RideNow Group Inc (RDNW) 2018 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the RumbleOn first-quarter 2018 conference call. Today's call is being recorded. (Operator Instructions). I would now like to turn the call over to Steven Berrard, Chief Financial Officer. Please go ahead, sir.

Good morning and thank you for joining our first-quarter 2018 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 discussions today may include forward-looking statements which are based on the 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 guarantees of future performance and, therefore, undue reliance should not be placed on 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 intention or obligation to update or revise any forward-looking statements except as required by law. I would now like to turn the call over to Marshall.

Thank you, Steve. Good morning, everyone, and welcome, everyone, to the RumbleOn first-quarter 2018 earnings conference call. As you know, our vision for RumbleOn was driven by the belief that there was a significant opportunity to disrupt the premium marketplace in power sports and recreational vehicles as it suffers from many of the same negative consumer sentiment and dealer practices that existed in the automotive sector prior to the advent and significant influx of new entrants and improved business models.

Our management team saw a need for a well designed, simple online solution where consumers could buy and sell a broad selection of pre-owned recreational vehicles at highly competitive prices. To that end, our goal from day one has been to change the way consumers and dealers buy and sell motorcycles by providing instant cash offers and offering a compelling value proposition through a quick, simple and transparent process utilizing an easy to use website and mobile app.

As we have grown the business over the last nine months, we have made significant investments in technology and marketing that gives us a strong foundation for our future. These investments in our unique model and proprietary platform ensure we can effectively scale with the buying and selling of high-quality low-cost vehicles to and for consumers and dealers. This in turn enables us to improve gross profit per unit and significantly reduce variable operating costs while also refining and developing logistics and fulfillment channels to improve inventory turns, transportation and reconditioning costs.

In addition, we have invested heavily in cost effective marketing, particularly in social media and search engine marketing, to further reduce customer acquisition costs which are currently significantly lower than is typical for the automotive industry. Our agnostic multichannel approach to consumers and dealers utilizes brand building and direct response channels to effectively source and scale our addressable market. It further ensures consumer and dealer loyalty to RumbleOn by driving high participation in the buying and selling process, increasing referrals and attracting new customers.

Our continued focus on being a market disruptor by creating a dominant and game changing 100% online marketplace once again drove strong sequential growth in the quarter. During the quarter we continued to execute on our plan of rapidly growing units sold and revenue while simultaneously improving unit economics and delivering a great buying and selling experience.

We have been focused on four primary objectives that enabled us to see strong growth in all areas of the business during the first quarter. Going forward we will continue to execute against these objectives to drive the long-term success of our business.

Let's now review our four primary objectives and how we measured up to our goals in Q1.

Our first objective is revenue and vehicle unit sales growth. We will achieve continued accelerated growth by focusing on our ability to penetrate and disrupt the industry's largest and highly inefficient transaction channel being peer to peer. We believe this is the most important driver of our business and it is how we evaluate our success.

In Q1 we began to see how scalable our business is as we sold 878 units to consumers and dealers, a 147% increase as compared to the fourth quarter. Total revenue in Q1 increased 136% to $8.1 million as compared to Q4 of 2017. These increases were driven by 209% growth in the number of cash offers made to consumers and dealers compared to the fourth quarter as our investments in cost effective marketing, particularly in social media search engine marketing, have captured consumer and dealer attention.

I might also add that in our fourth-quarter earnings call we estimated we would achieve 12,000 cash offers in Q1 and we ended the quarter with 12,059, which we feel validates our budgeting and management of our customer acquisition spend in these very early days of the Company.

We maintained a 14.9% acceptance rate during the quarter, a number we expect to improve over time. That said, our revenue growth was particularly offset by a 4% decline as compared to Q4 in the average selling price per vehicle. That was as our mix shifted towards lower-priced non-Harley-Davidson vehicles. Steve in his remarks will discuss sales mix in greater detail.

As we look ahead we expect to continue increasing the number of submitted and accepted cash offers, thus purchasing and selling significantly more volume going forward and leveraging our marketing spend. More specifically, we see the growth rate of cash offers continuing to accelerate in the second quarter and are currently on pace to more than double both the number of cash offers made and units sold over the first quarter total. Based on our current pace, we expect to sell more than 10,000 vehicles in 2018 versus our original projection of 8,100.

