Author Topic: RMBL - RumbleOn  (Read 12953 times)

landstander

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RMBL - RumbleOn
« on: June 12, 2018, 11:15:44 AM »
RumbleOn is the first company to provide a 100% online marketplace to buy/sell/deliver motorcycles. The company is asset light, utilizing regional dealers for pick up and delivery. The company has a small market cap of $60m, but has been growing rapidly since they began in late 2017. 

Management seems well aligned, owning over half of the outstanding shares. The CEO, Marshall Chesrown, has decades in the auto industry including selling his own company to Autonation in 1997. CFO Steve Berrard was the co-founder and co-CEO of Autonation.

Revenues were $3.5m in Q4'17 and $8.0m in Q1'18. They are estimating $16m+ for Q2'18 (Slide 15 in presentation linked below) and $100m for the year. They expect to be cash flow positive by the second half of the year or around 800 bikes per month. They should be north of 550 bikes per month for Q2, so I think this is reasonable.

It's very possible the company will be unable to ramp up sales. At less than a year old, it's also likely that other online offerings will be made available that make it impossible for RumbleOn to hit their margin targets.

The opportunity seems large with the company estimating 50k+ used bikes are sold per month. Perhaps RumbleOn is able to solidify their position as the trusted platform for buying/selling used bikes online and leverage their sales data to maintain that position.

I am currently long RMBL, but would like to hear opinions others have. 

Investor Presentation (06/08/2018) - https://www.sec.gov/Archives/edgar/data/1596961/000165495418006401/rmbl_ex991.htm


writser

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Re: RMBL - RumbleOn
« Reply #1 on: June 12, 2018, 11:46:32 AM »
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

RichardGibbons

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Re: RMBL - RumbleOn
« Reply #2 on: June 12, 2018, 04:37:01 PM »
In theory, they are in a hypergrowth phase where they're growing above 100% a year and their June sales this year are estimated to be 8 times their December sales. Also, they have a 19-day average turnover between buying and selling bikes, so they aren't accumulating inventory in December to sell in June, but rather turning over inventory every few weeks.

If all that's true, shouldn't we expect their inventory now to be much higher now than their inventory in the winter? An 8x sales increase is quite a bit.

But according to their 10K, on Dec 31, 2017, they had 751 vehicles for sale. Today, on their website, they have 783 vehicles for sale. And according to their presentations, their sales have increased dramatically in April and May compared to December.

So am I wrong about how their inventory should be behaving? Is there something I'm missing that explains why their inventory remains flat despite a projected 8x increase in sales?
« Last Edit: June 12, 2018, 07:38:57 PM by RichardGibbons »

landstander

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Re: RMBL - RumbleOn
« Reply #3 on: June 12, 2018, 07:09:21 PM »
Thanks for sharing Writser, the KD post was what got RMBL on my radar but forgot to include it.

Regarding the inventory, based on my observations I think it's a legitimate risk. Based on frequent checking, the site's listed inventory has consistently been in the 600-1000 range for the last 3 months. Further, these are not all available as with increasing sales there is a much higher percentage of "sold" bikes being listed. They will need to prove they can significantly increase their inventory with the right margins before it starts to limit sales.

My feel is that this will resolve over time as bike owners leave the common Craigslist-like methods of selling bikes and move to the more simplified Carmax-like method that Rumbleon offers. Based on motorcycle forum postings from last year, people seemed to be rather hesitant on the selling process but are starting to come around. Cash offers have grown from 2k/month in January to 10k/month in June. This should soon lead to higher inventory without stressing margins.

Spekulatius

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Re: RMBL - RumbleOn
« Reply #4 on: June 12, 2018, 08:23:43 PM »
Wouldn’t the main competition be ebaymotors?
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Foreign Tuffett

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Re: RMBL - RumbleOn
« Reply #5 on: June 13, 2018, 04:44:26 AM »
Thanks for sharing Writser, the KD post was what got RMBL on my radar but forgot to include it.

Regarding the inventory, based on my observations I think it's a legitimate risk. Based on frequent checking, the site's listed inventory has consistently been in the 600-1000 range for the last 3 months. Further, these are not all available as with increasing sales there is a much higher percentage of "sold" bikes being listed. They will need to prove they can significantly increase their inventory with the right margins before it starts to limit sales.

My feel is that this will resolve over time as bike owners leave the common Craigslist-like methods of selling bikes and move to the more simplified Carmax-like method that Rumbleon offers. Based on motorcycle forum postings from last year, people seemed to be rather hesitant on the selling process but are starting to come around. Cash offers have grown from 2k/month in January to 10k/month in June. This should soon lead to higher inventory without stressing margins.

Aren't traditional motorcycle dealers a better comp to the Carmax model than this is? I say this because the first step in the Carmax model requires you to take your car to one of their dealerships (I think?). That's different than what these guys are doing.

