from what we say mom and dad direct from consumers.
And the ability to pick those up in a timely fashion and stuff could be constrained through Thanksgiving and Christmas So.
That's part of the reason we gave some.
Guidance for total year, so that obviously you could have a.
Have a good expectation of what fourth quarter would look like.
And then also talks about the growth for 2022.
And everything that we've given you today is on an organic.
On an organic basis, and we do plan to stay that course as we move forward, we don't want to be you.
You know in 2020 to be presenting pro forma numbers and those types of things. So we will disclose as the transactions are closed.
Disclose obviously more detail and give you the net effect to the to the guidance.
Perfect. Thank you Marshall.
Thank you. Our next question is from Mike Baker with D. A Davidson. Please proceed with your question.
Excuse me. Thanks, a couple of follow ups, one Marshall you said that a new vehicle.
Inventories are trending positive at the stores, which seems it seems favorable.
Favorable so I'm.
I understand there's still inventory issues.
You said, there's no light at the end of the tunnel, but that that feels like it's getting a little bit better is that fair to say or or did I misinterpret that.
I think in some manufacturers', we've seen a little uptick in availability.
But as I said earlier I mean, it's everything right now is turning about as fast as they can unload. It there are some new products coming out that looked like.
Some of the inventory levels might be constrained a bit. So I think if I was to look at it.
Three year lands I would say probably anticipate fairly flat new vehicle sales. We don't we don't see anything on the radar screen that would lead us to believe that we'll have any continued.
Erosion in total volume.
But I.
I don't believe that's consistent with what the large manufacturers are sharing as well, but they also haven't shared any information that they feel comfortable that those inventories will be will be going up so.
You know the thing about but a couple a couple of you had mentioned seasonality and you heard in my notes I Didnt mentioned, a lot of seasonality I know the Rumble on we talked about it a lot in our path.
And our long past of four years, but.
Hum.
Right now did a really strategic thing and focusing on the Sun belt.
He built their company and if you look back through the numbers and then a lot of those numbers. We provided you and obviously, there's a lot of stuff out there in the.
In the filings.
But you will see that the seasonality effect for them has been really really mitigated because of their focus on the sunbelt region. So we'll share a little more of that as we as we continue to grow and give you a heads up on what we think might or might not be the effect of that but we do think that an omni channels really.
Insulate you a little bit from that because we'll be moving vehicles, depending on seasonality.
You know maybe the snow belt on two wheeled vehicles.
Those vehicles will be repositioned into the southern markets and vice versa Spring comes Yep.
Maybe more most north.
It really comes down to.
Being a centralized inventory system, ensuring all inventory one expectation you should have is today the individual dealerships websites really just host their own inventory that they presently have and as we move forward you will see that all the inventory I believe today between all.
All entities I think we're around 7000 pre owned vehicles in stock.
7000 will be that will be replicated across the entire group of websites as we move forward.
Yeah.
It sounds like it's going to be pretty powerful.
Longer term question.
Sorry for my voice here, but Gpus above 5000, you know I think some of that must be a function of the tight supply versus demand. So how sustainable is it and perhaps an offset if supply and demand comes more imbalance is you're improving efficiency and reconditioning can can you talk about how that might impact that.
Thanks.
Yeah, Mike we haven't really developed into those efficiencies yet I mean, that's really the purpose of the fulfillment center.
Is to get.
The stores on a what I call it keep fill inventory program.
Other words once we determine based on the data what a what a proper inventory should be in any individual store and let's just say for for ease that it's 50 units than the the philosophy would be we would keep that store full of 50 of the right units at all times from a fulfillment center, but yet they would have access to the to the end.
Tire inventory.
On the on the gross margin side, yes, the benefit on the new vehicle side has been.
A fairly significant increase I would tell you on a percentage basis. It is nowhere near what they've experienced on the car side.
But the amount of uptick is fairly manageable.
On the pre owned side I think it's really a point of merging a primarily dealer supply model be it rumble on.
To a pure retail play and obviously pushing significantly.
The dealerships that our advantage is now we have a distribution.
