Q3 2024 RumbleOn Inc Earnings Call

Operator: Good day and welcome to the RumbleON Inc. third quarter 2024 earnings conference. All participants will be on the sonoma If you need assistance, please signal a conference specialist for pressing the star key followed by zero.

Good day and welcome to the Ramble on Inc. Third quarter 'twenty to 'twenty four earnings conference call.

All participants will be in listen only mode.

Should you need assistance. Please signal conference specialist by pressing the star can you followed by zero.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone. To withdraw your question, please press star then 2. Please note, this event is being recorded.

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Elliot Wagner: I will now turn the conference over to Elliot Wagner, Vice President of Finance. Please go ahead.

Speaker Change: The conference over to Elliott Wagner, Vice President of Finance. Please go ahead.

Elliot Wagner: Thank you, operator.

Elliott Wagner: Thank you operator, good morning, everyone and thank you for joining US on this conference call to discuss Rumble on third quarter 2024 financial results.

Elliot Wagner: Good morning, everyone. And thank you for joining us on this conference call to discuss RumbleON's third quarter 2024 financial results. Joining me on the call today are Mike Kennedy, RumbleON's Chief Executive Officer, and Tiffany Kice, RumbleON's Chief Financial Officer. Our Q3 results are detailed in the press release we issued this morning, and supplemental information will be available in our third quarter Form 10-Q, once filed.

Elliott Wagner: Joining me on the call today are Mike Kennedy Rumble on Chief Executive Officer, and Tiffany Rumble launch Chief Financial Officer.

Elliott Wagner: Our Q3 results are detailed in the press release, we issued this morning and supplemental information will be available in our third quarter Form 10-Q once filed.

Elliot Wagner: Before we start, I would like to remind you that the following discussion contains forward-looking statements, including but not limited to, RumbleON's market opportunities and future financial results and involves 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 RumbleON's periodic and other SEC files. The forward-looking statements and risks in this conference call, including responses to your questions, are based on current expectations as of today, and RumbleON assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law.

Elliott Wagner: Before we start I would like to remind you that the following discussion contains forward looking statements, including but not limited to rumble on market opportunities and future financial results and involves risks and uncertainties that may cause actual results to differ materially from those discussed here additional information.

Elliott Wagner: Formation that could cause actual results to differ from forward looking statements can be found in <unk> periodic and other SEC filings.

Elliott Wagner: The forward looking statements and risks in this conference call, including responses to your questions are based on current expectations as of today and Rumble on assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.

Elliot Wagner: Also, the following discussion contains non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures, please see our earnings release issued earlier this morning.

Elliott Wagner: Also the following discussion contains non-GAAP financial measures for a reconciliation of these non-GAAP financial measures. Please see our earnings release issued earlier this morning and now.

Elliot Wagner: Now, I'll turn the call over to Mike Kennedy, RumbleON CEO. Mike?

Speaker Change: I will turn the call over to Mike Kennedy Rumble on CEO, Mike <unk>.

Michael Kennedy: Thanks, Elliot.

Michael Kennedy: Good morning, everyone, and thank you for joining us for RumbleON's third quarter earnings call. As we walk you through the details of our third quarter's results and key work streams within the team, you will see the entire organization has been fully engaged and continuing to reshape the company for long-term success. I'm excited to share our key focus areas with all of you today, and I'm enthusiastic about our future. We've engaged an investment bank to explore refinancing of a company's debt and continue to get clarity on a viable path to deleverage our balance sheet and lower our cost of capital.

Elliott Wagner: Elliot and good morning, everyone and thank you for joining us for <unk> third quarter earnings call.

Mike Kennedy: As you walk you through the details of our third quarter's results and key work streams within the team you will see the entire organization has been fully engaged and continue to reshape the company for long term success I am excited to share our key focus areas with all of you today and I'm, Louisiana.

Elliott Wagner: About our future.

Elliott Wagner: We've engaged an investment bank to explore refinancing of the company's debt and continue to get clarity on a viable path to deleverage our balance sheet and lower our cost of capital.

Michael Kennedy: We believe the $30 million of incremental capital commitments from our three largest shareholders announced this morning, which includes a commitment for a $10 million fully backstop equity rights offering, will enable full repayment of the convertible notes as they come due on January 1st, 2025, and help position us for successful refinancing. This incremental financial support from our largest shareholders shows the full team's alignment with our objectives. In the meantime, we continue to gain traction on our operational strategy of running the best performing power sports dealerships in America and feel great about what the future has in store for us.

Elliott Wagner: We believe the $30 million of incremental capital commitments from our three largest shareholders announced this morning, which includes a commitment for a $10 million fully backstopped equity rights offering will enable full repayment of the convertible notes as they come due on January one 2025 and help position us for successful refinancing.

Elliott Wagner: This incremental financial support from our largest shareholders shows before teams' alignment with our objectives.

Elliott Wagner: In the meantime, we continue to gain traction on our operational strategy of running the best performing power sports dealerships in America and feel great about what the future has in store for us.

Michael Kennedy: From an operations perspective, I'm incredibly proud of the RumbleON team's performance in the third quarter. In our power sports group, while the quarters landscape became incrementally more challenging from start to finish, we made significant improvements and progress in the business. Our automotive transport business, Wholesale Express, was able to deliver growth across the board on units delivered, revenue generated, and gross profit earned.

