This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk06: Greetings and welcome to Rumble On's third quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Will Newell. Thank you, Will. You may begin.
spk02: Thank you, Operator. Good morning, ladies and gentlemen. Thank you for joining us on this conference call to discuss Rumble On's third quarter 2021 financial results. Joining me on the call today are Marshall Chesrown, Rumble On's chairman and chief executive officer, and Peter Levy, Rumble On's president. 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. 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 that 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 non-GAAP financial measures, please see our earnings release issued earlier this morning. Our earnings release and supplemental financial results highlight our financial results on an as reported or GAAP basis and on a combined or pro forma basis. In our comments today, we will discuss certain pro forma results and all comparisons will be on a year over year basis, assuming a business combination as of January 1st, 2020. Now I will turn the call over to Marshall. Marshall?
spk01: Thank you, Will, and thank you everyone for joining us this morning. RumbleOn is the nation's first technology-based omni-channel marketplace in power sports, transforming the power sports industry. Our vision is to use technology to drive lifetime engagement by offering a best-in-class customer experience with unmatched omni-channel capabilities giving consumers a destination for all things power sports. In the third quarter, we closed our business combination with RightNow and delivered strong results, demonstrating broad-based strength across our business. In addition to delivering $392 million in revenue, record GPU, and adjusted EBITDA of $23.6 million, we are increasing our prior guidance ranges. We are pleased with our strong third quarter results and the progress we have made, but this is just the beginning. Our aggressive approach to strategic acquisitions translates to long-term market share as we march towards the objective of transforming and dominating the industry over time. Our full results can be found in the press release and supplemental tables we issued today. So instead of walking through the P&L, I'd like to focus on the drivers and trends we're seeing. then peter will come on to talk about our operational progress and i will walk through our outlook before we take questions you've heard everyone talking about the supply and demand imbalances in the market for several quarters now and it's our view that this is not going to correct itself in the next 12 or likely even 24 months we've said all along that the key to our omni-channel growth strategy is used unit sales and that insulates us in this environment and it's evident in our results. New vehicle sales were down 7% year over year in Q3, but used retail unit sales were up 53%. In September alone, we drove a 65% increase in used retail unit sales, continuing the momentum. Year over year, our new-to-use sales mix went from 3 to 1 in Q3 2020 to 1.8 to 1 in Q3 2021. After only one month in Q3 as a merged company, we can clearly see that our goal of one-to-one ratio of new to used over time is more than achievable. Current inbound new supply is trending positive, and current showroom inventories remain basically flat. The net effect, short supply is driving GPU increases on new and unit growth in used, which will more than offset the volume decline in new. Please also keep in mind we have yet to see the benefits of our full omnichannel capabilities. Components of the process and infrastructure to accomplish our consumer sales objectives will evolve over the coming quarters, and we anticipate being nearly fully functional by late 2022. We anticipate that everything we are building into our omnichannel strategy will be incremental to the already stellar performance of the current physical locations. We have a superior technology-driven and proven used vehicle acquisition strategy that we've been optimizing since day one. Between our over 40 physical locations and fast-growing online platform, we are converting more cash offers than ever before. By deepening our presence in existing markets and expanding into new markets through strategic acquisitions, we have set the flywheel in motion. Our cash offer technology brings in high-quality used inventory, which attracts more riders and drives more volume in used unit sales. This model enables us to quickly and effectively gain market share. Dealer groups around the country are meeting us with tremendous enthusiasm as they recognize the value of what RumbleOn is bringing to the power sports industry. Our recent announcements demonstrate this positive reception and we will continue to strategically evaluate opportunities to realize synergies across the ecosystem. Our vision is to drive lifetime engagement by offering a best-in-class customer experience with unmatched omnichannel capabilities, giving customers more control in the sales process. We are pleased that not only are we increasing the outlook that we provided back in March, we are exiting the year with strong momentum and I'm excited to share our preliminary expectations for our financial performance in 2022. One quick housekeeping update. We've met with several extremely qualified CFO candidates over the past few months since the unfortunate passing of Steve Berard. Our CFO search is a top priority for us, and we will, of course, provide an update as soon as the person has been appointed. In the meantime, the role of interim CFO is in very capable hands with Beverly Rath. Now I'll pass the call over to our president, Peter Levy, to discuss our operational progress. Thank you, Marshall, and good morning, everyone.
