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General Category => Investment Ideas => Topic started by: landstander on June 12, 2018, 11:15:44 AM

Title: RMBL - RumbleOn
Post by: landstander 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 (https://www.sec.gov/Archives/edgar/data/1596961/000165495418006401/rmbl_ex991.htm)
Title: Re: RMBL - RumbleOn
Post by: writser on June 12, 2018, 11:46:32 AM
Good blogpost about same name: http://kiddynamitesworld.com/rumbleon-disrupting-online-motorcycle-secondary-market/
Title: Re: RMBL - RumbleOn
Post by: RichardGibbons 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?
Title: Re: RMBL - RumbleOn
Post by: landstander 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.
Title: Re: RMBL - RumbleOn
Post by: Spekulatius on June 12, 2018, 08:23:43 PM
Wouldn’t the main competition be ebaymotors?
Title: Re: RMBL - RumbleOn
Post by: Foreign Tuffett 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?
Title: Re: RMBL - RumbleOn
Post by: landstander 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).
Title: Re: RMBL - RumbleOn
Post by: Schwab711 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.
Title: Re: RMBL - RumbleOn
Post by: Spekulatius 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.
Title: Re: RMBL - RumbleOn
Post by: globalfinancepartners 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...

Title: Re: RMBL - RumbleOn
Post by: Broeb22 on June 13, 2018, 03:55:22 PM
Some more info on Marshall Chesworn.

Am I the only one concerned to partner with someone who takes chances like this in their personal life after they already had more money than they would ever need?

https://www.inlander.com/spokane/gambling-losses/Content?oid=2189353 (https://www.inlander.com/spokane/gambling-losses/Content?oid=2189353)
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 14, 2018, 10:29:16 AM
Long post, have patience and I apologize for jumping around a bit….

I came across this blog through a Rumbleon Google alert and it’s great to see active discussion on RMBL.  Full disclosure, I am long just under 1% of the fully diluted shares.  All open market purchases, roughly in line with current share prices.  This story came across my desk when they were seeking to Re-IPO in October.  Given the banks involved, I chose to pass and do extensive research and likely acquire shares cheaper than deal price.  ($5.50) 

I have been investing in the markets for 15 years, mainly in micro/small caps, and this is my favorite situation I have ever been involved with.   Some additional color on what I focus on – I buy a few large positions a year, at most, and I will opportunistically trade around unique intraday or weekly situations outside my core positions.  My philosophy is every good story eventually has its day/week/month in the sun and the day trading chat rooms have replaced the funds that used to build large positions in microcaps.  (they create the parabolic moves) Most microcaps eventually go belly up, so with the right story, fundamentals, mgmt. team, etc…it’s a matter of time until the stock catches fire. 

With that said, I also start my due diligence backwards, starting with the cap structure.  Buying a STORY seldom works as most microcaps I encounter have messy cap tables littered with warrants, converts and other dilutive instruments that make it very challenging for the stock to appreciate. 

Rumbleon checks all the boxes in what I look for except one – volume….

Small Float – Check
Large Insider Ownership – Check
Experienced Jockeys – Check
Explosive Growth – Check, Check
Disruptive Technology – Check
Large TAM – check
Scalable – check
Volume – not yet (this is where the opportunity is)


So let me touch on a few points about this company that were raised on this forum and others that I have sorted out through 20+ calls with mgmt..

At its simplest form this is an incredibly powerful business model that is infinitely superior to Carmax, Carvana, Vroom, Blinker, Beepi (toast), Shift, Auto 1 Group and any other used auto tech startups.  Carvana loses ~$5,000 per car and the thesis is that they can achieve Carmax margins at scale.  They currently buy nearly all of their cars through auction – it’s going to be very difficult to meet their claims through this acquisition strategy.

RMBL is strictly a user acquisition marketing arbitrage story with no current competition and all metrics are pointing up and to the right.  Distribution is not the concern, acquiring bikes is the challenge.  Back of the envelope math shows that they are acquiring each bike at an average of under $200 marketing spend – conservative estimate.  That cost should decline month-over-month as they continue to refine their digital strategy, employ retargeting techniques, build a recognizable brand and experience some notion of referral/word of mouth traction.  At $200 they are still profitable on a unit basis.  Even at $200, it’s extremely compelling.  This is exceptionally low for a big ticket item.   This is a result of a ~15% conversion rate which includes deals that cant be touched because people are underwater on their loans.  (a massive opportunity if they can crack it with a banking partner)  So that 15% conversion is more like 30% of actual legitimate “doable” deals.  The reason for this is motorcycles are a WANT not a NEED.  You have an engaged audience that is very captive.  Digital marketing performs great when you quickly identify the audience and laser focus ad placement.

A note about digital ads:  If you’re like me, I see RMBL ads all day every day on my FB and IG feed.  You will see loads of angry people complaining about low-ball offers.  This is totally natural as bikes are more sentimental/emotional things to people then cars.  We are accustomed to getting low-ball offers the car dealership and for trade ins.  This is how the world works and has forever.  For many people they are experiencing this for the first time on their bike.  What it shows is that a lot of people are curious about selling their bike.  From conversations with the team, they are capturing a lot of these same people that complain and then a few weeks later realize that Peer-to-Peer methods are not worth the headache.  People are also delusional in what they think the value of their precious Harley Davidson is.  Fat margins on new bikes cause this reality check.  I am not a motorcycle owner but I am a boat owner and it’s a very similar experience. 

One concern brought up on this forum is the inventory tracker on the website.  It’s natural to think that as unit volumes increase so should the inventory count.  If the machine is well oiled – this is not the case.  What we are currently witnessing is mgmt. choosing to keep active inventory in the 600-800 bike range. If you are acquiring bikes at a more rapid pace (which we know they are by looking at cash offers) then you need to sync that with distribution.  I suspect, based on conversations with the team, that they throttle their digital spend and acquisition efforts with the auction calendar in mind. I expect the active listings to grow moderately over time but we do not want to see them grow too quickly.  They are churning efficiently.  As clearly indicated in the deck, they are making enhancements to the website to drive higher margin business by selling bikes to consumers vs. dealers/auctions.  This will result in longer inventory turn over and they should quickly determine the inflection point at which inventory turnover maximizes gross profit.  As a shareholder I would encourage them to increase the listing days to achieve higher margins and also ramp digital spend as every profile captured helps improve the moat and build the data set.

An anecdote about Data: Blockbuster was sold to Viacom for $8.5 billion not because of their physical locations but solely for the data.   RMBL data will prove to be valuable to a variety of suitors.

Suitors – who would acquire this company?  Most people would think Harley Davidson and this is plausible but from my research the auction companies are more natural fits.  Copart (CPRT) Adesa (KAR) and COX, the owner of Manheim Auctions, KBB and others.  (privately held conglomerate)

Valuation – The valuation of this company is a tough nut to crack.  I’ll give my $.02.  Since 2013 over $1billion has been invested, mainly by VC’s, in the “online” automobile sector.  I am referencing the companies above (Vroom, Carvana, etc.). If RMBL were privately held and walking down Sand Hill road in the Valley they would certainly command a $125-$200m valuation given their traction, asset light business model and TAM.  Where do I come up with these numbers?  They are based on data points of a variety of seed, series A-F and IPO data.  More importantly, I have spoken to well respected VC’s to get a gut check and they confirm that valuation range and say it could be light if the demand was there.  So, we basically are buying a company with revenue growth typically reserved for the VC/PE community at a seed/series A type valuation in the public markets.  Another way to skin it, they are trading at 1 times Q2 expected revenue.

The above statement will likely spur the question, “why did  they raise money and go public and not use private capital?”  The answer fairly simple, the largest shareholder, Berrard, is a public markets guy.  They funded the company by writing their own checks along with friends and family.  They didn’t need outside investment which comes with strings attached in the form of opinions. These guys have 40 years of auto experience and don’t need advice on how to run this business.  Next question, “Why did they do it with Vroom?” They needed large slugs of outside capital because Vroom is not asset light and inventory turnover is longer.  Through their experience, they have developed a streamlined mouse trap in an off-shoot of the car business.  Vroom brought on the Priceline CEO to run it and Marshall and Steve stepped away.  For what it’s worth, Marshall’s son is still the Chief Revenue Officer and both guys have large equity stakes in Vroom. 

Craigslist, Ebay, Cycle Trader and others are not incentivized for the bike to sell.  The listing fees are their bread and butter.  Some semblance of liquidity exists in the bike market as it does in the crypto currency market.  But it’s far from perfect- you cant efficiently buy/sell cryptos like stocks.  RMBL is not for everyone, if it were we wouldnt have an opportunity to own it.  Carmax isn’t for everyone but the convenience outweighs the headaches for a lot of people.  Same thing here.  There is a staggering amount of Harley Davidsons with non-active registrations.  That means they are sitting idle in garages collecting dust because they are a show-piece or the owner doesn’t feel like dealing with knuckleheads showing up at their house to kick the tires.  It’s like barn finds of pristine bikes and the auction companies are taking notice giving RMBL their own lane these days.

I originally was introduced to Steve Berrard through Services Acquisition Corp, a blank check (SPAC) that acquired Jamba Juice.  I was a large holder of the SPAC and was making a pure bet on Steve.  He delivered and the SPAC unit was up 50%+ upon deal announcement, which is far from the norm in the blank check spac sector.  This is his 13th pubco and he didn’t come out of retirement for money, he sees a massive opportunity. 

Marshall and Steve met when Autonation bought Marshalls company for $100million.  Does his BK scare me?  No, he went belly up after 2008 along with a lot of really smart people that were leveraged and the banks stopped lending.  It is certainly a red flag on the surface but find me successful person that doesn’t have several bad deals in their past.  They all do.  (plus over $300million of funding was put into Vroom after the BK.  Catterton, T Row Price, etc.. It didn’t bother them, shouldn’t bother us)

It’s also a good idea to listen to their last quarterly conference call.  These guys are professionals and miles above most micro cap teams.

What is my price target?  It all depends on what drives the buying and interest.  I can easily see a major publication writing a story about, “Meet the team disrupting the used motorcycle space” or next quarter earnings being the match that lights this up.  Given the low float, I expect to see a day that it trades several million shares moves to the $10-$20 range.  Once the volume comes, it will open the story up to many potential investors.  Low float mania is a real thing and we see companies moving wildly with little-to-no underlying sustainable business.  When this moves and people dig deeper they will be happy with what they find.  This is not the norm in microcap world.

In summary – creating liquidity in an illiquid market tends to create significant value.  I have never witnessed a micro cap grow from a few million in revenue to $100 million in less then two years.  It simply doesn’t happen.  Will they achieve this revenue target?  Yes.  They can juice the marketing spend to hit it.  Can they do it while creating positive cash flow?  That remains the question.  It’s only a matter of time until this disruptive story hits other radar screens as the growth simply can’t be ignored for long. 

Happy to continue the conversation.
Title: Re: RMBL - RumbleOn
Post by: johnny on June 14, 2018, 06:18:41 PM
If RMBL were privately held and walking down Sand Hill road in the Valley they would certainly command a $125-$200m valuation given their traction, asset light business model and TAM.  Where do I come up with these numbers?  They are based on data points of a variety of seed, series A-F and IPO data.