From an operations perspective, I'm incredibly proud of the Rumble on team's performance in the third quarter.

And our power sports group, while the quarters landscape became incrementally more challenging from start to finish we made significant improvements and progress in the business.

Elliott Wagner: Our automotive transport business wholesale express was able to deliver growth across the board on units delivered revenue generated in gross profit earned.

Michael Kennedy: Before turning the call over to Tiffany Kice, I'll walk you through a few of those highlights, specifically around our inventories, cost optimization initiatives, M&A strategy, and cash flow from operations. Our core strategy revolves around leveraging our national scale to run the best performing dealerships in America, supported by an aligned and efficient corporate office. We continue to focus on this goal, and as a result, the team's efforts have consistently delivered positive free cash flow during the first nine months of 2024. Although we remain laser-focused on achieving our Vision 2026 goals, which we outlined in March, we recognize that industry growth trends and the M&A opportunity set may influence the timing of reaching our goals.

Elliott Wagner: Before turning the call over to Tiffany case, I'll walk you through a few of those highlights specifically around our inventories cost optimization initiatives M&A strategy and cash flow from operations.

Elliott Wagner: Our core strategy revolves around leveraging our national scale to run the best performing dealerships in America supported by an aligned and efficient corporate office. We continue to focus on this goal and as a result, the team's efforts have consistently delivered positive free cash flow during the first nine months of 2024.

Elliott Wagner: Though we remain laser focused on achieving our vision 2026 goals, which we outlined in March we recognize that industry growth trends and the M&A opportunities that may influence the timing of reaching our goals.

Michael Kennedy: The current macro environment remains difficult, but we are proud of the gains we have made to date and continue to build positive momentum. We set a goal to reduce new inventories by $50 million for the full year 2024. As you review the balance sheet, you'll see a 53.8% reduction in total inventory as of September as compared to the prior year. While that number represents our total inventories, which includes new vehicles, pre-owned vehicles, parts and accessories, and apparel, it gives you a clear indication that we are headed in the right direction. As we strive to right-size our inventories during the third quarter, we experience margin compression.

Elliott Wagner: The current macro environment remains difficult, but we are proud of the gains we've made to date and continue to build positive momentum.

Elliott Wagner: We set a goal to reduce new inventories by $50 million for the full year of 2024.

Elliott Wagner: As you review the balance sheet, you'll see a 53 eight reduction in total inventory as of September.

Elliott Wagner: As compared to the prior year.

Elliott Wagner: Well that number represents our total inventories, which includes new vehicles pre owned vehicles parts and accessories and apparel. It gives you a clear indication that we are headed in the right direction.

Elliott Wagner: As we strive to right size, our inventories during the third quarter, we experienced margin compression.

Michael Kennedy: As a result, we're now positioning margins to improve in the business going forward. Our OEM partners have been constructive in helping us address the inventory overhang, which has further accelerated our progress. Although there's still more work to be done in optimizing our inventory levels and mix, I'd like to congratulate our team for making significant progress in this regard, and I'm confident we're on track to meet our year-end new inventory reduction target. I'm also pleased to share that we have fully executed on our $30 million of annualized cost savings announced on our Q2 earnings call. Congratulations to the team for proving our ability to move quickly and be agile in the current environment.

Elliott Wagner: As a result, we're now positioning margins to improve in that business going forward.

Elliott Wagner: Our OEM partners have been constructive in helping us address the inventory overhang, which has further accelerated our progress.

Elliott Wagner: Although there is still more work to be done in optimizing our inventory levels and mix I'd like to congratulate our team for making significant progress in this regard and I am confident we're on track to meet our year end new inventory reduction target.

Elliott Wagner: I'm also pleased to share that we have fully executed on our $30 million of annualized cost savings announced on our Q2 earnings call. Congratulations to the team for proving our ability to move quickly and be agile in the current environment.

Michael Kennedy: As we have mentioned on prior calls, we take a continuous improvement approach to managing the business and we see additional opportunities that we are addressing to both strengthen the team and drive more cost out of the business at the same time. Some of those opportunities come from our traction of our strategy of leveraging our scale to be the best in the industry, and other aspects come from our alignment and clarity on what is most important to drive the business. A key measure for us in our cost optimization work is adjusted SG&A as a percent of gross profit dollars.

Elliott Wagner: As we have mentioned on prior calls we take a continuous improvement approach to managing the business and we see additional opportunities we are addressing to both strengthen the team and drive more cost out of the business at the same time.

Elliott Wagner: Some of those opportunities come from our traction of our strategy leveraging our scale to be the best in the industry and other aspects come from our alignment and clarity on what is most important to drive the business.

Elliott Wagner: A key measure for us and our cost optimization work is adjusted SG&A as a percent of gross profit dollars as.

Michael Kennedy: As you'll see in the earnings release, adjusted SG&A as a percent of gross profit for the quarter was 86% versus 89% during the same period last year. From a year-to-date perspective, our adjusted SG&A as a percent of GP was 84% versus 87% a year ago. These metrics improved even in the face of gross profit declines of 19% from Q3 2023 to Q3 2024 and a 15% from a year to date to September 2023 to date September 2024. We would expect this KPI to improve even further in 2025 based on the actions executed and further cost optimization actions planned, which will set us up for a long-term target of 75% SG&A as a percent of gross profit.

