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spk02: Greetings and welcome to the Rumble On fourth quarter and full year 2021 earnings call. At this time, all participants are in a listen only mode. A 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. I would now like to turn the conference over to your host, Will Newell, head of investor relations for Rumble On. Thank you. You may begin.
spk09: Thank you, operator. Good morning, ladies and gentlemen. Thank you for joining us on this conference call to discuss Rumble On's fourth quarter and full year 2021 financial results. Joining me on the call today are Marshall Chesron, Rumble On's chairman and chief executive officer, and Narendra Sahai, Rumble On's chief financial officer. Full details of our results and additional management commentary are available in our shareholder letter, 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 Rumble On'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 Rumble On'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 reconciliation of these non-GAAP financial measures, please see our earnings release issued earlier this morning. Our earnings release, shareholder letter, 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 1, 2020. Now, I will turn the call over to Marshall.
spk03: Thanks, Will, and thank you, everyone, for joining us this morning. I'm very pleased to be reporting on our fourth quarter and full year 2021 results. We generated $117.4 million in adjusted EBITDA, the middle of our guidance range of 115 million to 120 million and delivered record revenue of nearly 1.6 billion at the high end of our revenue guidance we sold a total of over 55 000 power sports units in 2021 and meaningfully increased the number of used retail power sports units sold i want to start by giving out special thanks to the entire 2400 person staff of the company our integration efforts are well underway, and the reception from everyone has been extremely encouraging. The Ride Now and Freedom teams are a fantastic representation of what will be the best foundation possible as we further build this incredible company and as we embark on transforming the industry we all enjoy. 2021 was a transformational year for RumbleOn, and we ended the year with momentum that is continuing in the early days of 2022. We are reimagining the customer experience. building the future of power sports, both online and in-store, and we've made incredible progress on our mission. We delivered on our financial targets, and we continue to execute on our operational objectives. With that said, there is certainly a lot of work ahead. So far this year, we recruited a fantastic finance leader, Narendra Sahai, as our chief financial officer, appointed our president, Peter Levy, as president and COO, and announced our new regional management structure to support continued and scalable growth. In the last seven months, we acquired RightNow, completed the acquisition of a Jacksonville-based power sports retail facility, acquired Freedom Power Sports, and much more. Through these acquisitions, we grew to 55 retail locations and added several additional manufacturer product lines to the RumbleOn portfolio. There is no question that our business has changed meaningfully in the last year. not only in scale, but also in our ability to better serve our customers. We are absolutely focused on providing customers an unparalleled choice of products and services, as well as an unmatched buying experience, both online and in our retail locations. We are confident that this will position us as a dominant participant in the market for new and used power sports and make us a go-to partner for the major manufacturers and ensure sustainable long-term growth and profitability. We're quickly becoming the destination for used power sports, and introducing more used inventory into our showrooms attracts new customers to our platform and, most important, new riders due to the affordability that used units provide. We're focused on both new and used. However, the opportunity to dramatically increase the number of used retail power sports units presents the greatest near-term opportunity. In a supply-constrained environment, we can better control used inventory than new because it is not dependent upon manufacturers' current production or distribution constraints. In fact, our access to used inventory is and will continue to be an important differentiator for us in any market environment. We will continue to leverage short supply and potential pan-up demand to advance our opportunities to change the customer experience and grow market share for many quarters to come. We are advancing quickly with a keen eye on what we call our North Star, the customer experience. Our key priorities are coming to life over the following months. First, implementing our customer experience center network for efficient inventory acquisition, distribution, and fulfillment for new used parts and merchandise. We will use our physical locations to augment the online experience and vice versa, to offer a simple, friction-free customer experience. Powersports is a lifestyle, and consumers want to walk into a retail location and see the wide variety of experiences that Powersports represents. Our customers can come into one of our retail locations and shop for merchandise, talk to an expert about new and innovative products and features, and start to plan their next Powersports adventure. The future lies