RUMBLEON, INC.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is provided as a supplement to, and should be read in
conjunction with, our audited consolidated financial statements, the
accompanying notes, and the MD&A included in our 2021 Form 10-K, as well as our
unaudited Condensed Consolidated Financial Statements and the accompanying notes
included in Item 1 of this Quarterly Report on Form 10-Q.
Organization
RumbleOn, Inc. was incorporated inOctober 2013 under the laws of theState of Nevada asSmartServer, Inc. In 2016, following the acquisition of SmartServer byRumbleOn foundersMarshall Chesrown andSteven Berrard , we changed our name toRumbleOn, Inc. Since that time, we have grown our business through organic development and strategic acquisitions into the first and only true Omnichannel powersports retailer. Headquartered in theDallas Metroplex ,RumbleOn is revolutionizing the customer experience for outdoor enthusiasts across the country and making powersports vehicles accessible to more people, in more places than ever before.
Overview
RumbleOn is the nation's first technology-based Omnichannel marketplace in powersports, leveraging proprietary technology to transform the powersports supply chain from acquisition of supply through distribution of retail and wholesale.RumbleOn provides an unparalleled technology suite and ecommerce experience, national footprint of physical locations, and full-line manufacturer representation to transform the entire customer experience. Our goal is to integrate the best of both the physical and the digital, and make the transition between the two seamless. We buy and sell new and used vehicles through multiple company-owned websites and affiliate channels, as well as via our proprietary cash offer tool and network of 55 company-owned retail locations atMarch 31, 2022 , primarily located in the Sunbelt. Deepening our presence in existing markets and expanding into new markets through strategic acquisitions helps perpetuate our flywheel. Our cash offer technology brings in high quality inventory, which attracts more riders and drives volume in used unit sales. This flywheel enables us to quickly and effectively gain market share. As a result of our growth to date,RumbleOn enjoys a leading, first-mover position in the highly fragmented$100 billion+ powersports market.RumbleOn's powersports business offers motorcycles, all-terrain vehicles, utility terrain vehicles, personal watercraft, and all other powersports products, parts, apparel, and accessories. Facilitating our platform,RumbleOn's retail distribution locations represent all major OEMs and their representative brands, including those listed below. RumbleOn's Representative Brands Alumacraft Honda Sea-Doo Argo Indian Slingshot Benelli Kawasaki SSR BMW Kayo Sports Suzuki Can-Am KTM TideWater CF Moto Manitou Triumph Ducati Polaris Vanderhall Harley-Davidson Ryker Yamaha Hisun Scarab SpyderRumbleOn leverages technology and data to streamline operations, improve profitability, and drive lifetime engagement by offering a best-in-class customer experience with unmatched Omnichannel capabilities. Our Omnichannel platform offers consumers the fastest, easiest, and most transparent transactions available in powersports.RumbleOn customers have access to the most comprehensive powersports vehicle offering, including the ability to buy, sell, trade, and finance online, in store at any of our bricks-and-mortar locations, or both.RumbleOn offers financing solutions for consumers; trusted physical retail and service locations; online or in-store instant cash offers, and access to pre-owned inventory; and apparel, parts, service, and accessories. In addition to our powersports operations, we operate in complementary businesses including the brokerage of vehicle transportation and the wholesale distribution automotive business. 18
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Outlook
We will continue to optimize and broaden the selection of new and used
powersports vehicles we make available to our customers. Expanding our inventory
selection enhances the customer experience by ensuring each visitor, either
online or in-store, finds a vehicle that matches his or her preferences.
Optimizing our new inventory significantly depends on the allocations of our
manufacturers ("OEM"). Optimizing our used inventory selection depends on our
ability to source and acquire a sufficient number of appropriate used vehicles,
including acquiring more vehicles directly from our customers.
