Q3 2023 RumbleON Inc Earnings Call

Speaker 1: Greetings and welcome to the Rumble on Third Quarter 2023 earnings conference call. At this time, all participants aren't a listen-only mode. A question and answer session will follow the formal presentation. If anyone wants to require operator assistance, please press star zero under telephone.

Greetings and welcome to the Rumble on third quarter 2023 earnings Conference call.

At this time all participants are in a listen only mode.

Question and answer session will follow the formal presentation.

And what should require operator assistance. Please press star zero on the telephone keypad.

Speaker 1: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Will Newell, Head of Investor Relations. Thank you, you may begin.

As a reminder, this conference is being recorded it is now my pleasure to introduce your host well no head of Investor Relations. Thank you you may begin.

Speaker 2: Thank you, operator. Good morning, ladies and gentlemen. Thank you for joining us on this conference call to discuss Rumble on the third quarter of 2023 financial.

Thank you operator good morning.

Ladies and gentlemen, thank you for joining us on this conference call to discuss <unk> third quarter of 2023 financial results.

Speaker 2: Joining me on the call today on Mike Kennedy, Rumble on the new chief executive officer, Mark Tach, Rumble on board observer, and Ride Now founder, and Blake Lawson, Rumble on the chief finance law.

Joining me on the call today are Mike Kennedy Rumble on New Chief Executive Officer, Mark Tac Rumble on Board Observer, and widen our founder and Blake losses normalized Chief Financial Officer.

Speaker 2: Our Q3 results are detailed in the press release we issued this morning, and supplemental information is available in our third quarter form, KenQ. Before we start, I would like to remind you, the following discussion contains cold looking statements, including what I'm limited to, Rumble On's market opportunities, future financial results, and involve risks and uncertainties that may cause actual results to different materially from those discussed here.

Our Q3 results are detailed in the press release, we issued this morning and supplemental information is available in our third quarter Form 10-Q, before we start I would like to remind you all and discussion contains forward looking statements, including but not limited to <unk> market opportunities and future financial results and involve risks and uncertainties that may cause actual results.

To differ materially from those discussed here.

Speaker 2: Additional information that could cause actual results differ from all of the statements can be found in RumbleWon's periodic and other issues.

The information that could cause actual results to differ from forward looking statements can be found number once periodic and other SEC filings.

Speaker 2: The forward-looking statements and risks in this conference call you're putting responses to your questions are based on current expectations as of today. And Rumble on assumes no obligation to update or revise them whether as a result of new developments or otherwise except as required by the...

The forward looking statements and risks in this conference call, including responses to your questions are based on current expectations as of today.

<unk> assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.

Speaker 2: Also, foreign discussion contains non-gappern in our 2006s

Also 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.

Speaker 2: for reconciliation of these non- GAAP financial measures. Please see our earnings release issue for early this morning. Now I will turn the call over to Mark.

Now I will turn the call over to Mark.

Speaker 3: Thanks, Will, and good morning, everyone. Thank you for joining us for our third quarter 2023 earnings call. Excited to formally introduce my Kennedy to all of you as the new Chief Executive Officer.

Thanks will and good morning, everyone.

Thank you for joining us for our third quarter 2023 earnings call.

Cited to formally introduce Mike Kennedy to all of you as the new Chief Executive Officer.

Speaker 3: So please pass at the proven leader, join Rumble on at such an important time in our history.

We're pleased to have such a proven leader joined Rumble on its such an important time in our history.

Speaker 3: Mike is a seasoned executive with a proven track record in the power sports industry.

He is a seasoned executive with a proven track record in the power sports industry.

Speaker 3: I've known Mike for many years and I'm confident that with his expertise, the successful background in the field, he has uniquely qualified to lead Rumble on transformation plan and enhance value for our shareholder.

For many years and I'm confident that with his expertise and successful background in the field. He is uniquely qualified to lead Rumble on its transformation plan.

Hence value for our shareholders.

Speaker 3: I want to thank the Rumble on Team for their continued hard work and dedication throughout this transition, as we make progress towards our goals.

I want to thank the Rumble on team for their continued hard work and dedication throughout this transition as we make progress towards our goals.

Speaker 3: in terms of my feature role, I will continue to act as a consulting capacity to the term of my employment agreement.

Turns of my future role I will continue to act as a consulting capacity turned up my employment agreement.

Speaker 3: I'll also be a board observer and give them my significant ownership in the company and my passion for the industry. I plan to stay very involved in the business going forward.

I will also be a board observer and give them a significant ownership interest in the company and my passion for the industry I plan to stay very involved in the business going forward.

Speaker 3: With that, I will turn it over to our new CEO Mike. And Mike. Thanks, Mark. And welcome everyone. I've been on board for a week as Rumble on CEO . It's been a busy week. And there are already a couple of things that are clear in my mind. First, I've been very impressed with the passion of our team. As most of you know, there have been a lot of change in recent months here at Rumble on. And I'm convinced that the team is focused and is excited about what we can accomplish together.

With that I will turn it over to our new CEO Mike <unk>.

Right.

Thanks, Mark and welcome everyone.

And then on board for a week as Rumble on CEO, it's been a busy week and there are already a couple of things that are clear in my mind.

I've been very impressed with the passion of our team as most of you know.

Been a lot of change in recent months here Rumble on and I'm convinced that the team is focused and is excited about what we can accomplish together.

Speaker 4: Second, I'm confidently will deliver an efficient operation and deploy our capital smartly for the benefit of shareholders.

Second I'm confident that we will deliver an efficient operation and deploy our capital smartly for the benefit of shareholders.

Speaker 4: In particular, once the rights offering is completed, in a little over three weeks, our balance sheet will be greatly strengthened and will be in a position to go on the offense acquiring dealerships and expanding our footprint. I look forward to updating all of you on our progress going forward.

In particular once the rates offering is completed and a little over three weeks, our balance sheet will be greatly strengthened and will be in a position to go on the offense acquiring dealerships and expanding our footprint I look forward to updating all of you on our progress going forward.