in creating a true experience center. a destination for power sports enthusiasts to interact and engage with not only the products they desire, but also the broader power sports community and with our brand. Our vision is to co-locate our customer experience centers with our fulfillment needs in facilities of scale never seen in the industry. We're currently in the design phase and plan to open our first customer experience center in the second half of 2022. Second, continually expanding and enhancing our technology stack with a specific focus on inventory integration, data analytics, upgrading our retail location infrastructure, and improving the customer shopping experience. In order to truly improve the customer experience, we are building a technology engine across the organization, integrating real-time pricing and sales data from in-store transactions, will enable us to further optimize offers and pricing to increase capture rates. Implementing a proven fulfillment system with near real-time inventory replenishment will enable us to ensure we have the right vehicle, the right part or merchandise in the right place at the right time. And with digital inventory integration, RumbleOn will dominate digital search across the entire addressable market. Additionally, important to the future of RumbleOn's brand is creating a unified customer experience across all locations from technology and infrastructure to corporate culture. And third, developing our people and processes to attract and retain the best talent and build a scalable organization. This begins with our people and culture. We believe that the people and culture set the tone for our executions. We announced our new regional management structure. We appointed a new national senior vice president of retail overseeing six regional directors who will lead the daily operations of multiple facilities based primarily on geographic location. The regional directors will share best practices in customer service and general operations to enhance the overall performance of our retail locations. Our new regional management structure both enshrines our unique culture and ensures stable footing for continued growth. We're gaining momentum in 2022 and are very excited to have a truly incredible team and such an opportunity ahead of us. By focusing on improving the customer experience, implementing better inventory control and fulfillment, and adding technology that allows us to operate more efficiently, we are poised to benefit from our unique strategy, massive total addressable market, and our first mover advantage. Although many and other vehicle segments are experiencing and signaling headwinds, we're continuing to see robust demand for PowerSports products in all categories, on-road, off-road, and personal watercraft. We intend to capitalize on this incredible opportunity and focus on things that we can control, and that is executing on our business plan. We believe the steps we are taking with our plans discussed here today will allow us to be successful in driving long-term value for all our shareholders. Now I'll pass the call over to our new CFO, Narendra Sahai, who will provide more detail on our fourth quarter financials, as well as our outlook and guidance for 2022. Narendra?
spk08: Thank you, Marshall, and good morning, everyone. I'm thrilled to be joining my first earnings call as RumbleOn's Chief Financial Officer. Marshall, Peter, and the entire RumbleOn team have built an impressive organization with an incredible opportunity ahead. I'm excited to be joining the team as we continue to execute on our mission to transform the power sports industry. For comparison purposes today, I'm going to focus my commentary on unaudited Performa results, which assumes the business combination with RightNow closed on January 1, 2020. We provided detailed commentary in our shareholder letter, which is available on our investor relations websites. So instead of walking through our consolidated segment of operations, I want to take a moment to highlight some of the progress we have made and our strategic priorities this year before opening the call for questions. Before I get started, I want to quickly highlight one of the many components of RumbleOn's financial model that I believe makes this company a truly compelling opportunity. In 2021, the company generated $45.5 million in net income on a pro forma basis. Adjusting for stock-based compensation, which was largely related to the RightNow transaction, we generated $74.7 million in adjusted net income. And this is before realizing any operating synergies which we expect to benefit from over time. In the near term, we will be making thoughtful investments to lay the foundation for sustainable growth and profitability. With our balanced and disciplined approach to making these investments, we will continue to grow EBITDA and deliver GAAP profitability. Layer on Rumble on scale, relatively short operating history, and an attractive total addressable market, I believe that this company provides a truly unique opportunity. RumbleOn made meaningful progress in the last year and exited the year in a position of strength. In 2021, we sold over 55,000 power sports units, delivered revenue at the high end of our guidance range, and adjusted EBITDA in line with our guidance. Total revenue grew approximately 47% year-over-year to $440.9 million in the fourth quarter. bringing full-year revenue to nearly $1.6 billion. Since announcing