Q4 2021 RumbleOn Inc Earnings Call
Greetings and welcome to the Rumble on fourth quarter and full year 2021 earnings call. At this time all participants are in a listen only mode. A 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 I would now like to turn the conference over to your host well Newell head of Investor Relations for Rumble on Thank you you may begin.
Thank you operator.
Ladies and gentlemen, thank you for joining us on this conference call to discuss Rumble on its fourth quarter and full year 2021 financial results.
Joining me on the call today are Mark which has long run belongs chairman and Chief Executive Officer, and Orange is the hot Rumble on Chief Financial Officer.
All details of our results and additional management commentary are available in our shareholder letter, which can be found on the Investor Relations section of the website at investors got one belonged dot com.
Before we start I would like to remind you that the following discussion contains forward looking statements, including but not limited to rumble on market opportunities and future financial results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here.
Additional information that could cause actual results to differ from forward looking statements can be found at rumble loss periodic and other SEC filings.
The forward looking statements and risks in this.
It's call, including responses to your questions are based on current expectations as of today and number one assumes no obligation to update or revise them, whether as a result of new elements or otherwise except as required by law.
Also the following discussion contains non-GAAP financial measures for a reconciliation of these non-GAAP financial measures. Please see our earnings release issued earlier this morning.
Our earnings release shareholder letter and supplemental financial results highlight our financial results on an as reported or GAAP basis and on a combined pro forma basis in our comments today, we will discuss certain pro forma results and all comparisons will be on a year over year basis, assuming a business combination as of January one 2020.
Now I'll turn the call over to Washington.
Yeah.
Thanks will and thank you everyone for joining us this morning.
Very pleased to be reporting on our fourth quarter and full year 2021 results.
We generated $117 4 million and adjusted EBITDA in the middle of our guidance range of 115 to 120 billion and delivered record revenue of nearly $1 6 billion.
High end of our revenue guidance we.
We sold a total of over 55000 power sports units in 2021 and meaningfully increased the number of used retail power sports units sold.
Well I'll start by giving a special thanks to the entire 2400 person staff was accomplished our integration efforts are well underway on the reception from everyone. That's been extremely encouraging the right now and freedom teams are fantastic representation of what will be the best Foundation possible as we further build this incredible company.
And as we embarked on transforming the industry, we all enjoy it.
2021 was a transformational year for roll on and we ended the year with momentum continuing in the early days of 2022.
We are re imagining the customer experience building the future of power sports both online and in store and we've made incredible progress on our mission.
Delivered on our financial targets and we continue to execute on our operational objectives with that said there is certainly a lot of work ahead.
So far this year, we recruited a fantastic putting us leader Nylander, So high as our Chief Financial Officer appointed our President Peter Levy as President and C O L and announced our new regional management structure to support continued and scalable growth.
In the last seven months, we acquired right now.
The acquisition of the Jacksonville based power sports retail facility acquired freedom power sports and much more through these acquisitions. We grew to 55 retail locations and added several additional amount of Bachelor product wise to the rubble on portfolio.
There is no question that our business has changed meaningfully in the last year not only in scale, but also in our ability to better serve our customers.
We are absolutely focused on providing customers unparalleled choice of products and services as well as an unmatched buying experience both online and in our retail locations. We are confident that this will position us as the dominant participant in the market for new and used power sports and make US a go to partner for the major benefactor.
Yours, and ensure sustainable long term growth and profitability.
We're quickly becoming the destination for use power sports and introducing more used inventory into our showroom attracts new customers to our platform and most important new writers due to affordability.
The affordability that used units provide.
We're focused on both new and used however, the opportunity to dramatically increase the number of used retail power sports units presents the greatest near term opportunity.
In a supply constrained environment, we can better control used inventory than new because it is not dependent upon the manufacturers' plant production or distribution constraints.
In fact, our used inventory is and will continue to be an important differentiator for us in any market environment. We will continue to leverage short supply of potential pent up demand to advance our opportunities to change the customer experience and grow market share for many quarters to come.
We are advancing quickly with a keen eye on what we call our north star the customer experience are key priorities are.