Our second objective is to increase total profit and margin per vehicle. We will accomplish this by continuing to invest in technology and reducing our vehicle processing cost which include inspections, reconditioning and freight. In addition, we intend to grow the consumer channel throughout the year, which carries our highest margin opportunity.

Significant growth of our retail channel this year will have what we believe to be significant impact on overall quarter-to-quarter gross profit per vehicle and will provide sustainable increases in growth of total gross margin.

As our regional partner network continues to expand and the volume of vehicles acquired grows, we expect to see significant sequential improvement in the cost per vehicle. Thus until we realized the benefits of scale for processing costs we have determined that in the near-term sales margin and sales profit percentage, defined as the difference between the retail selling price of the vehicle minus our cost to acquire the vehicle excluding the cost of processing, are the best metrics for evaluating progress towards period-to-period unit profitability and peer group comparison.

Additionally, expansion of our partner network and further investment in technology will also enable us to reduce the average days of sale, improve the cost efficiency of vehicle logistics and optimize our pricing algorithm. For Q1 average gross sales profit per unit was $1,132 or 12.3% and an average gross profit per unit was $788 or 8.6% gross margin.

As I mentioned, we sold more non-Harley vehicles during the first quarter which carry a higher comparable gross margin percentage than Harley-Davidson. To help you gauge the magnitude of the margin difference between vehicle types during the first quarter, the average total gross margin on the units that sold for under $7,500 was 15%.

As we look ahead we will continue to evaluate the shift in sales mix on margin and work to increase the attachment rate of ancillary products through the expansion of our consumer sales channel to enhance gross profit. We also believe that as our brand awareness continues to increase we will see significant unit growth in our consumer channel. We anticipate that as our model sales mix falls more in line with the overall market our average gross margin percentage will continue to sequentially increase quarter to quarter throughout the remainder of 2018.

Our third objective is to achieve significant operating leverage through our investment in technology, marketing, reconditioning, logistics and corporate infrastructure. Because 100% of our transactions are conducted online and our capital light model operates with no reconditioning centers, showrooms, warehouses or any other type of physical structures or the people costs associated with facilities, we are uniquely poised to achieve significant operating leverage and scale and we are already beginning to see this in our business.

In fact SG&A expenses were 48% of Q1 revenue as compared to 84% in Q4 2017. We began a number of investments late last year that continued into the first quarter to enhance our business model, including the addition of 11 strategically located regional offices which drive down transportation and reconditioning costs while reducing days to sale. In Q1 we significantly increased our marketing spend on surf, social media and guerrilla marketing which drove an impressive increase in cash offer volume in the quarter.

To handle the surge in cash offers we expanded our product acquisition and distribution capabilities by not only adding a small number of people but also integrating and improving technology and improved processes. We continue to upgrade and enhance our technology infrastructure, expand the functionality of our platform and provide new product offerings in order to reduce the need for additional headcount as the business continues to expand.

In addition, though we believe our current website is a leader in the vehicle space, we will be launching significant upgrades and improvements to our online buying and selling experience. We anticipate that our improved functionality and implementing our next generation and never before seen customer experience will greatly enhance and help grow our consumer sales channel in a big way thus improving margins going forward. We also anticipate that SG&A expense as a percent of revenue will decline significantly in subsequent quarters during the remainder of 2018.

Our fourth objective is to strengthen our capital structure and enhance our liquidity position to ensure that we can continue rapidly building the industry leader in the only 100% online buyer and seller in the power sports. During Q1 we entered into a $25 million floor plan line of credit with Ally Bank and this morning we announced a $15 million term loan with Hercules Capital.

We believe the relationship with two large and well known institutions is confirmation that our plan is solid and achievable. The capital available under these arrangements provides us with a significant runway to quickly grow our business.

We are pleased with our continued rapid growth and are more excited than ever about the opportunities that lay ahead for the business and our shareholders. As I've said before, we continue to learn something new every day in our business and our consumers and dealers, all which enables us to strengthen RumbleOn for the long-term.

Being a new company that has rapidly grown into a market disruptor in an industry with no immediate peer group, it creates the need to be nimble and flexible as possible as we grow. We feel our extremely fast turn of inventory affords us exactly that. The objective is to effectively buy and sell what both consumers and dealers desire at a compelling price and do it 100% online at very high volume and doing it all with great margin.

From time to time we will need to reevaluate the current dynamic of the business to ensure our going forward expectations remain achievable in what we currently know about the business. Based on the results and our momentum in Q1, we are comfortable with our current outlook of $100 million of revenue for 2018 and would like to give you some perspective on how we get there.