Which specific transactions do you think are most representative of the market and analogous to this situation?
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 15, 2018, 07:29:04 AM
Johnny, unfortunately I no longer have access to Pitchbook(.com) which back in October 2017 allowed me to see the private valuations of the automobile startups.  I have reached out to a few colleagues who hopefully have access.  I will post the screenshot as soon as I receive it.  If anyone on here could help identify someone with Pitchbook that would also we great. (crunchbase pro may work too)
Title: Re: RMBL - RumbleOn
Post by: RichardGibbons on June 15, 2018, 08:42:13 AM
One concern brought up on this forum is the inventory tracker on the website.  It’s natural to think that as unit volumes increase so should the inventory count.  If the machine is well oiled – this is not the case.  What we are currently witnessing is mgmt. choosing to keep active inventory in the 600-800 bike range. If you are acquiring bikes at a more rapid pace (which we know they are by looking at cash offers) then you need to sync that with distribution.  I suspect, based on conversations with the team, that they throttle their digital spend and acquisition efforts with the auction calendar in mind. I expect the active listings to grow moderately over time but we do not want to see them grow too quickly.  They are churning efficiently.  As clearly indicated in the deck, they are making enhancements to the website to drive higher margin business by selling bikes to consumers vs. dealers/auctions.  This will result in longer inventory turn over and they should quickly determine the inflection point at which inventory turnover maximizes gross profit.  As a shareholder I would encourage them to increase the listing days to achieve higher margins and also ramp digital spend as every profile captured helps improve the moat and build the data set.

I'm trying to understand your argument here, but I'm not sure I completely do.

Are you basically saying that they are deliberately not trying to buy bikes except close to the time that the low-margin auctions are available so they can turn over their inventory quickly? Like, maybe they're so constrained by their storage costs or financing costs that it's not worth it for them to even bother trying to increase the inventory on their website. Or another way of putting it is that not enough people want to buy from their website for it to be worthwhile acquiring more inventory except when they're close to the time that they can dump that extra inventory at an auction.

Is this what you're saying? Most online marketplaces are driven to increase scale to increase networking effects--i.e. the exact opposite of "I expect the active listings to grow moderately over time but we do not want to see them grow too quickly". If you're right that they're deliberately not increasing scale, I want to understand the reasoning behind that. 

Why don't they want to see the high-margin listings on their website growing as fast as possible?  Is it that the storage or financing costs would be too high? Or am I misunderstanding something about their business model?
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 15, 2018, 08:56:19 AM
They are currently approaching 1,000 units sold per month.  Their active inventory is constantly churning.  When churn is efficient the inventory tracker is almost irrelevant.  When I first saw the inventory tracker, I was excited as I thought I could track unit sales.  Took me a while to realize that it's almost meaningless. 

You want to see this number grow moderately in the short term as they sort out the "turnover days : gross profit maximization point" <- totally made up metric.  We don't want them building up large amounts of inventory for too long as it ties up capital. We want them buying them and selling them as quick as possible until they precisely determine the exact amount of turnover days where they maximize sales to consumers.  This is one of those things that would be simple to explain over the phone - less so in writing, especially on a Friday. 

Said another way - The longer the bike sits on the site for sale, the greater the odds are it's sold to a consumer at the best margin.  But as it sits in inventory (which is misleading as they don't touch the bikes whatsoever) it reduces available capital.  For example, a bike could sit on their site for 6 months and produce a gross profit of $1,000 when sold.  That same bike could be sent to the auction after 30 days for a gross profit of $700.  I'd prefer to do that 6 times and generate more gross profit.  Currently they shouldn't have any capital issues as Ally $25m Floor Plan allows for 5X leverage.  But we want them to find the sweet spot ASAP, so they can scale harder and more efficiently.  It's not rocket science and I trust a career CFO in the auto business to sort this out very quickly. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 15, 2018, 09:00:45 AM
The one thing you may be missing is that they are not simply a listing site.  They pay same day cash for the bike from consumers.  Carmax for Bikes without the Brick and Mortar locations. 

Thats the technology platform they sit on top of.  Same team that built the True Car technology.  Almost immediate appraisal and cash/wire offer to the seller.  That is the major enhancement creating liquidity. 

Title: Re: RMBL - RumbleOn
Post by: Pelagic on June 15, 2018, 09:35:20 AM
Johnny, unfortunately I no longer have access to Pitchbook(.com) which back in October 2017 allowed me to see the private valuations of the automobile startups.  I have reached out to a few colleagues who hopefully have access.  I will post the screenshot as soon as I receive it.  If anyone on here could help identify someone with Pitchbook that would also we great. (crunchbase pro may work too)

Crunchbase's free option seems to have some decent comparisons. I used the filters "automotive" and "marketplace" then click on each individual company to see the funding rounds and amounts.

https://www.crunchbase.com/search/organization.companies/3533cd522bb46a61225306d3b3ace2865fc61f1d
(hopefully that links returns the same search I created)

Shift.com for example is a p2p marketplace for car buying and selling while offering intermediary concierge services - $112M raised.

Title: Re: RMBL - RumbleOn
Post by: cameronfen on June 15, 2018, 09:35:54 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.   
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 15, 2018, 09:40:19 AM
Johnny, unfortunately I no longer have access to Pitchbook(.com) which back in October 2017 allowed me to see the private valuations of the automobile startups.  I have reached out to a few colleagues who hopefully have access.  I will post the screenshot as soon as I receive it.  If anyone on here could help identify someone with Pitchbook that would also we great. (crunchbase pro may work too)

Crunchbase's free option seems to have some decent comparisons. I used the filters "automotive" and "marketplace" then click on each individual company to see the funding rounds and amounts.

https://www.crunchbase.com/search/organization.companies/3533cd522bb46a61225306d3b3ace2865fc61f1d
(hopefully that links returns the same search I created)

Shift.com for example is a p2p marketplace for car buying and selling while offering intermediary concierge services - $112M raised.

The key is getting the valuations at each of the rounds.  It will clearly show that RMBL is very cheap versus the peer group.  Shift, Blinker, Beepi (defunct), Vroom, Carvana, Auto 1 (Germany, i think)  Pitchbook has the data and is the best for details on private companies and VC/PE financing info.  Hopefully, I will get this info shortly. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker 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 didn’t 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 “can they sell it story”.  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 “toys” 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 “toys” in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (I’m being a bit overly broad here). Younger people want liquidity and are non commital. Women don’t 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. It’s picked up, transported and reconditioned through their dealer network. It’s simultaneously listed in their site for a limited time period and if it doesn’t sell to a consumer, it’s 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.
Title: Re: RMBL - RumbleOn
Post by: cameronfen 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 didn’t 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 “can they sell it story”.  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 “toys” 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 “toys” in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (I’m being a bit overly broad here). Younger people want liquidity and are non commital. Women don’t 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. It’s picked up, transported and reconditioned through their dealer network. It’s simultaneously listed in their site for a limited time period and if it doesn’t sell to a consumer, it’s 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. 
Title: Re: RMBL - RumbleOn
Post by: Spekulatius 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 didn’t 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 “can they sell it story”.  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 “toys” 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 “toys” in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (I’m being a bit overly broad here). Younger people want liquidity and are non commital. Women don’t 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. It’s picked up, transported and reconditioned through their dealer network. It’s simultaneously listed in their site for a limited time period and if it doesn’t sell to a consumer, it’s 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 can’t 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)?
Title: Re: RMBL - RumbleOn
Post by: RichardGibbons on June 15, 2018, 07:22:40 PM
Thanks LFValueSeeker. I understand what you're saying about inventory now, and their reasoning....
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker 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 didn’t 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 “can they sell it story”.  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 “toys” 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 “toys” in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (I’m being a bit overly broad here). Younger people want liquidity and are non commital. Women don’t 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. It’s picked up, transported and reconditioned through their dealer network. It’s simultaneously listed in their site for a limited time period and if it doesn’t sell to a consumer, it’s 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 can’t 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, it’s 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 aren’t guessing and with a 15% conversions rate, it seems to be working.  (If anyone has any experience in digital marketing, 15% is mind numbing)
Title: Re: RMBL - RumbleOn
Post by: cameronfen 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 didn’t 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 “can they sell it story”.  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 “toys” 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 “toys” in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (I’m being a bit overly broad here). Younger people want liquidity and are non commital. Women don’t 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. It’s picked up, transported and reconditioned through their dealer network. It’s simultaneously listed in their site for a limited time period and if it doesn’t sell to a consumer, it’s 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 can’t 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, it’s 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 aren’t 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...)
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker 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 didn’t 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 “can they sell it story”.  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 “toys” 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 “toys” in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (I’m being a bit overly broad here). Younger people want liquidity and are non commital. Women don’t 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. It’s picked up, transported and reconditioned through their dealer network. It’s simultaneously listed in their site for a limited time period and if it doesn’t sell to a consumer, it’s 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 can’t 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, it’s 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 aren’t 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.   
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker 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. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker 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.
Title: Re: RMBL - RumbleOn
Post by: spartansaver 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?
Title: Re: RMBL - RumbleOn
Post by: netnet on June 19, 2018, 10:47:35 AM
this looks very interesting.  It seems to me that there are not very many barriers to entry though.  Please correct me if I'm wrong. (Other than the narrow moat of a name brand.)  Nothing that they are doing with dealer networks would stop a competitor creating an alternate network.  There maybe some scale economies, the business model is unique, and Ithey may have operational efficiencies/excellence, but can't they be copied?

I still need to look deeply into both the market and the management, but the question is this, assuming everything checks out: Is this a really major position type company, or is this a speculative arbitrage between its current price and how a fast growing platform type company should be valued?
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 10:48:27 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?

FY17 Consisted of ~3 months since flipping the switch on, not a great indicator.  Q1 demonstrated a ~8.5% gross margin and I suspect Q2 will show an improvement upon that.  The gross margin increases as the distribution mix shifts towards consumers and away from auctions/dealers.  I laid this out in my "Risks" post.  I believe that dealers/auctions will always be a significant percentage of distribution/sales due to the rapid turnover and cash on cash returns.  I expect turnover days to increase moderately as they allow the bikes to sit longer on the website to drive consumer sales.  There will be a distinct inflection point at which it makes sense to send to auction/dealers.  Ideally we would like to see 50/50 mix.  We saw a 33% jump in GP from Q4 to Q1, clearly this rate won't continue but it shows a path to 13% at scale. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 10:58:18 AM
this looks very interesting.  It seems to me that there are not very many barriers to entry though.  Please correct me if I'm wrong. (Other than the narrow moat of a name brand.)  Nothing that they are doing with dealer networks would stop a competitor creating an alternate network.  There maybe some scale economies, the business model is unique, and Ithey may have operational efficiencies/excellence, but can't they be copied?

I still need to look deeply into both the market and the management, but the question is this, assuming everything checks out: Is this a really major position type company, or is this a speculative arbitrage between its current price and how a fast growing platform type company should be valued?

First mover advantage is always nice to have in a $7+ billion market domestically.  With a enough time and money you can reverse engineer pretty much everything and find a way into any market.  That being said, I laid out the competition risk in my previous post.  Some competition will be good and validate the space.  Too much well funded competition will drive up marketing costs and create issues.  The management is highly experienced and has built the backbone of the business for a while now.  The distribution and logistics can't be created overnight and the technology underlying the bidding process is also proprietary.  Each dollar they spend on digital marketing builds their data set which will prove to be valuable and each profile gets more expensive for any entrants to acquire.  With 50,000-70,000 used bikes traded per month, there is room for a few players.  60%+ of that used volume is craigslist which should drop drastically as RMBL grows and potential entrants come in. 

I can't answer the "major" position type question.  I find the risk/reward extremely compelling and will be some time before we see hiccups, IMO.  This is the micro cap market and it's extremely risky regardless of the company.  In 15 years, I have never witness any public company grow from a few million to $100m in revenues in 15 months.  I think the story will be hard to ignore.  I also believe that there are several natural acquirers that are watching.  Carvana, Manheim, Adesa, Copart, Harley Davidson all make a good partners. 
Title: Re: RMBL - RumbleOn
Post by: Schwab711 on June 19, 2018, 11:53:43 AM
@LFvalueseeker:
Do you have an opinion on:
How much in sales they need to break even?
Incremental margins after that point?
Expectations for base case and bull case peak annual sales?