the business combination with RightNow, RumbleOn focused on significant opportunity in used power sports and used retail units in particular. On a comparable performer basis in the fourth quarter, our first full quarter as a combined company, we sold 87% more used retail power sports units and generated 164% more revenue from these sales compared to the same quarter last year. Regardless of sales channel, retail or wholesale, in aggregate, revenue from used power sports grew 91% year over year. These results demonstrate the high level of consumer demand and validate the opportunity we have in front of us. In the fourth quarter, total gross profit was $90.1 million. up from $78.8 million in the same quarter last year. Total gross profit margin was 20.4%, down from 26.3%, driven primarily by a decrease in the automotive segment, which was offset slightly by the power sports segment. Operating expenses were $75.2 million, or 17% of revenue, compared to $54.8 million, or 18.3% of revenue in the same quarter last year. Within operating expenses, total stock-based compensation was $2.1 million in the fourth quarter, up from $0.5 million in the prior year quarter. For the full year 2021, stock-based compensation was $29.2 million, up from $3.2 million in 2020. These increases were primarily driven by restricted stock unit grants issued in connection with the RightNow transaction, which had the largest impact in the third quarter of 2021. Net income was $20.6 million in the fourth quarter, resulting in fully diluted earnings of $1.35 per share. This compares to a net loss of $5.5 million in the prior year quarter. Adjusted EBITDA was $22.7 million, down 24.4% from $30 million in the same quarter last year, impacted primarily by a decrease in total gross margin and other one-time items. For the full year 2021, pro forma net income was $45.5 million, a significant improvement for $18.9 million pro forma net income last year. RumbleOn delivered adjusted EBITDA of $117.4 million in line with our guidance range, and up approximately 18.7% from $95.9 million adjusted EBITDA in 2020. As of December 31, cash and cash equivalents, including restricted cash, was $52 million. Total available liquidity, defined as cash and cash equivalents, including restricted cash, plus availability under our fold plan credit facilities, was $172 million. For the year 2021, cash used in operating activities was $36 million. Now, turning to our outlook. As Marshall outlined, we completed 2021 with strong momentum and are seeing continued strength with robust demand for used retail power sports units. For 2022, we are modeling an excess of 50% year-over-year growth in the used retail power sports unit sales, while we expect new retail power sports unit sales to be consistent with the prior year due to ongoing manufacturer supply chain constraints. From a pricing standpoint, we expect the used retail power sports unit pricing to moderate somewhat as the current elevated demand is fulfilled as we progress through the year. We expect to accelerate the acquisition of power sports units on our online platform and channel them to our retail locations. Given these dynamics, we expect to deliver $1.9 to $2 billion in revenue for 2022. Note that this revenue guidance range assumes organic growth in a power sports segment at a point of previously provided range of 10 to 15%. As a reminder, we closed the Freedom Power Sports transaction on February 18, 2022, and our guidance excludes the period we did not own Freedom. Further, our revenue guidance range considers $500 to $600 million in revenue from non-Power Sports segments. You have and will continue to hear us talk about our North Star. which is providing customers an unparalleled choice of products and services, as well as an unmatched buying experience both online and in-store. We are confident that rebuilding the customer experience in power sports will position RumbleOn for sustainable long-term growth and profitability. It is clear that we must make disciplined investments to scale RumbleOn. Our investments will be centered around the three strategic priorities Marshall previously discussed, implementing our customer experience and our network, continually expanding and enhancing our technology stack, and developing our people and processes to attract and retain the best talent and build a scalable organization. Many of these initiatives are already underway. While we must invest in our business, we are taking a balanced approach and plan to invest approximately 1% of total 2022 revenue or up to $20 million throughout 2022 in support of our long-term growth objectives. Including these investments, we expect to generate at least $145 million of adjusted EBITDA in 2022. Note that although we continue to evaluate tuck-in acquisition opportunities that meet our investment criteria, we have not included any incremental impact due to acquisitions in our revenue and adjusted EBITDA outlook. Finally, we expect any contribution from RumbleOn Finance to be de minimis in 2022 as we continue to refine and scale that platform. To conclude, RumbleOn continues to build an exceptional power sports experience on behalf of our customers, and we have a long runway ahead of us. I am thrilled to be a part of this organization, and I look forward to contributing towards RumbleOn's growth and delivering long-term value for all of our stakeholders. I will now turn the call over to Marshall for closing comments. Marshall?