We are also implementing a fulfillment system with near real-time inventory
replenishment to make the right powersports unit available in the right
quantities at the right locations. This centralization of inventory will launch
company-wide virtual selling through access to all company-owned inventory and
not just what might be available at an individual location. This will increase
the probability that our customers can find their powersports unit on our
platform, thereby enhancing the customer experience while eliminating geographic
boundaries. With digital inventory integration and over 60 individual websites
that share content, RumbleOn will be top-of-mind for powersports searches. All
of the technology infrastructure required is under development and will be
implemented throughout 2022 and beyond.
We will continue to make significant investments in improving and adding to our
online customer offering. We believe that the complexity of the traditional
powersports retail transaction provides substantial opportunity for technology
investment and that our leadership and continued growth will enable us to
responsibly invest in further enhancing the customer experience.
From our founding, we have been laying the groundwork to offer a friction-free
and fully integrated customer experience both online and in-store. We are
building the technology engine to enable this integration, while methodically
expanding our retail footprint. We plan to begin rolling out our new and
innovative technology throughout 2022 and will continuously make improvements to
our technology offering.
In order to truly rebuild the customer experience, we are investing to build the
technology engine across the organization. Our Cash Offer Tool is supplying
proprietary data on hundreds of thousands of unique Vehicle Identification
Number (VIN) inputs, in addition to actual retail sales and transaction data
from RideNow and Freedom Powersports' databases. Marrying this data creates a
data-driven "market maker" that does not exist in the industry today.
Integrating real-time pricing and sales data from in-store transactions will
also enable us to further optimize offers and pricing.
Beyond innovative technology and inventory integration, we will use our retail
locations to augment the online experience-and vice versa -to offer a simple,
friction-free customer experience. A key component to transforming the customer
experience to support our growth strategy is enhancing the in-store experience
and we are strategically expanding our geographic retail footprint. As a result
of the RideNow and Freedom transactions, we currently operate in 55 retail
locations.
KEY OPERATING METRICS
We regularly review a number of key operating metrics to evaluate our segments, measure our progress, and make operating decisions. Our key operating metrics reflect what we believe will be the primary drivers of our business, including increasing brand awareness, maximizing the opportunity to source vehicles from consumers and dealers, and enhancing the selection and timing of vehicles we make available for sale to our customers. Our key operating metrics also enhance management's ability to translate this information into sales through multiple sales channels. Please note that results of RideNow and Freedom Powersports prior to the respective acquisition dates are not reflected in the presentation below. The acquired entities have certain lines of business, including new vehicle sales, material finance and insurance revenue, and parts and service revenue, thatRumbleOn did not have before the RideNow and Freedom transactions. As such all increases in these line items are exclusively the result of the acquisition and the reader should note that most period-over-period dollar comparisons (as opposed to per unit amounts) are materially impacted by the introduction of the new business (the "Acquisition Effect").
Powersports and Automotive Segments
Revenue
Revenue of is comprised of vehicle sales, finance and insurance products bundled
with retail vehicle sales ("F&I"), and parts, service and
accessories/merchandise ("PSA"). We sell both new and pre-owned vehicles through
retail and wholesale channels. F&I and PSA revenue is almost exclusively earned
through retail channels. Automotive sales are almost exclusively via wholesale
channels, and therefore, contribute to a very small portion of F&I revenue.