When we initially provided this goal in the third quarter of 2017, we indicated that to achieve $100 million of revenue in 2018 we needed to sell on average 675 units per month or 8,100 units for the year at a selling price of $12,500. That $12,500 average selling price was at the time heavily dominated by a Harley-Davidson product mix which was approaching 90%.

Our expected unit sales are now on pace to exceed 10,000 units for the year, a 23% increase from our original expectations, but our current average selling price has declined 27% to $9,185 as our sales mix has shifted more quickly than anticipated to better represent the overall power sports market.

With the decline in average selling price we have also learned that the sales and margin opportunity in the non-Harley-Davidson product segment is significantly better than we originally thought. These vehicles generally have a higher gross margin percentage than Harley-Davidson and, as such, we have adopted our acquisition strategies to ensure we have the proper inventory mix to meet the current market demand.

If the average selling price stays at the current levels or greater we remain on track to achieve our $100 million sales goal for the year. Keep in mind, however, more than 90% of our inventory is acquired from consumers and as such, to achieve our profitability goals, we must maintain the inventory mix to meet market demand. As a result we must acquire vehicles that can be sold at our targeted margins regardless of selling price.

To this point the gross margin per vehicle with a sales price under $10,000 was 12.4% in Q1, which gives us confidence that we are positioning ourselves well to continue increasing profitability and driving the business forward for the long-term.

To say the least, we are extremely pleased with the great progress that we are making in the business and believe that we are on track to continue our rapid growth trajectory. We believe that we have just scratched the service of opportunity here and see great prospects for the continued disruption of the market.

With that now I'll turn it over to Steve for a discussion of our first-quarter financial results.

Thank you, Marshall. Before I begin I just want to remind everyone that there were no vehicle sales or other business activity during the first quarter of 2017, so we will not discuss comparisons of that quarter. For the first quarter of 2018 total revenue was $8.1 million and was ahead of our expectations. This was primarily the result of strong reception to our marketing efforts driving $8 million from the sale of used vehicles to consumers and dealers as well as related vehicle financing and service contracts.

During the first quarter we experienced a significant shift in our sales mix between Harley-Davidson and non-Harley-Davidson, as well as a shift in sales channel mix between consumers and dealers. In Q1 we sold 878 units to consumers and dealers at an average selling price of $9,185 and a total average blended gross profit of $788 or 8.6% per unit as compared to $887 or 9.2% a unit in Q4 2017.

The change in unit gross profit and margin percentage was a result of the higher margin consumer sales representing a smaller percentage of total sales in Q1 than in Q4 of 2017. In Q1 unit sales profit for consumer sales was $2,008 with a 16.4% sales margin and dealer unit sales profit of $1,041 with an 11.7% sales margin. In Q1 the average selling price for consumer units was $12,207 with a gross profit of $1,677 or 13.7% and the average selling price for dealer units was $8,874 with a gross profit of $696 or 7.8%.

Regarding sales mix, during the quarter Harley-Davidson represented 69% of vehicle sales with an average selling price of $10,759 and a gross margin of 7.5% and non-Harley-Davidson had an average selling price of $5,622 with a 13.1% gross margin. Other sales and revenue in the first quarter was $52,000 which primarily consisted of $37,000 or $1,275 per vehicle on finance and service contracts. Finance and service contracts were sold on 35% of the consumer vehicle transactions.

Total cost and expense for the first quarter was $11.6 million and included the cost of pre-owned vehicle sales to consumers and dealers of $7.5 million. In the quarter the average per vehicle cost of the 878 vehicles sold was $8,372, which was comprised of $9,921 for Harley-Davidson and $4,865 from non-Harley-Davidson. Included in vehicle cost was freight and reconditioning of $539 per vehicle. Cost of other sales and revenue in the first quarter was $47,500 resulting from the cost of finance and vehicle service contracts associated with vehicle sales.

In the first quarter we began to leverage our cost structure as we continued our move towards profitability. In the first quarter selling, general and administrative expenses were $3.9 million or 48% of revenue as compared to 84% of revenue in Q4 of 2017. As our business continues its rapid growth we believe we will experience increases in operating cost and expenses in absolute dollar terms, but we'll see a significant sequential quarter-to-quarter decline in expenses as a percentage of total revenue.

Let's walk through the components of our expenses for the first quarter and give some broad directional input on how we see expenses trending as we begin to gain scale in the business.

