# RideNow Group, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [RideNow Group, Inc.](/companies/rdnw.md) (CIK 1596961)
- Form: 10-Q
- Filed: 2024-11-12
- Accepted by EDGAR: Nov 12, 2024, 16:56 ET
- Period: 2024-09-30
- Accession: 0001596961-24-000106
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1596961/000159696124000106/rmbl-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1596961/000159696124000106/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $295.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $939.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $220.7m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $692.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $74.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $246.8m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $65.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $211.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $5.3m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $25.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $16.6m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $48.9m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | −$400.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$11.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$22.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.32 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.63 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.32 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.63 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 35,283,033 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 35,209,785 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $1.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $50.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $394.6m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $830.5m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $351.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $747.2m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $209.8m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $39.2m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $83.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,065 characters.

*This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes, and the MD&A included in our 2023 Form 10-K, as well as our unaudited condensed consolidated financial statements and the accompanying notes included in Item 1 of this Quarterly Report on Form 10-Q. Terms not defined in this MD&A have the meanings ascribed to them in the condensed consolidated financial statements. Unless otherwise noted, comparisons are of results for the quarter ended September 30, 2024, or third quarter, to the quarter ended September 30, 2023.*

### Overview

RumbleOn, Inc. operates primarily through two operating segments: our powersports dealership group and Wholesale Express, LLC (“Express”), a vehicle transportation services provider. We were incorporated in 2013. We have grown primarily through acquisitions, the largest to date being our 2021 acquisition of the RideNow business followed by our 2022 acquisition of the Freedom Powersports business. These acquisitions added 54 powersports dealerships to our Company.

### Powersports Segment

Our powersports segment is the largest powersports retail group in the United States (as measured by reported revenue, major unit sales and dealership locations), offering a wide selection of new and pre-owned motorcycles, all-terrain vehicles (“ATV”), utility terrain or side-by-side vehicles (“SXS”), personal watercraft (“PWC”), snowmobiles, and other powersports products. We also offer parts, apparel, accessories, finance & insurance products and services (“F&I”), and aftermarket products from a wide range of manufacturers. Additionally, we offer a full suite of repair and maintenance services. As of September 30, 2024, we operated 56 retail locations consisting of hundreds of powersports franchises (representing various brands of motorcycles, ATVs, SXSs, PWCs, snowmobiles, and other powersports products) in Alabama, Arizona, California, Florida, Georgia, Kansas, Massachusetts, Nevada, North Carolina, Ohio, Oklahoma, South Dakota, Texas, and Washington.

We source high quality pre-owned inventory online via our proprietary Cash Offer technology, which allows us to purchase pre-owned units directly from consumers.

Our powersports retail distribution locations represent all major manufacturers, or OEMs, and their representative brands, including those listed below.

|  |  |  |
| --- | --- | --- |
| **Powersports’ Representative Brands** |  |  |
| **Benelli** | **Karavan Trailers** | **Segway Powersports** |
| **BMW** | **Kawasaki** | **Ski-Doo** |
| **Can-Am** | **Kayo** | **SSR** |
| **CF Moto** | **KTM** | **Suzuki** |
| **Club Car** | **Lynx (snowmobiles)** | **Tidewater Boats** |
| **Continental Trailers** | **MAGICTILT Trailers** | **Timbersled (snow bikes)** |
| **Ducati** | **Manitou** | **Triton Trailers** |
| **Harley-Davidson** | **Mercury (boat engines)** | **Yamaha** |
| **Honda** | **Polaris** | **Yamaha Marine** |
| **Husqvarna** | **Royal Enfield** | **Zieman Trailers** |
| **Indian Motorcycles** | **Sea-Doo** |  |

### Vehicle Transportation Services Segment

Express provides asset-light transportation brokerage services facilitating automobile transportation primarily between and among dealers.

### Recent Developments

As of September 30, 2024, the Company was in compliance with the financial covenants under Amendment No.8 to the Credit Agreement (defined in Note 4) but determined it may need additional capital and/or relief from the financial covenants in the future. On November 11, 2024, the Company and Oaktree executed Amendment No. 9 to the Credit Agreement (each as defined in Note 12), which provided the Company with revised financial covenants through June 30, 2026, and permitted the Company to enter into the Rights Offering Term Sheet and the Pre-Owned Floor Plan Facility and SLB Commitment Letter (each as defined in Note 12), representing a total of approximately $30.0 million of incremental capital.