spk03: Thank you, Narendra. RumbleOn was built on our passion and our customers' passion for the experiences power sports deliver. We're creating the customer experience that will build lifetime relationships with our customers, and define the future of power sports as we embrace the next generations of new and innovative products. We believe RumbleOn will be a primary destination for both innovative manufacturers and all power sports enthusiasts, regardless of age, lifestyle, or passion. We're very excited about the progress that we've made in this very short period of time, but we also have our heads down and laser focused on executing our plans. We will be visible throughout the first half of 2022 with appearances at investor conferences and will always welcome opportunities to engage with investors to share our exciting story. To find a business segment of this size that has not been affected by new technology and in an industry that has not improved the customer experience to the level that consumers' expectations and behaviors are today, we believe this is unique to say the least. We strongly believe that our business strategy is right for today's consumer. Based on current performance enhancements, market demand, and consumer response thus far, we are more convinced than ever that we are well on our way to leading the way of change to dominate this market. Thank you again for joining us this morning. And with that, operator, we are ready for questions.
spk02: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd 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. In the interest of time, we ask that you keep one question and one follow-up. Thank you. Our first question comes from the line of Eric Wold with B. Reilly Securities. Please proceed with your question.
spk07: Thank you, and good morning. So two questions. I just have one question as a follow-up. So I guess the first question, looking at the Q4 EBITDA that put the full-year portfolio number kind of at the midpoint of the guidance range, even though revenues came in at the high of the range, can you talk about any puts and takes that potentially kept even off from being higher than it was?
spk03: Yeah, good question. Obviously, there were several items, what I would call integration items in Q4 that affected the P&L. A couple examples would be in Q4, we reclassified certain capital leases to operating leases, which along with miscellaneous other items, we would have just on that one item would have exceeded guidance of the 120. I also might point out that I think something else worth sharing in that regard is we had $2.5 million less used Power Sports wholesale gross profit quarter over quarter. And that's due to because we continue to ramp the showroom inventories right now. And thus, we didn't push these units to the auction as we would have in the past. You guys have all heard me talk about many times and outline before that what we acquire this quarter or this month is what we will sell next quarter or next month. With Freedom now needing a similar injection of used inventory, this will be a continuation of diminishing wholesale sales replaced by higher gross margin from the retail channel in subsequent quarters and months. Said differently, our strategy in Q4 to grow inventory at the stores will certainly be reflected in Q1 retail power sports sales. There are various other integration-related items affecting the P&L, but those are the more meaningful examples.
spk07: Hopeful. Thanks, Marshall. And then the follow up question. If you think about the $20 million of technology spending expected this year, how much of that would be considered one time this year versus a kind of recurring spend in future years? And can you talk about the expected return on that spend and kind of what you expect from kind of a, you know, an even a tailwind coming from that?
spk03: Yeah, I think, well, first off, you know, obviously technology is an important piece of this in the early days. You know, for instance, the expenses on things like rebuilding all the websites and integrating all of that, building the inventory control piece of our technology, et cetera, a lot of the things we've talked about in the past are well underway. Most of those will be demonstrated in late Q2 and into Q3. So those would kind of be more one-time situations. We do have a significant need to build a more robust logistics system, and that will be an ongoing probably for the next couple of years. And then, of course, it just becomes maintenance and so forth. But one of the huge investments in that regard is making sure that we're in a position to that last touch with the customer is Keep in mind, we have two customers that we do a last touch with. One is selling an asset to us, and one is buying an asset. And we think it's super important over time to build the infrastructure to support that. Now, so you know, we already have infrastructure in each of the retail locations, such as trucks and trailers and so forth. But we need to integrate that. We need to centralize that and get significantly more efficient and really upgrade the presentations. The Wi-Fi investments that we're making with regards to the stores, some of this we've discussed before, is really around getting the proper Internet capabilities in the stores, the switching required to do that. It's a sizable number. And then, of course, all the technology that follows behind that. It would be impossible to really change the customer experience on the showroom floor over time if, in fact, we don't have the technology and obviously the Wi-Fi capability? What were some of the other items on the $20 million?
