RumbleON, Inc. (NASDAQ:RMBL) Q3 2023 Earnings Call Transcript

RumbleON, Inc. (NASDAQ:RMBL) Q3 2023 Earnings Call Transcript November 7, 2023

RumbleON, Inc. misses on earnings expectations. Reported EPS is $-0.99 EPS, expectations were $-0.32.

Operator: Greetings, and welcome to the RumbleON Third Quarter 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. The question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Will Newell, Head of Investor Relations. Thank you. You may begin.

Will Newell: Thank you, operator. Good morning, ladies and gentlemen. Thank you for joining us on this conference call to discuss RumbleON’s third quarter 2023 financial results. Joining me on the call today are Mike Kennedy, RumbleON’s new Chief Executive Officer; Mark Tkach, RumbleON Board Observer and RideNow Founder; and Blake Lawson, RumbleON’s Chief Financial Officer. Our Q3 results are detailed in the press release we issued this morning and supplemental information is available in our third quarter Form 10-Q. Before we start, I would like to remind you 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, 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 will turn the call over to Mark.

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Mark Tkach: Thanks, Will, and good morning, everyone. Thank you for joining us for our third quarter 2023 earnings call. We’re excited to formally introduce Mike Kennedy to all of you as the new Chief Executive Officer. We’re pleased to have such a proven leader join RumbleON at such an important time in our history. Mike is a seasoned executive with a proven track record in the powersports industry. I’ve known Mike for many years, and I’m confident that with his expertise and successful background in the field, he is uniquely qualified to lead RumbleON’s transformation plan and enhance value for our shareholders. I want to thank the RumbleON team for their continued hard work and dedication throughout this transition as we make progress towards our goals.

In terms of my future role, I will continue to act as a consulting capacity through the term of my employment agreement. I will also be a Board observer and given my significant ownership interest in the company and my passion for the industry, I plan to stay very involved in the business going forward. And with that, I will turn it over to our new CEO, Mike Kennedy. Mike?

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Q&A Session

Mike Kennedy: Thanks, Mark, and welcome, everyone. I’ve been on board for a week as RumbleON’s CEO. It’s been a busy week, and there are already a couple of things that are clear in my mind. First, I’ve been very impressed with the passion of our team. As most of you know, there have been a lot of change in recent months here at RumbleON, and I’m convinced that the team is focused and is excited about what we can accomplish together. Second, I’m confident that we will deliver an efficient operation and deploy our capital smartly for the benefit of shareholders. In particular, once the rights offering is completed, in a little over 3 weeks, our balance sheet will be greatly strengthened, and we’ll be in a position to go on the offense acquiring dealerships and expanding our footprint.

I look forward to updating all of you on our progress going forward. For now, I’d like to provide some color on my background before turning it over to Mark to walk through the team’s progress towards the exciting future here at RumbleON. I love this industry, and I bring over 3 decades of experience at leading powersports companies. Most recently, I was CEO of Vance & Hines, a private equity-owned leading manufacturer of powersports performance products. I spent the bulk of my career at Harley-Davidson, serving in several capacities across different geographies and commercial aspects. By time at Harley-Davidson [indiscernible] as Vice President and Managing Director of the Americas where I managed a network of 800 dealers throughout North America and Brazil.

One of the aspects of this opportunity that really excites me is being close to the showroom. I’ve often said in my career that the action is in the showroom with our customers. And now I’ve never been closer to that excitement. I look forward to speaking with all of you in the coming weeks and months. Mark will now walk you through the company’s business update in more detail. Go ahead Mark.

Mark Tkach: Thanks, Mike. After an extensive search, we’re excited to entrust the leadership of RumbleON to Mike. We’re confident that he will manage our turnaround plan efficiently and effectively by instituting further cost-saving initiatives, repositioning our inventory management process, strengthening our balance sheet, and executing a more disciplined and strategic approach to acquisitions. We look forward to keeping you updated on our progress on these initiatives while Mike forms his vision for driving long-term shareholder value. I will now walk you through what we’ve done, what we’re doing now and what we plan to do going forward. First, during the quarter, we continued to make progress in our plan to right-size the cost structure, specifically in our regional management structure, optimizing positions that were overbuilt in anticipation of a much larger footprint.

We’re evaluating our options regarding unused or underused facilities in an effort to offset our real estate expenses. Further, we continue to identify incremental cost savings at our dealerships and distribution centers. As you know, we have implemented $30 million in annualized cost reductions and have identified another $12 million, totaling annualized cost savings of $42 million, with the effect of these measures benefiting 2024. We believe we can further reduce expenses, as Blake will describe in more detail. I think expenses out of an organization is not always immediately visible, and often there’s a tail, it can lag for a few months. Second, we continue to improve our inventory management. We have implemented a stringent buy sell process at the store level that will continue to self-correct our used inventory levels and at the same time, allow those inventories to be increased and decreased more efficiently, adjusting for our seasonal network meetings.

Manufacturers of our new products are assisting us as well through increased rebates and incentives, while also easing some carrying costs like free flooring programs. We will take advantage of these programs and enhance them through increased digital strategy, on-site events, stronger staff incentives and the movement of excess products into higher-performing consumer markets. We will see some margin compression on the noncurrent products, but with higher 2024 product GPUs being delivered in the quarter that will help counter a portion of that compression. Our team is committed to clearing out the 2023 products and feel confident these actions are setting us up for a strong 2024 and forward. Additionally, we have overhauled our cash offer tool, effectively reducing marketing spend, freight costs and administrative timelines.