RideNow Group Inc (RDNW) 2018 Q4 法說會逐字稿

Good afternoon. My name is Chris, and I'll be your conference operator today. At this time, I would like to welcome everyone to RumbleON Fiscal 2018 Earnings Call. (Operator Instructions)

Whitney Kukulka, Investor Relations, you may begin the conference.

Thank you, operator. Good afternoon, everyone. Thank you for joining us on RumbleON 2018 Financial Results Conference Call. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website. This conference call is the property of RumbleON, and any taping or other reproduction is expressly prohibited without prior written consent.

Joining me on the call today are Marshall Chesrown, Founder, Chairman and Chief Executive Officer; and Steve Berrard, Chief Financial Officer.

Before we start, I would like to remind you that the following discussion contains forward-looking statements, including, but not limited to, RumbleON market opportunities and future financial results that involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in RumbleON's periodic SEC filings, including risk factors discussed under the caption, Factors Affecting Operating Results and Market Price Stock, in RumbleON's most recent Form 10-K. The forward-looking statements and risks in this conference call are based on current expectations as of today, and RumbleON assumes no obligation to update or revise them whether as a result of new development or otherwise.

The company's independent registered public accounting firm has not completed its review of the company's results for the year ended December 31, 2018. As such, the information provided on today's call is subject to change. Although the company currently expects that its final 2018 fourth quarter results will be as described on this call, it is possible that the company's final 2018 results will be different. The information in this letter represents the most current information available to management and is not meant to be a comprehensive statement of the company's financial results for the year ended December 31, 2018.

With that, I will turn the call over to Marshall Chesrown, Chief Executive Officer. Marshall?

Thanks, Whitney, and thank you, everyone, for joining our 2018 earnings call. We're very excited to share our 2018 results and expectations for 2019. Hopefully, you've all had a chance to read our shareholder letter, which is available on our Investor Relations site.

Our shareholder letter not only highlights our results, progress and future expectations, but it also details key components of our model and answers common questions that we hear from investors. We like the format because it's easily assessable, transparent and affords us more time for Q&A on our conference calls. Rather than repeating everything in the letter, I'll make brief comments on our strategy, opportunities and expectations, and then Steve will provide some color on our financial results, and we'll open it up for questions.

2018 was RumbleON's first full year in operations and was marked with many exciting milestones for our company. Not long ago, we made our first sale. And since June of 2017, we haven't looked back. We went from generating less than $8 million in total revenue in 2017 to over $61 million of revenue from powersports in 2018. Including the revenue contribution from the 2 months we owned Wholesale, Inc. and Wholesale Express, 2018 total revenue was over $156 million. And for Q1 2019, we're guiding total unit sales in the range of 11,500 to 11,800 units and total revenue in the range of $210 million to $215 million.

Our organic growth rate in 2018 solidifies our winning strategy. That said, as we outlined in the shareholder letter, we faced challenges throughout the year that impacted our results and caused our 2018 revenue and unit sales results from the powersports segment to come in below our prior guidance. Even with those challenges taken into account, our results from the combined company exceeded our prior annual guidance. This demonstrates the impressive progress we have already made integrating that 3 acquired business units.

RumbleON's an innovative supply chain solution in an industry that is already creating dramatic disruption. Our market opportunity is not the $40 billion preowned car and truck market, our opportunity is the well over $1 trillion supply chain in whole. Redistribution is a major opportunity with many fragmented but scalable and profitable segments. Our efficient software-based solutions and unique business model enables us to participate in more ways than anyone else. If we participate in just 1% of the total market over time, that would be over $10 billion in revenues. And RumbleON is a very young company, and we have experienced some growing pains in our first year as a public company. But from that, we gained valuable insight on trends, market dynamics and amassed critical proprietary data. We have a powerful business model, proven track record of delivering growth, immense market opportunity and a world-class management team. We are confident in our ability to execute against our key objectives and drive profitable growth over the long term.