Anyone ever tried to sell a motorcycle? Is the market really as illiquid as RMBL wants us to think? If so, why haven't others (aka traditional dealers and entrepreneurial gear heads) stepped in to profit via providing liquidity to the market? Presumably some motorcycle dealers will make lowball cash offers for bikes just like these guys do, right?

landstander

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Re: RMBL - RumbleOn
« Reply #6 on: June 13, 2018, 06:04:41 AM »
Thanks for the feedback!

I think there is a lot of liquidity provided by C2C (200k+ bikes available on CycleTrader right now) and C2B. My understanding is that for most bike owners, the local bike dealer will buy quickly but offer a very low price. Craiglist/CycleTrader can be better pricing, but can take much longer.

Yes, Carmax isn't the best comp, but I haven't found a better one. Ideally, RMBL's ability to sell bikes nationwide enables them to offer better pricing than a single local bike dealer. In some cases, a bike seller might get 10%-20% more from CycleTrader (based on forum posts), but sellers will prefer the speed and convenience of the RMBL selling process (quick quote, warranty, home pickup, etc).

Schwab711

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Re: RMBL - RumbleOn
« Reply #7 on: June 13, 2018, 06:56:46 AM »
I see GAAP breakeven around $125m. Somewhere between 2%-7% incremental EBT margins after that point (probably closer to 3%, judging by motorcycle dealer comps). I really like this idea for some of the reasons mentioned. It's an above-average business, that could potentially serve a relatively large market, with talented management, and a reasonable cap structure/SBC history. They probably deserve some research. Can RMBL do $500m in sales anytime soon? If so, you can probably do well in this name. If not, it's going to be like a few other good businesses in microcap land that could never get over the hump. I think $500m in sales seems possible and would probably mean RMBL would be a 2x-3x at a very reasonable exit valuation.

On the B-side, the motorcycle market has been shrinking and I don't see millennials saving it. There's potentially a supply-demand issue coming as baby boomers and post-boomers age. Millennials haven't been able to work on their cars as easily as previous generations. Millennials demos have generally been more risk averse. Who knows what the future brings but the data is concerning.

I think this could be an ideal market for RMBL's strategy. Large enough to make good money but small enough that competition may be limited. Thanks for the idea and the blog introduction.

Spekulatius

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Re: RMBL - RumbleOn
« Reply #8 on: June 13, 2018, 07:35:31 AM »
Thanks for sharing Writser, the KD post was what got RMBL on my radar but forgot to include it.

Regarding the inventory, based on my observations I think it's a legitimate risk. Based on frequent checking, the site's listed inventory has consistently been in the 600-1000 range for the last 3 months. Further, these are not all available as with increasing sales there is a much higher percentage of "sold" bikes being listed. They will need to prove they can significantly increase their inventory with the right margins before it starts to limit sales.

My feel is that this will resolve over time as bike owners leave the common Craigslist-like methods of selling bikes and move to the more simplified Carmax-like method that Rumbleon offers. Based on motorcycle forum postings from last year, people seemed to be rather hesitant on the selling process but are starting to come around. Cash offers have grown from 2k/month in January to 10k/month in June. This should soon lead to higher inventory without stressing margins.

Aren't traditional motorcycle dealers a better comp to the Carmax model than this is? I say this because the first step in the Carmax model requires you to take your car to one of their dealerships (I think?). That's different than what these guys are doing.

Anyone ever tried to sell a motorcycle? Is the market really as illiquid as RMBL wants us to think? If so, why haven't others (aka traditional dealers and entrepreneurial gear heads) stepped in to profit via providing liquidity to the market? Presumably some motorcycle dealers will make lowball cash offers for bikes just like these guys do, right?

I bought and sold a motorcycle ( Kawasaki 500, very common model) via Craigslist and it was very easy and quick. I could see that rare or heavily customized Motorcycles are more difficult to sell. I do think there is a fairly liquid market for Harley’s.
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globalfinancepartners

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Re: RMBL - RumbleOn
« Reply #9 on: June 13, 2018, 07:51:40 AM »
I'm not sure about this business model.  I did a quick look at the website and there are hardly any motorcycles listed on there.  There are so many ways to sell a used motorcycle, from craigslist and ebaymotors, as mentioned, to the countless specialized online forums that have classified buy/sell/trade sections.  Plus autotrader and now facebook classified ads and specialized facebook groups for certain affinity interests (I'm a member of several buy/sell/trade groups on facebook and there is an active market there for vehicles and parts).  I have bought and sold motorcycles primarily through the large online community advrider.  It's more for adventure bikes and offload bikes, but moto folks tend to have several bikes of different types, so people really list all types on just that one site.  It's free, so is craigslist.

There are online forums like this one for each subculture of motorcycle, harleys, dirt bikes, side car bikes, vintage bikes, you name it...