Q4 2021 Camping World Holdings Inc Earnings Call
Good morning, and welcome to Camping World Holdings Conference call to discuss financial results for the fourth quarter and fiscal year of 'twenty 'twenty. One at this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. Please be advised that this call is being <unk>.
Corded and the reproduction of the call in whole or in part is not permitted without written authorization from the company participating on the call today.
Our markets will notice chairman and Chief Executive Officer.
Moody President Karen Bell, Chief Financial Officer, Tamara Ward, Chief Operating Officer, Lindsay Christian Executive Vice President and General Counsel, and Matthew Wagner Executive Vice President Oh alert I will turn the call over to Mr. Moody to get Us started.
Thank you and good morning, everyone. A press release covering the company's fourth quarter and year ended December 31, 2021 financial results was issued yesterday afternoon, and a copy of that press release can be found in the Investor Relations section on the company's website.
Management's remarks on this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of $19 95.
These remarks may include statements regarding the impact of COVID-19 on our business financial results and financial condition, our business goals plans abilities and opportunities industry and customer trends, our 2019 strategic shift.
Recently disclosed cyber security incident increases in our borrowings our liquidity and future compliance with our financial covenants and anticipated financial performance.
Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the risk factors section in our Form 10-K , our form 10, Qs and other reports on file with the SEC any forward looking statements represent our views only as of today and we undertake no obligation to us.
<unk> please.
Please also note that we will be referring to certain non-GAAP financial measures on today's call such as EBITDA adjusted EBITDA and adjusted earnings per share diluted which we believe may be important to investors to assess our operating performance.
Conciliation of these non-GAAP financial measures to the most directly comparable GAAP financial statements are included in our earnings release and on our website.
All comparisons of our 2021 fourth quarter and fiscal year results are made against the 2024th quarter and fiscal year results, respectively, unless otherwise noted.
Now I'll turn the call over to markets. Good morning. Thank you, Brian I'm here with our entire senior management team.
Throughout the call.
<unk> section there'll be able to answer any questions. You may have as we review both the fourth quarter and the 2021 year.
On today's call. We're also lay out a few short term and long term objectives for 2021 was a great year for our company and we're confident that the long term trends and strategies in areas like used RV sales.
Finance and insurance.
<unk> operations and our good Sam business, coupled with optimized new inventory levels and strong demand resulted in our best year ever.
We retailed a record 126000 rvs for the year and our company with that is proud to announce that it has officially surpassed selling 1 million rvs.
Last year, we pursued a disciplined and opportunistic approach to capital allocation with capital investments in the growth of our business share repurchases and the return of capital to shareholders through dividends.
Our management teams capital allocation plan is to continue investing our excess cash flow as efficiently as possible, but we have a focus on three core things.
We want to grow our company like we have over the last five years and 2021, we added 16, new locations, bringing our total to 185.
It is our plan to continue that cadence for the foreseeable future, we're either operating or scheduled to operate within 18 months in 45 of the 48 states.
We also wanted to reduce the overall share count.
'twenty, one we repurchased $156 million worth of shares with almost $70 million coming in the fourth quarter.
As we previously mentioned our board has authorized an additional $150 million of buyback availability and now adding that to our bucket. We have a total availability of $200 million as we March into this calendar year.
We also want to continuously improve the overall return to our shareholders.
In April of last year, we increased our annual dividend public holders of our common stock.
Over eight 5%.
And in August we doubled the annualized dividend from $1 to $2 per share for our public holders of class a common stock.
This week the management team with board approval announced another 25% increase in our annualized dividend going from $2 to $2 50 a share.
I wanted to give you a brief summary of our Q4 2021 financial results we.
We recorded record revenue of $1 4 billion, an increase of $244 million or 21% and record net income of $59 million an increase of 47%.
Our adjusted fourth quarter, EBITDA was $131 5 million.
An increase of $43 million or 44%.
We grew our good Sam business during the quarter, both in revenue and gross profit driven by our core offerings like roadside assistance credit card warranties and insurance.
Our used vehicle revenue, which is a big goal of ours went from $205 million to $412 million.
Almost 100% increase more than a 100% increase.
During the quarter, we finalized our exit of noncore low margin low turning products like fishing hunting and firearms.
<unk> and a reduction of products services and other revenue. However, we have redeployed that capital into higher margin better performing segments of our business.