Of at retail and obviously retail gross margins are significantly higher we posted that by the way in a way that you can do comparable to the other automotive companies out there whether they'd be up here online plays offline plays or pure.
Used vehicle plays.
And I do think it's interesting that the ASP. He is significantly lower than the actual dollar gross margin is significantly higher I've mentioned in my notes.
About.
That gives us some flexibility.
Please don't take that we plan to lower gross margins, but I would tell you that.
Anytime we have the ability we have very high gross margins and if we have the ability to give up a small amount of gross margin for significant gains in market share in their early <unk>.
Orders in years of this company, we think it's very very important too to dominate market share.
And we'll do so the nice part about that is we're not under margin pressure.
In the reverse where we're also chasing to cover a you know a mark.
That expectation. So we're a we think it's really important that everybody looks at these gross margins on a dollar basis on a per unit basis and compares it to what is out there because I believe that the.
The power sports industry as a whole becomes very very intriguing.
Yeah agreed and thank you for the color I appreciate that.
Yeah.
Thank you. Our next question comes from Seth Basham with Wedbush.
Wedbush Securities. Please proceed with your question.
Thanks, a lot good morning, and congrats on a great start to the integration of the acquisition and more to come.
For a link to the new vehicle side of it.
The business can you give us some color as to what kind of allocations, you're getting front of manufacturers given the tight supply environment.
With such a large market share are you getting disrepair disproportionate allocation.
Yeah.
Well, we wouldn't have any data or probably support that nor would I.
I want to lead you to believe that we're going to get any special favors I don't think that's the intention of the allocation system.
But I would tell you that it varies dramatically from a manufacturer to manufacture so when we look at it on a total availability basis and a total.
The average inflows, we are seeing them start to tick up and there are some new products also coming to the marketplace.
Like the new switch that as a b R P product and various others by by other manufacturers and we do see most of those type products as being additive to our total availability and volume so.
I think your information Seth with regards to our.
OEM inflows is probably as accurate as ours is by looking at what are the likes of Polaris and Harley Davidson and others are all represented to the street.
Yeah, what's remarkable is that Polaris and Harley I talking to 60% declines.
As much as that you guys are seeing much more limited declines in fact, youre talking to flattish or slightly higher inventory. So it seems like youre significantly outperforming what they're thinking factories I suggest.
I think a big part of it and stuff is there really I mean, we've the Peter and I have been on the road visiting.
A lot of the stores as of late and the showroom inventories are really really low.
They are very very quick to show us all the pre sell that they have in the system. So I think it's about the turn.
It is giving us some level of normalcy I would tell you that.
You know on the pre owned side also.
This is usually one current year and one year old pre owned vehicles arent exactly the sweet spot, whether you're talking about cars or power sports because typically they're too close to the valuation of a new one.
So they they tend to trend low they are trending a little higher.
Which obviously, that's replacing the inability for us to acquire new vehicles from the Oems.
Got it Okay, and then on the used side specific to the finance platform could you give us an update there on maybe some data points as it relates to increased conversion rates you soon because of the rollout of the finance platform.
Yeah, Seth I'd I'd like to tell you that it's been dramatic, but we have been a little bit slow in the.
Integration of that it.
It really is just in the early stages, but I would tell you in the stores that we have brought or that the locations that we have brought online.
We pretty much started in the east and are working west.
The returns have been dramatic I think that.
The way to look at it is it's what we're targeting is incremental sales. This isn't a replacement by any means or any of the captive finance companies.
Say, a Harley Davidson credit corporation or any of those they buy they buy very very aggressively all applications still go to them.
As a first and top priority.
But you know for everybody's interests I think if we would if we step in and we were able to fill a void, saying lower dollar financing or non brand financing in these stores those are incremental sales and so we do tend to see the finance company going forward as kind of.
Our you know our our our ace in the hole if you will.
Because if you look at the success of the Carvana and Carmax, who the world.
I think you're well aware of it because I know you're aware as we've talked about it.
That you know that the ability to underwrite your own credit is very very important to the creation of incremental sales. So summation is we have not seen a significant amount yet, but it is not because of demand, but demand where we have rolled it out has been high and by the end of the year.
