RideNow Group Inc (RDNW) 2017 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the RumbleOn fourth-quarter 2017 earnings conference call. Today's call is being recorded. (Operator Instructions)

I would now like to turn the conference over to Steve Berrard, Chief Financial Officer. Please go ahead.

Good morning and thank you for joining our fourth-quarter and fiscal 2017 earnings conference call. On the call with me today is Marshall Chesrown, our President and Chief Executive Officer.

By now everyone should have access to our earnings announcement, which was filed prior to this call. The document may be found on our website at rumbleon.com under the investors section. Before we begin, let me remind you that part of our discussion today may include forward-looking statements, which are based on expectations, estimates, and projections of management as of today.

The forward-looking statements in our discussions are subject to various assumptions, risks, uncertainties, and other factors that are difficult to predict which could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not a guarantee of future performance and therefore undue reliance should not be placed upon them.

We refer all of you to our 2017 Form 10-K and other recent filings with the SEC for a more detailed discussion of the risks that could impact the future operating results and financial condition of RumbleOn Inc. We disclaim any intentions or obligations to update or revise any forward-looking statements except as required by law.

I would like to now turn the call over to Marshall.

Thank you, Steve, and good morning and welcome, everyone, to the RumbleOn fourth-quarter and fiscal 2017 earnings conference call. RumbleOn was founded on the concept that consumers would prefer to buy and sell preowned recreation vehicles through a well-designed simple online solution with a broad selection of vehicles at highly competitive prices.

We recognized that there was a huge opportunity to disrupt the current supply chain solutions for consumers to gain liquidity, as over two-thirds of all transactions were being completed through the inefficient peer-to-peer market. The market's appetite for such a solution has been extremely encouraging and we are quickly proving that we have the ability to scale the online model for the acquisition and distribution of vehicles in a meaningful way.

That is exactly what we began to create and launched in mid-2017 and we are very pleased with the response that we have seen thus far to our offering. Throughout the year, we have gained tremendous support from consumers and dealers, all who appreciate the effective, seamless, and hassle-free 100% online marketplace that we have developed and deployed.

This further strengthens our belief that we are on track to achieve our goal of disrupting and controlling meaningful market share of the $7.5 billion road bike market. And we are already expanding into other segments in the recreational vehicle market through natural progression.

We remain the only platform in the resale market that provides the ability for consumers and dealers to transact through an end-to-end 100% online marketplace acquisition and distribution solution. RumbleOn is already a dominant online source that provides liquidity to consumers and dealers through an easy website or mobile application to get real instant cash offers. And we have received consistently great consumer feedback on the buying and selling experience that we offer.

We believe that we have a significant first-mover advantage in this market, which affords us the flexibility to make sure that we are continuously learning from and evolving our business to best meet the needs of our consumers and dealers. Keep in mind: RumbleOn is still in the early stages and we are quite literally learning something new every day that will make us a stronger business and enable us to remain the preeminent player in the market for the long term.

Now let's review some of our accomplishments from the year as well as what we have learned over the past several months. Then I will discuss how we are using those learnings to further enhance the business model for improved productivity.

In 2017, we solidified our liquidity and balance sheet in order to aggressively execute our strategy and fund the rapid growth of our business, raising over $18 million of equity and generating almost $3 million in debt financing proceeds. In addition, our stock began to trade on the NASDAQ market in connection with the completion of our public offering this past October.

We also established 21 regional partner locations to provide inspection, reconditioning, and distribution services. We signed supply agreements with Sonic Automotive and another top five publicly traded auto retailer, giving RumbleOn access to potential supply from more than 400 dealer locations.

Finally, and perhaps most importantly, we succeeded in our goal of developing and operating the only true 100% online capital- and infrastructure-light vehicle acquisition and distribution marketplace available today. This is evidenced by the fact that we have no retail locations, no reconditioning centers, no vending machines, nor the people and fixed cost associated with them. We simply conduct our business in a 4,500-square-foot office in Irving Texas with no boots on the ground in any regard. More importantly, no one at RumbleOn physically sees or touches any of our inventory either at the time of purchase or at the time of sale.