For now I'd like to provide some color on my background before turn it over to Mark to walk through the team's progress towards the exciting future here at Rumble on.

Speaker 4: For now, I'd like to provide some color on my background for turning over to Mark to walk through the team's progress towards the exciting future here at Rumble-O.

Speaker 4: I love this industry and I bring over three decades of experience at leading power sports companies.

I Love this industry and I bring over three decades of experience at leading power sports companies.

Speaker 4: Most recently, I was CEO of Anten Hines, a private equity owned leading manufacturer, a power sports performance product.

Recently, I was CEO of bats, and Hines private equity owned leading manufacturer of power sports performance products.

Speaker 4: I spent the bulk of my career at Harley Davidson, serving in several capacities across different geographies and commercial aspects. By time at Harley Davidson, culminated as vice president, managing director of the Americas, where I managed a network of 800 dealers throughout North America and Brazil.

Spent the bulk of my career at Harley Davidson, serving in several capacities across different geographies and commercial aspects.

At Harley Davidson culminated as vice President managing director of the Americas, where he managed a network of 800 dealers throughout North America and Brazil.

Speaker 4: One of the aspects of this opportunity that really excites me is being close to the showroom. I've often said on my career that the action is in the showroom with our customers. And now I've never been closer to that excitement. I look forward to speaking with all of you in the coming weeks and months. Mark will now walk into the company.

One of the aspects of this opportunity that really excites me is being close to the showroom.

I've often said in my career that the action is in the showroom with our customers and now I've never been closer to that excitement.

I look forward to speaking with all of you in the coming weeks and months.

Mark will now walk you through the company's business update in more detail.

Go ahead Mark.

Speaker 3: Thanks Mike. After an expensive search, we're excited to entrust the leadership of Rumble on to Mike, with confidence that he will manage our turnaround plan efficiently and effectively by instituting further cost saving initiatives, repositioning our inventory management process, strengthening our balance sheet, and executing a more disciplined and strategic approach to acquisitions. We look forward to keeping you updated on our progress on these initiatives while Mike forms his vision for driving long-term shareholder value.

Thanks, Mike after an extensive search we're excited to entrust the leadership of Rumble on Tonight, We're confident that he will manage our turnaround plan efficiently and effectively by instituting further cost saving initiatives repositioning our inventory management process strengthening our balance sheet and executing a more disciplined and strategic approach to acquisitions.

We look forward to keeping you updated on our progress on these initiatives, while my pharmacist vision for driving long term shareholder value.

Speaker 3: I will not walk you through what we have done, what we're doing now, and what we plan to do going forward.

I will now walk you through what we've done what we're doing now.

Plans will do going forward.

First.

Speaker 3: During the porter, we continue to make progress in our plan to right side of the cost structure, specifically in our regional management structure, optimizing positions that were overbuilt in anticipation of a much larger foot.

During the quarter, we continued to make progress on our plan to right size the cost structure, specifically and our regional management structure optimizing positions that were overbuilt in anticipation of a much larger footprint.

Speaker 3: We're evaluating our options regarding unused or underused facilities in a network to offset our real estate expense.

We're evaluating our options regarding unused or underutilized. So these in an effort to offset our real estate expenses.

Speaker 3: Further, we continue to identify incremental cost savings at our dealerships and distributions.

Further we continue to identify incremental cost savings at our dealerships your distribution centers.

Speaker 3: As you know, we have implemented $30 million in annualized cost reductions and have identified another $12 million. Totally annualized cost savings of $42 million. But the effect of these measures benefiting 2024.

As you know we have implemented $30 million in annualized cost reductions and have identified another $12 million.

Italy annualized cost savings of $42 million, but the effect of these measures benefiting 2024.

Speaker 3: believe we can try to reduce expenses, the Blake will describe more people.

We believe we can further reduce expenses as Blake will describe in more detail.

Speaker 3: I think expenses out of an organization is not always immediately visible. And often there's a pale leg for a few months. Second, we continue.

I think expenses out of an organization is not always immediately visible and often there's a tale lag for a few months.

Second we continue to improve our inventory management.

Speaker 3: We have implemented a stringence by self-process at the store level that will continue to self-direct our used inventory levels. And at the same time, allow those inventory to be increased and decreased more efficiently. Adjusting for our sheep.

We have implemented a stringent buy sell process at the store level that will continue to direct our used inventory levels and at the same time allow those inventories to be increased and decreased more efficiently adjusting for our seasonal network needs.

Speaker 3: Manufacturers of our new products are shifting us as well. To increase rebates and incentives while also easing some pairing costs like pre-flooring programs.

Manufacturers of our new products are assisting us as well.

Kris rebates and incentives while also.

Also easing some carrying costs like tree flooring programs.

Speaker 3: We will take advantage of these programs and enhance them to increase digital strategy on site events, stronger staff incentives, and the movement of excess products into higher performing Pichima Mark.

Take advantage of these programs and enhance them through increased digital strategy onsite events strongest staff incentives and the movement of excess products into higher performing consumer markets.

Speaker 3: We will see some margin compression on the non-current products, but with higher 2020 full product, people use being delivered in the quarter, it will help counter a portion of that compression.

We will see some margin compression on the non current products.

Higher 'twenty 'twenty four product is being delivered in the quarter that will help counter a portion of that compression.

Speaker 3: The team is committed to clearing out the 2023 products and feel confident. These actions are setting us up for a strong 2024 and full.

<unk> is committed to clearing out the 2023 products and feel confident these actions are setting us up for a strong 2024 and forward.

Speaker 3: Additionally, we have overhauled our cash offer tool, effectively reducing marketing spend, rate costs, and administrative timeline.

Additionally, we have overhauled our cash offer tool effectively reducing marketing spend great costs and administrative timelines. These.

Speaker 3: These changes will increase the right vehicle yield, helping us achieve a better balance of new and used inventory.

These changes will increase the right vehicle yield, helping us to achieve a better balance of new and used inventory.

Speaker 3: It also allows us to get the right vehicles in the right place at the right time and at the right value. Third, we are active.

Also allows us to get the right vehicles in the right place at the right time and at the right value.

