Q2 2023 RumbleON Inc Earnings Call
Greetings and welcome to Rumble on corporate <unk> second quarter 2023 earnings Conference 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. Please note. This conference is being recorded I will now.
I will turn the conference over 12, new head of Investor Relations. Thank you you may begin.
Thank you.
Operator, good morning, ladies and gentlemen, thank you for joining us on this conference call to discuss Rumble on second quarter 2023 financial results.
Joining me on the call today are Mark Tac Rumble launch interim Chief Executive Officer.
Steve Pulley around belongs executive chairman.
Blake, Boston <unk>, Chief Financial Officer.
Our Q2 results are detailed in the press release, we issued this morning and supplemental information will be available in our second quarter Form 10-Q will be filed later today.
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 future financial results and 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 in 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.
Number one assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.
Also the following discussion contains non-GAAP financial measures a reconciliation of these non-GAAP financial measures.
Please see our earnings release issued earlier this morning.
Now I will turn the call over to Mark.
Mark.
Thanks, Nate good morning, everyone. Thank you for joining us for our second quarter 2023 earnings call.
Well I've met with some of you in recent months I would like to explain to everyone. Why I returned to Rumble on.
My long time business partner, Bill culture, and I are substantial shareholders in the room alone Rumble on share price performance and financial results over several quarters indicators that it needed significant change as such Bill and I ran a proxy contests, which ultimately resulted in me rejoining the company as interim CEO along with our refresh.
The board of directors, we are rapidly, bringing about the changes that we believe are necessary.
I've been in the power sports business for over 30 years, and 1989 I co founded right now power sports retailer with Doe Coulter Oprah.
Over those years doing I agree right now into a premier nationwide destination to buy and sell motorcycles, atvs and personal watercraft with 41 dealerships across the United States billing.
Bill and I learned many valuable lessons about how best to serve customers and grow a thriving business one that can sustain itself in various economic cycles and seasons.
I know this industry and business very well.
I'm honored to serve as interim CEO and as a member of the board of directors.
Fortunately the team that led right now towards success is largely already in place you have already met Blake Larson, who was appointed as Rumble on CFO in January and previously was right now CFO .
Hundreds of other Rumble on employers have remained steadfast in the work that has driven the company for many years led by the general managers of our dealerships along with many dedicated people.
I'd like to remind everyone here, what separates rumble on from our competitors.
Number one is well positioned in the power sports market as the largest north American power sports retailer, providing both online and in store options at 55 locations. We offer the best selection of power sports brands and models, where the only power sports company with a nationwide used vehicle acquisition and resale.
Graham.
And we are the only pure play public company in the industry.
Rumble on now has a very experienced and successful management team well.
Some of us having over 30 years in the industry.
We have developed deep relationships with our suppliers and vendors along the way.
Since I rejoined the company nearly two months ago, we've been building on these strengths.
We built a new business plan, which includes further cost saving initiatives improved inventory management and more disciplined and strategic approach to acquisitions.
The first step is the rates that our cost structure, we are implementing the $30 million in annualized cost reductions that Blake mentioned earlier. This year. Additionally, we have identified another $12 million in reductions.
Annualized cost savings of 40 to my left.
Full effect of these measures benefiting 'twenty 'twenty four.
We believe we can further reduce expenses as Blake will describe in more detail.
Next we have opportunities to improve our inventory management in several ways.
Over the last few months, we have dramatically reduced the amount of our used inventory that is more than 90 days old.
We'll look to be more precise in adjusting our inventory level to match seasonal demand patterns.
Our ability to buy inventory nationwide and our real time knowledge of retail pricing for vehicles are huge assets that we will look to further maximize.
As the only power sports player with a nationwide used vehicle acquisition and resale program, we have a great opportunity to capitalize on this source of high margin business.
Longer term, we look to grow the footprint of our dealerships, we will do this organically and through accretive acquisitions and strategically attractive markets. The current management team has a long track record of acquiring and immediately improving dealership profitability for our best in class operations and economies of scale.
Bill.
We drive that profitability through the riding off brand and culture, our technology platform, our ability to source and transport inventory nationally and our back office efficiencies.
Our sports dealer industry remains quite fragmented and we see ourselves as the first mover consolidated.
