RumbleOn, Inc.

Greetings. Welcome to Rumble On's first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the full presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Hillary Sumnick. Thank you. You may begin.

Thank you, operator. Good morning, ladies and gentlemen. Thank you for joining us on this conference call to discuss Rumble On's first quarter 2021 financial results. Joining me on the call today are Marshall Cressron, Chairman and Chief Executive Officer, and Steve Berard, Chief Financial Officer. Full details of our results and additional management commentary are available in our earnings release, which can be found on the investor relations section of the website at investors.rumbleon.com. Please note that this call will be simultaneously webcast on the investor relations section of the company's corporate website. This conference call isn't the property of RumbleOn, and any taping or other reproduction is expressly prohibited without prior written consent. Before we start, I'd 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 that involve risk and uncertainties that may cause actual results to differ maturely from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in RumbleOn's periodic SEC filings. Forward-looking statements and risks in this conference call, including responses to your questions, are based on the 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 may contain non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures, please see our earnings release. Now I'll turn the call over to Marshall. Marshall?

Thanks, Hillary, and thanks, everyone, for joining us this morning. We reported solid performance in the first quarter, delivering 48% revenue growth quarter over quarter, $11.2 million total gross profit, and positive adjusted EBITDA. As we will illustrate with our Q2 guidance, we continue to experience that momentum in Q2 by continuing to accelerate growth in revenue and gross profit in all facets of our business. We expect on a year-over-year basis Q2 revenue and gross profit growth rates of 68% to 78% and 113% to 125% respectively and to deliver another EBITDA positive quarter. Our overall mission has not changed, but during the past year, We've continued to implement the plan, meaningful enhancements to our strategy and technology stack, which we believe will enable us to participate in a tremendous share of power sport transactions over time with improved unit economics. In Q1, we announced a pending business combination with the nation's largest power sports dealer group right now, which we believe will transform the power sports industry forever. Though the transaction is not yet closed, both businesses are already benefiting from the synergistic nature of the proposed combination, which I will discuss at greater length shortly. We've taken meaningful steps to improve our margin opportunity and manage our limited liquidity and available capital over the past few quarters, and we're seeing the impact in our results. As you heard us and other vehicle resellers discuss, There continues to be a significant imbalance in supply and demand in the market. And we're certainly seeing that in the power sports with extremely low new inventory availability, which is driving higher pre-owned vehicle prices in all segments. Even as we emerge from COVID restrictions in this country, manufacturers still haven't been able to ramp production back to normal level, leaving far fewer new vehicles in showrooms. While this has created significant supply constraints of new inventory across the industry, it has created a strong tailwind and outstanding opportunity for RumbleOn, particularly with our buy direct from consumer strategy and our new B2B redistribution capabilities through dealer direct. Clearly, our business has never been better aligned to realize sustainable and significant margin improvements than today in our short history. However, we recognize that like our peers, our Q1 margin to some extent is benefiting from macro trends, which we expect will normalize over time. Though the macro backdrop is a tailwind for our business in the near term, it is important to understand that our model is a perfect solution for dealers and thus consumers in all macro environments due to our unique core capabilities, which we believe is evident in our Q2 guidance we are sharing today. First, our ability to efficiently aggregate and distribute power sports vehicles through RumbleOn.com which includes our highly successful buy direct from consumer strategy. As you know, we launched our RumbleOn.com 3.0 platform late last summer and continue to see very exciting momentum. As of quarter end, we had nearly 450 dealers on RumbleOn.com and continue to grow our dealer count. In fact, we added over 30 dealers in April alone. In the first nine months since we launched RumbleOn 3.0, We already have roughly half the number of listings at CycleTrader, who has been operating in this space for over 40 years. Recently, the industry has seen a more than 30% decline in average listings per dealer due to the supply-demand imbalance I just discussed. Based on our dealer count, we estimate that under normal new vehicle stocking levels, we would have expected 80,000 listings on our site. We are confident that the number of listings per dealer will grow significantly as OEMs get back to normal inventory flows, thus increasing dealer supply. We further believe that our opportunities for market dominance in listings and thus quality dealer lead generation to be market leading in the very near future. Still today, more than 95% of all inventory redistributed by RumbleOn is acquired directly from consumers. which is a compelling and a strong competitive advantage of our model. Most importantly, consumers now have the unique ability to work with our dealers in the locality where they live to sell or trade their vehicles for instant liquidity, which has significantly improved our overall conversion rates and incremental gross margin from the fees it generates for RumbleOn. The strength of our platform revolves around providing consumers with a transparent transaction experience including the prequalification of financing and the transparent and fair valuation of their trade-in, which creates quality leads, provides tremendous value to dealers, and marries the current online consumer demands with traditional retail sales processes. And second, our enhanced dealer direct solution. In Q4, we launched the B2B online dealer auction technology for dealer direct. Dealers can now use our platform to buy and sell units to and from each other, enabling RumbleOn to participate in more transactions and earn sell-through fees without taking ownership. This is an industry first to offer