10-K: RumbleOn Reports FY2024 Results: Revenue Declines Amidst Strategic Shifts and Management Changes

RumbleOn's FY2024 results reveal a revenue decrease primarily due to lower powersports vehicle sales, coupled with significant executive leadership changes and ongoing efforts to address internal control weaknesses.

Summary

• RumbleOn, Inc. reported its financial results for the fiscal year ended December 31, 2024.
• The company operates through two segments: a powersports dealership group and a vehicle transportation services entity, Wholesale Express, LLC.
• Total revenue decreased by $157.2 million, mainly due to lower revenue from powersports vehicles and related products.
• The company operated 56 dealerships as of December 31, 2024.
• The company experienced significant changes to its executive team, including the appointment of Michael Quartieri as CEO effective January 13, 2025.
• A material weakness in internal control over financial reporting was identified related to user access and segregation of duties in IT systems.
• The company is taking steps to remediate this weakness.
• The company is involved in an SEC investigation and Delaware litigation.
• The company's Class B Common Stock trades under the symbol RMBL on the Nasdaq Capital Market.
• The company has never declared or paid any cash dividends and does not intend to in the foreseeable future.
• The company plans to refinance its term loan in 2025.

Sentiment

Score: 4

Explanation: The sentiment is slightly negative due to declining revenue, a net loss, and a material weakness in internal controls, offset by cost-cutting measures and improved operating cash flow.

Positives

• Operating loss improved by $54.8 million, or 78.8%, to a loss of $14.7 million in 2024 from a loss of $69.5 million in 2023.
• SG&A expenses decreased by $71.9 million, or 20.7%, to $275.4 million in 2024 from $347.3 million in 2023.
• Net cash provided by operating activities improved by $138.3 million to $99.4 million in 2024 from $(38.9) million in 2023.
• The company repaid principal of $38.8 million plus accrued interest due under its 6.75% convertible senior notes on January 2, 2025.
• The company is taking steps to remediate a material weakness in internal control over financial reporting.

Negatives

• Total revenue decreased by $157.2 million, or 11.5%, to $1,209.2 million in 2024 from $1,366.4 million in 2023.
• Loss from continuing operations was $(78.6) million in 2024.
• A material weakness in internal control over financial reporting was identified related to user access and segregation of duties in IT systems.
• The company is cooperating with an SEC investigation and defending against Delaware litigation.
• The company's independent auditor issued an adverse opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2024.

Risks

• The company's success depends on its ability to grow organically and through strategic acquisitions, which may not be realized.
• The company may not be able to acquire sufficient powersports inventory to satisfy consumer demand.
• The company depends on key personnel, and the loss of senior management could harm the business.
• The company has identified a material weakness in its internal control over financial reporting.
• The company relies on third-party financing providers to finance a substantial portion of its customers' purchases.
• Adverse conditions affecting powersports manufacturers could have a material adverse effect on the business.
• The company is dependent on relationships with the manufacturers of powersports vehicles and is subject to restrictions imposed by them.
• The company may be subject to product liability claims and may be adversely impacted by manufacturer safety recalls.
• Natural disasters, adverse weather, and other events can disrupt the business.
• The company has incurred significant indebtedness, which could adversely affect the business.
• The powersports industry is sensitive to unfavorable changes in general economic conditions.
• The company participates in a highly competitive market for powersports products and services.
• If powersports vehicle manufacturers reduce or discontinue sales incentive programs, the company's financial condition may be materially adversely affected.
• Seasonality or weather trends may cause fluctuations in revenue and operating results.
• The company relies on Internet search engines to drive traffic to its website.
• A significant disruption in service on the company's websites could damage its reputation.
• Disruptions or breaches involving the company's or its third-party providers' IT systems could interrupt operations.
• If state laws that protect powersports retailers are repealed, the company's retail locations may be more susceptible to termination.
• The company operates in a highly regulated industry and is subject to a wide range of federal, state, and local laws and regulations.
• The company is subject to various legal proceedings.
• The company's largest stockholders may have the ability to exert substantial influence over actions to be taken or approved by the company's stockholders.
• The market price of the company's Class B common stock has been, and may continue to be, highly volatile.
• If securities analysts issue adverse or misleading opinions regarding the company's stock, the stock price and trading volume could decline.
• The company does not currently or for the foreseeable future intend to pay dividends on its common stock.
• Anti-takeover provisions may limit the ability of another party to acquire the company, which could adversely impact the stock price.

Future Outlook

Express is in the process of hiring additional employees, including brokers, we expect 2025 volume to be substantially less than what was generated in 2024 as we rebuild the business. The Company plans to refinance the term loan in 2025; however, the terms and conditions available to the Company may not be favorable.

Management Comments

• Effective January 13, 2025, our Board appointed our Chairman, Michael Quartieri, as CEO of the Company.
• In the first quarter of 2025, several employees, including almost all brokers, exited Express, which is expected to reduce the volume of business conducted by this segment in 2025.

Industry Context

The powersports retail marketplace in the United States is highly fragmented, with competition from traditional franchised dealers, independent pre-owned dealers, and private parties.

Comparison to Industry Standards

• The document does not provide enough information to make a detailed comparison to industry standards.
• Comparable companies in the powersports retail industry include publicly traded companies such as Polaris, BRP, and Harley-Davidson, as well as large private dealership groups.
• Key metrics for comparison would include same-store sales growth, gross margin, inventory turnover, and SG&A expense as a percentage of revenue.
• The document mentions that the powersports retail marketplace in the United States is highly fragmented with low barriers to entry.

Management Changes

Corporate Governance

Legal Proceedings

• The company is cooperating with an SEC investigation regarding the use of company resources by the former Chairman and CEO, related party transactions, and disclosures related to the RideNow Cash Offer tool.
• The company is defending against a lawsuit filed by former CEO Marshall Chesrown in Delaware Superior Court, seeking $7.5 million in termination compensation damages and $50.0 million in general and reputational damages.

Related Party Transactions

• On December 27, 2024, the company sold a dealership property to an entity controlled by William Coulter and Mark Tkach, who are directors and former executive officers of the company, for $4.0 million, and then entered into an operating lease with the entity.
• On December 19, 2024, the company issued and sold shares of Class B common stock to Stone House Capital Management, LLC, which is managed by Mark Cohen, a director of the company, for approximately $1.5 million.
• On December 6, 2024, the company entered into a floor plan facility agreement with related parties Coulter, Tkach and Ridenow Management LLLP, an entity controlled by Coulter and/or Tkach that provides up to $16.0 million of revolving availability.

Stakeholder Impact

• Shareholders may be concerned about the declining revenue, net loss, and material weakness in internal controls.
• Employees may be affected by the executive leadership changes and cost-cutting initiatives.
• Customers may experience changes in service or product offerings due to the company's strategic shifts.
• Suppliers and creditors may be impacted by the company's financial performance and debt obligations.

Next Steps

• The company plans to refinance its term loan in 2025.
• The company is taking steps to remediate a material weakness in internal control over financial reporting.
• The company is cooperating with an SEC investigation and defending against Delaware litigation.

Key Dates

Keywords

RumbleOn, powersports, dealership, financial results, revenue, earnings, inventory, acquisitions, management changes, risk factors, internal control, SEC investigation, litigation, stock price, debt, floor plan financing, vehicle transportation, Wholesale Express