spk04: This has been a transformational year for RumbleOn, underpinned with our long-term commitment in leveraging best-in-class technology. You've seen a lot of announcements recently, including acquiring dealership groups, adding physical locations to our portfolio, and launching our newest fulfillment center concept. We recently announced that we've signed definitive agreements to acquire dealership groups in our existing Florida and Texas markets. Our most recent acquisition announcement, Freedom Power Sports, includes 13 locations, including in Georgia and Alabama. Adding Freedom's founder, Kevin Lackey, and his team brings further professionalism, energy, and excitement to our entire efforts. Kevin is a self-made entrepreneur who sees joining RumbleOn at this point of time as an opportunity for him and his team to accelerate their already impressive success and reputation in power sports. Our mission is to provide the best omnichannel customer experience, no matter what portion of the transaction is online or in-store. Recently, we opened our first fulfillment center in Orlando, focused on used inventory processing. In doing so, we unveil proprietary technology, recreating how we inspect, recondition, and process used inventory. From cataloging inventory with detailed descriptions to capturing high-definition photos and video via our state-of-the-art and fully automated media capture system. This allows us to effectively standardize the online presentation of inventory for risk-free transactions. Since our closing of the combination with RideNow, we've already more than doubled used showroom inventory available at the stores, and now we will deploy inventory management systems to accurately utilize our data for future stocking and distribution. Making sure our vehicles are in the right location at the right time is a clear opportunity for us to grow and maximize market share across the country. Leveraging multiple platforms and associated sales channels is key. and we will begin to integrate, improve, and standardize our websites to allow for effective sharing of inventory, giving consumers the ability to access and purchase used power sports from us regardless of its physical location. Upon purchase, we will offer the choice of delivery at home or in one of our facilities. In the back office, we are rolling out a standardized technology platform so all our retail locations will be operating on the same platform. enabling more synchronization and reducing redundant work streams. We will have shared inventory and integrated websites across the entire enterprise in 2022. We are presently rolling out Rumble on Finance to all our locations. We anticipate that offering flexible financing solutions will help capture incremental sales in the near future. Much like some of the newest online sellers of automobiles, the ability to pre-approve credit online Real-time and friction-free is what we believe to be a game-changer in power sports, setting the bar even higher. Our new Chief Marketing Officer, Matthew McCartan, is spearheading our branding and marketing efforts as we enter into the next chapter of our evolution. We plan to evolve our brands and already are working closely with several of our 17 manufacturing partners to accomplish our mutual initiatives for a win-win combination. Many see the first entrance of public capital to the industry as the potential to be extremely beneficial as they consider the same consumer behavior changes in front of all business today. Building a united national brand extends beyond marketing efforts. We have acquired a wide breadth of facilities, and we intend to standardize the experience where all locations are representative of our family of brands. As we look forward down the road, our omnichannel vision would not be complete without the last touch. We are making investments to support our omnichannel strategy and are in early phases of developing the technology and processes to support a last touch logistics network for home pickup and delivery, which we will begin testing in 2022. We want to earn a lifetime relationship with our customers. That starts with the right team, right technology. and an overall culture that shows our customers we are unique in all we do. We've been hard at work centralizing processes and integration across our entire business, and there is no doubt we have a well thought out plan to dominate the power sports industry and revolutionize the future customer experience.
