Q3 2024 Earnings Summary
- RumbleOn has fully executed on $30 million of annualized cost savings and continues to see opportunities for further cost optimization and efficiency improvements, which are expected to enhance profitability as gross profit dollars increase.
- The company is making significant progress in reducing new inventory levels, targeting a $50 million reduction by year-end, which is expected to improve margins and cash flow. Management is confident in achieving this goal with support from OEM partners.
- RumbleOn's preowned business, supported by its cash offer platform, is a competitive advantage with good margins and strong performance. The company is optimistic about this platform and its ability to leverage its national scale to acquire and sell preowned products.
- The company may have limited room for further cost reductions, as management indicated that future cost savings will not be at the same $30 million level achieved this year, potentially hindering profitability improvement.
- Declines in preowned vehicle volumes are negatively affecting higher-margin parts, service, and accessories revenues, which could pressure overall margins and profitability.
- The company's reliance on capital infusions from its largest shareholders, including a $10 million fully backstopped rights offering and $16 million floor plan facility from shareholders, suggests potential liquidity concerns and challenges accessing traditional financing, which may lead to shareholder dilution and financial strain.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Inventory reduction | FY 2024 | no prior guidance | $50 million reduction in new inventory | no prior guidance |
Interest expense savings | FY 2025 | no prior guidance | $3 million savings in cash interest expense | no prior guidance |
Annual revenue | Vision 2026 | no prior guidance | In excess of $1.7 billion | no prior guidance |
Annual adjusted EBITDA | Vision 2026 | no prior guidance | Greater than $150 million | no prior guidance |
Annual adjusted free cash flow | Vision 2026 | no prior guidance | $90 million or more | no prior guidance |
Adjusted SG&A as % of gross profit | Vision 2026 | no prior guidance | 75% | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Inventory reduction and management | • Q4 2023: Planned to reduce $60M of new inventory, acknowledged overstocking and aimed to clean up aged units. • Q1 2024: Reiterated goal to reduce inventories by $60M, focused on exiting non-core brands. | • Q3 2024: Reported 53.8% inventory reduction YOY, targeting $50M reduction for 2024 but facing margin compression. | Consistently mentioned with ongoing progress and challenges |
Cost savings initiatives and profitability focus | • Q4 2023: Executed $60M of annualized cost reductions, focused on SG&A control. • Q1 2024: Removed over $50M in annualized costs, SG&A down to 89.5% of gross profit. | • Q3 2024: $30M of annualized savings fully executed, aiming for 75% SG&A-to-gross-profit long term. | Recurring focus on improving efficiency |
Debt, interest expenses, and refinancing efforts | • Q4 2023: Targeted refinancing in 2024; net debt of $218M, high interest on non-floorplan debt. • Q1 2024: No mandatory payments due in 2024; exploring refinance as prepayment penalty drops. | • Q3 2024: Engaged an investment bank to refinance; secured $30M incremental capital to repay convertible notes; $217M non-vehicle net debt. | Continuously addressed with active refinancing pursuit |
Preowned business performance and margins | • Q4 2023: Saw lower preowned sales, took a $12.6M inventory adjustment, strategy to hold inventory for spring. • Q1 2024: Preowned units sold down 13.4%, margins rose to 17.5%, strong Cash Offer usage. | • Q3 2024: Preowned sales off 19% YOY, margins at 12.1% vs 13.6% prior, comfortable days supply. | Recurring segment with mixed results and margin pressures |
OEM promotional activity (previously significant, now less mentioned) | • Q1 2024: Extremely high promotional activity, including rebates and interest rate buydowns. • Q4 2023: Not specifically mentioned. | • Q3 2024: No specific mention. | Previously highlighted, now not discussed |
Strategic acquisitions and Vision 2026 plan | • Q4 2023: Emphasized accretive acquisitions and Vision 2026 (>$1.7B revenue, >$150M EBITDA, >$90M FCF). • Q1 2024: Discussed M&A opportunities, opening new stores, reaffirmed Vision 2026. | • Q3 2024: Reaffirmed M&A strategy through selective growth, purchased West Bridgewater HD, reiterated Vision 2026 profitability targets. | Consistent theme of disciplined expansion to meet long-term goals |
Withdrawal of annual guidance and emphasis on long-term objectives | • Q4 2023: Withdrew all 2024 guidance, shifted focus to Vision 2026. • Q1 2024: No mention of withdrawing guidance. | • Q3 2024: Not mentioned. | Mentioned in Q4 2023 only, absent in later periods |
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Capital Infusion Details
Q: Can you provide more details on the $30 million capital infusion?
A: Management explained that the $30 million infusion comprises $10 million from a fully backstopped rights offering by their three largest shareholders, to be launched before December 1. The remaining $20 million includes $4 million from a sale-leaseback of a Florida property and $16 million from a floor plan facility provided by two major shareholders. -
Inventory Reduction Progress
Q: Where are you relative to the $50 million inventory reduction goal?
A: Management is confident in achieving the $50 million inventory reduction target by year-end. Significant progress was made in Q3 with the help of OEM partners in resetting profiles and improving days supply. They declined to provide specific figures but emphasized the team's strong performance. -
SG&A to Gross Margin Improvement
Q: Will SG&A to gross margin improve through higher gross profit or cost savings?
A: Improvement is expected from both higher gross margins and continued cost optimization. Management anticipates increased gross profit dollars and sees opportunities to reduce costs across the business. -
Used Vehicle Inventory Strategy
Q: How aggressive are you in acquiring used vehicle inventory?
A: The company views its cash offer platform as a competitive advantage and is comfortable with the current days supply of preowned inventory. They've reengineered their acquisition process and are optimistic about turning inventory through their national dealership network. Margins in the preowned business have been good this year. -
F&I and Parts Revenue Decline
Q: What drove the decline in F&I and parts revenue relative to vehicle sales?
A: The decline is attributed to reduced preowned volume impacting fixed operations and normalization after extraordinary COVID numbers. Management expects improvement as they enter 2025 and focus on these areas. -
Partnership with Octane
Q: What can you share about the economics of the Octane partnership?
A: The partnership with Octane is a preliminary but strong relationship, offering white-label services across outlets. Management considers Octane a great partner, opening opportunities for the future.
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