While we work to adapt rumble on to the current environment and make substantial changes to our business operations. We have also made significant improvements to rumble on financials. We've reached an agreement with Oaktree capital to favorably amend our financing agreement we've agreed to sell certain non core assets using the proceeds for debt reduction.
We are planning to raise equity capital with the support of don't go through myself and other significant shareholders. We.
We issued a separate press release this morning with more details our.
Our executive Chairman, Steve Hooley will provide more details on these in our call.
There are two more important items that I wanted to mention.
We're actively recruiting a permanent CEO .
Also interviewing for and looking to hire a new independent audit firm as grant Thornton has chosen did not stand for reelection for the fiscal 2023 audits.
As you read in our press release from earlier. This morning, we have revised our full year 2023 guidance.
It's important to know that we understand exactly the reasons behind this revision and have already begun to remedy that.
The reasons were primarily related to used inventory levels and operating costs.
Afterwards, Blake will address shortly in more detail.
I will now turn it over to Steve I'll, let Steve introduce himself and discuss his areas of focus.
Thanks Mark.
I want to express my excitement and gratitude for being part of the team at Rumble on and for the hard work. The team has done over the past few months getting us on track to accomplish our initiatives and bring about real change.
As Mark mentioned I was recently appointed executive chairman over.
Over the course of my career I have served on over 30 boards of public and private companies I've been the Chief Executive officer of a retail focused manufacturing company.
Also been an investment banker and an attorney.
As discussed one of our immediate priorities has been to work with our partners at Oaktree capital management to reach a more optimal capital structure I'm very pleased to update you on our progress we've received covenant waivers for the second quarter and third quarter of 2023, and we've negotiated more flexible.
Requirements for the following three quarters, providing us with a good runway over the next 12 months.
We are taking steps to meaningfully improve our balance sheet. We have signed a letter of intent to sell our rumble on finance portfolio of loans. We believe that gross proceeds will be at least $24 million with $15 million available to reduce our debt to our lenders. We anticipate the transaction will close in the third.
Third quarter we.
We also have signed a letter of intent to sell nine properties with leaseback provisions.
We expect this transaction to close in the third quarter as well.
We anticipate gross proceeds of $56 $9 million with approximately $55 million that will be used to reduce our debt.
We have leased back these properties for 15 years. The initial annual rent will be $4 $3 million and it will increase by no more than 2% per year. We were also looking to exit leases on properties, which are no longer core to our business plan.
In conjunction with these modifications, we are announcing that certain large shareholders, including Mark and bill.
Ive committed up to $100 million to support our new equity raised by the company.
The company is planning to file a registration statement detailing a rights offering but the large shareholders will backstop.
The net proceeds will allow the company to both reduce our obligations to oak tree and fund future accretive acquisitions under.
Under the recent amendment to our credit agreement, we will be required to apply one half of the proceeds received from the equity raise transaction to the repayment of debt.
The rest will be available to fund the growth and development of our business.
We're actively recruiting a permanent CEO to continue the vision of management and the board to elevate this business to even greater success. We've retained a nationally known executive recruiting firm to assist in the search for a permanent CEO and we hope to have the individual identified very soon.
We plan to implement further changes to enhance the corporate governance of Rumble on even beyond the recent refreshment of our bulk book the board.
We intend to propose to the shareholders next year that the board of directors be declassified such that each member stands for election every.
The interest of shareholders second we will ensure that the compensation programs for our executives are well aligned with shareholders third we are planning to add Mark Cohen to onboard Mark as the CIO of Stone House, which is a large investor in our company.
This is expected to take place after Mark completes our normal governance committee on boarding procedures.
Rumble, one will be a company where shareholders have meaningful input and engagement.
As we move through the year, we will update you on our continued progress I.
I would like to thank our dedicated team members for their extraordinary efforts.
With that I will turn the call over to Blake to walk through our second quarter, 2023 financials and outlook in more detail.
Thank you, Steve and good morning, everyone.
As Mark mentioned that there have been many changes that rumble on since we last spoke.
I'm grateful to be working side by side with Mark again, as we endeavor to stabilize and improve the capital structure grow the business sensibly and create lasting shareholder value.