Before highlighting our key accomplishments and turning to our outlook for 2019, I want to review the challenges we faced in Q4 and 2018 that contributed to our shortfall relative to guidance. Our management team's background is clearly dominated by experience in the automotive sector not powersports. There are no larger participants in the powersports supply chain than RumbleON. We spent the past 1.5 years gathering -- roughly gathering and garnering data and assumptions without the benefit of observations from others in the space. However, with that said, RumbleON is currently in the top position in the nation -- in the national market for powersports redistribution, and we believe that our Q1 guidance demonstrates that we are leveraging our observations from our first full year in the powersports business in a very meaningful way, and we are already reaping huge rewards from our experience in automotive -- of our automotive part of RumbleON.

Our powersports segment still represents a massive opportunity for potential growth. And with the current lack of competitors, we believe that we can build on our dominant position in the U.S. and eventually reach many other countries around the world.

In regards to our fast-growing automotive business, Wholesale Inc. has a well-established brand built over 27-plus years, which made it an ideal acquisition for RumbleON. We have made solid progress against the ambitious time line we set for ourselves, and the AutoSport-USA further extended this plan. With the launch of our next generation of RumbleOn.com, which is scheduled for Q2, RumbleON will enable both consumers and dealers to have the same luxury of fast, easy and friction-free liquidity and unparalleled customer service across both our powersports and automotive segments. All of our technology is currently architected for our launch into the RV and Boats segments. We are extremely confident that the same dynamics exist, including the benefit of no meaningful competition. We expect to introduce RVs and Boats later in 2019.

In the end, our goal is to become the only online marketplace that allows the customer to buy, sell, trade and finance any vehicle with a VIN. Like our strategy in powersports, our cash offers are highly competitive with what a customer would get from another buyer whether bricks-and-mortar or an online competitor. Management is confident that our process for cash offers is significantly easier. And keep in mind that we focus marketing and technology resources around vehicle acquisition due to our demonstrated ability to distribute all vehicles we can acquire at a profit.

Over time, the size of our inventory offering and the value proposition that our model commands, we would anticipate growing into an even larger player in all distribution channels, including consumer retail. Our strategy is not to acquire vehicles cheaper than competitors. We believe our data and testing clearly shows that low-ball offers have very low capture rates, especially when contemplating the best quality inventory available. Our strategy is focused on making the customer experience significantly faster and easier and do it fairly. We believe that a strategy -- this strategy will propel RumbleON into a brand that consumers trust for all their vehicle needs.

We're amid the process of integrating our automotive business units into RumbleON, and we are leveraging our observations of the market dynamics outlined in our shareholder letter. While there are inherent risks and unknown factors associated with being a public company at this early stage of our life cycle, we believe that our growth rate affirms our ability to successfully execute our business model.

To frame our model, we believe investors should consider the following: our proprietary technology, our inventory advantage, our industry-low average days to sale, our growth in unit sales volume across all vehicle segments driving revenue growth and the efficiencies we realized by leveraging regional third-party fulfillment centers across the country.

And to track progress against our strategic goals in the near to midterm, we encourage investors to consider a few things: first, the strong results we drove by integrating our technology and process improvements quickly and efficiently across the acquired business units; second, our plans to launch automotive inventory acquisitions and distribution for consumers in the automotive sector in Q2 and continuing to grow acquisitions from consumers and powersports, further advancing our inventory advantage; third, maintaining average days to sale to under 30 days; and fourth, driving consistent and sequential year-end growth in sales volume and revenue across all vehicle segments; and finally, further expanding our already national footprint, which we did 2 quarters ahead of our previous plan, as well as entering new geographic locations throughout 2019. Steve will discuss our expectations for Q1 and full year 2019 in more detail, but all of our expectations include progress against all of these benchmarks.

For Q1, we expect total revenue in the range of $210 million to $215 million and total unit sales in the range of 11,500 to 11,800 and maintain average days to sale to under 30 days. We expect our future results to benefit from the enhancements we are making across the business, including our plans to add automotive to RumbleON.com and to begin buying and selling cars and trucks directly from consumers as well as dealers through Dealer Direct. Over the long term, we are confident that we can leverage our low cost and efficient acquisition and distribution model to achieve operating profitability. RumbleON has incredibly low SG&A and CapEx requirements to scale compared to other vehicle sellers out there today, and we view all of that as a massive opportunity and significant competitive advantage.