Third we are actively strengthening our balance sheet.

Speaker 3: Previously discussed. We are in the process of raising $100 million in a fully backstop rights offering. 50 million of those proceeds will be used to pay down debt.

So we discussed we are in the process of raising $100 million in a fully backstopped rights offering $50 million of those proceeds will be used to pay down debt.

Speaker 3: The remaining funds will be utilized to accommodate the growth of our national brick-and-mortar platform.

The remaining funds will be utilized to accommodate the growth of our national brick and motor platform.

Speaker 3: Regarding our real state portfolio, during the quarter, we completed the Chalice back of eight of the nine previously identified properties for an aggregate purchase price of just over 49 million dollars.

Regarding our real estate portfolio during the quarter.

Completed the sale leaseback of eight of the nine previously identified properties for an aggregate purchase price of just over $49 million.

Speaker 3: We also expect to complete the sale lease back of the remaining property in 2023.

We also expect to complete the sale leaseback of the remaining property in 2023.

Speaker 3: The knit cash proceeds were remitted directly to Oak Tree to pay down our terminal.

The net cash proceeds the remit of directly to oaktree to pay down our term loan.

Speaker 3: Next, as we have previously disclosed, we're in the process of filling our finance company credit portfolio. We are betting the current options and our intent remains to finalize that sale in 2023.

Next as we have previously disclosed we.

We are in the process of selling our finance company credit portfolio.

We are betting the current options and our intent remains to finalize that sale in 2023.

Fourth.

Speaker 3: I want to update you on a disciplined and strategic approach to acquisition.

I want to update you on a disciplined and strategic approach to acquisitions.

Speaker 3: We've identified certain accretive acquisition candidates that we can expect to be closed by the end of the first quarter of 2024, and we have additional targets in the pipeline for the remainder of 2024.

We've identified certain accretive acquisition candidates that we can expect to be close by the end of the first quarter 2024.

We have additional targets in the pipeline for the remainder of 'twenty four.

Speaker 3: We've proven that acquiring underperforming dealerships and optimizing our operations with the right process is personnel and inventory management, which right now perfected over 30 plus years span. The yield of the best results for the company and its share role.

We've proven that acquiring underperforming dealerships and optimizing our operations with the right processes personnel and inventory management, which right now perfected over a 30 plus year span will yield the best results for the company and its shareholders.

Speaker 3: This strategy has produced strong returns in the past, and we believe it is vital to the long-term success of the company.

This strategy has produced strong returns in the past we believe it is vital to the long term success of the company.

Speaker 3: With that, we'll turn the call over to Blake to walk through our third quarter, 2023 financials and outlook in Northeaf.

With that I will turn the call over to Blake to walk through our third quarter 2023 financials and outlook in more detail.

Thank you Mark and good morning, everyone. As the team has detailed we continue to execute on our strategy during the quarter and are pleased with the progress we have made despite having to make some tough decisions.

Speaker 4: Thank you, Mark, and good morning, everyone, as the team has detailed, we continue to execute on our strategy during the quarter and are pleased with the progress we have made despite having to make some tough decisions.

Speaker 4: We have put the company back on solid ground with a plan for growth and value creation for share.

We've put the company back on solid ground with a plan for growth and value creation for shareholders.

Speaker 4: Not to diminish the challenges that exist, which are real, heightened interest rates, non-current inventory, inflationary and economic pressures on our consumers, and geopolitical unrest to name a few.

Not to diminish the challenges that exist, which are real heightened interest rates non current inventory inflationary and economic pressures on our consumers and geopolitical unrest to name a few.

Speaker 4: While options to finance our discretionary product remain available in plentiful.

Well options to finance, our discretionary product remain available and plentiful.

Speaker 4: Rates are certainly higher and we are seeing increased pressure on the lower credit consumer.

Rates are certainly higher and we are seeing increased pressure on the lower credit consumers.

Speaker 4: Despite the challenges that exist, we have the utmost confidence that our team of dealership professionals will rise to the occasion, and we look forward with

Despite the challenges that exist, we have the utmost confidence that our team of dealership professionals will rise to the occasion.

And we look forward with confidence to the future.

Speaker 4: As you are all aware, we recently favorably amended our financing agreements with our primary lender.

As you are all aware, we recently favorably amended our financing agreements with our primary lender oaktree.

Speaker 4: As part of these agreements, we have committed to pay down $120 million to the sale of non-core assets and inequity.

As part of these agreements we have committed to pay down $120 million through the sale of noncore assets and an equity raise.

Speaker 4: Mark already gave you an update on our real estate sales, resulting in the company remitting $47 million directly to Oak Tree to reduce outstanding debt under the term loan.

I already gave you an update on our real estate sales, resulting in the company remaining 47 million directly to oaktree to reduce outstanding debt.

The term loan.

Speaker 4: Additionally, we believe we will sell our finance portfolio before year ends 2023, and are confident we will be able to pay off an additional $15 million of Oaktree debt from the proceeds of this sale, as well as eliminate the finance company line of credit that supported this loan portfolio, further reducing costs, simplifying our company, and reducing debt.

Additionally.

We believe we will sell or finance portfolio before year end 2023, and are confident we will be able to pay off an additional $15 million of oaktree that from the proceeds of the south as well as eliminate the finance company line of credit that supported this loan portfolio further reducing costs, simplifying our company and reducing debt.

I wanted to provide an update on the 100 million fully backstop rights offering that we announced on our Q2 earnings call in August.

Speaker 4: I want to provide an update on the $100 million fully backstopped rights offering that we announced on our Q2 earnings call.

Speaker 4: As Mark stated, we plan to use $50 million of the proceeds to further reduce debt and the remainder to be allocated to highly accretive acquisitions.

As Mark stated, we plan to use $50 million of the proceeds to further reduce debt and the remainder to be allocated to highly accretive acquisitions.

Speaker 4: We believe the size of the capital raise and the format are well suited to achieve these two goals.

We believe the size of the capital raise and our format are well suited to achieve these two goals.

Speaker 4: The board of directors has fixed the close of business on November 13th as the record date.

