Q1 2025 RumbleOn Inc Earnings Call
Greetings and welcome to the RumbleON Inc's first quarter 2025 earnings conference call.
At this time, all participants are in a listen-only mode
Speaker Change: A brief question-and-answer session will follow the formal presentation. As a reminder, this current press is being recorded. It is now my pleasure to introduce your host, Elliott Wagner, Vice President of Finance. Thank you. Please go ahead.
Elliot Wagner: Thank you, operator. Good morning, everyone. And thank you for joining us on this conference call to discuss RumbleON's first quarter 2025 financial results.
Elliot Wagner: Joining me on the call today is Michael Quartieri, RumbleON's Chief Executive Officer.
Elliot Wagner: Our Q1 results are detailed and the press release we issued this morning and supplemental information will be available in our Form 10Q 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. I would like to remind you that the following discussion contains forward-looking statements including but not limited to RumbleON's market opportunities and
Elliot Wagner: Additional information that could cause actual results to differ from forward-looking statements can be found in RumbleON's periodic and other SEC filings.
Elliot 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 RumbleON 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.
Elliot Wagner: Now I'll turn the call over to Michael Quartieri, RumbleON C.E.O. Mike
Michael Quartieri: Good morning, everyone, and thank you for joining us for RumbleON's first quarter 2025
Michael Quartieri: The first quarter of 2025 has been a period of rapid change and opportunity for our business
Michael Quartieri: Although we continue to experience year over year volume declines amidst a difficult backdrop for consumers
Michael Quartieri: I am pleased with our team's progress on our turnaround and my confidence in our path forward is growing every day as our most recent financial and strategic initiatives are beginning
Speaker Change: Now that I've become fully immersed in the organization, it's a good time to highlight what I believe drives the core of success in any company.
Speaker Change: The people who collectively buy in to make the long-term vision attainable
Speaker Change: It is critical for our executive team to set the tone and create an environment where our team moves forward with confidence, urgency, and a sense of purpose that starts from the top and emanates down through all levels of our organization.
Speaker Change: It is important to emphasize this mindset is not only relevant to today's dynamic operating environment but also over the longer term as we drive to create the future state of the business and ensure consistent success [inaudible]
Speaker Change: As CEO , it is my job to ensure everyone within our organization is on board and operates with a team-based winning mindset, focused on driving positive change into the organization that will position the company for long-term success.
Speaker Change: At the core of this is putting the right leaders in the right places and filling out missing skill set gaps within our employee base where they exist.
Speaker Change: When you establish and empower leaders that align with your winning mindset, the rest falls in place as their team members below them buy into the vision.
Speaker Change: To that end, I am incredibly excited to announce the additions of few new key members of our management team which will further strengthen our position in the market.
Speaker Change: Our new Chief Legal Officer, Melissa Binkston, comes to us with extensive public experience and will help move the team forward with our legal and governance efforts
Speaker Change: Our new VP of wholesale express, Fred Mosley, will help us grow our transportation business
Speaker Change: We're also engaged in a comprehensive search for a new CFO to lead the business into the next phase of our long-term growth [inaudible]
Speaker Change: These new and future team additions align with our strategic goal of building a strong foundation for growth by getting the right people in the right place at the right time doing the right things.
Speaker Change: As we've mentioned in the past, the operating environment remains difficult from a macro and industry perspective . . .
Speaker Change: The evolving landscape around tariffs has created volatility and uncertainty in the market. This creates risk and opportunities in our power sports business as consumer taste and preferences shift.
Speaker Change: Although new unit sales are coming in lower than last year, we are seeing robust demand in our pre-owned segment with strong margins as consumers shift to pre-owned products and business tariffs and a tough purchasing environment for higher price new items.
Speaker Change: Regardless of the impacts of terrors and the current economic environment, we are focused on improving what we can control approaching our business with fresh thinking, operational discipline and a renewed commitment to serving our customers even better.
Speaker Change: We are pleased with the actions we have taken today which have helped us achieve positive aid even a result even with the lower year over year sales volumes.
Speaker Change: We are confident we are taking the right actions today to position the company for long-term financial success when the sale cycle returns positive again I'm confident in our actions coupled with discipline capital allocation decisions
which result in bleeding for long-term shareholder value creation. Thank you.
Speaker Change: Lastly, as we mentioned last quarter, our asset light vehicle transportation brokerage, business
has a new experience management team leading the operation
and they are moving forward with improving business performance.
Speaker Change: We still expect 2025 results from this segment to take a large step back from 24, but we believe the operation is far better position for more sustainable long-term growth and potential further integration into the power sport segment [inaudible]
Speaker Change: Although AEBIT was down year over year this quarter, a large driver of this directional decline was related to the wholesale express challenges discussed previously.