As a company, we are still in early stages, as I said, of our total journey, and we'll continue to learn as our business evolves. We now have a clear understanding of inventory valuation, availability and proper positioning in both high and low sessions -- seasons, and we have accumulated a host of data points that provide us enormous insights into the buying and selling habits of our customers in a dynamic marketplace that we believe will help optimize our forecast models moving forward.

And with that, I'll turn it over to Steve.

Thank you, Marshall. Before we dive into the results and future expectations, I'd like to get some housekeeping out of the way. As you know, we are reporting earnings later than we have historically. We have been heads down integrating the large acquisitions we've made, including allocating time and resources to ensure the accuracy of the accounting and auditing process is in place. We plan to file our 10-K on time on Monday, April 1, 2019, and anticipate to report Q1 2019 earnings in early May consistent with our historical practice.

Now taking a look -- a brief look at our results. Revenue for the year was $156.4 million, which was comprised of powersports revenue of $61.2 million, automotive of $91.3 million and transportation of $3.8 million. Gross profit was $8.8 million or 5.6%, which included gross profit to powersports of $5.8 million or 9.4%, $5.7 million or 6.2% for automotive and $1.1 million or 28.9% for transportation. We incurred operating loss of $8.7 million and a loss per share of $1.70 based on 14.8 million weighted average shares. For Q4, revenue was $115.1 million, which was comprised of powersports revenue of $19.9 million, automotive of $91.3 million and transportation of $3.8 million. Gross profit was $8.8 million or 5.6%, which included gross profit of powersports of $2 million, which was $806 gross profit per unit or 11.2%. Automotive gross profit per unit was $1,021 or 5.3%. In Q4, we had an operating loss of $8.7 million or a loss of share -- and I don't have that number.

We outlined many levers that we'll use to our advantage, in Marshall's remarks, as we continue to drive volume and revenue growth. And as we continue to grow revenue and volume, we expect to expand gross margins over the long term. And as you heard from Marshall, we expect total revenue in the range of $210 million to $215 million and total unit sales in the range of 11,500 to 11,800. And we maintain average days to sales of less than 30 days. Given the early stage of our life cycle, we may experience fluctuations throughout the year as we test the optimum pricing, make adjustments to inventory, positioning our seasonality and potentially other factors we may encounter during the year. We are not guiding for full year expectations, but we expect to drive growth throughout the year. We believe that the combination of quarterly guidance and introducing our long-term objective of 10% operating margins will provide investors enough transparency into our future expectations.

So for those building models, we expect to deliver mid-single-digit growth in Q2 over our expectations for Q1. We believe the combination of continued growth in the powersports segment and our plans to introduce the full functionality of RumbleON to the automotive sector will generate upside in inventory, unit volume and revenue expectations over time. We made the decision to reinvest gross profit dollars into initiatives, such as sales and marketing, technology development and human capital to support our rapid growth. As such, we expect to delay our EBITDA profitability expectations. Over the long term, we are confident in our ability to leverage our low cost and efficient distribution model to achieve 10% operating margins.

2018 was a transformational year for RumbleON, and we look forward to providing updates on our quarterly results throughout the year.

Operator, we're now ready for questions.

(Operator Instructions) Your first question...

If I may clarify, it was $0.86 per share in Q4.

Your first question comes from Steve Dyer with Craig-Hallum.

I guess, just on the powersports side, going forward, just any indication as to what you're seeing in terms of -- and I know you don't want to give 500 different metrics every single quarter, but just generally speaking, what are you seeing in terms of cash offers, in terms of acceptances and your -- sort of your ongoing ability to calibrate that to the right number and, generally speaking, sales to retail versus wholesale? So I don't want pin you down to a whole bunch of things, but generally, if you can just give us a flavor as to how that's evolved recently and how you sort of see that in Q1.

