RideNow Group Inc (RDNW) 2023 Q2 法說會逐字稿

Greetings. Welcome to RumbleON's, Inc. Second Quarter 2023 Earnings Conference Call. (Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to Will Newell, Head of Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, ladies and gentlemen. Thank you for joining us on this conference call to discuss RumbleON's second quarter 2023 financial results.

Joining me on the call today are Mark Tkach, RumbleON's Interim Chief Executive Officer; Steve Pully, RumbleON's Executive Chairman; and Blake Lawson, RumbleON's Chief Financial Officer.

Our Q2 results are detailed in the press release we issued this morning and supplemental information will be available in our second quarter Form 10-Q that will be filed later today.

Before we start, I would like to remind you that the following discussion contains forward-looking statements, including, but not limited to, RumbleON's 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 and other SEC filings.

The forward-looking statements and risks in this conference call, including responses to your questions are based on current expectations as of today, and RumbleON assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. Also, the following discussion contains non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures, please see our earnings release issued earlier this morning.

Now I will turn the call over to Mark. Mark?

Thanks, Will. Good morning, everyone. Thank you for joining us for our second quarter 2023 earnings call. While I've met with some of you in recent months, I would like to explain to everyone why I returned to RumbleON. My long-time business partner, Bill Coulter and I, are substantial shareholders in RumbleON. RumbleON's share price performance and financial results over several quarters indicated that it needed significant change. As such, Bill and I ran a proxy contest, which ultimately resulted in me rejoining the company as interim CEO, along with a refreshed Board of Directors. We are rapidly bringing about the changes that we believe are necessary.

I've been in the powersports business for over 30 years. In 1989, I co-founded RideNow, a powersports retailer with Bill Coulter. Over those years, Bill and I grew right now into a premier nationwide destination to buy and sell motorcycles, ATVs and personal watercraft with 41 dealerships across the United States. Bill and I learned many valuable lessons about how best to serve customers and grow our thriving business, one that can sustain itself in various economic cycles and seasons. I know this industry and business very well, and I'm honored to serve as interim CEO and as a member of the Board of Directors.

Fortunately, the team that led right now to its success is largely already in place. You have already met Blake Lawson, who was appointed as RumbleON's CFO in January and previously was RideNow's CFO. Hundreds of other RumbleON employees have remained steadfast and the work that has driven the company for many years, led by the general managers of our dealerships, along with many dedicated people.

I'd like to remind everyone here what separates RumbleON from our competitors. RumbleON is well positioned in the powersports market is the largest North American powersports retailer providing both online and in-store options at 55 locations. We offer the best selection of our sports brands and models. We are the only powersports company with a nationwide used vehicle acquisition and resale program. And we are the only pure play public company in the industry.

RumbleON now has a very experienced and successful management team with some of us having over 30 years in the industry. We've developed deep relationships with our suppliers and vendors along the way.

Since I rejoined the company nearly 2 months ago, we have been building on these strengths. We've built a new business plan, which includes further cost-saving initiatives, improved inventory management and a more disciplined and strategic approach to acquisitions.

The first step is to rightsize our cost structure. We are implementing the $30 million in annualized cost reductions that Blake mentioned earlier this year. Additionally, we have identified another $12 million in reductions, totaling annualized cost savings of $42 million, with the full effect of these measures benefiting 2024. We believe we can further reduce expenses, as Blake will describe in more detail.

Next, we have opportunities to improve our inventory management in several ways. Over the last few months, we have dramatically reduced the amount of our used inventory that is more than 90 days old. We will look to be more precise in adjusting our inventory level to match seasonal demand patterns.

Our ability to buy inventory nationwide and our real-time knowledge of retail pricing for vehicles are huge assets that we will look to further maximize. As the only powersports player with a nationwide used vehicle acquisition and resale program, we have a great opportunity to capitalize on this source of high-margin business.

