Greetings, ladies and gentlemen, and welcome to RumbleON's First Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Will Newell, Head of Investor Relations with RumbleON. Thank you.

Thank you, operator. Good morning, ladies and gentlemen, and thank you for joining us on this conference call to discuss RumbleON's first quarter 2023 financial results. Joining me on the call today are Marshall Chesrown, RumbleON's Chairman and Chief Executive Officer; and Blake Lawson, RumbleON's Chief Financial Officer. Our Q1 results are detailed in the press release we issued this morning and supplemental information will be available on our first quarter Form 10-Q will be filed later today. Before we start, I'd 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 and 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 Marshall. Marshall?

Thanks, Will. Good morning, everyone, and thank you for joining us for our first quarter 2023 earnings call. We delivered encouraging results this quarter and are just beginning to see the benefits of the proactive measures we took in the fourth quarter of '22 in response to economic challenges that really began in Q3 of 2022. Despite continued macroeconomic headwind, our team continues to work toward our 5 key priorities for 2023, and we are confident about RumbleON's position as we build the leading destination for all things powersports. Before discussing first quarter results, I will address the preliminary proxy statement filed by 2 former directors. Our Board is working diligently on resolution of this issue. Our primary focus is around creating a smooth transition over the next 65 days leading up to the annual shareholders meeting and not a fire-ready aim approach. You should expect a series of public communications from the company as we move towards a positive resolution. I would urge you to continue to be patient. We will address all concerns and comments with accurate data and we have not and will not make any decision without first and foremost considering the best possible outcome for shareholders. With that, I'll begin with a high-level overview of our first quarter 2023 performance and guidance followed by our 2023 objectives before turning it over to Blake to discuss important financial metrics. First quarter overview. In the first quarter, we experienced normal seasonality delivering revenue and unit sales in line with our expectations. We achieved this in the face of unprecedented industry-wide new vehicle inventory rebalancing over the course of the 4Q and 1Q of this year, not to mention significant atypical seasonal weather disruptions. These factors have not altered our 5-pillar plan to profitably grow our company for…

Thank you, Marshall, and good morning, everyone. As Marshall detailed, we remain focused on our key priorities for 2023 and continue to take proactive measures that will benefit our financials throughout the remainder of the year and beyond. As we navigate this dynamic environment, my team is managing our balance sheet and P&L to ensure our plan for self-funding is achieved. Now I will begin with a review of our first quarter financial results, followed by our outlook. Beginning with first quarter units, we sold 17,336 total units, comprising 10,436 new units and 6,900 used units, both down 1.9% sequentially in the powersports segment. As we mentioned last quarter, we took a strategic approach to decrease our purchase of used inventory. This decision was made because the normalization of new inventory happened faster than anticipated and the data from late September indicated a greater decline in the value of used vehicles compared to earlier quarters. While we recently started to increase our used inventory acquisition, as to date, our used inventory is reduced nearly 40% from the peak in October. And we don't anticipate returning to the peak prior year used inventory levels. The new-to-use ratio for Q1 was 1.5:1, in line with the prior quarter. Our focus remains on both new and used products, which helps us maintain our status as a good OEM partner, supporting the brands we represent. As a reminder, we maintain a competitive advantage with our cash offer tool and our ability to quickly and effectively source used inventory, moving it to where it is most needed. We continue to closely monitor days supply, and we strive to maintain significantly more used inventory that was held prior to the RideNow, RumbleON merger. This level of used inventory allows us to show the customer a much…

Thank you, Blake. To close out, as you know, there's a lot of noise out there right now, and we are doing our best to navigate through the challenging environment and deliver strong results to drive long-term shareholder value. We remain fully committed to our business plan and the 5 pillars of our strategy. There is no change in our plan, and we are marching forward with a relentless focus on execution. I want to take a moment to recognize and thank the incredible team at RumbleON. We are fortunate to have such a talented and dedicated group of individuals working together towards our shared goals. With that, I will open it up for questions.

[Operator Instructions] Our first question comes from Eric Wold of B. Riley.

So two questions and one follow-up. I guess, one, can you just give more color on the timing and kind of details around the fulfillment that are opening in Bristol, I guess a couple of subquestions. When will that be open to the public? How large of a market do you envision for that center that you haven't tapped before? How quickly can you source inventory for the location will be new and used? And is that included in guidance?

