RumbleOn Q2 2024 Results Highlight Strategic Adjustments Amid Challenges

RumbleOn Incorporated (RMBL), a prominent Powersports dealership group, released its financial results for the second quarter of 2024, highlighting a combination of strategic efforts and challenges faced in the industry.

CEO Michael Kennedy emphasized the company’s resilience, noting positive free cash flow in the first half of the year and the intention to sustain this momentum. Although there was a decline in major unit sales and new unit gross margins—attributed to industry overstocking and planned exits from noncore product lines—improvements were observed in pre-owned gross margins.

The company is making significant advancements toward its Vision 2026 objectives, having launched its first pre-owned center, Powersports of Houston, and actively seeking acquisitions to spur growth.

CFO Tiffany Kice introduced new financial reporting adjustments aimed at aligning with industry standards. For the quarter, RumbleOn achieved $336.8 million in revenue and $16.2 million in adjusted EBITDA.

### Key Takeaways
– RumbleOn reported revenue of $336.8 million and adjusted EBITDA of $16.2 million for Q2 2024.
– Positive free cash flow was delivered in the first half of 2024, with an aim to maintain this trend.
– New unit sales decreased, affecting gross margins due to industry overstocking and strategic exits from noncore product lines.
– Improvements in pre-owned gross margins were noted, alongside strong performance from the financing and insurance team.
– The company opened its first pre-owned center in Houston and is exploring expansion opportunities.
– RumbleOn is pursuing acquisitions while adjusting financial reporting to meet industry norms.
– An amendment with term loan lenders raised the minimum unrestricted cash requirement, providing additional flexibility.
– Challenges include lower sales, declining gross margins on new vehicles, and elevated inventory levels.
– Despite economic challenges, RumbleOn remains optimistic about achieving its Vision 2026 targets.

### Company Outlook
– The company is refraining from providing top-line guidance due to volatile conditions, high inventories, and an approaching election.
– Q3 is anticipated to be strong, with a typical decline expected in Q4.
– Goals include exceeding $1.7 billion in annual revenue, over $150 million in annual adjusted EBITDA, and $90 million or more in annual adjusted free cash flows by 2026.

### Bearish Highlights
– Notable decreases in major unit sales and new unit gross margins were reported.
– Gross margins have been pressured by industry overstocking and decisions to exit noncore product lines.
– The current economic environment and forthcoming elections pose challenges to the business.

### Bullish Highlights
– Pre-owned gross margins showed improvement, with the financing and insurance team achieving strong results.
– The Houston store opening is expected to generate cash flow with low capital costs.
– Potential interest rate cuts could positively impact the business model.

### Misses
– Efforts are underway to reduce new vehicle inventory, with a goal to resolve the issue by year-end.
– Exits from the marine business and certain niche brands are strategies aimed at optimizing brand offerings in stores.

### Q&A Highlights
– CEO Kennedy addressed challenges regarding inventory clearance and the competitive landscape, including reduced OEM support.
– The company has nearly fully exited the marine business, maintaining only personal watercraft and some Yamaha products.
– Kennedy expressed confidence in achieving the Vision 2026 targets, emphasizing gratitude for the team’s efforts.

As RumbleOn navigates through various challenges, the management remains committed to its growth objectives, demonstrating a focused strategy for the future.