Q4 2023 Earnings Summary
- RumbleOn plans to reduce new inventory by $60 million throughout the year, which is expected to lower floorplan interest expense and increase free cash flow, positioning the company for improved financial performance in the following year.
- The company is focusing on strategic, accretive acquisitions as part of its Vision 2026 plan, potentially taking advantage of more favorable valuations due to market conditions, which could drive growth and enhance shareholder value.
- RumbleOn is actively working on refinancing its debt to reduce interest expenses and improve financial flexibility, with the aim to lower interest costs and enhance cash flow, indicating prudent financial management.
- RumbleOn has withdrawn its annual guidance for 2024, creating uncertainty about its near-term financial performance. The company stated it will no longer provide annual guidance but will focus on its Vision 2026 plan instead. This shift may concern investors who rely on short-term forecasts to assess company performance.
- The company carries a high level of debt with significant interest expenses, impacting its profitability and cash flow. RumbleOn reported non-floorplan net debt of $218 million with an interest rate close to 14%, resulting in an annual interest expense of approximately $38 million to $40 million. The company is in the early stages of refinancing, and there is no certainty that it will achieve more favorable terms.
- RumbleOn is overstocked with inventory, and the planned reduction of $60 million in new inventory won't be realized until the end of the year. This excess inventory may pressure margins and tie up capital throughout 2024, potentially affecting cash flow and profitability in the interim.
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Debt Refinancing
Q: What are your plans for debt restructuring?
A: The company aims to refinance its high-interest debt this year to gain flexibility and reduce interest costs. They currently have $218 million of net non-floorplan debt and $225 million owed to Oaktree at nearly 14% interest, resulting in $38–$40 million of interest expense this year. They are in the early stages of refinancing, noting that credit markets are opening up and better 2024 numbers will provide more options. -
Inventory Optimization
Q: How are you addressing excess inventory levels?
A: The company plans to reduce new inventory by $60 million throughout the year by centralizing ordering and managing inventory more diligently. This reduction, expected to be completed by year-end, will position them well for the following year. Approximately two-thirds of the reduction comes from existing lines and one-third from lines they are exiting. -
Inventory Mix
Q: What's the mix of current vs. noncurrent inventory?
A: Aged inventory (model year 2022 and earlier) makes up less than 3% of total inventory. The focus is on clearing out model year 2023 products, with OEM support, during the strong upcoming selling season. The timing is favorable as demand is expected to be strong over the next four to five months. -
Acquisition Plans
Q: How aggressive will you be with acquisitions?
A: The company intends to pursue acquisitions strategically, ensuring they are accretive to the business. They note that prices are coming down post-COVID, presenting potential opportunities, but emphasize they won't acquire stores just to grow—they aim to be smart and strategic. -
Interest Rate Outlook
Q: What's the impact of potential rate cuts?
A: The company's 2024 outlook doesn't assume any rate cuts. However, they believe rate cuts would be beneficial by reducing debt and floor plan interest expenses and potentially boosting consumer demand among customers and riders. -
Current Quarter Trends
Q: Any updates on retail trends this quarter?
A: The company declined to provide mid-quarter updates but noted that March typically ramps up significantly compared to January and February. They don't find it productive to discuss specifics mid-quarter.
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