We are very pleased with what we have accomplished in a very short period of time. Perhaps even more so, we are proud of the flexibility and diligence that our team has shown in being able to adapt and evolve the business to incorporate our continued learning about the marketplace, the consumer, and the dealers.

There are four major takeaways for us from the year, all of which center around one key theme and that is adjustability. We built our model to be completely agnostic on the distribution side of the supply chain. We have learned that we have to remain flexible when thinking about our marketplace distribution channels. Our multiple distribution channels allow us to increase inventory turns and reduce days to sale to maximize revenue, profitability, and ROI by selling to the channel where the opportunity is at any given time based on customer demand, market conditions, seasonality, or inventory availability.

Keep in mind, 100% of what we sell ends up in the garage of a consumer in the end. It is just a matter of what path it takes to get there. This happens either through our online platform, which is attractive to many due to the free shipping, warranty, and competitive pricing or from one of our dealer showrooms, where they acquire inventory either direct from our website or at auction.

What we have seen thus far is that the auction channel is providing a great opportunity to aggressively build and scale our online marketplace distribution network. And margins thus far from this channel are exceeding our expectations.

We have discovered a number of benefits of utilizing the regional auctions in the US as an extension of our dealer strategy. One: auctions attract a significant number of dealers looking to buy and reduces regional seasonality as we can reach a national dealer audience via online simulcast.

Auctions perform high-quality reconditioning work at prices that are significantly less than most dealers and sometimes faster than dealers due to dealers' need to meet the current service department consumer demands. The auctions are equipped and trained to take consistent quality photos that meet our standards.

Auctions do detailed condition reports that can be shared with potential buyers that are consistently accurate and provide a clear description of the vehicle, which gives buyers the confidence to purchase online. By adding auctions to our regional location strategy, our freight costs can be reduced by shortening the time and distance to market.

Since adding auctions to our regional rollout strategy, average gross margins on the vehicles we have been selling to dealers have been in excess of $1,200 or 13% per vehicle on a $9,200 average selling price, which is $700 of gross margin higher than our earlier projections. We are confident that we can increase this margin over time as our data becomes more robust, which will give us a clear advantage in the general market.

Utilization of auctions has enabled us to reduce our inventory turns to less than 30 days while allowing us to aggressively acquire more vehicles from consumers. We would like to point out that the inventory turns of less than 30 days is unheard of in the vehicle industry and management thinks it's a compelling differentiator of RumbleOn as we expand into our other vehicle segments.

All of these factors have enabled us to offer very attractive online pricing to consumers. The competitive pricing combined with our aggressive consumer marketing has resulted in sequential monthly growth in consumer sales since October, on scale with our dealer sales from our auction and direct channels combined.

Consumer sales since January have already exceeded total fourth-quarter consumer sales. This also has shown that there is a significant opportunity for RumbleOn to bring new buyers into the motorcycle market.

The lion's share of our consumer sales are derived from people that don't presently own a motorcycle, which we feel is a huge win for the industry as a whole and is driven primarily by the affordability we provide. We believe that there are a lot more buyers that can enter the market at a price point of well below $10,000 than those who would be willing and able to spend more than $20,000 on their first bike.

Importantly, we believe that our ability to bring a first-time motorcycle buyer to the market with the more compelling price dynamic of preowned and doing it 100% online means that we rarely, if ever, in competition with existing dealers for sales. Instead, we are bringing new interest into the market due to our disruption of the peer-to-peer marketplace.

That said, many traditional recreational vehicle buyers will continue to utilize their existing relationships with bricks-and-mortar dealers, both franchise and independents. We support these dealers for providing real-time inventory as needed. And which gives them an opportunity to access particular vehicles that they may need when they need them, even ones that are typically not available to them due to seasonal or regional market dynamics.