spk01: Marshall? Thanks, Peter. As you can see, we're moving fast, but we're moving with well-guided discipline. We are confident in our ability to exceed the milestones and financial targets we set for the year and are increasing our prior full-year 2021 revenue and adjusted EBITDA guidance ranges by approximately 5%. We now expect pro forma combined company revenue to be in the range of $1.55 billion to $1.6 billion and adjusted EBITDA in the range of $115 million to $120 million. We are well positioned heading into the final days of 2021, but as a reminder, the fourth quarter is typically the tightest quarter in regards to new inventory industry-wide due to manufacturer shutdowns during the holidays. This dynamic is assumed in our guidance. We are executing on our strategic objectives and are excited to share our preliminary expectations for 2022. For full year 2022, we expect to deliver year-over-year revenue and adjusted EBITDA growth in the range of 10% to 15% on an organic basis, driven largely by an increase in used power sport unit sales supported by RumbleOn Finance. RumbleOn has revenue and gross profit opportunities that our competitors in other vehicle segments simply do not. For example, as we expand our physical footprint, we can gain meaningful market share nationwide in used sale, parts, service, accessories, apparel, and power sport consumer financing. These high-margin services offer significant upside to our long-term GPU targets over time as we gain more market share. As Peter mentioned, we are making strategic yet prudent investments in our growth. We will be investing in technology development, marketing, logistics, and facilities in the coming quarters as we integrate the businesses, but are confident in our expectation that any SG&A increases will be outpaced by increases in revenue and total gross profit. Beyond our organic growth drivers, we anticipate incremental upside from both our pending and future acquisitions. With over $100 million of cash and cash equivalents on our balance sheet as of September 30th, strong free cash flow generation, and $120 million term loan facility we have available for future acquisitions, we believe at this time that we have an appropriate capital structure in place and do not anticipate the need to raise equity capital to fund the cash consideration of our pending acquisitions. We are focused on delivering on our strategic priorities and are committed to delivering sustainable, long-term value for our shareholders. And with that, operator, we're ready for questions.
spk06: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from Eric Wold with B. Riley Securities. Please proceed with your question.
spk05: Thank you. Good morning. Congratulations to all of you guys on the great progress so far with the combination. A couple questions. I guess one, Marshall, we all know about the supply chain issues that have been impacting the availability of new vehicles in the market. But can you give us a sense of the level of used vehicles at your stores versus where you believe they need to be and how easy it's been or possibly difficult to bring those vehicles into the mix?
spk01: Sure. I think obviously there are some offsets with regards to supply chain issues on the new side with the pre-owned. The stores presently are, as Peter mentioned, significantly up in inventory. Some stores, due to facility constraints, are probably at about where they need to be. However, some of the larger stores still have room and we're still shipping a significant amount I think that the important part is, as we evolve here, is to get shared inventory on all the websites, get consistency in photos, pricing, descriptions, and so forth. We'll really be a driver of our future performance on the pre-owned side.
spk05: Got it. I haven't seen an update since a few months back. How many dealers are on the platform right now from the 530 that you had a few months back? We've seen a significant increase in the number of used vehicles on the website in recent months. Just trying to get a sense of how much of that is driven by more dealers come on the platform versus more efficient vehicle flow of the dealers that are already on the platform.
spk01: Well, there's well over 500 dealers on the platform presently. Um, the new vehicle inventories, uh, as I mentioned, are flat at best. Um, the used vehicles primarily because of the increase, uh, on the ride now, uh, websites, keep in mind each of the stores, not only is there right now.com, but there's also, uh, individual stores with their inventories being higher. It makes up a lot of the, uh, Delta. I believe the end of last quarter, we were in the 60,000 range as far as listings and we're, north of 80,000 today, and we see that continue to grow, especially as new inventories start to come back into balance. But as we said, from what we're hearing and speaking to our manufacturing partners, it doesn't look like there's a lot of light at the end of the tunnel anytime soon, and we certainly don't expect any normalization. But with regards to that, I would say that really the processes have changed. I think you're reading about it in the automobile space. I think you're seeing it in power sports as well, where the stores are getting significantly more efficient at pre-selling inbound inventory. So I think what we'll first have to shake out is we'll have to fill all of the current needs of pre-sold inventory with then we can obviously start talking about the potential of feeding some type of pent-up demand. And we certainly don't have a crystal ball on what that pent-up demand is, but as long as the supply imbalance has been in place, I think it's reasonable to expect there's a fairly sizable pent-up demand.
spk05: Got it. And then final question for me. How should we reconcile the LTM pro forma, just an EBITDA of $130 million, at the end of June with the new guidance of 115 to 120. I'm assuming that the seasonality you talked about in the fourth quarter was there last year as well. So maybe what's baked into that? Is that new vehicle supply chain concerns? Is it conservatism on your part into kind of year-end? How do I think about those two numbers?