spk08: Yeah, so just to add on to that, Eric, we also talk about scaling the organization and building our own capabilities in-house. So clearly bringing talent in, and doing some of those things in-house, obviously replacing some of the outside services. So we do expect to gain some leverage there as we go along. And then there's some marketing spend focused on the acquisition of inventory. That obviously, as you know, in our conversation, that pays for itself over time. So there is a fair bit of investments here, which are one time. But as we kind of go along, we will measure you know, the return on these. And obviously, we would expect the return to be, you know, quite meaningful and happen over a short period of time. But, you know, we'll be looking at all those things and be thoughtful about these investments. Yeah, that brings up a good point.
spk03: One more thing, Eric, in this regard is with regards to marketing, our entire marketing efforts right now revolve around acquisition of inventory. We do not have an issue, thankfully, with opportunity. In the retail channel, the demand remains extremely high, much more than what we've been able to fill to date. So all of the marketing that you see us, whether that be digital or as we migrate into more traditional, it is going to revolve around acquiring more inventory. When we took our tour of the 13 Freedom locations, it was very, very clear that that probably even more so than the right now group even has a bigger opportunity on the pre-owned because they're just really really have not been in the business so we've got a huge demand uh from the consumer we've got a uh we we've got a need for additional inventory as i call feeding the beast uh and so that's where our efforts will be spent and the timing i think is good because to
spk04: One moment, please. We're having technical difficulties. One moment. Sorry. Yeah, sorry, everybody.
spk03: We lost our connection. So anyway, just to finish up on that thought, The timing is really good because, you know, as we develop these new websites, and most important, one of the other things in this spend, if you will, is customer service and call center. Right now, leads, for example, are still handled at the store level. And as we combine these websites and so forth, it's going to be necessary to be able to have a more efficient process of handling the leads that we have. And that means, you know, 24-7 access to talk to someone, whether you want to sell or buy. So just, you know, several items, but I would say from a customer service perspective, the industry is very, very lacking in that regard. It's hard to get a lead answered. It's hard to get your questions answered, and we obviously need to change that. That's a high demand of all consumers today.
spk04: Perfect. Thank you both.
spk02: Thank you. Our next question comes from the line of Craig Kennison with Baird. Please proceed with your question.
spk06: Hey, good morning. Thanks for taking my questions. And Narendra, congratulations on your new role. I had a question on the fulfillment strategy and maybe just a request that you shed a little more light on where you're headed there. Maybe how many stores can a fulfillment center serve? How many fulfillment centers might you need long term? And what are the capex and sort of operating costs associated with running a fulfillment center?
spk03: Well, first off, there will be an organic retail location as well with an experience center. I think if you were to think through what is this going to look like and next quarter we'll be showing you what that's going to look like because we will be well down the road. In that regard, we have secured the property in Dallas and we're close in Phoenix, which will be the first two that we roll out. If you were to do some type of comparable, I would say to consider Nebraska Furniture, which is a Warren Buffett concept that has just been very, very well received by consumers. I believe the one they just opened here not long ago in Dallas is like 22 football fields under roof. I would also say that it would probably be like a Cabela's or a Bass Pro Shop on steroids, but all revolving around all the products we represent, which again, remember, are on-road, off-road, and personal watercraft. Where this all comes from is this industry, and this is recognized by the manufacturers, this isn't something that we dreamed up, but as we went around and toured the stores, the thing that Peter and I were most surprised about is these facilities that were built five years ago or 20 years ago were built primarily for two-wheel motorcycles. And if you talk to the manufacturers, one of them shared with us the other day that they've done an analysis and 80% of their stores don't even have a door big enough to get the current products into the showroom floor if they had room on the showroom floor. And that goes one step further if their service departments were designed for that same