RideNow Group, Inc. (RDNW) Q1 2018 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. And welcome to the RumbleON First Quarter 2018 Earnings Conference Call. Today's call is being recorded. [Operator Instructions]. I will now like to turn the conference over to Steven Berrard, Chief Financial Officer. Please go ahead, sir.

Good morning and thank you for joining our first quarter 2018 earnings conference call. On the call with me today is Marshall Chesrown, our President and Chief Executive Officer. By now everyone should have access to our earnings announcement which was filed prior to this call. This document may be found on our website at RumbleOn.com under the Investor section. Before we begin, let me remind you that part of our discussion today may include forward-looking statements which are based on the expectations, estimates and projections of management as of today. The forward-looking statements and our discussions are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not a guarantee of future performance and therefore undue reliance should not be placed upon them. We refer all of you to our 2017 Form10-K and other recent filings with the SEC for a more detailed discussion of the risks that could impact the future operating results and financial condition of RumbleON, Inc. We disclaim any intentions or obligations to update or revise any forward-looking statements except as required by law. I would like to now turn the call over to Marshall.

Thank you, Steve. Good morning and welcome everyone to the RumbleON first quarter 2018 earnings conference call. As you know our vision for RumbleON was driven by the belief that there was a significant opportunity to disrupt the pre-owned marketplace in power sports and recreational vehicle as it suffers from many of the same negative consumer sentiment and dealer practices that's existed in the automotive sector prior to the advent and significant influx of new instance and improved business model. Our management team saw a need for a well-designed simple online solution where consumers could buy and sell a broad selection of preowned recreational vehicle at highly competitive prices. To that end our goal from day one has been to change the way consumers and dealers buy and sell motorcycle by providing instant cash offers and offering a compelling value proposition through a quick, simple and transparent process utilizing an easy to use website and mobile app. As we have grown the business over the last nine months we have made significant investments in technology and marketing that gives us a strong foundation for our future. These investment in our unique model and proprietary platform ensure we can effectively scale with the buying and selling of high faulty low cost vehicle to and for consumers and dealers. This in turn enables us to improve growth process for the unit and significantly reduce variable operating cost while also refining and developing logistics and fulfillment channels to improve inventory returns, transportation and reconditioning stock. In addition we have invested heavily in cost effective marketing particularly in social media and search engine marketing to further reduced customer acquisition cost which are currently significantly lower than it's typical for the automotive industry. Our agnostic multi-channel approach to consumers and dealers utilizes brand building and direct response channel to effectively source and scale our addressable market. It further ensures consumer and dealer loyalty to RumbleON by driving high participation in the buying and selling process increasing referrals and attracting new customers. Our continued focus on being a market disruptor by creating a dominant theme [ph] changing 100% online marketplace once again grow sequential growth in the quarter. During the quarter we continue to execute our plan of rapidly growing unit sold and revenue while simultaneously improving unit economics and delivering a great buying and selling experience. We have been focused on four primary objectives that enabled us to achieve strong growth in all areas of the business during the first quarter. Going forward we will continue to execute against these objectives to drive the long term success of our business. Let's now review our four primary objectives and how we measured up to our goals in Q1. Our first objective is revenue and vehicle unit sales growth, we will achieve continued accelerated growth by focusing on our ability to penetrate and disrupt the industry's largest and highly inefficient transaction channel being peer to peer. We believe this is the most important driver of our business and it is how we evaluate our success. In Q1 we began to see how our scalable business is as we sold 878 units to consumers and dealers, a 147% increase as compared to the fourth quarter. Total revenue in Q1 increased to 136% to $8.1 million compared to Q4, 2017. These increases were driven by 209% growth in the number of cash offers made to consumers and dealers compared to the fourth quarter as our investments and cost effective marketing particularly in social media and search engine marketing have captured consumer and dealer attention. I might also add that in fourth quarter earnings call we estimated we would achieve 12000 cash offers in Q1 and we ended the quarter with 12059 which we feel validates our budget and management of our customer acquisition spend in the very early days of the company. We maintained a 14.9% acceptance rate during the quarter, a number we expect to improve over time that said our revenue growth was particularly offset by 4% decline as compared to Q4 in the average selling price per vehicle, that was as our mix shifted towards lower price non-Harley Davidson vehicle. Steve in his remarks will discuss sales mix in greater detail. As we look ahead we expect to continually preach in the number of submitted and accepted cash offer thus purchasing and selling significantly more volume moving forward and leveraging our marketing spend. More specifically we see the growth rate of cash offers continuing to accelerate in the second quarter and are currently on pace to more than double open number of cash offers made and units sold over the first quarter total. Based on our current phase we expect to sell more than 10,000 vehicles in 2018 versus our original protection of 8100. Our second objective is to increase total profit margin per vehicle. We will accomplish this by continuing to invest in technology and reducing our vehicle processing cost which includes inspection, reconditioning and freight. In addition we intend to grow the consumer channel throughout the year which carries our highest margin opportunity, significant growth of our retail channel this year will have what we believe to be significant impact on overall quarter to quarter gross profit per vehicle and will provide sustainable increases in growth of total gross margin. As our regional partner network continues to expand and the volume of vehicle acquired grows we have to see significant sequential improvement in the cost per vehicle. Thus until we realize the benefits of scale for processing cost we have determined that in the near term sales margin and sales profit percentage defined as the difference between the retail selling price of the vehicle minus our cost to acquire