Executive Summary

Q3 revenue was $295.0M (-12.7% YoY), net loss was $11.2M (improved vs. $16.5M YoY), operating income was $5.3M (vs. $(0.2)M YoY), and Adjusted EBITDA was $6.8M (-26.1% YoY), reflecting a tougher selling environment and margin pressure from inventory reduction actions .
Management executed on balance-sheet actions: received $30M of incremental capital commitments (including a fully backstopped $10M rights offering), amended the term loan to increase flexibility, and engaged a bank to explore refinancing; the plan is to repay converts due Jan 1, 2025, supported by these actions and cash generation .
Working capital actions were strong: inventories decreased by $53.9M QoQ and floor plan notes payable fell by $52.9M; YTD operating cash flow was $68.6M and free cash flow was $67.0M .
Near-term stock catalysts: execution of the rights offering and refinancing, further inventory normalization and gross margin recovery, and stabilization in high-margin F&I and fixed operations trends (management expects 2025 SG&A/GP to improve) .

What Went Well and What Went Wrong

What Went Well

Cost discipline and liquidity: Adjusted SG&A fell 21.7% YoY to $64.3M (86.5% of GP vs. 89.2% YoY); covenant headroom maintained; YTD operating cash inflows of $68.6M and free cash flow of $67.0M .
Inventory and floorplan reduction: Total inventories reduced by $53.9M and floor plan notes payable by $52.9M in Q3; management reiterated progress toward year-end inventory targets, aided by OEM cooperation .
Transportation segment growth: Vehicles transported rose 9.4% YoY to 25,084; revenue grew 7.9% to $15.1M and gross profit grew 2.9% to $3.5M .

Management quotes:

“We have received significant support from our three largest shareholders…which aligns with our goal to deleverage our balance sheet and lower our cost of capital” .
“We have fully executed on our $30 million of annualized cost savings… and we see additional opportunities…to drive more cost out of the business” .
“We experienced margin compression…as we strive to rightsize our inventories…we’re now positioning margins to improve…” .

What Went Wrong

Top-line and unit pressure: Revenue fell 12.7% YoY; retail units declined 13.2% with new units -10.2% and pre-owned -19.0% YoY, reflecting industry overstocking and weaker demand .
Margin compression: New unit gross margin fell to 11.3% (vs. 13.8% YoY) and pre-owned to 12.1% (vs. 13.6% YoY) from overstocking and brand rationalization; Powersports GPU declined 7.9% YoY to $4,955 .
Fixed operations and F&I down YoY on lower volumes: F&I revenue was $24.3M (-17.1% YoY) and parts/services/accessories revenue was $49.2M (-17.6% YoY), weighing on gross profit dollars .

Financial Results

Metric	Q3 2023	Q1 2024	Q2 2024	Q3 2024	Consensus
Revenue ($M)	$338.1	$307.8	$336.8	$295.0	N/A (S&P Global consensus unavailable)
Gross Profit ($M)	$92.0	$82.6	$89.9	$74.3	—
Gross Margin (%)	27.2% (92.0/338.1)	26.8% (82.6/307.8)	26.7% (89.9/336.8)	25.2% (74.3/295.0)	—
SG&A ($M)	$85.0	$73.9	$71.4	$65.9	—
Adjusted SG&A ($M)	$82.1	$—	$70.8	$64.3	—
Operating Income ($M)	$(0.2)	$5.2	$15.4	$5.3	—
Net Loss ($M)	$(16.5)	$(10.3)	$(0.7)	$(11.2)	—
Diluted EPS ($)	$(0.99)	$(0.29)	$(0.02)	$(0.32)	N/A

Notes: The company does not provide formal quarterly revenue/EPS guidance; S&P Global consensus data was unavailable at the time of analysis (API limit), so no estimate comparison is shown .

Segment breakdown (Q3 2024 vs Q3 2023):

Segment / Metric	Q3 2023	Q3 2024
Powersports Revenue ($M)	$324.1	$279.9
- New ($M)	$159.6	$147.1
- Pre-owned ($M)	$75.5	$59.3
- Finance & Insurance, net ($M)	$29.3	$24.3
- Parts, Services & Accessories ($M)	$59.7	$49.2
Powersports Gross Profit ($M)	$88.6	$70.8
- GPU ($ per retail unit)	$5,380	$4,955
Vehicle Transportation Revenue ($M)	$14.0	$15.1
Vehicle Transportation Gross Profit ($M)	$3.4	$3.5

KPIs and Balance Sheet/Liquidity:

KPI	Q1 2024	Q2 2024	Q3 2024
Retail Units – New	10,503	12,004	9,740
Retail Units – Pre-owned	5,005	4,796	4,549
Total Retail Units	15,508	16,800	14,289
Powersports GPU ($)	$5,099	$5,167	$4,955
Vehicles Transported (#)	24,637	23,334	25,084
Cash (Unrestricted) ($M)	$50.3	$58.1	$50.1
Vehicle Floor Plan Notes Payable ($M)	$300.2	$295.4	$242.5
Long-term Debt incl. current ($M)	$245.2	$247.7	$249.0
Non-Vehicle Net Debt ($M)	$203.4	$209.1	$217.0
Liquidity (Unrestricted Cash + Floorplan Availability) ($M)	$212.7	$201.2	$188.2