### J.P. Morgan Floor Plan Line

On September 30, 2024, the Company was not in compliance with the “Minimum EBITDA” financial covenant associated with its JPM Credit Line (as defined in Note 4). On October 23, 2024, the Company paid off the outstanding balance under this floor plan line, which was $5.7 million as of September 30, 2024. This floor plan line terminates on December 31, 2024, and no amounts may be drawn under the line after November 1, 2024.

### Key Operating Metrics

We regularly review a number of key operating metrics to evaluate our segments, measure our progress, and make operating decisions. Our key operating metrics reflect what we believe will be the primary drivers of our business, including increasing brand awareness, maximizing the opportunity to source vehicles from consumers and dealers, and enhancing the selection and timing of vehicles we make available for sale to our customers.

### Powersports Segment

#### Revenue

Revenue is comprised of powersports vehicle sales, finance and insurance products bundled with retail vehicle sales (“F&I”), and parts, service and accessories/merchandise (“PSA”). We sell both new and pre-owned powersports vehicles through retail and wholesale channels. F&I and PSA revenue is earned through retail channels. Retail channels provide the opportunity to maximize profitability by increased sales volume and lower average days to sale and are impacted by customer demand, market conditions and inventory availability. The wholesale channel provides the opportunity to move excess inventory or inventory that does not meet our needs for retail. The number of vehicles sold varies from period to period due to these factors. Factors primarily affecting pre-owned vehicle sales include inventory levels and the availability of inventory, as well as the number of retail pre-owned vehicles sold and the average selling price of these vehicles.

#### Gross Profit

Gross profit generated on vehicle sales reflects the difference between the vehicle selling price and the cost of revenue associated with acquiring the vehicle and preparing it for sale. Cost of revenue includes the vehicle acquisition cost, inbound transportation cost, and particularly for pre-owned vehicles, reconditioning costs. The aggregate gross profit and gross profit per vehicle vary across vehicle type, make, model, etc. as well as through retail and wholesale channels, and with regard to gross profit per vehicle, are not necessarily correlated with the sale price. Vehicles sold through retail channels generally have the highest dollar gross profit per vehicle given the vehicle is sold directly to the consumer. Pre-owned vehicles sold through wholesale channels generally have lower margins and do not enable any other ancillary gross profit attributable to financing and accessories. Factors affecting gross profit from period to period include the mix of new versus pre-owned vehicles sold, the distribution channel through which they are sold, the sources from which we acquired such inventory, retail market prices, our average days to sale, and our pricing strategy. We may opportunistically choose to shift our inventory mix to higher or lower cost vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of demand/supply imbalances in our sales channels, which could temporarily lead to gross profits increasing or decreasing in any given channel.

#### Vehicles Sold

We define vehicles sold as the number of vehicles sold through retail and wholesale channels in each period. Vehicles sold is the primary driver of our revenue and gross profit. Vehicles sold also impacts complementary revenue streams, such as F&I and PSA. Vehicles sold increases our base of customers and improves brand awareness, which can lead to future sales.

#### Total Gross Profit Per Unit

Total gross profit per unit is the aggregate gross profit of the powersports segment in a given period, divided by retail powersports units sold in that period. The aggregate gross profit of the powersports segment includes gross profit generated from the sale of new and pre-owned vehicles; any income related to loans originated to finance the vehicle; revenue earned from the sale of F&I products including extended service contracts, maintenance programs, guaranteed auto protection, tire and wheel protection, and theft protection; gross profit on the sale of parts, service and accessories/merchandise; and gross profit generated from wholesale sales of vehicles.

### Vehicle Transportation Services Segment

#### Revenue

Revenue is derived from freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The freight brokerage agreements are fulfilled by independent third-party transporters who must meet our performance obligations and standards. Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service.

#### Vehicles Delivered

We define vehicles delivered as the number of vehicles delivered from a point of origin to a designated destination under freight brokerage agreements with dealers, distributors, or private parties. Vehicles delivered are the primary driver of revenue and, in turn, profitability in the vehicle transportation services segment.

#### Total Gross Profit Per Unit

Total gross profit per vehicle transported represents the difference between the price received from non-affiliated customers and our cost to contract an independent third-party transporter divided by the number of third-party vehicles transported.