Longer term, we look to grow the footprint of our dealerships. We will do this organically and through accretive acquisitions in strategically attractive markets. The current management team has a long track record of acquiring and immediately improving dealership profitability through our best-in-class operations and economies of scale. We drive that profitability through the RideNow brand and culture, the technology platform, our ability to source and transport inventory nationally and our back office efficiencies.

The powersports dealer industry remains quite fragmented and we see ourselves as the first mover consolidator. While we work to adapt RumbleON for the current environment and make substantial changes to our business operations, we have also made significant improvements to RumbleON's financials.

We have reached an agreement with Oaktree Capital to favorably amend our financing agreement. We have agreed to sell certain noncore assets using the proceeds for debt reduction. We are planning to raise equity capital with the support of Bill Coulter, myself and other significant shareholders. We issued a separate press release this morning with more details. Our Executive Chairman, Steve Pully, will provide more details on these in our call.

There are 2 more important items that I want to mention. We are actively recruiting a permanent CEO. We're also interviewing for and looking to hire a new independent audit firm as Grant Thornton has chosen to not stand for reelection for the fiscal 2023 audit.

As you read in our press release from earlier this morning, we have revised our full year 2023 guidance. It's important to know that we understand exactly the reasons behind this revision and have already began to remedy them. The reasons were primarily related to used inventory levels and operating costs, both of which Blake will address shortly in more detail.

I will now turn it over to Steve. I'll let Steve introduce himself and discuss his areas of focus.

Thanks, Mark. I want to express my excitement and gratitude for being part of the team at RumbleON. And for the hard work the team has done over the past few months, getting us on track to accomplish our initiatives and bring about real change. As Mark mentioned, I was recently appointed Executive Chairman. Over the course of my career, I have served on over 30 Boards of public and private companies. I have been the Chief Executive Officer of a retail-focused manufacturing company. I've also been an investment banker and an attorney.

As discussed, one of our immediate priorities has been to work with our partners at Oaktree Capital management to reach a more optimal capital structure. I'm very pleased to update you on our progress. We have received covenant waivers for the second quarter and third quarter of 2023, and we have negotiated more flexible covenant requirements for the following 3 quarters, providing us with a good runway over the next 12 months.

We are taking steps to meaningfully improve our balance sheet. We have signed a letter of intent to sell our RumbleON finance portfolio of loans. We believe that gross proceeds will be at least $24 million, with $15 million available to reduce our debt to our lenders. We anticipate this transaction will close in the third quarter.

We also have signed a letter of intent to sell 9 properties with leaseback provisions. We expect this transaction to close in the third quarter as well. We anticipate gross proceeds of $56.9 million with approximately $55 million that will be used to reduce our debt. We have leased back these properties for 15 years. The initial annual rent will be $4.3 million and it will increase by no more than 2% per year. We are also looking to exit leases on properties which are no longer core to our business plan.

In conjunction with these modifications, we are announcing that certain large shareholders, including Mark and Bill, have committed up to $100 million to support a new equity raised by the company. The company is planning to file a registration statement, detailing a rights offering that the large shareholders will backstop. The net proceeds will allow the company to both reduce our obligations to Oaktree and fund future accretive acquisitions.

Under the recent amendment to our credit agreement, we will be required to apply 1/2 of the proceeds received from the equity raised transaction to the repayment of debt. The rest will be available to fund the growth and development of our business.

We are actively recruiting a permanent CEO to continue the vision of management and the Board to elevate this business to even greater success. We have retained a nationally known executive recruiting firm to assist in the search for a permanent CEO, and we hope to have the individual identified very soon.

We plan to implement further changes to enhance the corporate governance of RumbleON even beyond the recent refreshment of the board. First, we intend to propose to the shareholders next year that the Board of Directors be declassified such that each member stands for election every (technical difficulty) in the interest of shareholders. Second, we will ensure that the compensation programs for our executives are well aligned with shareholders. Third, we are planning to add Mark Cohen to our Board. Mark is the CIO of Stone House, which is a large investor in our company. This is expected to take place after Mark completes our normal governance committee onboarding procedures. RumbleON will be a company where shareholders have meaningful input and engagement. As we move through the year, we will update you on our continued progress. I would like to thank our dedicated team members for their extraordinary efforts.