Okay. This is Marshall. The cash offers continue to grow quarter-over-quarter. And then, obviously, we continue to get better and better data. Our averages of actual selling price to estimated selling price through our software is getting -- is very, very close to a 0 sum. The desire for consumers to utilize the tool, as I said, continues to grow. I would say that probably on the Harley-Davidson side, the biggest reason for not having tremendous increases in capture rate based on the improved data that we have revolves around negative equity that the majority of those people tend to have. But again, it continues to grow. You're going to say -- we definitely learned in fourth quarter, Steve, that there's a huge opportunity to acquire inventory for the spring market. The difference -- and you might have seen it in the shareholder letter, but the peaks and valleys in this powersports space is, from a valuation perspective, are higher and deeper. And we're going to do a much better job in taking advantage now that we have data, good, reliable data, on high-volume numbers to be able to do that. So we're going to need to -- we'll look at fourth quarter completely different going forward. Also in fourth quarter, obviously, I mean I don't have -- need to give you a weather report, everybody knows what the weather was, but also with holidays falling in the middle of the week, it basically eliminated our opportunity for any live auctions the last 2 months of the quarter. So we did ramp inventory. You might have seen the inventories growing significantly in the first quarter, and part of that was the function of not being able to sell efficiently but continues to grow, gets better and better. Our capture rates continue to increase. With regards to the retail versus dealer sales, consumer retail is growing the same rate as our total business. We haven't seen a breakout at this point, but we also haven't put significant capital towards that with regards to marketing. We're still trying to buy everything that we can buy and funneling well-managed advertising dollars towards acquisition because we can clearly distribute the majority of it. And obviously, instead of just rambling on, we have a lot more detail in the 10-K as well.

Got it. And then just to hop over to autos, it sounds like cash offers here are imminent this quarter. What do you sort of expect that launch to be like? I mean, do you expect the majority of it initially because of awareness and so on and so forth to be most of that sold back to Wholesale? Or just sort of some color as to how you think that kind of scales over the balance of the year.

Well, launch -- let's talk real quick about automotive retail because, as I believe you are aware, maybe not everyone, we did close their bricks -- Wholesale, Inc.'s bricks-and-mortar off the lot that they had in Nashville, and we took them 100% online right at the end of the year. And it has been done with great success. The business is growing dramatically, and so we see a lot of opportunity in that regard. With regards to the acquisition side, we think there's a huge opportunity with the millions of people that now know who RumbleON is to step into that -- in that position of buying cars and trucks direct from consumers. There's a lot of talk around that today with a lot of different competitors. Obviously, we've discussed the difference between CarMax' model and CarMax driving those leads into their store for their retail traffic. There are some out there that are going after -- directly to the consumer online. I would tell you that if you will match -- when we launch, match our usability for a consumer, our tool next to everything that's available out there, and you will see processes that take 3 to 5 minutes versus competition that takes 20 to 30. And we know from our testing and all of the volume that we've done on the motorcycle side, every time you ask additional questions, it's additional friction, and you have additional fallout. Further, low-ball offers, which I would contend a lot of them are, that bottom fish -- whatever you want to call it, we just don't believe as a management team that you can do that today and garner any type of results because consumers have the ability, with so much transparency on the Internet, to know exactly where they're at. And so this isn't a model that we're saying, hey, we're going to go out and buy cars cheaper than Carmax or anybody else. This is a model that says we know how to aggregate them one at a time better than anybody. We know how to process them in a more efficient, less expensive way. And we certainly know how to distribute, whether that be from -- through retail or direct to the dealer and then, of course, the addition of our Dealer Direct site and so on and so forth. So we just think we have the total package. It's significantly easier for people to use, and we think we'll benefit from the capture rates.

Got it. That's helpful. And then just a couple of points of clarification on guidance, and then I'll pass it along. On the Q1 unit guidance, are you willing to break out powersports versus auto in that?

We will clearly break that out in our call when we actually announce the earnings.

Got you. Okay, not for guidance. And then secondly, just an important clarification, on Page 16 of your letter, you had indicated you expect higher SG&A as a percentage of revenue this year. But I don't know if you're talking about pro forma or just powersports because it would imply something like $180 million SG&A number, which seems almost impossible overall this year. Just want to make sure I'm thinking about that the right way.

Steve, I think the way you need to think about it is we will leverage our operating expenses. The only one that may not decline at the same rate with the growth in revenue is marketing. But clearly, we will see the leverage that one would expect with the kind of revenue growth that we're talking about.

