RumbleOn, Inc.

accessories online, making us the only power sports company with such an extensive inventory selection and online capabilities for buying, selling, financing, and handling service needs, as well as purchasing parts and merchandise. Our list of functionality enhancements goes on and on, and we are committed to providing our customers with the best possible experience through innovative technology. Fourth, we remain focused on initiatives that create better experiences for our customers in-store and online. We are proud of the diverse best in class selection of brands at our retail locations and continue to add new and exciting offerings from around the world, thereby expanding this unparalleled selection to our existing location. We continue to test iPad selling and many other showroom enhancements. It is important that the experience online and offline is a great one. If the customer is within any reasonable distance of our current location, we will do everything possible to create a showroom visitor. However, long-term, we intend to bring down the geographic boundaries with continuous improvements to our online capabilities as consumer behavior continues to march towards simple online commerce. Fifth, we are focused on increasing market share through both organic and acquisition growth. As we mentioned in our Q4 commentary, we acquired a very exciting dealership in Tallahassee during the quarter. Since merging the location into our portfolio, we elevated that location's productivity dramatically and couldn't be more excited about that and future addition. We continue to see ample M&A opportunities, but for the time being, our capital allocation priority is in reducing debt and maintaining strong liquidity due to the uncertainties that remain in the world economy. We look forward to opportunities in the latter half of 2023 and beyond and would expect more favorable acquisition pricing. We see the continued implementation of our fulfillment strategy on the organic side as a long-term game changer. Fulfillment not only drives bricks and mortar efficiencies in sales and service, but also sets the foundation and infrastructure for the ultimate objective of pure online sales. Our fulfillment strategy will improve sell-through and efficiencies in our sales and service departments, which we expect will then increase revenue and, most of all, improve the customer experience. We are slowing most initiatives due to the uncertainties discussed, but have not modified the business plan. We have made prudent moves since June of 2022 to just slow the timing and spend around facilities, new business, and real estate ventures, but have not slowed our technology plans at this point. If we are the long-term winner in this space, it will revolve around our technology. We certainly would be much further along on initiatives such as fulfillment, centralization, and others. But simply put, what might have happened this year might have to wait until 2024. We have built flexibility into all we do, recognizing that some plans may underperform our expectations while others will exceed them. It's the way it works when you're doing things that haven't been done before in a legacy business like Power Sports. With our focus on lifetime value of customers, the future of power sports is ours to own. The focus is execution at this point, and as consumer demand evolves, we are determined to be the forefront of that change. Bottom line, our long-term plan is to be the leading destination for all things power sports by providing the best-in-class customer experience with clear focus on the lifetime value of our customers. We are proud of our team's hard work and remain fully committed to our objective of a completely self-funded business model for growth and increased market share far into the future. The current environment has slowed our progress, but our plan is nimble enough to get back on the throttle when things improve, and they always do. With that, I'll hand the call over to Blake to walk through our first quarter 2023 financial and outlook in more detail.