With that, I will turn the call over to Blake to walk through our second quarter 2023 financials and outlook in more detail.

Thank you, Steve, and good morning, everyone. As Mark mentioned, there have been many changes at RumbleON since we last spoke. I'm grateful to be working side by side with Mark again as we endeavor to stabilize and improve the capital structure, grow the business sensibly and create lasting shareholder value. As Steve mentioned earlier, we have favorably amended our financing agreements with Oaktree, providing the necessary runway to execute our business plan.

We have begun implementing the $30 million in annualized cost reductions that we outlined in previous conference calls. We also have targeted an additional $12 million in annualized cost savings, bringing our total cost savings to $42 million per year. The full effect of these cost reductions will flow through in 2024.

Cutting expenses out of an organization is not always immediately visible and often there is a tail that can lag for a while. For example, we made the decision at the end of Q3 last year to exit the automotive business, which I'm happy to report was finally completed at the end of this quarter. This segment will now be classified as discontinued operations in our financial statements going forward.

Our cost reduction so far have largely focused on discontinued operations and corporate level expenses. We are now in the early stages of identifying incremental cost savings at dealers, distribution centers and at our unused or underused facilities, which will result in additional savings down the road.

As Mark mentioned, we have already improved our inventory management. We have done so in several ways. Over the last few months, we have dramatically reduced the amount of our used inventory that is more than 90 days old. We will rely on our experienced powersports team to be more precise in adjusting our inventory level to match seasonal demand patterns.

Our unmatched ability to buy inventory nationwide, coupled with our real-time knowledge of retail pricing for vehicles are huge differentiators that will allow us to further maximize our competitive advantage. As the only powersports player with a nationwide used vehicle acquisition and resale program, we have a great opportunity to capitalize on this source of high-margin business.

Now I would like to talk about our second quarter financial results and update our 2023 outlook. All comparative financial results are sequential and do not include the discontinued automotive operations unless otherwise stated. Starting with the second quarter units, we sold 20,277 retail units, including 13,126 new units and 7,151 used units, up 17.7% from the prior quarter. Although we expected Q2 volume to outpace the prior quarter due to seasonality, new unit growth was even stronger than expected, increasing 25.8% quarter-over-quarter compared to 17.5% over the same period in 2022. Normalized new inventory levels year-over-year are a major driver for this trend.

Moving to revenue in the second quarter. We generated $382.7 million of revenue, which is up 14.5% or $48.3 million from the prior quarter. Revenue from finance and insurance increased 22% from the prior quarter due to increased retail units sold, while parts, accessories and service sales increased 10.7% quarter-over-quarter, demonstrating our continued commitment to this high-margin profit center.

Total second quarter gross profit was $106.4 million, up $16.1 million from the prior quarter. Gross margin was 27.8% compared to 27% in the prior quarter. Gross margin has troughed and normalized. Although gross margin is significantly down year-over-year compared to Q2 2022's pandemic high of 13.3%, we knew that level was not sustainable long term. The year-over-year reduction in gross margin was driven entirely by reduced vehicle margin of 14.6% compared to the pandemic high of 21% last year.

The margin reduction is attributable to normalized supply and demand economics, pressure on lower-tier credit buyers due to rising interest rates and inflation as well as lower-than-normal used unit margins that were largely self-inflicted from purchasing and liquidation decisions. However, worth noting we have moderately increased powersports gross margin above the prior 2 quarters.

Total powersports gross profit per unit was $5,349 flat sequentially and down $1,155 from the prior year. Although GPU was down significantly from last year's all-time high pandemic level, it has stayed consistent over the last 2 quarters and remains significantly higher than the pre-pandemic 2019 GPU of $4,900.