spk01: Well, I think clearly we want to create a cadence of, you know, beat and raise if possible. But we do want to, you know, we are still in the midst of a very early on integration. And so, you know, there's always the potential of hiccups, I guess, in that we haven't determined any or seen any of any size at this time. But certainly it's always possible. Second thing is the holidays are always kind of unknown. On the new vehicle side, as you're probably aware, you know, New vehicle deliveries will slow the ability for truckers to pick up. Keep in mind we buy the lion's share of our inventory direct from what we say mom and dad, direct from consumers, and the ability to pick those up in a timely fashion and stuff could be constrained through Thanksgiving and Christmas. So that's part of the reason we gave some clearer guidance for total year is so that obviously you could have a – a good expectation of what fourth quarter would look like, and then also talked about the growth for 2022. And everything that we've given you today is on an organic basis, and we do plan to stay that course as we move forward. We don't want to be, you know, in 2022 be presenting pro forma numbers and those types of things. So we will disclose as the transactions are closed, We'll disclose, obviously, more detail and give you the net effects to the guidance.
spk05: Perfect. Thank you, Marshall.
spk06: Thank you. Our next question is from Mike Baker with DA Davidson. Please proceed with your question.
spk08: Hey, excuse me. Thanks. A couple of follow-ups. One, Marshall, you said that new vehicle, Inventories are trending positive at the stores, which seems favorable. So I'm saying there are still inventory issues. And you said there's no really light at the end of the tunnel, but that feels like it's getting a little bit better. Is that fair to say, or did I misinterpret that?
spk01: I think in some manufacturers, we've seen a little uptick in availability. But as I said earlier, I mean, everything right now is turning about as fast as they can unload it. There are some new products coming out that look like some of the inventory levels might be constrained a bit. So I think if I was to look at it through your lens, I would say probably anticipate fairly flat new vehicle sales. We don't see anything on the radar screen that would lead us to believe that we'll have any continued erosion and total volume, and I don't believe that's consistent with what the large manufacturers are sharing as well, but they also haven't shared any information that they feel comfortable that those inventories will be going up. You know, the thing about a couple of you have mentioned seasonality, and you heard in my notes I didn't mention a lot of seasonality. I know that it's rumbled on. We talked about it a lot in our long past of four years. But right now did a really strategic thing in focusing on the Sunbelt as they built their company. And if you look back through the numbers and a lot of those numbers we've provided you, and obviously there's a lot of stuff out there in the filings, but you will see that the seasonality effect for them has been really, really mitigated because of their focus on Sunbelt regions. So we'll share a little more of that as we continue to grow and give you a heads up on what we think might or might not be the effect of that. But we do think that an omni-channel really – uh insulate you a little bit from that because we'll be moving vehicles depending on seasonality um from you know maybe the snow belt on two-wheel vehicles uh those vehicles will be repositioned into the southern markets and vice versa as spring comes you know maybe more moves north uh that that really comes down mike to um you know having a centralized inventory system and sharing all inventory one expectation you should have is today the individual dealerships' websites really just host their own inventory that they presently have. And as we move forward, you will see that all the inventory, I believe today between all entities, I think we're around 7,000 pre-owned vehicles in stock. And those 7,000 will be replicated across the entire group of websites as we move forward.
spk08: Yeah. Excuse me. That sounds like it's going to be. Pretty powerful. A longer-term question, and sorry for my voice here, but GPUs above 5,000, you know, I think some of that must be a function of the tight supply versus demand. So how sustainable is it, and perhaps an offset if supply and demand comes more in balance, is your improving efficiency in reconditioning? Can you talk about how that might impact that number? Thanks.