Speaker Change: excluding the underperformance in Hostel Express this quarter, R-A-E, but it would have been up year over year despite the 20.5% year over year decline in units sold for the quarter, which speaks to the continued progress of our team is making an operational and cost saving initiative.
Speaker Change: Now let me shift gears and walk everyone through the first quarter 2025 financial performance in detail followed by a summary of our balance sheet.
Speaker Change: We generated $244.7 billion of adjusted EBITDA of $7 billion in the first quarter of 2025. Adjusted EBITDA was down slightly when compared to the same quarter last year despite revenue being down 20.5 percent.
Speaker Change: Total company adjusted SGNA expenses were 57.5 million or 85.6% of gross profit.
Speaker Change: compared to the same quarter last year of 72.6 million or 87.9% of gross profit.
Speaker Change: We continue to target adjusted SGNA to be 75% of gross profit in the long term.
Speaker Change: Adjusted SGNA expenses were 20.8% lower than the same quarter last year [inaudible]
Moving on to the segment performance
Speaker Change: The power sports group sold 13,186 total major units during the quarter, which is down 20.5% from the same quarter last year [inaudible]
Speaker Change: Total new power sport major unit sales were 8,013 units down 23.7% as compared to the same quarter last year while pre-owned unit sales total 4,307 units down only 13.9%
Speaker Change: Although gross margin dollars for major unit sales decreased to the lower unit volumes,
Speaker Change: This was partially offset by higher gross margin percentages as we saw a new unit gross margins improved at 13.5% for the quarter compared to 12.5% for the same quarter last year the same quarter last year, the same quarter last year, the same quarter last year,
Speaker Change: Pre-owned gross margins were 16.3% for the quarter compared to 19.5% in the same quarter last year
Speaker Change: However, the pre-owned gross margin percentage in Q1 of last year was elevated due to an inventory right down in the pre-seating quarter which was recorded as a charge in Q4 of 2023
Speaker Change: Our parts, services, and accessories, or fixed operations business delivered 46.1 million of revenue and 20.8 million of gross profit, which represents a 12.9% decline in revenue and a 11.9% decline in gross profit.
Speaker Change: These declines were trivial to the overall decline in unit sales during the quarter. Our gross profit per unit totaled 1,688 of 166 dollars or 10.9 percent.
Speaker Change: Our financing and insurance teams deliver 21.1 million of gross profit which represents an 18.2% decline compared to the previous year. This decline is also attributable to the decline in unit sales during the quarter. [inaudible]
Gross profit per unit was $1,713, up $49 or 2.9%.
Speaker Change: So all land revenue from our power sports dealership group was 239.2 million down 18.5 percent as compared to the same quarter last year with the primary driver being the lower major unit volume.
Speaker Change: Total gross profit per unit for the group was $5,365 up $266 or 5.2% to the same quarter last year which is primarily a trivial to the shift to pre-owned units as a higher percentage of our overall unit sales.
Speaker Change: Turning now to our asset light vehicle transportation services operating group, for the first quarter wholesale express revenue was down 61.5%, as compared to the same quarter in the prior year, while gross profit decreased 68.6% to 1.1 million.
Speaker Change: On the last call, we addressed the broker departures within wholesale express and the expected impact on our results for the remainder of 2025.
Speaker Change: Turning to our balance sheet, we ended the quarter with 56.2 million in total cash, inclusive of restricted cash and non-vehicle net debt of 188.2 million.
Speaker Change: During the quarter, we fully repaid the 38.8 million outstanding of our 6.75% convertible notes that were due on January 2nd.
Speaker Change: Availability under our short-term revolving floor plant credit facilities totaled approximately 115.2 million as of March 31, 2025.
Speaker Change: Total available liquidity defined as total cash plus availability under floor plan credit facilities.
totaled $171.4 million as of March 31, 2025.
Speaker Change: Cash outflows from operating activities were $6.9 million for the three month ended March 31, 2025 as compared to cash inflows of $17 million for the same period in 2024.
Speaker Change: As you may recall, the prior year cash flow from operations benefited from proceeds from the sale of our finance receivable portfolio .
Speaker Change: As we look ahead, we continue to actively evaluate different opportunities to optimize our capital structure, lower our cost to capital, and extend the debt maturity profile of our company.
Speaker Change: As we mentioned last quarter, we've engaged in investment banker to help explore a re-financing of the company's debt and those conversations continue to be ongoing.