Turning to operating expenses. Total second quarter SG&A expenses were $100.3 million, up $14 million or 16.3% sequentially. If we exclude expenses related to key onetime occurrences, second quarter SG&A would have been flat sequentially, while revenue was up $48.3 million. Additionally, we expect to show a substantially larger reduction in SG&A expenses over the next 2 quarters due to recently implemented cost-saving measures.

Within SG&A, total compensation was $57.1 million, up from $51 million in the first quarter of 2023, but down to 14.9% compared to 15.2%. Stock-based compensation was $4.9 million, up from $2.9 million in the first quarter of 2023 due primarily to triggered early vesting of former management.

Marketing, advertising and selling expenses were $8.5 million, $2.7 million up from $5.8 million in the first quarter of 2023. Professional fees were $6.7 million, $2.9 million, up from $3.8 million in the first quarter of 2023 as legal fees continue to remain higher than normal. Technology, facilities and general and administrative expenses increased marginally, up $0.3 million combined or less than 1.5% sequentially.

Adjusted EBITDA was $23.6 million in the second quarter, up 118.6% from the first quarter of 2023, driven by normal seasonal trends and offset by lower-than-expected unit sales in GPU. Adjusted net income was $0.3 million and adjusted diluted earnings per share was $0.02.

Turning to the balance sheet and cash flow. At the end of the quarter, we had $44.4 million of unrestricted cash. We have a $75 million used floorplan facility with JPMorgan with untapped capacity of $42.9 million, which combined with unrestricted cash provides liquidity that can be used to help fund the business. At the end of Q2, we had $45.3 million of unfloored equity in our used inventory. As Steve mentioned, we have signed agreements to sell noncore assets that will greatly improve the balance sheet.

Now let me provide additional details on our 2023 outlook. For the full year, we now expect powersports and transportation revenue combined to be within the range of $1.38 billion to $1.48 billion. For 2022, the comparable figure was $1.46 billion, reflecting our assumptions for flat revenue growth year-over-year. This is mostly driven by softer sales of used vehicles and primarily offset by a rebound in new vehicle sales.

We expect to generate a full year gross profit per unit similar to Q1 and Q2 of $5,300 to $5,400. That compares to $6,159 in the prior year 2022 and below the $5,700 GPU guidance we gave previously.

We now expect adjusted EBITDA in the range of $55 million to $65 million for full year 2023, driven primarily by lower than previously modeled volume, used vehicle GPU and the layered impact of cost-cutting initiatives recently implemented. The range is somewhat broad because new management is just getting started fully identifying the business needs, and this requires time to rightsize some short-term inventory issues.

I want to provide further color and guidance for 2024, which will show the full benefit of the cost savings and capital restructuring initiatives we have been working on. As mentioned previously, we have letters of intent and are very close to purchase agreements with 2 separate buyers to acquire real estate and finance portfolios. The net impact of these transactions will allow RumbleON to pay down $70 million of term debt most likely within Q3, but certainly before year-end.

We have also committed to an equity raise of $100 million, which is entirely backstopped by our largest shareholders who are fully aligned with the unique opportunity to profitably consolidate the retail powersports industry. The economics of the $100 million call for $50 million to further reduce debt and the remainder for growth initiatives in the form of accretive acquisitions. These decisive actions allow management flexibility and turn to implement our plan.

Turning to the 2024 guide. Full year forecasted baseline revenue is $1.58 billion, which anticipates modest improvements in our used unit volume and margin as we get back to focusing on our used inventory playbook. We project GPU will remain relatively flat at $5,400. Baseline adjusted EBITDA for our 2024 forecast will be $80 million to $90 million.

In closing, I would just like to thank the incredible and dedicated employees of RumbleON right now and also express for their commitment and effort during this transition.

And with that, operator, we will open it up to questions.