The board of directors has fixed the close of business on November 13th at the record date.

Speaker 4: Under the terms of the rights offering, the company expects to distribute non-transferable subscription rights to each holder of its class A and B common stock as of the record.

Under the terms of the rights offering.

The company expects to distribute non transferable subscription rights to each holder of its class a and b common stock as of the record date.

Speaker 4: The subscription period for the rights offering is expected to commence on or about November 13th and terminate approximately 16 calendar days thereafter.

The subscription period for the rights offering is expected to commence on or about November 13th and terminate approximately 16 calendar days thereafter.

Speaker 4: All eligible stockholders, as of the record date, will have the opportunity to participate in the $100 million proposed rights offering on a pro rata.

All eligible stockholders as of the record date will have the opportunity to participate in the 100 million proposed rights offering on a pro rata basis.

Speaker 4: The Special Committee has not yet determined the subscription price to be paid upon exercise of the subscription rights, but expects to announce the remaining terms prior to the commencement of the rights offering. Now, moving on.

The special Committee has not yet determined the subscription price to be paid upon exercise of the subscription rights, but expects to announce the remaining terms prior to the commencement of the rights offering.

Now moving to our third quarter financial results.

Speaker 4: All comparative financial results are sequential and do not include the discontinued automotive.

All comparative financial results, our sequential and do not include the discontinued automotive operations.

Speaker 4: October of 2022 marks the final month of what I would characterize as the COVID bump.

October of 2022 marks the final month of what I would characterize as the Covid bump as.

Speaker 4: that the power sports market drastically normalized in November 2020.

As the power sports market drastically normalized in November 2022.

Speaker 4: I believe after this quarter, our comparisons will revert back to a more standard year-over-year versus sequential comparison.

I believe after this quarter, our comparisons will revert back to a more standard year over year versus sequential comparison.

Speaker 4: Starting with the third quarter units, we sold 17,573 retail units, including 10,851 new units.

Starting with the third quarter units, we sold 17573 retail units, including 10851 new units.

Speaker 4: 5,619 used units, down 13.3% from the prior quarter due primarily to normal seasonality.

5619 used minutes down 13, 3% from the prior quarter due primarily to normal seasonality.

Speaker 4: Moving to revenue in the third quarter, we generated 338.1 million, which is down 11.7 percent or 44.6 million from the prior quarter due to normal seed? season.

Moving to revenue in the third quarter, we generated $338 1 million, which is down 11, 7% or $44 6 million from the prior quarter due to normal seasonality.

Speaker 4: Total third quarter gross profit was 91.9 million, down 14.5 million from the prior quarter. Gross margin was 27.2%. Gross margin has troughed and normalized. The quarter over quarter reduction in gross profit dollars was driven entirely by reduced vehicle sales due to normal seasonality as all other profit centers, which include FNI, parking accessories and service, tend to flow in concert with vehicle sales.

Total third quarter gross profit was $91 9 million down $14 5 million from the prior quarter.

Gross margin was 27, 2%.

Gross margin has trough and normalized quarter over quarter reduction in gross profit dollars was driven entirely by reduced vehicle sales due to normal seasonality as all other profit centers, which include F&I parts and accessories and service tend to flow in concert with vehicle sales.

Speaker 4: Total Power Sports gross profit per unit was $5,380, up $32 from the prior quarter, and in line with our 2023 guidance of 5,300 to 5,400 GPU.

Total power sports gross profit per unit was $5380 up $32 from the prior quarter and in line with our 2023 guidance of 5300 5400 GPU.

Turning to our asset light vehicle logistics segment vehicle logistics gross profit was $3 4 million roughly flat for the quarter.

Speaker 4: Turning to our asset light vehicle logistics segment, vehicle logistics gross profit was $3.4 million, roughly flat for the quarter.

Moving down to expenses total third quarter, SG&A expenses were $85 million down.

Speaker 4: Moving down to expenses. Total third quarter SG&A expenses were $85 million, down $15.4 million, or 15.3% sequentially.

Down $15 4 million or 15, 3% sequentially.

Speaker 4: related primarily to a reduction in compensation, professional fees in general, and administrative, partially offset.

Related primarily to a reduction in compensation professional fees and general and administrative.

Partially offset by increased facilities.

Speaker 4: We continue to work on reducing our facility's meant through sub-lease.

We continue to work on reducing our facilities expense through sublease initiatives.

Speaker 4: Additionally, in the month of October , we made significant headcount reduction that are clop it up.

Additionally, in the month of October we made significant headcount reductions at our corporate office.

Speaker 4: These positions were all fixed cost and will provide more flow through to the bottom line in Q4 and going forward.

These positions were all fixed cost and we'll provide more flow through to the bottom line in Q4 and going forward.

Turning to inventory.

Speaker 4: We still have work to do in Q4 to completely correct some of our oldest needs inventory, but overall base supply for used is at 87, which is in line with our internal benchmark as we work to improve the mix. With very few exceptions, new inventories

We still have work to do in Q4 to completely correct. Some of our oldest used inventory, but overall base supply for used is at 87, which is in line with our internal benchmark as we work to improve the mix.

With very few exceptions, new inventories back to pre pandemic levels.

Speaker 4: We plan to make more room for the 2024 model year and are making progress by aggressively marketing the non-current model year.

We plan to make more room for the 2020 for model year and are making progress by aggressively marketing the non current model year product.

Speaker 4: The Jeff DeBitt I was 13.2 million in the third quarter, down 44% from the second quarter of 2023, driven by normal seasonality and a lag and expense reductions made during the quarter.

Adjusted EBITDA was $13 2 million in the third quarter down 44% from the second quarter of 2023, driven by normal seasonality and a lack of expense reductions made during the quarter.

Speaker 4: Adjusted net loss from continuing operations was $11.9 million, and adjusted diluted earnings per share was negative $71.6 million.

Adjusted net loss from continuing operations was $11 9 million and adjusted diluted earnings per share was negative 71 cents.

Turning to the balance sheet and cash flow at the end of the quarter, we had $41 4 million of unrestricted cash.

