RideNow Group, Inc. (RDNW) Earnings Call Transcript & Summary

Greetings, and welcome to the RumbleOn Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Hilary Sumnicht, Director of RumbleOn. Thank you. You may begin.

Good afternoon, everyone. Thank you for joining us today. Marshall Chesrown, RumbleOn's Chairman and Chief Executive Officer, is joining me on this conference call to discuss the combined business. We will not be taking any questions on today's call, but I encourage investors to reach out to the Investor Relations team at [email protected]. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website. The conference call is the property of RumbleOn, and any taping or other reproduction is expressly prohibited without prior written consent. Before we start, I'd 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 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. Now I will turn the call over to Marshall. Marshall?

Thanks. We're very excited to announce that we closed our business combination with RideNow to become the first omnichannel customer experience in powersports. Consumers are seeking new and exciting experiences, and there is no better place than powersports. Powersports are wants, not needs, and it's that lifestyle, that passion for the sport that creates the opportunity for an omnichannel solution. We're confident that the integration of RideNow's extensive geographic footprint and strong retail brand, combined with RumbleOn's technology platform and access to pre-owned inventory will make powersports vehicles more accessible to both the enthusiast and the first-time buyers nationwide. We received approval from our shareholders as well as the approvals and consents necessary to close the transaction. We completed our public offering, raising approximately $167 million for the business combination and working capital, demonstrating the confidence and support of our stakeholders. Following the close of our capital raising transaction, we have an estimated $65 million in cash and cash equivalents on our balance sheet and approximately 14.98 million shares outstanding. We expect average weighted fully diluted shares outstanding to be approximately 8.2 million in Q3. You can reference our prior and upcoming SEC filings for more detail on the transaction in RideNow's financial performance. So I want to use this time to provide context on our expectations for the combined company, and how we will think about our business going forward. We've been partnering with RideNow for several months and are excited to begin the official integration process. The advantages of becoming the first omnichannel enables us to utilize tech-driven nationwide inventory aggregation, while leveraging e-commerce presence to drive foot traffic to retail locations and using physical locations to drive online sales. The combination of RumbleOn's database and real-time business intelligence from online transactions with RideNow's many years of retail data gives us compelling stocking, pricing and seasonal analytics to drive inventory and pricing decisions to make sure the right vehicle is in the right place at the right time and price to generate online activity and superb customer experience. At a high level, I would like to emphasize a few key areas: Number one, increasing pre-owned sales, better inventory selection from our consumer sourcing approach. We believe we are and will continue to be the leader in inventory sourcing and will continue to bring supply to the industry as we have since 2017. Number two, attaching RumbleOn Finance and other high-margin ancillary offerings such as service, parts, apparel and merchandise. We have already begun testing our captive finance offerings and are seeing impressive early indicators. RumbleOn Finance is clearly providing incremental sales on both new and used for those consumer loans that are better suited for us than other lenders in the space today, thus creating pure incremental sales. RumbleOn Finance is not a replacement or a competitor for the consumer lenders in powersports today, but an option primarily in subprime and mid-prime lending, where an approval creates a sale that might not have happened otherwise. The availability of new finance opportunities to fill any current void has the potential to drive incremental sales for every dealer, which is a win for dealers and manufacturers alike. For RumbleOn, taking advantage of an untapped opportunity of RumbleOn Finance by offering online preapproval and facilitating transactions 100% online or in store for a potential margin upside. Number three, consolidating a massive and extremely fragmented industry. We have received and continue to receive inbound inquiries from dealers, who are excited to be part of this transformational business model. This demonstrates that we can fill a void for great dealers in the powersports space, and that's exactly what we experienced in the early days of AutoNation, which was the first public company in the auto space as we are now bringing to powersports. The optionality created by not being locked into only selling to a private competitor offers dealers more options to grow their business, create liquidity and potentially participate in the transformation created by RumbleOn of the $100 billion total addressable market. Number four, leveraging synergies. Integrating the business will enable us to optimize our cost structure by streamlining and centralizing operations and a continuation of RideNow strategy to date. We do believe there could be significant opportunities to leverage SG&A over time. And lastly, but, in our view, most importantly, we plan to create a world-class customer experience. Improving business cultures with the launch of the first omnichannel in powersports to enable preowned customers to shop and buy online, offline or in a combination of both, however the customer so chooses. Net-net, buying, selling, trading, financing, delivering and supporting the purchase after the sale is what differentiates us in the overall market and supply chain. We will remain focused on leveraging technology to streamline the entire vehicle transaction in-store or online and improving access to high-quality pre-owned inventory through our proprietary pre-owned vehicle sourcing while continuing to consolidate a fragmented industry. The combined company is expected to drive sales growth, cost synergies and margin expansion over time. In the very near term, we will be acutely focused on integrating operations and additional acquisitions. We believe we can make significant strides on the integration this year and expect to realize long-term benefits from incremental sales and margin opportunities. In addition to optimizing our technology suite to serve the combined business needs, we will continue to prioritize and enhance high ROI marketing channels. Powersports vehicle sales will be the vast majority of the combined company's revenue. As such, the primary drivers of our internal model are powersport unit sales, revenue and gross margin based on the type of powersport units sold, new and used. And on the used side, we will also report the sales channel they are distributed through retail and wholesale. We are highly confident in the prior outlook we provided for the combined company. Assuming the combination completed as of January 1, 2021, the company expects full year 2021 revenue for the combined company in a range of $1.45 billion to $1.55 billion, and an adjusted EBITDA in the range of $110 million to $115 million. We remain confident that our market leadership and continued evolution of our business positions us to deliver long-term sustainable value for our shareholders as we enter this exciting phase of rapid growth. Our current technology-enabled solution and the expansive opportunities that our business combination with RideNow will bring, combined with the powerful macro and secular tailwinds, we are poised to benefit from some of the most durable shifts in consumer behavior. We plan to offer up the best team, the best locations and an unparalleled mix of quality inventory available in the market today. This could not be coming at a more momentous time in this industry, and we are excited to work with all the dealers and all manufacturers to assist in accomplishing their goals and initiatives like never before. I'd also like to recognize our late co-founder and CFO and my dear friend, Steve Berrard, as we would not be here without his tremendous contributions to the organization and this business combination. I know Steve would be extremely proud, and we all wish he was here today to celebrate with us on the closing of another transformational business plan in his incredibly successful life. In closing, I want to personally thank Bill Coulter, Mark Tkach, their business partners and most importantly, the entire team of nearly 2,000 RideNow employees. You create the biggest and the best in powersports, and you should be very proud of your role in making all of this happen. The RumbleOn team couldn't be more excited to join with you as we transform the industry we all love. I'd like to say that lots of people can dream these kinds of things up, but at the end of the day, it's all about execution and make no mistake about it. Great execution is not about management alone, it's about the team and each of you play the most important role. Thank you to all of our stakeholders for your confidence and continued support. We look forward to updating you on our progress on our next earnings call.

Thank you. Ladies and gentlemen, that concludes our conference call. We thank you for your participation. You may now disconnect your lines.