(Operator Instructions) Our first question is from Eric Wold with B. Riley Securities.

I guess, Blake, maybe trying to understand the Q2 a little bit more, I guess, $24-ish million of EBITDA. Previously, on the Q1 call, you noted that April EBITDA was above Q1, so call it, $11 million, subsequently noted that May -- the trends continued into May. So it looks like June really reversed core. So maybe help us understand what happened so dramatically in June to reverse the strength you were seeing in April and May?

Thank you, Eric, and I appreciate the question. I would say some of the drivers, we'll continue to see a little bit of issue with credit on the low tier. And obviously, it's been a really hot summer, which on record, which has kind of impacted some of our markets. and just our used inventory as we have to -- we had a bunch of inventory over 90 days that we've significantly reduced. And so I would attribute it to that.

Okay. And then my follow-up question. What's -- maybe help us understand also what's so different or what's changed with the used inventory procurement process now versus what was in place either under prior management under the prior system. What's any different now versus what was not being done before?

Eric, this is Mark Tkach. I'll offer some light onto that. I think that -- I think we're going to -- a couple of things. One, we're fine-tuning the process of acquisition, basically our cash offer program. I think there's -- there can be better buying done at certain times of the year. We need to really load up for the full selling season and maybe not have to carry that inventory. The length of maybe some of it was carried in the past. I think that we need to -- we really need to focus on that, number one. We can also save a little bit of money. I think actually there's a lot of money to save on the freighting of this product. We've really spent a lot of money moving product around the country. So we're going to -- we're not giving you any real -- too much secret sauce here, we're going to really cut back on the freight that we're spending. I think there's literally millions of dollars of freight that could be saved. So I think that alone will be a massive impact on the handling of our used product. And that's really our bread and butter.

Our next question is from Craig Kennison with Baird.

I wonder, you provided a very helpful EBITDA guidance for 2024. I wonder if you would share with us what the pro forma debt level would be after the backstop secondary and after the sale leaseback and any other changes you're making to the capital structure.

Yes. So our commitment is to eliminate $120 million of debt off of our term loan with Oaktree. And then we'll also be in conjunction taking out our smaller sector Credit Suisse facility that was used to finance our RumbleON finance portfolio. I think that's around $18 million. That will also come off of the debt stack.

Got it. So if I do the math right, would that get you to debt-to-EBITDA of 3x or less on pro forma basis?

Based on our 2024 guidance? Or the 2023 guidance?

Yes.

'24?

2024. Yes.

Yes. It will definitely hit that market. And also for the first couple of quarters of 2024, our covenant ratio is significantly higher than the 3.75 you might be used to. The 3.75 kicks in again in the third quarter of 2024. So we should be well positioned to get our strategy to have the full runway we need to implement our strategy, which consists of getting the used bike business back going, getting those margins. That's where the real opportunity is with these margins and then our cost-cutting initiatives, too. Anything else, Craig?

Yes, if I could follow up on that. I understand what you're saying on the used side, it does feel like a big opportunity. At the same time, this quarter, you kind of reduced your ratio of used inventory sales, and you talked about maybe the aging of that inventory being an issue. Like what's the strategy to make sure you can grow used business without necessarily bringing some of those aging issues into play.

Craig, Mark, again. I think -- we want to be more specific on what we're buying. We want to buy more -- I know it's not simple, but it's not really a simple process. We want to -- we really want to buy the right product. We want to buy it at the right time, and we want to buy it at the right price. And it's as simple as buying low and selling high. I mean it's not easy. So -- but we will turn that inventory. We're not going to hang on to it. I mean we're going to basically go through that process, bring the inventory in. If it's not really what we want or it doesn't turn out to be exactly what we want to or it begins to age, it's going to go much quicker, and that inventory will be gone within that 90 days as opposed to maybe some of the things that we're having to unload right now.

Our next question is from Michael Baker with D.A. Davidson.

