Good morning. My name is Jessa and I will be your conference operator today. At this time, I would like to welcome everyone to RumbleOn First Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Miss Whitney Kukulka, Director, Investor Relations. You may begin your conference.

Thank you, operator. Good morning, ladies and gentlemen. Thank you for joining us on this conference call to discuss RumbleOn’s first quarter 2019 financial results. 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, 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 statement 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 statement can be found in RumbleOn's periodic SEC filings including those factors discussed under the caption “Factors Affecting Operating Results and Marketplace 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 developments or otherwise except as required by law. During the call today, we will refer to non-GAAP financial measures which are intended to supplement though not substitute for our most directly comparable GAAP measures. Our shareholder letter which contains the financial and other quantitative informative we discuss today as well as reconciliation of non-GAAP to GAAP measures is also available on our website. And now, I will turn the call over to Marshall Chesrown, Chief Executive Officer. Marshall?

Thanks, Whitney, and thank you everyone for joining our first quarter 2019 earnings call. We're happy to report our strongest quarter to date outpacing our prior expectations. For a detailed discussion of our operating results, please review the shareholder letter we posted to our Investor Relations website. Our shareholder letter not only gives an in-depth view of our results operating highlights and business objectives, but also outlines our future expectations and answers many questions we hear from investors. Rather than repeating everything in the letter, I will make brief comments on our strategy, opportunity and expectations, and then Steve will provide some color on our financial results before we open the call to questions. In the first quarter, we sold 12,103 vehicles producing record revenue of $223.2 million and expect to deliver steady growth for the rest of the year. Based on what we are seeing in the business today and including our expectations for incremental revenue from cars and trucks in Q2, we anticipate total revenue in the range of $230 million to $240 million. Our first quarter results were driven by successful execution and integration. We continue to gain market share in power sports with consumer and dealer customers, and our automotive group demonstrated impressive growth in the first quarter. Growth in auto was in the legacy automotive business alone, without adding any additional sales channels. We are excited to introduce cars and trucks to the RumbleOn suite including buying and selling to consumers on RumbleOn.com and creating a virtual inventory for dealers on dealer direct. We now have over 2500 vehicles listed on RumbleOn.com and expect to include autos on dealer direct and RumbleOn classifieds in the coming weeks. RumbleOn is an innovative disruptor in an industry that has seen little improvement or change in its entire…

Thank you, Marshall. You can find a detailed discussion of our financials and our shareholder letter, so I'll hit on key metrics and our outlook for Q2 and beyond, before opening the call to questions. For the three months ended March 31, 2019 revenue was $223.2 million as compared to $8 million for the same quarter last year and up 92% over Q4, 2018. Revenue from Power Sports was $26.9 million and automotive revenue was $190.9 million. Gross profit was $14 million or 6.3% as compared to $8.8 million in Q4 of 2018. On a per vehicle basis, power sports gross profit per vehicle was $960 or 11.8% versus 8.6% for Q1 of 2018. Automotive gross profit per vehicle was $1072 or 4.9%. We incurred an operating loss of $8.3 million or $0.20 per diluted share, based on $20.5 million weighted average shares. Adjusted EBITDA for the quarter was a loss of $4.7 million. Adjusted EBITDA is defined as net loss, plus interest expense, net of interest income, depreciation, amortization and other non-operating or non-recurring income and expense items. As of March 31st 2019, RumbleOn had $10.9 million in cash on hand. Finally, we announced the pricing of $30 million aggregate, principal amount of convertible senior notes, as well as the pricing of a $9.5 million private placement. The offerings will expect to close today May 14, 2019. These capital raises will significantly strengthen our balance sheet and enhance our capital structure. We expect to use approximately $11.1 million of the net proceeds from the offering to refinance certain outstanding restricted indebtedness and the remainder for other general corporate purposes and expenditures necessary to grow the business. Pending these uses, RumbleOn may invest the net proceeds in short term interest bearing investment grade instruments. Marshall described many levers that we…