Coming to life over the following months first implementing our customer experience center network for efficient inventory acquisition distribution and fulfillment for new used parts and merchandise, we will use our physical locations to augment the online experience and vice versa to offer a simple fiction fresh.
<unk> free customer experience, our sports is a lifestyle and consumers want to walk into a retail patient and see the wide variety of experiences that power sports represents.
Our customers can come into one of our retail locations and shop for merchandize talk to an expert about new products.
Products and features and start to plan their next power sports adventure.
Our future lies in creating a true experience are a destination for power sports enthusiasts to interact and engage with not only the products. They desire, but also the broader power sports community and with our brand.
Our vision is to co locate our customer experience centers with our fulfillment needs in facilities a scale never seen in the industry.
Currently in the design phase and plan to open up.
<unk> experience center in the second half of 2022 .
Second continually expanding and enhancing our technology stack with a specific focus on inventory integration data analytics upgrading our retail location infrastructure and improving the customer shopping experience.
In order to truly improve the customer experience. We are building the technology engine across the organization integrated real time pricing and sales data from in store transactions will enable us to further optimize offers and pricing to increase capture rates implementing a proven fulfillment system would mirror.
Real time inventory replenishment will enable us to ensure we have the right vehicle the right part or merchandise and the right place at the right time and with digital inventory integration Rumble on will dominate digital search across the entire addressable market. Additionally.
Additionally, important to the future of Bumble ones brand is creating a unified customer experience across all locations from technology and infrastructure the corporate culture.
And third developing our people and processes to attract and retain the best talent and build a scalable organization.
This begins with our people and culture, we believe that the people and culture set the tone for our execution, we announced our new regional management structure, we appointed a new national Senior Vice President of retail overseeing six regional directors, who will lead the daily operations of multiple facilities based primarily on geographic location.
The regional directors will share best practices in customer service and general operations to enhance the overall performance of our retail locations, our new regional management structure, both in shrines, our unique culture and ensures stable footing.
For continued growth.
We're gaining momentum in 2022 and are very excited to have a truly incredible team and such an opportunity ahead of us by focusing on improving the customer experience implementing better inventory control and fulfillment and adding technology that allows us to operate more efficiently. We are poised to benefit from our unique strategy.
Massive total addressable market and our first mover advantage, although many another vehicle segments are experiencing a signaling headwinds we're continuing to see robust demand for power sports products in all categories on road off road.
Personal watercraft, we intend to capitalize on this incredible opportunity and focus on things that we can control and that is executing on our business plan. We believe the steps we are taking with our plans discussed here today will allow us to be successful in driving long term value for all our shareholders.
Now I'll pass the call over to our new CFO renders the hot who will provide more detail on our fourth quarter financials as well as our outlook and guidance for 2022 Noranda.
Thank you Marshall and good morning, everyone.
I'm thrilled to be joining my first earnings call and I'm, an artist Chief Financial Officer.
Marshall Peter and the entire underlying team have built an impressive organization with an incredible opportunity ahead.
I'm excited to be joining the team as we continue to execute on our mission to transform the power sports industry.
For comparison purposes today, I'm going to focus my commentary on unaudited pro forma results, which feels the business combination with right now closed on January one 2020.
We provide a detailed commentary in our shareholder letter, which is available on our Investor Relations website.
So instead of walking into a consolidated cement of operations I wanted to take a moment to highlight some of the progress we have made in our strategic priority. This year before opening the call for questions.
Before I get started I want to quickly highlight one of the many components I'll ramble on financial model that I believe make this company a truly compelling opportunity.
In 2021, the company generated $45 $5 million and net income on a pro forma basis.
Adjusting for stock based compensation, which was largely related to the right now transaction, we generated $74 $7 million and adjusted net income.
And this is before realizing any operating synergies, which we expect to benefit from overtime.
In the near term, we will be making thoughtful investments to lay the foundation for sustainable growth and profitability.
With a balanced and disciplined approach to making these investments we will continue to grow EBITDA and delivered GAAP profitability.
Layer on Rumble on scale relatively short operating history, and an attractive total addressable market I believe that this company provides a truly unique opportunity.
Rumble on made meaningful progress in the last year and exited the year in a position of strength.
In 2021, we sold over 55000 in power sports units.