Compensation was $1.4 million or 17% of revenue as compared to 34% in Q4 of 2017. Compensation was driven by the significant growth of the business and included $326,000 of share based compensation amortization.

As we execute and aggressively expand our business, compensation expense will continue to increase in future periods as we add management and support personnel to ensure we adequately develop and maintain operational, financial and management control, as well as our reporting systems and procedures. We believe compensation expense net of share based compensation amortization as a percentage of revenue will decline to a range of 5% to 7% by Q4.

Advertising and marketing expenses were $1.1 million or 13.9% of revenue as compared to 19% in Q4 2017. Marketing and advertising was driven by a significant increase in social media and search engine marketing as we began to aggressively build our brand through various channels to efficiently sourced and scale our addressable market. We believe our strong consumer focus continues to drive high levels of participation in the acquisition process and increasing of referrals.

In addition to our paid channels, in future periods we intend to increase media spending and public relations efforts while we continue investing in our proprietary technology platform. As we continue to source and scale our addressable market, advertising and marketing spending will continue to increase in absolute dollar terms, but we believe as a percentage of revenue will decline to a range of 5% to 8% by Q4.

Technology development expense was $283,000 or 3.5% of revenue as compared to 5% in Q4 2017. Technology development included the development of new and existing products and services and additional technology infrastructure expenses, headcount and costs related to software development. During Q1 $186,000 of technology development costs were capitalized.

Looking forward our total technology development costs and expenses will increase in absolute dollar terms while declining as a percentage of revenue as we continue to upgrade and enhance our technology infrastructure, further develop our online buying and selling experience for consumers and dealers, expand the overall functionality of our platform and provide additional features.

General and administrative expenses were $864,000 or 11% of revenue as compared to 21% in Q4 of 2017. The significant G&A expenses in Q1 included insurance fees and expenses for filing, exchange-related matters and financing transactions, office supplies and process application software, rent and selling expenses for outbound transportation and auction fees.

As our business continues its rapid growth G&A expenses will continue to increase in absolute dollar terms, but we expect GA expense as a percentage of revenue to decline to a range of 2% to 3% by Q4.

Professional fees were $209,000 or 2.6% as compared to 5% in Q4 of 2017 and consisted of legal and accounting fees associated with various [forward] matters resulting from growth and expansion of our business.

Depreciation and amortization for the quarter was $206,000, which included $174,000 of amortizations of capitalized technology development. Interest expense for the quarter was $87,000, which included $47,000 in debt discount amortization.

Our net loss for the three months ended March 31, 2018 was $3.6 million or $0.28 per share, which was on the higher end of our outlook due to a greater than expected shift in our sales mix between dealers and consumers resulting in lower gross profit and a higher level of selling expenses than we had anticipated.

Looking ahead we expect to continue to rapidly build the RumbleOn business, which we anticipate will enable us to drive significant growth and shareholder value in the month and years to come. Now I will turn it back to Marshall.

Let me close by reiterating a few key takeaways. First, we are very pleased with the ramp in units and revenue we experienced in the first quarter and expect the trends to continue, doubling unit sales in Q2 and totaling in excess of 10,000 units for the full year.

Next, we clearly see the ability to leverage the model in a meaningful way. We expect a sequential improvement in expenses as a percentage of revenue and believe we have significant room to improve sales margins through technology improvements and as we drive an increase in the consumer sales mix via some exciting enhancements to the RumbleOn customer experience.

Our expectation is to be profitable by year-end and see significant operating leverage beyond that period. We have taken aggressive steps to refine the model and believe the metrics are a powerful indicator for where we can take RMBL.

The first quarter represented our first full quarter of operations and we already have achieved unit sales levels that took years for peers in the automotive sector to achieve and we accomplished this at gross margin percentages and dollars that are competitive to or better than what our automotive peers are realizing currently. We expect to turn inventory with an average days in the inventory of less than 20, which improves the risk profile significantly and ROI and will easily be best-in-class.

Once again, I want to make crystal clear we are the only buyer and seller of vehicles of any kind that does it 100% online. We don't just market online, we transact online and that leads to significant disruption in the way vehicles are bought and sold going forward. Lastly, we as a management team are highly focused on creating shareholder value and have a significant alignment with our shareholders.

In closing, I want to point out from Steve and my perspective the most important asset RumbleOn enjoys at this time. I have been quoted many times saying that lots of people can dream this stuff up. However, the winners are always those that can execute on the dream.