As you'll see in the earnings release adjusted SG&A as a percent of gross profit for the quarter was 86% versus 89% during the same period last year.

On a year to date perspective, our adjusted SG&A as a percent of G. P was 84% versus 87% a year ago.

Elliott Wagner: These metrics improved even in the face of gross profit decline of 19% from Q3 2023, <unk> to Q3, 2024, and a 15% from a year to date September 2023 to date September 2024.

We would expect this kpis to improve even further in 2025 based on the actions executed and further cost optimization actions planned, which will set us up for a long term target of 75% SG&A as a percent of gross profit.

Michael Kennedy: Shifting gears, I want to provide an update on our M&A strategy and highlight our recent expansion in the Northeast. In August, we acquired a Harley-Davidson dealership in West Bridgewater, Massachusetts, now named Revolution Road Harley-Davidson. This expansion showcases the team's ability to grow our network and our OEM's commitment to aligning with us. We are poised to continue growth via acquisitions and greenfield opportunities as they arise. We remain focused on our acquisition pipeline activity and are encouraged by the number of opportunities. That being said, we recognize the need for discipline in the current environment. We will be selective and only deploy capital where it makes financial sense and will be accretive to our per share values.

Elliott Wagner: Shifting gears I want to provide an update on our M&A M&A strategy and highlight our recent expansion in the northeast.

Elliott Wagner: In August we acquired a Harley Davidson dealership in West Bridgewater, Massachusetts, now named Revolution rode Harley Davidson. This.

Elliott Wagner: And showcase of the team's ability to grow our network and our Oems commitment to aligning with us.

Elliott Wagner: We are poised to continue growth via acquisitions and greenfield opportunities as they arise.

Elliott Wagner: We remain focused on our acquisition pipeline activity and are encouraged by the number of opportunities that being said, we recognized the need for discipline in the current environment, we will be selective and only deploy capital where it makes financial sense and will be accretive to our per share value.

Michael Kennedy: Lastly, we're pleased to see the Federal Reserve interest rate reductions of 50 basis points on September 18th and a 25 basis point cut on November 7th. The 75 basis points of cumulative rate reductions over the last few months will help us save approximately $3 million in cash interest expense in 2025, helping to improve our financial metrics and free cash flow. We are managing through the execution of a turnaround, the industry transition off of COVID and the broader macro challenges. And I'm both encouraged and optimistic about the progress we're making to improve the core operations of the company.

Elliott Wagner: Lastly, we are pleased to see the federal reserve interest rate reductions of 50 basis points on September 18th and a 25 basis point cut on November seven.

Elliott Wagner: The 75 basis points of cumulative rate reductions over the last few months will help us save approximately $3 million in cash interest expense in 2025, helping.

Helping to improve our financial metrics and free cash flow.

Elliott Wagner: We are managing through the execution of our turnaround the industry transition off of Covid and the broader macro challenges and I'm, both encouraged and optimistic about the progress we're making to improve the core operations of the company.

Michael Kennedy: We're focusing on what we can control to establish a strong foundation for the future, positioning ourselves to capitalize on a recovery in the industry. We are moving aggressively to improve the long-term earnings potential of the business and optimizing efficiencies and costs in an effort to drive free cash flow. We believe there is significant competitive advantage with our cash offer platform and being the largest power sports dealership network in North America, and we're confident in our long-term plan, a vision 2026 strategy.

Elliott Wagner: We're focusing on what we can control to establish a strong foundation for the future positioning ourselves to capitalize on a recovery in the industry.

Elliott Wagner: We are moving aggressively to improve the long term earnings potential of the business and optimizing efficiencies and cost and effort to drive free cash flow.

Elliott Wagner: We believe there is significant competitive advantage with our cash all of our platform and being the largest power sports viewership network in North America, and we're confident in our long term plan. It vision 2026 strategy.

Tiffany Kice: And with that said, I'd like to turn the call over to Tiffany to walk us through this quarter's financial performance. Thank you, Mike, and good morning, everyone. I will start by reviewing our financial results for the third quarter of 2024, followed by an overview of our balance. We generated revenue of $295 million and adjusted EBITDA of $6.8 million in the third quarter of 2024. Revenue was down 12.7% year-over-year and adjusted EBITDA was down 26.1% year-over-year. Total company adjusted SG&A expenses with $64.3 million or 86.5% of gross profit compared to the same quarter last year of $82.1 million or 89.2% of gross profit.

Speaker Change: With that said I'd like to turn the call over to Tiffany to walk us through this quarters financial performance.

Tiffany: Thank you, Mike and good morning, everyone I will start by reviewing our financial results for the third quarter of 2024, followed by an overview of our balance sheet.

Tiffany: We generated revenue of $295 million and adjusted EBITDA of $6 8 million in the third quarter of 2024.

Tiffany: New was down 12, 7% year over year, and adjusted EBITDA was down 26, 1% year over year.

Tiffany: Total company adjusted SG&A expenses were $64 3 million or 86, 5% of gross profit compared to the same quarter last year of $82 1 million or <unk> 89, 2% of gross profit.