### Results of Continuing Operations

*($ in millions)*

| Revenue | Three Months Ended September 30, 2024 | 2023 | YoY Change | Nine Months Ended September 30, 2024 | 2023 | YoY Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Powersports vehicles | $206.4 | $235.1 | $(28.7) | $656.2 | $738.1 | $(81.9) |
| PSA | 49.2 | 59.7 | (10.5) | 159.0 | 184.2 | (25.2) |
| Finance and insurance, net | 24.3 | 29.3 | (5.0) | 79.8 | 89.7 | (9.9) |
| Vehicle transportation services | 15.1 | 14.0 | 1.1 | 44.6 | 43.2 | 1.4 |
| Total Revenue | 295.0 | 338.1 | (43.1) | 939.6 | 1,055.2 | (115.6) |
| Gross Profit |  |  |  |  |  |  |
| Powersports | 23.8 | 32.3 | (8.5) | 84.4 | 104.0 | (19.6) |
| PSA | 22.7 | 27.0 | (4.3) | 72.5 | 84.7 | (12.2) |
| Finance and insurance, net | 24.3 | 29.3 | (5.0) | 79.8 | 89.7 | (9.9) |
| Vehicle transportation services | 3.5 | 3.4 | 0.1 | 10.1 | 10.3 | (0.2) |
| Total Gross Profit | 74.3 | 92.0 | (17.7) | 246.8 | 288.7 | (41.9) |
| SG&A expenses | 65.9 | 85.0 | (19.1) | 211.2 | 271.6 | (60.4) |
| Depreciation and amortization | 3.1 | 7.2 | (4.1) | 9.7 | 17.2 | (7.5) |
| Operating Income (Loss) | 5.3 | (0.2) | 5.5 | 25.9 | (0.1) | 26.0 |
| Floor plan interest expense | 4.4 | 3.9 | 0.5 | 12.7 | 9.8 | 2.9 |
| Other interest expense | 12.2 | 16.0 | (3.8) | 36.2 | 46.0 | (9.8) |
| Other income | 0.1 | 0.1 | — | 0.4 | 0.2 | 0.2 |
| Loss from continuing operations before income taxes | (11.2) | (20.0) | 8.8 | (22.6) | (55.7) | 33.1 |
| Income tax benefit | — | (3.5) | 3.5 | $(0.4) | (9.7) | 9.3 |
| Loss from continuing operations | $(11.2) | $(16.5) | $5.3 | $(22.2) | $(46.0) | $23.8 |