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
New Inventory Reduction Target	FY2024	Reduce by ~$60M (Q1/Q2 commentary)	Reduce by ~$50M (Q3 commentary)	Lowered
Adjusted SG&A as % of Gross Profit	LT (Vision 2026)	Target 75%	Target 75%; expect improvement in 2025 given actions	Maintained (timing reiterated)
Financial Guidance (Revenue/EPS)	2H24/2025	Not guiding	Not guiding	Maintained
Term Loan Covenants	2024–2026	Temporary relief through 12/31/24	Amended; relaxes certain covenants through 6/30/26	Extended flexibility
Capital Plan / Converts	Jan 1, 2025	—	$30M commitments incl. $10M backstopped rights offering; plan supports convert repayment by 1/1/25	New disclosure
Interest Rate Sensitivity	2025	—	75 bps cumulative Fed cuts expected to save ~$3M cash interest in 2025	New disclosure

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2)	Current Period (Q3)	Trend
Inventory normalization	Q1: Targeted ~$60M reduction; pre-owned light, new heavy . Q2: Still heavy; OEMs slow to react; confident in year-end reduction .	Reduced inventory by $53.9M in Q3; confident on year-end target; OEM support emphasized .	Improving execution
Gross margin dynamics	Q1: New pressured; pre-owned stronger margins via Cash Offer . Q2: New margins compressed by overstocking and brand exits .	Margin compression continued due to inventory rightsizing, positioning for improvement ahead .	Near-term pressure, setup for recovery
Cost optimization	Q1: SG&A down; continuous improvement mindset . Q2: New actions to deliver $30M annualized savings .	$30M run-rate savings fully executed; more opportunities identified .	Positive
Capital structure/refinancing	Q2: Covenant relief through 12/31/24; exploring options .	$30M commitments, rights offering, term loan amendment to 6/30/26; bank engaged for refinancing; plan to repay converts 1/1/25 .	De-risking in progress
F&I and fixed ops	Q1–Q2: Resilient GPUs but volume drag; P&A softness .	F&I $24.3M (-17.1% YoY); PSA $49.2M (-17.6% YoY); management expects improvement in 2025 with better mix/volume .	Stabilizing later
Pre-owned strategy	Q1: Cash Offer margins strong; pre-owned center pilot planned . Q2: Houston pre-owned store opened .	Comfortable days’ supply; platform performing; aiming to scale prudently .	Strategic focus sustained
Financing partnership/tech	—	Octane partnership to launch RideNow Finance (private-label financing) across 56 stores .	Enhancing lead gen/financing funnel

Management Commentary

“Our SG&A as a percent of gross profit dollars has decreased, which evidences the increasing productivity of our operations…we expect to drive continuous improvements in further cost optimization” – CEO Mike Kennedy .
“We have fully executed on our $30 million of annualized cost savings… and we see additional opportunities…to drive more cost out of the business” – CEO .
“Gross margins for major unit sales were challenged on new and preowned… driven by overstocking in the industry, compounded by our decision to exit noncore product lines and over assorted brands not aligned with Vision 2026” – CFO Tiffany Kice .
“We signed a credit agreement amendment… which relaxes certain covenants… through June 30, 2026… we have received incremental capital commitments for $30 million…” – CFO .
“We believe the 75 bps of cumulative rate reductions… will help us save approximately $3 million in cash interest expense in 2025” – CEO .

Q&A Highlights

Capital commitments structure: $10M fully backstopped rights offering launching before Dec 1; $4M sale-leaseback; $16M floorplan facility from two large shareholders .
Octane partnership economics: white-label “RideNow Finance” to roll out across all outlets, strengthening customer experience and marketing; details evolving .
Pre-owned acquisition and inventory posture: Cash Offer remains competitive advantage; comfortable days’ supply; pre-owned performance slightly better than Q2 .
SG&A/GP path to 75%: Improvement expected from both higher GP dollars and further cost optimization .
Inventory target: Confident on year-end new inventory reduction target; OEM partners “incredibly productive,” but no specificity until year-end .

Estimates Context

Wall Street consensus (S&P Global) for Q3 2024 EPS and revenue was unavailable at the time of analysis due to data access limits; therefore, we cannot quantify beats/misses vs. consensus. We will update when S&P Global data is accessible.
Absent consensus, directional implications: management cited pressured new/pre-owned margins from inventory correction and lower F&I/fixed ops on volumes, suggesting near-term estimate risk to margin lines; however, completed cost actions and inventory normalization set up 2025 for SG&A/GP improvement and potential interest expense tailwinds (if rates remain lower) .

Key Takeaways for Investors

Balance sheet de-risking underway: $30M capital commitments, term loan amendment to 2026, and a plan to repay converts by 1/1/25 reduce near-term solvency risk; successful execution and refinancing clarity are tangible catalysts .
Inventory normalization is working: $53.9M inventory reduction and OEM support should alleviate front-end gross margin pressure over coming quarters; watch for GPU recovery into 2025 .
Cost actions are real: $30M annualized savings fully executed with more opportunities, supporting SG&A/GP progress toward a 75% target in Vision 2026 .
Mix and volume headwinds: F&I and fixed ops declined on volume; stabilization depends on unit recovery (particularly pre-owned) and less promotional pressure; monitor seasonal Q4/Q1 dynamics and pre-owned throughput .
Interest expense leverage: If rates remain lower, ~$3M 2025 cash interest savings could augment FCF; ongoing debt refinancing is a key swing factor .
Strategic initiatives: RideNow Finance with Octane could enhance conversion and lead quality; scaling pre-owned format prudently could add high-margin growth avenues .
Near-term setup: Q4 likely remains margin- and volume-challenged, but inventory and cost work provide a cleaner 2025 base; trading skew likely tied to capital plan execution milestones and early signs of margin stabilization .

References:

Q3 2024 8-K Press Release: .
Q3 2024 Earnings Call Transcript: .
Q2 2024 Press Release and 8-K: .
Q1 2024 8-K and Transcript: .
Other press releases: Octane x RideNow (RideNow Finance) ; Q3 earnings schedule .

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