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Good day and welcome to the RumbleOn, Inc. Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Elliot Wagner, Vice President of Finance. Please go ahead.

Thank you, operator. Good morning everyone and thank you for joining us on this conference call to discuss RumbleOn's third quarter 2024 financial results. Joining me on the call today are Mike Kennedy, RumbleOn's Chief Executive Officer; and Tiffany Kice, RumbleOn's Chief Financial Officer. Our Q3 results are detailed in the press release we issued this morning and supplemental information will be available in our third quarter 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 Mike Kennedy, RumbleOn's CEO. Mike?

Thanks Elliott. Good morning everyone and thank you for joining us for RumbleOn's third quarter earnings call. As we walk you through the details of our third quarter results and key work streams within the team, you will see the entire organization has been fully engaged and continue to reshape the company for long-term success. I'm excited to share our key focus areas with all of you today, and I'm enthusiastic about our future. We've engaged an investment bank to explore a refinancing of the company's debt and continue to get clarity on a viable path to deleverage our balance sheet and lower our cost of capital. We believe the $30 million of incremental capital commitments from our three largest shareholders announced this morning, which includes a commitment for a $10 million fully backstop equity rates offering will enable full repayment of the convertible notes as they come due on January 1st, 2025, and help position us for successful refinancing. This incremental financial support from our largest shareholders shows a full team's alignment with our objectives. In the meantime, we continue to gain traction on our operational strategy of running the best-performing Powersports dealerships in America and feel great with what the future has in store for us. From an operations perspective, I'm incredibly proud of the RumbleOn team's performance in the third quarter. In our Powersports Group, while the quarter's landscape became incrementally more challenging from start to finish, we made significant improvements and progress in the business. Our automotive transport business, Wholesale Express, was able to deliver growth across the board on units delivered, revenue generated and gross profit earned. Before turning the call over to Tiffany Kice, I'll walk you through a few of those highlights, specifically around our inventories, cost optimization initiatives, M&A strategy, and cash flow from operations. Our core strategy revolves around leveraging our national scale to run the best-performing dealerships in America, supported by an aligned and efficient corporate office. We continue to focus on this goal and as a result, the team's efforts have consistently delivered positive free cash flow during the first nine months of 2024. Although we remain laser-focused on achieving our Vision 2026 goals, which we outlined in March. We recognize that industry growth trends and the M&A opportunity set may influence the timing of reaching our goals. The current macro environment remains difficult, but we are proud of the gains we have made to date and continue to build positive momentum. We set a goal to reduce new inventories by $50 million for the full year 2024. As you review the balance sheet, you'll see a 53.8% reduction in total inventory as of September as compared to the prior year. While that number represents our total inventories, which includes new vehicles, preowned vehicles, parts and accessories, and apparel, it gives you a clear indication that we are headed in the right direction. As we strive to right-size our inventories during the third quarter, we experienced margin compression. As a result, we're now positioning margins to improve in the business going forward. Our OEM partners have been constructive in helping us address the inventory overhang, which has further accelerated our progress. Although there's still more work to be done in optimizing our inventory levels and mix, I'd like to congratulate our team for making significant progress in this regard, and I'm confident we are on track to meet our year-end new inventory reduction target. I'm also pleased to share that we have fully executed on our $30 million of annualized cost savings announced on our Q2 earnings call. Congratulations to the team for proving our ability to move quickly and be agile in the current environment. As we have mentioned on prior calls, we take a continuous improvement approach to managing the business, and we see additional opportunities that we are addressing to both strengthen the team and drive more cost out of the business at the same time. Some of those opportunities come from our traction of our strategy of leveraging our scale to be the best in the industry and other aspects come from our alignment and clarity on what is most important to drive the business. A key measure for us in our cost optimization work is adjusted SG&A as a percent of gross profit dollars. As you see in the earnings release, adjusted SG&A as a percent of gross profit for the quarter was 86% versus 89% during the same period last year. From a year-to-date perspective, our adjusted SG&A as a percentage of GP was 84% versus 87% a year ago. These metrics improved even in the face of gross profit declines of 19% from Q3 2023 to Q3 2024, and 15% from a year-to-date to September 2023 to-date September 2024. We would expect this KPI to improve even further in 2025 based on the actions executed and further cost optimization actions planned, which will set us up for a long-term target of 75% of SG&A as a percent of gross profit. Shifting gears, I want to provide an update on our M&A strategy and highlight a recent expansion in the Northeast. In August, we acquired Harley-Davidson viewership in West Bridgewater, Massachusetts, now named Revolution Road Harley-Davidson. This expansion showcase the team's ability to grow our network and our OEMs commitment to aligning with us. We are poised to continue growth via acquisitions and greenfield opportunities as they arise. We remain focused on our acquisition pipeline activity and are encouraged by the number of opportunities. That being said, we recognize the need for discipline in the current environment. We will be selective and only deploy capital where it makes financial sense and will be accretive to our per share value. Lastly, we're pleased to see the Federal Reserve interest rate reductions of 50 basis points on September 18th and a 25 basis point cut on November 7th. The 75 basis points of cumulative rate reductions over the last few months will help us save approximately $3 million in cash interest expense in 2025, helping to improve our financial metrics and free cash flow. We are managing through the execution of our turnaround, the industry transition of a COVID and the broader macro challenges, and I'm both encouraged and optimistic about the progress we are making to improve the core operations of the company. We're focusing on what we can control to establish a strong foundation for the future, positioning ourselves to capitalize on a recovery in the industry. We are moving aggressively to improve the long-term earnings potential of the business and optimizing efficiencies and costs in an effort to drive free cash flow. We believe there is significant competitive advantage with our cash offer platform and being the largest power sports dealership network in North America, and we're confident in our long-term plan Vision 2026 strategy. And with that said, I'd like to turn the call over to Tiffany to walk us through this quarter's financial performance.