purpose. So as opposed to figuring out a strategy and a CapEx expense of trying to figure out how to rebuild 55 stores across the country and soon to be more, we felt that, you know, marrying what other large retailers have certainly done successfully of having a processing fulfillment opportunity would be huge. So the things that will happen there are, as opposed to individual units going to a predicted a dealership in boxes and having to utilize the service department to put those together and so forth, they will go to a centralized location, be processed, be photoed consistently, videoed consistently, priced consistently. And what will happen is each store now will have what is the appropriate size of inventory, both new and used, at each individual location. I call it perfect inventory. Once you identify that perfect inventory based on the sales data and inventory turn and so forth, Then what will happen is, let's say it's Oklahoma City, and this weekend they sell three new and four used, the Dallas Fulfillment Center, which is 180 miles away, by noon the following day, no different than a Walmart or a Target, a truck will be pulling up with the replacement vehicles to keep that full. What that does on the service side is it frees up the service operations to be able to take care of customers and customers only. The time it takes in this industry is to get your vehicle fixed is absolutely atrocious. If you compare it to the automobile business, it is wildly different. I mean, we have stores that it could take you 30 plus days to get your vehicle out of service. And by the way, these are all things that are industry-wide. And so if we're going to create a much better customer experience, we've got to address this issue. And for us to make The time investment and the capital investment to figure out how to go out and buy land and build bigger stores, we just don't feel was a prudent decision. And we think there's already a proven model out there with fulfillment. And then the last piece is we're also bolting on this experience center on the front, which gives us a testing ground to before we roll things into a store that is significantly profitable, we want to make sure that these are proven out. And some of those are really in the customer process, right? the way vehicles are priced. Most power sports dealers today don't even put a price on their vehicles on the showroom floor. Many of them don't even put it online, which to me is totally cuckoo, right? And so we're going to test all of those changes within our own environment and then also have a place that when people walk into it, they are not going to find that experience anywhere else in the country. And we don't believe presently with the competition that's out there we'll ever be able to match in any reasonable period of time this type of concept.
spk06: That's great, Marshall. Thank you for that. And then just to follow up, I'm curious, we know all about the supply chain issues with your OEMs. What's the current message from those OEM partners on inventory and supply and their ability to get you what you need?
spk03: We are seeing improvements in that regard. We're modeling new fairly flat, but there's some other opportunities for growth here, which, again, really plays into the fulfillment piece, is a lot of new products, which are really innovative products, like the new switch from BRP, just as an example. That's something that hasn't existed in the space before. I think we represent that product in, I don't know, 15 or 17 markets today. And that product for 2022 is completely sold out. So some of these new products are really additional opportunities that are bringing a different consumer to the showroom. But back to the heart of the question, we are seeing an uptick on certain manufacturers, but we have to listen to what they're telling the world. Most of these are public companies. Their information is out there. And what they're saying is that they don't see any major improvements in they supply at the store level in 2022. But, you know, we're aggressively trying to buy from other dealers, both new product and used product, to backfill that. And so, you know, we think there's some opportunity there, but we can't kind of buck the trend of what the manufacturers are leading us to.
spk04: Great. Thank you.
spk02: Thank you. Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star 1 on your telephone keypad. Our next question comes from the line of Seth Basham with Wedbush Securities. Please proceed with your question.
spk05: Yes, hi. This is Nathan Friedman on for Seth, and thank you so much for the time. My first question is regarding the pricing environment. Can you share what you're seeing from a broader industry perspective in terms of power sports for both new and used? Has pricing helped firm, or have you seen any changes year to date? And to what extent do you see power sports prices moderating over the course of this year?
