RumbleOn Inc. (RMBL) Misses Q1 EPS by $7.77, Revenues Miss

RumbleOn Inc. (NASDAQ: RMBL) reported Q1 EPS of ($10.77), $7.77 worse than the analyst estimate of ($3.00). Revenue for the quarter came in at $144.4 million versus the consensus estimate of $212.9 million.

First Quarter 2020 Financial Highlights

• Total vehicle unit sales of 7,420
• Total revenue was $144.4 million, up 13.8% from Q4 of 2019
  • Powersports revenue was $23.1 million, up 39.2% from Q4 of 2019
  • Automotive revenue was $114.2 million, up 8.6% from Q4 of 2019
  • Transportation revenue was $7.1 million, up 37.4% from Q4 of 2019
• Gross profit was $(1.3) million or (0.9%), net of $11.7 million non-cash inventory impairment loss, and $1.2 million for net realizable value adjustments for inventory. Gross profit for Q4 of 2019 was $9.0 million. See the section titled “Impairment and Net Realizable Value Adjustments” below for additional details.
• Adjusted gross profit was $11.6 million, excluding the $12.9 million in impairment and net realizable value adjustments for inventory. Adjusted gross margin was 8.1%. See the section titled “Impairment and Net Realizable Value Adjustments” below for additional details.
  • Gross margin on vehicles sold was 6.8%
  • Powersports gross profit per vehicle sold was $1,039, a 13.8% increase from Q4 of 2019 and up 8.2% from Q1 2019
  • Automotive gross profit per vehicle sold was $1,379, a 11.3% increase from Q4 of 2019 and up 28.7% from Q1 2019
  • Sales, general and administrative expenses were $18.1 million, a decrease of 18.5% from $22.2 million in Q4 of 2019
• Operating loss was $19.9 million
• Net Loss was $22.0 million
• Adjusted EBITDA loss of $6.5 million
• Net loss per share was ($10.77) based on 2,046,423 basic and fully diluted Class B shares. On May 20, 2020, RumbleOn effected a one-for-twenty reverse stock split of its issued and outstanding Class A Common Stock and Class B Common Stock. Following the reverse stock split, the Company has outstanding 50,000 shares of Class A Common Stock and approximately 2,162,696 shares of Class B Common Stock

“Consistent with the goals we outlined last fall, we have taken prescriptive measures to drive gross margin expansion, gross profit per unit improvements and reduce operating expenses. We had a strong start to the year, with January and February tracking in line with our expectations as our initiatives, including opportunistically building inventory in Q4 for the anticipated acceleration in sales in 2020, began to pay off. Beginning in March, the industry - and our business - experienced imbalances in both supply and demand. We were decisive and quick to take action to protect our business through prudent management of our financial resources from the onset of the pandemic,” commented RumbleOn CEO Marshall Chesrown.

“We are seeing a rebound in demand, consistent with others in our industry. While we anticipate significant improvements from the low volume experienced industry wide in April and May, we expect continued fluctuations in market trends and will maintain our conservative approach to sales volume while closely monitoring market conditions.

“Looking ahead, we are focused on the successful launch of the third generation of RumbleOn.com in Q3, which will improve powersport dealers’ ability to compete in a meaningful manner in online-only transactions while expanding RumbleOn’s opportunities for monetization, and furthering our advanced discussions with potential strategic alliances. RumbleOn is still in its early days, and we look forward to years of innovation ahead of us.”

Chesrown continued, “Our nimble business model enabled us to make operational changes necessary to withstand the deepest demand slowdown the vehicle market has probably ever seen, and we believe that the actions we took during this time will enable us to emerge in as strong a position as ever. We are committed to making sustainable improvements to SG&A and GPU as we execute on our strategy to become the first online vehicle provider to achieve profitability.”

Second Quarter 2020 Commentary and Outlook

RumbleOn experienced the bottom of the downturn in mid-April, with the largest unit sales decline and its lowest level of inventory acquisition during the quarter. By the end of April conditions began improving slowly, ramping up more quickly as the month of May progressed. Total unit sales for the month of April were down 66% from January levels. The velocity of the rebound in May and thus far through June has been higher than expected and with the return of demand, our acquisition of inventory has accelerated. In May, unit sales increased more than 22% from April’s lows, and based on initial June month-to-date results the Company is expecting a 26% increase in month-over-month unit sales in June as compared to April. Though current monthly unit volumes experienced are still below January and February, preliminary results for the month of June show the highest gross margin on units sold in the Company’s history and significant operating income improvement from prior periods.

“Our results reflect progress we are making on our objective of a more disciplined approach to sales volume as we take prescriptive steps to achieve our goal of accelerating profitability. We intend to continue our disciplined approach to unit sales in favor of margin enhancements. Although we are optimistic, we remain cautious. We expect continued fluctuations in market trends that will impact our business throughout the remainder of this year and don't anticipate sales level getting completely back to normal until potentially late in the year or early 2021. We are committed to our goal of achieving profitability through margin expansion and SG&A improvements and we continue to believe we will be the first in our industry to reach profitability,” concluded Chesrown.

Given the uncertainty of the ongoing impact and unprecedented conditions surrounding the COVID-19 pandemic, we cannot predict the overall effect to RumbleOn, our customers, regional business partners, and others that we work with. As a result, we believe it is prudent to withhold guidance for the back half of the year until we can better gauge market conditions and have a clearer understanding of the lasting impact from the COVID-19 pandemic.

For earnings history and earnings-related data on RumbleOn Inc. (RMBL) click here.

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