We ended the quarter with nearly $360 million of cash consisting roughly a $267 million of cash and equivalents on our balance sheet and $92 million of cash available in our floor plan offset account. Additionally.
Additionally, at the end of the quarter.
We own used RV inventories of $374 million without related floorplan financing and real estate of nearly $225 million without related mortgage financing.
It's been a little over five years since camping World went public.
Latter reflecting to do.
And in that time, the company's revenue has nearly doubled but more importantly, our adjusted EBITDA has more than tripled.
In 2016, with just over 100 locations selling and servicing rvs, we generated close to $1 billion in gross profit and we made about $286 million and adjusted EBITDA.
Fast forward five years, we have almost 200 dealerships.
Generated nearly $2 5 million in gross profit and over $942 million and adjusted EBITDA.
But when you Peel back the onion on that remarkable growth from around 290 to over $942 million, we're going to see a few major drivers and those drivers don't change going forward.
First our youth business has more than doubled in size from $703 million to $1 7 billion of revenue.
Additionally, we will continue to make acquisitions of new and used RV dealerships likely have since the inception of the company.
Second our high margin products services and other businesses has substantially grown from $540 million in 16 to over $1 1 billion in 2021.
Third our crown jewel.
Good Sam services and plans business with high margin recurring revenue has grown has grown gross profits by over 30%.
Fourth and maybe most importantly, we have become a structurally more efficient business.
In 2016 for every $1 of gross profit, we spent 70 cents on SG&A.
In other words, we have a 70% SG&A to gross ratio.
Today, it's 64%.
With every passing year, we intend to do more with less.
Within the RV industry, we're pioneering investments in technology and processes that enrich both the customer experience, while unlocking additional operating efficiencies for us.
Our ability to leverage our scale, our sourcing capabilities, our database and our unique proprietary technologies make acquisitions more accretive for us.
Any other industry than any other entity in the industry.
And generating over $942 million and adjusted EBITDA in 'twenty, one look we benefited from the supply demand imbalance in new Rvs.
The elevated margins that came from it but we've also significantly grown the parts of our business that benefit from the ever growing installed base of rvs.
That is used rvs.
Service and repair aftermarket products and services and obviously, our big Crown Jewel the good Sam business.
We generated double the gross profit from these businesses that primarily benefit from the installed base of our viewers and we did it with fewer incremental operating expenses and.
In summary, we are more proud of what we've accomplished over the last five years and looking forward our objectives are simple or.
Our primary goal is to replicate the growth we have enjoyed over the last five years for the next five years.
How do we get there well first we want to continue to acquire dealerships like we have since the inception of the company.
We plan to grow our used RV business from $1 7 billion to $3 billion.
At our historic average of 20% to 20, 20% to 26% gross margins this should generate $3 million to $400 million of incremental gross profit and a meaningful portion of that will flow to the bottom line.
Third we want to grow our service parts and renovation business. We currently operate around 2600 service and collision base and we plan to add at least 500 more through our existing stores acquisitions and new store openings.
Last we want to grow the good Sam revenue by 10% per year. This.
This business generates a 180 <unk>.
$181 million of revenue for us.
And growing this by over 50% should result in another $90 million of revenue and with its current margins around 60% much of that incremental growth should fall right to the bottom line.
In many ways the goals for the next five years well they look a lot like the last five years, we want to continue to grow in the areas of our business that benefit from the installed base of our viewers, while always taking full advantage of the new RV environment presented to us.
Let me finish by summarizing a few key points.
I remain extremely excited about camping world today, even more so than it was all went public five years ago.
The optimism we're at outdoors and Rvs has never been higher for manufacturers suppliers dealers campgrounds, but most importantly consumers to.
The growth has brought new consumers to the RV lifestyle and they have fed our installed base of rvs.
This will continue to grow and benefit us for many years to come and we remained steadfast in those goals.
Starting in 2022, we are moving away from our approach of giving annual guidance.
Suffice it to say this year has started very strong.
Similar to the start we experienced last year.
But as we see with too many public companies managing the business to deliver an annual metric carries the risk of compromising long term value creation.
We believe each month and each quarter are only as important as the role. These serve as markers on our road to continued growth of this company and maximizing value to our shareholders.
Again, our goals are clear.
Grow the company repurchase shares.
And give capital back to our shareholders and the smart and accretive way.
This is what we are singularly focused on we'll now turn the call over to the operator.
Thank you would like to ask a question. Please signal by pressing star one on the telephone keypad.
You're using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
Again, Please press star one to ask a question.