spk03: I'll answer it a couple ways. Let's talk about new first. Because of supply constraints, new has stayed very, very stable, and I don't see anything on the horizon that would change that. So I think that's pretty solid all through 2022. Keep in mind there, too, as you look at the numbers and you compare our KPIs to, say, the automotive guys, you will see that we didn't have nearly the uptick in gross profit on a per-unit basis that you saw in automotive. So as it neutralizes, I think it will be more than offset or at least equally offset by additional volume by the availability. So that's the new piece. On the used piece... We think that there's some real opportunity here. I mean, the price today is not done with proper data science. And we think that we're probably, if anything, leaving some on the table because of the inconsistency in pricing from market to market, not having the proper data when it comes to that pricing. As far as the wholesale values of pre-owned inventory, which might be what you're referencing, they remain very, very stable. But again, slightly higher, but not really more than what it has been in the past. This is an industry that has a little bit more seasonality effect in wholesale valuation. And so we're in a season that typically right now in the spring that prices do go up. They have gone up from fourth quarter. But you will see that fluctuation as we move forward. And since we're on that, I might touch on something that I have mentioned to several of the analysts, is as we continue to change this mix scenario, we originally said that this group, the RightNow group, is at 1.3 to 1. We've obviously cut that in half. We set a long-term goal out there of 1 to 1 mix. We think that that one-to-one is probably going to be achieved sooner than later. It was probably a little longer term when we put it out there, but it's certainly looking shorter term at this point. And we are really encouraged with the Freedom Group from the standpoint that they are even more than three-to-one on the new-to-use ratio. And again, we don't see anything that would cause used vehicles to slow down any time in the next couple of years. But for us to go in and put vehicles in a showroom floor that basically don't have any today, that's going to be a meaningful move. So prices are up, but seasonally pretty consistent. And we don't see a huge valuation change of what we give a consumer.
spk04: There's just nothing in the data that would reflect that.
spk05: Got it, and thank you. That's very helpful color. And my follow-up is on GPU. Can you provide some color regarding what weighed on gross profit in the fourth quarter, and more specifically, PowerSports GPU, as well as your GPU expectations for 2022, and what may the key drivers be that formulate your expectations for both new and used retail? Thank you very much.
spk03: Yeah, I think the used... gross profit on a per unit basis was really affected by kind of shock and awe from an inventory perspective. We took stores that had 10 used bikes and now have 60 or 80, and stores that had 30 now have 150. And so that has been a situation where, and because we don't have effective data-driven pricing, I think some things were probably sold too cheap. and we'll address those as we go forward. So we do believe that there is upside. But right now, the mission is to sell everything that we have and continue that turn rate. For new, as an example, we want to make sure that we are not holding back inventory for $100 or $200 more of gross profit because the day will come where we want to have those turn rates driving allocations that will come from these manufacturers. So, you know, this is a situation where, yes, you can get more greedy, but it might cost you in the long run by slowing down your turn and so on and so forth. We think there's upside in gross margin. I would tell you that if you look at our total gross margin, you guys have heard me say it many times, if you look at all of our gross margin divided by all of our sales, both retail and wholesale, you will see a number that doesn't exist even remotely close in the automobile business that you all know I've done for many, many years. We have a luxury here of very, very high gross margins. We certainly don't intend to shrink those, but I'll use one more gross margin example is in service. If we have the ability to do just as much service, and today we have 80% gross margins on labor, And we can take those gross margins to 70% and do double the revenue at a 70% gross versus an 80% gross. I'm going to take that math every day of the week. And we believe those kind of opportunities exist. So it'll move around a little bit, but just keep in mind it's very high and it has consistently been very high, even if you go back to prior years for the likes of Right Now and Freedom.
spk05: Got it.
spk04: Thank you very much again for the time, and good luck. Thank you. Thank you.
spk02: Thank you. Our next question comes from the line of Rommel Dionisio with Aegis Capital. Please proceed with your question.
spk01: Good morning. Thanks for taking my question. Marshall, you talked a lot about customer experience. Certainly appreciate your comments on a macro basis with regards to parts availability and inventory. You've acquired a lot of... locations over the last several months and integrated them. I wonder if you could just talk about the initiatives you're putting into place for improving the customer experience with a lot of these new dealerships that you brought in, maybe on a more cohesive or national level. So you've got this sort of similar look and feel and branding across the chain. Thanks.
