Q4 2019 Earnings Call

This time, all participants are in a listen only mode.

The speakers presentation, there will be a question and answer session.

The question during the session you'll need to press star one on your telephone.

Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Debbie Harold corporate controller. Thank you. Please go ahead material.

Okay. Thank you so much good morning, Thank you for joining us for our fourth quarter year end 2019 financial results Conference call I'm, Debbie Harold corporate controller at lazy days.

We issued the Companys earnings press release. This morning, a copy of the earnings release is available under the events and presentations section of the Investor Relations page of our website and has been furnished as an exhibit to our current report on form 8-K with the FCC.

With me on the call today are Mr. Belmar name, our chairman and Chief Executive Officer, Mr., Nick Thomas shot, our Chief Financial Officer.

As a reminder, please note that some of the information you'll hear today during our discussion may consist of forward looking statements, including without limitation statements regarding units sales revenue gross margin operating expenses stock based compensation expense taxes product mix shifting geographic expansion.

Actual results or trends for future periods could differ materially from the forward looking statements as a result that many factors.

For additional information please refer to the risk factors discussed in the form 8-K filed with the FCC on March 19th 2020.

We also will discuss non-GAAP measures of financial performance that we believe are useful for understanding the company's result, including EBITDA and adjusted EBITDA. Please refer to our earnings press release for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

For the fiscal year ended November or December 31st 2019. The three month ended December 31st 2019, and the three month ended December 31st 2018, the financial information presented represents the operating result of Lazy days Holdings, Inc.

For the fiscal year ended December 31st 2018, the financial information presented represents the combined operating result of lazy days holdings Inc. for the period from March 15th 2018 to December 31st 2018, with the operating result of Lazy days RV Center Inc. for the period.

From January 1st 2018 to March 14th 2018.

Now it is my pleasure to introduce nickel me shot that will provide an overview of the 2019 fourth quarter and full year financial.

Thank you Debbie.

Please note that unless stated otherwise the quarter in fiscal year results comparisons are just the to the same three and 12 month period ended December 31st 2018.

Total revenues for the fourth quarter were $144.9 million up 19 million or 15.1% from 2018.

Revenue from the field recreational vehicles was 126.5 billion dollar for the quarter up 16.4 million or 14.9%.

RV unit sales, excluding wholesale units were 1585 up 251 units or 18.8%.

[laughter].

Q4 revenue from the sale of new recreational vehicles with $74.4 million up 8.3 million or 12.6%.

New vehicle unit sales were 874 up 87 units or 11.1%.

The average selling price of new vehicles was $84500 up a thousand dollars or 1.2%.

Q4 revenue from the sale of pre on vehicles was $52.1 billion up 8 million or 18.2% from 2018.

Are you on units sold excluding wholesale units were 711 up 164 units for 30%.

The average selling price of use recreational vehicles was $68300, which was 7.7% lower compared to the fourth quarter of 2018.

Revenue in our other channels consist of sales of parts accessories and related service finance and insurance for ethanol I revenue.

As well as can't ground in miscellaneous revenue.

In total revenue from these other lines of business was $18.4 million up 2.7 million or 17.1% compared to 2018.

The increase was driven by an ethanol revenue increase of $1.4 billion or 20.6% to 8.2 million.

And parts and service revenue increase of $1.6 million or 20.7% to 9.3 million.

These increases were partially offset by a point 3 million decrease at camp ground and other miscellaneous revenue.

Q4 gross profit excluding noncash lasting first outdoor lifestyle adjustment was $30.1 billion up 2.8 million versus 2018.

Gross margin, excluding LIFO adjustment decline between the two periods to 20.8% compared to 21.7% in 2018 with a change primarily driven by competitive end of model your pricing, reducing RV sales gross margin as Walt increase wholesale sales as a percentage of our overall sales.

Sales mix.

Including noncash LIFO adjustments, which had a net unfavorable swing of <unk> point 5 million compared to prior year gross profit for the quarter was 29.2 billion up 2.3 million or 8.6%.

Excluding transaction costs stock based compensation depreciation and amortization SGN name for the quarter was $26.3 million.

Up 4.6 million compared to prior year.

This increase is attributable to the additional overhead expenses contributed by the recently acquired location at the villages in Florida.

