RDNW - NASDAQ

Greetings, and welcome to the RumbleOn, Inc. Second Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jerene Makia, Vice President of Finance. Thank you. Please go ahead.

Thank you, Chloe. Good afternoon, everyone, and thank you for joining us on this conference call to discuss RumbleOn's second quarter 2025 financial results. Joining me on the call today is Michael Quartieri, RumbleOn's Chairman, Chief Executive Officer and Interim Chief Financial Officer. Our Q2 results are detailed in the press release we issued this afternoon and supplemental information will be available in our 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 today. Now I'll turn the call over to Michael Quartieri, RumbleOn's CEO. Mike?

Good afternoon, and thank you for joining us for RumbleOn's Second Quarter 2025 Earnings Call. Before I take you through the Q2 results, I'd like to take a few minutes and update you on some key initiatives. Needless to say, it's been a busy 6 months since stepping into the role. The evolving landscape around tariffs continues to create volatility and uncertainty in the market coupled with optimism stemming from the recent tax reforms embedded in the Big Beautiful Bill. This creates risk and opportunities in our highly discretionary powersports business. Although new unit sales are coming in lower than last year, we are continuing to see robust demand in our pre-owned segment with strong margins as consumers shift to preowned products amidst tariffs and a tough purchasing environment for higher-priced new units. Regardless of the impact of tariffs, the current economic environment or the Big Beautiful Bill, we are focused on improving what we can control, approaching our business with fresh thinking, operational discipline and a renewed commitment to serving our customers. We are pleased with the actions we've taken to date, which have helped us achieve improved year-over-year adjusted EBITDA results despite the lower year-over-year sales volumes, a testament to the strong cost discipline we are instilling within our company. We are confident that we are taking the right actions today to position the company for success when the sales cycle returns positive again, and we can harness the true earnings power of this company. I've been in the seat for just about 6 months now and with each day that passes my conviction in our future success and value creation potential grows. Since our Q1 earnings call, we have continued to formulate and enact a tactical plan that's based on balance between near-term initiatives to improve financial performance and more structural changes to reset the strategic direction of the company and drive long-term value creation to our shareholders. The near-term initiatives of getting the right leadership in place, reevaluating the cost structure of the business, and reinstalling a disciplined approach to store performance management have progressed nicely to date with more work to do. By focusing on the highest and most impactful priorities in the near term, we are starting to show tangible benefits in our operating results as demonstrated in our year-over-year improvement in adjusted EBITDA despite the decline in new units and business volumes at Wholesale Express. Rest assured, these near-term initiatives are not short-lived or temporary in nature. They are the building blocks for long-term structural changes that will provide lasting benefits well into the future. To simplify our business, align corporate and store operations and reinforce a cultural shift aimed at returning to our roots as the leading operator and consolidator of this industry we are rebranding the company to RideNow Group Inc. Our legal name, RumbleOn Inc. will be legally changed to RideNow Group Inc. and our ticker symbol on NASDAQ will be changed from RMBL to RDNW each effective Wednesday, August 13. In addition, we are returning our corporate headquarters back to the original home of RideNow within our existing office space in our flagship store in Chandler, Arizona. It's important to call out to you and even more so, our team both in the field and in the support center we are one team fully focused on serving our customers and optimizing this business, bringing in leaders with multiunit retail and dealership experience coupled with our existing vastly experienced powersports team is a powerful combination that brings the best of both worlds together that will yield meaningful shareholder value. Lastly, we executed on amendment to our term loan agreement, which extended the maturity by 13 months to September 30, 2027. The extension gives us the runway needed for our business improvement initiatives to take hold and produce the tangible benefits in our operating results, thus putting us in a stronger position to execute a refinancing of our debt. Our team is aligned with clear goals, performance metrics and a culture of accountability. As I stated in my opening remarks, my conviction in our ability to execute and deliver improved results grows by the day. Looking forward, higher adjusted EBITDA and increased free cash flow, which we intend to deploy with a discipline of an owner-oriented company is the recipe for value creation that we are pushing towards. Now let me shift gears and walk everyone through the second quarter financial performance in detail, followed by a summary of our balance sheet. We generated approximately $300 million of revenue and adjusted EBITDA of $17.2 million in the second quarter of 2025. Adjusted EBITDA was up $1 million when compared to the same quarter last year despite revenue being down 11%, driven by lower new unit volume and the reduction in revenue from our vehicle transportation business. Total company adjusted SG&A expenses were $64.9 million or 77.4% of gross profit compared to the same quarter last year of $70.8 million and 78.8% of gross profit. Adjusted SG&A expenses were $5.9 million or 8.3% lower than the same quarter last year. Moving on to our segment performance. The Powersports group sold 17,117 total major units during the quarter, which is down only 590 units or 3.3% from the same quarter last year. Total new powersport major unit sales were 10,618 units, down 11.5% as compared to the same quarter last year, while pre-owned unit sales totaled 5,283 units, which is up 10.2%. Although revenue from major unit sales decreased by $16 million due to the lower unit volumes, gross profit dollars for major unit sales increased $700,000 as higher gross margin percentages offset volume declines. We saw new unit gross margins improved to 13.2% for the quarter compared to 12.3% for the same quarter last year. And pre-owned gross margins were 18.8% for the quarter compared to 17% in the same quarter last year. Our parts services and accessories or fixed operations business delivered $52.4 million of revenue and $24.9 million of gross profit in Q2 2025, which represents a 7.9% decline in revenue and a 5% decline in gross profit. These declines were attributable to the overall decline in unit sales during the quarter. Our gross profit per unit totaled $1,566, which is flat to prior year. Our financing and insurance teams delivered $27.2 million of gross profit, which represents an 8.4% decline compared to the previous year. This decline is also attributable to the decline in unit sales during the quarter. Gross profit per unit was $1,711, down $57 or 3.2%. All in, revenue from our Powersports dealership group was $298.6 million, down 7.2% compared to the same quarter last year, while gross profit was $83.7 million down only 3.6% with the primary driver being the lower major unit volume. This represents the lowest quarterly decline in revenue in the last year and the second lowest in the last 9 quarters showing that we are making progress, and as such, we believe the turn is near. Total gross profit per unit for the group was $5,264 up $97 or 1.9% to the same quarter last year, which is primarily attributable to the shift to pre-owned units as a higher percentage of overall unit sales. Turning now to our asset light vehicle transportation services group. As you will recall from the last quarter, we addressed the departures of the brokers within the Wholesale Express and expected the impact on our results for the remainder of 2025. For the second quarter, Wholesale Express revenue was $1.3 million, which is down $13.9 million or 91.4% as compared to the same quarter in the prior year, and gross profit decreased $2.9 million or 93.5% down to $200,000. Turning to our balance sheet. We ended the quarter with $59.8 million in total cash, inclusive of restricted cash and nonvehicle net debt of $185.1 million. Availability under our short-term revolving floor plan credit facilities totaled approximately $125.9 million as of June 30, 2025. Total available liquidity defined as total cash plus availability under the floor plan credit facilities, totaled $185.7 million as of June 30, 2025. Cash flow from operating activities was $4 million for the 6 months ended June 30, 2025, as compared to $29 million for the same period in 2024. As you may recall, the prior year cash flow from operations benefited from proceeds from the sale of our finance receivable portfolio. As mentioned previously, on August 10, 2025, we executed an amendment to our term loan credit agreement, which extended the maturity by 13 months to September 30, 2027. Extending this maturity was a critical step as we continue to actively evaluate different opportunities to lower our cost of capital and extend the debt maturity profile of our company. Under the terms of the amendment, we agreed to pay down $20 million on the term debt, which was funded with $10 million from the balance sheet and $10 million in proceeds from the issuance of a subordinated note to related parties. In addition, the company lowered its annual interest rate by 0.5%. And when combined with the $20 million paydown will result in a $3.4 million reduction in our annualized cash interest expense. The minimum liquidity requirement was also reduced from $30 million to $20 million for the quarters ended September 30 and December 31, 2025, with $2 million increases per quarter commencing March 31, 2026. For further details, we refer to our disclosures in the financial statements on Form 10-Q that was filed with the SEC this afternoon. With that, I'd like to begin the Q&A session, and I'll turn the call back over to the operator to open up the lines.