the vehicle excluding the cost of processing are the best metrics for evaluating our progress for period to period unit profitability and peer group comparison. Additionally expansion of our partner network and further investment in technology will also enable us to reduce the average days of sale, improve the cost efficiency of vehicle logistics and optimize our pricing algorithm. For Q1 average gross sales profit per unit was $11,032 or 12.3% and an average gross profit per unit was $788 or 8.6% gross margin. As I mentioned we sold more non-Harley vehicles during the first quarter which carry a higher comparable gross margin percentage than Harley Davidson. To help you gauge the magnitude of the margin difference between vehicle size during the first quarter the average total gross margin on the units that sold for under $7500 was 15%. As we look ahead we will continue to evaluate the shifts in sales mix on margin, and work to increase the attachment rate of ancillary products through the expansion of our consumer sales channel to enhance gross profit. We also believe that our brand awareness continues to increase we will see significant unit growth in our consumer channel. We anticipate that as our model sales mxi falls more in line with the overall market our average gross margin percentage will continue to sequentially increase quarter to quarter throughout the remainder of '18. Our third objective is to achieve significant operating leverage through our investment, technology, marketing, [indiscernible] logistics and corporate infrastructure because a 100% of our transactions are conducted online and our capital light model operates with no reconditioning center, showroom, warehouses or any other type of physical structure or the people cost associated with facility we're uniquely poised to achieve significant operating leverage of scale and we're already beginning to see this in our business. In fact SG&A expenses were 48% of Q1 revenue as compared to 84% in Q4 2017. We began a number of investment late last year that [indiscernible] to the first quarter to enhance our business model including the addition of 11 strategically located regional offices which drive down transportation or reconditioning cost while reducing days of sale. In Q1 we significantly increased our marketing spend on social media and guerrilla marketing which drove an impressive increase in cash offer volume in the quarter. To handle the surge in cash offered we expanded spend our product acquisition and distribution capability by not only adding a small number of people but also integrating and improving technology and improved process. We continued to upgrade and enhance our technology infrastructure, expand the functionality of our platform and provide new product offering in order to reduce the need for additional head count as the business continues to expand. In addition though we believe our current website is a leader in the vehicle space. We will be launching significant upgrades and improvements to our online buying and selling experience. We anticipate that our improved functionality and implementing our next generation and never before seen customer experience will greatly enhance and help grow our consumer sales channel in a big way thus improving margins going forward. We also anticipate that SG&A expense as a percent of revenue will decline significantly in subsequent quarters during the remainder of 2018. Our fourth objective is to strengthen our capital structure and enhance our liquidity position to ensure that we can continue rapidly building the industry leader and the only 100% online buyer and seller in the power sport. During Q1 we entered into a $25 million floor plan line of credit with Allied Bank and this morning we have announced the $15 million term loan with Hercules Capital. We believe the relationship with two large and well known institutions is confirmation that our plan is solid and achievable. The capital available under these arrangements provides us with a significant runway to quickly grow our business. We're pleased with our continued rapid growth and I'm more excited than ever about the opportunities that lay ahead for the business and our shareholders. As I said before we continue to learn something new every day in our business and our consumers and dealers all of which enables us to strength RumbleON for the long term. Being a new company that has rapidly grown into a market disruptor in an industry with no immediate peer group that creates the need to be nimble and flexible as possible as we grow. We feel are extremely fast turn of inventory affords us exactly that. The objective is to affectively buy and sell what both consumers and dealers desire at a compelling price and do it a 100% online at very high volume and doing it all with great margins. From time to time we will need to re-evaluate the current dynamics of the business to ensure our going forward expectations remain achievable and what we currently know about the business. Based on the result and our momentum in Q1 we are comfortable with our current outlook of a $100 million revenues for 2018 and I would like to give you some perspective on how we get there. When we initially provided this goal in the third quarter of 2017 we indicated that to achieve a $100 million of revenue in 2018 we needed to sell on average 675 units per month or 8100 units for the year at a selling price of 12500, that $12500 average selling price was at the time heavily dominated by Harley Davidson product mix which was approaching 90%. Our expected unit sales are now on pace to exceed 10,000 units for the year at 23% increase from our original expectation but our current average selling price has declined 27% to 91.85 as our sales mix is shifted more quickly than anticipated to better represent the overall power sport market. With the decline in average selling price we have also learned that the sales and margin opportunity in the non-Harley Davidson product segment is significantly better than we originally thought. These vehicles generally have a higher gross margin percentage than Harley Davidson and as such we have adapted our acquisition strategies to ensure we have the proper inventory mix to meet the current market demand. If the average selling price stays at the current levels or greater we remain on track to achieve our $100 million sales goal for the year. Keep in mind however more than 90% of our inventory is acquired from consumers and as such to achieve our profitability goal we must maintain the inventory mix to meet market demand. As a result we must acquire vehicles that can be sold at our targeted margins regardless of selling price. To this point the gross margin per vehicle with the sales price under $10,000 was 12.4% in Q1 which gives us confident that we are positioning ourselves well to continue increasing profitability and driving the business forward for the long term. To say the least we are extremely pleased with the great progress that we're making in the business and believe that we are on track to continue our rapid growth trajectory. We believe that we have just scratched the surface of opportunity here and see great prospects for the continued disruption of the market. With that now I will turn it over to Steve for discussion of our first quarter financial results..