spk03: Yeah, I think that's part of our investment strategy that Narendra shared. I think there are significant opportunities that will be executed at the current store level over time. We are already doing some things that we're just kind of basic blocking and tackling, making sure that vehicles are priced and those types of things. But to your point, over time, we want to make sure that when you drive by one of our dealerships that it means something. Today, there's a huge disparity between our nicest store, which would probably be one of the large ones in Phoenix, to one of our lesser quality facilities, maybe in a different market. We need to make sure that, I think a good example is when you drive by a CarMax store today, you know it's CarMax. And that's going to be things that evolve over time. The showroom customer experience is not going to be significantly changed in the near term. We are going to utilize our fulfillment customization centers to reevaluate all of those. There's some obvious indicators out there in all retail markets, right, of what consumers expect today. We were talking internally about the new Amazon Now, right? I mean, a year ago, we thought, Ben, same-day delivery is just crazy. How do they affect that? And now today, you know, we can pay a little bit extra and have it delivered in the next 20 minutes. I mean... These are things that we need to participate in. We need to be the leaders in all regards of customer experience, but we don't intend to blow up dealerships. One last thing from their current profitability. One thing we are doing is we have chosen two low-performing stores in the organization that are not part of any region, And we are using them as basically a retail store test location. And so we are testing things like one price, no fees, an iPad selling process where one customer, one person is handling those transactions. Those are all the things that we are pretty confident are where we need to be at the end of the day. But if you walk in a store 60 days from now, one of the existing stores, you will not see those changes. But I would say by year end, once websites are changed, infrastructure for online selling is up to speed, we have the opportunity to create well-thought-out processes at the store level with people like salespeople, service riders, parts people, and so forth. And then the last thing I would say in this regard is, If you think about the people that have tried to do in the auto space what CarMax does as an example, and they haven't had a lot of success, and I personally believe that it's because they look at what a retailer like they do as a selling system. And what they do differently, and I'm not here to pitch CarMax. I just like to use them as an example because I've been a student of them since they started. What they do differently is a culture. and cultures change over time and you have to have buy-in to culture changes and so you can't just go in and paint all these stores with a single brush and say this is the best way to do it and then expect people that were brought up in a whole different culture to be able to immediately adapt it just doesn't work that way so it's going to be methodical it will be well thought out it will be very well tested all right and nothing would be changed at a store level Today, six months from now or two years from now, that we can't draw a direct correlation to better customer satisfaction, better profitability, and a better long-term experience so that we can start thinking about the life cycle of these customers. We sell product all the way from a minibike to a seven-year-old all the way to a trike. A Harley-Davidson trike is an example to an 80-year-old. We have a huge breadth of potential customers, and we've got to make sure that our systems and processes and everything appeal to that wide range of demographics. So lots and lots of information there, lots of stuff to do, but that's where that's at.
spk04: Thanks very much, Marshall. It's very helpful. Thanks.
spk02: Thank you. Ladies and gentlemen, we've come to the end of our question and answer session. I'll turn the floor back to Mr. Tesron for any final comments.
spk03: Great. Well, I think we've taken up enough of your time today, but we really, really appreciate everybody's involvement. And a lot of you have been with RumbleOn for a long time, and we've just got some really, really exciting times ahead. And hopefully you sense that in the delivery today. And I would tell you that in closing, one of the biggest benefits that we have as a company that I mentioned in my opening is really the teams. If you look at the tenure of the team that is now regional directors, the average tenure of those guys is over 20 years with right now themselves. Not 20 years in the industry, 20 years with that retailer. And it isn't just that handful of people. As we tour the stores, the most amazing thing that I saw coming from an industry, be it cars, that have pretty much a revolving door of employee turnover is We walk in service departments that have people that have been through four ownership changes and have been a mechanic there for 30 years and parts people and so forth. I think we can all agree that the industry is in need of technology changes, but when you have this type of foundation to be able to build a great company on with talent and tenure that the ownership of these companies has provided, we have a lot to look forward to, and I think we can move significantly quicker. than most companies at the stage we're in. So with all of that, we really, really appreciate you guys' time today and look forward to your follow-up questions as we go through the next few days. And 60 days from now, we're going to be back talking to you again about Q1, of which we're very excited about. So again, thank you very much. Have a great day.
spk02: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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