<unk> revenue at the high end of our guidance range and adjusted EBITDA in line with our guidance.
Total revenue grew approximately 47% year over year to $449 million in the fourth quarter.
Full year revenue to nearly $1.6 billion.
Since announcing the business combination with right now Rumble on focus on significant opportunity in used power sports and used retail units in particular.
On a comparable pro forma basis in the fourth quarter, our first full quarter as a combined company, we sold 87% more use retail power sports units and generated 164% more revenue from these sales compared to the same quarter last year.
Regardless of sales channel retail or wholesale in aggregate revenue from used power sports grew 91% year over year.
These results demonstrate the high level of consumer demand and validate the opportunity we have in front of us.
In the fourth quarter total gross profit was $91 million up from $70 $78 $8 million in the same quarter last year.
Total gross profit margin was 24% down from 26, 3% driven primarily by an equally in the automotive segment, which was offset slightly by the power sports segment.
Operating expenses were $75 $2 million or 17% of revenue compared to $54 8 million or 18, 3% of revenue in the same quarter last year.
Within operating expenses total stock based compensation was $2 $1 million in the fourth quarter up from 0.5 million in the prior year quarter.
For the full year 2021 stock based compensation was $29 2 million up from $3.2 million in 2020 .
These increases were primarily driven by restricted stock unit grants issued in connection with the right now of transaction.
Which had the largest impact in the third quarter of 2021.
Net income was $26 million in the fourth quarter resulted resulting in fully diluted earnings of $1.35 per share.
This compares to a net loss of $5 $5 million in the prior year quarter.
Adjusted EBITDA was $22 $7 million down 24, 4% from $30 million in the same quarter last year impacted primarily by a decrease in total gross margin and other one time items.
For the full year 2021 pro forma net income was $45 5 million a.
A significant improvement for 18 $9 million pro forma net income last year.
Rumble on delivered adjusted EBITDA of $117 4 million in line with our guidance range and up approximating, 18.7% from $95 $9 million adjusted EBITDA in 2020.
As of December 31, cash and cash equivalents, including restricted cash was $52 million.
Total available liquidity defined as cash and cash equivalents, including restricted cash.
Availability under our bank credit facilities was $172 million for the.
And in 'twenty, one cash used in operating activities was $36 million.
Now turning to our outlook.
As Marshall outlined we completed 2021 with strong momentum and are seeing continued strength with robust demand, but use retail power sports units.
For 2022, we got them all.
Modeling in excess of 50% year over year abroad.
Used retail power sports unit sales.
We expect new retail power power sports unit sales to be consistent with the prior year due to ongoing manufacturer supply chain constraints.
From a pricing standpoint, we expect to use retail power sports unit seemed to moderate somewhat as the current elevated demand as suppose filled as we progressed through the year.
We expect to accelerate the acquisition of power sports net on our online platform and channel them through our retail locations.
Given these dynamics, we expect to deliver one $9 billion to $2 billion in revenue for 2022.
Note that this revenue guidance range assumes organic growth in our power sports segment at mid point, our previously provided range of 10% to 15%.
As a reminder, we closed the freedom power sports fans accident on February 18, 2022, and our guidance excludes the period, we did not own freedom.
Further our revenue guidance range considers $500 million to $600 million in revenue from non power sports segments.
You have and will continue to hear us talk about our north star, which is providing customers an unparalleled choice of products and services as well as an unmatched buying experience both online and in store.
We are confident that rebuilding their customer experience and power sports will position Rumble on for sustainable long term growth and profitability.
It is clear that we must make disciplined investments to scale down the line.
Our investments will be centered around three strategic priority Marshalls previously discussed.
Implementing our customer experience Center network.
Nearly expanding and enhancing our technology stack and developing our people and processes to attract and retain the best talent and build a scalable organization.
Many of these initiatives are already underway, while we must invest in our business. We are taking a balanced approach and plan to invest approximately 1%.
Total 2002 until the revenue are up to $20 million throughout 2022 in support of our long term growth objectives.
Including these investments we expect to generate at least $145 million adjusted EBITDA in 2022.
Note that although we continue to evaluate tuck in acquisition opportunities that meet our investment criteria. We have not included any incremental impact due to acquisitions and our revenue and adjusted EBITDA outlook.