Well, it's a full quarter of overhead associated with the tend to see location acquired in December 2018.

The prior comparable is also on favorable won't because of an approximately 1.2 million net favorable impact in Q4 2018 related to accruals for employee benefits and incentive compensation and bad debt reserves.

In addition, Q4 2019 S. You name was impacted by a point 4 million dollar adjustment for impairment of rental units.

As well as an increase of performance and incentive compensation and other personnel costs.

[noise] amortization of stock based comp compensation decreased $1.7 million and appreciate it depreciation and amortization increased point 2 billion compared to prior year.

Net loss for the fourth quarter was point $5 million, that's compared to a net loss of 2.4 million in 2018.

Just 1.9 billion dollar improvement was primarily the result of but just discussed increasing gross profit in operating expenses the decline in amortization and stock based compensation as well as a 2.7 million dollar decrease in income tax expense.

Adjusted EBITDA was $3.3 million for the quarter down one point threemillion.

Adjusted EBITDA margin decreased by 140 basis points to 2.3%.

Please please refer to our earnings release for the table, which includes a reconcile that income or loss to adjusted EBITDA.

I'm not going to take you through a summary of our full year and financial results.

Total revenue for the year was $644.9 million up 36.7 billion or 6% from 2018.

Revenue from the sale of recreational vehicles was $56.1 billion for the year up 28.9 billion EUR, 5.4%.

RV unit sales, excluding wholesale units were 7591 up 295 units or 4%.

You're in gross profit, excluding LIFO adjustments was $134.6 million up 1.5 million versus 2018.

Gross margins, excluding LIFO adjustments decline between the two years from 21.9% in 2018% to 20.9% in 2019, primarily driven by competitive end of model year pricing, reducing RV sales gross margins, partially offset by improved death and high revenue per vehicle sold.

Including noncash LIFO adjustments, which had a net unfavorable swing of $1 million compared to the prior year gross profit for the quarter was 132.2 million.

<unk> point 5 million, 4.4% versus 2018.

Excluding transaction costs stock based compensation and depreciation and amortization SGN aim for the year was $103.5 million up 6.7 million compared to the prior year.

This is attributable to the additional overhead expenses contributed by the recently acquired location at the villages as well as before year overhead impact associated with the Minnesota and Tennessee locations acquired in 2018.

Amortization of stock based compensation decreased $3.9 billion, and depreciation and amortization increased $1.4 million compared to the prior year.

Adjusted EBITDA, a non-GAAP financial measure was $27.9 billion for the year down 4.4 million compared to 2018.

This was primarily driven by decreased RV sales gross margins previously discussed partially offset by the increase in revenue and units sold.

Adjusted EBITDA margin as a percentage of revenue decrease for the year to 4.3% compared to 5.3% in 2018.

Now turning to the December 30, Onest balance sheet, and our financial position, we had cash on hand of $31.5 million and net working capital of 36.9 million with cash down 2 million compared to September Thirtyth 2019.

This decrease in cash includes the impact of cash used to invest in growth initiatives, including more than <unk> $9 million for fourth quarter funding towards Greenfield startups, near Houston, Texas, and Nashville, Tennessee.

We had approximately $160.9 million, an inventory consisting of 124 million in new vehicles 36.6 million in pre owned vehicles and approximately $3.8 million in parts inventory and LIFO reserves of 3.7 million.

As of December 30, Onest 2019, we had no borrowings under our 5 million.

Dollar revolving credit facility 14.9 million of term loans outstanding and $144.1 billion in gross notes payable on our four plan facility.

We also had approximately 6.7 million outstanding on notes payable related to acquisitions.

Thank you and now I'll turn the call, but up overnight.

Thank you Nick.

One of the 19 was a tough year.

Overall demand for arby's declined excess inventory created aged inventory across the industry.

Aged inventory in turn created a challenging pricing and margin environment.

The combination of lower demand and aggressive pricing ultimately led to lower profits.

While 2019 proved to be a tough year.

For unit margins, we are happy with our overall revenue growth during the year.

We were especially pleased with our service enough and I revenue growth, which are higher margin sources of revenue for our business.

Although it was a challenging year, we did not let the tough conditions of 2019 deter us from executing on our long term business strategy.

