Operator:

Greetings, and welcome to the RumbleOn Second Quarter 2021 Earnings Call. At this time, all lines are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to turn the conference over to your host, Hilary Sumnicht. Thank you. You may begin. Hilary Sumnicht: Thank you, Operator. Good morning, ladies and gentlemen. Thank you for joining us on this conference call to discuss RumbleON's second quarter 2021 financial results. Joining me on the call today are Marshall Chesrown, Chairman and Chief Executive Officer; and Beverly Rath, Interim Chief Financial Officer. Full details of our results and additional management commentary are available in our earnings release, which can be found on the Investor Relations section of the website at investors.rumbleon.com. Please note that this call will be simultaneously webcast on our Investor Relations section of the company’s corporate website. This 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, including responses to your questions, 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. Also, the following discussion may contain non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures, please see our earnings release issued earlier this morning. Now, I’ll turn the call over to Marshall. Marshall? Marshall Chesrown: Thank you, Hilary, and thank you, everyone, for joining us this morning. Our entire team at RumbleON is very excited to share with you the results of a fantastic second quarter, and many other updates for both the business and the merger with RideNow. However, before we jump in, I want to speak to something very unfortunate in the quarter. As most of we suffered a tragic loss in June, with the unexpected and sudden passing of Steve Berrard, our co-founder, CFO, and a dear friend. For those lucky enough to have known Steve, you know he was a larger-than-life figure, with a long history in the public markets with the likes of Blockbuster, AutoNation, and many other successful companies, and RumbleON would not be in the position it is today without his tremendous knowledge, experience, and contributions. Steve was a true leader and made an impression on everyone he met. We suffered a great loss, but I'm so proud of the entire RumbleON team, for stepping up and supporting each other, and committing to their work each and every day to carry out the vision. Before turning to the progress we made this quarter, I'd like to introduce our interim CFO, Beverly Rath, and welcome other recent executive appointments. Beverly, our Controller, has stepped in as interim CFO to lead us through our pending combination with RideNow. Beverly is a seasoned financial executive, who has been a key part of our finance organization, working alongside Steve for many years. Beverly continues to make tremendous contributions to the organization, and we're excited to have her assist in filling some very big shoes with Steve's passing. We’ve started the search for a new CFO. In the meantime, I'm proud and inspired by the way our team has risen to the challenges. We also announced the appointment of our Chief Operating Officer, Peter Levy, to the Board of Directors. Peter has a deep understanding of our business, and has been instrumental in the evolution of RumbleON. Peter has been on our executive team since 2017, and is a natural fit to join our board, as we enter the next stage of phenomenal growth. Finally, we're excited that our trusted Legal Advisor, Michael Francis, has joined the RumbleON team as Executive Legal Counsel. Michael worked with Steve for nearly 25 years, including helping AutoNation build a dominant national brand through dealership acquisitions. His long track record of success and familiarity with Steve's strategy and business style, will be an invaluable asset to RumbleON, as we combine with RideNow and consolidate the highly fragmented power sports industry. As many of you know, Steve Berrard was not just a credits and debits guy. He was a dealmaker first and foremost. Michael knew his strategy and style better than anyone, and we are confident that he will bring incredible expertise to our leadership team. We have a world-class leadership team, and we'll continue to add top talent as the company grows and evolves. On Friday, July 30th, 2021, RumbleON announced that its stockholders approved the proposed business combination with RideNow at the special meeting of stockholders. The business combination is expected to close very soon, subject to the satisfaction of the remaining closing conditions. Not only are we hard at work on the pending business combination with RideNow, but we delivered another stellar quarter for RumbleON. RumbleON delivered $168.3 million in total revenue, up 100% year-over-year, and 61% quarter-over-quarter. We grew gross profits to $19.5 million, up 131% year-over-year, and 74% compared to Q1. Gross margin was 11.6%, representing gross margin expansion of 90 basis points from Q1, and 160 basis points from Q2 last year. We also reported another quarter with positive adjusted EBITDA of $3 million. We also made significant progress across our strategic priorities. We continue to add new dealers to RumbleON.com, and have over 60,000 new, used, and private party listings, on our site today. And with over 500 dealers using our B2B inventory redistribution capability, and more in the pipeline to be onboarded, we are seeing