We will take our first question from Chris <unk> with Keybanc. Please go ahead.
Hey, good morning Markus.
What about so.
Good morning, so understanding that youre not guiding for 2022, but can you just.
Maybe help us.
Around how we should think about vehicle profitability. This year I mean, it's stepped down.
A little bit from the third to the fourth quarter I'm, just I'm looking more on a GPU basis, right I think 13000.
New and 9000 users I mean, how much can you hold.
Do you think you can hold me over the balance of 'twenty two.
Look I think as we talked about last year as the supply.
Starts to return to some level of normalcy, those gpus are going to come down and we saw a little bit of that in Q4, particularly on the new side that was really driven by our need to want to continue to grow the market on the used side, we made a decision to actually get rid of some aged inventory. So we expect that our used margins should be.
Maintaining themselves pretty well, but we are forecasting that our new margins are going to come down and we think theyre going to come down a little bit more than what we saw in Q4.
Partially we want to continue to dominate the sale of rvs in the market as a company and we're going to always be managing and monitoring what the supply levels are how other dealers are selling and while we don't want to participate in a race to the bottom we don't like to lose that anything that we do.
So we want to continue to maximize the grosses on the new and used side, but we're not going to compromise our volume gain in 'twenty two because as we learned in study 21, the volume feeds the rest of our business. The new RV sale is nothing more than a fire starter for what really matters to our business.
Which is it creates a trade for or used to drive service that drives good Sam it drives our aftermarket business and I think we want to really focus on now that our supply on total bowls is where we want it we want to really focus on grabbing share both through acquisition through new store openings and most importantly organically.
Got it okay. If I could just follow up I think you said your total.
<unk> is where you want it.
But I mean, I think you mentioned the word also in your prepared remarks.
Optimize speaking around new inventory so.
Optimize mean running it.
Higher turns or how do you think about your.
Appetite to acquire.
New inventory from here on out.
Yes, so the optimized in my script was really talking about how in 2021, we looked at maximizing every single transaction for growth because the supply was limited, but the optimized that youre, referring to and I like more is how we're thinking about inventory going forward and one thing that we learned through 2020 in 2021.
As that we're able to do more with less.
And we know that the manufacturers as we go into 'twenty, two and 'twenty three are going to be far more responsible about manufacturing inventory than they were in the past do not flood the market and I think both the manufacturers and dealers alike enjoy better margins than it had historically because it learn that if it manage the supply.
A little more responsibly, we can do that now Thats My hope.
But I don't control what other people do and so we have to make sure that we're responsible about our own inventory and so when we wake up every day and we look at what other dealers are pricing at we want to make sure that we're keeping our days supply at a level that avoids aging and avoids unnecessary margin compression.
But we.
We will never wake up on a Tuesday without every single product that we need being at every single store.
That is the most important thing.
So there is that fine balance between managing your aging and never being out of stock in core items.
Got it okay. Thank you.
Brad I wanted to I don't want to give you one more bit of color.
Because I know that you and I always have these discussions we are anticipating just so everybody can sort of forecast volume is giving you kind of the roadmap on the margin side, but we are forecasting slightly positive same store sales in 2022. So.
So we don't we don't want anybody thinking that there is some sort of margin compression coupled with this demand thesis that people had that the demand was elevated and not it was fake news we believe as we've seen already at the start of 'twenty two that the demand is real.
And that the demand is there and by the way we're not living in most states with mass mandates and things are wide open. So we want to be clear that we are very confident as we look at our leads as we look at our foot traffic and as we look at more importantly, our actual transactions we feel positive in fact.
This last Saturday in the Middle of February we ended up selling over 1000 units and that has not happened on a Saturday since June of last year.
And it's February .
So we are very confident that we are doing what we need to on the inventory side and we're doing what we need to on the used side because the mix of new to US has continued its dominance of that use growing every single day. So we will talk about selling 1000 units on a Saturday, we believe that our fourth quarter <unk>.
And the start of our year is going to look different than a lot of other dealers because while the market was down double digits in Q4.
Our same store sales numbers, new and used.
They were positive.
So we think that this use game that we're going to be playing is going to change which is why we've always been agnostic of whether the customer buys newer use.
We are planning and expecting for positive same store sales and we believe that used as the driver regardless of what happens on the supply side.
Got it because of your open open the door to a follow up then so just to be clear the same store.
Is it all in in terms of being positive this year that's done that.