How concerned are you about the long-run trend of decreasing demand for motorcycles? What do you assume (if anything) for long-run demand?

Thanks for sharing your opinions here. It's been helpful to read through them.
Title: Re: RMBL - RumbleOn
Post by: cameronfen on June 19, 2018, 12:07:25 PM
Non Harley Davidson bikes carry higher magin because there is a less developed used market.  They initially target HD but now mix is shifting. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 12:08:27 PM
@LFvalueseeker:
Do you have an opinion on:
How much in sales they need to break even?
Incremental margins after that point?
Expectations for base case and bull case peak annual sales?

How concerned are you about the long-run trend of decreasing demand for motorcycles? What do you assume (if anything) for long-run demand?

Thanks for sharing your opinions here. It's been helpful to read through them.

Sure, here are my thoughts. Breakeven should be around $30m a quarter. (according to mgmt on the last conference call or investor call.  Seems to jive with my model)  They are approaching that run rate now.  Q2 I expect $16-$17m. 

I might not be understanding incremental margins question.  But margin should steadily climb to the target of 13% as the mix shifts towards consumers.  Each bike they sell past breakeven is incremental to the bottom line - less acquisition marketing cost, reconditioning, transport, etc. 

I believe by year end they will be at a $160mm run rate.  That's roughly a 3% market share.  Peak sales are a wild card.  I don't think they will ever achieve this because of likely acquisition by the previously mentioned companies or private equity.  However, growth will ultimately slow in the motorcycle space as it has to.  They are not motorcycle specific and their platform can tackle anything with a VIN number.  Personal Watercraft would be the next low hanging market to go after.  Essentially motorcycles on the water, simple machines.  Small jet boats could be next.  The story peaked my interest initially because a colleague of mine said the word, "boats", and I immediately started my research.  The used boat market is barbaric, to put it kindly, and disruption is inevitable.  After countless calls with mgmt, I don't think nor support them entering this market anytime soon.  Too complex.  But cars would be interesting. 

In their beta test when they were starting out they proved to drop the average age of consumers buying the bikes from the mid 50's to 42.  This is very important as millennials could prove to be a good market for motorcycles.  I haven't forecasted for the demand decrease over time as I think it's a very long time before this becomes a factor. 

I do not own this stock in my retirement accounts, I also am not looking to scalp a buck or two.  I think this is a 2-4X short term (3months - 1year).   
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 12:09:24 PM
Non Harley Davidson bikes carry higher magin because there is a less developed used market.  They initially target HD but now mix is shifting.

Agreed, lower unit cost but higher margins. 
Title: Re: RMBL - RumbleOn
Post by: cameronfen on June 19, 2018, 12:15:30 PM
this looks very interesting.  It seems to me that there are not very many barriers to entry though.  Please correct me if I'm wrong. (Other than the narrow moat of a name brand.)  Nothing that they are doing with dealer networks would stop a competitor creating an alternate network.  There maybe some scale economies, the business model is unique, and Ithey may have operational efficiencies/excellence, but can't they be copied?

I still need to look deeply into both the market and the management, but the question is this, assuming everything checks out: Is this a really major position type company, or is this a speculative arbitrage between its current price and how a fast growing platform type company should be valued?

Right now the moat is not developed but could be formitable.  It's a classic 2 sided market.  No one wants to buy from a rmbl competitor if they have no motorcycles, no one wants to sell on a competitor if there are no buyers, so the company with the largest 2 sided network takes share. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 12:25:15 PM
this looks very interesting.  It seems to me that there are not very many barriers to entry though.  Please correct me if I'm wrong. (Other than the narrow moat of a name brand.)  Nothing that they are doing with dealer networks would stop a competitor creating an alternate network.  There maybe some scale economies, the business model is unique, and Ithey may have operational efficiencies/excellence, but can't they be copied?

I still need to look deeply into both the market and the management, but the question is this, assuming everything checks out: Is this a really major position type company, or is this a speculative arbitrage between its current price and how a fast growing platform type company should be valued?

Right now the moat is not developed but could be formitable.  It's a classic 2 sided market.  No one wants to buy from a rmbl competitor if they have no motorcycles, no one wants to sell on a competitor if there are no buyers, so the company with the largest 2 sided network takes share.

Well said.
Title: Re: RMBL - RumbleOn
Post by: spartansaver on June 19, 2018, 01:23:12 PM
Vroom seem to be running into trouble. LFvalueseeker did management have any comments on this through your discussions with them?

https://techcrunch.com/2018/03/05/used-car-site-vroom-lays-off-staff-25-50-says-source-as-it-halts-dallas-and-indiana-operations/

Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 01:45:33 PM
Vroom seem to be running into trouble. LFvalueseeker did management have any comments on this through your discussions with them?

https://techcrunch.com/2018/03/05/used-car-site-vroom-lays-off-staff-25-50-says-source-as-it-halts-dallas-and-indiana-operations/

From what I understand they are both sizable shareholders and like any promising private business when you raise money from VC/PE they have their own ideas.  If Vroom went BK tomorrow it would not effect my thesis whatsoever.  In fact, the VC's don't care either.  They need and focus on only 1, 1 billion company per fund. Zero's and Grand Slams.  Grow, Grow, Grow, slow down, cut bait, on to the next.   

Investors are fortunate enough to be able to buy RMBL at a seed/series-a valuation.  I am not interested in the final outcome as I have liquidity and hopefully can adjust my position based on inflection points - Unlike a private company which has no traditional liquidity and it's a race to the top.  If you invested in the seed round or series A of Vroom you would have a tremendous return despite the current turmoil in the news.  Same with Shift, Blinker, Auto 1, etc.  Beepi went belly up after raising over $100 million.  My guess is they peaked around a $300-500m valuation. (using the 20% rule)  I am purely interested in investing in this company based on a $50m valuation (from last weeks first post) to something between $150 and $300m. If it heads higher than that, I hope to have some shares left.  Make no mistake, RMBL will have its issues but their are clear skies ahead during this hyper growth phase they are currently in.  I will continue to make this final statement until someone provides another example.  Has anyone ever witnessed any PUBLIC company go from ZERO to $100m in revenue in 15 months?  These types of situations are reserved for the few top tier VC's.  (yes, a few.  Only a small handful actually outperform their 12-13% benchmark.  A select group produce the overwhelming majority of all VC returns)
Title: Re: RMBL - RumbleOn
Post by: Foreign Tuffett on June 19, 2018, 01:51:31 PM
this looks very interesting.  It seems to me that there are not very many barriers to entry though.  Please correct me if I'm wrong. (Other than the narrow moat of a name brand.)  Nothing that they are doing with dealer networks would stop a competitor creating an alternate network.  There maybe some scale economies, the business model is unique, and Ithey may have operational efficiencies/excellence, but can't they be copied?

I still need to look deeply into both the market and the management, but the question is this, assuming everything checks out: Is this a really major position type company, or is this a speculative arbitrage between its current price and how a fast growing platform type company should be valued?

Right now the moat is not developed but could be formitable.  It's a classic 2 sided market.  No one wants to buy from a rmbl competitor if they have no motorcycles, no one wants to sell on a competitor if there are no buyers, so the company with the largest 2 sided network takes share.

Well said.

I don't understand what the bolded is supposed to mean. This isn't like eBay Motors, if you sell your motorcycle using RumbleOn's site the buyer is RumbleOn itself. What RumbleOn does or doesn't do with the bike afterwards is irrelevant to you as the seller.

Presumably what matters to you as the seller is maximizing two variables: price and convenience (aka how big of a hassle will it be to complete the selling process). Insofar, as I can tell, RumbleOn's business model maximizes convenience at the expense of price. The Google reviews seem to support this thesis.

The issue is how large is the "lazy" motorcycle seller addressable market? 

Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 02:10:42 PM
this looks very interesting.  It seems to me that there are not very many barriers to entry though.  Please correct me if I'm wrong. (Other than the narrow moat of a name brand.)  Nothing that they are doing with dealer networks would stop a competitor creating an alternate network.  There maybe some scale economies, the business model is unique, and Ithey may have operational efficiencies/excellence, but can't they be copied?

I still need to look deeply into both the market and the management, but the question is this, assuming everything checks out: Is this a really major position type company, or is this a speculative arbitrage between its current price and how a fast growing platform type company should be valued?

Right now the moat is not developed but could be formitable.  It's a classic 2 sided market.  No one wants to buy from a rmbl competitor if they have no motorcycles, no one wants to sell on a competitor if there are no buyers, so the company with the largest 2 sided network takes share.

Well said.

I don't understand what the bolded is supposed to mean. This isn't like eBay Motors, if you sell your motorcycle using RumbleOn's site the buyer is RumbleOn itself. What RumbleOn does or doesn't do with the bike afterwards is irrelevant to you as the seller.

Presumably what matters to you as the seller is maximizing two variables: price and convenience (aka how big of a hassle will it be to complete the selling process). Insofar, as I can tell, RumbleOn's business model maximizes convenience at the expense of price. The Google reviews seem to support this thesis.

The issue is how large is the "lazy" motorcycle seller addressable market?

Fair point.  I think the "lazy" low hanging fruit, which I believe will prove that the market is bigger then we all expect, is what mgmt is attacking immediately.  Lots of bikes sitting idle in garages without active registration, presumably a high income demographic that will value this service.  In time, they could morph into an active exchange where buyers and sellers complete multiple transactions.  I can only relate this to the boating world.  Many people start with one 18' boat, swap into a 24' then 30' and so on.  They get the boating bug.  I'm too scared to ride a motorcycle but I imagine it's amazing. An active liquid market place is needed as it has been in the car market for a very long time.

I read all the reviews and digital ad responses. These people are shocked to learn there prized possession isn't worth what they thought it is.  Just because the bike is listed on eBay motors for X doesn't mean it sells for X.  I dabbled in the old SUV market for a while and I always viewed Ebay as a place to view the listings, never transact on it.  It has a wide reach and as far as I know, zero incentive for the bike to sell as they simply care about listing fees.
Title: Re: RMBL - RumbleOn
Post by: globalfinancepartners on June 19, 2018, 02:17:28 PM
pump pump pump....


nothing promotional going on here, is there?


This company seems like a really low float, low liquidity, story that can be pushed up by a pump campaign on a message board, or a series of message boards...  That buys motorcycles from desperate sellers who need cash same day, like a pawn shop or the old EcoATM business.  There is no moat, no 2-sided market, nobody even knows they exist.  Their niche is people who have A,) heard that they even exist and B,) need to turn a motorbike into cash in a hurry.  That may be a big enough market to grow in, but this whole promotion campaign has a pump n dump vibe to it.  Moat?  eBay has a moat.  I don't know a single rider, harley or otherwise, that even knows the name Rumble On.
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 02:24:05 PM
pump pump pump....


nothing promotional going on here, is there?


This company seems like a really low float, low liquidity, story that can be pushed up by a pump campaign on a message board, or a series of message boards...  That buys motorcycles from desperate sellers who need cash same day, like a pawn shop or the old EcoATM business.  There is no moat, no 2-sided market, nobody even knows they exist.  Their niche is people who have A,) heard that they even exist and B,) need to turn a motorbike into cash in a hurry.  That may be a big enough market to grow in, but this whole promotion campaign has a pump n dump vibe to it.  Moat?  eBay has a moat.  I don't know a single rider, harley or otherwise, that even knows the name Rumble On.

Promotional?  I was extremely clear that I came across this blog (which is great and I'm chasing a few ideas down from other posts) through a google alert on Rumbleon.  I disclosed that I was long a sizable amount of stock.  I laid out the risks to others and I have been utterly transparent about my thesis.  Yes it's a low float with low liquidity.  A major aspect of the risk in this name.  I have not seen a single newsletter or pump type campaign.  Frankly, very few people are talking about it anywhere.  They have a traditional IR firm and from my understanding would never pay for a promote, I would sell quicker then anyone if that happened.