strong demand and remain confident in our strategy to offer virtual inventory distribution, both retail and wholesale nationwide on our platform. RumbleON.com enables dealers to reach consumers online, and our B2B inventory redistribution component within the website, gives dealers nationwide, an inventory advantage, and a place to not only acquire inventory, but sell unwanted inventory to other dealers regardless of their manufacturer affiliation. We launched the next generation RumbleON.com late last summer to help drive quality leads to participating dealers, and enhance the online experience for consumers and dealers. By doing so, we unlocked a massive opportunity for traditional brick and mortar power sports dealers across the country, enabling dealers to leverage technology to stay competitive, as consumers demand a digital-first customer experience. Since the launch, there has been significant traction among dealers, and we continue to see strong adoption. Our dealer count was up over 40% from Q1, and the total available listings as of the end of the quarter, were up 10% due to a continued reduction in the average dealer inventory, driven primarily by the lack of new vehicle supply. Based on our dealer count, we estimate that we would have an excess of 100,000 listings on the site once stocking levels are normalized, which manufacturers anticipate, at best, to be months away, and over 200,000 listings on our site long-term. We believe that the ongoing inventory shortages, lack of selection, and higher prices, should be building significant levels of pent-up demand that could take more than a year to normalize, once shipments returned to normal levels. RumbleON is benefiting from the supply and demand imbalance in the market. Pre-owned vehicle pricing remains strong, as sourcing new inventory continues to be an industry challenge due to the pandemic-related shutdowns and manufacturing delays. These factors combined to create tailwinds for our business. Not only is our ability to source inventory electronically from consumers, a strong advantage, but our strategy to enable dealers to thrive in a competitive market, is winning. The global pandemic impacted customer behavior and refined modern business. There has been increased demand for online buying and at-home delivery, as consumers become comfortable making large purchases online, and opting to digitize all steps of the purchase journey. At the same time, consumers crave human interaction. Many still want to walk into a store and connect with a trusted professional face-to-face. Power sports is a lifestyle, and that passion for the sport creates the need for an Omni-channel solution. We are combining with RideNow to give enthusiasts nationwide, the freedom to purchase their next experience completely online and have it delivered to their home, or in-store, and drive away on their next adventure. Consumers want to escape their home, their office, their gym, and seek new and exciting experiences, and there is no better escape than power sports. Not only is it a hobby, a passion, and a lot of fun. It promotes the involvement of the whole family, which has become an increasingly significant priority coming out of COVID-19. Our business combination with RideNow couldn't come at a more opportune time in this industry. If you consider our current technology-enabled solution and the expansive opportunities that our pending 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 will become the only Omni-channel customer experience available in power sports, and offer the best team, best locations, and an unparalleled mix of quality inventory available in the market today. Manufacturers are embracing our vision. We have seen significant support and enthusiasm, and we are already getting inbound interest from many dealers. The transaction is viewed as positive and transformative. Providing the first public capital access to dealers in power sports, is monumental in all regards. We are excited to become a valuable working partner with all manufacturers, and to provide incredible support for their initiatives, as we jointly make meaningful improvements to the customer experience through the first Omni-channel offering in power sports. RideNow has been a fantastic dealer partner over their 30-plus years. And the addition of RumbleON, will create synergies and opportunities unparalleled in the power sports segment. The opportunity to consolidate a highly fragmented industry, is very evident to us. We believe the dealer interest level is high. If a dealer wants to retire, we can tuck them in in our existing infrastructure, or if a group simply wants to grow faster and more efficiently, like RideNow, RumbleON can be a huge win for those dealers, who in many cases, have spent a lifetime building their businesses. Manufacturers will benefit from public company involvement, with unparalleled capabilities to enhance their initiatives, move them along quickly and professionally, and support their desire for each of their individual brands to provide unmatched customer experiences. Following our shareholder approval last week, we are in the final innings of completing our proposed business combination with RideNow. We are confident that the integration of RideNow’s extensive geographic footprint and strong retail brand, combined with RumbleON’s technology platform, will make power sports vehicles, more assessable to the enthusiast, and importantly, to the novice. Bringing new riders to the sport continues to be a mission of most manufacturers. Access to our pre-owned inventory is beneficial to all dealers, because we are introducing affordability, which is a key in bringing more buyers into the sport. First time buyers getting hooked on the adventure of power sport vehicle ownership, will have long-term positive effects on new vehicle sales. 