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RumbleON, Inc. misses on earnings expectations. Reported EPS is $-1.58 EPS, expectations were $-0.26.

Operator: Greeting and welcome to the RumbleOn, Inc. Fourth Quarter and Full-Year 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Elliot Wagner, Vice President of Finance. Thanks 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 fourth quarter and full-year 2024 financial results. Joining me on the call today are Michael Quartieri, RumbleOn’s Chief Executive Officer; and Tiffany Kice, RumbleOn’s Chief Financial Officer. Our Q4 and full-year results are detailed in the press release we issued this morning and supplemental information will be available in our Form 10-Q once filed. 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 involve risks and uncertainties that may cause actual results to differ materially from those discussed here.

Additional information that could cause actual results to differ from forward-looking statements can be found in RumbleOn’s periodic and other SEC filings. The forward-looking statements and risks in this conference call, including responses to your questions, are based on current expectations as of today, and RumbleOn assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. Also, the following discussion contains non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures, please see our earnings release issued earlier this morning. Now I’ll turn the call over to Michael Quartieri, RumbleOn’s CEO. Mike?

Mike Quartieri: Good morning everyone and thank you for joining us for RumbleOn’s fourth quarter and full-year earnings call. It’s great to be here with you on my first earnings call with the company. I’m very excited to have taken over the range of RumbleOn and honored that the board has placed its trust in me to lead the company. As CEO of the leading consolidator of power sports dealerships in the country, I’m drawing on my experiences within publicly traded companies such as Dave & Buster’s, Las Vegas Sands, and Scientific Games. My roles within these companies gave me hands-on experience managing multi-unit consumer facing operations, value creating M&A, and balance sheet optimization, as well as on overall financial rigor and discipline, focused on driving free cash flow and delivering shareholder value.

When I joined the board back in April, I developed a high level view of the business and recognized that while there were challenges, there were also a large opportunity to improve our overall execution. Over the last two months, I’ve had the opportunity to visit a number of our dealerships and meet with the teams that drive the business on the daily basis. We have identified key work streams and efficiency opportunities and are prioritizing specific initiatives, all with a focus on delivering improved results, driving free cash flow and creating value. It is my goal to foster a high-performance culture within our company. To that end, I’m excited to be partnering with Cam Tkach, our newly appointed Chief Operating Officer. Cam grew up in the power sports dealership business and has a lifetime of hands-on experience in all aspects of our frontline operations.

In the short-term, I believe there are immediate opportunities to enhance revenue, right-size the organization, and grow EBITDA and free cash flow. It is critical we build a strong foundation for future growth by streamlining our cost structure and further standardizing our systems and processes. Over time, I expect to accelerate our growth both via acquisitions and organic avenues, and we will allocate our capital to the highest return opportunities. It’s no secret we are operating in a difficult environment from a macro and industry perspective. That being said, I am proud of the team’s performance, especially our frontline teams in our stores. And I believe the actions we are taking during this difficult time for our industry will enable us to emerge a much stronger company.

As we mentioned on previous calls, we set a goal to reduce new inventories by 50 million for the full year 2024. We have exceeded that inventory reduction goal, reducing new inventories by over $80 million, and believe we are going into 2025 with the appropriate level of new inventory. Regarding cost and efficiency, while the company took steps last year to lower our expense structure, having been in the seat for two months now, I believe there is further opportunity to lower our costs. Our asset light vehicle transportation brokerage business, Wholesale Express, was able to deliver growth in units transported in 2024. However, a change in leadership in this segment and the subsequent exiting of nearly all of our sales team, known as brokers, in the first quarter of 2025 will likely result in a significant reduction in volumes in 2025.

We’ve taken immediate and decisive actions to mitigate the effect of this turnover. We’ve recruited a new experience management team to lead the operation, and they are moving forward with solid traction in attracting new brokers. Although we expect 2025 results from this segment to take a large step back from ‘24, we are expecting to achieve positive EBITDA from this segment in 2025, and believe that the operation is far better positioned for more sustainable long-term growth and potential further integration into our Powersports division. Looking forward, we are going to discontinue any reference to the Vision 2026 plan laid out by our prior management. In my experience, while it’s good to have aspirational goals in mind, our focus needs to remain on driving profitability, growing the company, and creating shareholder value day in and day out.