These sales channels provide us the opportunity to maximize profitability
through increased sales volume and lower average days to sale by selling through
the channel where the opportunity is the greatest at any given time based on
customer demand, market conditions or inventory
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availability. The number of vehicles sold to any given channel may vary from period to period these factors. Subject to economic uncertainties and the resulting Demand/Supply Imbalances, as discussed elsewhere in this MD&A, we expect pre-owned vehicle sales to increase as we begin to utilize a combination of brand building and direct response channels to efficiently source and scale our addressable markets while expanding our suite of product offerings to consumers who may wish to trade-in or to sell us their vehicle independent of a retail sale. Factors primarily affecting pre-owned vehicle sales include the number of retail pre-owned vehicles sold and the average selling price of these vehicles. Gross Profit Gross profit generated on vehicle sales reflects the difference between the vehicle selling price and the cost of revenue associated with acquiring the vehicle and preparing it for sale. Cost of revenue includes the vehicle acquisition cost, inbound transportation cost, and particularly for pre-owned vehicles, reconditioning costs (collectively, we refer to reconditioning and transportation costs as "Recon and Transport"). The aggregate gross profit and gross profit per vehicle vary across vehicle type, make, model, etc. as well as through retail and wholesale channels, and with regard to gross profit per vehicle, are not necessarily correlated with the sale price. Vehicles sold through retail channels generally have the highest dollar gross profit per vehicle given the vehicle is sold directly to the consumer. Pre-owned vehicles sold through wholesale channels, including directly to other dealers or through auction channels, including via our dealer-to-deal auction market, generally have lower margins and do not include other ancillary gross profit attributable to financing and accessory. Factors affecting gross profit from period to period include the mix of new versus used vehicles sold, the distribution channel through which they are sold, the sources from which we acquired such inventory, retail market prices, our average days to sale, and our pricing strategy. We may opportunistically choose to shift our inventory mix to higher or lower cost vehicles, or to opportunistically raise or lower our prices relative to market to take advantage of Demand/Supply Imbalances in our sales channels, which could temporarily lead to gross profits increasing or decreasing in any given channel.
Vehicles Sold
We define vehicles sold as the number of vehicles sold through both wholesale and retail channels in each period, net of returns. Vehicles sold is the primary driver of our revenue and, indirectly, gross profit. Vehicles sold also enables complementary revenue streams, such as financing. Vehicles sold increases our base of customers and improves brand awareness and repeat sales. Vehicles sold also provides the opportunity to successfully scale our logistics, fulfillment, and customer service operations.
Total Gross Profit per Unit
Total gross profit per unit is the aggregate gross profit of the Company in a given period, divided by retail units sold in that period including gross profit generated from the sale of the new and used vehicles, income related to the origination of loans originated to finance the vehicle, revenue earned from the sale of F&I products including extended service contracts, maintenance programs, guaranteed auto protection, tire and wheel protection, and theft protection products, gross profit on the sale of PSA products, and gross profit generated from wholesale sales of vehicles.
Vehicle Logistics Segment
Revenue
Revenue is derived from freight brokerage agreements with dealers, distributors, or private party individuals to transport vehicles from a point of origin to a designated destination. The freight brokerage agreements are fulfilled by independent third-party transporters who must meet our performance obligations and standards. Wholesale Express is considered the principal in the delivery transactions since it is primarily responsible for fulfilling the service. In the normal course of operations, Wholesale Express also provides transportation services toWholesale Inc. Vehicles Delivered We define vehicles delivered as the number of vehicles delivered from a point of origin to a designated destination under freight brokerage agreements with dealers, distributors, or private parties. Vehicles delivered are the primary driver of revenue and in turn profitability in the vehicle logistics segment. 20
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Total Gross Profit Per Unit
Total gross profit per vehicle transported represents the difference between the price received from non-affiliated customers and our cost to contract an independent third-party transporter divided by the number of third party vehicles transported.
