Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RumbleON Inc (RMBL, Financial) delivered positive free cash flow during the first six months of 2024 and expects to continue this trend in the back half of the year.
- The company opened its first pre-owned center, Powersports of Houston, which is now fully operational and poised for growth.
- RumbleON Inc (RMBL) has implemented cost-saving measures expected to generate $15 million in savings in the back half of 2024 and $30 million annualized going forward.
- The company reported improved pre-owned gross margins of 17% for the quarter compared to 14.5% in the same quarter last year.
- RumbleON Inc (RMBL) has signed a credit agreement amendment with existing term loan lenders, providing further flexibility within its capital structure.
Negative Points
- Revenue was down 12% year-over-year, and adjusted EBITDA was down 19.8% year-over-year.
- Total new Powersports major unit sales were down 8.5% compared to the same quarter last year, while pre-owned unit sales were down 21.9%.
- Gross margins for new unit sales continue to be challenged, dropping to 12.2% from 15.4% in the same quarter last year.
- The company is dealing with inflated new major unit inventories and a high interest rate environment, which are impacting financial performance.
- RumbleON Inc (RMBL) had to make a reduction in force of approximately 10% as part of its cost optimization efforts.
Q & A Highlights
Q: Could you comment on the overall environment, sales trends, and inventory levels?
A: Michael Kennedy, CEO: The volume is down as expected due to a tough macro environment and high interest rates. New inventory levels are heavy, but we are making progress and expect to reduce new inventories by $60 million by year-end.
Q: What is the impact of the cost savings program?
A: Michael Kennedy, CEO: The $15 million savings in the back half of 2024 will annualize to $30 million. This is incremental to previous cost-cutting measures.
Q: How is the elevated new vehicle inventory affecting your ability to bring in more used vehicles?
A: Michael Kennedy, CEO: The high new inventory levels have pressured gross margins but have not significantly impacted our ability to acquire pre-owned units. We expect to align new inventory levels by year-end.
Q: What are the startup costs and financing methods for the new Houston pre-owned center?
A: Michael Kennedy, CEO: The capital outlay for the Houston project is minimal. Inventory is financed through normal channels, including floor plan financing.
Q: How would a reduction in interest rates impact your business?
A: Michael Kennedy, CEO: Lower interest rates would positively impact customer sentiment and showroom activity. Tiffany Kice, CFO: A 25 basis point reduction would save approximately $1 million annually, though the impact would not be immediate.
Q: Why are you confident in achieving Vision 2026 despite current challenges?
A: Michael Kennedy, CEO: We have opportunities to optimize costs, grow the pre-owned business, and pursue acquisitions. The team is aligned and excited about the strategy.
Q: What drove the sequential inventory levels from Q1 to Q2?
A: Michael Kennedy, CEO: Q2 typically absorbs a heavy inflow of seasonal products, particularly watercraft. We are focused on reducing new inventory levels by year-end.
Q: How did the CDK outage impact your reported results?
A: Michael Kennedy, CEO: The impact was minimal as our dealer management system is not connected to CDK. Manual workarounds were implemented for affected platforms.
Q: What is the outlook for top-line trends for the rest of the year?
A: Michael Kennedy, CEO: We are not providing specific guidance but expect similar challenges as in the first half due to the macro environment and inflated inventories.
Q: What product lines and brands are you exiting?
A: Michael Kennedy, CEO: We have exited most of the marine business and several niche products. We have also made micro decisions to exit certain brands in specific stores.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