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. Turning to our outlook, we entered the second half of the year with strong momentum. We exceeded our prior revenue and gross profit expectations for Q2, and delivered adjusted EBITDA in line with our expectations. We have had a solid start to 2021, and we are very optimistic about the trajectory and opportunities in front of us. We are taking a prudent approach towards guidance, and are maintaining our prior expectations for the full year 2021. Assuming a combination completed as of January 1st, 2021, the company expects full year 2021 revenue for the combined company in the range of $1.45 billion to $1.55 billion, and adjusted EBITDA in a range of $110 million to $115 million. Both represent double digit growth. We have multiple growth levers to pull, and are extremely confident in the present guidance, as well as our longer term goal of $5 billion of revenue, and 10% adjusted EBITDA margin. There are many unknowns going forward, primarily in regards to when, and to what extent, gross margins will begin to normalize, and we believe it would be imprudent to revise guidance at this time. We will provide an update on our results and outlook on our third quarter earnings call, as well as the initiatives surrounding our long-term goals. We believe that the best people managing the best consumer experience, whether online or off, with unmatched selection and a national distribution and service footprint, creates a unique opportunity to absolutely dominate the power sports industry over time. We are excited about the road ahead. We remain confident that the robust growth and continued evolution of our business, positions us to deliver long-term sustainable value for our shareholders. I'll now turn the call over to Beverly to discuss our second quarter financial results. Beverly Rath: Thanks, Marshall. I am honored to assume the interim CFO role, and speak with everyone today. It has been my privilege to be a member of the RumbleON team since the very beginning. Steve is greatly missed and has large shoes to fill, but he and I worked very closely, and I am confident in the strength of our finance functions and team here at RumbleON, and look forward to continuing to deliver. We had another strong quarter, with gross margin expansion outpacing strong revenue growth. Revenue was up 100% year-over-year, and 61% sequentially. Gross profit was up 131% year-over-year, and 74% sequentially. Total gross margin for the quarter was 11.6%, up from 10% in the year ago period, and up from 10.7% in Q1. Gross profit was again aided by elevated pricing due to constrained supply of new inventory, as well as market tailwinds. We expect gross margins to normalize once supply and demand imbalances return to more normal levels. As projected by some manufacturers, that could be several months away. Advertising and marketing expense was just under $2 million in the quarter. And total operating expenses were 11% of total Q2 revenue, an improvement from 13% in Q1, demonstrating the progress we are making rationalizing our cost structure. We continue to make investments in our technology platform to enhance our customer experience and expand our business, adding new features and functionality to our website and mobile application. We generated operating profits for the first time in RumbleON its history of approximately $770,000 in Q2, improved from a Q1 operating loss of $2.8 million, and a loss of $3.2 million in Q2 of 2020, exclusive of the $5.6 million insurance adjustment realized during that period. As our sales volume increases, our improvement of inventory turn, results in a reduction of floor plan liability. We improved our net loss to approximately 2% of the total revenue, and generated another positive EBITDA quarter. Adjusted EBITDA was $3 million in quarter two, up from $21,000 quarter one, and significantly improved from an EBITDA loss of $1.3 million in Q2 of 2020. As of June 30th, 2021, RumbleON had $28 million in cash, including $3 million in restricted cash, and had over $9.2 million available on current lines of credit. As a reminder, we completed an equity raise of $36.8 million during Q2. Subsequent to the quarter end, we received over $3.1 million in additional insurance proceeds that will be reflected in Q3 2021 financials. We continue to demonstrate our disciplined approach to cash management. We will provide a more in-depth discussion of the pending business combination with RideNow upon closing, but I do want to take a moment to address our financing plans for this transaction. As a reminder, we have a commitment letter from Oaktree Capital, which provides $280 million for the transaction, plus another $120 million for future endeavors, whether that be acquisition or working capital. The balance of the purchase price will come from the issuance to sellers or sell of additional equity. We