Results of Operations
Three-Months Ended
RumbleOn Total Company Metrics
Three-Months Ended
YoY
2022 2021 Change
Revenue
Powersports $ 336,840 $ 10,855 $ 325,985
Automotive 110,729 84,071 26,658
Vehicle Logistics 12,351 9,338 3,013
Total revenue $ 459,920 $ 104,264 $ 355,656
Financial Gross Profit
Overview ($ Powersports $ 99,154 $ 2,978 $ 96,176
in 000s) Automotive 3,575 6,211 (2,636)
Vehicle Logistics 2,484 1,989 495
Total Gross Profit $ 105,213 $ 11,178 $ 94,035
Total Operating Expenses $ 82,550 $ 14,000 $ 68,550
Operating Income (Loss) $ 22,663 $ (2,822) $ 25,485
Total Company Net Income (Loss) $ 9,141 $ (4,452) $ 13,593
Adjusted EBITDA (1) $ 31,428 $ 21 $ 31,407
Vehicles Sold
Retail 15,839 206 15,633
Wholesale 3,541 3,294 247
Total Vehicles Sold 19,380 3,500 15,880
Revenue per Unit Sold
Retail $ 19,230 $ 4,896 $ 14,334
Unit Wholesale $ 24,919 $ 25,656 $ (737)
Metrics Other $ 3,462 $ 2,668 $ 794
Total Revenue $ 23,732 $ 29,790 $ (6,058)
Gross Profit per Unit
Retail $ 4,633 $ 493 $ 4,140
Wholesale $ 1,103 $ 2,382 $ (1,279)
Other $ 1,433 $ 568 $ 865
Total Gross Profit $ 5,429 $ 3,194 $ 2,235 _________________________
(1) Adjusted EBITDA is a non-GAAP measure of operating performance that does not represent and should not be considered an alternative to net income (loss) or cash flow from operations, as determined byU.S. GAAP. We believe that Adjusted EBITDA is a useful measure to us and to our investors because it excludes certain financial and capital structure items that we do not believe directly reflect our core operations and may not be indicative of our recurring operations, in part because they may vary widely across time and within our industry independent of the performance of our core operations. See the section titled "Adjusted EBITDA" below for a reconciliation of Adjusted EBITDA to Net Income (Loss). 21
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POWERSPORTS
RumbleOn Powersports Metrics
Three-Months Ended March 31,
YoY
2022 2021 Change
New retail vehicles $ 162,183 $ - $ 162,183
Used vehicles:
Used retail vehicles 86,658 - 86,658
Revenue ($ in 000s) Used wholesale vehicles 5,791 10,528 (4,737)
Total used vehicles 92,449 10,528 81,921
Finance and insurance, net 27,470 327 27,143
Parts, service and accessories/merchandise 54,737 - 54,737
Total revenue $ 336,839 $ 10,855 $ 325,984
New retail vehicles $ 31,193 $ - $ 31,193
Used vehicles:
Used retail vehicles 14,722 - 14,722
Gross Profit ($ in 000s) Used wholesale vehicles 470 2,651 (2,181)
Total used vehicles 15,192 2,651 12,541
Finance and insurance 27,470 327 27,143
Parts, service and accessories/merchandise 25,282 - 25,282
Total gross profit $ 99,137 $ 2,978 $ 96,159
New retail vehicles 9,677 - 9,677
Powersports Used vehicles:
Vehicle Unit Sales Used retail vehicles 6,101 - 6,101
Used wholesale vehicles 979 1,006 (27)
Total used vehicles 7,080 1,006 6,074
Total vehicles sold 16,757 1,006 15,751
New retail vehicles $ 16,760 $ - $ 16,760
Used vehicles:
Used retail vehicles 14,204 - 14,204
Revenue per vehicle Used wholesale vehicles 5,915 10,465 (4,550)
Total used vehicles 13,058 10,465 2,593
Finance and insurance, net 1,741 - 1,741
Parts, service and accessories/merchandise 3,469 - 3,469
Total revenue per retail vehicle $ 21,349 $ - $ 21,349
New vehicles $ 3,223 $ - $ 3,223
Used vehicles 2,146 - 2,146
Gross Profit per vehicle Finance and insurance, net 1,741 - 1,741
Parts, service and accessories/merchandise 1,602 - 1,602
Total gross profit per retail vehicle (1) $ 4,681 $ - $ 4,681 (1) Per vehicle values calculated as revenue or gross profit as applicable, divided by its respective units sold, except the other and total categories which are divided by total used units sold.
Revenue
Three-Months EndedMarch 31, 2022 Compared toMarch 31, 2021 . Total Powersports revenue increased by$325,984 to$336,839 for the three months endedMarch 31, 2022 compared to$10,855 for the same period in 2021. The Acquisition Effect specific to new and used vehicles, F&I and PSA revenue accounted for approximately$254,632 ,$27,143 , 22
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and 54,737 of the increase, which was partially offset by lower wholesale powersports vehicle revenue for the three months endedMarch 31, 2022 compared to the same period in 2021. The total number of vehicles sold increased by 15,751 to 16,757 for the three months endedMarch 31, 2022 as compared to 1,006 for the same period in 2021. Overall, the average revenue per retail vehicle sold was$21,349 , much of which is attributable to higher price point vehicles like UTVs and side-by-sides. We anticipate that unit purchasing levels and sales will continue to grow as we increase penetration in existing markets, build out fulfillment centers and acquire new dealers.