Whether it is our acquisition, marketing, customer service, technology, accounting and/or management team, we have assembled in our estimation the past people available to succeed in business today. They are motivated, incentivized for performance and encouraged to think about and critique everything we do every day. And most important, I can personally assure you we will never take our eye off the customer experience.

Yes, Steve and I have been building businesses for a long time and we certainly understand that our past successes have always been a direct reflection of our ability to acquire and retain the best talent. We have never been happier, nor have we ever put a more qualified, dedicated and hard-working group together. A great idea executed by great people is the key to building a really great company.

We are very enthusiastic about the prospects for the Company and the ability to deliver value to shareholders over both the near-term and the long-term horizon. Thank you a lot for your time and now we will open it up for questions.

(Operator Instructions). Darren Aftahi, ROTH Capital Partners.

Nice job on the ramp and the units. I had a question as you progressed through this. So, Steve, you mentioned a lot of numbers in the script. Is it a mix of 69% Harley, 31% non-Harley -- as you talk about the doubling of units, a couple questions. One, is the mix shift going to invert as the year goes on and as you (technical difficulty) the revenue? Like what's the blended mix on that?

And then I think there's a little disparity in terms of Harley and non-Harley gross margin. Can you, one, just talk about why that's the case? And then, two, how you get that more to a level of parity going forward?

And then my last question will just around your infrastructure for doing appraisals, cash offers, etc. Do you have enough people in place today to get to the $100 million number or what's the headcount assumption going forward? Thank you.

First off, we continue -- I'll start with the last one. We continue to make significant improvements in our technology which allows us to process a much higher amount per person per hour. We already -- which is very early in the cycle, earlier than we anticipated, we already do not have data people. The data is being produced by our system and the data we have. We simply have a supervisor that is releasing those vouchers, if you will, those cash offers.

We've gone from being able to do about 20 an hour with the new technology enhancements; a single supervisor can do about 100 an hour. So it's significantly higher than we even anticipated or were able to reach in the automotive sector. So we are pretty excited about that.

We actually have reduced headcount on the appraisal side, but because of the flow of purchases we increased the document people. The document specialists in this side of the business are a must have primarily because of titles. Each state has its own title laws and so there's things we have to deal with in that regard.

With regards to the mix, I think that the quarter is probably close to reflective of a going forward look. However, we will continue to increase the amount of non-Harley-Davidson simply because of the amount of the market that there is. We can't control necessarily what customers put into the appraisal funnel.

So it's going to be we think at the end of the day probably trued up with more of the total market, which Harley, as you've heard us say before, represents about 50% of just the 600 TC and larger motorcycles, but there's a whole lot of players in all the other things we are getting into, whether that be on-road motorcycles, the off-road and the ATV.

We think some of the difference in the average selling price will be offset by a higher percentage of retail as we go forward. We are confident we are going to build that retail channel. It does appear on the retail side that -- it does feel a little bit higher on the revenue side. So as that becomes a bigger percentage of our business, maybe more of the lesser valued stuff ends up to dealer.

And the last one was with regard to the metrics -- that was your middle question actually. With regards to metric mix and metric sales, what's driving that? I think part of that is, with regards to our dealer sales, there seems to be less inventory out there in the lesser priced vehicles.

Really kind of reminiscent of the automotive sector, the lower the price the faster the turn and typically the higher the margin. And it's just because primarily it's hard to find really, really nice four- or five-year motorcycles with low miles in great condition. And we're bringing a lot of those out of the garages of consumers today, which has created a little bit of a uniqueness in the marketplace.

With regards to where we are marketing, we have basically patterned our auction system after HDFS, which Harley-Davidson Financial Services is the largest reseller of repossessions obviously, but that's the biggest part of that part of the industry. And we've just mirrored their selling tactic which is a 11 locations geographically located in -- very, very well across the country.

We didn't feel we needed to reinvent the wheel. They think we bring a lot of benefit to the sales atmosphere because we aren't selling all Harley-Davidson; we are selling a little bit of everything. And we bring a unique buyer and seller, so that's -- without making it too long, that was a long answer to three questions, but hopefully that got it done.

Nehal Chokshi, Maxim Group.

So great results by the way. The 6.9% gross margin that includes the processing costs were about 150 basis points of processing costs based on the numbers that you gave in the conference call. And I think last quarter the processing costs came out to about 674 basis points. So, that's a dramatic improvement in the efficiency. What were the drivers of that improvement?