We have also learned that the opportunity in the non-Harley product segment is significantly higher than we originally thought. Importantly, these vehicles have competitive ROI with Harley-Davidson in general. And we have adapted our acquisition strategies to ensure that we have the proper inventory mix to meet the current customer demand.

In fact, more than a third of cash offers in the fourth quarter were for non-Harley-Davidson products and this percentage has continued to increase thus far in 2018. We expect it over time to match the current market shares of the individual manufacturers.

Next, we have continued to evolve our technology and organization to ensure that we remain positioned and effectively scale the buying and selling of high-quality low-cost vehicles to consumers and dealers. Finally, we now know that our cost-effective marketing strategy is key to driving customer acquisition at significantly lower cost than is typical for the vehicle industry.

By focusing on search, social media, and guerrilla marketing, we have grown our website users exponentially month over month since the fourth quarter while maintaining customer acquisition cost at effective rates. That said, we are careful to regularly look at each channel and refine our efforts as needed to enhance our overall reach and optimize our spend.

We have been continuously integrating those learnings into the business and will remain focused on doing so going forward. As we look ahead, we expect that this will enable us to continue our strong growth trajectory.

Let me share a few key expectations for early 2018. Keep in mind that we do not plan on providing such specific quarterly detail going forward. But given our rapid growth and evolution, we thought that it would be prudent and appreciated to give some additional details to start the year.

We will continue to rapidly increase vehicle sales. We expect to sell as many vehicles in the first two months of 2018 as we did in the entire year of 2017 and further accelerate growth into March and beyond. In fact, thus far in first quarter, we have far exceeded the number of vehicles sold in the entire fourth quarter, with only 25 of the vehicles that were in inventory at calendar year-end are currently remaining in stock.

We also expect to continue to see a decline in our days to sale and anticipate that days to sale will remain below 30 days throughout 2018. Overall, we are very pleased with our ability to both buy and sell inventory through our 100% online model, which has led to inventory turn rates that are unmatched in the vehicle industry as a whole and significantly reduces any typical inventory risks and carrying costs.

In addition, we expect to continue expanding the number of cash offers that we process. In the fourth quarter, we processed over 3,900 cash offers and at our current cash offer flows, we look to triple the total cash offers in the first quarter to more than 12,000. In fact, we have already processed more cash offers in February alone than we processed for the entire fourth quarter. In total since we launched, we anticipate more than 2,000 cash offers will have been accepted by consumers and dealers by the end of the first quarter.

Finally, we are committed to further enhancing our liquidity position to ensure that we can optimally serve both consumers and dealers. To that end, we are pleased to have recently entered into a $25 million floorplan line of credit with Ally Bank.

We believe the relationship with a well-respected lender in the vehicle financing market like Ally further validates RumbleOn's position as an innovator and a disruptor in the vehicle marketplace. Based on our current business model, this floorplan arrangement gives us significant runway to quickly grow our business.

In summary, we have a unique and compelling business model that has enabled us to carve out a niche in the highly fragmented recreational vehicle marketplace. Our game-changing 100% online marketplace has driven strong growth in a relatively short period of time. And we are committed to continuing to execute on our business plan to drive further expansion. Our management team clearly believes that there is even a bigger opportunity to dominate the market than our original high expectations contemplated.

Now I'd like to turn it over to Steve for a discussion of our fourth-quarter results and expectations for the first quarter.

Thank you, Marshall. Before I begin, I just want to remind everyone that there were no sales during the year or fourth quarter of 2016 and virtually no business activity. So we will not discuss comparative information.

For the year ended December 31, 2017, revenue was $7.3 million, driven in large part by the sale of 678 vehicles at an average selling price of $10,363 with a $750 gross margin. The net loss for the year was $8.6 million or $0.86 per share.