Gross Profit
Three-Months EndedMarch 31, 2022 Compared toMarch 31, 2021 . Total Powersports gross profit increased$96,159 to$99,137 for the three months endedMarch 31, 2022 compared to$2,978 for the same period in 2021. The increase in gross profit was primarily due to the Acquisition Effect; vehicle sales accounted for approximately$43,734 of the increase, PSA accounted for approximately$25,282 of the increase, and F&I accounted for approximately$27,143 of the increase. Overall, gross profit per retail vehicle sold was$4,681 . The Acquisition Effect was the primary driver of this, as all new vehicle sales fell into this category, however F&I and PSA represent new revenue channels for the Company after the RideNow Transaction and Freedom Transaction.
AUTOMOTIVE
RumbleOn Automotive Metrics
Three-Months Ended
YoY
($ in 2022 2021 Change
Automotive 000s, Revenue $ 110,729 $ 84,071 $ 26,658
except Gross Profit (1) $ 3,436 $ 6,211 $ (2,775)
per unit) Vehicles sold 2,623 2,494 129
Revenue per vehicle $ 42,215 $ 33,709 $ 8,506
Gross Profit per vehicle $ 1,310 $ 2,490 $ (1,180) (1) Total Gross profit per vehicle retailed is calculated by dividing the sum of new vehicle, used vehicle, and finance and insurance gross profit by total retail vehicle unit sales.
Revenue
Three-Months EndedMarch 31, 2022 Compared toMarch 31, 2021 .Total Automotive revenue increased by$26,658 to$110,729 for the three months endedMarch 31, 2022 compared to$84,071 for the same period in 2021. The increase in automotive revenue was primarily due to an increase in revenue per vehicle of 25.2% for the three months endedMarch 31, 2022 and an increase in vehicles sold of 129 as compared to the same period in 2021.
Gross Profit
Three-Months EndedMarch 31, 2022 Compared toMarch 31, 2021 .Total Automotive gross profit decreased by$2,775 to$3,436 for the three months endedMarch 31, 2022 compared to$6,211 for the same period in 2021. The decrease was attributable to a decrease in gross profit per vehicle of$1,180 to$1,310 for the three months endedMarch 31, 2022 compared to$2,490 for the same period in 2021, partially offset by an increase in vehicles sold of 129 as compared to the same period in 2021. 23
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VEHICLE LOGISTICS
RumbleOn Vehicle Logistics Metrics
Three-Months Ended
YoY
($ in 2022 2021 Change
Vehicle 000s, Revenue (1) $ 13,612 $ 10,030 $ 3,582
Logistics except Gross Profit $ 2,640 $ 1,989 $ 651
per unit) Vehicles transported 21,831 18,907 2,924
Revenue per vehicle transported $ 624 $ 531 $ 93
Gross Profit per vehicle
transported $ 121 $ 105 $ 16 (1) Before intercompany freight services provided to Wholesale of
Revenue
Three-Months EndedMarch 31, 2022 Compared toMarch 31, 2021 . Total Vehicle Logistics revenue increased by$3,582 to$13,612 for the three months endedMarch 31, 2022 compared to$10,030 for the same period in 2021. The increase in total revenue for the three months endedMarch 31, 2022 resulted from an increase of approximately 15.5% in the number of vehicles transported to 21,831 vehicles as compared to the transport of 18,907 vehicles for the same period of 2021. Additionally, revenue per vehicle transported for the three months endedMarch 31, 2022 increased by approximately 17.5% to$624 as compared to$531 for the same period of 2021. Gross Profit Three-Months EndedMarch 31, 2022 Compared toMarch 31, 2021 . Total Vehicle Logistics gross profit for the three months endedMarch 31, 2022 increased by$651 , or 32.7%, to$2,640 , or$121 per vehicle transported, as compared to$1,989 , or$105 per vehicle transported, for the same period in 2021. The increased gross profit was attributed to increases to the number of vehicles transported and revenue earned per vehicle for the three months endedMarch 31, 2022 as compared to the same period in 2021.