Your friends haven't heard the name because they have been around for 9 months.  This is a public venture opportunity littered with risks.  Like every investment, is the risk worth the potential reward?
Title: Re: RMBL - RumbleOn
Post by: globalfinancepartners on June 19, 2018, 02:28:56 PM
Quote
Promotional?

Yup.
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 02:34:24 PM
Quote
Promotional?

Yup.

Ok, if you review all of my posts, I think you may feel otherwise.  I joined this forum to have active dialogue on individual stocks.  Find the holes in the story and lets debate them as it tends to lead to better decision making.  I didn't join to be accused of "pumping" a stock.  Blatant pumps are my favorite short term trades.  This is anything but that.  I maintain that I have been very clear on the downsides and the fact that every microcap is inherently risky. 
Title: Re: RMBL - RumbleOn
Post by: Lakesider on June 19, 2018, 02:39:48 PM
I had a look at this and it doesnt seem (to me) that they are really doing anything that innovate.

The worry I have is that they have a pretty limited inventory, I fear growth rates are high because of the low numbers.

If my banana stand sold 1 banana last year and this year I sold two its time to see the VC's with my 100% growth.
Title: Re: RMBL - RumbleOn
Post by: Spekulatius on June 19, 2018, 02:51:26 PM
There should be seasonality in bike resale’s. Not many people buy bikes in winter. I am guessing that Q2 would be the top quarter. One might get a clue from Harley Davidsons seasonality.
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 02:52:38 PM
I had a look at this and it doesnt seem (to me) that they are really doing anything that innovate.

The worry I have is that they have a pretty limited inventory, I fear growth rates are high because of the low numbers.

If my banana stand sold 1 banana last year and this year I sold two its time to see the VC's with my 100% growth.

They aren't splitting atoms or curing cancer, that's for sure.  They saw a market opportunity and based on their experience went after it.  Carvana builds beautiful tower like car vending machines that are really interesting and cool to see.  They simply use technology to buy cars at auction and sell to consumers, the vending machines are a marketing tactic.  The market has rewarded them with a $6billion market cap at 3-4x 2018 revenue guidance. 

Inventory using the banana analogy.  If you had the capital to buy 100 bananas and sold 50 of those bananas quickly to the fruit distributor at a modest profit, you would have 50 bananas left in inventory.  You take the cash from your recently sold bananas and buy 55 new bananas.  Simultaneously though, "people" are buying  bananas from your existing inventory.  So maybe you have a total of 75 bananas.  Your selling them as quickly as your acquiring them and you maintain a certain banana inventory level that keeps enough cash free to buy juicy ripe bananas from others. That's the best I got and how I understand the churn if its efficient.
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 02:58:27 PM
There should be seasonality in bike resale’s. Not many people buy bikes in winter. I am guessing that Q2 would be the top quarter. One might get a clue from Harley Davidsons seasonality.

I live in the Northeast and this was my first question to management when trying to model out the quarters.  From what they said, they don't see much seasonality.  Like a typical New Yorker, we believe that we are the center of the universe, but apparently there are other states where people live and ride.  They said that the summers in southern climates are our winters.  So as bike sales slow in the northern climates, they pick up in the southern climates as the preferred riding season is not june, july or august. My buddy in Florida thought I was crazy when I visited him last August and want to "play" golf. (best analogy i have)  I guess wearing leather chaps is tough in 100 degree weather? 

In summary, they said we shouldn't see any seasonality early on and nominal at best at scale.  We shall see. 
Title: Re: RMBL - RumbleOn
Post by: Jurgis on June 19, 2018, 03:12:00 PM
Quote
Promotional?

Yup.

Ok, if you review all of my posts, I think you may feel otherwise.  I joined this forum to have active dialogue on individual stocks.  Find the holes in the story and lets debate them as it tends to lead to better decision making.  I didn't join to be accused of "pumping" a stock.  Blatant pumps are my favorite short term trades.  This is anything but that.  I maintain that I have been very clear on the downsides and the fact that every microcap is inherently risky.

I agree with globalfinancepartners: you come through as very promotional.
Maybe you have good intentions. Maybe you are just excited about this company and the opportunity. And, yes, you did disclose your position.

But still you have posts only on a single company and all of them very positive.

Good luck.

Disclosure: No interest in the company and stock.
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 03:20:41 PM
Quote
Promotional?

Yup.

Ok, if you review all of my posts, I think you may feel otherwise.  I joined this forum to have active dialogue on individual stocks.  Find the holes in the story and lets debate them as it tends to lead to better decision making.  I didn't join to be accused of "pumping" a stock.  Blatant pumps are my favorite short term trades.  This is anything but that.  I maintain that I have been very clear on the downsides and the fact that every microcap is inherently risky.

I agree with globalfinancepartners: you come through as very promotional.
Maybe you have good intentions. Maybe you are just excited about this company and the opportunity. And, yes, you did disclose your position.

But still you have posts only on a single company and all of them very positive.

Good luck.

Disclosure: No interest in the company and stock.

I get excited by a few stocks a year. This happens to be one of them. I apologize if it comes off as promotional. I tried my best to lay out the risks and state multiple times that this is not a blue chip name  Also refreshing that this forum asks the right questions and conducts in intelligent coversation.
Title: Re: RMBL - RumbleOn
Post by: indirect on June 19, 2018, 03:37:14 PM
Agree Promotional
Title: Re: RMBL - RumbleOn
Post by: cameronfen on June 19, 2018, 04:36:01 PM
I will say that LFinvestor you do sound promotional and I apologize if I sound promotional you can check my posts, I have a decent post history (although I checked LF does not).  That being said this does look like an interesting company.  I do stand by my 2 sided market comment.  Rumble may buy from consumers, but they have to sell their motorcycles too.  The largest network of private buyers gives rumble the best selection of people to sell to either raising gross margins or allowing higher prices on the buy side.  The other side was discused.  This is the same business model as autotrader and naspers which almost entirely invests in two sided markets thinks autotrader has these economics so argue with naspers if you dont think this has the correct model.  I would omvest more here, but tbh LFs pumpiness does make me hesitate. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 04:47:01 PM
I could understand if I came out of nowhere and started this thread. I didn’t and only was made aware of this forum from a google alert. I was happy to find this forum and excited that like minded investors took notice of this unknown company. I have been investing for 15 years and have not found a more robust and actively engaged forum on a variety of companies and investment ideas. I was excited to jump in on the conversation as I have probably spent more time on this name then any analyst (which doesn’t say much) or investor. I’m sorry many of you have viewed my enthusiasm as being promotional. I will sit tight and back off. Was only trying to help others understand the story from 7 months of due diligence.

And yes, this is the only stock discussion I have contributed to.  I joined a few days ago because the discussion was already in motion.
Title: Re: RMBL - RumbleOn
Post by: KJP on June 19, 2018, 05:11:35 PM
I could understand if I came out of nowhere and started this thread. I didn’t and only was made aware of this forum from a google alert. I was happy to find this forum and excited that like minded investors took notice of this unknown company. I have been investing for 15 years and have not found a more robust and actively engaged forum on a variety of companies and investment ideas. I was excited to jump in on the conversation as I have probably spent more time on this name then any analyst (which doesn’t say much) or investor. I’m sorry many of you have viewed my enthusiasm as being promotional. I will sit tight and back off. Was only trying to help others understand the story from 7 months of due diligence.

And yes, this is the only stock discussion I have contributed to.  I joined a few days ago because the discussion was already in motion.

For what it's worth, I applaud you for bringing a new micro-cap company to the board's attention.  I didn't find your posts overly promotional; instead, I found them far more interesting and useful than the numerous posts that contain nothing more than trivialities about megacaps. 

What are the two or three financial metrics that are most important to you with respect to this business and what would be the changes in them over time that would cause you to believe the business model may not work/is not working?   

Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 05:24:56 PM
Appreciate that. Cost to acquire a bike and gross profit per bike are the two most important. I’ll try to dive into this more tomorrow.  Currently licking my wounds from having my integrity questioned.
Title: Re: RMBL - RumbleOn
Post by: bobozou on June 19, 2018, 05:39:28 PM
1) LFvalueseeker... I also appreciate the posts and information.  Also agree that you've provided alot of information related to this idea (more than most, for most ideas).

2) Re -> promotionalism... It may just be a matter of style.  Some people say/write things with conviction (sometimes excessive).  Some people write with a degree of uncertainty (sometimes excessive). 

I feel I've seen just as much hype in Tesla, Sears, Amazon, probably Berkshire/Fairfax too.

I think it's a bit harsh/critical to be layout out accusations, rather than focusing on the analytical problem (of the business/founders).

3) This is not a traditional value investment.  It seems more akin to a high-risk bet, but with asymetrical payoff. 

I think that they are trying to do a workable business model (low/no-touch platform to provide liquidity) in a underserved market (2nd hand motorcycles).  The model has certainly derisked from 10-20 years ago, as proven by the used car market (and the number/success of entrants).  The management team seems far more legitimate to have a far more successful track-record than most microcaps (tho the CEO is probably not a 'value-investor', as much as he is a 'salesman'... not a bad thing at all, but some may find him 'promotional').

Could it be a fraud?  Yea I guess so

Could they fail to scale (due to lack of demand / excessively high acquisition costs)?  Yea, quite possibly

Could the economy go south prior to them reaching profitability?  Yes, and that would likely be very bad for stock

Could it work?  Yes, I dont see why not

Would it be an asymetrical payout of it does work?  Yes, I believe it will be

Oh yea - most importantly, (as it goes without saying?) caveat emptor?
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 19, 2018, 05:50:04 PM
“In my opinion, the main “risk” to how great the RumbleOn story sounds is that the guys telling it are expert storytellers!  They’re literally PROFESSIONAL car salesman, and everyone knows that car salesman are, well, let’s just say they can sell...”

KD Blog said it best.

Title: Re: RMBL - RumbleOn
Post by: Spekulatius on June 19, 2018, 06:45:14 PM
motorcycle sales are very seasonal, according to this somewhat dated article. I looked at HOG recent quarterly results and the are still very season, with Spring and summer sales 50% higher than on fall and winter.
https://www.fool.com/investing/general/2014/03/13/this-motorcycle-maker-is-surging-through-seasonali.aspx (https://www.fool.com/investing/general/2014/03/13/this-motorcycle-maker-is-surging-through-seasonali.aspx)

When I bought and sold my Motorcycle, I lived in Northern CA and ther was definitely a lot of seasonality. Weather is not as bad for riders than in the Northeast, but still somewhat cold and lots of rain make riding a bit dangerous and unpleasant in winter.

I am fairly sure, thr market for used bikes follows the same pattern. This almost assures, that thr next quarters will be weaker for Rumble, unless they can grow more than the  seasonal decline of 30-40%.
Title: Re: RMBL - RumbleOn
Post by: cameronfen on June 20, 2018, 02:43:13 AM
motorcycle sales are very seasonal, according to this somewhat dated article. I looked at HOG recent quarterly results and the are still very season, with Spring and summer sales 50% higher than on fall and winter.
https://www.fool.com/investing/general/2014/03/13/this-motorcycle-maker-is-surging-through-seasonali.aspx (https://www.fool.com/investing/general/2014/03/13/this-motorcycle-maker-is-surging-through-seasonali.aspx)

When I bought and sold my Motorcycle, I lived in Northern CA and ther was definitely a lot of seasonality. Weather is not as bad for riders than in the Northeast, but still somewhat cold and lots of rain make riding a bit dangerous and unpleasant in winter.

I am fairly sure, thr market for used bikes follows the same pattern. This almost assures, that thr next quarters will be weaker for Rumble, unless they can grow more than the  seasonal decline of 30-40%.