We remain laser focused on our three strategic pillars and made great strides towards achieving a best in class customer experience service excellence and geographic expansion. We believe this focus has and will continue to pay big dividends.

We've put a lot of money excuse me, we put a lot of time energy and money into understanding and improving our customer experience and we will continue to do so we independently survey every customer after their sales or service experience and have a high rate of participation in these surveys.

I'm happy to report that our survey scores are showing strong improvement.

And this is from a baseline that we believe is already higher than most in the industry.

We still have a long way to go towards creating a best in class customer experience, we're clearly moving in the right direction.

We are putting tremendous effort and resources into improving the service experience at lazy days.

These efforts are streamlining our service process. So our customers will have consistency and predictability when getting their RB serviced by lazy days.

In February we opened our first dedicated service center in Houston, Texas and is ramping up nicely.

To support our service excellence strategy, we expect to open more dedicated service centers in the future.

We are moving forward on our new dealership in Nashville, Tennessee.

It took us a little longer than expected to get our permitting in place, but it is now in place and we expect to open lazy days of Nashville for sales and service.

Late in Q3 or early in Q4 2020.

We're very excited to enter the rapidly growing national market.

Later this year.

Our growth pipeline remains robust and we believe we will be able to continue to grow our dealership and service network fairly aggressively for the foreseeable future.

After a tough 2019 were greeted in 2020 with a new pandemic called the Corona virus or co bid 19.

Taking into consideration the interest around the grown a virus and its impact on our business and industry. We have decided to give an update on the current quarter.

Although we normally will not comment on a quarter until it ends and we have closed our books. These are not normal times.

In addition, as a result of the later timing of our year end versus quarterly filings. Our earnings call is being held today with about 85% of Q1 complete so we have a clear picture of how the quarter Lloyd.

[noise] 2020 started strong and remained strong throughout the quarter to date.

In the first two month of the quarter that through February 2020 to be clear.

Our.

Consolidated units and revenue were up more than 20% year over year.

Our EBITDA was up more than 30% year over year through February.

The demand was strong in all regions of the country. As a reminder, we operate in four regions of the country the southeast the upper Midwest, The mountain and southwest regions.

So far in March and that means through yesterday, we have experienced unit growth of more than 20%.

It is hard to predict what the last 12 days of the quarter will look like especially in these uncertain time, but traffic in demand have held up reasonably well through the first 18 days of March.

We do not know what the future will hold and we're not trying to predict the future in this environment things can change dramatically at anytime.

We are simply trying to given up to date status of our business to the best of our ability in view of the uncertainty in the economy and in our industry.

We are encouraged by our growth and believe it as a result of our product pricing promotion and merchandising choices, along with our focused on improving our customer experience and service excellence.

Based on RV shipment data and RV registration data, we do not believe the market is growing at the same rate is lazy days.

We believe we are gaining market share.

I also want to point out that lazy days has a very strong balance sheet and is extremely well situated to either grow aggressively or whether a significant downturn.

Of course, we would prefer to use our financial strength to grow but we understand that often economic conditions are outside of our control and we've prepared carefully for either scenario.

We also don't believe the growth and the downturn are mutually exclusive we can and will when appropriate continue to expand our dealership in service Center network in good times, and bad and manage our balance sheet accordingly.

Our cash balance was 31.5 million at the end of 2019 versus 26.6 million at the end of 2018.

Moreover, we anticipate our cash balance will increase significantly during the current quarter.

We believe it is prudent to plan for the Corona drivers to have a negative impact on the economy in our industry over the next several weeks.

And we are actively putting plans in place to deal with the Patel with these potential situations.

I want to emphasize that we plan to stay open.

For business as long as we are legally allowed to be open.

I also want to be clear that nothing is more important to us than the safety of our customers and our employees. We have implemented and are strictly adhering to CDC CDC grown a virus guidelines at all lazy days location.

We believe that we provide a central services for our customers are customers rely on arby's for temporary housing.

A large segment of the RV owners our seniors.

The highest risk group for Corona Corona virus exposure.

And arby's provide seniors a safe and controlled environment. In addition, rvs are currently being used as cobot 19, mobile test centers and temporary quarantine quarters.

In fact, our industry Association petition Vice President Pence yesterday to designate RV dealers as a central service providers. If our customers are spending time in their rvs. They will depend on lazy days to support their RV needs and we will be there to support them.