Thanks, Steve. We look forward to see investors on the road in the coming weeks. We will be attending Craig-Hallum’s Institutional Investors Conference in Minneapolis on Wednesday May 29 and D.A. Davidson's Annual Consumer Conference in Chicago on Thursday May, 30th. The following week on Thursday, June 6, we will be attending Baird's Global Consumer Technology & Services Conference in New York, and we have several more investor events planned in the coming weeks and months. In closing, let me remind you, that everything we have shared with you today has been accomplished in a very short window of time. As some of you are aware, I presented the idea of RumbleOn to Steve right over Thanksgiving of 2016. We had a soft launch of a test Website in July of 2017, and increased the initial funding of the company with an off list transaction on October 19th, 2017. Our team is incredibly proud and confident and Steve and I couldn't be more proud of all of them for what they have created in the less than 18 month period since interception. We certainly want to thank all of our investors for their incredible support. The RumbleOn team for their hard work and dedication, and all our customers for voting for RumbleOn with their hard earned dollars. As a great retailer of his time once said, growth is never by mere chance; it is the result of all forces working together. Clearly first quarter, 2019 was an excellent quarter for RumbleOn and we are excited to provide updates on our expansion, and quarterly results throughout the year. An operator will now turn it over for questions.

Thank you. [Operator Instructions].Your first question comes from the line of Steve Dyer from Craig Hallum. Please go ahead.

Thanks. Congratulations on the good results.

Thanks, Steve.

Power Sports gross profit was very strong in the quarter, better than we were expecting certainly. Curious as to sort of how much you attribute that to the ASP, looks like your mix was a little bit better in the quarter and then just how much of it is just you know strictly as a result of improving scale and the operational improvements you're doing?

Steve, I would say, from my perspective most of it relates to better data as our data and data gets better and better. We become significantly more accurate at valuation on the consumer purchase side. And we remain with over 90% of all the power sports being purchased direct from consumer. The ASP is really a function of mix between primarily Harley Davidson and non-Harley Davidson. And it continues to move around that you'll probably see that it is settled in you know somewhere as what we represented I think a couple of quarters ago. We're kind of in a plus or minus $500 range and we continue to test different thought processes etcetera on generating additional leads under the funnel. We certainly think that the increase in gross profit validates the model. And we anticipate to be able to continue that march.

Steve, I also think it validates the fact that in the fourth quarter, we decided to build inventory and not liquidate it because of the seasonality situation, now in Q1, we got the benefits of that.

Yes, I would say that's a good point Steve. I think that, one of the things that you will see us do in a much bigger way in fourth quarter this year is both on the car and truck side because the data is so available as well as what we now know from power sports. I would anticipate ramping in the December, January timeframe this year at a much higher level for anticipation of the spring market valuations.

Got it, helpful. You mentioned Marshall that the data is getting better. Are you able or I guess willing to sort of share what the cash off or take rate has been doing at least directionally as that gets better, and you're able to price better?

Yes. We're trying to move away from exact specifics because of the additional channels that we'll be bringing on – additional segments of a vehicle. I will tell you that month in, month out, the cadence is upward both on volumes as well as capture. We are finding a lot of things that are significant to capture rate. One of those being the classifieds, which we might expand on later. It does appear that classifieds as an example, it could be a very effective channel on its own to generate cash offers. And what I mean by that is, we're bringing people in for the anticipation of getting a cash offer for their asset, and they could be in multiple stages in the process of actually selling their vehicle. They could be just checking to see what the value is, because maybe they want to do something in the future, they want to find out how much underwater they are. There's a million reasons. But when we, what we're seeing in the early days, and we haven't put any real capital behind it, we will be here in the near term as the shareholder letter states. We see that the capture rates and the conversion rates through the classified channel might be stronger, and we think the reason might be, that once a person has gone out, let's say to Google and has searched where to list my vehicle for sale, they have already mentally decided to sell. And so they might be further along in the customer journey of actually liquidating their assets.

Got it, makes sense. A follow from me, just wondering if you could explain a little bit more about the thought around financing, the mechanics, around in other words, are you going to hold the loans for a period of time before you securitize them, or are they -- are the ever going to appear on your balance sheet trying to sort of gauge your risk involved in that?