21

### Powersports Segment

*($ in millions, except per unit)*

| Revenue | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| New retail vehicles | $147.1 | $159.6 | $(12.5) | $477.9 | $501.5 | $(23.6) |
| Pre-owned vehicles: |  |  |  |  |  |  |
| Retail | 52.7 | 68.8 | (16.1) | 160.8 | 215.6 | (54.8) |
| Wholesale | 6.6 | 6.7 | (0.1) | 17.5 | 21.0 | (3.5) |
| Total pre-owned vehicles | 59.3 | 75.5 | (16.2) | 178.3 | 236.6 | (58.3) |
| Parts, service, accessories | 49.2 | 59.7 | (10.5) | 159.0 | 184.2 | (25.2) |
| Finance and insurance, net | 24.3 | 29.3 | (5.0) | 79.8 | 89.7 | (9.9) |
| Total revenue | $279.9 | $324.1 | $(44.2) | $895.0 | $1,012.0 | $(117.0) |
| Gross Profit |  |  |  |  |  |  |
| New retail vehicles | $16.6 | $22.0 | $(5.4) | $57.4 | $74.4 | $(17.0) |
| Pre-owned vehicles: |  |  |  |  |  |  |
| Retail | 7.7 | 10.9 | (3.2) | 27.4 | 31.2 | (3.8) |
| Wholesale | (0.5) | (0.6) | 0.1 | (0.4) | (1.6) | 1.2 |
| Total pre-owned vehicles | 7.2 | 10.3 | (3.1) | 27.0 | 29.6 | (2.6) |
| Parts, service, accessories | 22.7 | 27.0 | (4.3) | 72.5 | 84.7 | (12.2) |
| Finance and insurance | 24.3 | 29.3 | (5.0) | 79.8 | 89.7 | (9.9) |
| Total gross profit | $70.8 | $88.6 | $(17.8) | $236.7 | $278.4 | $(41.7) |
| Vehicle Unit Sales |  |  |  |  |  |  |
| New retail vehicles | 9,740 | 10,851 | (1,111) | 32,247 | 34,413 | (2,166) |
| Pre-owned vehicles: |  |  |  |  |  |  |
| Retail | 4,549 | 5,619 | (1,070) | 14,350 | 17,537 | (3,187) |
| Wholesale | 1,059 | 1,103 | (44) | 3,043 | 3,121 | (78) |
| Total pre-owned vehicles | 5,608 | 6,722 | (1,114) | 17,393 | 20,658 | (3,265) |
| Total vehicles sold | 15,348 | 17,573 | (2,225) | 49,640 | 55,071 | (5,431) |
| Total retail vehicles sold | 14,289 | 16,470 | (2,181) | 46,597 | 51,950 | (5,353) |
| Revenue per vehicle |  |  |  |  |  |  |
| New retail vehicles | $15,103 | $14,706 | $397 | $14,820 | $14,573 | $247 |
| Pre-owned vehicles: |  |  |  |  |  |  |
| Retail | 11,585 | 12,233 | (648) | 11,206 | 12,292 | (1,086) |
| Wholesale | 6,232 | 6,186 | 46 | 5,751 | 6,748 | (997) |
| Total pre-owned vehicles | 10,574 | 11,241 | (667) | 10,251 | 11,454 | (1,203) |
| Finance and insurance, net | 1,701 | 1,778 | (77) | 1,713 | 1,726 | (13) |
| Parts, service, accessories | 3,443 | 3,626 | (183) | 3,412 | 3,546 | (134) |
| Total revenue per retail vehicle | $19,127 | $19,267 | $(140) | $18,832 | $19,075 | $(243) |
| Gross Profit Per Unit |  |  |  |  |  |  |
| New vehicles | $1,704 | $2,035 | $(331) | $1,780 | $2,163 | $(383) |
| Pre-owned vehicles | 1,693 | 1,935 | (242) | 1,909 | 1,780 | 129 |
| Finance and insurance, net | 1,701 | 1,778 | (77) | 1,713 | 1,726 | (13) |
| Parts, service, accessories | 1,589 | 1,638 | (49) | 1,556 | 1,630 | (74) |
| Total gross profit per vehicle(1) | 4,955 | 5,380 | (425) | 5,080 | 5,358 | (278) |

*(1) Calculated as total gross profit divided by new and pre-owned retail powersports units sold.*

#### Revenue

Total powersports revenue for the quarter decreased $44.2 million compared to the same period in 2023 primarily due to lower volume of vehicle units sold. The impact on revenue from the volume was partially offset by a $397 increase in average revenue per new vehicle sold. The lower volume in retail sales of new and pre-owned vehicles contributed to a decline in F&I and PSA revenue for the quarter.

Total powersports revenue decreased $117.0 million for the nine months of 2024, with the decrease coming primarily from lower sales of vehicles in the retail channel. The impact on revenue from lower volume was partially offset by higher revenue per new vehicle sold.

#### Gross Profit

Total powersports gross profit decreased $17.8 million for the quarter and $41.7 million for the nine months of 2024. Lower sales volumes drove the decline in gross profit for both the quarter and nine months of 2024. Industry pressures as well as our efforts to reduce inventory more in line with our sales levels resulted in compressed gross profit for powersports.

### Vehicle Transportation Services Segment

|  | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue ($ in millions) | $15.1 | $14.0 | $1.1 | $44.6 | $43.2 | $1.4 |
| Gross Profit ($ in millions) | $3.5 | $3.4 | $0.1 | $10.1 | $10.3 | $(0.2) |
| Vehicles transported | 25,084 | 22,930 | 2,154 | 75,256 | 70,175 | 5,081 |
| Revenue per vehicle transported | $602 | $611 | $(9) | $593 | $616 | $(23) |
| Gross Profit per vehicle transported | $140 | $148 | $(8) | $134 | $147 | $(13) |

Total vehicle transportation services revenue increased for the third quarter and nine months of 2024 compared to the prior year comparable periods due to higher volume of vehicles transported. Gross profit was comparable in both periods.