Finally, we expect any contribution from Rumble on finance to be de Minimis in 2022, as we continue to refine and scale that platform.
To conclude Rumble on continues to build an exception power sports experience on behalf of our customers and we have a long runway ahead of us I am thrilled to be a part of this organization.
Forward to contributing towards the number of lines growing and delivering long term value.
For all of our stakeholders.
I would now turn the call over to Marshall for closing comments Marshall. Thank you.
Render wroclaw.
<unk> was built on our passion and our customers' passion for the experiences power sports deliver.
We're creating the customer experience that will build lifetime relationships with our customers and define the future of power sports as we embrace the next generations of new and innovative products. We believe rumble on will be a primary destination for both innovative manufacturers at all power sports enthusiasts regardless of age.
Life style or passion.
We're very excited about the progress that we've made in a short in this very short period of time.
But we also have our heads down and laser focused on executing our plan will.
It will be visible throughout the first half of 2022 with appearances at Investor conferences, and we'll always welcome opportunities to engage with investors to share our exciting story.
The final business segment of this size that has not been affected by new technology and in an industry that has not been that does not improve the customer experience that a level that consumers' expectations and behaviors are today. We believe this is a unique to say the least.
We strongly believe that our business strategy is right for today's consumer.
Just on current performance enhancements market demand and consumer response, thus far we are more convinced than ever that we are well on our way to lead in the way of change to dominate this market.
Thank you again for joining us this morning, and with that operator, we are ready for questions.
Thank you at this time I will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question. Kim You May press star two if you'd like to remove your question from the camp for participants using speaker equipment. It may be necessary to pick up your handset before pressing the.
Star Keys and.
The interest of time, we ask that.
One question and one follow up thank you.
Our first question comes from the line of Eric Wold with B Riley Securities. Please proceed with your question.
Thank you.
Good morning.
So two questions I guess, the one question or follow ups I guess the first question.
Looking at the Q4, EBITDA and then put the full year pro forma number kind of at the midpoint of the year.
Guidance range, even though revenues.
High end of the range can you talk about any puts and take but potentially kept EBITDA from being higher than it was.
Yes, good question.
Obviously, there were several items are what I would call integration items in Q4, the effect of the P&L.
A couple of examples would be in Q4, we reclassify certain capital leases to operating leases, which along with miscellaneous other items, we would've just on that one item would've exceeded guidance of a 120.
I also might point out.
I think something else worth sharing in that regard is we had $2 5 million less used power sports wholesale gross profit.
Order over quarter, and that's due to because we continue to ramp the showroom inventories right now.
This week.
We didn't push these units to the auction as we would have in the past.
You guys already talked about many times and outlined before that what we acquired this quarter or this month is what we will sell next quarter and next month.
With freedom now needing a similar injection of used inventory this will be a continuation of the diminishing wholesale sales replaced by higher gross margin from the retail channel.
Subsequent quarters and months.
Said differently, our spreads in Q4 to grow inventory of the stores will certainly be reflected in Q1 retail power sports sales there were various other integration.
Related items affecting the P&L, but those are the more meaningful examples.
Helpful. Thanks, Marshall and then the partners.
The follow up question as you think about the the $20 million Hum technology spending is expected this year.
That would be considered one time this year versus your kind of recurring spend in future years and can you talk about the expected return.
On that spend and kind of what you're expecting kind of a pet.
EBITDA tailwind coming from that.
Yeah, I think well first off you know obviously technology is.
The important piece of this.
In the early days you know for instance, the expenses on things like rebuilt.
Rebuilding all the websites and integrating all of that building the inventory.
Control piece of our technology et cetera, a lot of the things we've talked about in the past Oh, well underway. Most of those will be demonstrated in late Q2 and into Q3.
So those would kind of be more one time situations, we do have a significant need to build a more robust.
Logistics system.
And that will be an ongoing probably for the next.
Couple of years.
And then of course, it just becomes maintenance and so.
And so forth, but one of the huge.
Our investments in that regard is making sure that we're in a position to do that last touch the customer keep in mind. We have two customers that we do have lost touch with Wanda selling an asset to us and wanted to buy an asset and we think it's super important over time to build the infrastructure to support that.
