RideNow Group, Inc.: Form 10-Q for the period ended Sep 30, 2025

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 and the related notes and the MD&A included in our 2024 10-K, as well as our unaudited consolidated financial statements and the accompanying condensed notes included in Item 1 of this Quarterly Report on Form 10-Q. This discussion may contain forward-looking statements. See “Forward-Looking and Cautionary Statements” for a discussion of the uncertainties and risks associated with these statements. Terms not defined in this MD&A have the meanings ascribed to them in the consolidated financial statements and related footnotes. Unless otherwise noted, comparisons are of results for the quarter ended September 30, 2025, or third quarter, to the quarter ended September 30, 2024 and the nine months ended September 30, 2025 (nine months or year to date), to the nine months ended September 30, 2024.

Overview

Effective August 13, 2025, we changed our company name to “RideNow Group, Inc.” and our Class B common stock ticker symbol change to “RDNW”. Our Class B common stock continues to be listed on The NASDAQ Stock Market.

We operate primarily through two operating segments: a powersports dealership group and Wholesale Express, LLC (“Express”), a vehicle transportation services provider. We were incorporated in 2013. We have grown primarily through acquisitions.

Powersports Segment

We believe our powersports business is the largest powersports retail group in the United States 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, 2025, we operated 53 retail dealerships located predominantly in the Sunbelt region. We source high quality pre-owned inventory online via our proprietary RideNow Cash Offer technology, which allows us to purchase pre-owned units directly from consumers.

Vehicle Transportation Services Segment

Express provides transportation brokerage services facilitating automobile transportation primarily between and among dealerships and auctions through an asset-light business model.

Key Operating Metrics

We regularly review a number of key operating metrics such as revenue, volume and gross profit measures, to evaluate our segments, measure our progress, and make operating decisions. Key factors impacting our operating results include 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 Operations

($ in millions)

NM= not meaningful.

Powersports Segment

($ in millions except per vehicle)

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

Revenue

Total powersports revenue for the quarter increased $0.1 million compared to the same period in 2024 primarily due to higher revenue from sales of pre-owned retail vehicles along with increases in F&I and PSA revenue, partially offset by lower revenue from wholesale vehicle sales.

Total powersports revenue for the nine months decreased $77.2 million compared to the same period last year primarily due to a lower volume of retail units sold, which also led to F&I and PSA declines, partially offset by increases in the revenue per vehicle for pre-owned retail vehicles sold and PSA.

Gross Profit

Total powersports gross profit increased $4.9 million for the quarter due in part to higher volume, with improvement in vehicles, PSA and F&I. Total gross profit per retail vehicle increased $228 for the quarter compared to last year’s quarter.

Total powersports gross profit decreased $11.2 million for the year to date period primarily due to lower overall retail vehicle sales volumes with the ancillary business lines following suit. The volume declines were partially offset in by higher revenue per pre-owned vehicle sold and higher PSA per retail vehicle sold.

Vehicle Transportation Services Segment

Early in 2025, our vehicle transportation services segment results were impacted by the departure of several employees, including almost all of our brokers. While we have hired and continue to hire additional employees, including brokers, this segment’s year-to-date volume has been substantially lower than its volume in the same period last year, and we expect that to continue for the remainder of the year. Total vehicle transportation services revenue and gross profit decreased for the 2025 third quarter and year-to-date period compared to the prior year comparable periods due to lower volume of vehicles transported.

Selling, General and Administrative Expenses

($ in millions)

“bps” = basis points (i.e., 1/100th of a percent = one basis point)

Selling, general and administrative expenses (“SG&A”) were lower for the quarter and year-to-date 2025 period compared to the prior year comparable periods primarily due to our cost savings initiatives partially offset by higher professional fees.

In all periods presented, SG&A included certain charges and credits that we view as being outside of our normal, ongoing operations. For the 2025 quarter and year-to-date periods, SG&A included $2.6 million and $6.4 million, respectively, of legal costs primarily for the matters discussed in Note 12 and certain costs we incurred to amend and extend our term loan agreement. In addition, SG&A for the first nine months of 2025 included $1.1 million of management transition costs. SG&A for the 2024 third quarter and year-to-date periods included $1.3 million and $2.6 million, respectively, of charges for legal costs for the matters discussed in Note 12 and the cost to terminate a contract. Stock compensation expense for the nine months of 2025 included the $0.7 million reversal of expense due to the forfeiture of our former Chief Executive Officer’s equity awards.

SG&A includes costs for our leased facilities. As part of our initiatives surrounding the assessment of our dealership portfolio, we have recently taken actions to reduce our costs by consolidating our overall footprint and/or closing less profitable stores. In August 2025, we combined two Dallas / Fort Worth area locations into a new, larger location in Fort Worth, Texas. In September 2025, we closed a location in Ohio and transferred the inventory from that store to other locations. From time to time, we have incurred fees to terminate leases and may incur such termination fees and additional closing costs in the future as a result of actions we take to improve overall profitability. For the three and nine months ending September 30, 2025, SG&A includes a $0.5 million payment associated with the termination of a dealership lease, partially offset by a $0.4 million gain on lease termination.

Depreciation and Amortization

($ in millions)

Depreciation and amortization decreased primarily due to certain intangible assets becoming fully amortized.

Impairment of Franchise Rights

The 2025 year-to-date period contains a $34.0 million charge to impairment of franchise rights. Management determined that an impairment triggering event had occurred resulting from the prolonged economic uncertainty and our sustained depressed stock price through June 30, 2025. As a result of the interim quantitative impairment test we performed, we recorded a $34.0 million charge to impairment of franchise rights to reduce franchise rights to their fair value in the second quarter of 2025. There was no such impairment charge during the comparable period last year, and there was no impairment test required as of September 30, 2025.