In closing I want to take a moment to thank the lazy days employees.

I've never been around a team of people who are more dedicated to their customers.

The effort they are putting forth to make sure. We continue to take great care of our customers in these very difficult times, there's nothing short of amazing.

I'm proud to be part of this outstanding team of people. Thank you.

We'll now open the call for questions. Thanks. Thank you as a reminder to ask the question. Please press star followed by the number one on your telephone keypad, we'll pause for just a moment to compile the Q and a roster.

Your first question comes from Steve Dyer Your line is open.

Hey, guys could go on for Steve Steve.

Good morning.

[laughter].

Maybe to start just kind of your last point.

When you mentioned RBS being used for medical centers temporary housing et cetera have you seen any increase demand in the past two days weeks et cetera, or are you expecting any going forward.

Increased demand no I think in as ice as I mentioned, we have had increased demand over year over year in so far this month I would say the last seven days versus last year about flat is what our data showing.

But.

Our our we are showing that our leads are increasing.

So year over year that's.

Thats kind of where we're at right now.

But I wouldn't I wouldn't feel comfortable and is increasing in the last week.

Yes.

Importantly, worded question increasing for those specific uses and what you were seeing.

Would you answered.

As it relates to that your Q1 expectation how much of that has already been booked versus kind of whats your expectations for the last two weeks in the quarter.

Yeah, well, 85% of it's a it's a.

As the quarter is done.

We tend to deliver a lot of units at the end of.

End of the month and Weve.

We factored that into our into our consideration.

Here. So what was the other part of the question I'm, sorry, and also we haven't seen.

Cancellation rates above what they typically are for this time of the year. So our book of businesses is holding up and like I said, we do not know what today will bring what tomorrow will bring all we know is where we stand today.

And they are you factoring in any.

Delayed delivery or inability or on willingness to their customers. You think you take delivery in the next few weeks or are you assuming kind of business as usual.

That increase delivery trend at the ended the quarter.

We've got 10 different scenarios, where we're prepared for.

We as Nick said, we havent seen any change in our cancellation rates.

They've remained steady with historical levels.

And so we're anticipating we're going to deliver.

Honestly I think will deliver a few less I think a few less people becoming entered into these conditions.

But we're expecting still deliver a bunch of units over the next week and weaker too.

Great and then as it relates to capital allocation you mentioned you know the cash and some of your liquidity, but you authorize a stock buyback in late 2008 team, which looks more attractive at current prices, but also I understand.

Then the need to maintain financial Flexibilities. It's uncertain times is how do you think about cash uses and then what is your current liquidity I mentioned cash what kind all and what's the liquidity available and then any other covenants or restrictions that we should be aware, but six worsen.

Yeah, we we have quite a bit of headroom under any covenants under any of our.

Our debt agreements or other other agreements. So we're we're not I don't have an exact liquidity. Nick you may ask to get back that we may have to get back to you on that actually we are.

Because we didn't do an amendment to our debt agreement is going to be part of arcade closure. So.

Closing, Matt so there'll be more information in the K, but.

But I don't think we have an exact liquidity number you know in this environment, we're going to be real careful how we outlay, how we outlay cash and we're going to manage it maybe a little more closely than we typically would but like I said, we really have a very very strong balance sheet, probably one of the strongest in the industry if not the stay.

Longest in the industry and and we're where we don't have any concerns from a liquidity standpoint at this point.

Great one more for me and then I'll turn it over.

Houston Service Center just opened.

Any quick early learnings there from kind of economics.

What you've seen from that business and then the opportunity to expand kind of that.

Standalone Service Center opportunity Trophy U.S. Thanks, Good luck.

Yeah, No no your learnings as of yet it's still it's still early we're still ramping up but things are going smoothly.

So unfortunate that this situation.

Happened during the during that ramp but.

We do think that there's a chance that people will use the RV is even more in this environment and if they use a more they're going to need more service and repair and we're going to be there for them.

Help keep them, a safe and and allow them to use their their rvs as they see see fit but no earnings today other than we're ramping according to plan.

Great. Thanks, guys.

We have no further questions I turn the call back over to the presenters.

Alright.

Thank you everyone for joining us this morning, and please stay safe and we'll talk to you and.

Another quarter. Thank you.

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

[music].