As Steve mentioned earlier, we have favorably amended our financing agreements with oaktree, providing the necessary runway to execute our business plan.
We have begun implementing the $30 million in annualized cost reductions that we outlined in previous conference calls.
We also have targeted an additional $12 million in annualized cost savings, bringing our total cost savings to $42 million per year. The full effect of these cost reductions will flow through in 2024.
Cutting expenses out of an organization is not always immediately visible and often there is a tail that can lag for awhile.
For example, we made the decision at the end of Q3 last year to exit the automotive business, which I'm happy to report was finally completed at the end of this quarter.
This segment will now be classified as discontinued operations in our financial statements going forward.
Our cost reduction so far have largely focused on discontinued operations and corporate level expenses. We are now in the early stages of identifying incremental cost savings at dealers distribution centers and that our unused or underused facilities, which will result in additional savings down the road.
As Mark mentioned, we have already improved our inventory management, we've done so in several ways over the last few months, we have dramatically reduced the amount of our used inventory that is more than 90 days old.
We will rely on our experienced power sports team to be more precise and adjusting our inventory level to match seasonal demand patterns.
Our unmatched ability to buy inventory nationwide, coupled with our real time knowledge of retail pricing for vehicles are huge differentiators that will allow us to further maximize our competitive advantage.
As the only power sports player with a nationwide used vehicle acquisition and resale program, we have a great opportunity to capitalize on this source of high margin business.
Now I would like to talk about our second quarter financial results and update our 2023 outlook.
All comparative financial results, our sequential and do not include the discontinued automotive operations unless otherwise stated.
Starting with the second quarter units, we sold at 20277 retail units, including 13126, new units and 7151 used units up 17, 7% from the prior quarter.
Although we expected Q2 volume to outpace the prior quarter due to seasonality new unit growth was even stronger than expected, increasing 25, 8% quarter over quarter compared to 17, 5% over the same period in 2022.
Normalized new inventory levels year over year are a major driver for this trend.
Moving to revenue in the second quarter, we generated $382 7 million of revenue, which is up 14, 5% or $48 3 million from the prior quarter.
Revenue from finance and insurance increased 22% from the prior quarter due to increased retail units sold what parts accessories and service sales increased 10, 7% quarter over quarter, demonstrating our continued commitment to this high margin profit center.
Total second quarter gross profit was $106 4 million up $16 1 million from the prior quarter gross margin was 27, 8% compared to 27% in the prior quarter gross margin has trough and normalized although gross margin is significantly down year over year compared to Q2 2020 Twos Panther.
They make high of 13, 3%, we knew that level was not sustainable long term the year over year reduction in gross margin was driven entirely by reduced vehicle margin of 14, 6% compared to the pandemic high of 21% last year.
The margin reduction is attributable to normalize supply and demand economics pressure on lower tier credit buyers due to rising interest rates and inflation as well as lower than normal used unit margins that were largely self inflicted from purchasing and liquidation decisions.
However, worth noting we have moderately increased power sports gross margin above the prior two quarters.
Total power sports gross profit per unit was $5349 flat sequentially and down $1155 from the prior year.
Although G. P was down significantly from last year's all time high pandemic level. It has stayed consistent over the last two quarters and remains significantly higher than the pre pandemic 2019 G. P. U a 4900.
Turning to operating expenses total second quarter, SG&A expenses were $100.3 million up $14 million or 16, 3% sequentially. If we exclude expenses related to key one time occurrences second quarter SG&A would have been flat sequentially, while revenue was up $48 3 million.
Additionally, we expect to show a substantially larger reduction in SG&A expenses over the next two quarters due to recently implemented cost saving measures.
Within SG&A total compensation was $57 1 million up from $51 million in the first quarter of 2023, but down to 14, 9% of sales compared to 15, 2%.
Stock based compensation was $4 9 million up from $2 9 million in the first quarter of 2023 due primarily to triggered early vesting of a former management.
Marketing and advertising and selling expenses were $8 5 million to $7 million for the.
From $5 8 million in the first quarter of 2023.
Professional fees were $6 7 million $2 9 million up from $3 8 million in the first quarter of 2023 as legal fees continue to remain higher than normal.