In the fourth quarter of 2017, total revenue was $3.4 million, which was in line with our previously reported outlook and was primarily comprised of $3.41 million from the sale of used vehicles to consumers and dealers as well as related vehicle financing and service contracts. During the fourth quarter, we sold 355 used vehicles to consumers and dealers at an average selling price of $9,599 and a total average blended gross profit of $764 or 8% per vehicle.

We are pleased that we grew sequential improvement from the 6.7% gross margin we recorded in the third quarter. The decrease in average selling price and the increase in both gross profit and gross margin are a result of the continued shift in sales mix during the fourth quarter from higher-priced Harley-Davidson models to lower-priced and higher gross margin non-Harley-Davidson that Marshall discussed. In the fourth quarter, 41% of the vehicle sales were non-Harley-Davidson as compared to 35% in the third quarter.

Other sales and revenue in the fourth quarter was $42,000 and was driven by vehicle finance and service contracts sold in connection with consumer vehicle sales. Total cost and expenses in the fourth quarter was $6.3 million. This was the result of $3.4 million in cost of revenue, primarily driven by the sale of vehicles to consumers and dealers. The average cost of the vehicles sold in the fourth quarter was $8,879.

Cost of other sales and revenue in the fourth quarter was $39,000, resulting from the cost of finance and vehicle service contracts associated with the vehicle sales to consumers. In addition, total cost and expenses for the fourth quarter of 2017 consisted of compensation of $1.2 million, which was driven by the growth in headcount at our Irvine, Texas, operations center, which included payroll-related costs and expenses, benefits, and $215,000 of stock-based compensation related to new hires.

Advertising and marketing expense of $671,000. During the fourth quarter, we significantly increased our marketing spend as we begin to aggressively build our brand by utilizing a combination of brand-building and direct response channels to efficiently source and scale our addressable markets. Our paid advertising efforts included advertising through search engine marketing, social media, inventory site listings, organic referral, display, direct mail, and branded pay-per-view clicks.

We believe our strong and aggressive marketing and advertising approach aimed at consumers has driven high participation in the buying and selling process and increased referrals. This level of spending and aggressive approach to brand-building and consumer marketing will continue throughout 2018.

Technology development cost of $174,000 related to the development of new and existing products and services, technology infrastructure expenses, and costs related to the development and maintenance of software products. Looking forward, our technology development expenses will increase as we continue to enhance our industry-leading website, which will further enhance our online buying and selling experience for consumers and dealers, expand the overall functionality of our platform, and provide some exciting new product offerings.

General and administrative expenses of $716,000. During the fourth quarter, we had significant levels of spending associated with the continued progress made in the development of our business, the establishment of our Irvine, Texas, operations center, costs and expenses related to the NASDAQ uplisting, financing transactions, and meeting the requirements of being a public company.

Professional fees of $166,000 consist of legal and accounting fees associated with the 2017 public offering, NASDAQ uplisting, and various corporate matters resulting from the growth and expansion of our business. Depreciation and amortization for the fourth quarter was approximately $366,000, which included $166,000 of amortization related to a measurement period adjustment for goodwill and technology development recorded in connection with the NextGen acquisition. Interest expense for the fourth quarter was $222,000, which included $139,000 in amortization of debt discount on the senior secured promissory notes, which were paid in the fourth quarter.

Our net loss for the three months ended December 31, 2017, was $3.4 million or $0.28 per share. The loss in the fourth quarter is higher than previous quarters in 2017 due to the significant ramp in compensation and marketing associated with the rapid growth and expansion of the business. But also included significant increases or one-time adjustments in non-cash nonoperating expenses for depreciation and stock compensation expense, an increase in interest expense related to the amortization of debt discount, a higher level of debt outstanding, and the cost and expenses related to financing transactions and NASDAQ uplisting.