So you know we already have infrastructure in each of the retail locations, such as trucks and trailers and so forth, but we need to integrate that we'd need to centralize that and get significantly more efficient.
And really upgrade the presentation on the <unk>.
Wifi investments that we're making with regards to the stores.
So as we've discussed before.
<unk> is really well getting into proper.
Internet capabilities in the stores the switching required to do that.
The sizable number and then of course, all the technology.
All of that it would be impossible to really change the customer experience on the showroom floor over time, if in fact, we don't have the technology.
Excuse me and obviously the.
Wi Fi capability.
What were some other items on the on the $20 million.
So I'm just to add onto that.
And we also talk about scaling the organization and building our own capabilities in house. So clearly you know I'm, bringing talent and.
And in doing so all of those things in house, obviously to placing it sounds like the outside services. So we do expect some gain some leverage there as we go along.
And then there is you know some marketing spend focused on the acquisition of inventory that obviously as you know in our.
Conversation that tastes like south over time, so they didn't stand it up the investments here, which are which are one time, but as you kind of go along we will measure that.
Our return on these and obviously, we wouldn't expect the return to be quite meaningful and happened over a short period of time, but we'll be looking at all of those things and be thoughtful about these investments that brings up a good 0.1 more thing.
I Kinda Lazard is.
With regards to marketing.
Our entire marketing efforts right now revolve around acquisition of inventory.
We do not have an issue thankfully.
With opportunity in.
In the retail channel the demand remains extremely high and much more than what we've been able to fill to date. So all of the marketing that you see us whether that be digital or or as we migrate into more traditional it is going to revolve around acquiring more inventory.
When we when we took a tour of the 13 freedom locations. It was very very clear that probably even more so than the right now.
Even has a bigger opportunity on the pre owned because they are just really really have not been in the business. So we've got a huge demand.
From a consumer we've got.
We've got a need for additional inventory as I call feeding the Beast.
So that's where our efforts will be spent and the timing I think is good because just.
One moment, please we're having technical difficulties one moment.
Sorry.
Yes, sorry.
Lost our connection.
So anyway, just to finish up on that thought.
Timing is really good because you know as we develop these new websites and most important one of the other things in this spend if you will is customer service and call Center.
Right now leaves an example are still handled at the store level and as we combine these.
Our web sites and so forth, it's gonna be necessary to be able to have a more efficient process of handling this.
The leases that we have and means you know 24, seven access to talk to someone whether you want to sell or buy so I'm. Just you know several items, but I would say from a customer service perspective.
The industry is very very lacking in that regard, it's hard to give a lead answer us.
Hard to get your questions answered and we obviously need to change that that's a that's a high demand of all consumers today.
Perfect. Thank you both.
Thank you. Our next question comes from the line of Craig Kennison with Baird. Please proceed with your question.
Hey, good morning, Thanks for taking my questions and congratulations on your new role.
I had a question on the fulfillment strategy and maybe just a request that you shed a little more light on on where you're headed there maybe.
How many stores can have fulfillment centers or how many fulfillment centers might you need long term and what are the capex and sort of operating costs associated with running a fulfillment center.
Well first off there will be an organic retail locations as well with an experience center.
If you were to us.
Do you think through what is this going to look like in the next quarter, we'll be showing you what that's going to look like because we would be well down the road.
In that regard we have secured the property in Dallas, and we're close in Phoenix, which will be the first two that we rollout.
If you were to do some type of comparable I would say to consider Nebraska furniture, which is a Warren Buffett concept that has just been.
Very very well received by consumers I believe the one that just opened here not long ago in Dallas is like 22 football fields under roof.
I would also say that it would probably be likely cabela's or bass pro shop on steroids, but all but all revolving around all the products, we represent which again remember our on road off road and personal watercraft.
Or is this all comes from is this industry and this is recognized by the manufacturers. This isn't you know.
Something that we dreamed up but as we went around the tour the stores the thing about where we were most of that Peter and I were most surprised about is these facilities that were built five years ago or 20 years ago were built primarily for two wheel motorcycles and if you talk to the manufacturers are one of them are shared with us the other day that they've done.