Tiffany Kice: As a reminder, we are targeting adjusted SG&A to be 75% of gross profit within our vision 2026. Adjusted SG&A expenses were 21.7% lower than the same quarter last year. Moving on to our segmented performance, the PowerSports Dealership Group, retailing approximately 14,300 total PowerSports major units during the quarter, which is down 13.2% from the same quarter last year. Total new PowerSports major unit sales were approximately 9,700, down 10.2% to the same quarter last year, while pre-owned unit sales totaled approximately 4,500, down 19%. Our new inventory levels have been heavy throughout the year, and as Mike mentioned earlier, we have made great progress in working down these inventory levels and believe our new inventory reduction target is in sight for the end of the year.

Tiffany: As a reminder, we are targeting adjusted SG&A to be 75% of gross profit within our vision 2026 plan.

Tiffany: Adjusted SG&A expenses were 21, 7% lower than the same quarter last year.

Tiffany: Moving onto our segment performance the power sports dealership group retailing approximately 14300 total power sports major units during the quarter, which is down 13, 2% from the same quarter last year.

Tiffany: Total new power sports major unit sales were approximately 9700 down 10, 2% to the same quarter last year, while pre owned unit sales totaled approximately 4500 down 19%.

Tiffany: Our new inventory levels have been heavy throughout the year and as Mike mentioned earlier, we've made great progress in working down their inventory levels and believe our new inventory reduction target is insight for the end of the year.

Tiffany Kice: Our team is working closely with our LEAM partners to align new inventory levels to the current market environment. We have made significant progress during Q3 2024 and expect to meet our reduction goals and new inventories. Gross margins for major unit sales were challenged on new and pre-owned inventory in the third quarter. New unit gross margins for the quarter were 11.3% compared to 13.8% in the same quarter last year, driven by overstocking in the industry, compounded by our decision to exit non-core product lines and over-assorted brands not aligned with Vision 2020. Pre-owned gross margins of 12.1% for the quarter compared to 13.6% the same quarter last year.

Our team is working closely with our OEM partners to align new inventory levels to the current market environment.

Tiffany: We've made significant progress during Q3, 2024, and expect to meet our reduction goals and new inventory.

Tiffany: Gross margins for major unit sales were challenged on new and pre owned inventory in the third quarter.

Tiffany: New unit gross margins for the quarter were 11, 3% compared to 13, 8% in the same quarter last year driven by Overstocking in the industry compounded by our decision to exit noncore product line and over assorted brands not aligned with vision 2026.

Tiffany: Pre owned gross margins of 12, 1% for the quarter compared to 13, 6% in the same quarter last year.

Tiffany Kice: We continue to leverage Riding Out's Cash Offer or Purchasing Scale. and our industry relationships to improve the pre-owned business. Our Parts, Service, and Accessories, or Fixed Operations business delivered $49.2 million of revenue and $22.7 million of gross profit, or GPU of $1,589, down $49.03. The DQE comes primarily from Accessories and Services. Our financing and insurance teams delivered $24.3 million in revenue, or GPU of $1,701, down 4.3% year-over-year. The decrease was driven by a decline in unit volume. So all in, revenue from our Powersports Dealership Group was $279.9 million, down 13.6% to the same quarter last year.

Tiffany: We continue to leverage right now, it's a cash offer our purchasing scale.

Tiffany: And our industry relationships to improve the pre owned business.

Tiffany: Our parts service and accessories, our fixed operations business delivered $49 2 million of revenue and $22 7 million of gross profit, our GPU was 1589 down $49 or 3%.

Tiffany: The decrease comes primarily from accessories and service.

Tiffany: Our financing and insurance teams delivered $24 3 million in revenue our GPU of 1701 down four 3% year over year. The decrease was driven by a decline in unit volume.

Tiffany: So all in revenue from our power Sports dealership group was $279 9 million down 13, 6% for the same quarter last year.

Tiffany Kice: The decrease in revenue is attributed with a lower major unit volume. Total GPU for the group was $4,955 down $425 or 7.9% to the same quarter last year and in line with our expectations as we continue to manage the macro environment.

Tiffany: The decrease in revenue is attributable to lower major unit volume totaled.

Tiffany: Total GPU for the group was 4955 down $425 or seven 9% the same quarter last year and in line with our expectations as we continue to manage the macro environment.

Tiffany Kice: Turning now to our AssetLight Vehicle Transportation Services Operating Group. For the third quarter, wholesale express revenue was up 7.9% as compared to the same quarter in the prior year, while gross profit increased 2.9% to $3.5 million. The increase was driven by an increase in number of vehicles transported. Turning to our balance sheet, we ended the quarter with $66.7 million in total cash, inclusive of restricted cash, and non-vehicle net debt was $217 million. Availability under a short-term revolving floor plan credit facilities totaled approximately $121.5 million as of September 30. Total available liquidity, defined as unrestricted cash plus availability under floor plan credit facilities on September 30, totaled $188.2 million.

Tiffany: Turning now to our asset light vehicle transportation services operating group for the third quarter wholesale Express revenue was up seven 9% as compared to the same quarter in the prior year, while gross profit increased two 9% to $3 5 million.

Tiffany: The increase was driven by an increase in number of vehicles transport it.

Tiffany: Turning to our balance sheet, we ended the quarter with $66 7 million of total cash inclusive of restricted cash and non vehicle net debt was $217 million.