Unless I'm misunderstanding the next quarter is spring.  They already released their winter quarter results and they were fantastic. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 20, 2018, 04:43:58 AM
motorcycle sales are very seasonal, according to this somewhat dated article. I looked at HOG recent quarterly results and the are still very season, with Spring and summer sales 50% higher than on fall and winter.
https://www.fool.com/investing/general/2014/03/13/this-motorcycle-maker-is-surging-through-seasonali.aspx (https://www.fool.com/investing/general/2014/03/13/this-motorcycle-maker-is-surging-through-seasonali.aspx)

When I bought and sold my Motorcycle, I lived in Northern CA and ther was definitely a lot of seasonality. Weather is not as bad for riders than in the Northeast, but still somewhat cold and lots of rain make riding a bit dangerous and unpleasant in winter.

I am fairly sure, thr market for used bikes follows the same pattern. This almost assures, that thr next quarters will be weaker for Rumble, unless they can grow more than the  seasonal decline of 30-40%.

Unless I'm misunderstanding the next quarter is spring.  They already released their winter quarter results and they were fantastic.

My $.02 on seasonality.  After looking at HOG's quarterly top line for last 10+ years, it's clear that Q2 is their best quarter each year.  https://ycharts.com/companies/HOG/revenues

My earlier explanation on seasonality is flat out wrong unless used bikes don't experience the same seasonality - I can't see a reason they wouldn't follow the same pattern though.

With that said, here is where seasonality could throw a monkey wrench into the equation.  Any early stage company currently experiencing hockey stick growth will likely avoid top line seasonality until the business matures a bit.  This could be next year or the following year depending on how quickly market share capture starts to slow down.  The cost to acquire a bike through digital marketing could be impacted as, in theory, it should be more expensive to convert in the slower quarters.  It's anyones guess how severe that effect will be in 2018.  Best case scenario is their cost to acquire a bike stays flat or decreases through the seasonality as everyday that goes by their ads and audiences should get more efficient.  Worst case scenario, they have underestimated the negative effects of seasonality and cost to acquire a bike jumps into the negative ROI territory.  We have opposing forces occurring, Seasonality vs. Marketing Spend/Conversion Efficiency.  This is one of those potential problems that may be an unknown, even to mgmt at this point.  What I find interesting though is the fact that they continue to publicly confirm top line guidance and positive cash flow in 2nd half of 2018.  They have been on the record nearly a dozen times and once again in their new presentation a few weeks ago. They could be overly bullish or they see the data and it's simply an inexpensive land grab at the moment.  To achieve their projections of top line revenue they essentially need to grow at 100% quarter over quarter in 2018.  I don't see this happening in straight line.  (i.e. 8,16,32,64m)  Ultimately, I think it was a mistake to put forth these crazy growth projections as it becomes a "show me" situation.  They would have been better off issuing quarterly guidance and not focusing on the arbitrary $100m.  It creates a potential problem and could result in jamming revenues in to meet investor expectations.  As we have seen the bike mix shift from Harley to Non-Harley (lower unit prices), they would be better off focusing on turning a profit rather than top line.  My hope is that both are achievable but I'd rather see them do $75m this year producing positive cash flow than $100m with negative cash flow due to higher conversion spend.  Looking forward to Q2 earnings and further guidance as they will be smack in the middle of seasonality upon the release.  (Mid July)
Title: Re: RMBL - RumbleOn
Post by: globalfinancepartners on June 20, 2018, 06:03:45 AM
I do apologize if my comments were seen as a personal attack on your integrity.  In my view you were fully clear that your approach to the micro cap space is full on greater fool - and for that you will need a bunch of warm bodies to get excited.  It's no accident that as soon as you started posting the pitch for this stock volume started coming in and you were pretty clear about wanting volume to come in and push it to a technical analysis breakout.  I guarantee you that it would not have gone up 18% or whatever it was yesterday absent your campaign on this message board.  You have been very clear that you don't really care about the end game for the actual company, but are interested in selling your shares in a run-up when volume comes in and creates liquidity for your exit.  Call it what you want.
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 20, 2018, 06:08:01 AM
I do apologize if my comments were seen as a personal attack on your integrity.  In my view you were fully clear that your approach to the micro cap space is full on greater fool - and for that you will need a bunch of warm bodies to get excited.  It's no accident that as soon as you started posting the pitch for this stock volume started coming in and you were pretty clear about wanting volume to come in and push it to a technical analysis breakout.  I guarantee you that it would not have gone up 18% or whatever it was yesterday absent your campaign on this message board.  You have been very clear that you don't really care about the end game for the actual company, but are interested in selling your shares in a run-up when volume comes in and creates liquidity for your exit.  Call it what you want.

I have been buying additional shares over the past few days.  I would be shocked if this forum caused any of the movement of the stock price.  I didn't create this thread nor do I know a single person on this forum.  I can post a screen shot of the google alert that led me here, if someone can explain how to do that.  My intention is to educate not cause knee jerk investment decisions.  I believe I have been thoughtful with my commentary and analysis.  If my intention was to influence the price, I would be finding every investment forum and posting.  This is not the case.
Title: Re: RMBL - RumbleOn
Post by: KJP on June 20, 2018, 06:26:03 AM
I do apologize if my comments were seen as a personal attack on your integrity.  In my view you were fully clear that your approach to the micro cap space is full on greater fool - and for that you will need a bunch of warm bodies to get excited.  It's no accident that as soon as you started posting the pitch for this stock volume started coming in and you were pretty clear about wanting volume to come in and push it to a technical analysis breakout.  I guarantee you that it would not have gone up 18% or whatever it was yesterday absent your campaign on this message board.  You have been very clear that you don't really care about the end game for the actual company, but are interested in selling your shares in a run-up when volume comes in and creates liquidity for your exit.  Call it what you want.

I have been buying additional shares over the past few days.  I would be shocked if this forum caused any of the movement of the stock price.  I didn't create this thread nor do I know a single person on this forum.  I can post a screen shot of the google alert that led me here, if someone can explain how to do that.  My intention is to educate not cause knee jerk investment decisions.  I believe I have been thoughtful with my commentary and analysis.  If my intention was to influence the price, I would be finding every investment forum and posting.  This is not the case.

Most of your posts were responding to substantive questions or comments from other posters.  Again, for what it's worth, I don't see how that amounts to the type of pump-and-dump "campaign" of which you've been accused.  So, I again applaud you for substantively engaging with other board members and posting specific responses to specific questions.  Needless to say, your opinions should be, at the very most, a starting point for anyone whose interest has been piqued.

RumbleOn may be a terrible investment; I have no idea.  But I believe people should be encouraged to post more micro-cap ideas on here and to offer substantive responses to questions, rather than being attacked for doing so or limiting their posts to useless, repetitive minutia about very large and very well followed companies.

 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 20, 2018, 06:35:39 AM
I do apologize if my comments were seen as a personal attack on your integrity.  In my view you were fully clear that your approach to the micro cap space is full on greater fool - and for that you will need a bunch of warm bodies to get excited.  It's no accident that as soon as you started posting the pitch for this stock volume started coming in and you were pretty clear about wanting volume to come in and push it to a technical analysis breakout.  I guarantee you that it would not have gone up 18% or whatever it was yesterday absent your campaign on this message board.  You have been very clear that you don't really care about the end game for the actual company, but are interested in selling your shares in a run-up when volume comes in and creates liquidity for your exit.  Call it what you want.


I have been buying additional shares over the past few days.  I would be shocked if this forum caused any of the movement of the stock price.  I didn't create this thread nor do I know a single person on this forum.  I can post a screen shot of the google alert that led me here, if someone can explain how to do that.  My intention is to educate not cause knee jerk investment decisions.  I believe I have been thoughtful with my commentary and analysis.  If my intention was to influence the price, I would be finding every investment forum and posting.  This is not the case.

Most of your posts were responding to substantive questions or comments from other posters.  Again, for what it's worth, I don't see how that amounts to the type of pump-and-dump "campaign" of which you've been accused.  So, I again applaud you for substantively engaging with other board members and posting specific responses to specific questions.  Needless to say, your opinions should be, at the very most, a starting point for anyone whose interest has been piqued.

RumbleOn may be a terrible investment; I have no idea.  But I believe people should be encouraged to post more micro-cap ideas on here and to offer substantive responses to questions, rather than being attacked for doing so.

Thanks.  I didn't spend 7 months accumulating a position to make 20%.  Yesterday's action was a clear technical breakout and hopefully it holds but certainly can fade and turn into a broken chart.  I pointed out a great setup.  I was a buyer in the mid 5's and looking for 2-4X from current levels based on publicly available information.  That outlook can easily change based on positive or negative developments.  I think it's crazy to buy super risky stocks (every micro cap) for nominal returns.  I only get comfortable with a couple ideas a year as most microcaps are not investable due to years of horrible financings and reverse splits.  I am not a swing/thematic trader.  I have a concentrated speculative portfolio where I swing for the fences after a lot of work.  When it works, it's great.  When I am wrong, it's painful. 
Title: Re: RMBL - RumbleOn
Post by: Schwab711 on June 20, 2018, 06:37:33 AM
@LFvalueseeker:
Do you have an opinion on:
How much in sales they need to break even?
Incremental margins after that point?
Expectations for base case and bull case peak annual sales?

How concerned are you about the long-run trend of decreasing demand for motorcycles? What do you assume (if anything) for long-run demand?

Thanks for sharing your opinions here. It's been helpful to read through them.

Sure, here are my thoughts. Breakeven should be around $30m a quarter. (according to mgmt on the last conference call or investor call.  Seems to jive with my model)  They are approaching that run rate now.  Q2 I expect $16-$17m. 

I might not be understanding incremental margins question.  But margin should steadily climb to the target of 13% as the mix shifts towards consumers.  Each bike they sell past breakeven is incremental to the bottom line - less acquisition marketing cost, reconditioning, transport, etc. 

I believe by year end they will be at a $160mm run rate.  That's roughly a 3% market share.  Peak sales are a wild card.  I don't think they will ever achieve this because of likely acquisition by the previously mentioned companies or private equity.  However, growth will ultimately slow in the motorcycle space as it has to.  They are not motorcycle specific and their platform can tackle anything with a VIN number.  Personal Watercraft would be the next low hanging market to go after.  Essentially motorcycles on the water, simple machines.  Small jet boats could be next.  The story peaked my interest initially because a colleague of mine said the word, "boats", and I immediately started my research.  The used boat market is barbaric, to put it kindly, and disruption is inevitable.  After countless calls with mgmt, I don't think nor support them entering this market anytime soon.  Too complex.  But cars would be interesting. 

In their beta test when they were starting out they proved to drop the average age of consumers buying the bikes from the mid 50's to 42.  This is very important as millennials could prove to be a good market for motorcycles.  I haven't forecasted for the demand decrease over time as I think it's a very long time before this becomes a factor. 

I do not own this stock in my retirement accounts, I also am not looking to scalp a buck or two.  I think this is a 2-4X short term (3months - 1year).

Thanks for getting back to me. Cool we agree on ~$125m break-even. I didn't realize management explicitly stated their guess of $120m. Let's assume that.

First, I don't see the jetski/boat markets being very attractive for this business. The are basically Gazelle for motorcycles. That's fine by me. But to do it well, you have to stay away from products that can quickly depreciate or that have shallow liquidity. I think boats and jetskis would fail those tests miserably. Further, cell phones invite a lot more competition because of low cost and dense product value (for storage). Motorcycles definitely has a value-density issue (and probably a value volatility issue) that will keep competition away. Jetskis/boats are worse than motorcycles in everyway. I don't see RMBL expanding any time soon.

Also, I don't see how 2x-4x in the next year is feasible without some type of irrational decision (stupid M&A or retail investor speculation). RMBL is probably worth 15%-25% of sales. That would imply a $20m market cap ($1.54/shr).