spk01: Yeah, Mike, we haven't really developed any of those efficiencies yet. I mean, that's really the purpose of the fulfillment center is to get the stores on what I call a keep fill inventory program. So in other words, once we determine based on the data what a proper inventory should be in any individual store, and let's just say for ease that it's 50 units, then the philosophy would be we would keep that store full of 50 of the right units at all times from the fulfillment center, but yet they would have access to the entire inventory. On the gross margin side, yes, the benefit on the new vehicle side has been a fairly significant increase. I would tell you on a percentage basis, it is nowhere near what they've experienced on the car side. The amount of uptick is fairly manageable. On the pre-owned side, I think it's really a point of merging a primarily dealer supply model, be it rumble on, to a pure retail play, and obviously pushing significantly higher the dealerships. Our advantage is now we have a distribution at retail. And obviously, retail gross margins are significantly higher. We post that, by the way, in a way that you can do comparables to the other automotive companies out there, whether they be pure online plays, offline plays, or pure used vehicle plays. And I do think it's interesting that the ASP is significantly lower and the actual dollar gross margin is significantly higher. I mentioned in my notes about, you know, that gives us some flexibility to Please don't take that that we plan to lower gross margins, but I would tell you that anytime we have the ability, we have very high gross margins, and if we have the ability to give up a small amount of gross margin for significant gains in market share in the early quarters and years of this company, we think it's very, very important to dominate market share, and we'll do so. The nice part about that is we're not under margin pressure in the reverse, where we're also chasing to cover a margin expectation. So we think it's really important that everybody looks at these gross margins on a dollar basis, on a per-unit basis, and compares it to what is out there, because I believe that the power sports industry as a whole becomes very, very intriguing.
spk08: Yeah, agreed. Thank you for the color. Appreciate that.
spk06: Thank you. Our next question comes from Seth Basham with Wedbush Securities. Please proceed with your question.
spk03: Thanks a lot. Good morning and congrats on a great start to the integration of the acquisition and more to come. As it relates to the new vehicle side of the business, can you give us some color as to what kind of allocations you're getting from the manufacturers given this tight supply environment? With such a large market share, are you getting disproportionate allocations?
spk01: Well, we wouldn't have any data to probably support that, nor would I want to lead you to believe that we're going to get any special favors. I don't think that's the intention of the allocation system. But I would tell you that it varies dramatically from manufacturer to manufacturer. So when we look at it on a total availability basis and a total average inflows, we are seeing them start to tick up. And there are some new products also coming to the marketplace, like the new switch that is a BRP product and various others by other manufacturers. And we do see most of those type products as being additive to our total availability and volume. I think your information, Seth, with regards to OEM inflows is probably as accurate as ours is by looking at what the likes of Polaris and Harley-Davidson and others are representing to the street.
spk03: Yeah, what's remarkable is that Polaris and Harley are talking to 50% declines. As much as that, you guys are seeing much more limited declines. In fact, you're talking to to slightly higher inventory. So it seems like you're significantly outperforming what those manufacturers are suggesting.
spk01: I think a big part of it, Seth, is they're really, I mean, Peter and I have been on the road visiting a lot of the stores as of late, and the showroom inventories are really, really low. But they are very, very quick to show us all the pre-sale that they have in the system. So I think it's about the turn is giving us some level of normalcy. I would tell you that, you know, on the pre-owned side also, this is usually, you know, one current year and one year old pre-owned vehicles aren't exactly the sweet spot, whether you're talking about cars or power sports, because typically they're too close to the valuation of a new one. So they tend to trend low. They are trending a little higher, which obviously that's replacing the inability for us to acquire new vehicles from the OEM.
spk03: Got it. Okay. And then on the use side, specific to the finance platform, could you give us an update there and maybe some data points as it relates to increased conversion rates you're seeing because of the rollout of the finance platforms?
spk01: Yeah, Seth, I'd like to tell you that it's been dramatic, but we have been a little bit slow in the integration of that. It really is just in the early stages, but I would tell you in the stores that we have brought or the locations that we have brought online, we pretty much started in the east and are working west. The returns have been dramatic. I think that... I think the way to look at it is what we're targeting is incremental sales. This isn't a replacement by any means for any of the captive finance companies, say a Harley-Davidson Credit Corporation or any of those. They buy very, very aggressively. All applications still go to them as a first and top priority. But, you know, for everybody's interest, I think if we step in and we're able to fill a void, say in lower dollar financing or non-brand financing in these stores, those are incremental sales. And so we do kind of see the finance company going forward as kind of our ace in the hole, if you will, because if you look at the success of the Carvanhas and CarMaxes of the world, I think you're well aware, in fact, I know you're aware because we've talked about it, that, you know, that ability to underwrite your own credit is very, very important to the creation of incremental sales. So summation is we have not seen a significant amount yet, but it is not because of demand. The demand where we have rolled it out has been high. And by the end of the year, we will be fully active in all 40 locations.