### Selling, General and Administrative Expenses

*($ in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Compensation and related costs | $37.1 | $48.9 | $(11.8) | $122.3 | $157.0 | $(34.7) |
| Facilities | 12.0 | 13.0 | (1.0) | 33.9 | 35.5 | (1.6) |
| General and administrative | 7.4 | 8.9 | (1.5) | 25.0 | 29.7 | (4.7) |
| Advertising, marketing and selling | 4.1 | 7.1 | (3.0) | 15.9 | 21.5 | (5.6) |
| Professional fees | 3.7 | 2.6 | 1.1 | 8.9 | 13.1 | (4.2) |
| Stock-based compensation | 1.1 | 3.1 | (2.0) | 3.9 | 10.9 | (7.0) |
| Technology and software | 0.5 | 1.4 | (0.9) | 1.3 | 3.9 | (2.6) |
| Total SG&A expenses | $65.9 | $85.0 | $(19.1) | $211.2 | $271.6 | $(60.4) |
| Total SG&A as a % of gross profit | 88.7% | 92.4% | (370) bps | 85.6% | 94.1% | (850) bps |

Selling, general and administrative expenses (“SG&A”) as a percentage of gross profit improved 370 basis points for the quarter. SG&A decreased primarily due to our cost savings initiatives. Compensation and related costs comprised the majority of the savings. The expense reduction for the quarter was partially offset by higher legal costs included in professional fees for the matters discussed in Note 11. The prior year quarter included certain costs that did not recur in 2024: $0.6 million related to the separation of former executives, $0.4 million related to a proxy contest and reorganization of the board of directors, and a $0.6 million loss associated with the loan receivable portfolio that was sold at the end of 2023.

SG&A as a percentage of gross profit improved 850 basis points for the nine months ended September 30, 2024. SG&A decreased primarily due to our cost savings initiatives, as well as certain expenses in 2023 that did not recur in 2024. Facilities expense in the nine months of 2024 included a $0.9 million gain on the partial termination of a warehouse lease that was no longer needed. The nine months ended September 30, 2023 included $5.1 million of charges related to a proxy contest and reorganization of our board of directors, $5.3 million of personnel restructuring costs primarily associated with officer separations from the Company, and $6.0 million of charges associated with the RumbleOn Finance loan portfolio that was sold at the end of 2023.

### Depreciation and Amortization

*($ in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Depreciation and amortization | $3.1 | $7.2 | $(4.1) | $9.7 | $17.2 | $(7.5) |

Depreciation and amortization decreased for the quarter and the nine months compared to the same periods in 2023, primarily due to lower amortization expense for non-compete agreements related to prior acquisitions and lower software amortization costs. Software amortization expense in the 2023 periods included a $2.6 million impairment of the remaining capitalized costs of certain software that was no longer being used.

### Other Interest Expense

*($ in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Other interest expense | $12.2 | $16.0 | $(3.8) | $36.2 | $46.0 | $(9.8) |

Other interest expense consists primarily of interest and deferred financing costs on the: (i) term loan facility; (ii) convertible senior notes; (iii) finance lease obligation; and in 2023, (iv) the ROF Consumer Finance Facility. Interest expense decreased for the quarter and nine months of 2024 due primarily to lower outstanding principal on the term loan facility and the RumbleOn Finance consumer finance facility being paid off at the beginning of 2024, offset by interest expense on the finance lease obligation that was entered into in September 2023. Other interest expense was also lower due to our adoption of ASU 2020-06, as we are no longer amortizing the debt discount associated with our convertible senior notes. See Note 1, *Description of Business and Significant Accounting Policies, f*or more details on our adoption of the new accounting standard and Note 4, *Debt,* for more detail on the components of our other interest expense.

### Liquidity and Capital Resources

Our primary sources of liquidity are available cash and amounts available under our floor plan lines of credit.

Our financial statements reflect estimates and assumptions made by management that affect the carrying values of the Company’s assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. The judgments, assumptions and estimates used by management are based on historical experience, management’s experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company’s assets and liabilities and the results of operations.