The fair value of franchise rights was determined using an excess earnings method. This analysis incorporates estimates and forward-looking projections, such as future revenue growth rates, corresponding gross margin, return on debt-free working capital contributory asset returns, and the discount rate. The use of different assumptions would likely have resulted in a different fair value, and changes to these assumptions in the future, such as an increase to the discount rate, could result in future impairment charges.

Floor Plan Interest Expense

($ in millions)

Floor plan interest expense was lower in the quarter and year-to-date 2025 primarily because average inventory levels were lower compared to the prior year comparable periods. We have floor plan agreements with both manufacturer-affiliated finance companies and with related and non-related third parties for most new and certain pre-owned vehicles. The interest rates on these floor plan notes payable commitments vary by lender and are variable rates. See Notes 2 and 10 for more information.

Other Interest Expense

($ in millions)

Other interest expense consists primarily of interest on the term loan facility, finance lease obligation, the 6.75% convertible senior notes, and beginning in the third quarter of 2025, the Subordinated Loans, as defined in Note 10. See Note 4 for interest expense by debt instrument. Other interest expense decreased for the quarter and six months due primarily to the 6.75% convertible senior notes being paid off at the beginning of 2025, as well as lower average borrowings and a lower interest rate on the term loan in 2025 compared to 2024. Amortization of debt discount and issuance costs of $2.2 million and $7.1 million for the three and nine months ended September 30, 2025, respectively, and $2.1 million and $6.5 million for the three and nine months ended September 30, 2024, respectively, were included in other interest expense.

See Notes 4 and 10 for new and modified debt agreements entered into in August 2025 that will impact future interest expense, including the timing of paying such interest.

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, 2025 and December 31, 2024:

($ in millions)

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

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 2024 10-K. We believe that current cash balances plus cash generated from operations 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)

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

During the quarter we and the other parties to the Credit Agreement (as defined in Note 4) executed Amendment No. 10 to the Credit Agreement (“Amendment No. 10”), which, among other things: (i) extended the maturity date of the Credit Agreement from August 31, 2026 to September 30, 2027; (ii) required us to prepay $20.0 million of the borrowings under the Credit Agreement (“Senior Loans”) using the proceeds of the Subordinated Loans, as defined in Note 10, and other funds; (iii) reduced the interest rate applicable to the Senior Loans by 0.5% per annum; (iv) added certain reporting covenants; (v) added milestones requiring us to commence a refinancing process prior to September 30, 2026 and complete the refinancing on or prior to November 30, 2026, and provided that failure to achieve such milestones will be an event of default under the Credit Agreement unless, prior to such milestone dates we (a) reduce the outstanding principal amount of the Senior Loans to the lesser of (1) $150.0 million and (2) 3.25x Consolidated EBITDA or (b) both (1) form a special committee of the Company’s board of directors (the “Board”) to negotiate and recommend to the Board for approval any strategic alternatives, including any recapitalization, refinancing, any transaction resulting in a change of control or a sale of all or substantially all assets of the Company and its subsidiaries and (2) engage an investment banker or financial advisor acceptable to the Administrative Agent to evaluate and execute the strategic alternatives of the Company, and (vi) modified the financial maintenance covenants in the Credit Agreement. In connection with Amendment No. 10, we will pay a customary exit fee that is due at the maturity of the Credit Agreement. As of September 30, 2025, we were in compliance with all of the financial covenants under the Credit Agreement.

The following table summarizes our cash flows:

($ in millions)

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 flow for the nine months ended September 30, 2025 was $53.1 million lower than for the comparable period in the prior year, and was negatively impacted by $7.1 million of outstanding fleet receivables from the United States government, which remain outstanding due to the government shutdown. Prior year operating cash flow was driven by the reduction of excess inventory and the settlement of a $15.4 million loan portfolio transaction.

Inventory is one of the most significant components of our cash flow from operations. We have continued to focus on managing our mix and maintaining an appropriate level of new and pre-owned powersports inventory. Our inventory levels declined throughout 2024, as we worked to reduce excess inventory. Inventory as of the end of the quarter, while higher than the level of inventory at the end of 2024, is below the elevated level of inventory that we had at the end of the third quarter of 2024.

Investing Activities

($ in millions)

Our investing activities support and expand our operations.

Financing Activities

($ in millions)

Cash flows from financing activities primarily relate to our short and long-term debt activity. In January 2025, we repaid our 6.75% convertible senior notes at their maturity date, and in August 2025, we issued an aggregate $10.0 million of Subordinated Loans (as defined in Note 10) to related parties, and prepaid $20.0 million of principal amounts due under the Credit Agreement as required by Amendment No. 10. As a result of the prepayment and interest rate reduction pursuant to Amendment No. 10, we expect cash payments for interest expense to be $3.4 million lower per year on an annualized basis for the duration of the term loan facility.

See Notes 4 and 10 for the new and modified debt agreements entered into in August 2025.

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, 2024. 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 2024 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 2024 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.

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, 2025. 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, 2025, based on the ongoing remediation of material weakness identified in the 2024 10-K. The material weakness existing in our internal control over financial reporting relates to user access and segregation of duties related to certain information technology systems that support the Company’s financial reporting processes including revenue, inventory, purchasing and related expenditures, 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:

• Enhancing our processes related to reviewing and provisioning access to key financial systems and ensuring appropriate segregation of duties;
• Continuing 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 this material weakness 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, 2025 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.

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 2024 10-K. There have been no material changes to the risk factors previously disclosed in our 2024 10-K, the occurrence of any of which could have a material adverse effect on our actual results.