Right. Yes, obviously, first off on the cash flow side of it, we -- we have a warehouse line identified that will carry the majority of the cash needs with regards to that. As we said they both are [Indiscernible] in the letter. We anticipate on the very high side $10 million at some point maximum use of capital to fund the short term ownership of these -- of these loans. But I would tell you that the basics behind it is, if you look back in the days of the big increase in Carmax's move towards higher volumes, back several years ago, and obviously Carbon [ph] is modeled today, a lot of it relates around their ability to create loans internally and give customers that fast service, so that they can -- so that they can shop openly on the website knowing that they can, that they can acquire financing. So it is -- it's all relates around sales to consumer, obviously there's no dealer financing, and we just see it as a huge opportunity. Because if you look at those companies, and where their gross margin continues to grow, it tends to be higher on the finance side of the transaction, which we have very little of that today. So between enhancing our percentage of retail transactions, versus dealer transactions, consumer transactions, versus dealers, and also that additional gross margin, we think it has some real significant opportunities. Now, we started this just so you're aware. We did start this back in, in fourth quarter. We brought on a gentleman by the name of Scott Raymer, who is very well known in the industry. As of late, he was in charge of all automotive lending for CRB. Prior to that, he was with companies like Long Beach Acceptance and so on and so forth, he’s very, very talented, very well known in the industry, and he brought his entire team on to assist in this program. So we're -- it's fully baked and ready to go, and I think you'll see us in the very near future. I think, we announced third quarter; we're just weeks away from actually booking our first our first loans.

Got it. Yes, that makes sense. One more for me and then I'll pass it along. Your gross profit GPU was very good in the quarter. SG&A was sort of on the high side of what we had anticipated. How do you sort of think about balancing growth in the future, and spending for growth versus profitability?

Well Steve, I'll see if I can touch on the SG&A being a little higher. I think, there are a couple of factors. One was, we came out of Q4 at about 17 million too, but that only had two months of Wholesale Inc and Express on it. So you know I got to take the additional month. Normally on a run rate basis in Q4, they were about 3.8 million a month. They came in -- we limited about $2 million of total expenses. So the net effect of on the $70 million is about $1.5 million, $1.6 million. We increased marketing $1 million and we had some implementation costs for technology of another 250 grand. And we had AutoSport come into the full for the $250,000 to $300,000. So when you add all up, you get to the 20. I guess the real question is, where does it go from here? We also had about $1 million of non-recurring in that 20. So I think the 20 number is probably we’re going to be plus or minus, you know a few bucks either way. But I think that's probably the more like the run rate today as you go forward.

Got it. That's helpful. Thanks guys. That’s all up. Thank you.

Your next question comes from the line of Llya Grozvosky from National Securities. Please go ahead.

Thanks guys. A couple of questions. You guys, can you break out the Wholesale Express and the Wholesale Inc for last year’s Q1. You have the number kind of lumped together in the overall. We have the motorcycle side for Q1 of last year, but just kind of curious how it broke out Wholesale versus Wholesale Express for last year?

We are going to file an 8-K on that, if not today, tomorrow with the breakout. So I'll wait until then, we're going to get our orders sign off today for that.

Okay. Can you also go into a little bit of the marketing strategy? Obviously, this is the beginning of a pivot, integrating the cars onto Rumbles Website. Kind of what are you thinking from a marketing perspective? How you plan on capturing sellers, buyers, mindshare for their vehicles, for their car -- for the cars?

Well I think that, we think, what we've learned on the power sports side is valuable on the automotive side as well. We have had a different approach in that regard, and we'll continue that march. Couple of things. First off, with regards to branding. We continue to focus group even down to the name of the company, whether that's the long term best strategy. The early results are, it is. But, we certainly continue to test that, and work on that in the open market. Obviously, it just went live. So we're going to be able to get a lot more information shortly. With regards to the overall strategy, I think you know as we've said in the past, the vision is to have a single platform, where consumers can buy, sell and trade and finance any of these vehicles. The one thing that is a void in the market is, if you have a motorcycle today, and your lifestyles may be changed and now you need to buy a pickup truck, you have -- you're forced to basically liquidate your motorcycle through the likes of Craigslist or whatever, because there isn't any other liquidity opportunities, because you can't really other than -- you can't really walk into the typical dealership and get any kind of reasonable valuation for an asset that they don't typically carry or sell. So we think to have a one stop platform is a major advantage, and it becomes significantly more efficient for the consumer.

