RumbleOn, Inc.

Thank you, operator. Good morning, ladies and gentlemen. Thank you for joining us on this conference call to discuss Rambalan's first quarter 2022 financial results. Joining me on the call today are Marshall Chazron, Rambalan's chairman and chief executive officer, and Narendra Sahai, Rambalan's chief financial officer. Our Q1 results are detailed in the press release we issued this morning, and supplemental information will be available in our first quarter form 10Q that will be filed later today. Before we start, I'd 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 Rumble Law 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 non-GAAP financial measures, please see our earnings release issued earlier this morning. Now, I will turn the call over to Marshall. Marshall? Thank you, Will.

Good morning, everyone, and thank you for joining us today. I'm very pleased to be reporting on our strong financial and operational results for the first quarter of 2022. We enhanced our omnichannel customer offering, expanded our national footprint, deepened our leadership position in power sports, and delivered on our financial goals, while keeping our focus firmly on our North Star, providing customers an unparalleled choice of products and services, as well as an unmatched buying and selling experience, both online and in our retail locations. We sold over 19,000 total units in the quarter alone, delivered nearly $460 million in revenue, and generated over $105 million in gross profit. We recorded over $9 million of net income and over $31 million in adjusted EBITDA while making strategic investments to strengthen RumbleOn's core and execute on our mission. We are confident in our strategy and are reiterating our outlook for the entire year. Creating a best-in-class customer experience in power sports begins with building a fantastic end-to-end ownership experience with focus on lifetime relationships with our customers. At RumbleOn, we do not have a one-and-done transactional mentality as our goal to become a power sports destination of choice for participants in the space throughout their buying future. That starts with building trust, not only through professionalism, transparent pricing, quality assurance, and superior customer service, but also in our promise to provide the best selection of high-quality inventory from all of our manufacturing partners, an unparalleled selection of used products of all makes and models, courteous and on-time service, and market-leading financing options. Our cash offer tool is a key differentiator for RumbleOn. Since the beginning, our proprietary technology and process has enabled us to acquire high-quality used vehicles directly from consumers anywhere in the country. We've rolled out our cash offer tool in all 55 RumbleOn locations and continue to increase our capture rates dramatically. In addition to this highly efficient acquisition channel for used units, the significant expansion of our footprint has enabled us to funnel most of our used power sports inventory to our retail locations. This is reducing our previous dependence on the wholesale channel and increasing our market share in the higher margin retail channel. The strong demand environment combined with our efficient inventory strategy helped us expand sales of used retail power sports again in Q1. We sold 43% more used retail units than in Q4 of 21 and delivered 80% growth in gross profit from that channel. Despite this impressive growth, the majority of our stores are still in need of additional used inventory, and we're working hard to acquire more and accelerate day supply in our highest performing locations. We are continuing to work on the implementation of our new fulfillment system that will provide near real-time inventory replenishment to ensure that the right vehicle is in the right place at the right time with the right price. Our fulfillment system will also prioritize ensuring we have consistent photos, videos, and descriptions of each vehicle, further enhancing our omnichannel customer experience. We are on track to complete our digital inventory system and full integration of our retail location websites later this year, which will further support our retail growth strategy. We also continue to see strong demand for new inventory, and we sold more than 9,600 new units in Q1. New inventory continues to be dependent upon manufacturers' production and distribution constraints for the foreseeable future. Due to this dynamic and ongoing supply chain challenges, we expect new PowerSports retail unit sales in 2022 to be consistent with last year. While we are still in the early innings, we will continue our work to bring our new-to-use ratio to one-to-one. Long-term, we're focused on both new and used. However, our unique access to a broad array of high-quality used retail power sports units presents the greatest near-term opportunity. It provides some insulation from supply chain disruptions experienced across the industry today and is an important differentiator for us in any market environment. Used vehicles, due primarily to affordability, provide a great entry point into power sports for both newer and younger users which builds a base of new riders into the sport. By offering the best customer experience, compelling price points of products, and the ease of rumble on finance, we believe these lifetime relationships will be significant. Before I turn the call over to Narendra, I'd like to reiterate the three key investment areas that we outlined in our last earnings call. First, implementing our Customer Experience Center for efficient inventory acquisition and distribution, as well as fulfillment for new, used parts and merchandise. Our customer experience centers will enable us to become a destination for power sports enthusiasts to interact and engage with not only the products they desire, but also with both the broader power sports community and with our brand. The customer experience centers will also serve the dual purpose of fulfillment and inventory acquisition, reconditioning, and distribution. We plan to open our first experience center in the Dallas-Fort Worth market later this year, and over time, we look to replicate that playbook in other geographic areas that are important to our omnichannel growth strategies. Second, expanding and enhancing our technology stack. As I just discussed, optimizing and integrating our inventory is critical to ensuring we're the leading destination for power sports consumers. The near-term focus areas here are better leveraging the robust data we collect from online and in-store transactions and integrating our technology across our retail locations. Our real-time pricing and sales data from in-store transactions will enable us to further optimize offers and pricing across the entire ecosystem. We are also upgrading our technology infrastructure to enhance connectivity and collaboration across our retail locations and improve the customer shopping experience. We will continue to expand and enhance our technology stack throughout 2022 and beyond. And third, developing our people and processes to attract and retain the best talent and build a scalable organization. As with our technology development, we are thoughtfully investing in people and process to strengthen our foundation and prepare us for our next stage of growth. We implemented our regional management structure in Q1, and not only are our regional directors working more closely with one another, they're also sharing ideas and developing best practices. But we are realizing important efficiencies that will enhance our integration efforts going forward. We are also investing to build out our critical functional competencies, as well as systems to support these functional areas. Our omnichannel strategy, combined with our unique ability to source and distribute high-quality used inventory at affordable prices, are the cornerstones of our model. Amid increasing affordability concerns, inflation, the absence of government stimulus packages, negative consumer sentiment, and some of the highest fuel prices in history, consumers are responding to our offering, and we are delivering a superior product and experience to our customers while driving profitable growth. We believe that there is significant pent-up demand, which will continue to offset potential macro headwinds in the foreseeable future. We are building the premier destination for power sports enthusiasts and will continue to optimize our business and unlock opportunities to gain market share. With that, I will turn the call over to our CFO, Narendra Sahai, to provide you with further details on our recent financial performance and an update on our outlook.