But just as it relates to that, I mean, The Street said something like $60 million in SG&A this quarter. And whether that's $5 million or $8 million or $10 million too high or too low is one thing but just would imply that we're all like $100-plus million too low. And I just want to make sure, are you talking about the -- what are you using for a base to grow off of, I guess, the $35 million implies 22.5% or 22.4% of revenue. Raising that percent of revenue on whatever, $850 million, $900 million revenue base would imply, like I said, $170 million, $180 million, $200 million in EBIT -- or I'm sorry, in SG&A. Am I thinking about that -- or am I reading that correctly?

Well, I think the -- it's not going to be what you're explaining. We expect it to continue to grow. It's going to be [driving one side] percentage of revenue that is [higher] than it has. I think we'll give a little clarification in our 10-K on that -- with respect to that.

Your next question is from Darren Aftahi with Roth Capital Partners.

So can you just expand a little bit on the commentary about seasonality and then sequential growth throughout the year. So now that you've got over a year under your belt at least on the powersports side, what, besides kind of some of the stuff you called out in the holiday, should we be thinking about in terms of seasonal trends? And at least to my understanding, you're saying sequential growth throughout the year, it seems like Q3 would be peak revenue for both these businesses. Am I thinking about that correctly?

Yes, I think you are. I think, obviously, Q1 and Q2, with any vehicle provider, and the numbers are available, will see they're always the peak months. We do think that we'll have sequential growth going forward, but the dynamic growth that we've had from Q4 to Q1, I certainly wouldn’t look at that as something that could be done quarter-over-quarter over the fourth quarter period. I can expand on the seasonality, I'm sorry. We certainly understood seasonality from the automobile side. And it follows very closely to what we see in powersports. I think the difference is, like I said, the peak in [display] market is bigger percentage-wise than it is in automotive, and the fall in the fourth quarter is deeper than automotive. Automotive sells all the way through New Year's Eve. With all the end-of-the-year sales and all those kinds of things, there's just a lot of activity in the marketplace. And because of both the weather -- and this winter, obviously, we had a violent winter, there wasn't a lot of people thinking about riding a motorcycle in the month of December. I think the opportunity that we're excited about is what we now see with data and what we can buy during that time of the year at the price we can buy it for, I think you will see us in fourth quarter this year both -- in all the segments: cars, trucks and powersports, ramping inventory significantly for the spring market because we are seeing a major uptick even more than anticipated already in first quarter from a valuation perspective of -- and the market appetite for what we sell. So the percentages being sold at a given location are -- have increased dramatically in first quarter. We see it increasing again in second quarter. And then as we said in the shareholder letter, some level from a percentage basis of growth, we still see it growing, but we do see it flattening through third and fourth quarter.

That's helpful. And then just on Classifieds. So you just rolled that out nationally, and there's about 1,000 ads currently. I'm just curious, with the, I think, roughly 100,000 cash offers that weren't accepted, maybe that number is a little off, I'm just curious at this point how you're looking at kind of conversions. And any kind of color in terms of where we could see kind of conversion rates and number of classified ads maybe 6, 12 months from now.

Right. I think, Darren, we mentioned in the shareholder letter that it was a soft launch, that wasn't always the plan. But with everything that we had going with a major acquisition at the end of October, as you know, we have a lot of irons in the fire. The resources, both human resources and capital resources, have not been applied to that tool yet. We are very, very excited about it. I think you'll see major changes in second quarter. And really, as we roll here, in the last few days, we have many things that are in preparation of launching. We will put some marketing spend behind it very soon. The one thing that's been the most positive is we originally came with a consumer-only site to try to keep people in the RumbleON tent for a period of time. And these initial results are -- which, if we get on the road, we'll be prepared hopefully to share some of this, is the initial results have been significant of the amount of people that didn't accept the first offer, chose to list their vehicle and then within a fairly reasonable period of time, 7 to 14 days, are converting at high rates back into our core business, which is the whole reason why we kept -- built the Classifieds site to start with. The other thing I would share with you is that the size of this Classifieds has been 100% organic. The one thing that we didn't suspect was that the offers, because people have such a high expectation, that some of the people opt out at the time we give them the cash offer. So they don't accept the cash offer, and they opt out. And we can't legally reach out to those people via our database. And others that still opted in but were totally blown away by the amount of the value, let's say, we gave -- we said it was a $5,000 bike, and they owed $10,000, they obviously weren't very happy. And so as we approach them with more solicitation to list for free, they haven't had a high likelihood of opening those communications. So we're working on a whole different way to capture more of those, get early -- get in front of them earlier, some phone activity, there's just a whole bunch of things working. And so we're still very excited about Classifieds. We will be doing the same thing with cars and trucks. It will be a very unique site. And last thing, as we mentioned in the letter, we're already just without -- not $1 spent on promoting this thing. With 1,000 listings on the site, there are only 3 powersports sites with more consumer listings than we have at RumbleON already. So not certainly where we wanted it, but I think you'll see explosive growth in that over the next couple of quarters.