Speaker 4: Turning to the balance sheet and cash flow, at the end of the quarter we had $41.4 million of unrestricted cash.

Speaker 4: At the NFC Q3, we have 32.2 million of unflored equity in our user inventory, which could be used to help fund the business.

At the end of Q3, we had $32 2 million of unsold equity.

Our used inventory, which could be used to help fund the business.

Speaker 4: Our net debt, not inclusive of floor plan at the end of the third quarter, was $311 million.

Our net debt not inclusive of floor plan at the end of the third quarter was $311 million.

Speaker 4: This includes the principal balance of our term debt, convertible notes, and finance portfolio line of credit, not inclusive of reductions for debt discount and issuance costs, less unrestricted cash in the bank.

This includes the principal balance of our term debt convertible notes and finance portfolio of line of credit not inclusive of reductions for debt discount and issuance costs less unrestricted cash in the bank.

Speaker 4: By the end of the year after the completion of the 100 million rights offering and fell of other non-uncourt assets, net debt should be below 200.

By the end of the year after the completion of the $100 million rights offering and sale of other noncore assets net debt should be below $200 million.

Now let me provide additional details on our outlook for the remainder of 2023.

Speaker 4: Now let me provide additional details on our outlook for the remainder of 2020.

Speaker 4: For the full year, we are reiterating our guidance for all Mets.

For the full year, we are reiterating our guidance for all metrics.

Speaker 4: We expect there are two operating segments, power sports and asset light logistics to generate combined revenue within the range of 1.38 billion to 1.48.

Our two operating segments power sports and asset light logistics to generate combined revenue within the range of $1 38 billion to $1 4 billion.

We continue to expect to generate a full year gross profit per unit similar to Q3, a 5300 5400.

Speaker 4: We continue to expect to generate a full year gross profit per unit similar to Q3 a 50 300 to 54

Speaker 4: We expect our full year 2023 adjusted EBITDA in the range of 55 million to 65.

We expect our full year 2023, adjusted EBITDA in the range of 55 to 65.

Speaker 4: The range is somewhat broad because the management is just getting started fully identifying business needs and this requires time to write some short term in the village. And with that.

The range is somewhat broad because new management is just getting started fully identifying business needs and this requires time to rightsize some short term inventories.

And with that operator, we will open it up to questions.

Speaker 1: 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.

Thank you we will now be conducting a question and answer session.

Like to ask a question. Please press star one on your telephone keypad the.

Speaker 1: The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question.

A confirmation tone will indicate your line is in the question queue.

You May press star two if he would like to remove your question from the queue.

Speaker 1: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key.

Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker 1: We ask that you please limit yourself to one question and one to follow up questions. One moment please while we...

I ask that you. Please limit yourself to one question and one follow up question. One moment. Please while we poll for your questions.

Our first question is coming from the line of Eric Wold with B Riley Securities. Please proceed with your question.

Speaker 1: Our first questions come from the line of Eric Wold with B. Riley's securities. Please proceed with your questions. Thanks. Good morning.

Thanks, Good morning.

Couple of questions I guess I guess one.

Speaker 4: So I'm going to focus on the inventory comments. Given the current guidance that you have for this year, where would you expect inventories to settle out at your end as you work to push through some of the non-current model year inventory? And then as you think about returning to normal cadence in 24, how should we think about when this year building inventory back up again in the 24, which should have looked like that's up here?

Following up on the inventory comments given the current guidance that you have for this year, where would you expect.

Inventory just settle out at year end as you work to push through some of the non current model year.

Mentor, and then as you think about where.

Returning to our normal cadence in 'twenty four how should we think about.

When you start building inventory back up again in the 'twenty four but should look like that throughout the year.

Speaker 3: Well, we feel good currently with our input levels.

While we show we feel good currently with our inventory levels.

Speaker 3: We're doing well and moving the 23 product. I think we probably have.

We're doing well and move into 'twenty three product I think we probably have.

Speaker 3: Less than 9% of our product is.

Less than 9% of our product is is below 23 model year.

Speaker 3: the low 23 model year. And we've already done two large campaigns with two of our larger...

We've already done two large campaigns with two of our larger.

Speaker 3: Manufacturers moved a lot of that product out. They are assisting as I said earlier with incentives, rebates some additional buydown on the financing, so we're seeing good activity on those promotions.

Manufacturers moved a lot of that product out they are assisting as I said earlier with the.

With incentives rebates some additional buybacks on the financing so we're seeing good activity on those those promotions and bye.

Speaker 3: And by the end of the year, I think with our target to really try to get our youth in inventory lined up, I think we're in a really good shape.

By the end of the year as I think was our target to really try to get our used inventory lined up I think we're in really good shape.

Speaker 4: Here, this is Blake, I would just add, from a dollar perspective, I believe, not much will change, but we are working certainly like Mark mentioned on the mix to make room for the 2024 model year. And then on the youth side, we've still got some overhang there. Again, the dollars are probably...

Hey, Eric This is Blake I would just add you know from a dollar perspective I believe.

Not much will change.

But we are working certainly like Mark mentioned on the mix to make room for the 2020 for model year end.

And and then on the used side you know we've still got some overhang there again the dollars are probably.

Speaker 4: in line and the day supplier in line that we've got some aging issues and we hope to flush that out to MQ4 plan to plan to flush that out in Q4

In line and the day supply or in line, but we've got some aging issues and we hope to flush that out a and.

In Q4.

I had a plan to flush that out in Q4.

Speaker 4: and be ready for the selling season in 2024 in the spring.

And be ready for the selling season in 2024 in the spring.

Got it thank you and then.

Speaker 4: Got it. Thank you. And then, second question, kind of on the comment earlier on the acquisition pipeline, and once you complete the rights offering, kind of you've got some targets that are expected to close in Q1, and then more throughout the remainder of 24. Just give a sense of kind of what the environment looks like for acquisitions right now. You know, these are, you know, the number of willing sellers, you know, increasing, you're seeing a greater pool of potential targets coming up because of the environment we're in, and kind of what does that mean for,

Second question kind of on the on the comments earlier on the acquisition pipeline and once you complete the rights offering you can embed some some targets or expect to close in Q1 and then.

