Author Topic: RMBL - RumbleOn  (Read 19998 times)

LFvalueseeker

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Re: RMBL - RumbleOn
« Reply #20 on: June 15, 2018, 03:32:29 PM »
I am also confused with your inventory argument.  As they scale up, there will be more buyers.  Thus, they will need bigger inventory availible for the buyers to choose from.  I mean days in inventory can't decline for ever.  If you buy 5000 motorcycles vs 500, days in inventory has to go down by an order of magnitude to have the same inventory.  I do agree though that as the reach scale efficiencies can improve days in inventory as buyer and seller are better matched.

Perhaps I didnít focus more on this in my first post. They have ZERO issues selling/divesting/shifting/Fire sale-ing/punting/disposing the motorcycles. This is NOT a ďcan they sell it storyĒ.  They have figured out, a while back that, NOBODY is buying motorcycles with cash offers for nearly instant liquidity. They built a tech platform to enable this. (Technically they bought/paid for it from the same group that built the Truecar tech). Think about it, most items we own- small and big ticket- can be sold rather quickly. This includes cars. Motorcycles are similar to cars EXCEPT, they are a want NOT a need.  Therefore, there are many of these ďtoysĒ sitting around and no efficient way to sell them. Sure you can post it on Craigslist or other sites and get lucky, but chances are your going to deal with a lot of headaches. You can sell your car by yourself but most choose not to and same with a home, which very few sell on their own. Beyond the ďtoysĒ in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (Iím being a bit overly broad here). Younger people want liquidity and are non commital. Women donít want to haggle. (Stereotyping, I know). Dealerships dont offer cash. SO, here is your first platform company that will buy your motorcycle almost instantly. (They are vehicle agnostic and the tech can apply to anything with a VIN #) So to find those bikes they need to market. (See previous post). Once the bike is acquired, they never see it or touch it. Itís picked up, transported and reconditioned through their dealer network. Itís simultaneously listed in their site for a limited time period and if it doesnít sell to a consumer, itís sold to a dealer or sent to auction. In all three scenarios they are profitable. This is totally divorce from Carvana that buys vehicles at auction and sells to consumers. RMBL BUYS FROM CONSUMERS AND WILL INCREASE THE AMOUNT SOLD TO CONSUMERS BUT IN AN EFFORT TO HAVE FREED UP CAPITAL, they turn the bikes quickly.


cameronfen

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Re: RMBL - RumbleOn
« Reply #21 on: June 15, 2018, 05:00:05 PM »
I am also confused with your inventory argument.  As they scale up, there will be more buyers.  Thus, they will need bigger inventory availible for the buyers to choose from.  I mean days in inventory can't decline for ever.  If you buy 5000 motorcycles vs 500, days in inventory has to go down by an order of magnitude to have the same inventory.  I do agree though that as the reach scale efficiencies can improve days in inventory as buyer and seller are better matched.

Perhaps I didnít focus more on this in my first post. They have ZERO issues selling/divesting/shifting/Fire sale-ing/punting/disposing the motorcycles. This is NOT a ďcan they sell it storyĒ.  They have figured out, a while back that, NOBODY is buying motorcycles with cash offers for nearly instant liquidity. They built a tech platform to enable this. (Technically they bought/paid for it from the same group that built the Truecar tech). Think about it, most items we own- small and big ticket- can be sold rather quickly. This includes cars. Motorcycles are similar to cars EXCEPT, they are a want NOT a need.  Therefore, there are many of these ďtoysĒ sitting around and no efficient way to sell them. Sure you can post it on Craigslist or other sites and get lucky, but chances are your going to deal with a lot of headaches. You can sell your car by yourself but most choose not to and same with a home, which very few sell on their own. Beyond the ďtoysĒ in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (Iím being a bit overly broad here). Younger people want liquidity and are non commital. Women donít want to haggle. (Stereotyping, I know). Dealerships dont offer cash. SO, here is your first platform company that will buy your motorcycle almost instantly. (They are vehicle agnostic and the tech can apply to anything with a VIN #) So to find those bikes they need to market. (See previous post). Once the bike is acquired, they never see it or touch it. Itís picked up, transported and reconditioned through their dealer network. Itís simultaneously listed in their site for a limited time period and if it doesnít sell to a consumer, itís sold to a dealer or sent to auction. In all three scenarios they are profitable. This is totally divorce from Carvana that buys vehicles at auction and sells to consumers. RMBL BUYS FROM CONSUMERS AND WILL INCREASE THE AMOUNT SOLD TO CONSUMERS BUT IN AN EFFORT TO HAVE FREED UP CAPITAL, they turn the bikes quickly.