Thank you, Marshall. Before I begin I just want to remind everyone that there were no vehicle sales or little other business activity during the first quarter of 2017 so we will not discuss comparisons for that quarter. For the first quarter of 2018 total revenue was $8.1 million, and it was ahead of our expectation. This was primarily result of strong reception to our marketing efforts driving $8 million from the sale of used vehicle to consumers and the others as well as related vehicle financing and service contract. During the first quarter we experienced a significant shift in our sales mix between Harley Davidson and non-Harley Davidson as well the shifted sales channel mix between consumers and dealers. In Q1 we sold 878 unit to consumers and dealers at an average selling price of $9185 and a total average blended gross profit of $788 or 8.6% per unit as compared to $887 or 9.2% a unit in Q4 2017. The change in unit gross profit and margin percentage was a result of the higher margin consumer sales representing a smaller percentage of total sales in Q1 than in Q4 of 2017. In Q1 unit sales profit for consumer sales was $2008 with a 16.4% sales margin and dealer unit sales profit was $1041 with an 11.7% sales margin. In Q1, the average selling price for consumer unit was $12207 with a gross profit of $1677 or 13.7% and the average selling price for dealer units was $8874 with a gross profit of $696 or 7.8%. Regarding sales mix, during the quarter Harley Davidson represented 69% of vehicle sales with an average selling price of $10,759 and a gross margin of 7.5% and non-Harley Davidson had an average selling price of $5622 with a 13.1% gross margin. Other sales and revenue in the first quarter was $52,000 which primarily consisted of $37,000 or $1275 per vehicle on finance and service contracts. Finance and service contracts were sold on 35% of the consumer vehicle transaction. Total cost and expenses for the first quarter was $11.6 million and included the cost of pre-owned vehicle sales to consumers and dealers of $7.5 million. In the quarter the average per vehicle cost of the 878 vehicles sold was $8372 which was comprised of $9921 for Harley Davidson and $4865 for non-Harley Davidson. Included in vehicle cost was straight and reconditioning of $539 per vehicle. Cost of other sales and revenue in the first quarter was $47,500 resulting from the cost of finance and vehicle service contracts associated with vehicle sales. In the first quarter we began to leverage our cost structure as we continued our move towards profitability. In the first quarter selling, general and administrative expenses were $3.9 million or 48% of revenue as compared to 84% of revenue in Q4 of 2017. As our business continues its rapid growth we believe we will experience increases of operating cost and expenses in absolute dollar terms but we will see a significant, sequential quarter to quarter decline in expenses as a percentage of total revenue. Let's walk through the components of our expense for the first quarter and give some broad directional input and how we see expenses trending as we begin to gain scale in the business. Compensation was $1.4 million or 17% of revenue as compared to 34% in Q4 2017. Compensation was driven by the significant growth of business and included $326,000 or share based compensation and amortization. As we execute and aggressively expand our business compensation expense we will continue to increase in future period as we add management and support personnel to ensure we adequately develop and maintain operational, financial and management control as well as our reporting systems and procedures. We believe compensation expense net of share based compensation, amortization as a percentage of revenue will decline to a range of 5% to 7% by Q4. Advertising and marketing expenses were $1.1 million or 13.9% of revenue as compared to 19% in Q4 2017. Marketing and advertising was driven by significant increase in social media and search engine marketing as we began to aggressively build our brand through various channels to efficiently source and scale our addressable market. We believe our strong consumer focus continues to drive high levels of participation in the acquisition process and increasing of referral. In addition to our paid channel in future periods we intend to increase media spending and public relations efforts while we continue investing in our proprietary technology platform. As we continue to store some scale in our addressable market, advertising and marketing spending will continue to increase in absolute dollar terms but we believe as a percentage of revenue will decline to a range of 5% to 8% by Q4. Technology development expense $283,000 or 3.5% of revenue as compared to 5% in Q4 of 2017. Technology development included the development of new and existing products and services and additional technology infrastructure expenses, head count and cost related to software development. During Q1, a 186,000 of technology development cost was capitalized. Looking forward our total technology development cost and expenses will increase in absolute dollar terms while declining as a percentage of revenue as we continue to upgrade and enhance our technology infrastructure further develop our online buying and selling experience for consumers and dealers, expand the overall functionality of our platform and provide additional features. General and administrative expenses were $864,000 or 11% of revenue as compared to 21% in Q4, 2017. The significant G&A expenses in Q1 included [indiscernible] fees and expenses for filing exchange related matters and financing transaction, office supplies and process application software, rent and selling expenses for outbound transportation and auction fees. As our business continues its rapid growth G&A expenses will continue to increase in absolute dollar terms while we expect G&A expense as a percentage of revenue to decline to a range of 2% to 3% by Q4. Professional fees were $209,000 or 2.6% as compared to 5% in Q4 of 2017 and consisted of legal and accounting fees associated with various [indiscernible] resulting from growth and expansion of our business. Depreciation, amortization for the quarter was $206,000 which included a $174,000 of amortization from capitalized technology development. Interest expense for the quarter was $87,000 which included $47,000 in debt discount amortization. A net loss for the three months ended March 31, 2018 was $3.6 million or $0.28 per share which is in the higher end of our outlook due to a greater than expected shift in our sales mix between dealers and consumers resulting in gross profit and higher level of selling expenses than we had anticipated. Looking ahead we expect to continue directly build the RumbleON business which we anticipate will enable us to drive significant growth and shareholder value in the months and years to come. Now I will turn it back to Marshall.