We had the following liquidity resources available as of September 30, 2024 and December 31, 2023:

*($ in millions)*

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Cash | $50.1 | $58.9 |
| Restricted cash(1) | 16.6 | 18.1 |
| Total cash and restricted cash | 66.7 | 77.0 |
| Availability under powersports inventory financing credit facilities(2) | 121.5 | 165.0 |
| Committed liquidity resources available | $188.2 | $242.0 |

*(1) Amounts included in restricted cash are primarily comprised of the deposits required under the Company's various floor plan lines of credit.*

*(2) Aggregate availability at December 31, 2023 included $47.5 million for the JPM Credit Line (as defined below) that was reduced to $8.0 million as of September 30, 2024. During October 2024, aggregate credit availability was reduced by $22.8 million as a result of our lowering of limits with certain lenders and the reduction of the limits under the JPM Credit Line. Subsequent to November 1, 2024, pursuant to the terms of the agreement, no new amounts may be borrowed under the JPM Credit Line.*

At June 30, 2024, the Company was not in compliance with certain leverage ratio financial covenants under the Credit Agreement. On August 6, 2024, the Company, the Subsidiary Guarantors party thereto, Oaktree and the lenders party thereto executed Amendment No. 8 to the Credit Agreement (“Amendment No. 8”), pursuant to which, among other things: (i) the leverage ratios were revised and made less restrictive through December 31, 2024, (ii) the level of liquidity required by the minimum liquidity covenant was increased from $25.0 million to $30.0 million starting June 30, 2024 and continuing through the maturity of the term loan, and (iii) a compliance certificate is required to be submitted affirming compliance with the then effective leverage and liquidity tests upon any full or partial cash settlement of the convertible senior 6.75% promissory notes due January 1, 2025. The Company agreed to pay a one-time fee of 0.5% of the loan amount in cash, and the additional 0.5% of interest was extended through March 31, 2025.

Included in the availability under powersports inventory financing credit facilities as of September 30, 2024 was the JPM Credit Line with an advance limit of $8.0 million, of which $5.7 million was used. The JPM Credit Line was amended on August 6, 2024 after the Company was not in compliance with the “Minimum EBITDA” financial covenant as of June 30, 2024. The amendment revised applicable financial covenants for the remainder of its term, reduced the commitment level, reduced the advance rate of incremental floored units from 75% to 65% of cost, and extended the term from October 25, 2024 to December 31, 2024. On October 23, 2024, the Company paid off the outstanding balance under the JPM Credit Line. Pursuant to the terms of the agreement, no amounts are available to be borrowed under this line after November 1, 2024.

The Company executed Amendment No. 9 to the Credit Agreement, the Rights Offering Term Sheet and the Pre-Owned Floor Plan Facility and SLB Commitment Letter on November 11, 2024, as discussed more fully in Note 12.

Our future liquidity and capital requirements will depend upon numerous factors, including our results of operations, the timing and magnitude of capital expenditures or strategic initiatives, and other business and risk factors described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 as amended and supplemented in subsequent filings. We believe that current cash balances plus cash generated from operations and capital commitments received in November 2024 will be sufficient to meet both the operating and capital requirements of our ordinary business operations through at least the next twelve months; however, there can be no assurance that we will not require additional financing within this time frame.

Our outstanding principal amount of indebtedness is summarized in the table below:

*($ in millions)*

| Asset-based Short-Term Financing: | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Floor plan notes (financing for inventory) | $242.5 | $291.3 |
| **Long-Term Debt:** |  |  |
| Term loan facility | 226.4 | 248.7 |
| 6.75% convertible senior notes | 38.8 | 38.8 |
| Fleet notes and other | 1.9 | 2.1 |
| RumbleOn Finance secured loan facility(1) | — | 12.2 |
| Principal amount of long-term debt | 267.1 | 301.8 |
| Less: unamortized debt issuance costs | (18.1) | (27.5) |
| Total long-term debt, including current maturities | 249.0 | 274.3 |
| Total debt(2) | $491.5 | $565.6 |

#### (1) Amount was repaid on January 2, 2024 and facility was terminated.

*(2) Excludes finance lease obligations, which are included in other long-term liabilities.*

The following table summarizes our cash flows:

*($ in millions)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Net cash provided by (used in) operating activities | $68.6 | $(18.5) | $87.1 |
| Net cash used in investing activities | (2.7) | (12.8) | 10.1 |
| Net cash provided by (used in) financing activities | (76.2) | 34.0 | (110.2) |
| Net cash used by discontinued operations | — | (1.8) | 1.8 |
| Net change in cash | $(10.3) | $0.9 | $(11.2) |

26

### Operating Activities

Our primary sources of operating cash flows result from the sales of powersports vehicles and ancillary products. Our primary use of cash from operating activities are purchases of inventory, parts and merchandise; marketing costs; interest payments on trade floor plans, long-term debt, and finance lease obligations; rental costs for facilities; and personnel-related expenses. Operating cash flows for the first nine months of 2024 were $87.1 million better than in the comparable period in the prior year, reflecting the Company’s improved operating performance, primarily driven by our efforts to reduce inventory days on hand, the benefit of our cost savings initiatives and the settlement of the sale of the RumbleOn Finance loan portfolio.