More throughout the remainder of 24, 2% is kind of what the environment looks like for acquisitions right now.

These.

The number of willing sellers.

Increasing you're seeing a greater pool of potential targets coming out because of the environment, we're in and kind of what does that mean for.

Speaker 5: Maybe the size of an average target in your pipeline and evaluation multiple.

Maybe the size of an average target in your pipeline and valuation multiples.

Speaker 3: We'll keep them very busy on determining which direction we want to go. We have lots of options, but we really want to focus on what works best for the company and setting up our platform.

So I will keep them very busy on on.

Determined in which direction, we want to go where we have lots of options, but we really want to focus on what works best for the company.

And setting up our platform.

I think that.

And I think diesel clothes easily in the first quarter of the two that we're working on currently and the pipeline will carry us throughout the year I mean, there's plenty of opportunities Eric.

Speaker 3: I think these will close easily in the first quarter, the two that were working on currently. And the pipeline will carry us throughout the year. I mean, there's plenty of opportunities. Eric, it's really just a matter of focusing on what works best for our company and our platform.

Eric It's really just a matter of focusing on what works best for our company and our platform.

Speaker 6: Eric, I think his trailing 12-month EBITDA has normalized or is coming down for a lot of ma and pa dealerships and stuff. There's going to even be increased opportunities there at good values.

Yeah, Eric I think is trailing 12 month EBITDA.

Has normalized or is coming down for a lot of MA and PA dealerships and stuff, there's going to be increased opportunities.

They're at.

At good values.

Got it. Thank you both appreciate it.

Speaker 1: Thank you. Our next question has come from the line of Michael Baker with DA Davidson. Please proceed with your question.

Thank you. Our next question is coming from the line of Michael Baker with D. A Davidson. Please proceed with your question.

Speaker 7: Hey, thanks guys, uh, you know, I just wanted to ask a very big picture question You know as I recall what I

Hey, Thanks, guys.

I just wanted to ask a very big picture question as I recall.

Speaker 7: When we first started looking at you guys, the idea of the vision was RumbleOn was going to combine online and in-store, use the new and the customer would have visibility across the entire portfolio of product, again, new use online, etc. Either walking in the store or on their computer.

A couple of years ago. When we first started looking at you guys. The idea of the vision was romblon was going to sort of combine online.

And in store used the new and the customer would have visibility across the entire portfolio of product again, new use online et cetera, either walking in the store or on their computer.

How has the vision changed we've been through a couple of now a couple of CEO changes how what is the long term vision for the company how has that changed and let's say the last two years is that still a division or or it seems now it's a little bit more focus on brick and mortar to just.

Speaker 7: how was the vision changed we've been through a couple of our couple CEO changes are hot what is the long-term vision for the company how that changed and let's say that the last two years is that still the vision or or it seems now it's a little more focused on brick-and-mortar

Speaker 7: talking about the apple what didn't work and and and what's the vision of the company long

Talking about the what didn't work and what's the vision of the company longer term.

Speaker 3: Mike, you know, I think that I don't I think the vision has changed a little bit, but you know we still have the ability to to do what you're talking about which is

Mike I think that I don't I think the business changed a little bit, but we still have the ability to do what you're talking about which is.

Speaker 3: You know, complete a deal 100% online. You know, we still do that. We happen doing that.

Complete a deal a 100% online.

We still do that we are we have been doing that.

Speaker 3: There's just a lot more opportunity right now to really grow our cash offer program, which is our acquisition program. And by doing that, I think you'll find the omni-channel probably a lot more successful on the use side of the product. There's a lot of limitations with OEs on, you know, on moving new product around the country out of your target market. So, that portion of the business.

Theres, just a lot more opportunity right now to really grow that.

Our cash offer program, which is our acquisition program and by doing that I think you'll find the omnichannel probably a lot more successful on the used side of the product there's a lot of limitations with with Oes Sun.

I am moving new product around the country out of your of your target market so that.

That portion of the business really.

Speaker 3: I think the real growth in that side is on our cash shopper program. We can buy the bikes nationally, we can sell bikes nationally, we don't have to answer to anybody on the size of that business, where we ship it, what we sell it for, used is definitely still a future of the company.

I think the real growth in that side is on our cash off a program, where we can buy the bikes nationally with itself by internationally, we don't have to answer to anybody.

The size of that business, where we ship it.

What we sell it for US is is is definitely still a future of the company.

Okay.

Speaker 7: okay uh... and so i guess to follow up on that where are you and other words you know the idea was you need a big technology investment to get there uh... to make all that work

And so I guess to follow up on that where are you I know there was the idea was you needed a big technology investment to get there.

To make all that work can you.

Speaker 7: Can you... We understand you're cutting costs and you've cut some, I think, some technology people.

I'm going to say, you're cutting costs and you've got some I think some technology people what needs to be reinvested to make all this work or is the only investment going forward just going to be you know investing in and buying.

Speaker 7: what needs to be reinvested to to make all this work or the only investment going forward is going to be you know investing in in in buying uh...

Stores.

Speaker 3: Well, no, we're still moving forward on some of the technology. But frankly, we're really fine-tuning what we already have. I mean, we're making bigger leaps and more success just fine-tuning the admin on the acquisitions of those products, so really geo-targeting where we're buying product. And I don't want to give you too much of the secret sauce, but, you know, we're really looking at fine-tuning the process that's already in place. And we're being very successful with that.

Well no we're still moving forward on.

On some of the technology, but frankly, we're really fine tuning what we already have I mean, we're making bigger leaps. Most success just fine tuning the AD men on the on the acquisitions of those products, So really geo targeting where we're buying product and I don't want to I don't want to give you too much of the secret sauce, but we're really looking at.

It's fine tuning the process thats already in place and we're being very successful with that.

Speaker 7: Okay, thanks for that. I have other questions, but I'll jump back in the line to try to commit to the one question and one follow-up idea. Thank you, Mike.

Okay. Thanks.