Great. Just last one maybe for Steve, 2 things. One, what was the adjusted EBITDA number in the fourth quarter? And then what kind of revenue number quarterly do we need to be at to be at breakeven kind of adjusted EBITDA?

We're not going to go there quite yet. We want to get Q1 behind us, and then we'll give a little bit -- maybe a bit of guidance on that. I think it's still early now. And we -- and just as a point of thought, we're not really going to look at the company on an EBITDA basis, most of our interest expense is foreplanned, and we don't have a tremendous amount of depreciation. So EBITDA number is probably in the neighborhood of $8 million, $8 million to $9 million.

Your next question is from Ilya Grozovsky with National Securities.

Just a couple of questions. On the fourth quarter, I believe you guys put in a press release at some point over the past couple of months what the pro forma number looked like if you included the month of October for the acquired business. Can you just remind me what that was?

I would say $149 million.

No, you're saying $156 million is Q4 with just the 2 months, $156 million. So I'm saying if you do a pro forma -- and I'm pretty sure you had it in the press release, I just -- I'd have to dig it up. But somewhere, you guys said what the number would look like if you included it for the whole quarter not just from October 28. What was that number?

We got 2 people looking for it right now, so...

So while you guys find that, let's -- we'll come back to that then. The Q4 number, what percentage was the -- of the car revenues were from retail? I guess, you guys said you closed down the lot at the end of the quarter, but kind of what percentage of the cars were retail versus auction? And then also just we'll come back to it but on Q1, when you're talking about $210 million to $215 million, how do you see the breakout between motorcycles, powersports, cars and Wholesale Express? Those 3 pieces.

Well, first off, on the Q4 breakout, I think we're going to give that in the 10-K, right, more detail on the actual breakout of the powersports versus the automotive? I would tell you on your retail question, as a percent of the whole, it has stayed pretty steady with what was originally presented in the original filed numbers with Wholesale Inc. However, I would tell you that the volumes are higher than they were with the bricks-and-mortar location by taking it 100% online and working out of a virtual inventory versus a physical inventory. And I think it also had a lot to do -- by eliminating that piece of the business, it also accelerated our days to sale in great improvement because we aren't carrying vehicles sitting on a lot that are aging while we're waiting for a consumer to buy them. They now work online out of an entire virtual inventory. So -- but the initial results are about the same percentage as the whole. But as you can see, the sales have increased. I would say with regards to the increases at Wholesale Inc. on the volume side, we haven't taken -- as we said, we haven't taken RumbleON retail and acquisition onto the site. We'll be doing that very shortly. But we have integrated a bunch of our technology that has really, really helped that operation grow much faster than what we anticipated. Their acceptance of it, the use of it is going extremely well. We're having a lot of success with process improvement via our software on the automotive side. And it allowed us to have a need to roll out our footprint much faster. We launched this week in Southern California. These were -- the objectives that we have met on the wholesale side as far as our distribution footprint of being a national footprint have been highly accelerated, and all but one are already rolled out operational and have inventory flowing into them, as we speak.

Going back to your question, about 12% of the automobile sales were to consumers.

12%, you said? 12%?

Yes, 12%. And the number that we gave on pro forma basis was $165 million to $170 million.

$165 million to $170 million. Got it.

Correct.

Okay. And then if you -- and then just on the last piece, the Q1, kind of how do you see the breakout in this $210 million to $215 million between the motorcycles, the cars and Wholesale Express?

We'll do that on the earnings call when we announce. We'll have a clear breakout of both segments, the total and the segments broken out for automotive and powersports is how we'll represent both the revenue, the units, ASP, et cetera.