<unk> facilities in general and administrative expenses increased marginally up point 3 million combined.
Or less than 1.5% sequentially.
Adjusted EBITDA was $23 6 million in the second quarter up 118, 6% from the first quarter of 2023, driven by normal seasonal trends and offset by lower than expected unit sales in G. P. You.
Adjusted net income was <unk> 3 million and adjusted diluted earnings per share was <unk>.
Turning to the balance sheet and cash flow at the end of the quarter, we had $44 4 million of unrestricted cash.
We have a $75 million used floor plan facility with J P. Morgan with untapped capacity of $42 9 million, which combined with unrestricted cash provides liquidity that can be used to help fund the business.
At the end of Q2, we had $45 3 million up on Florida equity in our used inventory.
As Steve mentioned, we have signed agreements to sell noncore assets that will greatly improve the balance sheet.
Now let me provide additional details on our 2023 outlook.
For the full year, we now expect power sports and transportation revenue combined to be within the range of 1.38 billion to 1.48 billion.
For 2022, the comparable figure was 1.46 billion, reflecting our assumptions for flat revenue growth year over year.
This is mostly driven by softer sales of used vehicles, and primarily offset by a rebound in new vehicle sales.
We expect to generate a full year gross profit per unit similar to Q1 and Q2 of 5300 $5400.
That compares to 6159 in the prior year of 2022 and below the 5007 hundred G. P. A guidance we gave previously.
We now expect adjusted EBITDA in the range of 55 to 65 million for full year 2023, driven primarily by lower than previously bottle volume used vehicle GPU and the layered impact of cost cutting initiatives recently implemented the.
The range is somewhat broad because new management is just getting started fully identifying the business needs and this requires time to rightsize some short term inventory issues.
I want to provide.
I'd further color and guidance for 'twenty, 'twenty, four which will show the full benefit of the cost savings and capital restructuring initiatives, we have been working on.
As mentioned previously we have letters of intent and are very close to purchase agreements with two separate buyers to acquire real estate and finance portfolios.
The net impact of these transactions will allow rumble on to pay down $70 million of term debt most likely within Q3, but certainly before year end. We are also committed to an equity raise of $100 million, which is entirely backstopped by our largest shareholders.
Who are fully aligned with a unique opportunity to profitably consolidate the retail power sports industry.
The economics of the 100 million call for 50 million to further reduce debt and the remainder for growth initiatives in the form of accretive acquisitions.
These decisive actions allow management flexibility and time to implement our plan.
Turning to the 'twenty 'twenty four guide full year forecasted baseline revenue is 1.58 billion, which anticipates modest improvements in our used unit volume and margin as we get back to focusing on our used inventory playbook.
We project G. P. You will remain relatively flat at 5004 hundred.
Dollars.
Baseline adjusted EBITDA for our 2024 forecast will be $80 million to $90 million.
In closing I would just like to thank the incredible and dedicated employees of Rumble on right now and wholesale express for their commitment and effort during this transaction transition.
And with that operator, we will open it up to questions.
If you would like to ask a question. Please press star one on your telephone keypad.
Uh huh.
Your line is in the question queue.
You May press Star two.
A question from the queue.
Okay.
Thanks, Eric.
Necessary to pick up your handset before pressing the star.
Please ask one question and one follow up question.
For additional questions.
Our first question is from.
With B Riley.
Please proceed.
Thank you good morning, everyone I guess.
Blake, maybe trying to understand the Q2.
A little bit more I guess, you know 24 ish million of EBITDA you previously on the Q1 call you noted that.
April EBITDA was above Q1 to call it 11 billion.
He subsequently made it may the trends continued into may so it looks like June really reverse course, maybe help us understand what what happened so dramatically in June to reverse the strength you were seeing in April and May.
Okay.
Thank you Eric and.
I appreciate the question.
I would say you know.
Some of the drivers you know, we'll continue to see a little bit of.
Issues with credits on the low tier and <unk>.
Obviously, it's been a really hot summer, which you now on record, which is kind of impacted some of our markets.
And just our used inventory as we we have to see we had a bunch of inventory over 90 days that we've significantly reduced.
And.
And so I would attribute it to that.