Thank you, Mike and good morning everyone. I will start by reviewing our financial results for the third quarter of 2024, followed by an overview of our balance sheet. We generated revenue of $295 million and adjusted EBITDA of $6.8 million in the third quarter of 2024. Revenue was down 12.7% year-over-year and adjusted EBITDA was down 26.1% year-over-year. Total company adjusted SG&A expenses was $64.3 million or 86.5% of gross profit compared to the same quarter last year of $82.1 million or 89.2% of gross profit. As a reminder, we are targeting adjusted SG&A to be 75% of gross profit within our Vision 2026 plan. Adjusted SG&A expenses were 21.7% lower than the same quarter last year. Moving on to our segmented performance. The powersports dealership group retailing approximately 14,300 total powersports major units during the quarter, which is down 13.2% from the same quarter last year. Total new powersports major unit sales were approximately 9,700, down 10.2% to the same quarter last year, while pre-owned unit sales totaled approximately 4,500, down 19% Our new inventory levels have been heavy throughout the year. And as Mike mentioned earlier, we have made great progress in working down the inventory levels and believe our new inventory reduction target is in sight for the end of the year. Our team is working closely with our OEM partners to align new inventory levels to the current market environment. We have made significant progress during Q3 2024 and expect to meet our reduction goals in new inventories. Gross margins for major unit sales were challenged on new and preowned inventory in the third quarter. New unit gross margins for the quarter were 11.3% compared to 13.8% 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 not aligned with Vision 2026. Pre-owned gross margins of 12.1% for the quarter compared to 13.6% in the same quarter last year. We continue to leverage right now's cash offer, our purchasing scale and our industry relationships to improve the preowned business. Our parts, service, and accessories or fixed operations business delivered $49.2 million of revenue and $22.7 million of gross profit or GPU of $1,589, down $49 or 3%. The decrease comes primarily from accessories and service. Our financing and insurance teams delivered $24.3 million in revenue or GPU of $1,701, down 4.3% year-over-year. The decrease was driven by a decline in unit volume. So all in, revenue from our powersports dealership group was $279.9 million, down 13.6% for the same quarter last year. The decrease in revenue is attributable to lower major unit volume. Total GPU for the group was $4,955, down $425 or 7.9% to the same quarter last year and in line with our expectations as we continue to manage the macro environment. Turning now to our Asset Light Vehicle Transportation Services operating group. For the third quarter, Wholesale Express revenue was up 7.9% as compared to the same quarter in the prior year, while gross profit increased 2.9% to $3.5 million. The increase was driven by an increase in number of vehicles transported. Turning to our balance sheet. We ended the quarter with $66.7 million in total cash, inclusive of restricted cash and non-vehicle net debt was $217 million. Availability under our short-term revolving floor plan credit facilities totaled approximately $121.5 million as of September 30th. Total available liquidity, defined as unrestricted cash plus availability under floor plan credit facilities on September 30 totaled $188.2 million. Cash inflows from operating activities was $68.6 million for the nine months ended September 30 as compared to cash outflows of $8.5 million for the same period in 2023. This improvement is a direct result of our focus on efficiencies and cost optimization. I'm also happy to report that we signed a credit agreement amendment with our existing term loan lender, which relax certain covenants for the next quarter through June 30, 2026, providing further financial flexibility. In connection with our credit agreement amendment, we have received incremental capital cost commitments for $30 million from our three largest shareholders, of which $10 million is in the form of a back-stopped common equity rights offering. This new capital commitment reaffirms our three largest shareholder support of the business and strengthens our cash position as we focus on repaying the convertible notes coming due on January 1st, 2025, while maintaining debt covenant compliance. 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 part of this process, we recently engaged an investment bank to explore a refinancing of the company's debt. With that, we'd like to begin the question-and-answer session. I'll turn the call back over to the operator now to open the lines.