An analysis of 80% of their stores don't even have a door big enough.
To get the current products into the showroom floor, if they had room on the showroom floor and that that goes one step further is their service departments were designed for that same purpose. So as opposed to figuring out a strategy and a capex expense of trying to figure out how to rebuild 55 stores across the country that seem to be more we.
Felt that marrying what other large retailers have certainly done successfully of having a processing and fulfillment.
Opportunity would be huge so the things that will happen there are as opposed to individual units going to a predictable dealership in boxes and having to utilize the service department to put those together and so forth. They will go to a centralized location be processed the photo consistently videos consistently.
Price consistently.
What will happen is each store now we will have what is the appropriate size of inventory, both new and used at each individual location I call. It perfect inventory once you identify that perfect inventory based on the sales data and inventory turn and so forth.
What will happen is let's say, it's Oklahoma City and this weekend they sell three new and for US the Dallas fulfillment Center, which is 180 miles away by noon. The following day no different than a Walmart or a target a truck will be calling up with the replacement vehicles to keep that full what that does on the service side is it frees up the service opera.
<unk> to be able to take care of customers and customers only.
The time it takes in this industry to get your vehicle fixed is absolutely.
Atrocious, if you compare it to the automobile business is wildly different I mean, we have we have stores that you could take you 30, plus days to get your vehicle out of service and by the way. This is these are all things that are industry wide and so if we're going to create a.
A much better customer experience, we've got to address this issue and for us to make the the time investment and the capital investments to figure out how to go out and buy land and build bigger stores. We just don't feel was it was a prudent decision and we think there's already a proven model out there with fulfillment and then the last piece is we're also bolting on this.
Center on the front, which gives us a testing ground to before we roll things into a store that is significantly profitable we want to make sure that these are proven out and some of those are really in the customer process right. The way vehicles are priced most power sports theaters today don't even put a price on their vehicles on the showroom floor.
Many of them don't even put it online which to me is totally right.
And so we're going to test all of those changes within our own environment and then also have a place that when people walk into it.
They are not going to find that experience anywhere else in the country and we don't believe presently with the competition that's out there will ever be able to match in any reasonable period of time this type of concept.
That's great Marshall. Thank you for that and then just a follow up I'm curious.
Know all about the supply chain issues with your Oems, what's the current message from those OEM partners on inventory and supply and their ability to get you what you need.
We are seeing improved mix in that regard.
We're modeling do fairly flat.
But there is there are some other opportunities for growth here, which again really plays into the fulfillment piece is a lot of new products, which are really innovative products like the new switch from B R. P. Just as an example of.
That's something that hasn't existed in the space before Oh, I think we represent that product and I don't know.
15, or 17 markets.
And that product for 2022 is completely sold out. So some of these new products are really additional opportunities that are bringing a different a different consumer to the to the showroom, but back to the heart of the question. We are seeing an uptick on certain manufacturers', but you know we have to listen to what they're telling the world. Most of these are public companies there infer.
<unk> is out there and what they're saying is that they don't see any major improvement in days' supply at the store level in 2022.
But you know we're aggressively trying to buy from other dealers, both new product and used product to backfill that and so you know we we think there's we think there's some some opportunity there, but we can't but we can't kind of Buck the trend of what the manufacturers are leading us to.
Great. Thank you.
Thank you, ladies and gentlemen, as a reminder, if you'd like to turn the question queue. Please press star one from Keybanc.
Next question comes from the line of Seth Basham with Wedbush Securities. Please proceed with your question.
Yes, Hi, this is Nathan Friedman on for Seth and thank you so much for the time.
My first question is regarding the pricing environment can you share what you're seeing from a broader industry perspective in terms of power sports for both new and used has pricing held firm or have you seen any changes year to date and to what extent do you see power sports prices moderating in over the course of this year.
Tom I'll answer it a couple ways lets talk about new first.
Because of supply constraints.
New has stayed very very stable and I don't see anything on the horizon that would change that.
So I think that's a pretty solid all through 2022.
Keep in mind, there too as you look at the numbers and you compare.
Our kpis to.
Say the automotive guys.