We'll be fully active in all 40 locations.
Great. Good news and then lastly relate to your overall goal of three to one.
I knew he was going to run for one given the environment, you're talking on the new side and then the <unk>.
<unk> strength, and especially with the framework for outbound rollout how quickly do you think you can achieve that goal for 2022 goal.
I would say yes.
I might get some piece of that but because we have we haven't we didn't actually put that in the in any of our objectives, but we do think that it's very very a cheese achievable I mean, you know much like the car business.
There's probably five to one pre owned transactions taking place versus.
Versus new to us.
And we see what the differences on the on the car side.
And the way we look at itself as the majority of these transactions are happening today for powered for use power sports through the likes of Craig's list and another listing sites, but you know if you just think about that piece of it the fact that almost 70% prior to us entering the space where <unk>.
<unk> and those peer to peer transactions, it's a very very inefficient redistribution funnel, because obviously, if I'm selling you by motorcycle across town on say Craigslist I don't have any interest in financing you I don't have any interest in taking in your trade.
And not only that it's it's a pretty friction laden transfer.
Event I don't think I don't think a lot of people are looking forward to the next.
Action that they do with a total stranger to the likes of Craigslist. So that's really where we see the disruption and shifting that those sales.
As far as the market mix over to the to the dealerships. The dealerships are significantly more efficient at being able to handle those in a in a meaningful way so.
And I will tell you one other thing is if you were.
If you were looking at all the individual stores are there.
There are already locations that are exceeding the one to one.
<unk> ratio. So the fact that we use those as a cohort.
And we compare that on a going forward basis, we are extremely confident on a one to one ratio overtime and that one to one is not a reduction of new so we'll continue to build the new one of a very meaningful way. This is all additive and the thing that's important in that equation is we don't have to build another building we don't have to hire another general manager of these.
These are all very very accretive to already very high margins in the power sports business.
This is Peter I think are also to point out on the acquisition side. We have had just I mean, and just now the last 35 or 40 days of the integration of our physical locations the ability to do a warm handoff to the dealership in the acquisition side, allowing for the dealerships to help the mom and dads of the world that might have some anxiety.
Alrighty about doing things completely online and then getting them into the store, where they think they're just going to trade or sell their vehicle. They actually after spending some time in the beautiful locations they've actually converted these folks into retail sales. So we look forward to a closer percentage somewhere to the Carmax world of what happens when folks walking.
There to sell their vehicle and then actually convert to a retail sale.
So that's great news and one last question for you around the SG&A base, how should we think about a REIT G&A run rate going forward and then as it relates to advertising and you're expecting to amplify advertising or some sort of rocketing or keep it flattish here.
Yeah.
Well as I mentioned in my notes, we certainly see a topline and gross margin.
Exceeding whatever ramp in SG&A, but I think the only.
What would you say.
Service is a conservatism on the marketing side would really revolve around making sure. We understand the branding of this you know we're going to manage through what we call vertical brands, we're going to have multiple brands out there. We've got rub along we've got right. Now then we got 40 individual store.
<unk> with their own websites and hopefully, adding freedom and these others and so we really have to before we start putting significant marketing dollars to really drive that drive the business. We want to make sure we have a clear understanding of what that vertical branding marketing it looks like so.
We will be I think right now we're more on the blocking and tackling side, so as far as getting all of these websites right getting all these websites integrated make sure inventories are integrated make sure things are priced and photograph and describe properly and that's just a you know it's it's.
Fairly major undertaking, but we think that we'll be in pretty good shape with that bye bye first quarter.
Wonderful. Thank you guys very much.
Thanks I appreciate it.
Thank you. Our next question comes from Craig Kennison with Baird. Please proceed with your question.
Hey, good morning, Thank you for taking my questions as well I wanted to talk about inflation and maybe understand.
The type of inflation you are facing from your OEM suppliers, and the extent to which you're able to pass that along to consumers.
Well, it's part of the market as Greg.
It has been passed on obviously.
The suggested retail prices.
Our published by the manufacturers and as you can probably read they arent haven't been.
Excessive by any by any stretch.