Do you anticipate, a ramping up the marketing in terms of you know -- getting people to the combined Website with everything. I mean, I'm just trying to understand the marketing spend.

We're continuing to manage our marketing spend at a south of $500 per unit sold metric. And that's the way the entire market is measured --what regardless of who you look at. Now keep in mind, when we acquire consumers, we acquire them on both sides of the equation, because we're acquiring them to sell to us, and to buy from us. But, so that you can compare us, apples-to-apples to other automotive companies out there, you know being the remainder of the public companies we are doing the calculation the same as they do, which is the total marketing spend divided by the total amount of units sold. And, as this as these units continue to grow, we obviously continue to grow our spend. The spend, we will leverage a lot of our prior spend. Keep in mind, pretty much everybody that owns a power sports, that now there's millions of people out there that have visited our website, know RumbleOn, know what RumbleOn does. We have an organic opportunity, because the majority of those people as we can all assume also own a car. If we were to start off in cars and trucks, and move into power sports, we might have a 6% opportunity. But in this particular case, we anticipate we have more like a 99% opportunity to leverage the already millions of people that we already have in our database.

And Marshall just to be clear, if you're spending $500 per vehicle on a quarterly basis, and you're talking about 12,000 or so vehicles a quarter, we're talking about a marketing spend somewhere just about north of $1 million a quarter. Is that the right way to think?

No, no, no, no. We're talking about if you use say 13,000 units for second quarter, you'd be talking about a budget of north of $6 million.

$6 million, okay. And then my final question is on the Wholesale side. What percentage of the Wholesale, but this is prior to obviously combining your Website with Rumble? What percentage of the Wholesale cars were sold direct to consumer in Q1, I guess off their Website, kind of what was their percentage buying from consumers, selling to consumers?

Well, their acquisition from consumers is a little bit above 10%, but their distribution to consumers is about 10% which is where it was at with their legacy business.

Got it.

The only difference we did, with regards to their retail business is, we eliminated their bricks and mortar location, and we took them 100% online and converted them to one price selling and the -- and the pricing policies of a RumbleOn. And I would tell you that, their lead generation for -- on basically the same amount of inventory has grown exponentially.

Got it. Now I was just trying to get a baseline for to understand how it will look. Ultimately, I guess, not even in Q2 since we're halfway through, but ultimately in Q3, and then to figure out what the baseline was for wholesale buying from and selling from consumers to without you guys essentially. So, but thank you, it was very helpful.

Keep in mind the holes you’re referring to the automotive side of our business as Wholesale we won't be referring to it going forward. We've integrated now both companies and they are all -- they’re all a single entity at this point. So we're breaking it down for everybody. Purely power sports and automotive and soon to be recreational vehicles. Steve Berrard will….

On the baseline, keep in mind most of the retail and Wholesale was ingredients, not from direct purchases, from consumers. So I know where you're going to go. We'll try to give the combination of both, right. What we displaced now. How we started, and how many we acquired from consumers.

Right. Thanks a lot.

Yes, and we can't share a lot of -- we can’t share much with you, because the website went live on Friday. But I will tell you somehow without spending any money, they're already finding us, for -- for car cash offers, and we haven't even reached out to our database as of yet.

Okay. Thank you very much.

[Operator Instructions] Your next question comes from the line of Sameet Sinha from B.Riley FBR. Please go ahead.

Yes, thank you very much. A couple of questions here. So let me think about a couple of years down the line, Steve, you indicated a couple of onetime expenses this year obviously with the integration, the different technology investments. And can you help us think about how many of these do you think will drop off in let's say next year and the year after? That's my first question. Secondly, in terms of the marketing spend, you obviously spend to acquire customers as well as to sell customers. Now what percentage, what's the split right now if marketing spend between those two? And lastly in the financing business, can you help us think about kind of the revenue and gross profit opportunity there? And I have a couple of follow ups. Thank you.