spk03: Great. Good news. And then lastly, relate to your overall goal of three-to-one, new to use, going to one-to-one. Given the environment you're talking on, the new side, and then the used strength you're seeing, especially with the finance platform rollout, how quickly do you think you can achieve that goal? Is this a 2022 goal? I would say yes.
spk01: Everybody's... I might get some heat for that because we didn't actually put that in any of our objectives. But we do think that it's very, very achievable. I mean, much like the car business, there's probably five to one pre-owned transactions taking place versus new to use. And we see what the difference is on the car side. And the way we look at it, Seth, is the majority of these transactions are happening today for used power sports through the likes of Craigslist and other listing sites. But if you just think about that piece of it, the fact that almost 70% prior to us entering the space were happening in those peer-to-peer transactions, it's a very, very inefficient redistribution funnel because Obviously, if I'm selling you my motorcycle across town on, say, Craigslist, I don't have any interest in financing you. I don't have any interest in taking in your trade. And not only that, it's a pretty friction-laden event. I don't think a lot of people are looking forward to the next transaction that they do with a total stranger through the likes of Craigslist. So That's really where we see the disruption and shifting those sales as far as a market mix over to the dealerships. The dealerships are significantly more efficient at being able to handle those in a meaningful way. And I will tell you one other thing. If you were looking at all the individual stores, there are already locations that are exceeding the one-to-one range. So the fact that we use those as a cohort and we compare that on a going forward basis, we are extremely confident on a one-to-one ratio over time. And that one-to-one is not a reduction of new. We'll continue to build the new in a very meaningful way. This is all additive. And the thing that's important in that equation is we don't have to build another building We don't have to hire another general manager. These are all very, very accretive to already very high margins in the power sports business. And, Seth, this is Peter.
spk04: I think also to point out, on the acquisition side, we have had just, I mean, in just now the last 35 or 40 days of the integrations of our physical locations, the ability to do a warm handoff to the dealership and the acquisition side, allowing for the dealerships to help the mom and dads of the world that might have some anxiety about doing things completely online and then getting them into the store where they think they're just going to trade or sell their vehicle, they actually, after spending some time in these beautiful locations, they've actually converted these folks into retail sales. So we look forward to a closer percentage somewhere to the CarMax world of what happens when folks walk in there to sell their vehicle and then actually convert to a retail sale.
spk03: That's great news. And one last question for you around the SG&A base. How should we think about the right G&A run rate going forward? And then as it relates to advertising, are you expecting to amplify advertising in terms of the revenue or keep it flat this year?
spk01: Well, as I mentioned in my notes, we certainly see top line and gross margin exceeding whatever ramp in SG&A. But I think the only difference What would I say? Conservatism on the marketing side would really revolve around making sure we understand the branding of this. You know, we're going to manage through what we call vertical brands. We're going to have multiple brands out there. We've got Rumble On. We've got Right Now. Then we've got 40 individual store locations with their own websites and hopefully adding Freedom and these others. Before we start putting significant marketing dollars to really drive the business, we want to make sure we have a clear understanding of what that vertical branding marketing looks like. I think right now we're more on the blocking and tackling side, Seth, as far as getting all of these websites right, getting all these websites integrated, make sure inventories are integrated, make sure things are priced and photographed and described properly. And that's just, you know, it's a fairly major undertaking, but we think that we'll be in pretty good shape with that by first quarter.
spk03: Wonderful. Thank you guys very much.
spk01: Thanks, Seth.
spk06: Appreciate it. Thank you. Our next question comes from Craig Tennyson with Baird. Please proceed with your question.
spk07: Hey, good morning. Thank you for taking my questions as well. I wanted to talk about inflation and maybe understand the type of inflation you are facing from your OEM suppliers and the extent to which you're able to pass that along to consumers.