Let me close by reiterating a few key takeaways. First, we're very pleased with the ramp-in units and revenue we experienced in the first quarter and expect the trends to continue. Doubling unit, sales in Q2 and totalling in excess of $10,000 units for the full year. Next we clearly see the ability to leverage the model in a meaningful way. We expect a sequential improvement in expenses as a percent of revenue and believe we have significant room to improve sales margins through technology improvement and as we drive an increase in the consumer sales mix via some exciting some enhancements to the RumbleON customer experience. Our expectation is to be profitable by year-end and see significant operating leverage beyond that period. We have taken aggressive steps to refine the model and believe the metrics are a powerful indicator for where we can take RMBL. The first quarter represented our first full quarter of operation and we already have achieved unit sales levels that took years for peers in the automotive sector to achieve and we accomplish this at gross margin percentages in dollars that are competitive to or better than what our automotive peers are realizing currently. We expect to turn inventory with an average day in inventory of less than 20 which improves the risk profile significantly and ROI and will easily be best in class. Once again I want to make crystal clear we are the only buyer and seller of vehicles of any kind that does it 100% online. We don't just market online, we transact online and that leads to significant disruption in the way vehicles are bought and sold going forward. Lastly we as a management team are highly focused on creating shareholder value and have a significant alignment with our shareholders. In closing I want to point out from Steve and my perspective the most important asset RumbleON enjoys at this time. I've been quoted many times saying that lots of people can dream this stuff up, however the winners are always [indiscernible] that can execute on the dream, whether it is our acquisitions, marketing, customer service, technology, accounting and/or management team we have assembled in our estimation the best people available that succeed in business today. They're motivated, incentivized for performance and encouraged to think about and critique everything we do every day and most important I can personally assure you we will never take our eye off the customer experience. Yes Steve and I have been building businesses for a long time and we certainly understand that our past successes have always been a direct reflection of our ability to acquire and retain the best talent. We have never been happier nor have we ever put a more qualified, dedicated and hard working group together a great idea executed by great people is the key to building a really great company. We're very enthusiastic about the prospects for the company and the ability to deliver value to shareholders over both the near term and the long term horizon. Thank you a lot for your time and now we will open it up for question.