Right but no matter the days in inventory, if days in inventory stays constant when you double sale volume you should double inventory.  granted there should be some streamlining as you scale up but I can't see how if you sell 50,000 motorcycles a year you won't have signficantly more inventory than if you sell 5,000. 

Spekulatius

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Re: RMBL - RumbleOn
« Reply #22 on: June 15, 2018, 06:59:57 PM »
I am also confused with your inventory argument.  As they scale up, there will be more buyers.  Thus, they will need bigger inventory availible for the buyers to choose from.  I mean days in inventory can't decline for ever.  If you buy 5000 motorcycles vs 500, days in inventory has to go down by an order of magnitude to have the same inventory.  I do agree though that as the reach scale efficiencies can improve days in inventory as buyer and seller are better matched.

Perhaps I didnít focus more on this in my first post. They have ZERO issues selling/divesting/shifting/Fire sale-ing/punting/disposing the motorcycles. This is NOT a ďcan they sell it storyĒ.  They have figured out, a while back that, NOBODY is buying motorcycles with cash offers for nearly instant liquidity. They built a tech platform to enable this. (Technically they bought/paid for it from the same group that built the Truecar tech). Think about it, most items we own- small and big ticket- can be sold rather quickly. This includes cars. Motorcycles are similar to cars EXCEPT, they are a want NOT a need.  Therefore, there are many of these ďtoysĒ sitting around and no efficient way to sell them. Sure you can post it on Craigslist or other sites and get lucky, but chances are your going to deal with a lot of headaches. You can sell your car by yourself but most choose not to and same with a home, which very few sell on their own. Beyond the ďtoysĒ in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (Iím being a bit overly broad here). Younger people want liquidity and are non commital. Women donít want to haggle. (Stereotyping, I know). Dealerships dont offer cash. SO, here is your first platform company that will buy your motorcycle almost instantly. (They are vehicle agnostic and the tech can apply to anything with a VIN #) So to find those bikes they need to market. (See previous post). Once the bike is acquired, they never see it or touch it. Itís picked up, transported and reconditioned through their dealer network. Itís simultaneously listed in their site for a limited time period and if it doesnít sell to a consumer, itís sold to a dealer or sent to auction. In all three scenarios they are profitable. This is totally divorce from Carvana that buys vehicles at auction and sells to consumers. RMBL BUYS FROM CONSUMERS AND WILL INCREASE THE AMOUNT SOLD TO CONSUMERS BUT IN AN EFFORT TO HAVE FREED UP CAPITAL, they turn the bikes quickly.

How can they make a profit buying a bike from a private person and in case they canít sell it to another private person, resell it to a dealer? I doubt they make a profit in this case.

Also, with no involvement on their own, how can they prevent buying lemons that have non obvious issues (from scrapes etc)?
To be a realist, one has to believe in miracles.

RichardGibbons

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Re: RMBL - RumbleOn
« Reply #23 on: June 15, 2018, 07:22:40 PM »
Thanks LFValueSeeker. I understand what you're saying about inventory now, and their reasoning....

LFvalueseeker

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Re: RMBL - RumbleOn
« Reply #24 on: June 15, 2018, 07:51:57 PM »
I am also confused with your inventory argument.  As they scale up, there will be more buyers.  Thus, they will need bigger inventory availible for the buyers to choose from.  I mean days in inventory can't decline for ever.  If you buy 5000 motorcycles vs 500, days in inventory has to go down by an order of magnitude to have the same inventory.  I do agree though that as the reach scale efficiencies can improve days in inventory as buyer and seller are better matched.