### Investing Activities

*($ in millions)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Acquisitions, net of cash received | $(0.7) | $(3.3) | $2.6 |
| Purchase of property and equipment | (1.6) | (7.8) | 6.2 |
| Technology development | (0.4) | (1.7) | 1.3 |
| Cash used in investing activities | $(2.7) | $(12.8) | $10.1 |

Our investing activities support and expand our operations. We acquired a powersports dealership in Massachusetts in 2024 and a powersports dealership in Florida in 2023.

### Financing Activities

*($ in millions)*

|  | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Repayments of debt | $(35.5) | $(59.0) | $23.5 |
| Net increase (decrease) in non-trade floor plan borrowings | (39.3) | 46.0 | (85.3) |
| Proceeds from sale-leaseback transaction | — | 49.7 | (49.7) |
| Debt issuance costs | (1.1) | (1.8) | 0.7 |
| Shares redeemed for employee tax obligations | — | (0.9) | 0.9 |
| Other financing | (0.3) | — | (0.3) |
| Net cash provided by (used in) financing activities | $(76.2) | $34.0 | $(110.2) |

Cash flows from financing activities primarily relate to our short and long-term debt activity. In the first nine months of this year, cash used in financing activities was higher in 2024 primarily due to a reduction in non-trade floor plan borrowings. The prior year also included the proceeds from a sale-leaseback transaction.

### Critical Accounting Policies and Estimates

See Note 1 - *Description of Business and Significant Accounting Policies*, included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for accounting pronouncements and material changes to our critical accounting policies since December 31, 2023. There have been no other material changes to our critical accounting policies and use of estimates from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Form 10-K.

### Forward-Looking and Cautionary Statements

This Quarterly Report on Form 10-Q, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. These forward-looking statements are based on our current, reasonable expectations and assumptions, which expectations and assumptions are subject to risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed in our 2023 Form 10-K and this Quarterly Report on Form 10-Q. Given these risks and uncertainties, readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise or any forward-looking statements, except as required by law.

## Controls and procedures

As filed, 5,579 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2024, based on the ongoing remediation of material weaknesses identified in the 2023 Form 10-K. The material weaknesses existing in our internal control over financial reporting relate to:

- As previously disclosed, there was an insufficient number of accounting resources to facilitate an effective control environment following the integration of the RideNow business and incorporation of the acquired business into the Company’s control environment. Consequently, the Company did not effectively operate process-level control activities related to elimination of intercompany transactions; review and approval of account reconciliations, payroll, and journal entries; review and approval of accounting estimates; and execution and documentation of management review controls, including but not limited to evaluating debt covenants, and assumptions included in the Company’s annual indefinite-lived impairment assessment.
- In the areas of user access and segregation of duties related to certain information technology systems that support the Company’s financial reporting processes, resulting in ineffective journal entry and other manual controls.

As set forth below, management has taken and will continue to take steps to remediate the identified material weakness. Notwithstanding the material weakness, we have performed additional analyses and procedures to enable management to conclude that our consolidated financial statements included in this Form 10-Q fairly present in all material respects our financial condition and results of operations as of and for the periods presented.

### Management’s Remediation Plan

In response to the material weakness discussed above, we plan to continue efforts already underway to remediate internal control over financial reporting, which include the following:

- We are committed to hiring additional accounting resources with the required technical expertise and clearly defined roles & responsibilities;
- We continue to evaluate system enhancements to automate the consolidation and elimination of intercompany transactions;
- We continue to enhance the overall review and approval process relating to elimination of intercompany transactions;
- We continue to enhance the review and approval controls related to reconciling certain accruals and accounting estimates and assumptions;
- We are in the process of conducting additional training on the Company's document retention policies;
- We are enhancing our processes around reviewing privileged access to key financial systems and ensuring appropriate segregation of duties; and
- We continue to enhance governance and reporting over the execution of these remediation action items, including expansion of mitigating controls where appropriate.

Management and our Audit Committee will monitor these specific remedial measures and the effectiveness of our overall control environment. A material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We can provide no assurance as to when the remediation of these material weaknesses will be completed to provide for an effective control environment.

