Q4 2021 Lazydays Holdings Inc Earnings Call
As a reminder, please note that some of the information that you will hear today. During our discussion may consist of forward looking statements, including without limitation statements regarding unit sales revenue gross margins operating expenses stock based compensation expense taxes product mix shift and geographic expansion.
Actual results or trends for future periods could differ materially from the forward looking statements as a result of many factors.
For additional information please refer to the risk factors discussed in the form 8-K filed with the SEC on March 10 2022.
We will also discuss non-GAAP measures of financial performance that we believe are useful for understanding the company's results, 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 three months and year ended December 31, 2021 and 2020 the financial information presented represents the operating results of Lazy Days' Holdings, Inc.
Now it is my pleasure to introduce Bob Kevin Kimzey, who will provide some opening remarks for Nick Toman, Schott, who will share an overview of the 2021 fourth quarter and full year financial.
Thank you Debbie.
Having joined the board in October of 2021.
And then appointed interim CEO on January 1st of this year.
This is my first opportunity to address our shareholders and stakeholders and I'm very pleased to do so.
Let me start by providing a few financial performance highlights.
The fourth quarter of our financial year again demonstrated solid performance capped off a remarkable year for the RV industry and for you guys.
And our preliminary fourth quarter results press release that we issued on February 3rd.
We indicated that our expected fourth quarter results would yield revenues of $322 5 million.
Adjusted EBITDA of $32 $7 million.
Net income of $15 $3 million.
Today, we announced revenue results in line with our preliminary release.
$322 5 million and an improved EBITDA and net income results.
$33 million and $16 $9 million respectively.
Nick Thomas shot will provide more detail on our fourth quarter results as well as our 2021 full year fiscal results a bit later in the call.
With regard to our growth strategy in the fourth quarter, we announced plans to expand our existing footprint.
With an additional greenfield dealership location in Fort Pierce, Florida.
Which is our third location in Florida.
And we announced a greenfield dealership to be located in Council bluffs, Iowa.
To serve the greater Omaha, Nebraska market area.
As I have become more deeply engaged in the operations of the business.
I've been impressed with the leadership team and the partners that deliver the lazy days customer experience in the 17 dealerships and service locations that we operate.
The team continues to do a great job in moving the business ahead and dealing with the opportunities and challenges that 2021.
In the current timeframe has presented to the company and to the industry at large.
We have all gotten more comfortable with being uncomfortable as our business conditions have changed either from public health <unk>.
The increase in persistent levels of consumer demand.
Actuated inventory levels and other effects.
We have refined our ability to be flexible and adaptable and these skills will be critical to lazy days as we move through 2022 and beyond.
I wanted to offer a few comments about our current.
First quarter of 2022 period.
The topic of much discussion in the industry as the balance of RV unit supply and consumer demand.
And the control of price and margin.
Our industry partners. The Oems are working hard to return to normalized production levels, which in turn allows us to work to return to inventory levels are appropriate for our customer demand.
As you know this is a complicated process and has not been and we will not be seamless.
Brands models and product categories will restore at different rates.
<unk> are now approaching desired stock levels.
And inventories of higher end tables fifth wheel and motorized vehicles are improving but remain below historical levels and our desired levels given consumer demand.
With a modestly improved availability of units, we continued to experience strong demand for our inventory.
And we are presently experiencing margins in our Q1 2022 period.
Consistent with the fourth quarter of 2021.
We like most industry participants have heard the industry reports.
On margins and the expectations of likely declines later in 2022.
I will now turn the call over to Nick <unk>, who will provide a more complete overview.
Of 2021 in the fourth quarter and full year financial results.
Thank you Bob please.
Please note that unless stated otherwise the quarter and fiscal year results comparisons are versus the same three and 12 month periods ended December 31, 2020 revenues for the fourth quarter were $322 5 billion.
$126 million or 64, 1% from 2012.
Revenue for the quarter from the sale of recreational vehicles are rvs was $291 million up $114 4 million or 64, 8%.
Total RV unit sales, excluding wholesale units were 3211 up 1082 units or 58%.
Q4 revenue from the sale of new recreational vehicles was $174 7 million up $57 3 million or <unk> 48, 8%.
RV unit sales were 1835.
498 units or 37, 2%.
The average selling price of new rvs for the quarter was $95200.