Perhaps I didnít focus more on this in my first post. They have ZERO issues selling/divesting/shifting/Fire sale-ing/punting/disposing the motorcycles. This is NOT a ďcan they sell it storyĒ.  They have figured out, a while back that, NOBODY is buying motorcycles with cash offers for nearly instant liquidity. They built a tech platform to enable this. (Technically they bought/paid for it from the same group that built the Truecar tech). Think about it, most items we own- small and big ticket- can be sold rather quickly. This includes cars. Motorcycles are similar to cars EXCEPT, they are a want NOT a need.  Therefore, there are many of these ďtoysĒ sitting around and no efficient way to sell them. Sure you can post it on Craigslist or other sites and get lucky, but chances are your going to deal with a lot of headaches. You can sell your car by yourself but most choose not to and same with a home, which very few sell on their own. Beyond the ďtoysĒ in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (Iím being a bit overly broad here). Younger people want liquidity and are non commital. Women donít want to haggle. (Stereotyping, I know). Dealerships dont offer cash. SO, here is your first platform company that will buy your motorcycle almost instantly. (They are vehicle agnostic and the tech can apply to anything with a VIN #) So to find those bikes they need to market. (See previous post). Once the bike is acquired, they never see it or touch it. Itís picked up, transported and reconditioned through their dealer network. Itís simultaneously listed in their site for a limited time period and if it doesnít sell to a consumer, itís sold to a dealer or sent to auction. In all three scenarios they are profitable. This is totally divorce from Carvana that buys vehicles at auction and sells to consumers. RMBL BUYS FROM CONSUMERS AND WILL INCREASE THE AMOUNT SOLD TO CONSUMERS BUT IN AN EFFORT TO HAVE FREED UP CAPITAL, they turn the bikes quickly.

How can they make a profit buying a bike from a private person and in case they canít sell it to another private person, resell it to a dealer? I doubt they make a profit in this case.

Also, with no involvement on their own, how can they prevent buying lemons that have non obvious issues (from scrapes etc)?

They do make a profit when buying from a person and selling to an auction. (Dealer > auction)

Please see their deck. 

They prevent buying lemons because motorcycles are simple machines.  They get pics, VIN #s, and pull a soft credit check. They 100% buy a few bikes that they lose money on, itís inevitable. But the blended GP is solid.

As mentioned a few times know, their tech platform steers them in the right direction to a dollar amount that makes sense for them to acquire. They arenít guessing and with a 15% conversions rate, it seems to be working.  (If anyone has any experience in digital marketing, 15% is mind numbing)

cameronfen

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Re: RMBL - RumbleOn
« Reply #25 on: June 16, 2018, 07:44:35 AM »
I am also confused with your inventory argument.  As they scale up, there will be more buyers.  Thus, they will need bigger inventory availible for the buyers to choose from.  I mean days in inventory can't decline for ever.  If you buy 5000 motorcycles vs 500, days in inventory has to go down by an order of magnitude to have the same inventory.  I do agree though that as the reach scale efficiencies can improve days in inventory as buyer and seller are better matched.

Perhaps I didnít focus more on this in my first post. They have ZERO issues selling/divesting/shifting/Fire sale-ing/punting/disposing the motorcycles. This is NOT a ďcan they sell it storyĒ.  They have figured out, a while back that, NOBODY is buying motorcycles with cash offers for nearly instant liquidity. They built a tech platform to enable this. (Technically they bought/paid for it from the same group that built the Truecar tech). Think about it, most items we own- small and big ticket- can be sold rather quickly. This includes cars. Motorcycles are similar to cars EXCEPT, they are a want NOT a need.  Therefore, there are many of these ďtoysĒ sitting around and no efficient way to sell them. Sure you can post it on Craigslist or other sites and get lucky, but chances are your going to deal with a lot of headaches. You can sell your car by yourself but most choose not to and same with a home, which very few sell on their own. Beyond the ďtoysĒ in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (Iím being a bit overly broad here). Younger people want liquidity and are non commital. Women donít want to haggle. (Stereotyping, I know). Dealerships dont offer cash. SO, here is your first platform company that will buy your motorcycle almost instantly. (They are vehicle agnostic and the tech can apply to anything with a VIN #) So to find those bikes they need to market. (See previous post). Once the bike is acquired, they never see it or touch it. Itís picked up, transported and reconditioned through their dealer network. Itís simultaneously listed in their site for a limited time period and if it doesnít sell to a consumer, itís sold to a dealer or sent to auction. In all three scenarios they are profitable. This is totally divorce from Carvana that buys vehicles at auction and sells to consumers. RMBL BUYS FROM CONSUMERS AND WILL INCREASE THE AMOUNT SOLD TO CONSUMERS BUT IN AN EFFORT TO HAVE FREED UP CAPITAL, they turn the bikes quickly.

How can they make a profit buying a bike from a private person and in case they canít sell it to another private person, resell it to a dealer? I doubt they make a profit in this case.

Also, with no involvement on their own, how can they prevent buying lemons that have non obvious issues (from scrapes etc)?

They do make a profit when buying from a person and selling to an auction. (Dealer > auction)

Please see their deck. 