[Operator Instructions]. We will take our first question from [indiscernible] from ROTH Capital Partners.

I had a question as you progress through this. Steve you mentioned a lot of numbers, is that a mix of 69%, Harley 31%, non-Harley. Like as you talk about the [indiscernible] of units, a couple of questions. One, is the mix shift going to sort of inverse as the year goes on [Technical Difficulty] revenue like what's the blended mix on that and then I think there is a little disparity in terms of Harley and non-Harley gross margin? Can you one just talk about why that's the case and then two how you get that more to a level of parity going forward? And then my last question would just be around your infrastructure for doing appraisal, cash offers etcetera, do you have enough people in place today to get to the $100 million number or what's kind of the headcount assumption going forward. Thank you.

Well first of all, I will start with the last one. We continue to make significant improvements in our technology which allows us to process a much higher amount per person per hour. We already which is very early in the cycle earlier than we anticipated we already do not have data people but data is being produced by our system and the data that we have we simply have a supervised whether it is released in those vouchers if you will, those cash offers. We have gone from being able to do about 20 an hour with the new technology enhancements, a single supervisor can do about an 100 an hour, so its significantly higher than we even anticipated or were able to reach in the automotive sector. So we are pretty excited about that. We actually have reduced head count on the appraisal side but because of the flow of purchases we've increased the documents people, the document specialists in this side of the business are a must have primarily because of the title, each day has its own title laws and those other things that we have deal with that in that regard. With regards to the mix, I think that the quarter is probably close to reflective of going forward look. However we will continue to increase the amount of non-Harley Davidson simply that because of the amount of the market that there is. We can't control necessarily what customers put into the appraisal funnels. So it's going to be - we think at the end of the day probably [indiscernible] with more of the total market which you know Harley's you've heard it say before represents about 50% of just the 600cc in larger motorcycle but there's a whole lot of players in all the other things that we're now getting into whether that be on-road motorcycle, the off-road and the ATV. We think some of the difference in the average selling price will be offset by a higher percentage of retail as we go forward, we are confident we are going to build that retail channel. It does appear on the retail side that does feel a little bit higher on the revenue side, so as that becomes a bigger percentage of our business maybe more of the lesser value stuff ends up with the dealer and the last one was with regards to the metrics that was your middle question actually, with regards to metrics mix and metrics sales what's driving that? I think part of that is it with regards to our dealer sales there seems to be less inventory out there in the lesser price vehicle. Clearly kind of reminiscent of the automotive sector I mean the lower the price the faster the turn and typically the higher the margin and it's just because primarily it's hard to find really, really nice four or five year old motorcycle with low miles and great condition and we're bringing a lot of those out of the garages to consumers today which has created a little bit of a uniqueness in the marketplace. With regards to you know where we're marketing we've basically patterned our auction system after HBFS which is Harley Davidson Financial Services, the largest reseller you know of repossessions obviously but that's the biggest part of that at that part of the industry and we've just mirrored there selling tactic which is 11 locations geographically located in you know very, very well across the country. We didn't feel we needed to reinvent the wheel, they think we bring a lot of benefit to the sales atmosphere because we are not selling all Harley Davidson, we're selling a little bit of everything. We bring in unique buyer and seller. So that's - it makes it too long answer to three question but hopefully that's got it done.