The 13% is projected gross margins. I guess I don't understand why you'd mention them.

EBITDA (or even EBITA) probably doesn't make much sense to use for this type of business. If we look at EBT, RMBL might do 3% for each $1 of revenue beyond break-even. That's pretty lofty though considering it is higher than most similar car dealer and local/regional motorcycle dealer EBT margins. I don't know why RMBL will do better than all of them but let's assume.

Future Rev (Mrkt Shr %) / Proj EBT / P/pEBT
$125m (3%) / $0m / N/A
$250m (6%) / $4m / 19.5x
$500m (10%) / $11m / 7.0x
$1,000m (20%) / $26m / 3.0x

Even if we assume RMBL increases sales by at least an order of magnitude (13.5x [2018e rev] to 65x [2017 rev]) in sales growth AND AutoNation-like EBT margins AND does it while increasing market share from ~0.5% to 20%, the stock is still trading at 3x hypothetical future pre-tax profits.

RMBL would have to sell nearly every motorcycle in the country, with some indication that the motorcycle demand trend reversing, to be worth $350m-$400m. It looks like they've spent a few million on the technology, at most.

Talking about 2x-4x, especially in 3-12 months, seems detached from the facts of the industry. I don't get it.



Most of your posts were responding to substantive questions or comments from other posters.  Again, for what it's worth, I don't see how that amounts to the type of pump-and-dump "campaign" of which you've been accused.  So, I again applaud you for substantively engaging with other board members and posting specific responses to specific questions.  Needless to say, your opinions should be, at the very most, a starting point for anyone whose interest has been piqued.

RumbleOn may be a terrible investment; I have no idea.  But I believe people should be encouraged to post more micro-cap ideas on here and to offer substantive responses to questions, rather than being attacked for doing so or limiting their posts to useless, repetitive minutia about very large and very well followed companies.

+1. Folks should keep posting. There's so few original ideas/views right now.

@LF, assuming you aren't Landstander I thought you were more than fine. I think your writing style makes you appear to be a sophisticated/institutional investor. That may or may not be the case. Not your fault either way, but between the writing style, volume of posts, and stock movement, I could see why others would at least be concerned about the possibility.
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 20, 2018, 06:40:01 AM
@LFvalueseeker:
Do you have an opinion on:
How much in sales they need to break even?
Incremental margins after that point?
Expectations for base case and bull case peak annual sales?

How concerned are you about the long-run trend of decreasing demand for motorcycles? What do you assume (if anything) for long-run demand?

Thanks for sharing your opinions here. It's been helpful to read through them.

Sure, here are my thoughts. Breakeven should be around $30m a quarter. (according to mgmt on the last conference call or investor call.  Seems to jive with my model)  They are approaching that run rate now.  Q2 I expect $16-$17m. 

I might not be understanding incremental margins question.  But margin should steadily climb to the target of 13% as the mix shifts towards consumers.  Each bike they sell past breakeven is incremental to the bottom line - less acquisition marketing cost, reconditioning, transport, etc. 

I believe by year end they will be at a $160mm run rate.  That's roughly a 3% market share.  Peak sales are a wild card.  I don't think they will ever achieve this because of likely acquisition by the previously mentioned companies or private equity.  However, growth will ultimately slow in the motorcycle space as it has to.  They are not motorcycle specific and their platform can tackle anything with a VIN number.  Personal Watercraft would be the next low hanging market to go after.  Essentially motorcycles on the water, simple machines.  Small jet boats could be next.  The story peaked my interest initially because a colleague of mine said the word, "boats", and I immediately started my research.  The used boat market is barbaric, to put it kindly, and disruption is inevitable.  After countless calls with mgmt, I don't think nor support them entering this market anytime soon.  Too complex.  But cars would be interesting. 

In their beta test when they were starting out they proved to drop the average age of consumers buying the bikes from the mid 50's to 42.  This is very important as millennials could prove to be a good market for motorcycles.  I haven't forecasted for the demand decrease over time as I think it's a very long time before this becomes a factor. 

I do not own this stock in my retirement accounts, I also am not looking to scalp a buck or two.  I think this is a 2-4X short term (3months - 1year).

Thanks for getting back to me. Cool we agree on ~$125m break-even. I didn't realize management explicitly stated their guess of $120m. Let's assume that.

First, I don't see the jetski/boat markets being very attractive for this business. The are basically Gazelle for motorcycles. That's fine by me. But to do it well, you have to stay away from products that can quickly depreciate or that have shallow liquidity. I think boats and jetskis would fail those tests miserably. Further, cell phones invite a lot more competition because of low cost and dense product value (for storage). Motorcycles definitely has a value-density issue (and probably a value volatility issue) that will keep competition away. Jetskis/boats are worse than motorcycles in everyway. I don't see RMBL expanding any time soon.

Also, I don't see how 2x-4x in the next year is feasible without some type of irrational decision (stupid M&A or retail investor speculation). RMBL is probably worth 15%-25% of sales. That would imply a $20m market cap ($1.54/shr).

The 13% is projected gross margins. I guess I don't understand why you'd mention them.

EBITDA (or even EBITA) probably doesn't make much sense to use for this type of business. If we look at EBT, RMBL might do 3% for each $1 of revenue beyond break-even. That's pretty lofty though considering it is higher than most similar car dealer and local/regional motorcycle dealer EBT margins. I don't know why RMBL will do better than all of them but let's assume.

Future Rev (Mrkt Shr %) / Proj EBT / P/pEBT
$125m (3%) / $0m / N/A
$250m (6%) / $4m / 19.5x
$500m (10%) / $11m / 7.0x
$1,000m (20%) / $26m / 3.0x

Even if we assume RMBL increases sales by at least an order of magnitude (13.5x [2018e rev] to 65x [2017 rev]) in sales growth AND AutoNation-like EBT margins AND does it while increasing market share from ~0.5% to 20%, the stock is still trading at 3x hypothetical future pre-tax profits.

RMBL would have to sell nearly every motorcycle in the country, with some indication that the motorcycle demand trend reversing, to be worth $350m-$400m. It looks like they've spent a few million on the technology, at most.

Talking about 2x-4x, especially in 3-12 months, seems detached from the facts of the industry. I don't get it.

How would you analyze Carvana?  CVNA.  That is the best comp in my opinion. 

Your approach above is a traditional fundamental value approach.  I use CVNA because growth investors are pricing it at 3-4X sales.  RMBL certainly doesn't fit into a fundamental value portfolio.  To be clear, it's highly speculative.
Title: Re: RMBL - RumbleOn
Post by: Schwab711 on June 20, 2018, 06:46:09 AM
Let me read/think through CVNA and get back to you. I could be overly simplifying here.
Title: Re: RMBL - RumbleOn
Post by: Saluki on June 20, 2018, 06:46:18 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 didn’t 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 “can they sell it story”.  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 “toys” 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 “toys” in the garage collecting dust, RMBL has proven their ability to shift demographics from 50 year old men towards women and millennials. (I’m being a bit overly broad here). Younger people want liquidity and are non commital. Women don’t 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. It’s picked up, transported and reconditioned through their dealer network. It’s simultaneously listed in their site for a limited time period and if it doesn’t sell to a consumer, it’s 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 can’t 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, it’s 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 aren’t 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.

Well, if you go to Harley Davidson's webpage and type in your zipcode to find a dealer (Or Polaris' if you want an Indian bike) and see where the nearest dealerships are (one is 15 miles from me and the other is 20) you will quickly realize how much smaller the motorcycle market is than the auto market.  I have to drive less to get to a Tesla showroom than a Polaris or Harley showroom. If they tried this model and it showed growth for a few years, I would look at it, but I  see no shortage of people selling  used bikes on craigslist, but a lack of people buying new bikes (Harley is struggling to sell bikes to women, millennials and people of color because it's hard growing your company if your typical first time buyer is a white male in his late 50s). And although Harley's are expensive bikes, it doesn't cost a lot to buy a used yamaha or honda bike (versus a car) so if you factor overhead and low turnover into the equation, that doesn't leave a lot of meat on the bone.  Auto Dealers make most of their money on financing and servicing, it would be hard for an auto dealer to just make money on buying and selling low-priced cars, I assume the same would be true for motorcycles.   
Title: Re: RMBL - RumbleOn
Post by: KJP on June 20, 2018, 07:41:10 AM

How would you analyze Carvana?  CVNA.  That is the best comp in my opinion. 

Your approach above is a traditional fundamental value approach.  I use CVNA because growth investors are pricing it at 3-4X sales.  RMBL certainly doesn't fit into a fundamental value portfolio.  To be clear, it's highly speculative.

The market Carvana is pursuing is so much larger than RumbleOn's, so the "what might be" with respect to Carvana appears much greater than RumbleOn.  I believe that affects the valuation you would put on the business today.

Also, in the Carvana thread on this board I attempted to briefly summarize the importance of ancillary revenue sources to the economics of CarMax.  Is there an opportunity to sell similar types of ancillary products (financing, gap insurance, warranty plans) to the buyers of used motorcycles?
Title: Re: RMBL - RumbleOn
Post by: writser on June 20, 2018, 07:54:34 AM
Most of your posts were responding to substantive questions or comments from other posters.  Again, for what it's worth, I don't see how that amounts to the type of pump-and-dump "campaign" of which you've been accused.  So, I again applaud you for substantively engaging with other board members and posting specific responses to specific questions.  Needless to say, your opinions should be, at the very most, a starting point for anyone whose interest has been piqued.

RumbleOn may be a terrible investment; I have no idea. But I believe people should be encouraged to post more micro-cap ideas on here and to offer substantive responses to questions, rather than being attacked for doing so or limiting their posts to useless, repetitive minutia about very large and very well followed companies.

+1, appreciated.

What are your thoughts on the shelf registration + vote on ‘blank cheque’ preferreds? Aren’t you afraid of potentially dilutive securities? Have they discussed the goal of these preferreds in a conference call whatsoever? (sorry for being lazy).

Also, the dual class share structure is a bit of a turnoff for me. Thoughts on that? TIA.
Title: Re: RMBL - RumbleOn
Post by: landstander on June 20, 2018, 08:00:54 AM
KJP - I do believe ancillaries (finance, warranty) might be an opportunity at some point, but don't believe management has discussed their roadmap and it's not material now (less than 1% of rev).

BTW - I started this thread as I didn't see any analysis of the company, outside of KD's post. I was concerned about posting the company on this board as it wasn't a traditional value investment, but appreciate the differing viewpoints that have been offered. It's exactly why I lurk here so often :)
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 20, 2018, 08:03:04 AM

How would you analyze Carvana?  CVNA.  That is the best comp in my opinion. 

Your approach above is a traditional fundamental value approach.  I use CVNA because growth investors are pricing it at 3-4X sales.  RMBL certainly doesn't fit into a fundamental value portfolio.  To be clear, it's highly speculative.

The market Carvana is pursuing is so much larger than RumbleOn's, so the "what might be" with respect to Carvana appears much greater than RumbleOn.  I believe that affects the valuation you would put on the business today.

Also, in the Carvana thread on this board I attempted to briefly summarize the importance of ancillary revenue sources to the economics of CarMax.  Is there an opportunity to sell similar types of ancillary products (financing, gap insurance, warranty plans) to the buyers of used motorcycles?

About 100x the size larger with established competition from 18,000 dealers and new entrants such as Carvana, Vroom, Blinker, etc.. They are all trying to disrupt a much larger market and killing each other to acquire customers.  (RIP Beepi)  The key question is what market share can RMBL acquire?  At 10% it's $50m a month in revs.  That's a huge number and I have no idea how quickly they can even capture 2% let alone 10% and what the cost to get there will be especially if we see competitors enter the market.  Hyper growth doesn't last that long and the hurdles start approaching quickly.  This requires more DD on my part.