They prevent buying lemons because motorcycles are simple machines.  They get pics, VIN #s, and pull a soft credit check. They 100% buy a few bikes that they lose money on, itís inevitable. But the blended GP is solid.

As mentioned a few times know, their tech platform steers them in the right direction to a dollar amount that makes sense for them to acquire. They arenít guessing and with a 15% conversions rate, it seems to be working.  (If anyone has any experience in digital marketing, 15% is mind numbing)

You seem very positive on them.  What are the downsides?  If there advantage is the tech that the Truecar has, why didn't they or their software engineers get in on their business? (I guess one easy answer is they know the industry but curious about more...)

LFvalueseeker

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Re: RMBL - RumbleOn
« Reply #26 on: June 18, 2018, 04:35:38 AM »
I am also confused with your inventory argument.  As they scale up, there will be more buyers.  Thus, they will need bigger inventory availible for the buyers to choose from.  I mean days in inventory can't decline for ever.  If you buy 5000 motorcycles vs 500, days in inventory has to go down by an order of magnitude to have the same inventory.  I do agree though that as the reach scale efficiencies can improve days in inventory as buyer and seller are better matched.


Perhaps I didnít focus more on this in my first post. They have ZERO issues selling/divesting/shifting/Fire sale-ing/punting/disposing the motorcycles. This is NOT a ďcan they sell it storyĒ.  They have figured out, a while back that, NOBODY is buying motorcycles with cash offers for nearly instant liquidity. They built a tech platform to enable this. (Technically they bought/paid for it from the same group that built the Truecar tech). Think about it, most items we own- small and big ticket- can be sold rather quickly. This includes cars. Motorcycles are similar to cars EXCEPT, they are a want NOT a need.  Therefore, there are many of these ďtoysĒ sitting around and no efficient way to sell them. Sure you can post it on Craigslist or other sites and get lucky, but chances are your going to deal with a lot of headaches. You can sell your car by yourself but most choose not to and same with a home, which very few sell on their own. Beyond the ďtoysĒ in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (Iím being a bit overly broad here). Younger people want liquidity and are non commital. Women donít want to haggle. (Stereotyping, I know). Dealerships dont offer cash. SO, here is your first platform company that will buy your motorcycle almost instantly. (They are vehicle agnostic and the tech can apply to anything with a VIN #) So to find those bikes they need to market. (See previous post). Once the bike is acquired, they never see it or touch it. Itís picked up, transported and reconditioned through their dealer network. Itís simultaneously listed in their site for a limited time period and if it doesnít sell to a consumer, itís sold to a dealer or sent to auction. In all three scenarios they are profitable. This is totally divorce from Carvana that buys vehicles at auction and sells to consumers. RMBL BUYS FROM CONSUMERS AND WILL INCREASE THE AMOUNT SOLD TO CONSUMERS BUT IN AN EFFORT TO HAVE FREED UP CAPITAL, they turn the bikes quickly.

How can they make a profit buying a bike from a private person and in case they canít sell it to another private person, resell it to a dealer? I doubt they make a profit in this case.

Also, with no involvement on their own, how can they prevent buying lemons that have non obvious issues (from scrapes etc)?

They do make a profit when buying from a person and selling to an auction. (Dealer > auction)

Please see their deck. 

They prevent buying lemons because motorcycles are simple machines.  They get pics, VIN #s, and pull a soft credit check. They 100% buy a few bikes that they lose money on, itís inevitable. But the blended GP is solid.

As mentioned a few times know, their tech platform steers them in the right direction to a dollar amount that makes sense for them to acquire. They arenít guessing and with a 15% conversions rate, it seems to be working.  (If anyone has any experience in digital marketing, 15% is mind numbing)

You seem very positive on them.  What are the downsides?  If there advantage is the tech that the Truecar has, why didn't they or their software engineers get in on their business? (I guess one easy answer is they know the industry but curious about more...)

Sorry for the delay, unplugged for a bit this weekend to enjoy fathers day with the little one.  The technology was developed by a 3rd party team that specializes in developing software for the auto industry in a variety of applications.  They probably should consider taking some payment in stock considering the upside on select clients. 

Ok let's dive into the risks of this story. 

I'll start with General risks then get more granular.  I will also offer my perspective but please keep in mind these are all REAL risks.

Stock Market Risk:  Microcaps tend to significantly underperform down markets and volatile markets. Flight to quality causes this effect.  Low float stocks with clean cap tables (RMBL) should perform better then most BUT lack of volume and stability could get messy.  If someone needs to unload 50k shares quickly, "Look out below...."

