Greetings, and welcome to the RumbleOn, Inc.'s First Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Elliot Wagner, Vice President of Finance. Thank you. Please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us on this conference call to discuss RumbleOn's first quarter 2025 financial results. Joining me on the call today is Michael Quartieri, RumbleOn's Chief Executive Officer. Our Q1 results are detailed in the press release we issued this morning and supplemental information will be available in our Form 10-Q once filed. Before we start, I would like to remind you that the following discussion contains forward-looking statements, including, but not limited to, RumbleOn's market opportunities and future financial results and involves risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in RumbleOn's periodic and other SEC filings. The forward-looking statements and risks in this conference call, including responses to your questions, are based on current expectations as of today, and RumbleOn assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. Also, the following discussion contains non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures, please see our earnings release issued earlier this morning. Now I'll turn the call over to Michael Quartieri, RumbleOn's CEO. Mike?

Good morning, everyone, and thank you for joining us for RumbleOn's first quarter 2025 earnings call. The first quarter of 2025 has been a period of rapid change and opportunity for our business. Although we continue to experience year-over-year volume declines amidst a difficult backdrop for consumers, I am pleased with our team's progress on our turnaround and my confidence in our path forward is growing every day as our most recent financial and strategic initiatives are beginning to take hold. Now that I've become fully immersed in the organization, it's a good time to highlight what I believe drives the core of success in any company, the people who collectively buy in to make the long-term vision attainable. It is critical for our executive team to set the tone and create an environment where our team moves forward with confidence, urgency and a sense of purpose that starts from the top and emanates down through all levels of our organization. It is important to emphasize this mindset is not only relevant to today's dynamic operating environment but also over the longer term as we drive to create the future state of the business and ensure consistent success. As CEO, it is my job to ensure everyone within our organization is on board, and operates with a team-based winning mindset. I'm focused on driving positive change into the organization that will position the company for long-term success. At the core of this is putting the right leaders in the right places and filling out missing skill set gaps within our employee base where they exist. When you establish and empower leaders that align with your winning mindset, the rest falls in place as their team members below them buy into the vision. To that end, I'm incredibly excited to announce the addition of a few new key members of our management team, which will further strengthen our position in the market. Our new Chief Legal Officer, Melissa Bengtson, comes to us with extensive public experience and will help move the team forward with our legal and governance efforts. Our new VP of Wholesale Express, Fred Moseley, will help us grow our transportation business over time and capitalize on its long-term potential. We are also engaged in a comprehensive search for a new CFO to lead the business into the next phase of our long-term growth. Needless to say, I've been very active and hands-on with our finance and accounting teams, given my prior experience as a public company CFO at both Dave & Buster's and Scientific Games. These new and future team additions align with our strategic goal of building a strong foundation for growth by getting the right people in the right place at the right time, doing the right things. As we've mentioned in the past, the operating environment remains difficult from a macro and industry perspective. The evolving landscape around tariffs has created volatility and uncertainty in the market. This creates risks and opportunities in our powersports business as consumer tastes and preferences shift. Although new unit sales are coming in lower than last year, we are seeing robust demand in our pre-owned segment with strong margins as consumers shift to pre-owned products amidst tariffs and a tough purchasing environment for higher-priced new items. Regardless of the impacts of tariffs and the current economic environment, we are focused on improving what we can control, approaching our business with fresh thinking, operational discipline, and a renewed commitment to serving our customers even better. We are pleased with the actions we have taken to date, which have helped us achieve positive adjusted EBITDA results even with the lower year-over-year sales volumes. We are confident we are taking the right actions today to position the company for long-term financial success when the sales cycle returns positive again. I'm confident in our actions, coupled with disciplined capital allocation decisions, which result in meaningful long-term shareholder value creation. Lastly, as we mentioned last quarter, our asset-light vehicle transportation brokerage business, Wholesale Express, has a new experienced management team leading the operation. They are moving forward with improving business performance. We still expect 2025 results from this segment to take a large step back from '24, but we believe the operation is far better positioned for more sustainable long-term growth and potential further integration into the powersports segment. Although adjusted EBITDA was down year-over-year this quarter, a large driver of this directional decline was related to the Wholesale Express challenges discussed previously. Excluding the underperformance in Wholesale Express this quarter, our adjusted EBITDA would have been up year-over-year despite the 20.5% year-over-year decline in units sold for the quarter, which speaks to the continued progress our team is making in operational and cost-saving initiatives. Now let me shift gears and walk everyone through the first quarter 2025 financial performance in detail followed by a summary of our balance sheet. We generated $244.7 million of adjusted EBITDA, down $7 million in the first quarter of 2025. Adjusted EBITDA was down slightly when compared to the same quarter last year despite revenue being down 20.5%. Total company adjusted SG&A expenses were $57.5 million or 85.6% of gross profit, compared to the same quarter last year of $72.6 million or 87.9% of gross profit. We continue to target adjusted SG&A to be 75% of gross profit in the long term. Adjusted SG&A expenses were 20.8% lower than the same quarter last year. Moving on to the segment performance. The Powersports Group sold 13,186 total major units during the quarter, which is down 20.5% from the same quarter last year. Total new Powersport major unit sales were 8,013 units, down 23.7%, compared to the same quarter last year, while pre-owned unit sales totaled 4,307 units, down only 13.9%. Although gross margin dollars for major unit sales decreased due to the lower unit volumes, this was partially offset by higher gross margin percentages as we saw new unit gross margins improve to 13.5% for the quarter, compared to 12.5% for the same quarter last year. Pre-owned gross margins were 16.3% for the quarter, compared to 19.5% in the same quarter last year. However, the pre-owned gross margin percentage in Q1 of last year was elevated due to an inventory write-down in the preceding quarter, which was recorded as a charge in Q4 of 2023. Our parts, services and accessories or fixed operations business delivered $46.1 million of revenue and $20.8 million of gross profit, which represents a 12.9% decline in revenue and an 11.9% decline in gross profit. These declines were attributable to the overall decline in unit sales during the quarter. Our gross profit per unit totaled $1,688, up $166 or 10.9%. Our financing and insurance teams delivered $21.1 million of gross profit, which represents an 18.2% decline compared to the previous year. This decline is also attributable to the decline in unit sales during the quarter. Gross profit per unit was $1,713, up $49 or 2.9%. So overall, revenue from our powersports dealership group was $239.2 million, down 18.5% compared to the same quarter last year, with the primary driver being the lower major unit volume. Total gross profit per unit for the group was $5,365, up $266 or 5.2% compared to the same quarter last year, which is primarily attributable to the shift to pre-owned units as a higher percentage of our overall unit sales. Turning now to our asset-light vehicle transportation Services operating group. For the first quarter, Wholesale Express revenue was down 61.5% compared to the same quarter in the prior year, while gross profit decreased 68.6% to $1.1 million. On the last call, we addressed the broker departures within Wholesale Express and the expected impact on our results for the remainder of 2025. Turning to our balance sheet, we ended the quarter with $56.2 million in total cash, inclusive of restricted cash and non-vehicle net debt of $188.2 million. During the quarter, we fully repaid the $38.8 million outstanding of our 6.75% convertible notes that were due on January 2nd. Availability under our short-term revolving floor plan credit facilities totaled approximately $115.2 million as of March 31, 2025. Total available liquidity, defined as total cash plus availability under floor plan credit facilities, totaled $171.4 million as of March 31, 2025. Cash outflows from operating activities were $6.9 million for the three months ended March 31, 2025, compared to cash inflows of $17 million for the same period in 2024. As you may recall, the prior year cash flow from operations benefited from proceeds from the sale of our finance receivable portfolio. As we look ahead, we continue to actively evaluate different opportunities to optimize our capital structure, lower our cost of capital and extend the debt maturity profile of our company. As we mentioned last quarter, we've engaged an investment banker to help explore a refinancing of the company's debt, and those conversations continue to be ongoing.