understand that this is at the top of our investor's mind, but we cannot offer additional commentary around financing plans at this point, but we will provide an update after closing. On July 1st, we filed a proxy, which included historical financials for RideNow, and we included certain Q2 preliminary results in today's earnings release. RideNow benefited from similar market tailwinds as we described the RumbleON in the first half of 2021. For the second quarter of 2021, RideNow sold 13,080 units, and generated $268.2 million of total revenue. RideNow realized an increase in miscellaneous income related to $19 million in forgiveness of its PPP loan debt, which is a benefit to net income, but adjusted out of adjusted EBITDA. As such, the company reported net income of $54.5 million, and adjusted EBITDA of $36.8 million. Excluding this one-time event, RideNow’s net income would have been $35.4 million for the second quarter, and there is no impact on adjusted EBITDA. We expect the pending business combination with RideNow to close very soon. As such, we will be reporting RumbleON and RideNow financial results in aggregate, and thus will not be providing guidance for RumbleON as a standalone company. I'll now pass the call back to Marshall before we open the call to questions. Marshall? Marshall Chesrown: Thanks, Beverly. RumbleON and RideNow are very excited to become instrumental in the future transformation of the power sports industry, through the soon-to-close merger. I am optimistic about the future of our combined company, and our ability to drive sustainable long-term value for our shareholders, as we enter our next phase of growth. Thank you to all of our customers for your continued trust, to our employees for your hard work, and to our shareholders for your continued support. Operator, we're ready for questions. Operator: [Operator Instructions] Our first question comes from the line of Ron Josey with JMP Securities. Please proceed with your question. Ron Josey: Great. Thank you, Marshall, and Beverly, for the question, and of course our thoughts on Steve. I want to ask two questions really quick. Marshall, you mentioned in your opening remarks, that listings could be 100,000 now, 200,000 longer-term. Just talk to us about what needs to happen to get that, call it 100,000 - to get to a 100,000, and really the path to 200,000 going forward. I think that would be very helpful. And then on the margins and ASP, average selling prices in power sports, I think, was up another 7.5% sequentially. We talked a lot about supply and demand getting more into balance could take a year, I think, going forward. So, maybe just tell us more about where you think or how you think gross margins could just trend here on the core Rumble-Now businesses as we await the merger to be completed. So one on just listings and getting to 200,000, and the second is on margins. Thank you. Marshall Chesrown: Okay, great. Yes, I think the 100,000 comment really comes from our analysis prior to launching the RumbleON.com back in September. We were obviously doing a lot of analysis of average dealer listings, how many dealers on sites such as Cycle Trader. What we see is that the average inventory on specifically new vehicles, is down, like way down. And used and pre-owned, because of the turn rate and the high demand, they're also off on an average dealer count. So, if we were just to say in normal times, pre-pandemic, what would the average dealer have, times the amount of dealers that we have on the site, and we estimate it to be in excess of 100,000. As far as the 200,000, keep in mind, there's 7,000 licensed power sports dealers out there, a little bit of a misnomer from the standpoint that there's a lot of private individuals that have a dealer license and so forth. But we certainly think that with over 500 dealers we have today, we could easily get that to over 100 - excuse me, over 1,000 dealers in a reasonable window of time. And again, just the straight line math, if 500 did 100,000, obviously double that would be well in excess of 200,000. Secondly is with regards to margins and ASP. Obviously, ASP, as you’ve heard me say many times, Ron, that we don't control in our world now. It'll be much more controlled with the addition of RideNow because of the advent of new vehicle sales, but we don't choose what mom and dad put into our cash offer tool. And so thus, you can see our ASP has moved around sometimes fairly significantly. I think it's calmed down a lot, but I would tell you that the average gross margin is - continues to be up. We are seeing - we are certainly seeing stabilization in that regard. And because of our change of business model, as far as how we redistribute, and the fact that we don't use third parties, and some of the things that we've talked about before, where we're not paying fees, we're collecting fees and so forth, we do see the margins being significantly higher than say 2019, or even early 2020. But it's questionable to how long they stay at these kind of abnormal levels. I mean, if you look at it on a combined company basis, if you take the pro forma and look at the total vehicle sales with RumbleON and RideNow, 2020 was an average of about $4,128 a unit. This is all inclusive of variable, so it includes finance, et cetera. In Q1, it was $4,835, and in Q2 it was $5,307. So, we think at the low