[Operator Instructions] We have a question from Eric Wold from Texas Capital Securities.

Just a couple of questions. I guess one, there's still some uncertainty kind of with the demand environment, given the tariffs, just kind of the macro uncertainty still out there. But maybe just give us your thoughts on the kind of the current kind of pricing environment for new and pre-owned vehicles. Do you feel like we've gotten to a point where prices per vehicles have started to stabilize if inventories have gotten down to an appropriate level in your view and we could start seeing prices either stabilize or potentially can move higher from here in the quarters ahead?

Yes. Look, I think from a -- taking a look at it from an industry-wide perspective, it feels like the industry as a whole has really kind of bottomed out, and we're starting to see that upward trajectory that you're referring to. When I take a look back at the first 6 months of the year, obviously, January and February, we saw was a real rough start to the year. That's right at the start of the time when you were hearing about tariffs. There was a lot of uncertainty, inflation was high given the transition from the old administration to the new administration. We did see a bit of recovery in March, and then we've seen strong demand throughout Q2 for the preowned product. As we look forward through the end of Q2 and as we've seen some for July, I think with the passage of the Big Beautiful Bill that gave a lot of the middle class certainty around what their tax situation was going to be as it came to no tax on tips, no tax on overtime. Motorcycles being qualified as autos for the interest deduction has started to give more consumers more confidence, and we're seeing that pick up not only in the continued strength of our pre-owned product, but we're also seeing an uplift in the new products as well. So it seems like we're more stabilized. It feels like we've bumped off the bottom, and we're starting to see a nice trajectory going forward.

Perfect. And then on the Wholesale Express side of the business, I know you previously talked about an expectation for some disruption then. Maybe update us kind of on where you are with kind of the rebuilding that sales force and the team behind that, when you think you can get back to kind of maybe not necessarily prior levels or maybe kind of a more realistic level of business there? And maybe what that segment may look like going forward, if it wouldn't look like it was before, if this is an opportunity to kind of maybe rebuild it in a different way than how it was run previously.

Yes, that's the exact approach that we're taking. It's almost like you've got -- you hit the reset button and now you're starting with the blank sheet of paper. So two aspects. One is a very relationship-driven business. So the ability to find brokers that can come in and go back after our previous customers has proved to be very difficult as -- as I said, it's a relationship business and people are very sticky with the brokers that they had and who they've done business with for years. So that aspect of it has taken a bit longer to find those right brokers that either, a, can bring a book of business with them or that can grow and develop a new set of customers in this environment. Beyond that, we're also exploring and doing some testing around moving into what I call the B2C side of the business where you have individuals who are looking to move vehicles because they're part of a relocation or they're moving across state lines. They don't want to drive their vehicle. And so that's opening up a new avenue of business for us, which we historically have never even tapped into. The historical business was all auction houses to dealerships, dealerships back to the auction houses, this going from a B2C perspective, obviously, it opens up a new opportunity for us. But again, we've started that, I would say, probably within the last month at best. And so I'm looking to see what that's going to play out for us over the remaining of the year before we make a final determination as to what the status is going forward with the Wholesale Express business in its entirety.