Well, a couple things. One, the fact that we are now expanding out our partner network with auctions the freight number has come down. And because we are now doing a large percentage of our reconditioning at the auctions and not paying retail price and so we've seen a significant decline in reconditioning.

And we expect as we go forward part of the ramp up in margins is going to come from the fact that now we've added a few more additional auctions, the freight bill will continue to come down, the 569 that we had this quarter should be somewhere in the 400s next quarter. And we will continue to recondition that at the auctions as well just because they do a really good job. They give us condition reports, which has helped us a great deal in terms of resale of a vehicle.

Okay, great. And then I appreciate the color on how you got to $100 million. That is effectively that you're going to acquire something like 30% more vehicles at a more or less 30% lesser ASP than you originally indicated. I know I didn't get the numbers right but that's generally the ballpark you're talking about.

What is the actual acquisition rate you expect to achieve to reach that? So I think you said something like around 12.5% acquisition rate in this quarter. What is that acquisition rate you expect to achieve throughout the balance of calendar year 2018 and what are the signs that give you confidence in achieving that acquisition rate at the intended gross margin excluding the cost (inaudible)?

I will take that one. The increase in for the potential to increase the capture rate on appraisals continues to improve month in and month out. Some of it has to do with the more robust data -- as we move forward we are able to capture a bigger percent.

We are presently experiencing better numbers than the quarter. The quarter I believe was 14%, a little over 14% on the approval rate. And what that means is obviously 14 of 100 offers out there that they accepted. Keep in mind that a lot of the people can't accept because of negative equity, which is the same think CarMax experiences in their in-store model.

And secondly, obviously there's always some opportunity for unrealistic expectations. But with that said we think that over time we can continue to work that up to probably in the neighborhood of 20% acceptance rate and that greatly enhances the flow of vehicles.

We are improving week-over-week -- day-over-day week-over-week right now in the amount of opportunities to acquire. And I think as our algorithms get better on the pricing we will be able to increase that.

And then also we've made significant changes in our processes to where it's not taking the same -- taking half the time as far as days to process these vehicles. Right now our average shipping is running about six days, and considering that we are buying from every corner of the earth and shipping to 25 different locations, we've been very happy with the improvement there.

You didn't ask the question, but a 20-day turn rate in the vehicle business -- average days in stock is -- I've been doing it for 40 years, I've never seen numbers turn that turn that fast. So we're really excited from that standpoint because it really increases your -- or decreases your inventory risk.

Something else on the price of vehicles just real quick for everybody. As that ASP comes down the inventory value risk comes down with it. A $3,000 Harley-Davidson that's worth $3,000 today is worth $3,000 three years from now. So there really is no inventory risk in that lower price. So there's just a lot of dynamics that a lower ASP actually is a huge improvement as well as the opportunity for gross margin.

Okay, great. And then just to be clear, to get to that $100 million 10,000 units, so you did approximately 1,000 this quarter. You're saying you're going to double to 2,000. If you keep on doubling obviously you are going to blow through that, right? And so, your guidance includes some I guess you could say conservatism in terms of the reduction in the rate of your QoverQ growth rate.

But to be able to look out into the third and fourth quarter and say that, yes, we can definitely get to 3,000 to 4,000 vehicles per quarter, what is it that you're seeing that gives you that confidence other than what is your current QoverQ growth rate?

Well, first off there's plenty of opportunity. The size of the market is bigger than we originally anticipated. The desire from the consumer to not have to go through the current liquidation experience, which is craigslist primarily, is extremely high. And if you just purely do it on a market share rate, considering that the other option for consumers is so miserable, we are very, very confident. We're confident on Q2, as well as going forward.

One thing I did want to touch on, we didn't mention it in the script today, is with regards to last quarter we mentioned that we brought on some of the larger automotive groups, i.e. Sonic and AutoNation and others. I would tell you also that we are buying bikes on a daily basis from these automotive purveyors.

And we've brought a really great tool for them because the deals they are making today, by us providing liquidity on a product that they don't want but their consumer wants to trade, has been as big as anticipated and we think it's something that we can grow exponentially over time.

Rommel Dionisio, Aegis.

Good morning, thanks for taking my question. Some other publicly traded motorsports companies highlighted that adverse weather, unusually cold winter weather impacted sales in Q1. You obviously had great top-line results, but to what extent do you feel you may have been actually negatively impacted and your numbers could have been even stronger in Q1 if not for that pretty cold weather through much of the country? Thanks.