Your first question is from Eric Wold from Texas Capital Securities. Your line is now open.

Thank you. Good morning. I appreciate you taking my questions. So obviously, you're seeing some stronger demand on the pre-owned vehicle side. I guess with that and with the expectation that may continue in this environment, how aggressive do you want to be with the Cash Offer tool in bringing in additional pre-owned inventory as opposed to new vehicles from the OEM partners? And how would you characterize your pre-owned inventory levels right now versus where you feel would be appropriate for this environment?

Yes. So let me start with the Cash Offer tool and then get to where the inventory levels are. So we can be as aggressive as we want to be with the Cash Offer tool, but it only makes sense when the inventory is right, and we can know we can make the right profit and move that product pretty quickly. So it's really more of a function of the quality of the inventory that's put in front of us. But we have no restriction in our own operating environment on being able to utilize that tool effectively to get the right levels of inventory. Where we stand today with our inventory, we're feeling good. Obviously, when you look at a year ago, we were well over our inventory levels, both from a new and used perspective. That's what project Diet was, that was implemented by the prior management team that reduced those inventory levels throughout the year. So I think we'd always be looking for the best inventory possible on the Cash Offer tool, and we'll take advantage of that accordingly.

Got it. I have a follow-up question. Considering our current inventory levels, they have increased slightly, which is typical for this time of year as we move into the spring and summer. What are your expectations for our year-end inventory? Do you anticipate a year-over-year decrease given the current environment, assuming no significant improvement in trends? Or do you think there might be an increase from the year-end levels?

Yes. Look, I would think by the time we get to the end of the year, we should be right about where we ended up in 2024, maybe a little bit higher than that, just given normal inflationary factors that take place throughout the course of the year.

Thank you. Our next question is from Craig Kennison from Baird. Your line is open.

Hi, good morning. Thanks for taking my question. I'm curious about this tariff environment, what's the general message you get from your OEM partners? And how do they expect to help you navigate what looks like a very difficult environment regarding tariffs?

Yes. When we look at it from an OEM perspective, most of our exposure from our top OEMs is linked to Mexico, Canada, and Japan. Currently, China isn’t a major risk for us regarding finished products. However, many of our other OEMs operating in Canada, Mexico, and Japan may be using Chinese component parts in their manufacturing, which presents some exposure. Despite this, I believe that OEMs are largely absorbing the costs of the tariffs at this time due to the current state of the consumer. It’s still early in the process, but I am hopeful that within the next 45 days, a lot of the uncertainties will be resolved, deals will be finalized, and everyone will return to a normal operating environment. As it stands, we aren't seeing any significant impact from tariffs from the OEM perspective.

And it doesn't sound like consumers have to fear a big price increase given what you just said about OEMs potentially absorbing some of that cost. But has there been any evidence of a pull forward in demand as consumers feel it's better to buy now?

If I look at the Q1 results, the decline in new units by over 20% doesn’t suggest there's significant pull forward happening. We've observed slightly better performance on the used side, but this doesn't indicate that consumers are flocking back because they are trying to buy early in anticipation of potential tariff increases. In terms of power sports, the price increase due to the tariff is distributed across various products, which is different from a new car situation where a 25% tariff on an $80,000 vehicle represents a substantial price hike. I don't see that scenario occurring in the powersports sector.

Thank you. Ladies and gentlemen, that concludes the question-and-answer session for today. The conference has now ended. Thank you all for joining. You may all disconnect your lines.