Yes, thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question comes from Craig Kennison with Baird.

Hey good morning. Thanks for taking my question. Just following up on the capital infusion of $30 million. Can you give us a little more information about the terms of the $20 million and then the $10 million backstopped portion?

Yes. Sure, Craig. Let me start off. Thanks for the question. By the way, those details will be filed in the Q later on this afternoon and the 8-K this morning, sorry. But do you want to just talk a little bit about it, Tiffany?

Sure. So, we filed an 8-K this morning that we'll describe the $30 million, $10 million of it is coming from a fully backstopped rights offering from our three largest shareholders, and we will execute on that prior to December 1st, so we'll launch it prior to December 1st. The remaining $20 million, $4 million of that comes from a sale leaseback of one of our properties in Florida and then the remaining $16 million of that is coming from a floor plan facility that's being provided by two of our largest shareholders.

Okay. Thank you for that. And then I wanted to ask about a press release on the partnership with Octane and what you can share regarding the economics of that relationship?

Yes. Craig, thanks for the follow question. Yes, we announced the relationship with Octane. It's a preliminary relationship. We're doing a lot of exciting things for our customers and for our stores in terms of offering services. It's a white label program that's going to be rolled out across all of our right now outlets. And it's just a really good partnership. We've been doing a lot of business with Octane over the last few years. They're a great partner of ours and just strengthen the partnership and open up opportunities for down the road. .

Okay. Hey, thank you.

Thanks Craig.

Thank you. And the next question comes from Eric Wold with B. Riley Securities.

Thanks. Good morning. Appreciate taking my questions. A couple of questions. I guess, I know you talked about you're working a lot with your OEM partners to reduce the new vehicle inventories with the goal of $50 million reduction by year-end. Can you maybe talk a little bit more about kind of your actions around used vehicles. I guess how -- just one, how aggressive -- maybe aggressive not the right word, but how aggressive are you being with the cash offer tool and willingness to take on used vehicle inventory? And then maybe what are you seeing from the consumers in terms of the velocity of vehicles being offered to you or kind of looking for an offer versus maybe what you saw six, 12 months ago?

Yes. Sure Eric. Thank you. Appreciate the question. I can't really speak to your last point about what's changed over the last six months or so. Cash offer platform is a great tool for us. We think it's a competitive advantage. We're the largest purchaser of preowned products in the country by a long shot. And of course, as a reminder, right, we totally reengineered that process, and we're really pleased with the results. We entered the year with tight inventories from a days' supply perspective. We announced that early on in the year. We've been chipping away at that as we've gone through the year. And I would say we're comfortable with our days' supply of preowned today. And you can see the performance in the quarter was slightly better than Q2. And we're optimistic about that platform of incoming product and our ability to turn it at our stores. And then also leverage our national scale of dealerships where we also acquire a lot of product, own products direct from the customers, whether it's in the service lane, or trade-ins or just locally. So, all-in-all, it's a phenomenal opportunity for us. We love the preowned business. It's a great avenue for us, and the margins have been pretty good this year, too. So, we're pleased with it overall.

Thank you. And then a follow-up question. I know you talked a little bit about the year-over-year changes in F&I and parts service accessories. But just looking the percentage of those revenues as a percentage of vehicle revenues was down kind of meaningfully year-over-year and kind of off trend from kind of what it's been in recent years. Anything to call out there? Was that a decision internally or the changes you're making, was that due to mix of product? Was that a shift in just consumer demand trying to understand kind of what drove those declines relative to unit sales year-over-year?