Okay. Well, you've added a lot of questions in there. Yes, good question. We -- I kept my comments to a light war this morning compared since we already spoke to everybody 60 days ago, there wasn't -- there wasn't a whole lot for me to comment on. But good question. As far as the Bristol market, the Bristol market is intriguing for a whole lot of reasons. Number one, there's approximately 90 million people within a 250-mile circle of that location. It's about 30 -- around the 95, about 30 miles north of downtown Philadelphia and about 30 minutes from the tunnel. So we think the access is pretty incredible. Our wholesale distribution partner is 2.5 miles away with their Philadelphia facility. And so we're super excited about it. We are in -- the facility is pretty much complete with the retrofit like within days. And we are in the process of hiring and training for that facility. Obviously, we'll start small and manage costs accordingly. But I think just the two main things of being getting access into that Northeast, which is where we buy a large percentage and always have of our vehicles direct from consumers. They're high-quality vehicles up there because of the weather, they're all kept in the garage and they're a much better-quality vehicle than those say that come out of the Southeast. As far as it is not included in our guidance, we've mentioned that in past calls. So I think when we look at our guidance and we look at adjusted EBITDA for the month of March and again in April, I think certainly you can walk to the $100 million. We think that some of these opportunities, along with additional expense reductions that we've outlined that we've already identified that we will be implementing that don't affect our retail business, we're comfortable with the guidance.

Got it. Just one last piece on that one. It is going to be new and used, correct?

No. Well, yes, it has some new representation, but mostly secondary lines just because we did -- we made the determination to not go out and buy existing franchises. Now that isn't to say we wouldn't, okay? But right now today, the important part is to improve our gross profit opportunities with regards to preowned by getting our product closer to processing of those products. This facility will have the most reconditioning capability of any facility we have in our entire group.

Got it. Perfect. And then my follow-up question [indiscernible] a lot. But you said inventories are down on used 40% of where they were at the peak in October still down from kind of where they were in 2019. where do you expect the inventory to be by the end of the year for powersports and kind of what's an optimal level that you want to operate on kind of on a going-forward basis relative to sales?

Well, new should move around a little more than new from a days supply perspective just because of the way that these vehicles are built and delivered from the manufacturers, so they'll bounce up and down. On the used, our target today is about 90 days supply, which is extremely manageable from a depreciation perspective. As you know, powersports don't have nearly the depreciation such as automobile but it makes it extremely manageable. I would say that we overshot our target. Our business was probably better than we anticipated on the used side. And the inventory at year-end will be tied directly to day supply. We have the opportunity to turn on and off the throttle as we see fit. So we are back in the business of buying certainly not as aggressive as we were in the very early days because keep in mind, the stores -- a lot of the stores that we acquired didn't have any used inventory to speak of, especially on the Freedom group. So we were backfilling very aggressively and we reap the benefits of that early on. But obviously, with the events starting in June, we continue on a good day supply. In fact, I think coming into -- going through third quarter, we were around 75 to 80 days fairly standard. This is something I personally watch on a daily basis. And I think that it jumped up just like overnight and primarily that was because of the shock of what was going on with gas prices and everything else. I think some of that has normalized. Again, as I said in my comments, Eric, there's no lack of demand here, but you can clearly see from our ASP being higher with less side-by-side business, which is typical at this time of the year, which is our higher-priced units, we still actually outperformed on an ASP basis with less unit sales. So clearly, the pressure is -- which is always the same, right? And where does the pressure the most, it pressures is on the low end of the used market because that's where the low-end buyer. That's where that 650 credit score is lean. There has been no change, a 700-credit score can buy anything he wanted 6 months ago and he still buy anything he wants. But make no mistake about it, in that lower price unit with any type of credit challenge. It doesn't mean that they don't have credit available to them. It's just the cost of that credit could be significantly different, which would make it unaffordable for that particular consumer. Long answer, sorry.

The next question comes from Michael Baker of D.A. Davidson.

I wanted to ask you about what you're seeing competitively. In particular, we know that one of your suppliers has launched an online website, which at least on the surface, looks similar to years. They've ramped to about 65,000 units available. How do you see that competition? And what else are you seeing in terms of competition, both online and in physical locations.

Michael. Great question. And I think getting some clarity out there would be helpful. This is a listing site, no different than HD1, no different than cycle traders and so forth. I think it's a smart move by Polaris to be able to leverage the used business and provide leads for their dealers, which we are their largest dealer. So we welcome the opportunity. We do not see it a competition at all. Keep in mind, these are purely lead gen. These are not transactional website. We are a transaction company, okay? So my position, unlike possibly some of the OEMs' comments in the past, my position as every dealer should have his vehicles listed on every possible website that creates any type of ROI. The Internet as much as we hate it, on one hand, is not a winner take all media. You want to be in front of everybody with your goods. So the fact that people can now go to Polaris.com and be able to see all the used product that their dealers have available for sale. We think it's the opportunity for additional sales, and we welcome it. And I think you and I talked Michael about our relationship with Polaris. We just think they're super proactive. We were well aware this was coming. And under no circumstances, do we see anything from a competitive nature whatsoever.

Okay. Makes sense. Let's see, by way of follow-up, let me ask about the ramp that you're seeing in March and April. Is that -- when you say a ramp, so we know that this should normally be a seasonal ramp this time of the year. Is this ramp above and beyond that? In other words, you're seeing is March and April better than expected? Are you seeing growth on a year-over-year basis? Just more color on the improvement that you've seen in the last few months.