Okay, and then my follow up question.
What's what's maybe help us understand what's so different or what's changed.
On the used inventory procurement process now versus what was in place either under prior management was about another person wants look any different now versus what was not being done before.
Yeah.
Hey, Eric This is Marc tackle all I'll offer some some light onto that I think that Oh, yeah, I think we're gonna.
A couple a couple of things one we're fine tuning the process of acquisition basically our our cash offer program and theirs.
It can be better buying done at certain times of the year, we need to really load up for the for the full selling season and maybe.
Maybe not have to carry that inventory.
Length of maybe some of it was carried in the past I think that we need to.
I mean, I think we really need to focus on that number one.
We can also save a little bit of money and I think actually theres a lot of money to say, but I'm afraid of this product. We really spent a lot of money moving product around the country. So we're going to.
Without giving you any real too much secret sauce here.
Really cut back on that I'm afraid that we're spending I think there's there's literally millions of dollars that can be saved so.
I think that alone will be a massive impact on.
The handling of our news product and that's really our bread and butter.
Hum.
I appreciate it thank you both.
Our next question is from Craig Kennison with Baird. Please proceed.
Hey, good morning, Thanks for taking my question as well I Wonder.
You put you provided very helpful. EBIDTA guidance for 'twenty 'twenty four I Wonder if you would share with us what the pro forma debt level would be after the the backstop secondary and after the sale leaseback and any other changes youre, making to the capital structure.
Yeah. So our commitment is to eliminate 120.
Of debt off of our term loan with Oaktree.
<unk>.
And then.
We will also be in conjunction taking out.
Our smaller sector credit Suisse facility that.
It was used to finance our ramble on finance portfolio I think that's around $18 million that will also come off of.
The debt stack.
Got it so if I do the math right would that get you to.
Uh huh.
Debt to EBITDA of three times or less.
On pro forma basis.
Yeah.
Based on our 'twenty 'twenty four guidance or the 2023 guidance.
For 2020, yes.
Yeah, Yeah, we it'll it'll definitely hit that market and Oh.
Also you know for the first couple of quarters of 2024, our covenant ratio significantly higher than than the.
The $3 75, you might be used to the $3 75 kicks in again in the third quarter of 2024.
So we should be well positioned to.
To get our strategy.
To have the full runway, we need to implement our strategy, which consist of getting the used bike.
And is that going getting those margins, that's where the real opportunity is with these margins.
And then our cost cutting initiatives too.
Anything else, Chris if I could yes, if I could follow up on that and I understand what you're saying on the used side. It does feel like a big opportunity at the same time. This quarter you kind of reduced your ratio of used inventory.
Sales and you talked about maybe the the aging of that inventory being an issue like what's the strategy to make sure you can grow.
You know the used business without necessarily bringing some of those aging issues into play.
Hey, Greg Mark again, I think you know what.
Yeah.
We want to be more specific on what we're buying we went up we went up by more of a I mean, I know it sounds simple, but it's.
It's not really a simple process, we want to we will.
Really want to buy the right product, we want to buy it at the right time, and we want to buy it at the right price.
And it's a it's as simple as you know.
I'll hang low and selling high I mean, it's it's not easy so.
But we will turn that inventory, we're not going to hang onto it I mean, we're going to basically go through that process, bringing inventory in.
If it's not really what we want for it doesn't turn out to be exactly what we want towards or it begins to age it's gonna go much quicker.
And that inventory will be gone within that 90 days.
As opposed to maybe some of the things that we are.
We're having to unload right now.
Makes sense great. Thank you.
Yeah.
Our next question is from Michael Baker with D. A Davidson. Please proceed.
Okay. Thanks, you know I, just I guess more for Mark just ask a big picture question, if I could just.
Talk about your vision for Rumble on and how that you know longer term and how that might differ from the previous management teams vision what were they doing wrong. Besides I guess evidently not buying the right used inventory at the right time at the right price with the right products, but beyond that are there you know I think you sort of touched on everything here, but can you sort of articulate.
And overall strategy or vision are that might be different from from your predecessor.
Oh sure I appreciate the question, Michael I think that.
You know other than the used inventory which is.
Big Big part of the process, what we do here.