participating dealers real-time access to more high-quality inventory. From the very first day, our vision for RumbleOn was to completely disrupt the very inefficient pre-owned supply chain in PowerSports through the development and deployment of unparalleled software solutions for dealers, all while improving the consumer experience to buy, sell, trade, and finance online. Our tech-enabled real-time auction platform for dealers is our newest innovation and has already experienced a 100% sell-through rate, further reducing our already low average days in stock to new record levels. Dealer Direct will completely revolutionize how PowerSport dealers acquire and redistribute pre-owned inventory. The Dealer Direct online auction platform connects dealers with other dealers, reduces costs, and creates a more timely and efficient process for inventory acquisition and wholesale sales, making the PowerSport pre-owned supply chain more liquid than ever, which in turn makes PowerSport's vehicles more accessible to consumers. And we do this while eliminating expenses from our cost structure by not utilizing third-party reconditioning, no associated freight costs or auction fees, and multiple other benefits. Instead, we earn transaction fees and the acquiring dealer pays for freight, all of which provides a significant increase to our gross margin as demonstrated in our current results and future guidance. We are driving rapid adoption. we sold 310 units through DealerDirect's online auction in Q4, increased that by 235% to approximately 1,037 units in Q1, and we are seeing substantial growth in Q2 and expect sequential growth on the platform to exceed 100%. It is clear that the demand is high and we expect to dramatically grow the number of units sold through our platform, thus enabling RumbleOn to scale with higher margins from both the sale of company-owned inventory as well as buy and sell fees. The combination of RumbleOn 3.0 and our B2B application of DealerDirect is a valuable evolution of our business. For those of you who have been following RumbleOn for some time now, you know that we've had to operate RumbleOn as a lean organization since our inception. In 2020, we set a goal to achieve profitability and operational efficiency. And through maintaining this commitment, we believe we are now in a position to achieve sustainable profitability. We managed our inventory and inventory financing nimbly. But as Steve will discuss in more detail shortly, during Q4 2020 and Q1 2021, our unit volume capability was severely hampered by our limited access to capital and the customary operational limitations in connection with the proposed RightNow merger. However, on April 12th, we raised capital, and as of May 14th, 2021, we have a significant improvement of cash on our balance sheet. We've demonstrated our resilience over the past three years, and we will continue to march forward to unparalleled market domination with a significantly stronger capital structure. We believe our current liquidity and capital structure gives us the runway necessary to accelerate volume growth and gain significant market share as evidenced by our Q2 guidance. As we look ahead, we are incredibly excited by the opportunity to become the first omnichannel customer experience in power sports in North America through our pending business combination with RightNow. Our discussions with the multiple OEMs involved in this transaction have been very positive and we're encouraged that we'll be able to close in the very near future. This deal represents a meaningful evolution in the power sports industry and augments our mission to deliver an unparalleled solution for power sports enthusiasts nationwide. We are excited to bring public investors the opportunity to be part of this meaningful advancement in the power sports industry. The end-to-end platform will enable the combined company to reach more consumers in a secularly growing, yet still highly fragmented, market that is benefiting from changing consumer behavior. Combining RumbleOn and RightNow positions us to capitalize on the secular changes in consumer behavior accelerated by COVID-19. Together, we will have significant market share on day one, and we'll build a dominant position in the $100 billion marketplace for power sports. Our complimentary business models offer tremendous growth opportunities, both organically and through industry consolidation. From online to in-store sales and to ancillary services such as financing, parts, service, and merchandise, RumbleOn will have an unmatched end-to-end omni-channel consumer experience. We strongly believe that the integration of right now's extensive geographic footprint and strong retail brand combined with RumbleOn's technology platform will transform the nation's largest power sports dealer group into the first and only omni-channel power sports platform in North America. As a combined company, we will offer the fastest, easiest, and most transparent transaction process to consumers nationwide. Combined with our proprietary pre-owned vehicle sourcing, we are reinventing the purchase and sale experience for power sports enthusiasts, both online and in-store. The transaction is expected to propel revenue growth and drive meaningful cost synergies, leading to improved monetization and margin expansion. And we are already seeing evidence that the combination will be highly lucrative to our combined businesses. For us, this transaction is about unlocking incremental sales by improving access to quality pre-owned inventory, improving the associated supply chain inadequacies, consolidating a fragmented industry with the intent to drive efficiency, and most of all, improve the consumer experience. For our customers, consumers and dealers, this is about offering the most robust selection of inventory through a simple, safe, hassle-free, and flexible online experience. As always, We have high ambitions and are excited about the next chapter for RumbleOn. April was another strong month for our business, and it's shaping up to be a great Q2. RumbleOn is making power sports ownership accessible to everyone, from the first-time rider to the long-time enthusiast. And we are thrilled to give consumers and dealers what they want and need. We love meeting our customers at power sports rallies and events each year. We're hopeful that we'll continue to see a return to normal across the country and support in-person events again this year. We became an official sponsor of the City of Sturgis Motorcycle Rally for the first time in 2018 and look forward to another successful event this year, this time as the first omnichannel customer experience available in power sports in North America. And with that, I'll turn it over to Steve. Steve?