Ancillary Revenues - From what I understand nearly 50% of the appraisals they provide are a waste because the owner is underwater on their loan.  I mentioned in a previous post that they can only pay cash for the bike if it has a clean title, which half the time they don't.  I have no idea what the process would be to partner with the financing players to conduct a three way transaction in an effort to create a seamless exit for the seller.  My guess is that lots of bike owners that are underwater have low monthly payments and kick the can down the road.  If they could pay $X dollars to get out of their financing obligation and get rid of the bike, maybe they would act on this.  BUT, the last thing I want to see is RMBL turn into a specialty finance company.  I'll inquire about warranties and other revenue sources. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 20, 2018, 08:12:11 AM
Most of your posts were responding to substantive questions or comments from other posters.  Again, for what it's worth, I don't see how that amounts to the type of pump-and-dump "campaign" of which you've been accused.  So, I again applaud you for substantively engaging with other board members and posting specific responses to specific questions.  Needless to say, your opinions should be, at the very most, a starting point for anyone whose interest has been piqued.

RumbleOn may be a terrible investment; I have no idea. But I believe people should be encouraged to post more micro-cap ideas on here and to offer substantive responses to questions, rather than being attacked for doing so or limiting their posts to useless, repetitive minutia about very large and very well followed companies.

+1, appreciated.

What are your thoughts on the shelf registration + vote on ‘blank cheque’ preferreds? Aren’t you afraid of potentially dilutive securities? Have they discussed the goal of these preferreds in a conference call whatsoever? (sorry for being lazy).

Also, the dual class share structure is a bit of a turnoff for me. Thoughts on that? TIA.

I encouraged mgmt to file the shelf as I think it is good housekeeping for a variety of reasons.  (I am not taking credit for this but I support the decision)  Blank check prefs and dual class is also protective measures to retain control.  I understand why many investors don't like this.  I would guess after their Vroom experience they want to make the decisions and control the company.  They are the largest shareholders so at this point in time, it seems our interests are aligned. 

Shelf - why good housekeeping?  In the microcap market, I am a firm believer that you raise money when you can, not when you need to.  They do not need capital and they have been very open that they will not even consider the shelf anywhere near these levels.  If the stock were to trend higher and they believed they could grow faster with more cash, then a shelf should prove the cheapest cost of capital VS. a messy PIPE transaction.  If a strategic wanted to invest, it's nice to have the flexibility of the shelf.  If an acquisition made sense, the shelf is helpful.  If the stock was $15 and they place 1m shares in good hands, I would support this.  HOWEVER, constantly hitting the shelf like most small companies to delay the inevitable zero from poor execution is not my cup of tea.  With that said, I hope they never use it.  All comes down to the cost per acquisition and can they factor the HGC debt. Only time will tell.
Title: Re: RMBL - RumbleOn
Post by: bobozou on June 20, 2018, 08:18:26 AM
I'd also agree that CVNA is the closest analog

Market Size:  CVNA obviously deals in a much larger market (Used Cars) than RMBL (Used Motorcycles)
Competitive Dynamics:  CVNA has to deal with existing players (CarMax & other used/certified dealers) and new entrants (future peer-to-peer facilitator?  Amazon?)... my uneducated view of motorcycle market is that it's less liquid and less efficient
Sourcing:  CVNA sources primarily from auctions... RMBL is sourcing from individuals (more profitable and less efficient)
End Customer:  CVNA is selling primarily to consumers... if RMBL is selling primarily to dealers right now, then I think there would absolutely be margin-expansion opportunity to go direct-to-consumer
Ancillary Products: Agree w KJP that CVNA will likely make up bulk of pre-tax margin from additional products (financing/warranty)... don't see this being big income stream for RMBL (maybe I'm wrong) / but if RMBL can continue to source from individuals & effectively sell direct-to-consumers, then I'm not really worried about the unit economics

FWIW, I think CVNA's valuation seems aggressive, more aggressive than RMBL's (tho CVNA absolutely deserves credit for their execution thus far).  If RMBL is successful (big if), they would essentially dominate used motorcycles - there's probably significantly more value in the stock, if that outcome is realized (no doubt, far from certainty).

Honestly though, this management team is not the type that self-proclaimed risk-averse, value-investors would take home to meet the parents  :p
https://www.inc.com/magazine/20030201/25127.html

Title: Re: RMBL - RumbleOn
Post by: Spekulatius on June 20, 2018, 03:57:53 PM
I like the idea in general terms, but I am not convinced about the business model. I think the existing venues to transact a bike work better than described. I also doubt that the company really has an advantage in buying without having any boots on the ground to vet the bikes. This is essential, just like with cars, since the condition can vary significantly and I don’t think bikes are simple items either. I also doubt that they can resell bikes at a profit to dealers. if they can, it should show in the numbers. I think ebaymotors is a very viable competitor with scale advantages and a better business model too.
Title: Re: RMBL - RumbleOn
Post by: Broeb22 on June 20, 2018, 06:17:42 PM
The only way it makes sense to me to value a Carvana is to extrapolate some level of sales growth (30%) for 10 years (or some similarly long period of time) assume some kind of pre-tax margin akin to CarMax, and consider whether additional equity could be needed that would dilute shareholders over such a long time, and then take all of those to get to an EPS figure in year 10, then discount it back at some relatively high rate given the risk of the investment. Clearly a lot of assumptions to make.

While we are on the topic of Carvana, have you seen their cash flow? Highly negative. Why? Because they are buying inventory.

How does RMBL expect to be cash flow break-even and not need to increase inventory materially to meet growth targets? I don’t buy that.
Title: Re: RMBL - RumbleOn
Post by: BMC34 on June 21, 2018, 09:22:34 AM
Very interesting discussion, thanks.   If RMBL becomes more successful and/or proves out the market potential, what is stopping KMX from entering the market?  I would imagine it would be easy for them to quickly scale given their name recognition, experience in autos and plenty of capital.  Or maybe an even better question is why isn't KMX doing this already?  Seems like a big potential risk to the story that I don't think has been discussed. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 21, 2018, 09:27:56 AM
Very interesting discussion, thanks.   If RMBL becomes more successful and/or proves out the market potential, what is stopping KMX from entering the market?  I would imagine it would be easy for them to quickly scale given their name recognition, experience in autos and plenty of capital.  Or maybe an even better question is why isn't KMX doing this already?  Seems like a big potential risk to the story that I don't think has been discussed.

There have been lots of discussion on lack of current competition and how a well funded player could drive up marketing costs and create issues for RMBL to gain market share at rapid pace.  KMX, CVNA, HOG, Start ups, etc...Could all build their own mousetrap.  (with enough money and time you could build most things) It will take time and perhaps they are already doing this.  The auction companies, CPRT, Manheim/COX, and KAR could do the same.  It would take some time to do this and I guess it's a question of build or buy? 
Title: Re: RMBL - RumbleOn
Post by: cameronfen on June 21, 2018, 09:30:58 AM
Very interesting discussion, thanks.   If RMBL becomes more successful and/or proves out the market potential, what is stopping KMX from entering the market?  I would imagine it would be easy for them to quickly scale given their name recognition, experience in autos and plenty of capital.  Or maybe an even better question is why isn't KMX doing this already?  Seems like a big potential risk to the story that I don't think has been discussed.

It might be easier for Carmax than some, but also dealers and auction companies could also find it easier to replicate this network, but I will be tough to duplicate the network of buyers and sellers that RMBL becomes.  It's not there yet, but if everyone can get any motorcycle they want from Rumble, and everyone who wants to sell gets the highest prices (because RMBL has the best network of buyers), how do you break in?  That being said the counter argument is that there are 3-4 competitors in the Carmax space so obviously its possible, although they likely started at similar times. 
Title: Re: RMBL - RumbleOn
Post by: Foreign Tuffett on June 21, 2018, 10:08:36 AM
Has anyone own, or have access to a motorcycle that they could get a purchase offer from RMBL for? Or maybe someone has already done this and would be willing to share the #s? I am very interested in how their offers compare to Kelly Blue Book pricing.
Title: Re: RMBL - RumbleOn
Post by: spartansaver on June 21, 2018, 10:22:30 AM
Is rumble able to be more selective in bike purchases at a smaller scale which boosts margins? As sales increase, is it required to become less selective in its purchases in order to feed sales? As competition increases will, competitors bid up prices of purchasing bikes?

I don't see how management thinks they will reach break even at quarterly sales of $30mm. SG&A in the last quarter was $4.1mm on sales of $8mm. In the last quarter alone, Rumble would have needed $34mm in sales at a 12% gross margin to achieve break-even. So SG&A from here can't go up at all as revenues go up nearly 4x per quarter.
 
Also I think its a mistake to think of this as a marketplace (more buyers = more sellers feedback). These guys are a retailer (buy from one, sell to another).
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 21, 2018, 10:25:05 AM
Has anyone own, or have access to a motorcycle that they could get a purchase offer from RMBL for? Or maybe someone has already done this and would be willing to share the #s? I am very interested in how their offers compare to Kelly Blue Book pricing.

Here is how their system works in an oversimplified way.  The user submits the required details and their technology/algorithm automates a process to pull data from multiple pricing sources along with a soft credit pull.  This data is combined to spit out a "buy it now" price.  That price is quickly confirmed or slightly altered by a human.  This human can handle dozens of these per minute.  I don't know how it compares to KBB pricing but you could infer that the offer is within the margin of safety for the bike to be sold at auction still producing a positive GP. If the data suggests that the bike will sell at auction for $10,000 then RMBL may bid $8-$9,000. The technology handles the science part but the system is constantly learning and the human makes the final call.  They will sometimes bid low because of recent auction/dealer/trends as they don't really want the bike.  They will bid more competitively for models that they see positive recent trends and it could be a shiny toy to start the auction lineup or get in front of a dealer.  Basically the margins vary depending on the desirability of the make/model/year.

A great question that was asked earlier in the forum was, "how many lazy bike owners are there?" A direct quote from management, "we have even begun to scratch the surface."  As KD pointed in his blog - we are literally dealing with professional car salesmen. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 21, 2018, 10:36:35 AM
Is rumble able to be more selective in bike purchases at a smaller scale which boosts margins? As sales increase, is it required to become less selective in its purchases in order to feed sales? As competition increases will, competitors bid up prices of purchasing bikes?

I don't see how management thinks they will reach break even at quarterly sales of $30mm. SG&A in the last quarter was $4.1mm on sales of $8mm. In the last quarter alone, Rumble would have needed $34mm in sales at a 12% gross margin to achieve break-even. So SG&A from here can't go up at all as revenues go up nearly 4x per quarter.
 
Also I think its a mistake to think of this as a marketplace (more buyers = more sellers feedback). These guys are a retailer (buy from one, sell to another).

From my conversations, I don't get the sense that they are highly selective.  With that said, they want bikes that they know they can shift quickly. Well funded competition will drive acquisition costs higher, there is no doubt about this.  First mover advantage can't be understated, it's just a question of how long the head start is?  They are currently spending sub $200 in marketing costs to acquire a bike.  The used car companies are paying $1,250-$2,000 according to mgmt.  Each day that goes buy they are able to capture more and more profiles and I believe this data will prove to be valuable.  So the next guy in the space will have to spend more money to find the same audience.  Some competition is good IMO, it will validate the business model.  Too much, too quickly could be disastrous. 

Mgmt has stated on multiple conference calls that G&A will be stable.  So the profit of each bike sold after the breakeven point drops to the bottom line. I removed  the "S" because I am lumping that into digital marketing costs to acquire the bike.
Title: Re: RMBL - RumbleOn
Post by: cameronfen on June 21, 2018, 10:53:38 AM
Is rumble able to be more selective in bike purchases at a smaller scale which boosts margins? As sales increase, is it required to become less selective in its purchases in order to feed sales? As competition increases will, competitors bid up prices of purchasing bikes?