Selling, General and Administrative
Three-Months Ended March 31,
2022 2021
Advertising, marketing and selling $ 6,847
Compensation and related costs 45,935 4,247
Facilities 9,690 508
General and administrative 13,092 4,913
Stock based compensation 1,879 1,734
Technology development and software 633
403
Total SG&A expenses $ 78,076 $ 13,401
Selling, general and administrative expenses increased by $64,675 for the three
months ended March 31, 2022 compared to the same period in 2021. In each case
other than technology development and software, the increases were the result of
the Acquisition Effect, with over 2,000 additional employees, marketing
initiatives at the store level, general and administrative costs associated with
a larger team, and lease/facility expense related to 55+ new locations from the
RideNow Transaction and Freedom Transaction. In the case of technology and
development, in the third quarter of 2021 we began strategic technology projects
focused on inventory management, infrastructure, and integration efforts which
continued to progress during the three months ended March 31, 2022 .
Depreciation and Amortization
Depreciation and amortization increased by
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RideNow Transaction, approximately$1,043 is associated with depreciation resulting from the RideNow Transaction, approximately$204 is associated with the amortization of right-of-use assets resulting from the RideNow Transaction, and approximately$272 is associated with depreciation and amortization related to the Freedom Transaction. Interest Expense Interest expense increased by$9,572 for the three months endedMarch 31, 2022 compared to the same period in 2021. Interest expense consists of interest and deferred financing costs on the: (i) term loan credit agreement (the "Oaktree Credit Facility"); (ii) various floorplan facilities; (iii) private placement notes); (iv) convertible senior notes; and (v) the ROF credit facility.
Derivative Liability
In connection with our various financings, we undertake an analysis of each financial instrument to determine the appropriate accounting treatment, including which, if any require bifurcation into liability and equity components. We have determined that each of the convertible senior notes issued onJanuary 10, 2020 (the "New Notes") and the Warrant have a liability component that needs to be remeasured each reporting period with the change in value recorded in the Condensed Consolidated Statements of Operations.
New Notes
In connection with the issuance of the New Notes, a derivative liability was recorded at issuance with an interest make-whole provision of$20,673 based on a lattice model using a stock price of$14.60 , and estimated volatility of 55.0% and risk-free rates over the entire 10-year yield curve. The change in value of the derivative liability for the three months endedMarch 31, 2022 and 2021 were$39 and$(21) , respectively, and is included in change in derivative liability in the Condensed Consolidated Statement of Operations. The value of the derivative liability as ofMarch 31, 2022 andDecember 31, 2021 was$26 and$66 , respectively. Oaktree Warrant In connection with providing the debt financing for the RideNow Transaction, and pursuant to the commitment letter executed onMarch 15, 2021 , the Company issued warrants to purchase$40,000 of shares of Class B common stock toOaktree Capital Management, L.P. and its lender affiliates (the "Warrant"). The initial warrant liability and deferred financing charge recognized was$10,950 . The warrant liability was subject to remeasurement at each balance sheet date and any change in fair value was recognized as a component of change in derivative liability in the Condensed Consolidated Statements of Operations. The fair value of the Warrant was estimated using a Monte Carlo simulation based on a combination of level 1 and level 2 inputs. Upon closing of the RideNow Transaction, the warrants were considered equity linked contracts indexed to the Company's stock and therefore met the equity classification guidance. As a result, the$19,700 was reclassified to additional paid-in-capital. The$10,950 deferred financing charge was reclassified as part of the debt discount related to the Oaktree Credit Agreement. The recognition of the warrant liability and deferred financing charge and the reclassification of the warrant liability to additional paid-in capital and the reclassification of the deferred financing charge to debt discount are non-cash items.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flows or as a measure of liquidity. Non-GAAP financial measures are not necessarily calculated the same way by different companies and should not be considered a substitute for or superior toU.S. GAAP. Adjusted EBITDA is defined as net income (loss) adjusted to add back interest expense (including debt extinguishment), depreciation and amortization, changes in derivative liability and certain recoveries, charges and expenses, such as an insurance recovery, non-cash stock-based compensation costs, acquisition related costs, litigation expenses, and other non-recurring costs, as these recoveries, charges and expenses are not considered a part of our core business operations and are not an indicator of ongoing, future company performance. Adjusted EBITDA is one of the primary metrics used by management to evaluate the financial performance of our business. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry. Further, we believe it is helpful in highlighting trends in our operating results, 25
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because it excludes, among other things, certain results of decisions that are outside the control of management, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure and capital investments.