Looking ahead, we expect to continue to rapidly build the RumbleOn business, which we anticipate will enable us to drive significant growth in shareholder value in the months and years to come. To that end, we want to provide you with a little more direction on the future growth trajectory of the business, providing an outlook on the first quarter and full year 2018. As Marshall mentioned, we do not anticipate providing you with this quarterly information going forward.

As to our outlook, as our platform and business model begins to achieve scale, for the first quarter of 2018 we expect revenue in the range of $7.2 million to $7.5 million and a net loss ranging from $2.9 million to $3.5 million. We anticipate non-Harley-Davidson units to approach 45% of vehicle sales, which will result in an average selling price ranging from $9,200 to $9,400 and gross margin between 8% and 10%.

For the full year 2018, we expect revenue in excess of $100 million and that our sales mix between Harley-Davidson and non-Harley-Davidson vehicles will be about 50% each, which is more in line with the overall market sales mix. And we anticipate that this will result in an average selling price ranging from $9,000 and $9,200 and a gross margin ranging from 12.5% to 14.5%. And we continue to reiterate that we will have positive cash flow from operations in the second half of the year.

In closing, we believe that we have a strong foundation for long-term success and look forward to continuing to build on our momentum in 2018.

With that, we will open up the call for questions.

(Operator Instructions) Dillon Heslin, ROTH Capital Partners.

Hi, guys. Good morning and thanks for taking my question. First one relates to the sales channel mix. Just going forward, I know before you put out different percentages that you think is going to vary between dealer, consumer, and auction. But you are seeing that continued strength in auction.

Is there any outlook into 2018 and beyond as to where you think those will settle down? Or does it really just depend on where you are seeing the opportunities? And then I have a few follow-ups. Thank you.

Dillon, good question. We have taken the view after the last six months of dealing with the Street and investors that the channels are to some extent where they fall, it's really hard to predict. So from our perspective, we are going to be more focused on how many units we sell at what gross margin and getting ourselves the profitability and positive cash flow.

Until we get a year under our belts, it is really hard to predict what channels -- what percentages are going to fall in each channel. And right now, we are just seizing the opportunity. The fact that we can keep our inventory under 30 days supply because we have this robust ability to liquidate product and we think those margins are continuing to scale. We need to wait.

And I would add that both channels, Dillon, are growing at about the same rate. So as far as the total percentage, we are running about the same as we were.

Got it. Thank you. That's helpful. And then with the guidance -- with fiscal-year 2018 guidance above $100 million and then taking sort of the $7.5 million in the first quarter, just curious as to where -- is what is giving you the confidence in that second-half ramp? Is it really just related to the huge sort of January and February you are seeing so far that you are expecting to continue and grow even further?

Yes, I think it's -- we look at the growth that we have had from December to January, January to February, and even extrapolating that out on a more conservative basis, we still feel very comfortable with the $100 million. I do think that when that was originally put out, I think that was on an average of about 12 to 12.5, which came from our previous test. And obviously, we are seeing a lot of volume opportunities in the lower price point.

But I will tell you on a raw dollar margin, the lower price point is performing at the same dollar margin. Thus, a much higher percentage ROI on the inventory.

I think the other check for us is from the time we started and put out that outlook, the volume of units were either tracking or exceeding. And as a result of that, we think the acceleration is significantly higher than we originally anticipated. The market is much more liquid in terms of our opportunity to buy product.

This is really a buying product challenge. It is not selling it. We have proven we can sell it by the fact that -- when was the last time you heard a vehicle retailer have days turns in the 20s? It's because the market is there to sell it; it's the buying of it that's the bigger challenge for us.

But from our perspective looking back on when we originally started and when we first put the outlook out, we are probably in excess of the units. And the only difference has been average selling price, and we suspect that is going to settle out at some point as well. So we are certainly going to take advantage of the opportunities as they are presented.

I agree with Steve. And I think that it is a story about what we can acquire. And we have obviously made significant improvements on not just the raw volume of cash offers coming through the system, but also the capture rate associated to it with better pre- and post -- these offers are good for 72 hours.