Lack of Eyeballs:  This next statement may be a bit controversial given the fundamental nature of this forum.  I am a firm believer that the fundamentals rarely, if ever, reflect in the share price of a MICRO CAP STOCK.  Telling the story, getting in front of investors and generating volume is as important as execution.  I have stated in prior posts that I look small companies a bit backwards. Buying a STORY stock seldom works for me.  I love companies that have clean cap tables with a great underlying story.  The risk is somewhat shifted from execution to, "Will investors care?".  There are a variety of reasons any company goes public early on and wants to live in the cesspool of micro cap world.  Cheaper cost of capital often is the main reason.  Well, without volume, the cost of capital is normally very high when you witness all these PIPE and Shelf deals with warrant coverage and large discounts to the prior day close.  A lack of eyeballs/followers/volume has a very negative ripple effect to any of these pubcos. Everything takes longer and more money to achieve and solid volume will enable any company to raise money efficiently and provide the flexibility required to execute.  In summary, Volume is very important.  (please note, I do not expect RMBL to raise money through equity offerings anytime soon.  If the stock moved to the $10-$20 range, they should sell 1 million shares and strengthen the balance sheet.  The shelf they filed is good housekeeping for the future)

The economy:  Goes without saying that a turn in the economy effects every company to some degree.  A bad economy will multiply the market risk and volume risk by creating pressure on small companies and making it harder to find interested buyers.  Oddly enough a bad economy would be really interesting for RMBL on.  Ultimately, I pray this doesn't happen but it would be really interesting to see the effect on this business model.  Their cash offers would sky rocket as the first thing people divest of is their toys.  Boats and Bikes will be some of the first things people need to sell.  If this were to happen the only question is, "Can they continue to distribute effectively?".  My guess is RMBL would experience a massive spike for some time frame but the long term effect would lead to a change in their business model. 

Competition:  I would like to see some competition in the sector but multiple players entering the business would lead to higher digital marketing costs and SEO.  Some competition would validate the business, too much could create a mess for all parties.  Keep in mind the US market for used bikes is over $7 billion per year so there is room for a few players.  The last thing we want is a VC backed group of cowboys spending massive amounts of marketing dollars to gain market share.  The "grow at all costs" mentality of new entrants will hurt RMBL.

Consumer Distribution Shift:  The longer this process takes the longer time to profitability.  How long will it take them to crack the code to shift the distribution to 50/50 dealer/auction Vs. consumer.  It is unknown at this point.

I believe it is very important to take a step back and acknowledge that many of the risks to this business are not even known by management at this point.  They went live in September of 2017.  It hasn't even been one full year and they will make lots of mistakes as every early stage company does.  The beautiful part is, this team has been doing this for 40 years and most of the major blunders should be avoided.  From conversations with the team, they are taking a very responsible approach to growth.  They can scale harder but they have chosen to strategically throttle the growth to ensure that the backbone or infrastructure is stable and can support the future.   

LFvalueseeker

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Re: RMBL - RumbleOn
« Reply #27 on: June 18, 2018, 04:48:17 AM »
I was having a conversation with a former hedge fund manager over the week about RMBL vs. Carvana.  This individual invested privately in Carvana before the IPO and is a large shareholder in RMBL.  From a valuation perspective, Carvana currently has a $6 Billion market cap.  They generated $360 million in Q1 revenues and lost $53 million.  On a full year basis they are trading a 4X revs. 

RMBL is growing much faster on a percentage basis and losing a lot less with cash flow breakeven approaching quickly.  But using a simple revenue multiple the result is much higher share prices.  Just annualizing Q2 anticipated revs of $16 million you will get to a market cap of $128m at 2x,  $192m at 3x and $256m at 4x.  That puts the stock in the $10.50 to $21.00 range. 

At the projected $100m 2018 revenue number that equates to a range of $16.50 - $33.00. 

LFvalueseeker

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Re: RMBL - RumbleOn
« Reply #28 on: June 19, 2018, 07:48:37 AM »
For those that care about technicals, this is a beautiful set up.  Needs some volume and close above $5.50.

spartansaver

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Re: RMBL - RumbleOn
« Reply #29 on: June 19, 2018, 10:39:33 AM »
In FY17 the average sale price of a bike was $10,363 and the average cost was $9,730 (excludes auction fees, transportation and recondition cost) equating to a gross margin of 6%. This is below management's estimate of a 13% gross margin when at "scale." Why should the average gross margin more than double per bike?