We will take our next question from Nehal Chokshi from Maxim Group.

The 6.9% gross margins that includes the processing cost were about 150 basis points of processing cost based on the numbers you gave on the conference call, and I think last quarter the processing cost came out to about 674 basis points. So that's a dramatic improvement in the efficiency, what were the drivers of that improvement.

Well a couple of things, one the fact that we're now expanding out on our partner network with auctions, the freight number has come down and because we're now doing a large percentage of our reconditioning auctions we are not saying retail price and so we have seen a significant decline in reconditioning and we expect as we go forward part of the ramp up in margins is going to come from the fact that now we have added more additional logs and freight bill will continue to come down you know the 569 that we had this quarter in the 400 next quarter and we'll continue to recondition at the auction as well because they do a really good job. They give us condition reports which help us a great deal in terms of retail deal.

And then I appreciate the color on how you get to 100 million that is effectively there you got our I think 37% more vehicles or more or less 30% lesser ASP than - I know I didn't get the numbers right but that's generally ballpark that we are talking about, what is the acquisition rate that you expect to achieve to reach that? I think you said it might be around 12.5% acquisition rate in this quarter. What is that acquisition rate you expect to achieve throughout the downtown year, 18% and what are the [indiscernible] achieving that acquisition rate at the intended gross margin excluding the processing cost.

I will take that one. The increase in or the potential to increase the capture rate on appraisals continues to improve, month in and month out. Some of it has to do with the more robust data as we move forward, we're able to capture a bigger percent. We are presently experiencing better numbers than the quarter, the quarter I believe was 14 little over 14% on the approval rate and what that means is you know obviously 14 of a 100 out there they say accepted. Keep in mind that you know a lot of people can't accept because of negative equity which is the same thing CarMax experiences in their in-store model. And then secondly you know there's some - obviously there is always some opportunity for unrealistic expectations but with that said we think that over time we can continue to work that up to probably in the neighbourhood of 20% acceptance rate and that you know greatly enhances the you know the flow of vehicle. We are improving week over week day over day, week over week right now in the amount of opportunities to acquire and I think as our algorithms get better on the pricing we'll be able to increase that and then also we've made significant changes in our process to where you know it's not taking - it's taking half the time as far as days to process these vehicles. Right now our average shipping is running about the six days and considering that we're buying from every corner of the earth and shipping to you know 25 different locations we've been very happy with the improvement there and 20 date - you didn't ask the question but a 20 day turn rate in the vehicle business average days of stock is - I've been doing it for 40 years I've never seen numbers turn that fast. So we are really excited from that standpoint because it really increases your or decreases your inventory risk with - something else on the price vehicle just real quick for everybody as that ASP comes down the inventory value risk comes down with it. You know a $3000 Harley Davidson, the $3000 per day is worth $3000 three years from now. So there really is no inventory risk in that lower price so there's just a lot of dynamics that lower ASP actually is a huge improvement as one of the opportunity for gross margin.

And then just to be clear you know to get to the 100 million, 10,000 units so you did approximately 1000 this quarter, you're saying you're going to double it to 2000. If you keep on doubling obviously you're going to blow through that right? So your guidance includes some I guess expenses and services and in terms of the production and the rate of your acute growth rate. But to be able to look out you know into the third quarter and fourth quarter and say yes, we can definitely get to 3000, 4000 vehicles per quarter, what is that you're seeing that gives you that confidence other than what is your current acute growth rate?

Well first off there's plenty of opportunities. The size of the market is bigger than we originally anticipated. The desire from the consumer to not have to go through the current liquidation experience which is [indiscernible] primarily is extremely high and you know if you just purely do it on a market share rate considering that the other option for consumers is so miserable we're very, very confident and we're very confident on Q2 as well as you know as well as going forward. One thing I did want to touch on we didn't mention it in the script today is with regards to last quarter we mentioned that we brought on some of the larger automotive groups i.e. Sonic and Autonation and other. I would tell you also that we are buying bikes on a daily basis from these automotive purveyors and we've brought a really great tool for them because the deals that they are making today by us providing liquidity on a product that they don't want but their consumer wants to trade has been as big as anticipated and we think it's something that we can grow exponentially over time.