spk01: Well, as hot as the market is, Greg, you know, it has been passed on, obviously. The suggested retail prices are published by the manufacturers, and as you can probably read, they haven't been excessive by any stretch. I think that we'll obviously, if the market stays as it looks today, and we don't see any turnaround, as I mentioned in my comments, anytime soon, I think we will be able to pass whatever that is along just because the demand is so high in comparison to the supply. But to date, it's been fairly limited. I think we're probably seeing more. We don't talk a lot about parts and service, but we're probably seeing it more on the availability of parts from the manufacturers than we are on the actual units. The units have already been published. We can see inbound flows, but we are seeing average days to fill on parts orders a little behind the curve. And so it'll probably take some time for that to get back up.
spk07: Thanks. And then maybe an operational question here. Could you just help us understand how you handle reconditioning operationally, where you handle that actual processing? and how much you might spend on a per-unit basis to prepare these units for resale?
spk01: Yeah, I think that it's fairly de minimis compared to automotive for sure, where we would be looking at maybe a $1,200 or $1,500 average cost for reconditioning, and this is probably in the south of $300 range even on the retail side. As far as the process, a lot of it today is being done internally in the stores. However, we see a huge opportunity in taking that process out of the stores, other than maybe the trade-in that they traded for yesterday probably doesn't make sense to ship it to a fulfillment center and process it at this time and then ship it back. So they will always do some level of reconditioning at the store level, but the vision is to utilize the fulfillment centers for all these vehicles to go in be processed. And again, I think if you were to look at our cost of sales, I want to say it's less than $300 total reconditioning. I don't have it right in front of me, so hold me to that. I'll get it for you. But it's fairly small. I think the issue with power sports really revolves around safety. because you don't have all of the things that go wrong with cars. It's typically safety, so it's tires and brakes and those kinds of things that have to start and stop. So it's not a big driver of our plus or minus with regards to retail price and gross margins.
spk07: Got it. Thanks. And then just another, I guess, operational or technology-related question on the cash offer tool. Is there a way to frame the number of offers that you made in the quarter or in a certain period and what your conversion rate looks like? That feels like a game-changing tool as there's a lot of churn in the marketplace today.
spk01: yeah fair question craig i think you know we used to uh really tout that as a standalone rumble on um i think we're trying to get our arms around these conversion rates at the stores because it's looking very very positive so i would be hesitant to give you that those numbers today but i think on a going forward basis uh obviously we'll want you to understand what that flow is i would say that as far as the pure 100 online transaction they are trending upwards, and I think the last time we reported we were in the 10% range. I do believe that between what we're now pushing to the store level and what we're doing 100% online, I think the CarMax levels, and I believe they report around 30% conversion, is seriously potential, obviously, for us going forward. So, Again, long answer, but I think that it is a number that we should be able to share going forward, but we really want to get our arms around it, get it moved out to all the stores. Last piece with regards to cash offer, though, that I think might be interesting is we now have retail data. and it's actual retail data. This is a 31-year company that has sold hundreds and hundreds of thousands of units over their lifetime. We're just in the process of integrating all that data. And why that's important is because we will have retail data to say, this vehicle in this location at this time of year will turn at this level at X margins. And those are benefits that we didn't have before, and we think it's going to be really, really compelling when it comes to inventory management because we can dial up. If we know we have a high-margin vehicle in low-day supply, we can dial up the algorithm within Cash Offer Tool to be able to get a much higher capture rate on the fastest-turning product. Everything we do is data-based, and we just think the more and more data we acquire, the more efficient we're going to get, and that should reflect directly into our capture rates. That's great. Thank you, Marshall. Thanks, Craig. Appreciate it.
spk06: Thank you. There are no further questions at this time. I would like to turn the floor back over to Marshall Chestron for closing comments.
spk01: Great. Yeah, I won't take up any more of your time. You guys have been on here for quite a while, but I do want to thank everybody for joining us today. Obviously, these are really exciting times for Rumble On and right now and all of our teams. We're looking forward to speaking to you for Q4, and we certainly wish everybody a very, very happy holiday season, and we'll talk soon. Thanks again.
spk06: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Disclaimer