Tiffany: Availability under our short term revolving floorplan credit facilities totaled approximately $121 5 million as of September 30th.

Tiffany: Total available liquidity defined as unrestricted cash plus availability under four point in credit facilities on September 30 totaled $188 2 million.

Tiffany Kice: Cash inflows from operating activities was $68.6 million for the nine months into September 30, as compared to cash outflows of $8.5 million for the same period in 2020. This improvement is a direct result of our focus on efficiencies and cost optimization. I'm also happy to report that we signed a credit agreement amendment with our existing term loan lender, which relaxes certain covenants for the next quarter through June 30, 2026, providing further financial flexibility. In connection with our credit agreement amendment, we have received incremental capital commitments for $30 million from our three largest shareholders, of which $10 million is in the form of a backstopped Common Equity Rights Office.

Tiffany: Cash inflows from operating activities was $68 6 million for the nine months ended September 30, as compared to cash outflows of $8 5 million for the same period. In 2023. This improvement is a direct result of our focus on efficiencies and cost optimization.

Tiffany: I'm also happy to report that we signed a credit agreement amendment with our existing lender, which relaxes certain covenants for the next quarter to June 32026, providing further financial flexibility and.

Tiffany: In connection with our credit agreement Amendment, we have received incremental cash capital commitments for $30 million from our three largest shareholders of which $10 million in the form of a backstopped common equity rights offering.

Tiffany Kice: This new capital commitment reaffirms our three largest shareholders' support of the business and strengthens our cash position as we focus on repaying the convertible notes coming due on January 1, 2025, while maintaining debt covenant compliance. As we look ahead, we continue to actively evaluate different opportunities to optimize our capital structure, lower our cost of capital, and extend the debt maturity profile for the coming year. As part of this process, we recently engaged an investment bank to explore refinancing of the company's debt.

Tiffany: This new capital commitment reaffirms, our three largest shareholder support of the business and strengthens our cash position as we focus on repaying the convertible notes coming due on January one 2025, while maintaining debt covenant compliance.

Tiffany: As we look ahead, we continue to actively evaluate different opportunities to optimize our capital structure lower our cost of capital and extend the debt maturity profile of the company as part of this process. We recently engaged an investment bank to explore refinancing of the company's debt.

Tiffany Kice: With that, we'd like to begin the question and answer session.

Speaker Change: With that we'd like to begin the question and answer session I'll turn the call back over to the operator now to open the line.

Operator: I'll turn the call back over to the operator now to open the line. Yes, thank you.

Speaker Change: Yes. Thank you we will now begin the question and answer session to ask a question you Press Star then one on your telephone keypad, if you're using a speaker phone. Please pick up your handset before pressing the keys. So anytime you have questions have been addressed and you would like to withdraw it. Please press star then two.

Operator: We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing If at any time your question has been addressed and you would like to withdraw it, please press star then 2.

Craig Kennison: At this time we will pause momentarily to assemble the And the first question comes from Craig Kennison with Bayer.

Speaker Change: This time, we will pause momentarily to assemble the roster.

Speaker Change: And the first question comes from Craig Kennison with Baird.

Tiffany Kice: Hey, good morning, thanks for taking my question. Just following up on the capital infusion of $30 million, can you give us a little more information about the terms of the $20 million and then the $10 million backstopped portion? Yeah, sure, let me start it off. Thanks for the question. By the way, both details will be filed in the queue later on this afternoon. and the AK this morning.

Craig Kennison: Hey, good morning, Thanks for taking my question just following up on the.

Craig Kennison: Capital infusion of $30 million can you give us a little more information about the terms of the $20 million and then the $10 million.

Craig Kennison: Backstopped portion.

Speaker Change: Yeah sure let me, let me start it off thanks for the question by the way those details will be filed in the Q later on this afternoon.

Tiffany Kice: Sorry, but you want to just talk a little bit about it, Tiffany? Sure, Chad. So we filed an AK this morning that will describe the $30 million. $10 million of it is coming from a fully backstopped rights offering from our three largest shareholders, and we will execute on that prior to December 1st. We'll launch it prior to December 1st. The remaining $20 million, $4 million of that comes from a sale leaseback of one of our properties in Florida, and then the remaining $16 million of that is coming from a floor plan facility that's being provided by two of our largest shareholders.

Speaker Change: In the 8-K this morning, sorry, but do you want to just talk a bit about Tiffany sure. Chad. So we filed an 8-K. This morning that it will describe the $30 million 10 million of it is coming from a fully backstopped rights offering from our three largest shareholders and.

Speaker Change: And we will execute on that prior to December 1st of all watch it prior to December 1st the remaining $20 million a $4 million of that comes from a sale leaseback of one of our properties in Florida.

Speaker Change: And then the remaining $16 million of that is coming from a floor plan.

Speaker Change: <unk>, that's being provided by our two of our largest shareholders.

Craig Kennison: Okay, thank you for that.

Speaker Change: Okay. Thank you for that and then I wanted to ask about.

Craig Kennison: And then I wanted to ask about... Press release on the partnership with Octane and what you can share regarding the economics of that relationship. Yeah, Craig, thanks for the follow-up question. Yeah, we announced the relationship with Octane.

Speaker Change: A press release on the partnership with octane and what you can share.

