RumbleOn(RMBL) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Q2 2023 revenue was $382.7 million, up 14.5% or$ 48.3 million from the prior quarter [55] - Total gross profit for Q2 was $106.4 million, up$ 16.1 million from the prior quarter, with a gross margin of 27.8% compared to 27% in Q1 [29] - Adjusted EBITDA for Q2 was $23.6 million, up 118.6% from Q1 2023 [32] - Full-year 2023 revenue guidance is$ 1.38 billion to $1.48 billion, with gross profit per unit (GPU) expected to be$ 5,300 to $5,400 [33] - Full-year 2024 revenue forecast is$ 1.58 billion, with GPU projected to remain flat at $5,400 and adjusted EBITDA forecasted at$ 80 million to $90 million [35] Business Line Data and Key Metrics - Q2 retail unit sales were 20,277, including 13,126 new units (up 25.8% QoQ) and 7,151 used units (up 17.7% QoQ) [28] - Used inventory over 90 days old has been significantly reduced, improving inventory management [9][27] - The company is focusing on optimizing its used vehicle acquisition and resale program, which is a high-margin business [9][54] Market Data and Key Metrics - RumbleON is the largest North American powersports retailer with 55 locations, offering both online and in-store options [45] - The powersports dealer industry remains fragmented, presenting opportunities for consolidation [46] Company Strategy and Industry Competition - The company is implementing$ 42 million in annualized cost reductions, with full benefits expected in 2024 [20][26] - RumbleON is focusing on accretive acquisitions and improving dealership profitability through operational efficiencies [46] - The company is actively recruiting a permanent CEO and hiring a new independent audit firm [10][50] Management Commentary on Operating Environment and Future Outlook - Management expects to improve used inventory management by aligning inventory levels with seasonal demand patterns [9][54] - The company is addressing challenges in the used vehicle market, including aging inventory and credit issues for low-tier buyers [56][65] - Management is optimistic about the long-term demand for powersports vehicles, driven by consumer interest and manufacturer incentives [110][117] Other Important Information - The company has signed agreements to sell non-core assets, including a finance portfolio and nine properties, to reduce debt by $70 million [12][49] - RumbleON plans to raise$ 100 million in equity, with $50 million allocated for debt reduction and the remainder for growth initiatives [24][61] Q&A Session Summary Question: What caused the reversal in June EBITDA trends after strong April and May performance? - Answer: The reversal was attributed to credit issues for low-tier buyers, extreme summer weather, and the reduction of aged used inventory [65] Question: How is the used inventory procurement process being improved? - Answer: The company is refining its cash offer program, focusing on buying the right product at the right time and price, and reducing freight costs [66][72] Question: What is the expected leverage ratio at the end of 2023? - Answer: The company expects to reduce its leverage ratio to 1.5x by the end of the year [113] Question: What is the strategy for used versus new vehicle sales in the second half of 2023? - Answer: The company aims to improve used vehicle sales by better implementing its cash offer tool and aligning inventory with demand [124]