I think that.
Well, we'll obviously if the market stays as it looks today and.
And we don't see any turnaround as I mentioned in my in my comments.
Anytime soon I think we will be able to pass whatever that is a long just because the demand is so high in comparison to the to the supply but to date, it's been fairly limited I think we're probably seeing more but we don't talk a lot about parts and service, but we're probably seeing it more on the.
Availability of parts from the manufacturers' than we are on the actual units. The units have already been published we can see inbound flows, but we are seeing the average days to fill on parts orders a little behind the curve and so it'll probably take some time for that to get back up.
Thanks, and then maybe an operational question here could you just help us understand how you handle.
Reconditioning operationally, where you handle that actual process.
And you know how much you might spend on a per unit basis to prepare these units for resale.
Yeah, I think the you know it's fairly de Minimis compared to automotive for sure you know, where we would be looking at maybe a 12 or 1500 dollar average costs for reconditioning and this is you know probably in the AR.
And then the south of 300 range, even at on the on the retail side.
As far as the process.
It is a lot of it today is being done internally in the stores.
However, we see a huge opportunity and taking that process out of the stores other than maybe the trade in that they traded for yesterday, probably doesn't make sense to ship it to a fulfillment center and process. It at this time and then ship it back so they will always do some level of reconditioning at the store level, but the vision is to utilize the fulfillment centers.
For all these vehicles to go in.
The process and again I think if you were if you were to look at our cost.
Cost of sales I want to say, it's less than 300 total reconditioning I don't have it right in front of me. So don't hold me to that I'll get it for you.
But it's it's it's fairly small I think the the issue with power sports really revolves around safety.
Because you know you don't have all of the all the things that go wrong with cars. It's typically safety, so its tires and brakes and those kinds of things that has to start and stop.
So it's not a big driver of.
Our a plus or minus with certain large too.
Retail price I'm glad that gross margin.
Got it thanks, and then just another I guess operational or technology related question on the cash offer tool.
Is there a way to frame the number of offers that you made in the quarter or in in a certain period and what your conversion rate looks like that feels like a game changing tool as you know there's a lot of churn in the marketplace today.
Yeah.
Third question, Craig I think you know we used to really tout that as a standalone rumble on.
I think we're trying to get our arms around these conversion rates of the stores because it's looking very very positive. So I would be hesitant to give you that those numbers today, but I think on a going forward basis, obviously will want you to understand what that flow is I would say that as far as the pure 100% online transaction.
They are trending upwards and I think the last time, we reported we were in the 10% range I do believe that between what we're now pushing to the store level and to and.
What were doing 100% online I think the carmax levels and I believe they report around 30% conversion.
It is is seriously.
Serious potential obviously for us going forward so well.
Again.
Long answer, but I think that it is a number that we should be able to share going forward.
But we really want to get our arms around it did it get it moved out to all the stores last piece with regards to cash offer though that I think is it might be interesting.
As we.
We now have retail data.
And its actual retail data. This is a 31 year company that has sold hundreds and hundreds of thousands of dollars of units over their lifetime. We're just in the process of integrating all that data and why that's important is because we will have retail data to say this vehicle in.
Dislocation at this time of year are will turn at this level at X margin and those are those are benefits that we didn't have before and we think it's going to be really really compelling when it comes to inventory management, because we can dial up if we know we have a high margin vehicle and low.
Days supply, we can dial up the algorithm within cash offer tool to be able to get a much higher capture rate on the fastest turning product. So everything we do is database and you.
You know, we just think the more and more data we acquire the more efficient we're going to get and that should reflect directly into our capture rates.
That's great. Thank you Marshall.
Thanks, Greg appreciate it.
Thank you.
Your questions at this time.
Yeah.
I would like to turn the floor back over to Marshalls Catherine for her closing comments.
Great Yeah, I won't take up any more of your time. He has been on here for quite a while but I do want to thank everybody for joining us today, obviously, there's a really exciting times for four rumble on in right now and and all of our teams. We're looking forward to speaking to you for Q4, and we certainly wish everybody a very very happy holiday season, and we will.
Talk soon thanks again.
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