Yahoo Finance RumbleON Inc (RMBL) Q1 2024 Earnings Call Transcript Highlights: Strategic Adjustments Amidst ...
Total Revenue: $293.5 million, down 8.2% from the previous year.
Gross Profit: $23.6 million from fixed operations.
Net Income: Not specifically mentioned, focus on EBITDA instead.
EBITDA: $17.7 million for the powersports dealership group, nearly flat from $17.8 million last year; total company EBITDA increased to $9 million from $4 million.
Free Cash Flow: Positive, with $3 million provided by operating activities.
New Unit Sales: 10,503 units, up 0.6% year-over-year.
Pre-Owned Unit Sales: 5,005 units, down 13.4% year-over-year.
New Unit Gross Margin: 12.4%, down from 15.2% last year.
Pre-Owned Gross Margin: 17.5%, up from 11% last year.
SG&A Expenses: $73.9 million, down 14.3% from $86.3 million last year.
Total Cash: $63.4 million at the end of the quarter.
Non-Vehicle Net Debt: Approximately $203 million.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Pre-owned gross margins improved significantly to 17.5% from 11% in the previous year, demonstrating effective cost management and strategic inventory acquisition.
Total company EBITDA increased from $4 million last year to $9 million this year in the first quarter, reflecting strong cost control measures.
SG&A expenses were reduced by 14.3% compared to the same quarter last year, aligning with the company's expectations and contributing to overall profitability.
The company is on track to open its first pre-owned center by July, which is expected to enhance its market presence and capitalize on its cash offer technology.
RumbleOn Inc maintained a stable EBITDA of $17.7 million for the powersports dealership group despite an 8.2% decrease in revenue, indicating efficient operational management.
Negative Points
Total revenue from the powersports dealership group decreased by 8.2% compared to the same quarter last year, primarily due to lower pre-owned volume and a decrease in average selling price.
New unit sales saw a decline in gross margins from 15.2% to 12.4% year-over-year, affected by overstocking issues and strategic exits from non-core product lines.
The parts, service, and accessories segment experienced a revenue decline of 9.5%, mainly due to reduced sales in accessories and motor clothes.
Pre-owned unit sales decreased by 13.4%, reflecting challenges in inventory levels and market dynamics.
Despite efforts to reduce inventory by $60 million, the company faced challenges with heavy inventory levels from prior periods, impacting the overall financial performance.
Q & A Highlights
Q: Can you discuss the inventory levels compared to typical first quarter builds and confirm if you are on track to reduce inventory by $60 million this year? A: Michael Kennedy, CEO of RumbleOn Inc, explained that inventory levels were unusually high at the beginning of the quarter due to momentum from previous periods. However, inventory levels decreased towards the end of the quarter, which is atypical for Q1. Kennedy confirmed that the project to reduce inventory by $60 million is progressing well, with strong cooperation from manufacturing partners.
Q: What are the plans for the new stand-alone pre-owned retail center? A: Michael Kennedy, CEO, shared that the new pre-owned center is a pilot project located in a strong motorcycle market where RumbleOn is not currently present. The center will leverage RumbleOn's extensive pre-owned motorcycle acquisitions and will operate independently, focusing on local market impact without OEM brand leverage.
Q: Will the new pre-owned center act as a hub for acquiring vehicles for other dealerships? A: Blake Lawson, CFO, clarified that the new pre-owned center will not function as a distribution hub for other dealerships. It will focus on acquiring quality inventory through RumbleOn's cash offer tool and will operate autonomously, concentrating on local sales.
Q: Can you provide an update on debt repayment plans and potential refinancing? A: Blake Lawson, CFO, mentioned that there are no mandatory debt repayments required this year beyond scheduled principal payments. Any additional debt repayment would be voluntary, based on free cash flow. Michael Kennedy added that they are exploring all options for refinancing, which might be more feasible in early 2025 when prepayment penalties reduce.
Q: How is the spring selling season shaping up, especially with OEM incentives and promotional pressures? A: Michael Kennedy noted that promotional activity from OEMs is exceptionally high, which is helping to counterbalance challenges such as high inflation and interest rates. He expects these incentives to mitigate some of the difficulties faced during the spring season.
Q: What is driving the decline in pre-owned unit sales, and how are the gross profit units (GPUs) for pre-owned vehicles acquired through different methods? A: Michael Kennedy explained that the decline in pre-owned sales is due to a combination of factors, including an overstock of new inventory. He highlighted that GPUs from vehicles acquired through cash offers are comparable to those from trade-ins, indicating strong margins and effective inventory management.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