Narendra? Thank you, Marshall, and good morning, everyone. Our first quarter results reflect strong momentum and demonstrate our commitment to executing on our plan, realizing integration benefits, and delivering profitable growth. Please refer to our earnings press release and 10Q to be filed later today for full details of the quarter. Unless otherwise specified, all of the first quarter growth figures cited in my remarks today are quarter-over-quarter or sequential comparisons. Moving on to some key highlights, we are pleased to report a quarter of strong growth in used retail power sports unit sales. In the first quarter, we sold over 19,300 total units, up nearly 14% from the fourth quarter of last year, led by over 43% growth in used retail power sports unit sales. Our growth in used retail power sports unit sales was driven by continued strong execution in acquiring used power sports units from consumers and channeling this inventory through our retail locations. Excluding the contribution in the first quarter of power sports unit sales due to Freedom Power Sports acquisition, which closed on February 18, 2022, new retail power sports unit sales increased 5%, Used power sports unit sales increased 23%, and total power sports unit sales increased 12% sequentially. In the first quarter, we delivered nearly $460 million of revenue, a record, up approximately 7% sequentially. Our first quarter revenue growth was driven by strength across the power sports segment, which was up 22%, but offset by the decline in revenue from the automotive segment. Revenue from finance and insurance net grew 24%, and parts and services, accessories, and merchandise increased 7.6% sequentially. I'll note that we are reporting finance and insurance revenue net of costs in this quarter, and we'll be reporting finance and insurance revenue on a net basis going forward. For comparison purposes, we have calculated the prior quarter's finance and insurance revenue on a net basis in our earnings press release. In the first quarter, total gross profit was approximately $105 million, a record, up 17% from approximately $90 million in the prior quarter. Total gross profit margin was 23%, up from 21% in the fourth quarter of last year. Sequential increases were driven by strength across the PowerSports segment, particularly across the used retail unit sales which is the high-margin sales channel. The increase in retail sales also contributed to revenue and gross profit growth in finance and insurance nets and parts, services, accessories, and merchandise. Operating expenses were $82.6 million, or nearly 18% of revenue, compared to over $74 million, or 17% of revenue in the prior quarter. Our first quarter operating expenses include the early investment in technology, facilities, and people and processes they're making to scale RumbleOn. Within operating expenses, total stock-based compensation was approximately $1.9 million, down from $2.1 million in the fourth quarter of last year. Income from operations, our operating income was $22.7 million, compared to nearly $16 million in the prior quarter. Net income was $9.1 million compared to $20.7 million in the prior quarter, which was helped by a tax benefit of approximately $11 million and a $2 million one-time benefit from PPP loan forgiveness. Adjusted EBITDA was $31.4 million, up 29% sequentially, from $24.3 million in the prior quarter. As of March 31, 2022, cash and cash equivalents, including restricted cash, was approximately $69 million. Total available liquidity, which is defined as cash and cash equivalents, including restricted cash, plus availability under our inventory financing credit facilities, was over $201 million. we generated $31.3 million in cash flow from operating activities. Now turning to our outlook. We're encouraged by the positive trends we saw over the last several quarters. In regards to new power sports units, given the strong consumer demand and the ongoing supply constraints that manufacturers are broadly experiencing, our new inventory levels are down from the end of the fourth quarter. We expect new power sports supply to continue to be constrained throughout the year. While new power sports unit sales may fluctuate quarter to quarter, we now expect full year 2022 levels will be flat to slightly down on a comparable basis with the prior year. We expect that this dynamic in new power sports unit sales will be offset with used retail power sports unit sales as we continue to acquire used power sports units directly from consumers on our online platform and channel this used power sports inventory through our retail locations. We continue to expect in excess of 50% year-over-year growth in used retail power sports unit sales. As a result, we are reiterating our full-year 2022 outlook, which already reflects our visibility into the supply chain environment and a tough macro backdrop for consumers marked by higher inflation, rising interest rates, and consequently impacted affordability. For 2022, we continue to expect to deliver total revenue in the range of $1.9 to $2 billion and adjusted EBITDA of at least $145 million, which includes up to $20 million of incremental operating and capital investments over the course of the year. We remain on track with making these investments in a thoughtful manner. Additionally, our guidance does not include any incremental contribution from future acquisitions. Now, let me turn it back to Marshall before we open up the call for questions.