Okay. I just -- I guess more for Mark, just ask a big picture question, if I could. Just talk about your vision for RumbleON and how that longer term and how that might differ from the previous management team's vision. What were they doing wrong besides I guess, evidently not buying the right used inventory at the right time at the right price for the right products. But beyond that, are there -- I think you sort of touched on everything here, but can you sort of articulate an overall strategy or vision that might be different from your predecessor?

Sure. I appreciate the question, Michael. I think that other than the inventory, which is a big, big part of the process of what we do here, I think that our acquisition strategy going forward is probably a little different as well.

Our history says we bought product -- we bought dealerships that were underperforming generally, right now has, again, been in the business for 30-plus years. Bill and I have generally bought dealerships at a discount and put in the correct or what we feel were correct processes and procedures, the right people and take those dealerships that maybe we pick up at a free multiple. And we just basically create more profit out of that process and procedure that we've done for 30 years. We can take in the -- and really increase the return maybe a 6 or 7. So we've done in the past.

We bought stores that were underperforming at even a 6 or 7 multiple, but they paid for themselves in a year with the right people, the right processes and the right procedure. So a big part of our acquisition growth is based on that type of a philosophy. And it's been very successful in the past, and we expect it to be very successful in the future.

So if I could follow up on that and the inventory question. So one, on the acquisition of dealerships, can you talk about what the pipeline might look like? And what annual store growth might look like? Or how many dealerships over time, just some flesh out that store strategy, if you will. And then on the used inventory, correct me if I'm wrong, but it sounds like you pulled back in the near term, got rid of old inventory, but this isn't a pullback on the used business. This is just clearly the deck to get it to sort of positioning yourself to do better in that business, but still as committed to that used business as always. Is that the right way to think about it?

Yes. That's a great notice. I mean we anticipate -- well, a couple of things. We anticipate the runway to really expand that.

Yes, I mean, as far as the pipeline goes, I know that we get and specifically Mark gets new deal opportunities daily -- well, at least weekly, if not daily...

Yes, there's -- again, this is a very fragmented industry, Michael. And there's probably 8,000 plus dealers out there. A lot of them are mom-and-pop still. They were enthusiasts. They're ready to get out, especially after the COVID -- the wave that they've experienced. They realize they have to get serious about doing business again, and many of them just want to ride into the sunset. So there's tons of opportunity for consolidation in the markets that we want to be in. So we're very excited about that. I am getting many calls. We've got a couple of deals we're looking at right now that we're -- not quite at the LOI stage, but we are close.

Michael, just an example of one. We've only done one this year right now, Tallahassee, but an underperforming store, they're -- I think their building burnt down. And anyway, we picked it up because it's in a market that makes sense to us in Florida in our footprint and with all the brands. And we picked it up for $3.3 million. And through June, it was at [880] of EBITDA. And so just double that for the year, and it just pays for itself in a couple of years. So...

And a quick comment on your used inventory. Yes, we're going after that tenfold. I mean that's really one of the unique things about this company. It's really what connected Bill and I to RumbleON in the first place. And we think that once we get our runway cleaned off here, it's just wide open. I mean, we're seeing great results with the small tweaks we've made to the cash offer program. We expect to make more, get the product in here quicker, get the admin done quicker, get it [treated] quicker and flip the product quicker. So that's really one of the -- I'd say, 3 of the main keys to keeping the aging at a minimum.

Our next question is from Seth Basham with Wedbush Securities.

My first question is just if you wouldn't mind adding some clarity on the specific covenants -- leverage covenant amendments in the next 4 quarters, into the four quarters ahead.

Yes. I don't have it actually in front of me, but -- so I don't want to quote the exact wrong term. But I can tell you that we've got the third quarter -- or excuse me, second quarter and third quarter of this year waived. And then we start in the fourth quarter at either [5.75 or 5.5]. And then it goes down -- steps down in the first quarter a little bit, steps down in the second quarter a little bit. And then it goes back to normal in the third quarter. So Seth, I will send you those -- that exact language after this call.