Yes. No, it's a great question, Eric. I appreciate your paying attention because fixed operations are really, really important to our business, and we like that business because it's great customer engagement and relationship and then, of course, the margins are great as well. I think we're experiencing two things in that area. When your preowned volume drops, tends to sort of pull on that fixed operations because we're not pushing the volume of pre-owned motorcycles through the service department. So there's a little bit of that we're digesting. And then I think just think overall coming off of the extraordinary numbers from COVID and all those new customers that enter the market. I think -- I think that gets better as we turn to 2025. And our strategy of kind of focusing on in those areas has improved over the last quarter. So, I would expect that to improve going forward.

Helpful. Thank you.

Thank you. And your next question comes from Mike Baker with D.A. Davidson. Please go ahead Mr. Baker, your line is live.

Okay, sorry. To get to the 75% ratio of SG&A to gross margin, is that more likely to come from gross profit dollars getting better? Or is there still significant cost savings that you're working on?

Yes. Great question, Mike. The answer is a little bit of both, right? That's -- we expect gross margin and gross profit dollars to improve going forward. And we also see opportunities to strengthen the team and continue to drive cost optimization out of the business. So, it's -- I don't mean to kind of say it's both, but it is both, and we expect to get improvement on the GP side as well as the SG&A side going forward.

Well, and to follow up on that, that $30 million that you've already taken out, I guess what you're saying is there's more to go, but any way to size that relative to what you've already been able to accomplish?

Yes. Certainly not at that $30 million level. And again, as I've said from the beginning, right, my goal with the culture of this company and the senior leadership team is to develop a continuous improvement mindset. And we're going to wake up every day no matter how good yesterday was, we're going to have a mindset that we can do a little bit better tomorrow. And as our strategy takes traction, we're seeing opportunities whether it's on the marketing side of things or our cost per click, our cost per lead is coming down on the productivity side or effectiveness of closing those leads is going up. driving test rides within our stores is improving. And so we just think there's opportunities in a lot of different areas of the business to get better as well as take cost out and then as the business improves, the gross profit dollars will increase, especially coming off this inventory reduction, which I'm really proud of the team and the progress they made, but that certainly put some compressed pressure on gross margins on new categories.

Yes. Yes, makes sense. And if I could follow-up one more on that inventory question and sorry if I missed it. The -- how -- how much -- where are you relative to that $50 million goal. We know where you are, obviously, in total inventories, but I guess where relative to the -- just on the new side? Thanks.

Yes. No, good question. Thanks for asking. The team has done great work in this area, and I'll be totally transparent. At the end of Q2, I was a little nervous, and I was -- had some pretty heady conversations with my team around our progress and the team completely stepped up in Q3 and delivered. And by the way, I mentioned in my remarks, I want to mention again, our OEM partners have played a big role in that. They've been incredibly productive in helping us reset the right profiles and make sure our days' supply is at a healthy level. But the team at the end of the day, really delivered and moved out a lot of that product in Q3. So, I feel very confident that we're going to achieve our $50 million target which was set out at the beginning of the year to achieve by the end of the year and proud of the team, what they've been deliver in that regard.

Can you quantify where you are now or we're not breaking that out?

Yes, we're not bringing that out at this point. You'll see it in the year-end numbers, but yes, we just don't share that level of specificity right now.

Okay. Thank you.

You bet. Thank you.

Thank you. And this concludes our question-and-answer session. I would like to return the conference back over to Michael Kennedy for any closing comments.

Okay. Thank you, everyone. I'd like to close out, I just mentioned two important things. First, I want to take a moment to express my appreciation and gratitude to the entire team throughout the company. You continue to impress me by keeping our riders as our top priority and taking on the current macro environment with conviction and determination. Thank you very much, everyone. Lastly, I'd like to emphasize that we are committed to Vision 2026 and maximizing our long-term per share value while confidence builds on delivering our key targets around annual revenue in excess of $1.7 billion, annual adjusted EBITDA of greater than $150 million, and annual adjusted free cash flows of $90 million or more. And regardless of timing, we as a management team and the company are laser-focused on achieving Vision 2026, and we'll make decisions in the best interest of long-term per share value creation at every turn. Thank you very much for your time today and your continued interest in RumbleOn. That concludes our call.