Speaker Change: The economics of that relationship.

Speaker Change: Yeah, Greg Thanks for the follow up question, Yeah, we announced the relationship with octane. It's a it's a it's a preliminary relationship where we're doing a lot of exciting things for our customers and for our stores in terms of offering services. It's a it's a white label program, that's going to be rolled out across all of our right now outlet.

Michael Kennedy: It's a preliminary relationship. We're doing a lot of exciting things for our customers and for our stores in terms of offering services. It's a white-label program that's going to be rolled out across all of our right now outlets. It's just a really good partnership. We've been doing a lot of business with Octane over the last few years. They're a great partner of ours and just strengthen the partnership and open up opportunities for down the road. Okay.

Speaker Change: And it's just a really good partnership we've been doing a lot of business with octane.

Speaker Change: Over the last few years, they're a great partner of ours, and just strengthen the partnership and open up opportunities for down the road.

Unknown Executive: Hey, thank you.

Speaker Change: Okay, Hey, thank you.

Unknown Executive: Thanks, Greg. Thank you.

Speaker Change: Thanks, Craig.

Speaker Change: Yeah.

Eric Wold: And the next question comes from Eric Wold with B. Reilly Security. Thanks. Good morning, everyone. I appreciate you taking my questions. A couple questions.

Speaker Change: Thank you and the next question comes from Eric Wold with B Riley Securities.

Speaker Change: Thanks.

Eric Wold: I appreciate taking my for taking my questions.

Michael Kennedy: I guess I know you talked about you working a lot with your OEM partners to reduce the new vehicle inventories with the goal of $50 million reduction by year-end. But maybe talk a little bit more about kind of your actions around used vehicles. I guess just one, how aggressive, maybe aggressive is not the right word, but I guess how aggressive are you being with the cash offer tool and willingness to take on used vehicle inventory? And then maybe what are you seeing from the consumers in terms of the velocity of vehicles being offered to you or kind of looking for an offer versus maybe what you saw, you know, six, 12 months ago?

Couple of questions I guess I know you talked about you were working a lot with.

Speaker Change: Your OEM partners to reduce the use of new vehicle inventory with the goal of 50 million.

Goodbye for you Ed can you talk a little bit more about kind of your actions around where our used vehicles.

Speaker Change: One how aggressive.

Speaker Change: Maybe that's not the right word, but you know how.

Speaker Change: Aggressive are you being with the cash off our tool and willingness to take on used vehicle inventory and then maybe what are you seeing from the consumers in terms of the velocity of vehicles being offered to you're kind of looking for an offer versus maybe what you saw.

Speaker Change: I think 12 months ago.

Michael Kennedy: Yeah, sure, Eric. Thank you. I appreciate the question.

Speaker Change: Yeah sure. Thank you I appreciate the question.

Michael Kennedy: I can't really speak to your last point about, you know, what's changed over the last six months or so. You know, the CashOffer platform is a great tool for us. We think it's a competitive advantage. We're the largest purchaser of pre-owned products, you know, in the country by a long shot. And, of course, as a reminder, right, we totally re-engineered that process and we're really pleased with the results. We entered the year with, you know, tight inventories from a day's supply perspective. We announced that early on in the year. We've been chipping away at that as we've gone through the year.

Speaker Change: I can't I can't really speak to your last point about whats changed over the last six months or so a cash offer platform is a great tool for us competitive we think its competitive advantage. We're the largest purchaser of our pre owned products.

Speaker Change: In the country by.

Speaker Change: By a long shot.

Speaker Change: And of course, as a reminder rate we totally re engineered that process and we're really pleased with the results we entered the year with.

Speaker Change: Inventories from a days supply perspective.

Speaker Change: We announced that early on in the year, we've been chipping away at that as we've gone through the year and where I would say were.

Michael Kennedy: And I would say we're, you know, comfortable with our day's supply of pre-owned today. And you can see the performance in the quarter was slightly better than Q2. And we're optimistic about that platform of incoming product, you know, our ability to turn it at our stores. And then also leverage our national scale of dealerships where we also acquire a lot of product, pre-owned product, direct from the customers, whether it's in the service lane, trade-ins, or just locally. So, all in all, it's a phenomenal opportunity for us. We love the pre-owned business. It's a great avenue for us and the margins have been pretty good this year, too, so we're pleased with it overall.

Speaker Change: Comfortable with our days supply.

Speaker Change: Pre owned today and you can see the performance in the quarter was slightly better than Q2, and we're optimistic about that that platform of incoming product.

Speaker Change: And our ability to to turn it at our stores and then also leverage our national scale of dealerships, where we also acquire a lot of product breo in product direct from customers, whether it's in the service lane of trade ins or just locally so all in all it's a it's a phenomenal opportunity for us we love the pre owned business, it's a great.

Speaker Change: The Avenue for Us and the margins have been pretty good this year too. So we're pleased with that overall.

Eric Wold: Thank you. And then, follow-up question.

Speaker Change: Thank you and then a follow up question.