Great. And then just for purpose of clarity, based on your guidance for 2023, where do you expect your leverage to be at the end of the year?

Where do we expect our leverage to be at the end of the year?

Yes, your leverage ratio.

4.3.

Got it. And then my other question is just on the outlook for used versus new over the balance of the year. How are you thinking about unit sales trends for the back half relative to what you experienced in the second quarter in both used versus new?.

I'd say, by the end of the year, we'll probably get the ratio down to 1.5:1 used to new.

Got it. And by the end of this third quarter, do you expect your used inventory days outstanding to be normalized?

We're hoping by the end of the quarter. We're running a lot of product through several auctions around the country right now. We've got some campaigns that we're going to be starting here soon, to also finish out the season in some of the northern facilities and dealerships that we're working with and everything under the snowbelt line was getting ready to cool off. We hope this 100-degree weather has not been generous to anybody on a motorcycle. But we hope for that to abate a little bit as well, and we'll really target the remainder of what we feel as excessive as well as we're going to gain a lot of the new product to see how fast we can turn it and really test our capabilities on the new tweaks at the cash offer program.

Got it. And my last question, you talked pretty extensively about your vision for the business and the used market overall. When you think about some of the facilities that have been built over the last couple of years, including the one in Atlanta, the processing facility. Is that still part of the go-forward strategy? Or are you going to eliminate that portion of the strategy?

We're still evaluating. We made a run through all the facilities up and down the East Coast. And we see value in certain markets. We just haven't fully evaluated Seth, which ones to really fight harder for. The nice thing about the facilities that are there currently is an auction company, NPA has got facilities close by. So we don't have -- if we decided to move some of that product out of there and make that change, it's not a big problem for us. But we're still not 100% committed. There's a lot to cover here in the last 2 months, and we're just not 100% sure what direction we want to go in all the facilities.

Our next question is Eric Wold with B. Riley Securities.

Just a follow-up question. I appreciate it. So kind of just looking at the guidance between '23 and '24, it's about 10% or so top line improvement in 2 years. How much of that is organic versus acquisitions? Is there anything acquisitions in there? What acquisition that will be incremental? And then within kind of that guidance improvement or the revenue improvement, when are you expecting kind of consumer demand trends to pivot to be more positive or the driver more of that demand will remain relatively constant, but you'll benefit from a smarter inventory buying and having the right inventory on hand?

Yes. Thanks, Eric. So the guidance is baseline. So it's all -- as you see it now without acquisitions, and so that slight increase in revenue is coming from the used side and not really that demand will pick up much, but that we will do a better job of implementing our cash offer tool and getting the right vehicles in the right places at the right time. So...

Eric, the thing about our business, people love their toys and really the demand -- it's not generally -- it doesn't really rescind on the consumer end. Financing, that's a little bit out of our control, but the people, they just don't stop coming in the door. They want the new product. And the manufacturers the great thing about all the manufacturers is they've always -- they're all working on new products and nothing excites the consumer more than the latest greatest thing.

So the demand, I think, is always there. We don't obviously have a crystal ball on how high it will go or when it will dip, but weather is a factor. Again, 100 in the south, it's been 100-plus degree setting records, that can hinder the business a little bit. People still come in, but they're in an air-conditioned showroom. They're not out in the desert suffering the consequences of that.

So -- but demand-wise, it very rarely wanes. And the outside things that we can't control, well, that's a little bit of an issue occasionally. But manufacturers are ready to incentivize. They've got some incentives going right now. They're working on buy down rates, trying to keep the financing down around 3.99%, 4%, 5%, and that's really making it a winner for the consumer.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments.

Well, I just want to thank everyone for the questions, for the interest as RumbleON transitions into our new growth chapter. We appreciate your support for myself as well as the RumbleON team. And we're excited to make the necessary changes that we feel will drive shareholder value. Thank you very much.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.