I guess, what do you expect to use to do and what are you expecting you to do.
That is we expect we expect because of where our agnostic nature.
Of selling to the customer when they walk in the front door. We believe that our total same store sales new and used combined are going to be positive.
And we had our biggest year ever just to be clear. We did 126000 units last year that was our biggest year ever. So when we say positive that means 126000 and at least one.
Understood. Thank you.
Okay.
Our next question comes from Rick Nelson with Stephens. Please go ahead.
Alright, Thanks, a lot.
Right.
Congrats on a great quarter like to follow up <unk>.
Okay.
Gpus to pull back.
Sure Yes.
How much can be cut.
<unk> share there.
How much flexibility you have there.
While we don't ever like to think about cutting SG&A, we'd like to think about being more efficient with the available dollars that our gross profit provides us to run our business and while we have made specific decisions to cut about $15 million in marketing that we believe did not provide us the kind of return that we need.
We expect some SG&A improvement there, but in natural course, because we are a variable built business on the compensation side reductions and gross profit result, Unfortunately and reductions in wages and I say, Unfortunately, because we want our team members to always be striving to make more that will drive them to try.
To accelerate the volume to make up for it so GPU reduction doesn't necessarily always have to correlate to earnings reduction it can but I want to be clear. It doesn't always have to I think the one thing we've learned since we went public and you can see it in our numbers is how we learned how to be more efficient.
And I think the thing that we've enjoyed in the last 12 months is every time, we stacked on a new location and that new location came with a better used performance a better service performance and our good Sam business kept getting better we started to notice that we were able to hold the line on overall margins for our company.
And as that mix changes and we sell more used than we can tweak that overall margin even with new compression, we really feel like that number will move Rick it could move up from 64, but we feel very strongly that on an annualized basis, we will be able to stay away far away from where we were when we went public.
At 70%, but its work and that's what we're focused on.
Thanks.
And our color also like to follow up on the acquisition.
Or the pipeline.
Multiples churns.
Sitting out there.
Acquisition versus stock buyback.
So on our board today, either closed or about to close are under LOI, we have more acquisitions slated more rooftops that we opened stores in 2021.
That does not include the number of new stores that we're going to be opening in.
And as a matter of fact, our Lincoln, Nebraska store opened today, which is our new prototype for our camping World Supercenter, We know that there's 1500 RV dealers in America, and we don't even have 200.
So this idea that we're even close to being done is kind of I think it is laughable for us, but I also want to be clear that our ability to buy stores in price ranges.
That are attractive to us continue to be present, and when they're not we look at alternatives. The alternative for us in the last 510 years has been to open up new stores. When we opened them up they actually return really really well over a five year period. The radar the cash on cash return is phenomenal.
But the one thing that we have learned and we're proud to talk about today is that we really look at our business overall and you sort of rank the gross margin contributors in our segments you start with good Sam which has always been the thing that we loved the most and we get the least amount of credit for the big business that just <unk>.
<unk> cash the second piece is our F&I office and how that does its got no cost of goods and very low labor and it really does a good job. The third is our service parts and collision renovation refurbishment business unbelievable labor margins and really good parts and accessories margins.
And then next you have you used and then last you have your new and the reason that I would tell you that story because that's how we actually think about allocating technology capital inside of our business Chase to parts of our business and put systems in the parts of our business that are going to drive those high margin numbers not that we don't see it important.
To do the bottom ones, because we will always be the largest new RV dealer in America period.
But we've made the decision going forward that we are going to start opening pre owned super centers.
And they will look a lot like what you see today when you go to a camping world, except there'll be smaller real estate footprint, because we don't need 250, new on the ground. We can carry a 150 to 200 use.
We have far more service capacity to collision two collision boost because we'll do a lot more work big insurance work there.
Set of 12% to 14 traditional service bays, and then four to six renovation refurbishment base.
The retail experience will also look a lot different well it'll have necessities of supplies inside of it it will focus on refurbishment installation repair high ticket items that come out of our retail business awning towing systems satellites, all those things that customers need to pimp their RV or do what they want to there.
Other units.
I think the exciting thing for US is could you ever imagine taking your most profitable businesses and putting them on a piece of property, where nobody could compete with you.
And there is no margin compression because you have the one of a kind jewel box. It has things that nobody else can get and we proved over the last 24 months with our RV valuate or tool and our ability to procure inventory, which we demonstrated and will continue to demonstrate that there is really no barrier to entry and what we do we.