Yes. I think that -- I think I've been pretty transparent with all of you that November, December, January and February, not only are they typically our slowest months, but they were significantly impacted and all of the disruption that was out there, et cetera, with the consumer has certainly pressured us. We seem to feel a little normalization. We were very encouraged with the March numbers. As Blake pointed out, if February would have continued anywhere near -- excuse me, if March would have continued anywhere near February, we would have a completely different message today, and it would have been more of a dramatic reversal of the plan, at least from a timing perspective and a dramatic cut in expense. I -- as you guys -- ones that know me, I'm an optimist in all regards, but experience would tell me in the past that while we think we might still be in problem waters, we might be coming out of them faster than we think. And we just want to make sure that we're nimble enough to be able to take advantage of that situation. And I believe we are. This is just -- every time that we've been through this, and I've been through this and our team, all of our team, Blake, myself and others have had lots of experience in '08, '09 and various other downturns. And I just continue to tell everybody that the worst mistake we can make is overreact. We have to be prudent. We have to manage cash. We have to do all those things, of course, and we have to manage expenses. Adjustments to SG&A, by the way, and I know you didn't answer the question, but amendments to SG&A are -- should always be an ongoing process of…

The next question comes from Seth Basham of Wedbush Securities.

Given your priority around the balance sheet this year, I was hoping to ask a couple of balance sheet questions. First, what was the leverage ratio calculated under your debt covenant at the end of the first quarter.

Roughly 3.5.

Got it. And what's your expectation for the end of the second quarter?

To be below 3.75.

Got it. Okay. That's helpful. And in terms of the principal debt paydown that you referenced, how big a priority is that? Are you in the process of selling $60 million worth of noncore assets? Or is that an auction that you are still considering?

No, that is that's fairly certain. We have deployed third-party representatives in that regard. And I would say in the very near term, you should hear probably the first of those moves. So those are imminent from our perspective, but we don't want to announce it until the fat lady sings, right?

Got it. Okay. And that's incorporated into that expectation to be under 3.75 at the end of the second quarter.

Correct. Obviously, the only covenant that we have to live within right now that we have to watch very closely is that debt covenant. And I think we've got a very, very reasonable plan to make sure we maintain that. I think Seth, that you certainly know that the current challenge in that regard purely relates to dropping off. It's operated on a trailing 12, and we have a very, very strong first and second quarter of 2022 that are falling off. And so that added another element of challenge, but we're -- we think we have it well under control.

Got it. That's helpful. And then lastly, regarding the broader environment, the improvement that you're expecting within that expectation, what are you anticipating from a credit availability standpoint or cost of credit standpoint for your customers? Do you expect it to tighten further and restrict your ability to drive sales?

Yes. I mentioned in the call. Obviously, we don't guess on this. We involve the communications with our top lenders. Blake just had a conversation in the last couple of days with our largest noncaptive lender which does a lot of our used business for sure. And their comment is, they are not -- they don't see any tightening as far as eliminating the availability of credit, where the tightening is, is in the low end of the market and subprime primarily. And it isn't that the customer can't get financed. It's just he might have been a Tier 4 and now he's a Tier 5 and that Tier 5 drives 2 different things. Either we have to lower the price of the unit, which affects our GPU. And even with that, maybe the customer with that higher interest rate [can't] afford the payment. So that's where the pressure comes in. But I think the -- where our encouragement comes from, Seth, really revolves around traffic, right? I think sometimes people confuse a softening of sales or whatever, directly related to the customer not having the desire. We are not seeing a desire issue. We're seeing just some minor pressure with regards to consumer financing. You would know better on what to expect in that regard. But we don't see any further deterioration. And from the people that we do business with, they've assured us that they don't. And by the way, it's not across all lenders. I mean there are captive lenders that are every bit as aggressive today as they were. So as you can see, it's been fairly minimal in our results.

And one more point on that, Seth. One of the interesting things that our lenders -- or large lenders are telling us is, they're starting to see some pullback at maybe the local level with credit unions and banks, which is actually driving more business to the larger lenders despite them tightening slightly, they're getting more business. So -- and they don't see any pullback on their side.

Yes. I think the last thing I would say, Seth, and that one is the lenders that are probably the most effective are the middleman guys that borrow from the markets and have a markup and pass it through in consumer credit and manage those portfolios. The majority of our credit is more captive nature with the likes of Harley-Davidson financial services, Yamaha, Polaris and so forth.

Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the conference back over to Marshall Chesrown for closing remarks.

Well, thank you all for joining today. We -- as always, we always appreciate it. We look forward to the follow-up calls the next two days. And obviously, we're very approachable, both Blake and I. So any further questions, please feel free to reach out to Will and Don at any time, and we'll schedule a conversation. So have a great day. I appreciate you being an investor and enjoy day. Thanks. Bye.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for attending, and you may now disconnect your lines.