Executive Summary / Key Takeaways

• RumbleOn is executing a focused operational turnaround under new leadership, emphasizing cost discipline, inventory optimization, and leveraging its omnichannel powersports dealership network and proprietary technology.
• Despite a difficult macro and industry environment leading to a 20.5% year-over-year revenue decline in Q1 2025, the company's cost savings initiatives resulted in a significant reduction in SGA expenses, improving profitability metrics relative to gross profit.
• The powersports segment saw a shift towards higher-margin pre-owned units, contributing to a 5.2% increase in total gross profit per retail vehicle, partially offsetting lower overall volume.
• The vehicle transportation segment (Wholesale Express) faced significant headwinds in Q1 2025 due to employee departures, resulting in a sharp decline in revenue and gross profit, though management expects positive EBITDA from this segment for the full year 2025 and is rebuilding the team.
• Recent capital structure actions, including the repayment of convertible notes and securing $30 million in commitments from major shareholders, have improved liquidity and financial flexibility as the company explores debt refinancing.

Setting the Scene: An Omnichannel Player in a Dynamic Market

RumbleOn, Inc., established in 2013, has grown primarily through strategic acquisitions, notably integrating the core of the RideNow powersports dealership business. This history has shaped RumbleOn into one of the largest powersports retailers in North America, operating an omnichannel model that combines a significant physical footprint, primarily in the Sunbelt region with 55 locations as of March 31, 2025, with digital capabilities. Beyond powersports, the company operates an asset-light vehicle transportation services segment, Wholesale Express, adding diversification to its business lines.

The company operates within a challenging and dynamic industry landscape. Macroeconomic headwinds, including high interest rates and a cautious consumer, have pressured demand, particularly for new powersports units. Inflated industry-wide inventories have led to promotional activity and margin compression. The evolving global tariff landscape adds further uncertainty, potentially impacting product affordability and consumer demand.

In this environment, RumbleOn's strategy centers on executing a focused operational turnaround. Under the leadership of new CEO Michael Quartieri, the company is prioritizing operational discipline, streamlining its cost structure, optimizing inventory levels, and leveraging its core strengths to drive profitability and free cash flow. This involves putting the right leadership in place, standardizing processes, and making disciplined capital allocation decisions.

Within this competitive arena, RumbleOn faces established players like CarMax (KMX) and AutoNation (AN) in the broader used vehicle market, and other dealership groups and online platforms. While CarMax and AutoNation benefit from significant scale and brand recognition, RumbleOn differentiates itself through its specialized focus on powersports and its proprietary technology. Against purely online players like Carvana (CVNA), RumbleOn's omnichannel model offers a blend of digital convenience and physical presence for sales and service. Rumble (RUM), while primarily a content platform, represents a potential indirect competitor in the digital marketplace space.

Technological Edge and Operational Efficiency

A key differentiator for RumbleOn, particularly within its powersports segment, is its proprietary RideNow Cash Offer technology. This platform enables the company to source high-quality pre-owned inventory directly from consumers online, complementing traditional sourcing methods like trade-ins and auctions.

This technology provides tangible operational benefits. While specific quantitative metrics on processing speed or cost reduction directly attributable solely to the Cash Offer tool were not detailed, the competitive analysis suggests that RumbleOn's technology platform, in aggregate, enables faster transaction processing speeds and potentially lower operating costs per unit compared to more traditional models. The ability to efficiently aggregate pre-owned inventory through this digital channel is a strategic advantage in maintaining appropriate inventory levels and mix, particularly in a market where pre-owned demand is robust.

The "so what" for investors is that this technology contributes to RumbleOn's competitive moat by enhancing its sourcing capabilities and operational efficiency in the crucial pre-owned market. It supports the company's strategy of optimizing inventory and maximizing profitability per unit, which is particularly vital during periods of lower overall sales volume. While the company incurs technology development costs, the strategic intent is to leverage these platforms to drive better performance and gain a competitive edge.

Recent Financial Performance: Navigating Headwinds with Cost Discipline

RumbleOn's first quarter 2025 financial results reflect the challenging operating environment but also highlight the impact of the company's operational focus. Total revenue for the quarter was $244.7 million, a decrease of 20.5% compared to $307.8 million in the first quarter of 2024. This decline was primarily driven by a reduction in unit sales volume within the powersports segment and a significant $8.8 million decrease in revenue from the vehicle transportation services segment.

Within the powersports segment, revenue decreased by 18.5% year-over-year to $239.2 million. While total unit sales were down, the impact on revenue was partially mitigated by increases in average revenue per new retail vehicle ($14,988 in Q1 2025 vs. $14,754 in Q1 2024) and pre-owned retail vehicle ($11,168 vs. $10,784). Gross profit for the powersports segment decreased by $13.0 million, or 16.4%, to $66.1 million, primarily due to lower sales volumes. However, the segment saw an improvement in total gross profit per retail vehicle, rising 5.2% to $5,365, largely attributable to a favorable shift in sales mix towards higher-margin pre-owned units. New unit gross margins also improved to 13.5% from 12.5% year-over-year, while pre-owned margins were 16.3% compared to an elevated 19.5% in the prior year (which benefited from a prior-period inventory write-down).

The vehicle transportation services segment experienced a substantial decline, with revenue plummeting 61.5% to $5.5 million and gross profit falling 68.6% to $1.1 million. This underperformance was a significant factor in the overall financial results and was attributed by management to the departure of several employees, including most brokers, early in 2025.