You will see that we didn't have nearly the uptick in gross profit on a per unit basis that you saw in automotive so as it neutralizes I think it will be it'll be more than offset or at least equal equally offset by the additional volume by the availability. So that's the new piece on the use piece, we think that there is.
Some real opportunity here I mean the price.
Today is not done.
With proper data science, and we think that we're probably if anything.
<unk> some on the table.
Because of the inconsistency in pricing from market to market.
But not having the proper data when it when it comes to that pricing as far as the wholesale values of our pre owned inventory, which might be what you're referencing are they remained very very stable, but again slightly higher.
But not really more than what it has been in the past that this is an industry that has a little bit more seasonality effect in wholesale valuation.
And so you know we're in a square in a season that typically right now in the spring that the prices do go up they have gone up from fourth quarter.
But you will see that fluctuation as we move forward and since we're on that I might touch on something that I have mentioned to several.
The analysts as well.
As we continue to to.
Change this mix scenario.
We originally said that this group right now group is at one three to one we've obviously cut that in half.
We set a long term goal out there of one to one mix.
We think that that to one to one is probably going to be a cheese sooner than later.
It was probably a little longer term when we put it out there, but it's it's certainly looking shorter term at this point.
And we are really encouraged with the freedom from a standpoint that they are even more than three to one on the new to use ratio and again, we don't see anything that would cause used vehicles to slow down anytime in the next couple of years.
But for us to go in and put vehicles in the showroom floor that basically you don't have any today, that's going to be a meaningful move so prices are up but seasonally pretty consistent and we don't see a huge valuation change of what we gave a consumer there's just nothing in the data.
Would reflect that.
Got it. Thank you that's very helpful color and my follow up is on GPU can you provide some color regarding what weighed on gross profit in the fourth quarter and more specifically power sports GPU as long as your GPU TPU expectations for 2022 and what.
Maybe the key drivers be that formulate your expectations for both new and used retail. Thank you very much.
I think they used.
Profit on a per unit basis, I was really affected by kind of shock and awe from an inventory perspective, we took stores that had 10 used bikes and now have 60 or 80 stores that had 30 now have 150, and so that has been a situation where and because we don't have.
Effective data driven pricing I think that some things were probably sold too cheap.
And we'll address those as we go forward. So we do believe that there is upside but right now the mission is to sell everything that we have.
Continue that turn rate.
For new as an example, we want to make sure that we are not.
Not holding back inventory for 100 or $200 more gross profit because the day will come where we want to have that those term rates driving allocation. It will come from these manufacturers. So you know this is a this is a situation where yes, you can get more greedy, but it might cost.
In the long run by slowing down your turn in and so on.
Fourth.
We think there's upside in gross margin I would tell you that if you look at our total gross margin you guys have heard me say it many times if you look at all of our gross margin.
But all of our net sales both retail and wholesale you will see a number that doesn't exist even remotely close and the automobile business that you all know I've done for many many years, we have a luxury here are very very high gross margins, we certainly don't.
Tend to shrink those but you know I'll use one more gross margin example is in service.
If we have the ability to do this as much service and today, we have 80% gross margins on labor and we can take those gross margins to 70% and do and do do double the deep the revenue.
At a 70% gross versus an 80% growth I'm going to take that math everyday of the week.
And we believe those kind of opportunities.
So it'll move around a little bit, but just keep in mind is it's it's very high it has consistently been very hard even if you go back.
Here's for the likes of right now and freedom.
Got it. Thank you very much again for the time and good luck.
Thank you. Thank you.
Thank you. Our next question comes from the line of Rommel.
He just capital. Please proceed with your question.
Hi, Good morning, Thanks for taking my question Marshall you talked a lot about customer experience I certainly appreciate your comments on a macro basis with regards to you know parts availability and inventory.
Acquired a lot of.
Locations over the last several months and integrate them I Wonder if you could just talk about that.
Initiatives, you're putting into place for.
Improving the customer experience.
Lot of these new dealerships that you brought in maybe on a more cohesive or national level. So you've got this sort of similar look and feel and brand name across the chain. Thanks.
Yeah, I think that's part of our investment.
<unk> strategy that.
Sure.
I think there are significant opportunities that will be executed at the current store level overtime.