Ilya, I think when you -- when we file the K, I think the breakout and the number of metrics and the amount of data that we have put in MD&A should allow people to pretty much get pretty close.

Your next question is from Sameet Sinha with B. Riley FBR.

A couple of questions actually. Let me understand, when you put out the cash offer tools on the auto business, where do you get the data to kind of jump start the offers? And is that something that you found at Wholesale, Inc.? Or is that something that you can buy then fine-tune over time? Can you explain that? My second question is regarding adjusted EBITDA comment that you made that this is a year of investment. Can you elaborate on that? Where exactly are you planning to invest? And what sort of efficiencies do you expect to see because of that over, let's say, in 2020?

Okay. Number one, the software with regards to automotive acquisition, the data that is available out there through a plethora of sources is very robust. So when we started in the powersports business, there wasn't much to grab. Obviously, we have a lot of Wholesale Inc. data, but we also have all of the available retail data via scraping tools, et cetera. And we also have all of the data feeds live real time from the likes of Manheim, ADESA and others. So we've got a lot of wholesale data, real time wholesale data, real-time retail data to drive a much more robust platform to start with than what we had on the powersports side. So it's -- there's lots and lots of stuff out there. We have a lot of data feeds. And I would tell you, too, with regards to data, on the powersports side, we already have a lot of people wanting access to our data. Obviously, we're not in a position to do that at this point. But we think we already -- because of the amount of cash offers we've done, we have a database of current real market values that would be extremely beneficial to a lot of people out there whether they're new manufacturers or other users. And so over time, we'll work through various different ways to leverage those. Second part of the question was, I'm sorry, it's been a long day. What was the second part of your question?

Investments that you're planning to make in 2019, if you can help us think about where exactly you're investing, that will be great.

Yes. Well, obviously, we're investing in operations with a heavy emphasis on marketing. And I would tell you, in the letter, we have some numbers in there about our marketing expense on a per-unit basis. I think it's interesting to look at because if you look at other publics that are out there and look at what our current customer acquisition and total marketing and advertising spend on a per-unit basis, you start to understand why a high volume, lower margin with very little SG&A and CapEx all of a sudden makes significant financial sense. We have a -- we posted a CAC of under $400 a unit at this point. And I would tell you that for start-ups, it's unheard of. But even in established mature public companies, $400 is a very, very reasonable number. And as fast as our volume is growing, it creates a very, very sizable budget to be able to spend money to support things like automotive acquisitions and Classifieds and so forth.

A final question for me. Talking about ASPs in the powersports business, obviously, went up sequentially. Can you talk about what drove that? And secondly, is that continuing into Q1? And also, if you could help us think about the Q1 higher margin, is that just primarily seasonality? Or are there other things in play, maybe higher consumer sale?

Yes. It's seasonality both consumers and dealers. The way the auction system works, obviously, the more people you have in the lane, the more people you have online, the higher the valuations. So -- and then consumers, obviously, are marked up from whatever those valuations are whether that be us or other retailers. The -- can you help, I'm sorry.

I was talking of the ASP in the quarter, which is up sequentially for powersports.

Yes. ASP on powersports, I've tried to guide everybody to using a plus or minus $7,000 number. You're going to see quarters where it is higher than that. I don't think you'll see a lot of quarters from our data now, it's sizable enough. I think our low point was about $6,600. You will see in -- you saw it in fourth quarter, there's a -- that it had moved back up. You're likely to see it a little higher also in Q1. But that is driven by the mix of Harley-Davidson and non-Harley-Davidson. If you look at our website, if you see the percentage of Harley-Davidson's accelerate, the average cost of those is significantly higher than non-Harley-Davidson. So that's the cause of that. The ASP really isn't driven much by seasonality. When people need to sell, they need to sell. It doesn't matter what time of year it is. So it's really more about mix that drives that.

This concludes the Q&A portion of the call. I now turn things back over to Marshall for any closing remarks.

All right. With that, we'll make it short. We have proven competitive advantages. We are confident in our overarching strategy as we disrupt the $1 trillion vehicle supply chain in a very meaningful way. To say we're encouraged about the future would be a dramatic understatement.

I want to thank you all for joining our call. We look forward to seeing everyone on the road very, very soon. Thanks again.

This concludes today's conference call. You may now disconnect.