RumbleOn completes sale of finance portfolio in Q1

Powersports retailer RumbleOn’s sale of the RumbleOn Finance portfolio for $17 million in January allowed th e company to reduce its term debt , t he company reported during its fourth-quarter earnings call today , also noting that its finance and insurance revenue inched down . Irving, Texas-based RumbleOn closed the sale of its finance portfolio, Chief Financial Officer Blake Lawson said on the call. The company in Q2 2023 had announced its intention to sell the finance portfolio. Clear Haven 2021 Trust , a Delaware statutory trust, purchased the portfolio for $17 million, according to a Jan. 4 8-K filing with the Securities and Exchange Commission . “In early 2024, we further reduced term debt by another $33 million, bringing the total reduction to $142 million with the sale of RumbleOn Finance portfolio closing in early January,” Lawson said. The company’s non-vehicle net debt stood at $218.5 million as of Feb. 29, he said. The company received about $3 million in cash proceeds “ after the satisfaction of secured indebtedness, expenses, commissions, and fees,” according to the 8-K filing. Gross proceeds from the finance portfolio sale as of the third quarter were expected to be “at least $24 million, with $15 million available to reduce our debt to our lenders,” Steve Pully , chair of the company’s board of directors, said in Q3. RumbleOn eliminated much of its debt in 2023 with additional reductions in 2024, moves that helped the company save on interest and increase cash flow, Lawson said. The company is in the early stages of “some type of a refinance” he added. F&I revenue declines as sales fall RumbleOn’s finance and insurance (F&I) revenue declined in Q4 as retail sales decreased. F&I revenue came in at $27.4 million in Q4, down 0.7% year over year , according to the company’s earnings release. For the full year 2023, F&I revenue was $117 million, down 5.2% YoY. RumbleOn sold 15,596 new and pre-owned retail units in Q4, down 5.8% YoY, according to the earnings release. Of those retail sales, 11,293 were new units, up 6.2% YoY, and 4,303 were pre-owned, but the company did not break out retail pre-owned sales for Q4 2022. Full-year retail sales totaled 67,546 units, declining 3.2% YoY , with new sales accounting for 45,706 units and pre-owned accounting for 21,840 units. The decrease in sales is “due entirely to a reduction in pre-owned units,” Lawson said. The retailer sold 1,995 pre-owned units through wholesale channels, according to an Auto Finance News analysis of the earnings release. “In the fourth quarter, we worked on correcting our pre-owned inventory heading into the 2024 spring selling season,” Lawson said. “We ended the year heavy in new inventory and light in pre-owned inventory.” “We expect to reduce our new inventory by $60 million by yearend, resulting in lower floorplan interest expense and increased free cash flow,” he said. “We anticipate this aggressive reduction will put pressure on new margins in 2024, which should be offset by increased pre-owned margins and cost savings.” Used brick and mortar on the horizon Meanwhile, RumbleOn is planning to pilot its first standalone brick-and mortar used-unit dealership this year to add to its 54 dealer locations, Chief Executive Mike Kennedy said during the call, noting that the company is in a good spot to “stand up a standalone pre-owned-only dealership.” The company’s efforts to reduce debt will help offset wider market challenges, Lawson said. “Although we believe the retail environment will remain challenging in 2024, we anticipate that the significant changes implemented in 2023, particularly with regard to expense reduction, will drive positive operational free cash flow in 2024,” he said. Early-bird registration is now available for the annual Auto Finance Summit East 2024 , May 1-3 in Nashville, Tenn., which gathers lenders, dealers and fintech innovators in an event designed to bring the power of technology to a cross-section of industry players. Early-bird pricing ends March 15. Visit AutoFinance.Live to learn more.

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