We will take our next question from [indiscernible] from Aegis.

Some have probably traded companies and most of the companies have highlighted that adverse weather unusually cold winter weather impacted sales in Q1, you also had great topline results but to what extent do you feel you may have been actually negatively impacted and your numbers been even stronger in Q1 if not for that pretty cold weather through much of the country. Thanks.

We don't feel at all. We feel that the opportunity to buy in the colder areas of the country, and [indiscernible] weather or power sports which again these are wants not needs that people want to liquidate their opportunity to put that in Craigslist in a snowstorm in the northeast is probably not very efficient and we offer cash for that customer. We are anticipating seasonal and we're tracking the data that we've received from some of people that we work with i.e. the auctions and dealers, but we don't anticipate to have the amount of seasonality or the effect of these local weather pattern because as an example right now the market is really starting to eat up in the northeast and obviously it's not real hot in December and in January but it seems from our perspective that the type of inventory that we're selling there is a demand for all kinds of year and we just look at it as an offset, we are in all 48 states so you know when it gets too hot in Texas which is June and July it's the middle of the season for the north and the Midwest and the northeast and the flip flop of that as time progresses. So we do anticipate some seasonality we have not experienced that at this point and in fact it seems like the opportunity to acquire which is what our whole deal revolves around actually is a benefit in the increment time.

And we will take our next question from [indiscernible].

So one quick housekeeping question I think you guys mentioned it but I missed it how many total appraisals did you do for the quarter? I thought maybe Marshall mentioned in his.

Oh yes, its $12059. I think fourth quarter was about $3900.

Okay, that makes sense.

With regards to the marketing it seems like we can continue to dial that at a rapid phase but we are obviously but we're still very, very new in the cycle and we're trying to you know maintain some reasonable fiscal responsibilities with regards to the marketing expense not just on cash added but it does seem you know we've enhanced the advertising spend significantly pretty much in the same areas and it does not feel like we've you know even scratched the surface yet of opportunity.

And then just as a follow up, it looks like you've taken the dealer listings off the site, is that a temporary thing or is that a permanent change?

Yes, I wondered if someone is going to say that. We have a plan - we're getting ready to launch as we said some really, really interesting enhancements, I will be interested to get everybody's feedback on them with regards to the website and we do see a huge opportunity to be a significant listener of vehicle both for consumers and dealers but we want to do it in a different format and I won't get into all the details of it but I would tell you that before the quarter you will see what that plan is as it's rolled out. Definitely a big appetite out there for it but we felt at the present time that it was kind of muddying up the customer offering that it was a little confusing for the consumer but we wanted to wait until we had enough meaningful inventory. Today we have about 700 motorcycles in stock and so we're starting to get meaningful inventory that we happen to know is that very, very competitive prices and you know it's exciting for consumers to see and to muddy that up with vehicles that we don't control the pricing metrics of it, etcetera, is a little confusing I guess. So we've got an answer for it we think it's a great opportunity, we think it's a great opportunity for future revenue but we'll unveil that as time goes forward.

We will take our next question [indiscernible].

Just wondering what is the quarterly breakeven run-rate for you guys revenue wise?

Probably in the $30 million range.

We will take Patrick Murphy from Maxis Group [ph].

So on the Harley Davidson call they mentioned a competitive environment in the used market and it was putting some pressure on their business. Do you guys think that RumbleON is providing some of that pressure and if so is that a reason why there are a discrepancy in margins between Harley Davidson and non-Harley Davidson? Thanks.

I don't know they have anything to do with the margin piece of it. I think that yes we have been disruptive in that regard you know a big percentage of these are going to dealers and Harley is always had the opinion that when they sell a used bike they could have sold to customer a new one, I for one don't agree with that scenario but you know the used market is based on supply and demand, the demand will always be higher on pre-owned because of price point and a lot more people can afford what we sell. We think over time that enhancements [ph] all the manufactures because we are bringing a significant amount of first time riders to the marketplace which they are all sending millions and millions of dollars of trying to generate So again I can't speak for Harley's business on the new side because obviously we're not in it but I do think that we have been a participant in disrupting the purchase intention of consumers. We have got room for one more question if someone has? I think we're good.

There are no further questions.

Thanks everyone for their time. We really appreciate it.

See you next quarter.