We don't feel at all. We feel that the opportunity to buy in the colder areas of the country, inclement weather for power sports -- which again, these are wants, not needs -- that people want to liquidate. Their opportunity to put that on craigslist in a snowstorm in the Northeast is probably not very efficient and we offer cash to that customer.

We are anticipating seasonal -- and we are tracking the data that we've received from some of our people that we work with, i.e. the auctions and dealers. But we don't anticipate to have the amount of seasonality or the effect of the local weather patterns because, as an example, right now to market is really starting to heat up in the Northeast and obviously it's not real hot in December and January.

But it seems from our perspective that the type of inventory that we are selling there is a demand for all times of year and we just look at it as an offset. We are in all 48 states. So when it gets too hot in Texas, which is June and July, it's the middle of the season for the North and the Midwest and the Northeast and the flip-flop of that as time progresses.

So, we do anticipate some seasonality. We have not experienced it at this point. And in fact, it seems like the opportunity to acquire, which is what our whole deal revolves around, actually is a benefit in the inclement times.

[Eric Bolte], Grand Slam.

Congrats on a good quarter. One quick housekeeping question. I think you guys mentioned it but I missed it. How many total appraisals did you do for the quarter?

Do you have it in the script?

I thought Marshall mentioned that in his --?

Oh, yes. It's 12,059, excuse me. That was up from I think -- fourth quarter was about 3,900.

Okay, that makes sense.

With regards to the marketing, it seems like we can continue to dial down at a rapid pace but we are obviously -- we're still very, very new in the cycle. And we are trying to maintain some reasonable fiscal responsibilities with regard to marketing expense, not just throwing cash at it. But it does seem we've enhanced the advertising spend significantly, pretty much in the same areas. And it does not feel like we've even scratched the surface yet of opportunity.

Great. And then just as a follow-up, it looks like you've taken the dealer listings off the site. Is that a temporary thing or is that a permanent change?

Yes, I wondered if someone was going to catch that. We have a plan -- we're getting to launch, as we said, some really, really interesting enhancements. I'll be interested to get everybody's feedback on them with regards to the website. And we do see a huge opportunity to be a significant lister of vehicles both for consumers and dealers. But we want to do it in a different format. And I won't get into all the details of it, but I would tell you that before the quarter you'll see what that plan is as it rolls out.

Definitely a big appetite out there for it, but we felt at the present time that it was muddying up the customer offerings and was a little confusing for the consumer. We wanted to wait until we had enough meaningful inventory. Today we have about 700 motorcycles in stock, and so we're starting to get meaningful inventory that we happen to know is at very, very competitive prices and is exciting for consumers to see.

And to muddy that up with vehicles that we don't control the pricing metrics of, etc., is a little confusing I guess. So we have got an answer for it; we think it's a great opportunity. We think it's a great opportunity for future revenue, but we will unveil that as time goes forward.

Paul Cooney, Joseph Gunnar.

Congratulations on the ramp-up. Just wondering -- what is the quarterly breakeven run rate for you guys revenue wise?

Oh, that's a good question. I'm trying to gauge my answer here. Probably in the $30 million range.

Patrick Murphy, Maxim Group.

So, on the Harley-Davidson call, they mentioned a competitive environment in the used market and that it was putting some pressure on their business. Do you guys think that RumbleOn is providing some of that pressure? And if so, is that a reason why there is a discrepancy in margins between Harley-Davidson and non-Harley-Davidson?

I don't know that it has anything to do with the margin piece of it. I think that, yes, we have been disruptive in that regard. A big percentage of these are going to dealers and Harley has always had the opinion that when they sell a used like they could've sold the customer a new one. I for one don't agree with that scenario, but the used market is based on supply and demand. The demand will always be higher on pre-owned because of price point and a lot more people can afford what we sell.

We think over time that we are an enhancement to all the manufacturers because we are bringing a significant amount of first time riders to the marketplace, which they are all spending millions and millions of dollars trying to generate. So again, I can't speak for Harley's business on the new side because obviously we are not in it, but I do think that we have been a participant in disrupting the purchase intentions of consumers. We have room for one more question if someone has one. Okay, I think we're good.

There are no further questions.

Thank you very much.

Thanks, everyone, for your time. We really appreciate it.

See you next quarter.

That concludes today's call. You may now disconnect.