Over time, our results will speak for themselves. Furthermore, the global tariff landscape is dynamic and rapidly changing. Assuming currently contemplated tariffs are enacted and persist, affordability of certain products we sell could be hampered, negatively impacting customer demand. I’ll conclude by saying again that I’m very excited to be here. I’m focused on instilling a high performance winning culture and building a strong foundation for growth, while improving profitability. Two of our larger shareholders, Mark Tkach and Bill Coulter, founded the core of RumbleOn over 30-years ago through their company RideNow, which was acquired by RumbleOn a few years ago. Under Mark and Bill, RideNow was a well-run and profitable business. As I take over the helm as CEO, my overarching goal is to return the company to operational excellence and re-instill that winning culture that existed for so many years.

With 55% of outstanding shares owned by members of the board, rest assured, we and the board will continue to make decisions in the best interest of long-term per share value creation. Now I’d like to turn the call over to Tiffany to walk us through the fourth quarter financial performance in detail.

Tiffany Kice: Thank you, Mike, and good morning, everyone. I will start by reviewing our financial results for the fourth quarter of 2024 followed by an overview of our balance sheet. We generated revenue of $269.6 million and adjusted EBITDA of $2.2 million in the fourth quarter of 2024. Revenue was down 13.4% year-over-year. Adjusted EBITDA was up year-over-year, as compared to a slight loss in the same quarter last year. Total company adjusted SG&A expenses were $62.3 million or 92.3% of gross profit, compared to the same quarter last year of $80.8 million or 113.5% of gross profit. We continue to target adjusted SG&A to be 75% of gross profit in the long-term. Adjusted SG&A expenses were 22.9% lower than the same quarter last year.

Moving on to our segmented performance. The Powersports Dealership Group retailed approximately 14,100 total Powersports major units during the quarter, which is down 9.3% from the same quarter last year. Total new Powersports major unit sales were approximately 10,200, down 9.5% to the same quarter last year, while pre-owned unit sales totaled approximately 3,900, down 8.8%. As Mike mentioned earlier, we have made great progress in working down our new inventory levels over $80 million from 2023 to 2024. Our team is working closely with our OEM partners to ensure new inventory levels are aligned to the current market environment going forward. Gross margins for major unit sales continued to be challenged on new and pre-owned inventory in the fourth quarter.

New unit gross margins for the quarter were 10.8%, compared to 13.2% 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. Pre-owned gross margins of 9.8% for the quarter, compared to negative 10.3% in the same quarter last year, which may not be comparable due to an inventory write-down in the fourth quarter of 2023. We continue to leverage RideNow Cash Offer Technology, our purchasing scale, and our industry relationships to improve the pre-owned business. Our parts, service, and accessories, or fixed operations business, delivered $47.2 million of revenue and $22 million of gross profit, or GPU, of $1,554 down $91 or 5.6%. The decrease comes primarily from accessories and service.

Our financing and insurance teams delivered $22.6 million in revenue, a GPU of $1,600, down 8.9% year-over-year. The decrease was driven by a decline in unit volume. So all in, revenue from our Powersports dealership group was $256.2 million, down 14.1% to the same quarter last year. The decrease in revenue was attributed to lower major unit volume. Total GPU for the group was $4,547, up $197, or 4.5%, in the same quarter last year. Turning now to our asset light vehicle transportation services operating group. For the fourth quarter, wholesale express revenue was up 3.1%, as compared to the same quarter in the prior year, while gross profit decreased 2.9% to $3.3 million. The increase was driven by an increase in the number of vehicles transported.

Looking at the full-year total company revenue and adjusted EBITDA was approximately $1.2 billion and $32.9 million respectively, as compared to $1.4 billion and $37.4 million in the prior year. Revenue was down $11.4 million in prior year. Revenue was down 11.5% year-over-year and adjusted EBITDA was down 12%. Total Powersports units retailed for the year were approximately 42,500 and 22,500 for new and pre-owned respectively. That’s compared to 45,700 and 27,000 for new and pre-owned in the prior year. New unit sales were down 7.1% for the year, while pre-owned units were down 16.4%. Turning now to our balance sheet. We ended the quarter with $96.7 million in total cash, inclusive or restricted cash and non-vehicle debt was $182.1 million.