I think that our acquisition strategy going forward is probably a little different as well you know our history our history says.
We bought product what about dealerships that were underperforming generally.
Right now as you haven't been in the business for 30 plus years, but when I have generally bought dealerships.
At a discount and put in the correct or what we feel are correct processes and procedures the right people.
And.
Take those dealerships to maybe pick up at a free multiple and you know we we.
We.
Basically create more profit out of that process and procedure that we've we've done for 30 years, we can take and.
And really increase the return.
So maybe a six or seven so.
We've done in the past we bought scores that.
They were underperforming.
Even a six or seven multiple but they pay for themselves in a year with the right people the right processes and they're a procedure. So a big part of our acquisition growth is based on that that type of philosophy and it's been very successful in the past and we expect it to be very successful in the future.
So if I could follow up on that and the inventory question. So one on the acquisition of dealerships can you can you talk about what the pipeline might look like and what what you know annual store growth might look like or how many dealerships are overtime. Just some you know flush out that store strategy. If you will.
And then on the used inventory correct me, if I'm wrong, but it sounds like you pulled back in the near term got rid of old inventory, but this isn't a pullback on the used business. This is just clearing the decks to to get it to sort of position yourself are to do better in that business, but still as committed to that use business as as always is that the right way to think about it.
Yeah. That's a that's that's that's a great notice I mean, we are you know we anticipate.
Ah well a couple of things, where we anticipate the runway.
To really expand that.
Yeah, I mean as far as the pipeline goes I know that that we get in specific markets.
New deal opportunities.
Daily well at least weekly if not [laughter].
You know again, it's a very fragmented industry, Michael and there's probably 8000 plus dealers that there are a lot of them are mom and pop still they were enthusiasts. They are they're ready to get out, especially after the COVID-19 a wave that they've experienced.
They realize they have to get serious about doing business again, and many of them just want to ride into the sunset. So.
There's tons of opportunity for us.
For consolidation in the markets that we want to be and so we're very excited about that I am getting many calls are we've got a couple of.
Deals we're looking at right now that were.
Not quite at the LOI stage, but we are we are close.
Michael just a just an example of one you know we've only done one this year.
Now Tallahassee, but you know an underperforming store there I think they're building burned down in any way we picked it up because it's in a market that makes sense to us in Florida, and our footprint and with all the brands and you know it is we picked it up for $3 3 million.
Dollars.
And through June .
It was at 880 <unk>.
Of EBITDA and so you know.
Just double that for the year and it you know it just pays for itself in a couple of years. So.
A quick comment on your on your used inventory, yeah, where we're going after that tenfold.
That's really one of the unique things about this company, it's really what connected bill and I to Rumble on in the first place.
We think that the.
We once we get our runway it cleaned up here.
It's just wide open I mean, we're seeing great results.
With the small tweaks, we've made to the cash offer program, we expect to make more get product here quicker.
I get the admin done quicker get afraid it quicker and and flip the product quicker. So that's really one of them I'd say three of the main keys to our.
Keep in the AR aging at a minimum.
Got it. Thank you appreciate it.
Q.
Our next question is from Seth Basham with Wedbush Securities. Please proceed.
Thanks, a lot and good morning. My first question is just if you wouldn't mind, adding some clarity on the specific covenant.
Our leverage covenant amendments in the next four quarters each of the fourth quarters ahead.
Yeah.
Yeah.
I don't have it actually in front of me, but so I don't want to.
Quote the exact wrong term, but I can tell you that we've got there.
The third quarter, excuse me second quarter and third quarter of this year waived.
And then we start in the fourth quarter.
At either 575 or 5.5.
And then it goes down steps down in the first quarter, a little bit steps down in the second quarter, a little bit and then it.
And then it goes back to normal in the third quarter. So Beth I will I will send you those those are that exact language.
After this call.
Great. Thank you and then just for purposes of clarity based on your guidance for 2023, where do you expect here.
<unk> leverage to be at the end of the year.
Yeah.
Yes.
Where do we expect our our leverage to be at the end of the year.
Yeah, Yeah, our leverage ratio.
Four three.
Yeah.
Got it.