But I think we are doing a much more organized and better job of pre-communication and also post-communication after they have expired to try to increase that capture rate. We have seen some early-on really good success with that process.

Nehal Chokshi, Maxim Group.

Yes, thank you. Could you actually share what your capture rate was in the quarter?

In fourth quarter? Yes, I can share fourth quarter. Fourth quarter was a little bit less than 12%, but it has increased significantly since then.

Okay.

And just for a -- our previous experience in automotive, we very seldom ever got past 10%. So I think a lot of that has to do with the fact that there isn't a lot of competition out there. But we are also maintaining very, very -- we aren't being extremely conservative because we see -- feel the market where they are at. And we don't -- obviously in the early days, we want to make sure that we have a brand of fairness.

Got it. Understood. Now, I know you probably addressed some of this during the script, but I just want to make sure I got it right. So what you are seeing is a shift in mix to what you are selling into to be more dealer-focused than consumer relative to your prior expectations. And on the acquisition side, it looks like it is more auction-focused than consumer-focused. Is that correct?

No, let me correct you there. We do no purchasing from auctions. We only acquire direct from consumers. Primarily the lion's share of what we get is consumer direct. The rest is from dealers.

And as we said in the script, we are having a lot of success -- early success with regards to automotive dealers since they really don't want to keep a motorcycle they take in on trade. And most of them have never had the opportunity to aggressively go after them.

On the distribution side, it's consumer and dealer. Again, like I said in the script, keep in mind that whether a dealer buys it direct from our website or they buy it through one of the auction channels, it ends up being retailed to a consumer at the end of the day.

So this is truly a complete supply chain solution from starting where the preowned vehicle exists, which is in the hands of a consumer, and redistributing it through the process back to the hands of the consumer.

And to add to that, I think we are pretty much on track where we expected to be in terms of the consumer. The only difference that we've seen is units we are selling to dealers are going through auctions as opposed to off our website.

And I think it's -- we've been a very, very short time building a retail channel online. And it does take some time and we are one dealer. It kind of makes sense that there is over 10,000 recreational vehicle dealers out there between franchise and independents and they are all accessing their inventory through the auction channel.

So it just gives us another opportunity to spin inventory significantly faster. And that has always been our intent is to buy and sell at scale and at big volume motorcycles.

So I think from our perspective, it's clear that we can both acquire and distribute at volume; now it's a matter of ramping the volume. And doing it profitably, mind you.

Great. Okay, if I look at your guidance, I extract out an implied OpEx of around $4 million for the March quarter. Is that correct?

Can you repeat that, please?

Using the midpoint guidance parameters, I extract out an OpEx of around $4 million. Is that about right?

Yes, that's probably about right. [In a range].

Okay, all right.

(Operator Instructions) Rommel Dionisio, Aegis.

Thanks very much (multiple speakers)

Can I add something to the last answer, please?

Of course.

I think the key in the first quarter is we are now starting to get the leverage part of the business. Our expenses, 80% of them, are tied up in marketing and headcount. Our headcount in the first quarter is starting to level out. Where we are the -- $4 million of revenue we may add, we are only adding $100,000 of payroll. And as we look into 2018, the number does not increase dramatically relative to the huge increase in sales volumes.

The variable still is in marketing and that is controllable on our part. But we are going to be aggressively spending marketing. So in some respects, we are going to control what that bottom-line ultimate result is. And the trade-off is going to be for us are we gaining market share.

Remember: we need to build a moat around our capital. And that is probably in our brand and our technology, the two things that we are going to spend money on in 2018. But we are starting to see the leverage. And that is why the first quarter will be the first time you actually see where expenses are starting to level out and we are starting to reach a reasonably predictable level of expense. Go ahead, I'm sorry.

Sure. Thanks for taking my question. So Harley-Davidson being publicly traded, they've talked about some level of stabilization trend in terms of used bike prices here over the last few months and quarters. I wonder if you are seeing something similar in the marketplace, not just for Harleys, but for the heavyweight bike category overall?