Thank is unregulated.
Replicate a bowl.
Our database and our other parts of our business.
Supercharge, what that location can be and in fact, we think potentially based on our early estimates that those locations could actually be our most profitable cash on cash out locations.
We can remember we don't hold a lot of our real estate, we go to third party rights.
We have the floor plan for our inventory so the actual cash or it takes to open up one of these locations this could be like around $4 million.
And in a matter of 24 months. These things can be doing 20% to $25 million of top line with the kind of margins that we're used to and.
And Youre getting your money back in a year or two.
So we learned that the used business is going to be the biggest pivot that our company has ever had because we have proven it over the years.
We went from 2016 was $703 million as of yet.
Hughes' revenue.
Just literally like 1213 or excuse me to $985 million apologize. We went from 2016 from $7 three to 2021 of around 985 to making a decision.
Conscious decision when the supply chain was broken to change our business forever and we went from 985% and 21 to $1 7 billion.
Okay. So we saw that growth happen in 12 months that we had never seen before because our management team said look we're not married to any manufacturers or suppliers, but we can't wait for inventory and we can't play this margin game on the new side, if things ever returns. So how do we take matters into our own hands and how do we finally differentiate our.
Company from every single other peer that we get compared to including the manufacturers as we become a use juggernaut.
And while we said $3 billion is our target I promise you that we believe we can get there in the next 18 months.
And then $5 billion will be our target.
This business is actually the sweet spot, it's what I grew up on and understand the best and it's where we think we can really add value to our shareholders.
Thanks Harold.
Color Marc Hess.
Mark.
Thank you Rick.
And our next question comes from Mike Swartz with true <unk> Securities. Please go ahead.
Hey, good morning, everyone.
Markets, maybe maybe touching on new vehicle margins. This is a big focal point for people obviously.
Maybe looking at it a different way is there any reason why we should believe maybe over the next 18 24 months that new vehicle margins would revert to what we saw pre pandemic in more in the mid teens level.
I don't really think so and I'll tell you why I think that even though the manufacturers hopefully will manufacturers 600000 units. This coming year, we're dealing with a bigger installed base and a bigger excitement about the industry that we've ever seen before the demand that we see on our websites and the traffic and the inquiries is like <unk>.
The thing we've ever seen before so while we know that margins may come down and while we're comfortable with inventory levels starting to settle in the manufacturers have a lot of work to do years and years of work to be able to build capacity to get to 700000 800000, and so because the installed base grew so much.
And because demand continues to be strong even in an inflationary environment, because remember when they finance them over.
180 months or 240 months, while the inflation is unfortunate and not great. They still are being we're able to stretch that into a monthly payment they can afford.
Don't see unless the manufacturers.
Accelerate their capacity ability quicker than we believe they can and they don't say disciplined with manufacturing to demand instead of trying to create demand by manufacturing we should be in good shape and the manufacturers that we deal with Forest River and <unk>.
For our very solid financial stewards of both the industry and their dealer body. They really do pay attention to the health of their dealer body and Thats a good thing for our overall industry I can't speak to all the other manufacturers and their willingness just to mass produce we don't know.
Okay.
Very helpful. Thank you for that and then just on the on the product service and other in the quarter came in a little lighter than I think you said there is still some cleanup going on with some of the lower margin categories. You were getting out of and I think you called out on the third quarter call, but maybe I'm just trying to understand how much of a headwind that creates to 2022 is there any way to think about.
How much revenue some of those lower margin categories actually contributed into 'twenty one.
Yes, we actually know that on an annualized basis. It was around $200 million of revenue that we got out of and unfortunately for us last fourth quarter.
That business that hunting firearms.
Ice fishing business is more of a fourth quarter business and so we had some pretty big headwinds in the fourth quarter that we just overcame but we made a lot of it up with our service business. Unfortunately, we didn't make up enough as we head into the first quarter second quarter and third quarter, we're dealing with about 100 and.
Call it $20 $30 million over those three quarters. So we have some wood to chop to be able to get ahead of that however, more importantly, we expect that you will see meaningful improvement in the gross margin and you'll feel really good about the fact that we exited these categories and then took that cash and redeploy it into <unk>.
Our furniture business, our mattress business. These things that are not only going to be driven by our us business, but provide better turns better margins and it gives us something different than other dealers, but there is some headwind for sure.
Okay wonderful thanks, thanks for the color.
Okay.