For the three months ended
•Non-cash stock-based compensation expense recorded in the Condensed Consolidated Statement of Operations,
•Acquisition costs associated with the RideNow Transaction and Freedom Transaction, which primarily include professional fees and third-party costs, and
•Other non-recurring costs, which include one-time expenses incurred. For the three months endedMarch 31, 2022 , the balance was primarily related to technology implementation, establishment of the ROF secured loan facility, and various integration costs associated with the Freedom Transaction and the RideNow Transaction. For the three months endedMarch 31, 2021 , the balance was primarily related to litigation expenses. The following tables reconcile Adjusted EBITDA to net income (loss) for the periods presented: Three-Months Ended March 31, 2022 2021 Net income (loss) $ 9,141$ (4,452) Add back: Interest expense (including debt extinguishment) 11,181 1,609 Depreciation and amortization 4,474 599 Income tax provision 2,380 - Change in derivative and warrant liabilities (39) 21 EBITDA 27,137 (2,223) Adjustments: Stock based compensation 1,879 1,026 Transaction costs - RideNow and Freedom 716 1,097 Other non-recurring costs 1,697 121 Adjusted EBITDA$ 31,429 $ 21
Liquidity and Capital Resources
Our primary sources of liquidity are available cash, amounts available under our floor plan lines of credit, and monetization of our retail loan portfolio. In 2021, we completed two public offerings that provided net proceeds of$191,000 and obtained the Oaktree Credit Facility, which initially provided net proceeds of$261,000 that was used to finance a portion of the cash consideration for the RideNow Transaction. OnFebruary 18, 2022 , in conjunction the Freedom Transaction, the Company drew down$84,500 against the Oaktree Credit Facility. As ofMarch 31, 2022 , the Oaktree Credit Facility provides for up to$120,000 , of which$35,500 is available, in additional financing that may be used for acquisitions and up to an additional$100,000 in incremental financing that may be used for acquisitions and working capital purposes. Our financial statements reflect estimates and assumptions made by management that affect the carrying values of the Company's assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. The judgments, assumptions and estimates used by management are based on historical experience, management's experience, and other factors, which are believed to be reasonable under the circumstances. Because of the nature of the judgments and assumptions made by management, actual results could differ materially from these judgments and estimates, which could have a material impact on the carrying values of the Company's assets and liabilities and the results of operations. We will continue to evaluate the nature and extent of the impact to our business and our results of operations and financial condition as conditions evolve as a result of the COVID-19 pandemic and the resulting Demand/Supply Imbalances. 26
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We had the following liquidity resources available as ofMarch 31, 2022 andDecember 31, 2021 : March 31, December 31, 2022 2021 Cash$ 59,362 $ 48,974 Restricted cash (1) 9,500 3,000 Total cash and restricted cash 68,862 51,974 Availability under short-term revolving facilities 132,318 124,116 Committed liquidity resources available$ 201,180 $ 176,090
(1) Amounts included in restricted cash represent the deposits required under the
Company's short-term revolving facilities.