being 2020 at $4,128, the high today being at $5,307, we think obviously it's settled in somewhere between those two levels at much higher volume levels, obviously. As you can see from our numbers, we sold a lot more units. If you look at gross margin as a percent, which I know you guys do, it's fairly flat with consensus, et cetera. But if you look at it as total gross margin in raw dollars, it's up significantly. Ron Josey: Great. Thank you. Operator: Thank you. Our next question comes from the line of Michael Baker with D.A. Davidson. Please proceed with your question. Michael Baker: Hi. Just one quick clarification, and then a longer-term question. I think you said that Q2 sales and gross margins were ahead of plan, but EBITDA was in line. I think the implication there would be that there was some cost or something that maybe was a little bit higher such that EBITDA also didn't feed. Can you - did I hear that right? And so, if sales and gross margins be, why wouldn't EBITDA have been better than planned? Marshall Chesrown: Well, I'm not exactly clear what plan we're referring to, but if we look at - there are a couple of effects here that everybody should consider with regards to - and I know you mentioned EBITDA, but we'll get there. On the EPS side, we have had an adjustment $10.9 million, which was a balance sheet adjustment in Q1, but we had a additional adjustment to the P&L in Q2 of about $2.2 million. So, EPS, I believe this morning, is at negative $1.5. This is in reference to the Oaktree warrant, which obviously has not taken place yet, but required under GAAP and under SEC regulations. We have to take those expenses. Obviously, it's not a cash entry. It's an accounting entry, but we have the net EPS at about 0.36. As far as the EBITDA, again, could you clarify for me which guidance you're referring to? Michael Baker: I guess I'm just referring to the prepared comments as I heard them, and there was a transcript that I'm following here. It says something along the lines of, sales and gross margin were ahead of plan. And then it said EBITDA was in line, but it's a minor point. So, I guess I wouldn't worry. We exceeded our prior revenue and gross profit expectations, and delivered EBITDA in line. So it's the exceed versus the in-line. Marshall Chesrown: Right. Michael Baker: It’s not a big point. Let me ask another question if I could. And I guess on this one, the answer is probably just conservatism, but I'm wondering if there's something more to the idea that your 2021 EBITDA dollar guidance, is actually lower than the last 12 months, pro forma guidance, I believe, or pro forma, what you've delivered. So, it implies back half is pretty conservative. Is there anything specific we should be worried about in the back half, or is it just the idea that you think gross profit per unit should normalize, and like I said, just being prudent? Marshall Chesrown: Well, we definitely felt that it was imprudent to adjust guidance. Obviously, you can do the straight line math and talk about run rate. You can see from the past that - now that they're public numbers, you can see from RideNow’s experience, because of their emphasis on the Sunbelt, they have not had hardly any seasonality from first half to second half, unlike RumbleON, which has had some of that. So, as a combined company, I think it was very, very little effect in that regard. We just felt that it was imprudent with the fact that we have an integration that's going to take place. We think there's still a lot of unknowns out there with regards to COVID and all these new variances. When do the manufacturers actually ramp production? Some of them are now talking about possibly, before they can get back to any normal levels, a year or so. So we just think there's a lot of unknowns. And I think the important part is, we want to make sure as a total company, that we've set the expectations at a level that - and we set that as an example of how we plan to operate going forward, that these will be numbers that we can beat or exceed. And I just - like I said, we just - we certainly talk about it a lot internally, but we just think it would be imprudent to adjust at this time. We are very confident of our guidance where we have it. Michael Baker: Right. Yep. It makes sense. Understood. Thank you. I'll turn it over to someone else now. Marshall Chesrown: Thank you. Operator: Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Chesrown for any final comments. Marshall Chesrown: I think that's it. We appreciate everybody joining us today. Obviously, we've got a lot of stuff going on. We will update everyone as soon as we are able to with regards to RideNow and any improvements, I guess, to getting closer to closing. We’re down to the final, what I consider nits and nats of our checklists to get this to the finish line. And as I've told many, we kind of feel as a team that we're about on the one yard line. So, I think you'll hear some things very soon from us. And we are even more excited as we get more and more introduced to the RideNow group. And I think there's a high level of enthusiasm there as well. So, lots of good stuff ahead from our management's perspective for 2021. And certainly, we think 2022 is going to have a lot of legs. So, appreciate your time. Look forward to speaking to you all soon. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.