Once again, if you would like to ask a question. Please press star one. Our next question comes from Martin Taylor with Raymond James. Please go ahead.
Good morning, and thank you for taking my question and congrats on a great quarter I'll quick question regarding the dividend.
Now that we have increased significantly in less than a year should we expect to grow along with earnings from here.
Can you repeat the last part of the question.
Absolutely. So now that we've seen the dividend increased significantly in less than a year should we expect it to grow along with earnings from here.
We'll look at as <unk> always our plan to grow earnings, but more importantly to grow the earnings per share. It is always important for us to do that and so we know in order to grow the earnings per share we have to buy shares back at a very aggressive level as long as we believe there is a dislocation between where.
Are we as a management team believes the value of the company is and where the market thinks the value of the company as we are going to astutely use our capital to the extent that we're permitted by the board to buy back and when we do that we will go back for more and we will go back for more and we will go back for more I want to be clear about that that we are going to be very disciplined.
And very <unk>.
Sort of almost.
In our DNA that share buybacks are part of our DNA as we move forward as a company and it's accelerated even more when we don't buy off on the market's value, but I would expect it to exist in the long term on the dividend side I hope that that grows well we want to be responsible with her.
We're using our capital in the most important use of capital is the growth of our company.
The second most efficient use of our capital is and we can buy partners back at below market value because that gives us unbelievable returns and the third is the dividend.
And it is important because there are a lot of investors that like all three and that's what we're striving to perfect perfect balance that makes everybody happy across all three to really accelerate that return for our holders.
Great. Thank you. So that does also segue extremely well to my next question, which is you spent over $150 million last year on share repurchases in stock is well below your average costs. How quickly do you expect to deploy that $200 million left on your authorization.
We are going to be very disciplined about deploying it but the larger the dislocation the less discipline will have.
We have the capital we have the cash we have the availability and so if we continue to feel like the dislocation is extreme will accelerate it.
Great. Thank you and I think.
Fixing what we believe is the dislocation in value is part of the dividend model right. You got to have that perfect balance between having people know that if youre going to short the stock there's going to be a heavy dividend and if you own. The stock there is going to be a heavy dividend while shares are also being repurchased aggressively.
When possible.
Okay.
Great. Thank you Marcus.
And our next question comes from Craig Kennison with Baird. Please go ahead.
Hey, good morning, Thank you for taking my question as well.
Also we appreciate the 2026 goals I'm wondering if you can translate that into EBIT.
Goals.
The 2026, I'm, sorry, Craig what was the 2026 call.
Well I thought you said that over the next five years you want to replicate the growth that you saw in the last five years, so I interpreted that as 2000.
Six and then you talked about some <unk>.
Segment goals as well I'm, just wondering Patrick yes.
Re creating yet I mean, our goal is to obviously recreate that the pace of acquisitions and the size of the growth, but obviously as you know as you get to $7 billion going from three five to seven is a lot easier than going from 7% to 14, but when you look at our free cash flow and you look at our ability.
To open stores and you look at our access to capital and you look at our access to inventory and you look at the available markets that are out there sure would we love to double the business in the next five years, absolutely, but we also have to be responsible with how we actually do that because to go from seven to 14 means were taking on another 14000 employees.
14000 employees require a lot of training and a lot of support and a lot of infrastructure and we would never want the pace of our growth to not be able to handle the necessary training both for our associates and the customer experience. So growth has to be very much tempered not by capital but <unk>.
Youre going to create inside of your company because ultimately that bad experience in hyperbolic growth can end up having a hyperbolic problem at the same time and so I don't know that I want to peg a certain number but I will tell you that it is our continued plan to accelerate acquisitions and new store openings.
<unk> in the 15 to 18 to 20 range, we'll do about 20. This year I can tell you that already and we already have nine markets on the board both in 2003 and in 2004.
So if you could just compound that and look at the average size of a dealership that we acquire or build ends up maturing and being somewhere in that $25 million to $30 million range, we sort of do the math that way and say, okay, youre going to add $3 million to $400 million in year, one and $5 $600 million in year, two and it starts to compound and thats.
Ultimately, how we see that growth compounding. So if we were sitting here five years from now we should have approximately.
Almost 100 more stores 90 to 100 more stores than we have today, averaging between 20 and $30 million of top line and then the rest of our business gets that same level of growth at the same time March it up just the same way you did when we add one store.