### Changes in Internal Control Over Financial Reporting

Other than described above, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints that require management to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

## Risk factors

As filed, 5,781 characters.

Our business, financial condition, operating results, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our 2023 Form 10-K. The information provided below updates the disclosure to the 2023 Form 10-K regarding certain financial risks affecting the Company. Except as set forth below, there have been no material changes to the risk factors previously disclosed in our 2023 Form 10-K, the occurrence of any of which could have a material adverse effect on our actual results.

### Financial Risks

***We have incurred significant indebtedness, which could adversely affect us, including our business flexibility.***

We have a substantial amount of debt, which has had and will continue to have the effect, among other things, of reducing our flexibility to respond to changing business and economic conditions. We have various operating and financial covenants under our debt agreements that may limit our operating flexibility due to the need to manage operations with a view to satisfying these covenants at the applicable date of determination. We have incurred and expect to continue to incur a substantial amount of interest expense. Our level of indebtedness, including the applicable interest payments, could also reduce funds available for working capital, capital expenditures, and other general corporate purposes, and may create competitive disadvantages for us relative to competitors with lower debt levels. If our financial performance does not meet our current expectations, then our ability to service our indebtedness may be adversely impacted.

At June 30, 2024, the Company was not in compliance with certain leverage ratio financial covenants under the Credit Agreement as of such date. On August 6, 2024, the Company entered into Amendment No. 8 to the Credit Agreement, which, among other things, revised the applicable leverage ratios, increased the minimum liquidity covenant, required a compliance certificate to be delivered upon any full or partial cash settlement of the convertible senior 6.75% promissory notes due January 1, 2025, and extended the additional 0.5% of interest through March 31, 2025. Amendment No. 8 was made effective as of June 30, 2024 and the lenders agreed that no event of default existed from such financial covenants as of such date.

At September 30, 2024, the Company was in compliance with the leverage ratio financial covenants under the Credit Agreement. However, as of such date we determined that we may need additional capital and/or relief from certain financial covenants in the future. Accordingly, on November 11, 2024, the Company entered into Amendment No. 9 to the Credit Agreement, which provided the Company with revised financial covenants through June 30, 2026, permitted the Company to enter into the Rights Offering Term Sheet and Pre-Owned Floor Plan Facility and SLB Commitment Letter and permitted the Company to pay the convertible senior 6.75% promissory notes due January 1, 2025. The additional 0.5% of interest previously extended through March 31, 2025 will terminate on December 31, 2024.

The Company has established internal controls in place to monitor compliance with the financial covenants. In the event that the Company is unable to comply with the financial covenants in the future, there is no assurance that the Company will be able to obtain an amendment or waiver of such financial covenants. The failure to meet financial covenants under the Credit Agreement, or to obtain an amendment or waiver, would have a material adverse effect on our business, financial condition, and results of operations.

***We may require additional financing or capital to pursue acquisitions or because of unforeseen circumstances. If financing or capital is not available on terms acceptable to us or at all, we may not be able to develop and grow our business as anticipated and our business, operating results, and financial condition may be harmed.***

We intend to continue making investments to support the development and growth of our business and to make strategic acquisitions. Although we currently intend to self-fund our growth initiatives, under certain circumstances we may determine that it is necessary or advisable to raise additional financing or capital. Additional financing or capital may not be available when we need it, on terms that are acceptable to us, or at all. If we decide to raise additional capital through issuances of equity, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common stock. In 2023, our three largest stockholders backstopped our rights offering, and they recently agreed to provide $30.0 million in incremental capital commitments, which includes a $10.0 million backstopped rights offering. If we decide to raise additional debt, our existing stockholders may be subject to the risks associated with higher leverage. In addition, we may need to refinance all or a portion of our existing debt. We utilize multiple vehicle floor plan facilities to finance a substantial amount of our new and pre-owned inventory. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, including under one or more of our vehicle floor plan facilities, or we are unable to obtain additional capital, including from any of our stockholders, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges, or unforeseen circumstances could be significantly limited, and our business, operating results, financial condition, and prospects could be adversely affected.

Filed Nov 12, 2024.
Source: SEC EDGAR, the filing index for accession 0001596961-24-000106. Last ingested by Listed: Nov 11, 2026, 00:56 ET. No prices; not investment advice.