Thank you, Marshall, and good morning, everyone. As Marshall detailed, we remain focused on our key priorities for 2023 and continue to take proactive measures that will benefit our financials throughout the remainder of the year and beyond. As we navigate this dynamic environment, my team is managing our balance sheet and P&L to ensure our plan for self-funding is achieved. Now, I will begin with a review of our first quarter financial results, followed by our outlook. Beginning with first quarter units, we sold 17,336 total units, comprising 10,436 new units and 6,900 used units, both down 1.9% sequentially in the power sports segment. As we mentioned last quarter, we took a strategic approach to decrease our purchase of used inventory. This decision was made because the normalization of new inventory happened faster than anticipated. and the data from late September indicated a greater decline in the value of used vehicles compared to earlier quarters. While we recently started to increase our used inventory acquisition, as to date, our used inventory is reduced nearly 40% from the peak in October, and we don't anticipate returning to the peak prior year used inventory levels. The new-to-use ratio for Q1 was 1.5 to 1, in line with the prior quarters. Our focus remains on both new and used products, which helps us maintain our status as a good OEM partner, supporting the brands we represent. As a reminder, we maintain a competitive advantage with our cash offer tool and our ability to quickly and effectively source used inventory, moving it to where it is most needed. We continue to closely monitor day supply, and we strive to maintain significantly more used inventory than was held prior to the Ride Now Rumble On merger. This level of used inventory allows us to show the customer a much larger and broader array of models than any of our competitors and provides additional lower cost options for those credit challenge consumers. Total revenue in the first quarter was 346.3 million, in line with our expectations. Revenue from finance and insurance declined 1.4% sequentially, as that revenue stream typically mirrors units sold. while parts, accessories, and service sales decreased 9.5% sequentially due to a mixed reduction of UTV and ATV units, driving lower-priced parts and accessories per unit sold. Total gross profit for the first quarter was $91 million, down 2% sequentially. The decline in gross profit was due to slight consumer finance tightening, as well as a 15% reduction in the profitable side-by-side category, partially offset by an increase in on-road motorcycles. Total GPU was 5,349 compared to 5,420 in the prior quarter. In the quarter, GPU was pressured as we worked through our used inventory overhang brought on by the 2022 supply imbalances in new and used units. As I mentioned, we have right-sized our used inventory and have begun acquiring fresh used products, which will benefit GPU going forward. We saw improvements in March, as March GPU was 14% higher than the combined January and February average. What is also encouraging is that April GPU was slightly above March, inching us closer to our $5,700 second half of the year target GPU. Moving to operating expenses. Since I was promoted to CFO in late January of this year, my overarching focus is on expense control. There is always a natural lag from the time you cut an expense to the visible results, but we are now starting to see the results, which will aggressively ramp up in Q2 through Q4. As we previously mentioned, we implemented a strategy to reduce 15 million of expenses and are now identifying additional cost-cutting opportunities. Our goal is to reduce SG&A by eliminating inefficiencies and waste without cutting into the sales muscle of the business. We know that we can't simply expense our way to our EBITDA target, but it remains a key component to its achievement. Total SG&A expenses in Q1 were $87 million, down $5 million or 5% sequentially. Within SG&A, total stock-based compensation was approximately 2.9 million, up from 2.1 million in the fourth quarter of 2022. Adjusted net income was a loss of 16.9 million, and adjusted diluted earnings per share was a loss of $1.04. I will give some additional color on our expense breakdown for the quarter. Total compensation increased 1% sequentially. primarily due to strategic headcount additions in key sales and service roles in anticipation of the spring selling season, as well as targeted increases in select corporate positions that will drastically decrease our utilization of higher cost professional services in the second half of 2023. Professional fees were 64% lower sequentially. We also saw a slight decrease in G&A expenses compared to the prior quarter. Additionally, we are seeing some increased wages from inflationary pressures and labor market competition. Starting in Q2, we are implementing our plan to reduce annualized expenses by an additional 10 to 15 million. Subject to change, expense buckets include reductions in, number one, compensation achieved through a hiring freeze and a small workforce reduction in non-revenue generating positions. Number two, employee benefits which were obtained through our annual renewal. Number three, professional fees as we replace vital outside services with our own internal workforce. These expense reductions will be partially offset by increases in facility and legal fees. Additionally, we have targeted other opportunities to further reduce expenses as the market dictates. Adjusted EBITDA was 10.7 million in the first quarter, down 43% from the fourth quarter of 2022. driven by continued margin compression on new and used units and the usual lag effect from SG&A reductions. GPU has normalized from the peak pandemic record, which was driven at the time by extremely favorable supply and demand economics. As I mentioned previously, we believe the severe margin compression we experienced from November through February was partly self-inflicted with the aggressive buying of used inventory into Q3 of 2022. just as new inventory unexpectedly came rushing back. As I mentioned, we are seeing positive signs of increased GPU in March and April. March EBITDA alone represented over 100% of total EBITDA for Q1. Additionally, similar results to March were experienced in April. Turning to the balance sheet and cash flow, at the end of the quarter, we had $51.8 million in unrestricted cash and a $75 million used floor plan facility with JP Morgan with unused capacity of 50 million. We also had 30 million of unfinanced equity in our used inventory, which combined with unrestricted cash provides roughly 80 million of available liquidity that can be used to fund the business as outlined in our plan. As we mentioned last quarter, we have signed a letter of engagement with JP Morgan to review our balance sheet initiatives and options. We continue to work closely with JPMorgan so that we are ready to go to the rating agencies and credit markets when they open back up for business. We remain focused on profitability and cash generation for the remainder of 2023 as we scale our business and service our debt. Moreover, as Marshall mentioned, we have identified additional non-core assets which we are actively working on that will allow for the payment of an additional 60 to 70 million in principal debt over the course of 2023 without impacting our operating cash flow. Now, let me provide more details on our outlook for 2023. For the full year, we reiterate our guidance of total company power sports and transportation revenue within the range of 1.4 billion to 1.6 billion, compared to power sports and transportation revenue of 1.46 billion in 2022. We continue to ramp up toward our target GPU of approximately 5,700, which we anticipate achieving in the second half of 2023, compared to 6,159 in the prior year 2022. We continue to expect adjusted EBITDA of $95 million to $105 million for 2023, driven by gross margin pressure offset by SG&A reductions. We remain comfortable with this guidance range as we believe we have the flexibility to offset any shortfalls with further reductions in expenses as needed. We maintain a strong relationship with our lender and we are fully compliant with our financial debt covenants and plan to remain so. I will now pass the call back to Marshall for closing remarks before we open the call for questions.

Thank you, Blake. To close out, as you know, there's a lot of noise out there right now, and we are doing our best to navigate through the challenging environment and deliver strong results to drive long-term shareholder value. We remain fully committed to our business plan and the five pillars of our strategy. There is no change in our plan, and we are marching forward with a relentless focus on execution. I want to take a moment to recognize and thank the incredible team at RumbleOn. We are fortunate to have such a talented and dedicated group of individuals working together towards our shared goals.