Our cash balance at fiscal year-end was benefited by the completion of our previously announced $30 million capital raise in the form of a $10 million rights offering, $4 million related party property sale and lease back, and $16 million related party pre-owned floor plan facility. Availability under our short-term revolving floor plan credit facilities totaled approximately $146.2 million as of December 31. Total available liquidity defined as total cash plus availability under floor plan credit facilities on December 31 totaled $242.9 million. Cash inflows from operating activities were $99.4 million for the 12-months ended December 31, as compared to cash outflows of $38.9 million for the same period in 2023. I am also pleased to announce that shortly after the close of fiscal 2024, we repaid all of our outstanding $38.8 million of convertible notes, which matured on January 1, 2025, from our $85.3 million of unrestricted cash as of 12/31/2024.

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 we mentioned last quarter, we’ve engaged an investment bank to help explore refinancing of the company’s debt, and those conversations continue to be ongoing. With that, we would like to begin the question-and-answer session. I will turn the call back over to the operator now to open the line.

Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from [Seth Basham] (ph) with Wedbush Securities. Please go ahead.

Matt Mccartney: Hi this is Matt Mccartney on for Seth. Just a couple of questions for you. I guess let’s just get the tariffs or question out of the way here. I’m sure it’s on everyone’s mind. If you could give some more color on your exposure there, the sort of key OEMs that have the largest exposure and how you think about sort of handling the cost increase that might come through?

Mike Quartieri: Yes, look, obviously it’s a question that’s on top of mind for a lot of people. But I think the best way to answer that is if we look at our top three OEMs, it’s Polaris, BRP, and Harley-Davidson. Historically, they basically run, call it 60% to 65% of our sales. So, given their background and where their distribution is from a manufacturing perspective. I think it’s difficult at our time to really gauge the magnitude of the impact given the level of uncertainty and the fact that it changes just about every day. Obviously, when we look at it in the short run, there’s two ends to the extreme. They’re either, the OEMs are going to accept 100% of the tariff, or they’re going to pass 100% on to the consumer. And so, we’re going to be sandwiched in the middle of that.

So, there’s going to be a push and pull that just takes place. And I think that push and pull is going to be dynamic and basically be ever-changing. So at this point to quantify any type of impact of that, I think it’s just way too early to tell.

Matt Mccartney: Okay, fair enough. I guess though, just the, we’ve seen a lot of consumer issues crop up here in the last couple months in consumer confidence and sort of the thought of tariffs having impact on the consumer. I was wondering if there’s anything quarter-to-date that you could kind of share if you’re seeing a similar sort of slowdown in the business or anything you can add that can help us understand how things are going so far this year?

Mike Quartieri: Yes, look, I think I’ll comment on one, we don’t give inter-quarter commentary on results since we don’t give out guidance, but we’re not any different than anybody else from a consumer perspective. There’s a multitude of factors that are impacting consumers, whether it’s interest rates, their overall health from a spending perspective, obviously the potential impact of tariffs, any other impact from any other new policy or potential policy changes from the new administration. So the one thing we can do is control what takes place within our four walls, and that’s what we’re doing.

Operator: The next question comes from Craig Kennison with Baird. Please go ahead.

Craig Kennison: Good morning. Thanks for taking my questions. I think you mentioned that you feel comfortable now with the level of inventory in your dealerships? I’m curious how you feel about the rest of the inventory — the industry and inventory?

Mike Quartieri: Yes, I think from an overall inventory perspective, like we said, we were very comfortable with the measures we took place a year ago to get the new inventory in line with where we thought expectations should be. So, we’re very happy and confident with where we’re sitting there. I think from a parts inventory perspective, it’s probably a little still too high, but that’s not a material component of our operation from a balancing perspective today.

Craig Kennison: Do you feel like the rest of the industry is at your level, or will there continue to be promotional activity that depresses gross margin?

Mike Quartieri: I think there will always be that factor sitting out there. One of the offsets of that is, you know, what the impact of tariffs are going to be on that as well. So it’s going to be an ever-evolving operation of what we’re seeing from not only our competitors, but what our OEMs are going to be providing us to help move product, depending on what the impact of all of this will be.

Operator: This concludes our question-and-answer session, and concludes the conference call. Thank you for attending today’s presentation. You may now disconnect.