As of March 31, 2022 , and December 31, 2021 , excluding operating lease
liabilities and the derivative liability, the outstanding principal amount of
indebtedness was $503,276 and $384,585 , respectively, summarized in the table
below. See Note 3 - Notes Payable and Lines of Credit and Note 4 - Stockholders'
Equity to our Condensed Consolidated Financial Statements included above.
March 31, December 31,
2022 2021
Asset-Based Financing:
Inventory $ 122,994 $ 97,278
Total asset-based financing 122,994 97,278
Term loan facility 363,800
279,300
Unsecured senior convertible notes 38,814 39,006 Line of credit 6,853 - PPP and other loans 4,314 4,472 Total debt 536,775 420,056
Less: unamortized discount and debt issuance costs (33,499)
(35,471) Total debt, net$ 503,276 $ 384,585
The following table sets forth a summary of our cash flows for the three months
ended
Three-Months Ended
2022 2021
Net cash provided by (used in) operating activities
$ (12,937) Net cash (used in) investing activities (67,987) (395) Net cash provided by financing activities 53,601 11,946 Net increase (decrease) in cash$ 16,888 $ (1,386) Operating Activities Our primary sources of operating cash flows result from the sales of used vehicles and ancillary products. Our primary use of cash from operating activities are purchases of inventory, cash used to acquire customers, and personnel-related expenses. For the three months endedMarch 31, 2022 , net cash provided by operating activities was$31,274 , an increase of$44,211 compared to net cash used in operating activities of$(12,937) for the three-months endedMarch 31, 2021 . The increase in our net cash provided by operating activities was primarily due to a$13,593 increase in our net income, a$3,370 increase in non-cash adjustments, and a$27,248 increase in cash provided by other operating assets. Investing Activities
Our primary use of cash for investing activities is for technology development
to expand our operations. Net cash used in investing activities increased
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same period in 2021. The increase in our net cash used in investing activities was primarily due to an outflow of$(64,916) for the three months endedMarch 31, 2022 for the Freedom Transaction, an outflow of$(1,319) for the purchase of property and equipment, and an increase of$(1,357) in outflows for technology development as compared to the same period in 2021.
Financing Activities
Cash flows from financing activities primarily relate to our short and long-term debt activity and proceeds from equity issuances which have been used to provide working capital and for general corporate purposes, including paying down our short-term revolving facilities. Cash provided by financing activities increased$41,655 to$53,601 for the three months endedMarch 31, 2022 compared to net cash provided by financing activities of$11,946 for the same period of 2021. The increase in net cash provided by financing activities for the three months endedMarch 31, 2022 is primarily attributable to an increase of$84,500 in proceeds from new secured debt and$6,541 in proceeds from the issuance of notes, primarily driven by proceeds from the ROF secured lending facility for the three months endedMarch 31, 2022 as compared to the same period of 2021. The increases were partially offset by an outflow of$(31,597) in repayments of debt and mortgage notes and lower increases in borrowings from non-trade floor plans of$(5,843) for the three months endedMarch 31, 2022 as compared to the same period of 2021.
Off-Balance Sheet Arrangements
As ofMarch 31, 2022 , we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Estimates
See Note 1 - Description of Business and Significant Accounting Policies, included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q for accounting pronouncements and material changes to our critical accounting policies sinceDecember 31, 2021 . There have been no other material changes to our critical accounting policies and use of estimates from those described under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2021 Form 10-K, other than the use of estimates for the Oaktree Warrant, as described above. Forward-Looking and Cautionary Statements This Quarterly Report on Form 10-Q, as well as information included in oral statements or other written statements made or to be made by us, contain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "projects," "will be," "will continue," "will likely result," and similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. These forward-looking statements are based on our current, reasonable expectations and assumptions, which expectations and assumptions are subject to risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in our 2021 Form 10-K for the year endedDecember 31, 2021 , which was filed with theSEC onApril 8, 2022 , and the risks discussed under the caption "Risk Factors" included in our definitive Proxy Statement on Schedule 14A filed with theSEC onMay 2, 2022 , and this Quarterly Report on Form 10-Q. Given these risks and uncertainties, readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to publicly update or revise or any forward-looking statements, except as required by law.
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