Yes, pricing seems to be staying extremely stable. When we were tracking it in late 2016, we saw a little more fall off in the fourth quarter in valuation than we saw in 2017. So the demand definitely seems to be there.

I think the fact that Harley Davidson has chosen to cut production might be helping that on the preowned side. Keeping in mind that if they reduce production and we have the same bikes at significantly less cost, we have an opportunity to capture market share.

Okay, great. And just a quick follow-up question. I think you saw a pop, if I remember correctly, in the third-quarter consumer sales, probably due to Sturgis. And with Daytona coming up, A, I want to ask what kind of sort of marketing programs you have with the Daytona Bike Week coming up. And second, if we might see a similar sort of pop given that event here coming up in March. Thanks.

Well, first off, I will tell you what our plan is. Daytona Bike Week is one of what we call our guerrilla marketing opportunities. We have a key position; we have one of our semi-trucks and trailers. We have our road team there, which goes out on the streets of Daytona and engages with people to do things like downloading our app and various other things.

We have a bunch of engaging things into our site this year. We are out at the Speedway with all the manufacturers and all the major suppliers. And we have a whole bunch of different things planned in the space to engage with consumers and let them know who RumbleOn is.

It's estimated that there will be 500,000 to 700,000 people there. The majority of them do go through the tradeshow portion of it, if you will, outdoors. But we also go manually on the street with our RumbleOn girls and engage with all the consumers that we possibly can.

We think that Sturgis was a huge win last year from a visibility perspective. We were a brand-new brand out there. And I think, again, it's an industry that is interesting from the standpoint that very few that -- certainly that I have ever been involved in, can you find that group of density of people that are sitting on the back of the product that you buy and sell. So it's a very, very tight demographic and a great place from our estimation to generate business.

I might add: our outlook does not include anything from those type of events.

Yes, that's a good point. And we don't -- we won't be taking physical motorcycles to Daytona. The Florida laws, as do most laws, prohibit it. In Sturgis, we were able to because they allow in South Dakota a temporary dealer license.

So we will be engaging with them online. We have big 80-inch TVs that they can go on an iPad and shop our inventory and get their cash offer on their bike, etc. But it's made to just interact with people that are passionate about the product that we buy and sell.

Great. Thanks very much.

(Operator Instructions) Okay, we will go ahead and go back to today's speakers for any additional or closing remarks. Okay, it does look like we do have one more question.

Nehal Chokshi, Maxim Group.

Thanks. I wanted to get a little more detail on the debt agreement with Ally, the [four-inch] floor credit line. Could you disclose what is the interest rate and what is the specified equity debt for inventory that will be financed? And then what are the measures that need to be met for Ally to expand that line of credit as well?

First off, it's a traditional floorplan line of credit, so there is nothing -- there is not any nuances of it that it wouldn't be traditional to the vehicle industry as a whole.

Ally obviously is happy to grow above and beyond the $25 million based on sales performance, etc. But as of right now, the -- he's pulling it up here to see what the current rate structure is, but it's --.

And the way the advance works just -- well, we are trying to dig that up for you real quick. The advance is 85%, so on a $10,000 bike, obviously $8,500. But the need for why we have the capital and why we raised the capital, as we stated in a lot of previous conversations, is obviously to fund that equity in floorplan.

Great.

It's about 5% to 6%. But again, I am trying to find the document here to give you an exact answer. But again, it is very traditional. If you were to compare it to a floorplan with any of the automotive, which they do a lot of automotive financing, it would be similar. And all of the requirements, etc., are similar as well.

Okay, great. Thank you very much.

Well, with that, we will bring the call to a close. Thank you very much. We look forward to updating you again at the end of the first quarter. Thank you.

Thanks, everyone.

This does conclude today's call. Thank you for your participation. You may now disconnect.