We are already doing some things that we're just you know kind of basic blocking and tackling making sure that that vehicles are priced in those types of things, but to your point over time, we want to make sure that when you drive by one of our dealerships that it means something.
Today, there's a huge disparity between our nicer store, which would probably be one of the large ones and in Phoenix to one of our lesser quality facilities, maybe in a different market.
We need to make sure that I think a good example is when you drive by a farmer Mac's door today, you know as Carmax and that's going to be things that that evolve over time.
Showroom customer experience is not going to be significantly changed in the near term we are going to utilize our fulfillment customization centers to reevaluate all of those there's some obvious indicators out there in all retail markets right of what consumers expect today, we were.
We were talking internally about the new.
Amazon now right I mean.
A year ago, we thought that same day delivery, it's just crazy how do they how do they affect that and now today you know we can pay a little bit extra and have it delivered in the next 20 minutes. I mean. These are these are things that we need to participate in we need to be the leaders in all regards to customer experience, but we don't intend to blow up our dealer.
Ships, one last thing from.
From their current.
Profitability. One thing we are doing is we have chosen to low performing stores in the organization that are not part of any region and we are using them.
As a basically a retail store test location and so we are testing things like a one price no fees.
IPad selling process that where one customer one one person is handling those transactions. Those are all the things that we are pretty confident are or where we need to be at the end of the day.
But if you walk in our store 60 days from now one of the existing stores you will not see those changes, but I would say by year end once our websites or changed our infrastructure for online selling is is up to speed, we have the opportunity to create a well.
Well thought out processes at the store level with people like salespeople.
Service riders parts people and so forth.
And then the last thing I would say in this regard is it.
If you think about the people that have tried to do in the auto the auto space.
What Carmax does as an example, and they haven't had a lot of success and I personally believe that it's because they look at what a retailer like they do as a selling system and what they do differently and I'm not here to pitch Carmax I'd just like to use me. As example, because I've been a student of them since they started.
What do they do differently as a culture and cultures change over time and you have to have by end two culture changes and so you can't just go in and pick all the stores with a single brush and say this is the best way to do it and then expect people that were brought up in a whole different culture to be able to immediately.
We adapt it just doesn't work that way so it's gonna be methodical it will be well thought out it will be very well tested right and nothing would be changed at a store level today six months from now or two years from now that we can't draw a direct correlation to better customer satisfaction better.
<unk> and a better long term experience. So that we can start thinking about the lifecycle of these customers that we sell we sell products all the way from a mini bags to a seven year old all the way to Attrite Harley Davidson strike as an example to an 80 year old. We are we have a huge breadth of potential.
Customers and we've got to make sure that our systems and processes and everything appeal to that wide range of demographics, so lots and lots of lots of information there lots of stuff to do but that's that's where that's at.
Thanks, very much Marshall, it's very helpful. Thanks.
Thank you, ladies and gentlemen, we've come to the end of our question and answer session I'll turn the floor back to Mr turnaround for any final comments.
Great well I think we've taken up enough of your time today, but we really really appreciate everybody's involvement and a lot of you have been been with Rumble on for a long time and we've just got some really really exciting times ahead, and hopefully you sense that in the in the in the delivery today and I would tell you that in closing.
One of the biggest benefits that we have as a company.
That I mentioned in my opening is really the cheap if you look at the tenure of the team that is now a regional directors. The average tenure of those guys who has over 20 years with right now in themselves not 20 years in the industry 20 years with that retail would that retailer.
And it isn't just that handful of people as we toured the stores. The most amazing thing that I saw coming from an industry be it cars, then how 'bout pretty much a revolving door of employee turnover, we walked from service Department and service departments that had people that have been through for ownership changes and have been a mechanic there for 30 years at parts people in soap.
Fourth.
We can all agree that that the industries need of technology changes, but when you have this type of a foundation to be able to build a great company on with talent and tenure.
Our ownership of these companies has provided a we have a lot to look forward to and I think we can move significantly quicker than most companies yet at the stage. We're in so with all of that we really really appreciate your guys time today and look forward to your follow up questions. As we go through the next few days and 60 days from now we're going.
Be back talking to you again about the Q1 of which we're very excited about so again. Thank you very much have a great day.
Thank you. This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.