And over the next four or five months and potentially earlier than that we're going to be providing to the market. Some basic assumptive models around what a new store looks like and what it cost to build and what the returns are what an acquisition looks like and what it cost to build and what are used supercenter will look like and I think that will help build.
The model for people to say if youre, adding this many stores and you are projecting this much revenue and they take on this sort of EBITDA margin in that period, you can extrapolate that out pretty easily and the only flux in that is.
Improvements in SGA.
And variations in margin.
Becomes far more predictable for all of us.
That's extremely helpful. I appreciate that just to follow up on the collision piece. There I think you said.
Do you want to go from 26.
100 days to adding another 500 days what are the what's the economic contribution of increasing.
The number of days by 500.
So every bay contributes around a quarter of a $1 billion of gross profit on an annualized basis.
Perfect.
Great. Thank you so much.
On it.
Once again it is star one to ask a question. Our next question comes from Bret Jordan with Jefferies. Please go ahead.
Hey, good morning.
On the service phase could you tell us sort of how we're running capacity utilization of the current 2600 bays and then maybe as you look at adding to that business sort of what is the staffing environment like it sort of seems like an RV technician is probably a plumber, an electrician and the mechanic kind of hybrid.
Could you talk about the rollout of this incremental service capacity.
Acquisitions are always a huge part of what our company does because we're picking up human capital, which is far more important than financial capital and so we're able as we make these acquisitions and do 10 to 15 to 20 acquisitions a year whatever that number may be we're picking up team members at the same time and.
Theres a bit of a farm system, there I think where we have some wood to chop and work to do is growing our own farm system and so we've started to identify specific regional locations across our country, where we're bringing people into an educational platform and an apprentice platform without and while we're working with third parties to do that.
We've had to take matters into our own hands and our goal is to try to create <unk>.
Far more technicians than we have base if I told you what our utilization was you'd laugh because it's over 100%, but especially in peak season, because theres times. When we're working in the parking lot and were working with two units in the bay, but there are other times of the year, where there is capacity and so we're looking much like our hotel.
Wood are much like a campground would look what we're looking at our utilization on an annualized basis, but we're also looking at different times of the year and trying to figure out what we can do to generate more revenue and generate more opportunities in those shoulder seasons, that's part of what drove us to get into this renovation and refurbish.
<unk> business and it's also a big driver of why used <unk>.
Can be massively important when we go into a new calendar year, we want to start with a lot of inventory.
But when we get to August we start driving our inventory down when.
When you look at our service bays in November and December there not as busy as they are in June and July so as we accelerate our used purchases, particularly from other dealers that need cash or from consumers that don't want a storm over the winter and we're buying deep in September and October were now able to utilize the capacity inside of our service Department.
In November and December to create that reconditioning work that gives us great inventory starting on January one. So that's part of what we're trying to improve when we said we want to do more with less and searching for nighttime shifts maybe having seven day operating systems and our service department looking for shoulder seasons, we know.
So that in order to really improve this business, we can't just keep buying and just keep opening we have to take the orange that we have now we got to get more juice out of it and I think we've gotten a lot better and to be honest I think the pandemic actually helped us it really was the catalyst for us to learn how to do more with less.
As people were out sick or people quit or whatever happened we had to learn how to do more with less and I think that was maybe the silver lining in all of it.
We learned how to pick fix our use we learn how to better manage our service we learn how to do more with less and that may be the silver lining coming out of this which is why we believe the next five years are going to be really profitable for us.
And I guess on that five year forward pre owned Super centers could you sort of talk about how you see this as a percentage of the mix in five years and now are these.
Existing RV stores that youre converting to used only.
How do you sort of see it.
As a as a percentage of the pie five years out.
I'll, let you behind the fourth wall for just a minute to give you a little chuckle, but if it was we have a split between our management team on whether we're going to buy some and convert them or whether we're going to open some and we I think what we've learned is we want to be really really engineered and efficient.
From a from a environmentally responsible standpoint, because we're responsible company to a financially responsible company, we want to find that balance and we believe that we've created a template of about an eight acre store with about a 31000 square foot building with 175 parking spaces with knowing where the bathroom is going.
And what the customer experience is going to look like and what we can do to make that thing really efficient from a labor standpoint, and enjoyable for our customer experience.
I would back that will we will start opening them here. This year in fact, it is our plan to open our first one and hold our Investor conference. There in the fall with a date to be determined in Detroit, Michigan.