Thanks for that I have other questions, but I'll jump back in the line to try to commit to the one question and one follow up idea.

Thanks, Mike.

Okay.

Thank you. Our next question is come from the line of Seth Basham with Wedbush Securities. Please proceed with your questions.

Speaker 1: Thank you. Our next questions come from the line of Seth Basham with Wedbush Securities. Please proceed with your question.

Speaker 4: Thanks a lot, and good morning. First, could you give us a little bit more color on how demand trended through the quarter and how you're thinking about the outlook in 4Q and 1Q? Do you think that we've hit a bottom, or do you think that some of the macro pressures are gonna further restrict demand?

Thanks, a lot and good morning.

First could you give us a little bit more color on how demand trended through the quarter and how you're thinking about the outlook in <unk> do you think that we've hit a bottom or do you think that some of the macro pressures are going to further restrict connect.

Okay.

Well I wish we had a crystal ball on that.

Speaker 3: And maybe you could help, but we're just moving forward, what we have to do. And I mean, we have to, we're lowering our debt. We've lowered a lot of money out of our S-T-N-A costs. We've made progress on our inventory. And we're doing everything we wanted to do, and it's all moving forward. And that's really all we can do. We can't control the macro environment. We can just do the best we can do, and continue to sell products. That is the best.

And maybe you could help but.

We're just moving forward with what we have to do and I mean, we have to we're lowering our debt.

We've lowered our a lot of money out of our SG&A costs.

We've made progress on our inventories and we're doing everything we wanted to do and it's all moving forward.

That's really all we can do we can't control the macro environment. We can just do the best we can do and we continue to sell product.

We do best.

Got it as you turn the page into 2024, it seems like you're expecting a higher demand you're expecting higher gross profit in your cost base has come down so that points to a materially higher EBITDA and 24% 23 that the right interpretation delay you guys are forecasting the business.

Speaker 8: Got it. As you turn the page into 2024, it seems like you're expecting higher demands, you're expecting higher gross profit, and your cost base has come down. So that points to materially higher EBITDA in 2024 than 2023. Is that the right interpretation, the way you guys are forecasting the business? Yeah, I would say...

Yes.

Yeah, I would say that.

Our.

Speaker 6: are 2024 guidance reflects a little bit of growth. And we're pretty conservative, but a little bit of growth in use. GPUs relatively the same and definitely cost reductions, which to your point does bump up, even a... integrate the back of that.

Our 2020 for guidance.

Reflects a little bit of growth and we're pretty been pretty conservative, but a little bit of growth in used gpus relatively the same and definitely cost reductions, which to your point does does bump up EBITDA.

Can you give us a little bit more color on that GPU expectation into 'twenty four considering that you guys have taken a lot of pain as you've moved through aged inventory I shouldnt, we see better trends without that pressure in 2024.

Speaker 8: Can you give us a little bit more color on that GPU expectation into 2024 considering that you guys have taken a lot of pain as you've moved through aged inventory? Shouldn't we see better trends without that pressure in 2024?

Speaker 6: We hope so. The guidance right now is 5350, which is pretty squarely in the middle of where we're at right now, and anticipate that we will start to see improved margins in use in 2024. But that could be partially offset by new inventory margins, which

We hope so.

The guidance right now is $53 50, which is pretty squarely in the middle of where we're at right now and anticipate that we will start to see improved.

Improved margins and used in 2024.

But that could be partially offset by.

New inventory margins, which.

Speaker 6: quite frankly, you know, we've got a lot of new inventory at this point. And so we're just

Quite frankly, we've got a lot of new inventory at this point and so.

We're just kind of trying to take a.

Speaker 3: a conservative approach, but certainly there could be some upside there. And to Blake's point, I mean, we've got 24 product coming in. It is holding a fair margin. I mean, there's a lot of, there's always demand for 2024 product. Every, every new year.

Conservative approach, but certainly there could be some upside there.

<unk> points I mean, we've got 24 product coming in that is holding a better margin I mean, there's a lot of there's always demand for 2024 product every every new year.

Speaker 3: You know, our consumers really love their toys. They want to have the coolest, the newest thing that's out there. And there's a lot of that generally gets released by the OE's early 24 models that will come out late in the 23 years. So, you know, we're really

Our consumers really love their toys. They wanted to have the coolest the newest thing that's out there and there's a lot of that.

Generally it gets released by the Oes early.

Early 'twenty four models that will come out late in the in the.

23 years, So you know what.

We're really.

Speaker 3: I think focusing on the efficiencies of what we do, covering the expenses again, and really trying to offset some of that inventory correction, some of these campaigns that we're running now with the rebates, the incentives, and the 24 product that's coming in, we're getting all the money for the 24.

I think focusing on the efficiencies of what we do.

Cover the expenses again, and really trying to offset some of that inventory correction for some of these campaigns that we're running now with the rebates and incentives and the 24 product that's coming in that's getting we're getting all the money for the 24th.

Speaker 8: Got it. And my last question is thinking about the use to new ratio into 2024 with some of the changes to your cash offer. It seems like a little bit less emphasis on the use business. Should we expect the use to new ratio to change meaningfully next year?

Got it and my last question is just thinking about that used to new ratio into 2024 with some of the changes to your cash offer and it seems like a little bit less emphasis on the used business should we expect that they used to new ratio to change meaningfully next year.

Speaker 3: You know, we're running to the one right now. You knew the one news. We're happy with that ratio.

We're running a two to one right now to move to one use them, we're happy with that ratio.

Speaker 3: You know, we have slowed down a little bit on our acquisitions, but it's that time of year. I mean, we really don't want to ramp up our acquisitions still.

We have slowed down a little bit on our acquisitions, but it's that time of year. I mean, we really don't want to ramp up our acquisitions still January February.

Speaker 3: January , February , and in the early March to really ramp everything up for the summer. So, you know, right where we want to be, we're going to turn that knob and right now we're unloading some of the data stuff, but we're really leaving.

And then the early March to really wrap everything up for the summer. So we're right where we want to be where are we going to turn that knob.

