First the word was leaked to the business press on a Friday afternoon, fueling speculation all weekend by industry pundits. Then the official press release was issued stating “RumbleOn and RideNow Announce Definitive Agreement To Combine Companies” subsequently followed by RumbleOn’s 2020 Financials. However the statements seemed to raise more questions about franchise laws, financials and more rather than providing concrete answers as to how this massive "merger/equity purchase agreement” will play out.
Despite the glowing headline that RumbleOn “Grew Gross Profit Per Vehicle Sold By 100% Year-over-Year” the numbers presented during their quarterly financial call didn’t look quite as rosy from RumbleOn. At a time when pandemic-enforced factory closures and shipping lane SNAFUs resulted in record lows of new inventory and just about every used bike at wholesale auctions going for better than book value, RumbleOn reported, “Total vehicle unit sales was 18,024, a decrease from 43,143 in 2019.” Worse, “Total revenue was $416.4 million, a decrease from $840.6 million in 2019.”
Rather than speculate further on numbers we don’t understand, here are both official statements:
DALLAS & CHANDLER, Ariz.--(BUSINESS WIRE)--RumbleOn, Inc. (NASDAQ: RMBL), an ecommerce company using innovative technology to aggregate and distribute pre-owned vehicles to and from both consumers and dealers, and the nation’s largest powersports dealer, RideNow, today announced they have entered into a definitive merger/equity purchase agreement, creating the only omnichannel customer experience in powersports and the largest publicly traded powersports dealership platform. The integration of RideNow’s extensive footprint and strong retail brand with RumbleOn’s technology platform will transform the nation’s largest powersports dealer into the first - and only - omnichannel powersports platform in North America.
Together, the combined company will have a dominant position in a $100+ billion market. The end-to-end platform will enable the combined company to reach more consumers in a secularly growing – yet still highly fragmented market, that is benefitting from changing consumer behavior. The transaction is expected to propel revenue growth and drive meaningful cost synergies, leading to improved monetization and margin expansion.
Company Details and Strategic Rationale
Powersport vehicle demand continues to experience significant growth, accelerated by consumer lifestyle changes and advanced vehicle innovation, while access to affordable pre-owned vehicles attracts new riders.
The proposed transaction combines a robust technology leader in online acquisition and distribution of powersports vehicles with the largest traditional brick and mortar retailer in powersports.
RideNow is the nation’s largest powersports retailer, with more than 40 full-service retail locations in 11 states across the country. In 2020, RideNow sold 45,527 powersport units, including ATVs, UTVs, motorcycles, snowmobiles, and personal watercraft, generating approximately $899.4 million in total revenue, $90.3 million in net income and approximately $96.6 million in adjusted EBITDA.
RumbleOn’s ecommerce platform provides an efficient, timely and transparent transaction experience, without leaving home. Whether buying, selling, trading or financing a vehicle, RumbleOn offers dealers and consumers a friction free experience - without geographic boundaries.
The combined company will offer the fastest, easiest and most transparent transaction process available to consumers nationwide, which, combined with proprietary pre-owned sourcing, disrupts the customer search and purchase experience for powersports enthusiasts, both online and in-store.
In addition to driving organic growth by combining and scaling the legacy RumbleOn and RideNow models, the combined company will be positioned to further consolidate the highly fragmented powersports industry.
RideNow’s co-principal owners and co-founders Mark Tkach and William Coulter will bring more than 70 additional years of combined experience in the vehicle retail industry, joining RumbleOn’s executive team, Marshall Chesrown, Steve Berrard, and Peter Levy, who have a combined 80+ years of experience. Both Mr. Tkach and Mr. Coulter will also join the RumbleOn Board of Directors at closing.
Management Commentary
“We are creating the only omnichannel solution in the powersports industry – offering an unparalleled customer experience for outdoor enthusiasts across the country. RideNow’s significant physical retail platform provides the missing piece of a ‘bricks and clicks’ strategy for RumbleOn, enabling us to reach consumers wherever they want to shop, whether online, offline, or both,” said Marshall Chesrown, RumbleOn’s Chief Executive Officer. “For us, this transaction is about unlocking incremental sales, capturing additional monetization opportunities such as parts and services, and consolidating a fragmented industry to drive efficiency and improve the customer experience. For our customers, this is about offering the most robust selection of inventory through a simple, safe, hassle-free and flexible experience nationwide,” concluded Chesrown.
RideNow’s co-principal owner and co-founder, Mark Tkach, commented, “We are thrilled to be joining Marshall and the rest of the RumbleOn team as we gear up to enable more consumers to shop with us through the first omnichannel customer experience. We are excited to begin leveraging both companies’ capabilities to expand our combined offering. From adding financing options with RumbleOn Finance to exploring the opportunity to open pre-owned retail stores, RumbleOn’s technology and ecommerce presence will provide us access to a nationwide audience and high demand pre-owned inventory. Combining the proprietary technology platform, online aggregation and distribution, nationwide logistics network and the scale and physical footprint of these two companies will give more powersport enthusiasts across the country access to our robust inventory.”
Pro Forma Financials and Guidance
On a pro forma basis the combined company would have generated approximately $1.3 billion in revenue, $65.3 million in net income and $90.8 million in adjusted EBITDA in 2020.