And I had a question was just on the outlooks are used versus new over the balance of the year and then how are you thinking about unit sales trends for the back half relative to what you experienced in the second quarter in both users yeah.
Yeah.
I'd say by the end of the year.
And we'll probably get the ratio down to 115 to one.
He used to new.
Got it and by the end of the third quarter do you expect your used inventory days outstanding to be normalized.
Well, we're hoping by the end of the quarter, where we're running a lot of product through several auctions around the country right now we've got some campaigns that are going to.
Starting here soon.
To also finish out the season and some of the northern Oh facilities in dealerships and we're working with them and everything into the.
Under the snow belt line.
It is getting ready to call up we'd hope.
There's 100 degree weather has not been generous to anybody on a motorcycle but we.
We hope for that to abate, a little bit as well and.
Well, we really target the remainder of what we feel is excessive.
As well as bringing in a lot of the new product see how fast we can turn it really pissed our capabilities on the new tweaks at the cash offer program.
Got it and my last question you talked.
Pretty extensively about your vision for that business on the used market overall.
Overall, when you think about some of the facilities have been built.
Over the last couple of years.
Including Atlanta, Atlanta, the processing facility is that still part of the go forward strategy are you going to.
Eliminate that portion of the strategy.
You know, we're still evaluating we made a run through all the facilities up and down the east coast.
And we see value in certain markets, we just haven't fully evaluated Seth which ones.
You know to really fight harder for the nice thing about the.
The facilities that are there currently is.
An auction company NPA has got.
You know its got facilities close by so we don't have to if we decided to move some of that product out of there and make that change it's not a big problem for us, but we're still not 100% committed oh, there's a lot to cover here in the last two months and that we're just not 100% sure.
What direction, we want to go in all the facilities.
Understood. Thank you very much.
Our next question is Eric Wold with B Riley Securities. Please proceed.
Greg just a follow up question I appreciate it so kind of looking at the the guidance between between 23 and 'twenty four it's about 10% or so.
Topline improving to two years, how much of that is organic versus acquisitions or is there anything acquisition in there with what acquisition there'll be incremental and then within kind of that guidance improvement or the revenue improvement.
When are you expecting.
Consumer demand trends with the pivot to be more positive or the driver more of that demand will remain relatively constant, but you always benefit from from smarter.
Inventory buying and having the right inventory on hand.
Yeah. Thanks, Eric.
So the.
The guidance is is baseline so.
It's it's al.
As you see it now without acquisitions.
And so that that slight increase in revenue is coming from the used.
Syed Ali.
And and not really that demand will pick up much but that we will do a better job of Oh.
Of implementing our cash offer tool and getting the right vehicles in the right places at the right time.
So.
Eric the thing about our business our people love their toys and really the demand.
You know it's not generally.
It doesn't it doesn't really we send on the on the consumer and.
Financing that that that's a little bit out of our control.
But the people they just don't stop coming in the door. They they want the new product and the manufacturers the great thing about all of the manufacturers as they've always.
They're all working on new product and.
And nothing excites the consumer more than.
And the latest greatest thing so the demand I think there's always there we don't obviously have a crystal ball.
How high it will go or one little bit, but you know weather is a factor again, you know 100 are in the south that's been 100 plus degrees setting records.
That could hinder the business a little bit people still come in but they're you know they're in an air conditioned showroom, they're not they're not out in the desert.
Definitely the consequences of that so.
But demand wise Ah it barely very rarely wanes and.
Uh huh.
The outside things that we can't control well, that's a little bit of an issue occasionally but you know manufacturers are ready to incentivize they've got some.
Incentives going right now they're working on.
Bye bye down rates, you know trying to keep the financing down around 390, 94% 5%.
And that's really a.
That's really making it a winner for the consumer.
Got it very helpful. Thank you.
We have reached the end of our quest.
And answer session I would like to turn the conference back over to management for closing comments.
Yeah.
I just want to I just wanted to.
Thank everyone.
For the questions for the interest of grumble on transitions or our new growth chapter. We appreciate your support for.
For myself as well as Rumble on team.
And we're excited to make the necessary changes that we feel are will drive shareholder value. Thank you very much.
Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Yeah.
Yeah.
[music].
Yeah.
Okay.
[music].
Okay.
[music].