Right now we're loading some of the some of the data and stuff, but where we're really leaning it up.

Gotta get ramped up January February March and we'll be ready for the summer.

Speaker 3: It's gonna get ramped up January , February , March, and we'll be ready for the summer with two to one. You might see that even shift a little stronger, maybe 175 to one in the spring after we load up with that product. It's gonna fluctuate a little bit, but on a year annual basis, we're quite content right now with a two to one ratio.

With two to one you might see that even shifted a little stronger.

175 to one.

In the spring after we load up where that product that's going to fluctuate a little bit but on a year annual basis, we're quite content right now.

<unk> ratio.

Thank you.

Speaker 1: Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone.

Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

Speaker 1: Our next questions come from the line of Michael Baker with DA Davidson. Please proceed with your question.

Our next questions come from the line of Michael Baker with D. A Davidson. Please proceed with your questions.

Speaker 7: Alright, jump back in. Thanks. I just, can you, and maybe it's in your filing somewhere, but remind me, just walk through again, the how the deck goes from, I think you said, 311 million to less than 200, and remind us what your revised covenants are in terms of leverage ratios and how long those revisions permanent or temporary waivers just remind us of that works.

Alright jumping back in.

Thanks, I just can you and maybe it's in your filing somewhere but remind me just walk through again, the how how did that goes from I think you said $311 million to less than than 200 and remind us what your revised covenants are in terms of leverage ratios and how long those are those.

Revisions permanent or temporary waivers just remind us how that works.

Yeah.

Yeah.

Speaker 6: Great question. So $311 million goes to below $200 million really with

Great question.

So $311 million.

Goes to below $200 million really with the.

Speaker 6: the $100 million rights offering where 50 goes straight to principal debt and the other 50 is in your cash account.

The $100 million rights offering, where we're 50 go straight to principal debt and <unk>.

The other 50 isn't your cash account.

You know so.

Which.

Speaker 6: There's also obviously we've got one more real estate property which will get us another

There's also obviously, we've got one more real estate property, which will get us another.

Speaker 6: 7 million, call it, and the finance portfolio.

7 million call it and the finance portfolio.

Speaker 6: coming off right now, the principal balance of that is about $14 million. That'll go away as well as some proceeds up to $15 million to pay down debt.

Coming off.

Right now the principle balance of that is about $14 million that will go away as well as.

Some proceeds up to $15 million to pay down debt.

So.

Speaker 6: should be below 200 million at the end of the year just with those facts. And as far as our.

Should should easily be below $200 million.

At the end of the year just with those.

Those facts.

And as far as our covenant.

Speaker 6: With Oak Tree, we did have...

With Oaktree.

We did have.

Speaker 6: relief for Q2 and Q3 being in the form of not even being tested. And then in Q4 that covenant starts at a total net leverage of 5.5.

Relief for Q2, and Q3 being in the form of not even being tested.

And then in Q4 that covenant darts at a total net leverage.

Five five.

Speaker 6: And then in the first quarter, it drops to five.

And then in the first quarter it drops to five.

Speaker 6: And that's for both total net leverage and secured net leverage.

And that's for both total net leverage in and secured net leverage.

Speaker 6: So 5.5 and then 5 and then in Q2 of 2024 it goes to 4.75 for total net leverage and 4.25 for the care net leverage.

So $5 five and then five and then in Q2 of 'twenty.

24.

Goes to $4 75 for total net leverage.

And for two five first.

Secured net leverage.

And then.

In Q3 of 2024.

Speaker 6: It goes to 4.25 of total net leverage and 3.75 of secured net leverage, which is where it actually was to begin with. So, it goes back to where it was to begin with.

It goes to four to five of.

Total net leverage and $3 75, a secured net leverage which is where it actually was to begin with so it goes back to where it was to begin with.

Speaker 6: in next Q3 in a year.

And next next Q3 and a year.

Speaker 7: uh... okay can i ask uh... that they've been done questions uh... wrote that about but uh... the calculation so it was the the numerator did not know where i guess it is not that right to you to give yourself credit for the cash and the denominator is that the the annual

Okay can I ask maybe it was a dumb questions relative to that but.

Calculation so.

The numerator.

Or I guess he is not.

Right. So you said you'd give yourself credit for the cash and the denominator is that the the.

Annual EBITDA.

Speaker 7: Took 14 months to determine the status of the Awards for 2020, in Broad short term,

EBITDA.

Or is it trailing 12 months EBITDA or just remind us.

Yeah.

Trailing 12 months adjusted EBITDA.

Okay.

And the numerator is not net debt in other words, you get a credit for the cash.

Exactly.

Yeah, Okay. Thank you.

Yep.

Speaker 1: Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Mike Kennedy for closing remarks.

Thank you we have reached the end of our question and answer session I would now like to turn the floor back over to Mike Kennedy for closing remarks.

Speaker 9: Thank you. Let me wrap up, just share a couple of things. First, I wanna thank Mark Tacks for his confidence in me as well as his mentorship during the transition period. Mark is an incredibly successful entrepreneur and smart businessman and I look forward to building on momentum that he's created here. Secondly, I wanna reiterate that we will lay out a clear vision and set a strategy that will deliver an efficient operation and deploy our capital smartly for the benefit of Cheryl.

Thank you, let me wrap up with just share a couple of things first I want to thank Mark <unk> for his confidence in me as well as metro as well as his mentorship during the transition period, Mark is an incredibly successful launch barrel and smart businessman and I look forward to building on the momentum that you've created here.

Secondly, I want to reiterate that we will lay out a clear vision and a set of strategies that will deliver an efficient operation and deploy our capital smartly for the benefit of shareholders.

Speaker 9: And lastly, thank you, everyone, for your questions and your interest in RumbleOn, and I look forward to speaking with you in the near future.

And then lastly, thank you everyone for your questions and your interest in <unk> and I look forward to speaking with you in the near future.

Speaker 1: Thank you, this does conclude today's teleconference. You may disconnect your lines at this time.

Thank you. This does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and enjoy the rest of your day.

Speaker 10: Thank you for your participation and enjoy the rest of your day.

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