As far as the one time, and I would say startup type of activities, I would have told you before the acquisition of Wholesale Express, we pretty much were getting to the point where a lot of that non-recurring onetime expenses were pretty much going to be behind us, and that's why I've never been a big proponent of adjusted EBITDA. But, since we've decided to go with finance company, we carry that expense from the last two quarters, and it's been significant. If you think about Wholesale, that whole integration of that entire business is taking place in the better part of three and a half, four months. So we have had a fair amount of onetime items. Generally I think, you'll start to see that subside rather dramatically in the second half of 2019. I would imagine that the $20 million, $20.4 million of SG&A that we're now running, that number probably we would lose a million and a half, a million, a million of onetime items and we may pick up a little bit on the other side as we grow. And I think, we're -- I don't see us being a big adjusted EBITDA reconciled to the net loss, net income kind of company.

I'll take the -- I'll take the marketing piece. The marketing split presently between acquisition, we break it out in three categories; acquisition, distribution and brand. Today, we are probably 80% in the acquisition side of spend, and 20% split between distribution, meaning retail advertising etcetera. I see that coming you know more in the line of in the 50:50 range as we move forward, but it will probably be a slow march, because we are going to put dollars towards acquisition of cars and trucks, and we also are going to add some marketing spend towards classifieds. Now keep in mind, all of these marketing spends are in the dollar amount and on a per vehicle basis that we shared with you on the earlier question. With regards to the finance company and what is the meaning of the revenue gross margin opportunity. I would be fairly modest at this point, because we are going to start off financing only power sports in the early months, and the average carry back on those loans is fairly small. So the income opportunity on a lower dollar loan, just give you an example. If you take a car ASP at say 21,000 to 22,000 a power sports would be 7 to 7500 ASP, that obviously drives your amount carried which thus drives your income opportunity. But as a percentage basis of gross margin, it will be very similar to the automotive side. We intend to bring cars and trucks into the fold. But we see the largest opportunity in the early days on the power sports side, because the amount of players if you will, participants, in the power sports retail financing world are fairly limited, they're pretty good, but there -- but there isn't very many of them. And we think that's where our biggest opportunity is. So I think it's, you know if you looked at cars, those opportunities are in the $1000 plus of additional gross margin range. I would say it'd be more in the hundreds on the -- on the power sports.

Sameet, if you're thinking – if you’re not thinking longer term, the effect, we think it could be a 2%, 3% margin increase for us, as we hit some kind of level of steady state maturity if you will. I think, as we get this launch, and as we start to roll it out, I think we have a better idea how that cadence is going to play out quarter versus quarter.

Got it. And a final question, in terms of the power sports business, what percentage of the inventory was sold to consumers versus auction or dealers?

It stayed fairly consistent, but keep in mind the overall is growing fairly rapidly. So it's growing at the same pace as our base business, but again, we think this finance company could have a meaningful difference in this -- in the split of consumer versus dealer sales. And the other thing that we are doing in that regard to enhance that. And the reason why we've used the term keep inventory turns below 30 days average days to sale is, presently we're in the 16 day to 18 day range, but we are as we add finance and we're starting to get better and better retail data. Our thought is – is that we will give consumers a window of opportunity ahead of dealers. And what I mean by that is, today, if we acquire a vehicle from you today, it's immediately available for sale to consumers and to dealers. But if we have meaningful data that says there's a high likelihood of that being very hot merchandise in the retail channel, we might give that an extra one week of life to consumers only prior to making it available to dealers. That has not been implemented yet, but it's certainly on the radar screen, and thus we're not seeing, we have an 18-day average days to sale although it is, we're saying, we're going to maintain south of 30, which again is 50% better than anybody that we're aware of in the vehicle business.

Sameet, the consumer sales were a little less than 9% of total.

Got it. Thank you.

Is there another one?

There are no further questions at this time. We turn the call back over to Marshall for closing remarks.

Okay, great. Well we really appreciate everybody joining us today, and we look forward to seeing a lot of you on the road in the near future, and some of you on the -- on the phone later today. Obviously, all of us at RumbleOn have increased confidence in the model. We've always been excited, but we're more excited today than ever, and we look forward to the future quarters, and we'll be reporting accordingly. So thank you again for joining us. Have a great day.

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