Despite the top-line pressure, RumbleOn demonstrated progress on cost control. Selling, General and Administrative (SGA) expenses decreased by $12.8 million, or 17.3%, year-over-year to $61.1 million. This reduction was primarily driven by cost savings initiatives, particularly in compensation and related costs. As a percentage of gross profit, total SGA improved slightly to 90.9% in Q1 2025 from 89.5% in Q1 2024. Excluding the underperformance in the Wholesale Express segment, management noted that adjusted EBITDA would have shown a year-over-year increase, underscoring the impact of operational and cost-saving initiatives in the core powersports business. Depreciation and amortization also decreased, contributing to the lower expense base.

Other interest expense saw a reduction, primarily due to the repayment of the $38.8 million 6.75% convertible senior notes at maturity in January 2025, along with lower average borrowings and interest rates on the term loan. The net loss for the quarter improved slightly to $9.7 million from $10.3 million in the prior year period.

Liquidity and Capital Structure Optimization

RumbleOn maintains liquidity through its cash balances and available floor plan financing. As of March 31, 2025, the company held $41.1 million in cash and $15.1 million in restricted cash, totaling $56.2 million. Availability under its powersports inventory financing credit facilities stood at $115.2 million, providing total committed liquidity resources of $171.4 million.

Cash flow from operating activities was an outflow of $6.9 million for the three months ended March 31, 2025, compared to an inflow of $17.0 million in the same period of 2024. This change was primarily due to building inventory in Q1 2025 in anticipation of seasonal demand and the prior year benefiting from a non-recurring settlement of a finance receivable portfolio.

The company has taken significant steps to strengthen its capital structure. The successful repayment of the $38.8 million convertible notes in January 2025 was a key event. Furthermore, in connection with a credit agreement amendment in Q3 2024 that relaxed certain covenants, the company secured $30 million in incremental capital commitments from its largest shareholders. These commitments included a $10 million equity rights offering (completed in December 2024), a $4 million property sale and leaseback, and a $16 million related-party pre-owned floor plan facility. These actions have provided financial flexibility and improved the company's liquidity position. Management is actively evaluating further opportunities to optimize the capital structure, potentially lower the cost of capital, and extend the debt maturity profile, having engaged an investment banker for this purpose. The company also anticipates approximately $3 million in cash interest expense savings in 2025 due to Federal Reserve interest rate reductions in late 2024.

Strategic Initiatives and Operational Execution

RumbleOn's strategic focus under its new leadership is centered on driving operational excellence and building a strong foundation for future growth. Key initiatives include:

• Cost Optimization: The company has executed on $30 million of annualized cost savings, resulting from streamlining the workforce and corporate structure, and continues to pursue further efficiencies. This is aimed at improving adjusted SGA as a percentage of gross profit, with a long-term target of 75%.
• Inventory Management: Having exceeded its goal to reduce new inventories by $50 million in 2024 (achieving over $80 million in reductions), the company is focused on maintaining appropriate inventory levels aligned with market demand and working closely with OEM partners.
• Powersports Dealership Performance: The core strategy is to run the best-performing dealerships through operational discipline, standardized processes, and a continuous improvement mindset.
• Wholesale Express Turnaround: Following significant employee departures, the company has installed a new management team and is actively recruiting brokers to rebuild this segment. While volume is expected to be substantially lower in 2025, management anticipates positive EBITDA for the year and sees potential for sustainable long-term growth and integration with the powersports business.
• Growth Avenues: The company continues to explore growth opportunities through selective acquisitions and organic initiatives, such as the pilot pre-owned center in Houston, which is being evaluated for scalability and cash return potential.
• Leadership and Culture: New CEO Michael Quartieri is focused on instilling a high-performance culture and ensuring the right team is in place to execute the strategy.

These initiatives are designed to enhance profitability, improve free cash flow generation, and position RumbleOn to capitalize on an eventual recovery in the powersports market.

Risks and Challenges

Despite the strategic focus and operational improvements, RumbleOn faces significant risks and challenges that could impact its performance and the investment thesis:

• Macro and Industry Headwinds: The difficult operating environment characterized by high interest rates, cautious consumer spending, and potential impacts from tariffs could continue to pressure sales volumes and margins. Inflated industry inventories may prolong promotional activity.
• Wholesale Express Rebuild: The substantial reduction in volume and gross profit in the vehicle transportation segment following employee departures poses a challenge to overall profitability and requires successful execution of the rebuilding strategy.
• Legal and Regulatory Matters: The ongoing SEC investigation and the litigation with the former CEO introduce uncertainty and potential costs, diverting management resources and potentially impacting the company's reputation and financial condition.
• Internal Control Weakness: The identified material weakness in internal control over financial reporting, while being remediated, highlights operational risks that need to be effectively addressed to ensure reliable financial reporting.
• Debt Refinancing: While the company has improved its liquidity and is exploring refinancing options, successfully optimizing the capital structure and extending debt maturities will be critical for long-term financial health.

These factors require careful monitoring by investors as they could influence the pace and success of RumbleOn's turnaround efforts.

Conclusion

RumbleOn is executing a determined turnaround strategy in the face of a challenging powersports market. The company's focus on operational discipline, cost optimization, and leveraging its omnichannel model and proprietary technology is beginning to yield results, as evidenced by reduced expenses and improved gross profit per unit in its core powersports segment despite lower volumes. The strategic actions taken to strengthen the balance sheet and improve liquidity provide a necessary foundation for navigating the current environment and pursuing future growth.

While significant headwinds persist, particularly in the vehicle transportation segment and the broader macro landscape, the company's emphasis on controlling what it can – operational efficiency, cost structure, and inventory management – positions it to potentially emerge stronger when market conditions improve. The success of the Wholesale Express rebuild, the ability to further optimize the capital structure, and the effective management of ongoing legal and control issues will be critical factors determining the trajectory of the investment thesis. Investors should watch for continued progress on cost reduction, signs of stabilization or recovery in sales volumes, and developments related to debt refinancing and the Wholesale Express segment's performance.