Michael Kennedy: I know you talked a little bit about the year-over-year changes in F&I and parts, service, and accessories, but just looking at the percentage of those revenues as a percentage of vehicle revenues was down meaningfully year-over-year, off-trend from what it's been in recent years. Anything to call out there? Was that a decision internally for the changes you were making? Was that due to a mix of product? Was that a shift in just consumer demand? Try to understand what drove those declines relative to unit sales year-over-year. Yeah, no, it's a great question, Eric. I appreciate you paying attention because fixed operations are really, really important to our business, and we like that business because it's great customer engagement and relationship, and then, of course, the margins are great as well.

Speaker Change: I know you talked a little bit about the year over year changes in F&I.

Speaker Change: Parts service and accessories, but just looking.

Speaker Change: The percentage of those revenues as a percentage of vehicle revenues was down meaningfully year over year, you're kind of off trend from what it's been in recent years any anything to call out. There was that was under decision internally are the changes youre, making was that due to mix of product was that shifted.

Speaker Change: Consumer demand and try to understand kind of what what drove those declines relative to unit sales.

Speaker Change: Yes, no it is.

Speaker Change: It's a great question, Eric I appreciate you're paying attention because fixed operations are really really important to.

Speaker Change: So our business and we like that business because it.

Speaker Change: It's great customer engagement and relationship and then of course.

Speaker Change: The margins are great as well I think we're experiencing two things in that area. When you pre owned volume drops tends to sort of pull on that fixed operations, because we're not pushing the volume of pre owned motorcycles through the service department. So theres a little bit of that that we're digesting and then I just think overall coming off of.

Michael Kennedy: I think we're experiencing two things in that area. When your pre-owned volume drops, it tends to sort of pull on that fixed operations because we're not pushing the volume of pre-owned motorcycles through the service department, so there's a little bit of that that we're digesting, and then I just think overall coming off of the extraordinary numbers from COVID and all those new customers that entered the market.

Speaker Change: You know the extraordinary numbers from Covid and all those new customers that entered the market.

Eric Wold: So I think that gets better as we turn to 2025, and our strategy of kind of focusing in on those areas has improved over the last quarter, so I would expect that to improve going forward. Helpful. Thank you.

Speaker Change: So I think I think that I think that gets better as we turn to 2025 and our strategy of focusing on in those areas.

Speaker Change: <unk> improved over last quarter, so I would expect that to improve going forward.

Speaker Change: Helpful. Thank you.

Michael Baker: And the next question comes from Mike Baker with the A. David. Please go ahead, Mr. Baker. Your line is live. Okay, sorry. To get to the 75% ratio of SG&A to gross margin, is that more likely to come from gross profit dollars getting better, or is there still significant cost savings that you work Yeah, great question, Mike. The answer is a little bit of both, right? That's, you know, we, we expect gross, gross margin and gross profit dollars to improve going forward. And we also see opportunities to, you know, strengthen the team and continue to drive cost optimization out of the business.

Speaker Change: Thank you and the next question comes from Mike Baker with D. A Davidson.

Speaker Change: Please go ahead Mr. Baker Your line is live.

Speaker Change: Okay sorry.

Speaker Change: Get to the 75% ratio of SG&A.

Speaker Change: Gross margin is that more likely to come from gross profit dollars getting better or is there still significant cost savings that you're working on.

Speaker Change: Yeah, Great question Mike.

Speaker Change: New Hampshire is a little bit of both right that's where.

Speaker Change: We expect our gross gross margin and gross profit dollars are to improve going forward and we also see opportunities too.

Speaker Change: Strengthen the team and continue to drive cost optimization out of the business. So it'll be I don't mean that.

Michael Kennedy: So I don't mean to kind of say it's both, but it is both. And we expect to get improvement on the GP side as well as the SG&A side going forward. Well, and to follow up on that, that that, you know, $30 million that you've already taken out. You know, I guess what you're saying is there's more to go, but in any way to size that relative to what you've already been able to accomplish? Yeah, certainly not at that $30 million level. And it's, again, it's, as I've said from the beginning, right, my goal with the culture of this company and the senior leadership team is to develop a continuous improvement mindset.

Speaker Change: Say, it's both but it is both and we expect to get improvement on the GP side as well as yesterday side going forward.

Speaker Change: And to follow up on that that $30 million that you've already taken out.

Speaker Change: You know I guess, what you're saying is there's more to go but any way to size that relative to what you've already been able to accomplish.

Speaker Change: Yeah, certainly not at that $30 million level and.

Speaker Change: And it's again as I have said from the beginning right my goal with the culture of this company and the senior leadership team is to develop a continuous improvement mindset.

Michael Kennedy: And we're going to wake up every day, no matter how good yesterday was, we're going to have a mindset that we can do a little bit better tomorrow. And as our strategy takes traction, we're seeing opportunities, you know, whether it's on the marketing side of things, where, you know, our cost per click, our cost per lead is coming down, on the productivity side, our effectiveness of closing those leads is going up, driving test rides within our stores is improving. And so we just think there's opportunities still in a lot of different areas of the business to get better, as well as take costs out.

Speaker Change: And we don't wake up every day and no matter how good yesterday was we're gonna have a mindset that we can do a little bit better tomorrow.

Speaker Change: And as our strategy takes traction we're seeing opportunities.

Speaker Change: Whether it's on the marketing side of things, where you know our cost per click or cost per lead is coming down on the on the productivity side, our effectiveness of closing those leads is going up.

Speaker Change: Driving test rides within our stores is improving.