I don't see how management thinks they will reach break even at quarterly sales of $30mm. SG&A in the last quarter was $4.1mm on sales of $8mm. In the last quarter alone, Rumble would have needed $34mm in sales at a 12% gross margin to achieve break-even. So SG&A from here can't go up at all as revenues go up nearly 4x per quarter.
 
Also I think its a mistake to think of this as a marketplace (more buyers = more sellers feedback). These guys are a retailer (buy from one, sell to another).

I can't believe G&A will stay stable although management has said that gross profit will go up (although 12% is above where it is at currently).  I don't know if I buy the retailer bit.  The money is made by buying from consumers and then reselling to consumers.  With a retailer, the wholesaler likely has pricing power and there really is no benefit of having a network on the buy side.  I think the closer comparison is craigslist, where they literally have put no effort into maintaining the website for 15 years and yet basically no one is replacing them.  Clearly they act more middlemanish than craigslist, which is only a platform while RMBL is like a broker, however the network effects of this marketplace on both ends leads to synergies, but even in the world of brokers, network effect benefits are huge.  Look at online stockbrokers or big insurance brokers etc.  Obviously smart people can look at the same company and come to different conclusions. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 21, 2018, 11:01:05 AM
Is rumble able to be more selective in bike purchases at a smaller scale which boosts margins? As sales increase, is it required to become less selective in its purchases in order to feed sales? As competition increases will, competitors bid up prices of purchasing bikes?

I don't see how management thinks they will reach break even at quarterly sales of $30mm. SG&A in the last quarter was $4.1mm on sales of $8mm. In the last quarter alone, Rumble would have needed $34mm in sales at a 12% gross margin to achieve break-even. So SG&A from here can't go up at all as revenues go up nearly 4x per quarter.
 
Also I think its a mistake to think of this as a marketplace (more buyers = more sellers feedback). These guys are a retailer (buy from one, sell to another).

I can't believe G&A will stay stable although management has said that gross profit will go up (although 12% is above where it is at currently).  I don't know if I buy the retailer bit.  The money is made by buying from consumers and then reselling to consumers.  With a retailer, the wholesaler likely has pricing power and there really is no benefit of having a network on the buy side.  I think the closer comparison is craigslist, where they literally have put no effort into maintaining the website for 15 years and yet basically no one is replacing them.  Clearly they act more middlemanish than craigslist, which is only a platform while RMBL is like a broker, however the network effects of this marketplace on both ends leads to synergies, but even in the world of brokers, network effect benefits are huge.  Look at online stockbrokers or big insurance brokers etc.  Obviously smart people can look at the same company and come to different conclusions.

90% of last quarters sales were to dealers and auctions.  Consumers buying bikes represented 10%.  They are projecting that GP will go up as the mix shifts and consumers become a larger slice of the distribution pie.  From the way I understand it, the G&A will remain stable as the infrastructure and head count is in place to handle substantially more volume.  To me, the most important number is the cost to acquire a bike.  If that starts to move higher it will be due to competition or realization of a smaller market, both bad scenarios. 

They have 8.4% GP margins selling 90% to dealer and auctions.  That is what is intriguing to me. 
Title: Re: RMBL - RumbleOn
Post by: KJP on June 21, 2018, 11:06:11 AM


Clearly they act more middlemanish than craigslist, which is only a platform while RMBL is like a broker, however the network effects of this marketplace on both ends leads to synergies,

Unless you'd call Walmart a "broker" between manufacturers and consumers, I don't think RumbleOn is a broker.  They are buying goods at price A, have distribution costs of B, and sell for C, and hope that C > A + B.  That's the equation of a retailer.

Craigslist acts as a platform connecting buyers and sellers who transact directly with each other.  Sellers want to be there because that's where the buyers are.  Demand will draw supply, just as advertisers go to Facebook because that's where the eyeballs are.  The same goes for any other platform facilitating a two-sided network.

But the retail sellers here aren't using RumbleOn's website as a platform to sell directly to retail buyers.  The retail sellers are selling to RumbleOn.  So, how are there network effects on both sides?  Said another way, why does the ability of a seller to sell his bike to RumbleOn grow more valuable as the number of buyers looking at RumbleOn's website increases?  Is the theory that RumbleOn will ultimately pay sellers more for sellers' bikes as its network of buyers increases?  That seems contrary to the investment case, which is that RumbleOn won't have to do that.

Title: Re: RMBL - RumbleOn
Post by: spartansaver on June 21, 2018, 11:14:02 AM
I'm not sure these guys benefit from a network effect like a typical marketplace does. A marketplace adds more value to the seller by having a larger audience seeing the product. In Rumble's case, the seller never see the marketplace, so they don't care as much about how large the buying side is, simply that they get the best price. A seller on a marketplace gets more of a feeling that they are getting at the best sales price for their product as they see all the bids (benefit from more buyers).
Title: Re: RMBL - RumbleOn
Post by: spartansaver on June 21, 2018, 11:14:55 AM
Ditto what KJP said
Title: Re: RMBL - RumbleOn
Post by: cameronfen on June 21, 2018, 11:26:08 AM


Clearly they act more middlemanish than craigslist, which is only a platform while RMBL is like a broker, however the network effects of this marketplace on both ends leads to synergies,

Unless you'd call Walmart a "broker" between manufacturers and consumers, I don't think RumbleOn is a broker.  They are buying goods at price A, have distribution costs of B, and sell for C, and hope that C > A + B.  That's the equation of a retailer.

Craigslist acts as a platform connecting buyers and sellers who transact directly with each other.  Sellers want to be there because that's where the buyers are.  Demand will draw supply, just as advertisers go to Facebook because that's where the eyeballs are.  The same goes for any other platform facilitating a two-sided network.

But the retail sellers here aren't using RumbleOn's website as a platform to sell directly to retail buyers.  The retail sellers are selling to RumbleOn.  So, how are there network effects on both sides?  Said another way, why does the ability of a seller to sell his bike to RumbleOn grow more valuable as the number of buyers looking at RumbleOn's website increases?  Is the theory that RumbleOn will ultimately pay sellers more for sellers' bikes as its network of buyers increases?  That seems contrary to the investment case, which is that RumbleOn won't have to do that.

If you don't like the craiglist analogy look at a stock broker.  You buy from someone you hold for a short time and then sell to someone else.  Network effects matter a lot for stock brokers.  If you have more high quality buyers of motorcycles, you can a.) offer higher prices to buyers as you have less need to sell to a auction or dealer, b.) take higher profits (for the same reasons), c.) have a more liquid market which can reduce costs like transportation (c.) might be minor).  I don't know if Rumbleon **will** have to pay more as they have more buyers, but they certainly **can** pay more as you have more retail buyers willing to buy your product.  Said another way, selling to dealers is an example of a market failure.  There is a buyer somewhere to buy every bike sold on RumbleOn (assume the dealer wouldn't buy if they don't think they would find a seller), but the reason RMBL has to sell to dealers and auctions is because their own network isn't big enough to find these buyers.  Thus, they have to pay a premium to **use** someone else's network, which cuts into profits. 
Title: Re: RMBL - RumbleOn
Post by: cameronfen on June 21, 2018, 11:33:44 AM
I'm not sure these guys benefit from a network effect like a typical marketplace does. A marketplace adds more value to the seller by having a larger audience seeing the product. In Rumble's case, the seller never see the marketplace, so they don't care as much about how large the buying side is, simply that they get the best price. A seller on a marketplace gets more of a feeling that they are getting at the best sales price for their product as they see all the bids (benefit from more buyers).

The seller might not see the buying market place but RMBL does.  Thus RMBL captures the advantages of a larger marketplace and can choose to pass on these advantages to the seller (or book higher profits).  Obviously this is more delicate and more muted than a direct market place.  I don't think the main benefit of having a 2-sided market is seeing that you are getting the best deal, rather it is the effect that produces the feeling ie that anything you put on the market will fetch the best price and anything you buy has a large selection where you can pick the cheapest/best match.  I think those things still carry over, its just it can't really evolve spontaneously like it does on amazon, but RMBL will have to be deliberate in figuring out how to best make that effect flow between buyers in sellers.  Again reasonable people may disagree. 
Title: Re: RMBL - RumbleOn
Post by: cameronfen on June 21, 2018, 11:51:26 AM


Clearly they act more middlemanish than craigslist, which is only a platform while RMBL is like a broker, however the network effects of this marketplace on both ends leads to synergies,

Unless you'd call Walmart a "broker" between manufacturers and consumers, I don't think RumbleOn is a broker.  They are buying goods at price A, have distribution costs of B, and sell for C, and hope that C > A + B.  That's the equation of a retailer.

Craigslist acts as a platform connecting buyers and sellers who transact directly with each other.  Sellers want to be there because that's where the buyers are.  Demand will draw supply, just as advertisers go to Facebook because that's where the eyeballs are.  The same goes for any other platform facilitating a two-sided network.

But the retail sellers here aren't using RumbleOn's website as a platform to sell directly to retail buyers.  The retail sellers are selling to RumbleOn.  So, how are there network effects on both sides?  Said another way, why does the ability of a seller to sell his bike to RumbleOn grow more valuable as the number of buyers looking at RumbleOn's website increases?  Is the theory that RumbleOn will ultimately pay sellers more for sellers' bikes as its network of buyers increases?  That seems contrary to the investment case, which is that RumbleOn won't have to do that.

If you don't like the craiglist analogy look at a stock broker.  You buy from someone you hold for a short time and then sell to someone else.  Network effects matter a lot for stock brokers.  If you have more high quality buyers of motorcycles, you can a.) offer higher prices to buyers as you have less need to sell to a auction or dealer, b.) take higher profits (for the same reasons), c.) have a more liquid market which can reduce costs like transportation (c.) might be minor).  I don't know if Rumbleon **will** have to pay more as they have more buyers, but they certainly **can** pay more as you have more retail buyers willing to buy your product.  Said another way, selling to dealers is an example of a market failure.  There is a buyer somewhere to buy every bike sold on RumbleOn (assume the dealer wouldn't buy if they don't think they would find a seller), but the reason RMBL has to sell to dealers and auctions is because their own network isn't big enough to find these buyers.  Thus, they have to pay a premium to **use** someone else's network, which cuts into profits.

You're focusing on the benefits to RumbleOn from having a lot of buyers.  I was talking about the benefits to the people who sell bikes to RumbleOn.  I think we agree that to the extent there's a  benefit to the sellers it's indirect and contingent.   



The more sellers you have, the more bikes hit your hurdle purchase price.  Now I couldn't find where management said LFinvestors comments about inventory staying the same same regardless of the amount of revenue, I don't believe it's possible, especially if number of motorcycles increases like 10x.  However, if more bikes pass your hurdle, you have a larger selection of bikes for buyers at any one time (assuming days in inventory is the same).  This attracts more buyers into your market.  Even if days in inventory drops enough to compensate for 10x motorcycle increase (for example not trying to pump the stock), you come back the next day and you have hundreds of new motorcycles to choose from.  Now this is not as good a deal as amazon, but I think the two sided nature of it still holds.  I actually think Walmart is a good example of a moat from a two sided network FWIW. 
Title: Re: RMBL - RumbleOn
Post by: cameronfen on June 21, 2018, 12:01:21 PM
I also should clarify, I don't think this moat is in place yet.  Only if RMBL is left alone for a few years it could develop. 
Title: Re: RMBL - RumbleOn
Post by: LFvalueseeker on June 21, 2018, 03:09:32 PM
BBB link for reviews.  Helpful to track and see good things and potential problems from real world customers.

https://www.bbb.org/charlotte/business-reviews/motorcycle-dealers/rumbleon-in-charlotte-nc-577102/reviews-and-complaints