Speaker Change: With that, I'd like to begin the question and answer session, and I'll turn the call back over to the operator now open up the lines [inaudible]
Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question? Please press the store followed by the one on your touch-tone phone.
Speaker Change: Should you wish to cancel your request, you may press store followed by the two.
Speaker Change: If you are using a speaker phone, please lift a hands up before pressing any keys.
Speaker Change: Once again, that is door 1, should you wish to ask a question? [inaudible]
Speaker Change: Your first question is from Eric Wold, from Access Capital Securities. Your line is out open.
Eric Wold: Thank you. Good morning. I appreciate taking my questions. So obviously you've seen some stronger demand on the pre-owned vehicle side. I guess with that and with expectation that may continue this environment. How aggressive do you want to be? Thank you.
Speaker Change: with the cash offer tool and bringing in additional pre-owned inventory as opposed to your new vehicles from the OEM partners and how would you characterize your pre-owned inventory levels right now versus where you feel would be appropriate for this environment.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: Yeah, so let me start kind of with the cash offer tool, then get to where the inventory levels are so
Speaker Change: We could be as aggressive as we want to be with the cash offer tool, but it only makes sense when the inventory is right and we can know we can make the right profit and move that product pretty quickly.
Speaker Change: So, it's really more of a function of the quality of the inventory that's put in front of us but we have no restriction in our own operating environment on being able to utilize that tool effectively to get the right levels of inventory.
Speaker Change: Where we stand today, with our inventory, we're feeling good. Obviously, when you look at a year ago, we were, you know,
Speaker Change: Well over, our inventory levels both from a new and used perspective.
Speaker Change: That's what project diet was that was implemented by the prior management team that reduced those inventory levels throughout the year. So I think we'd always be looking for the best inventory possible on the cash offer tool and we'll take advantage of that accordingly.
Speaker Change: God, and then just send me question, as you look at our inventory now, if you went up a little bedding, which is normal for this time of year in the spring, summer period, what would you expect inventories at year end to look like? Would you expect them to be down year over year in the environment or currently in assuming your trends don't improve materially or you think?
Speaker Change: We may actually increase from here. We're from urine, from urine. Yeah, look, I would think by the time we get to the end of the year we should be right about where we ended up 2024 maybe a little bit higher than that just given normal inflationary factors that take place throughout the course of the year.
Perfect, thank you [inaudible]
Speaker Change: Thank you once again, please press door one, should you wish to ask a question?
Speaker Change: Our next question is from Craig Kennison, from Lyard, Caroline Sewell-Pink.
Craig Kennison: Hey, good morning. Thanks for taking my question. I'm curious with this tariff environment. What's the general message you get from your OEM partners on? How do they expect to help you navigate what it looks like a very difficult environment on tariff? [inaudible]
Speaker Change: Yeah, I think when we break it down from an OEM perspective, the majority of our exposure from our top OEMs is going to come from Mexico, Canada and Japan
China right now is not a significant risk to us.
when it comes to finished product
Speaker Change: But we all know that a lot of our other OEMs that are producing from Canada, Mexico, in Japan
Speaker Change: There's always the opportunity that they're using China component parts to finish their manufacturing in those areas. So there's a little bit of exposure there but given the current state of the
Speaker Change: Consumer, I think for the most part OEMs are absorbing that cost of the tariff at this point in time But again, it's still learning the process I think we would be all expecting
Speaker Change: I'm hoping in the next 45 days that a lot of this noise is cleaned up, deals are signed and everybody's back to a normal operating environment, but I think where it stands right now, we're not seeing any real impact from the OEM perspective on tariffs.
Speaker Change: It doesn't sound like consumers have to fear a big price increase given what you just said about OEM is maybe absorbing some of that price, but has there been any any evidence of a pull forward in demand as consumers say?
Better to buy now.
Speaker Change: Look, I think if I look at Q1 results, new units being down 20 plus percent, doesn't feel like there's a whole lot of pull forward that's taking place [inaudible]
where we've seen a bit of...
I'd say better performance.
Meaning, less down-year-over-year on the use side.
and doesn't yield into the mantra of...
Speaker Change: Consumers are returning in growth because they're trying to pull forward demand from potential increases in tariffs. I think when it comes to power sports
Speaker Change: The increase in the price as a result of a tariff pretty much gets spread out over a number of different products so it's not like a, say, a new car.
Speaker Change: where a 25% tariff on an $80,000 car is a meaningful price increase. I'm going to see at that case being in the power sports groups.
Speaker Change: Thank you, ladies and gentlemen, that concludes the questioning answers session for today. The conference has now ended. Thank you all for joining. You may all disconnect your lines.