The business combination is expected to close in the second or third quarter of 2021. Given the highly complementary business models, the Company expects to achieve cost synergies over time, while driving incremental growth. For 2021, assuming a combination as of January 1, 2021, total revenue is expected to be in the range of $1.45-$1.55 billion and adjusted EBITDA in the range of $100.0-$110.0 million. The companies expect to drive sustainable long term revenue growth and strong unit economics, with a long-term revenue target in excess of $5.0 billion and Adjusted EBITDA margin target in excess of 10%.
2020 financial and pro forma information is based on unaudited financial information of RideNow and RumbleOn. Pro forma financial information is preliminary and does not include purchase accounting adjustments. Audited historical financials and updated unaudited pro forma information will be provided in future filings with the SEC.
Transaction Details
Under the terms of the definitive agreement, RumbleOn will combine with up to 46 entities operating under the RideNow brand for a total consideration of up to $575.4 million, consisting of $400.4 million of cash and approximately 5.8 million shares of RumbleOn Class B Common Stock. RumbleOn will finance the cash consideration through a combination of up to $280.0 million of debt and the remainder through the issuance of new equity. RumbleOn has entered into a commitment letter with Oaktree to provide for the debt financing, subject to certain conditions. The number of shares to be issued to RideNow is subject to increase as described in the definitive agreement. The transaction is subject to successful completion of the debt and equity financing, RumbleOn stockholder approval, manufacturer approval, other federal and state regulatory approvals, and other customary closing conditions as described in the definitive agreement.
Certain RideNow minority equity holders are not initially parties to the definitive agreement and some minority holders have rights of first refusal (“ROFR”) with respect to the RideNow entity in which they own a stake. If any of these equity holders either decide not to sell their interests to the Company or to exercise their ROFR, RumbleOn will not be able to acquire all of the equity interests of the acquired companies, or in certain cases any interests in an acquired company, and the consideration payable in the business combination will be correspondingly reduced. RideNow anticipates that all minority owners will participate in the business combination and that no minority owners will exercise their ROFR, but there is no assurance this will occur.
Upon closing, the RideNow and RumbleOn executive teams will join their combined 150+ years of vehicle retail experience. Each member of the combined company senior management team will enter into three year Executive Employment Agreements upon closing. Messrs. Tkach and Coulter will also join the RumbleOn Board of Directors.
RumbleOn and RideNow expect to close the business combination during the second or third quarter of 2021.
B. Riley Securities, a subsidiary of B. Riley Financial Inc., is acting as exclusive financial advisor to RumbleOn and sole debt placement agent in conjunction with the transaction.
The official Q4 Statement from RumbleOn:
DALLAS - RumbleOn, Inc (NASDAQ: RMBL), an e-commerce company using innovative technology to aggregate and distribute pre-owned vehicles to and from both consumers and dealers, today announced financial results for the year ended December 31, 2020. Management is hosting an investor call to discuss results today, March 15, 2021 at 8:30am ET.
"Less than seven months after launching RumbleOn 3.0 its clear the newest generation of RumbleOn has been a great success," said Marshall Chesrown, Chief Executive Officer. "RumbleOn 3.0 has increased overall listings on RumbleOn.com which has led to an improvement in gross profit on vehicles sold of more than 100% in 2020 as compared to 2019."
Chesrown concluded, "The prescriptive steps we've taken to improve margins and expand our offering over the past year have quickly cemented RumbleOn as a Powersports leader in the United States."
Full Year 2020 Financial Highlights
RumbleOn's decision to focus on profitability in 2020, combined with the impact of COVID-19 has resulted in significantly reduced commercial activity and total inventory in the market. Despite these factors the Company's full year results demonstrate improvements in margin and EBITDA.
Unless otherwise noted, all comparisons are on a year-over-year basis for the twelve months ended December 31, 2020.
• Total vehicle unit sales was 18,024, a decrease from 43,143 in 2019
• Total revenue was $416.4 million, a decrease from $840.6 million in 2019
-Powersports revenue was $46.7 million
-Automotive revenue was $337.1 million
-Transportation and vehicle logistics revenue was $31.8 million
• Total gross profit was $31.6 million, or a total gross margin of 7.6%, an increase from 6.0% in 2019
-Gross margin on vehicles sold (excluding the impairment loss on automotive inventory) was 9.6%, up from 5.4%. Gross profit per vehicle was $2,047 per vehicle, a 100.4% increase from 2019
-Powersports gross profit per powersport vehicle sold was $1,478
-Automotive gross profit per automotive vehicle sold was $2,282
• Sales, General and Administrative Expenses was $53.7 million, a decrease from $86.6 million in 2019
-Compensation expense was $25.7 million
-Advertising and Marketing expense was $5.3 million
-Professional fees were $3.2 million
-Technology development expense was $1.4 million
-General and Administrative expense was $18.1 million
• Operating loss was $(18.6) million, an improvement from $(37.8) million in 2019
• Net loss was $(25.0) million, an improvement from $(45.2) million in 2019
• Adjusted EBITDA was $(5.8) million or (1.4)% of revenue, an improvement from $(26.4) million or (3.1)% of revenue in 2019
• Net loss per basic and fully diluted Class B share was $(11.44), an improvement from $(40.53) in 2019