Speaker Change: And so we just think there is opportunities still in a lot of different areas of the business too.

Speaker Change: Get better as well as take cost out and then as as the business improves the gross project up gross profit dollars will increase.

Michael Kennedy: And then as the business improves, the gross profit dollars will increase, especially coming off this inventory reduction, which I'm really proud of the team and the progress they made. But that's certainly put some compressed pressure on gross margins on a new category. Yep, yep, makes sense.

Speaker Change: Especially coming off this inventory reduction, which I'm really proud of the team and the progress they made but that certainly put some compressed a pressure on gross margins on new categories.

Speaker Change: Yeah, It makes sense and if I could follow up one more on that inventory question and sorry, if I missed it.

Michael Kennedy: And if I could follow up one more on that inventory question, and sorry if I missed it. The, um, how, how much, where are you relative to that $50 million goal? We know where you are, obviously, on total inventories, but, but I guess where, um, relative to the, uh, just on the new set. Yeah, no, good question. Thanks for asking. The team has done great work in this area, and I'll be totally transparent. At the end of Q2, I was a little nervous, and I had some pretty heated conversations with my team around our progress, and the team completely stepped up in Q3 and delivered.

Speaker Change:

Speaker Change: The how.

Speaker Change: How how much.

Speaker Change: Relative to that $50 million goal, we know where you are obviously in total inventories, but but I guess were relative to the just on the new side, yes.

Speaker Change: Yeah no. Good question, thanks for asking and the team has done great work in this area.

Speaker Change: I'll be totally transparent at the end of Q2, I was a little nervous and I was had some pretty heated conversations with my team around our progress and the team completely stepped up in Q3 and delivered and by the way I mentioned in my remarks, I want to mention again, our OEM partners have played a big role in that they've been incredibly productive and helping us.

Michael Kennedy: And by the way, I mentioned in my remarks, I want to mention again, our OEM partners have played a big role in that. They've been incredibly productive in helping us reset the right profiles and make sure our day supply is at a healthy level. But the team, at the end of the day, really delivered and moved out a lot of that product in Q3. So I feel very confident that we're going to achieve our $50 million target, which was set out at the beginning of the year to achieve by the end of the year. And so I'm really proud of the team, what they've been up delivering in that regard.

Speaker Change: Reset the right profiles and make sure our days supply is at a healthy level, but the team at the end of the day really delivered in and moved out a lot of that product in Q3, So I feel very confident that we're going to achieve our $50 million target.

Speaker Change: Which was set out at the beginning of the year to achieve by the end of the year and so I'm really proud of the team what they've been up deliver in that regard.

Michael Baker: Can you quantify where you are now, or are we not breaking the law? Yeah, we're not bringing that out at this point. You'll see it in the year-end numbers, but yeah, we just don't share that level of specificity right now. Okay, thank you. You bet. Thank you.

Can you quantify where you are now or.

Speaker Change: So we're not breaking that out yeah, we're not breaking that out at this point youll see it in the year end numbers, but.

Speaker Change: Yes, we just don't share that level of specificity right now.

Speaker Change: Okay. Thank you you bet.

Speaker Change: Thank you.

Michael Kennedy: And this concludes our question and answer session.

Speaker Change: Thank you and this concludes our question and answer session I would like to return the conference back over to Michael Kennedy for any closing comments.

Michael Kennedy: I would like to return the conference back over to Michael Kennedy for any closing comments. Okay, thank you, everyone. I'd like to close out and just mention two important things. First, I want to take a moment to express my appreciation and gratitude to the entire team throughout the company who continue to impress me by keeping our riders as our top priority and taking on the current macro environment with conviction and determination. Thank you very much, everyone. Lastly, I'd like to emphasize that we are committed to Vision 2026 and maximizing our long-term per share value, while confidence builds on delivering our key targets around annual revenue in excess of $1.7 billion, annual adjusted EBITDA of greater than $150 million, and annual adjusted free cash flows of $90 million or more.

Michael Kennedy: Okay. Thank you everyone I'd like to close out just mentioned two important things first I wanted to take a moment to express my appreciation and gratitude to the entire team throughout the company, who continue to impress me by keeping our riders.

Michael Kennedy: As our top priority and taking on the current macro environment with conviction and determination. Thank you very much everyone last.

Lastly, I'd like to emphasize that we are committed to vision 2026, and maximizing our long term per share value while confidence builds on delivering our key targets around annual revenue in excess of $1 7 billion annual adjusted EBITDA of greater than $150 million in annual adjusted free cash flows of $90 million or more and regardless of timing.

Michael Kennedy: And regardless of timing, we as a management team and the company are laser-focused on achieving Vision 2026 and will make decisions in the best interest of long-term per share value creation at every turn. Thank you very much for your time today and your continued interest in RumbleON.

Michael Kennedy: We as a management team and the company are laser focused on achieving vision 2026, and we will make decisions in the best interest of our long term per share value creation at every turn.

Michael Kennedy: Thank you very much for your time today and your continued interest in <unk> that concludes our call.

Operator: That concludes our call. Thank you.

Operator: As mentioned, the conference is now concluded.

Speaker Change: As mentioned the conference is now concluded. Thank you for attending today's presentation you may now disconnect.

Operator: Thank you for attending today's presentation.

Speaker Change: Okay.

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