Detroit, Michigan as Michigan is one of the top six states in the country and we have really accelerated our presence there and we will be the largest dealer there by the end of 2022, we will be the largest deal ever with the acquisitions. We just made with stores that we've opened and whats about to be announced we will be the largest dealer there.
And so in the middle of Detroit is our old stand alone camping World store it didn't sell any <unk> and what we've done is we've shut it down it's totally being refurbished we're adding 14 base to it we added some land and our first pre owned Supercenter will open there you can expect in the next five years the bulk of the superstores.
What happened in the top 12 to 14 RV registration States in America, because part of having a use store is understanding that that new store is also a buyer in the market and so the selling centers will act as buying centers as well and as an example, we can launch a campaign on a Sunday.
By pressing a button and within 24 hours have 5200 leads of people that want to sell their RV to us and have gone through the RV evaluated tool that number isn't a hypothetical it happened this weekend.
And so we want to really teach ourselves that the name of the game in used is in selling.
It's buying and Thats, what we needed to prove out that we could do with raise their sharpness and so thats. Our model. My goal is that we would have at least 30 standalone use super centers over the next five years that is my goal.
It doesn't mean that I'm going to do it and not be responsible about it but that is the goal.
And by the way when you do that.
Yes.
You bet.
Yes.
I don't think next question.
Our last question comes from Derrick Johnson with BMO capital markets. Please go ahead.
Great. Thank you.
<unk>.
Your comments on getting.
Aged inventory and used had an impact on your margin can you talk a little bit about that move with surprise to hear that there is in each.
In this environment.
Well, our definition of aged and a typical dealers definition of aged are very different I was brought up in the used car business and so my expectations for used aged inventory is probably by some people's opinion too tight, but I believe that the most important asset in the company is the used <unk>.
Inventory because it really moves in the market moves and if you don't keep it tight and a really tight days' supply in aging you get yourself in trouble.
I always believe that your first loss is your best loss and so when it when it really starts to be past 120 days, we don't like it that stay honest truth, when we buy dealerships, we find inventory thats been there 500 days.
And that's the kind of difference that we put in through our process and so when we got through the end of the year. There were certain makes and models are certain manufacturers are certain age of units eight years old nine years old 10 years old and Youre going to have things that once in a while you make a mistake on when you take a trade it.
That's part of what happens in the market you have a human element is is an element in the process and so we don't ever like to hide.
Where our used inventory as we would always be to know that our shareholders know that we manage that like it's a pot of gold and so we do take losses from time to time.
Okay. So it doesn't sound like it's a certain.
Tyler modular brand.
Just to clean up.
Inventory thats been at dealerships you purchased.
That would be.
Sure.
Yes, Sir.
Okay now one more question on sort of the macro and how it impacts your business I want to talk about inflation.
And I'm not just talking about the price of an R&D, but you know everything that goes with it Toby until the gas.
But also families budgets will be I think compressed.
Costs more for grocery is more for clothes things like that.
You see that is having an impact on your business, particularly on the pre owned and sort of part beyond that what is the average monthly payment.
For one of your customers, particularly your pre owned customer.
Well, we really the bulk of what we sell is on the travel trailer and total side and we're under a $200 payment on average, but we agree with you that inflation is a concern.
And I think that we there are two things that work in our advantage in one I think people are going to scratch their head on but I'll go ahead, and say it anyway, but one thing about.
<unk> is that it is the most affordable vacation that people can take.
And that's not just a marketing campaign. It is factually correct between airlines and hotels and theme parks and cruises and whatever else. It may be there is a more expensive journey to get there and when you talk about the tow vehicle in insurance in the RV payment itself and the campgrounds.
That you have to rent you are still talking about in the hundreds of dollars not thousands of dollars and so we feel very good that we are a spectacular alternatives.
Part of the other reason why we also started to shift in the middle of last year outside of the supply issue in outside of the great returns is because we did see that inflation was becoming a problem on the new side and that will impact margins and that could potentially slow down volume for some dealers.
That because they don't have us have to just sell something to generate some revenue.
And so we think inflation is going to be an issue. We think use for our company mitigates a lot of it because it's a value proposition to a customer about getting more for less.
And that will be our campaign by the way it is more for less.
Okay.
Thank you.
There are no further questions at this time.
Thank you for joining us for today's call. We will see you as we report the first quarter in the spring. Thank you so much.
This concludes today's call. Thank you for your participation you may now disconnect.
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Okay.
Yes.
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Yeah.