Up $8200 or nine 4%.
Q4 revenue from the sale of pre owned Rvs was $116 3 million up $57 1 million or <unk> 96, 6%.
Pre owned RV units sold excluding wholesale units were 1376.
584 units over 73, 7%.
The average selling price of pre owned recreational vehicles was $81400 up 10400, or 14, 6% versus the fourth quarter of 2020.
Revenues in our other channels consist of sales of parts accessories and related service.
Finance and insurance or F&I revenue as well as campground and miscellaneous revenue.
In total revenue from these other lines of business was $31 5 million.
Up 11, 5 billion or 57, 9% compared to 2020.
The increase was driven by an F&I revenue increase of $8 $2 million or 81, 4% to $18 2 million and parts and service revenue increase of $3 5 million.
Or 37, 5% at $12 7 million.
Q4 gross profit excluding noncash last in first out or LIFO adjustments was $87 6 million up $42 million versus 2020.
Gross margin, excluding LIFO adjustments increase between the two periods to 27, 2% compared to 23, 2% in 2020.
With the change driven by growth in all lines of business.
Including noncash LIFO adjustments, which had a net unfavorable swing between periods of $2 million compared to prior year gross profit for the quarter was $84 2 million up $40 million or 94%.
Excluding transaction costs stock based compensation and depreciation and amortization SG&A for the quarter was $53 7 million up $24 million compared to prior year.
This increase is attributable to overhead associated with the Elkhart in Chicago land, Indiana locations acquired respectively in October and December 2020.
The Maryville, Tennessee dealership acquired in March 2021.
And the Portland, Oregon, Vancouver, Washington in Milwaukee, Wisconsin dealerships acquired in August 2021 as.
As well as the Nashville, Tennessee, Greenfield location, which opened in January 2021.
SG&A as a percentage of gross profit ex LIFO increased from 53, 8% in Q4 of 2020 to 55, 8% in 2021, reflecting the increased overhead from the acquisitions mentioned above.
Amortization of stock based compensation decreased <unk> 4 million and depreciation and amortization increased <unk> 9 million compared to prior year.
Yeah.
Net income for the fourth quarter was $16 9 million as compared to $2 2 million in 2020.
This was driven by improved RV sales and gross profit relative to overhead expenses previously discussed.
Adjusted EBITDA for the quarter was $34 $3 million up $18 8 million or 121%.
Adjusted EBITDA margin increased 270 basis points to 10, 6% from seven 9% in 2020.
Please refer to our earnings release for the table, which is <unk>.
<unk> a reconciliation of net income to adjusted EBITDA.
I'll now provide a summary of our 2021 full year year end financial results.
Revenue for the year was $1 2 billion up $417 9 million or 51, 1% versus 2020.
Revenue from the sale of recreational vehicles was $1 $1 billion for the year up $382 million or <unk> 52, 3%.
RV unit sales, excluding wholesale units were 2014.
270 up 4250 units or 42, 4%.
Year end gross profit, excluding LIFO adjustments was $329 6 million.
The $150 7 million versus 2020.
Gross margin, excluding LIFO adjustments increased between the two periods from 21, 9% in 2020 to 26, 7% in 2021, driven by growth across all lines of business.
Including noncash LIFO adjustments, which had a net unfavorable swing of $4 $9 million compared to prior year gross profit for the quarter was $324 8 million up $145 8 million or <unk> 81, 5% versus 2020.
Excluding transaction costs stock based comp compensation, and depreciation and amortization SG&A for the year was $183 8 million up $66 1 million compared to the prior year.
The increase was due to overhead associated with eight locations added in 2020, and 21 and increased performance wages as a result of the increased unit sales and gross profit for the year ended December 31 2021.
SG&A as a percentage of gross profit ex LIFO decreased from 65, 8% in 2020 to 55, 8% in 2021, reflecting improved operating leverage.
Amortization of stock based compensation decreased <unk>, 8 million and depreciation and amortization increased $3 1 million compared to prior year.
Adjusted EBITDA for the year of non-GAAP financial measure was $144 $9 million.
Up $86 million or 145, 8% compared to 2020.
This was driven by improved RV sales and gross profit relative to overhead expenses previously discussed.
Adjusted EBITDA margin as a percentage of revenue increase for the year to 11, 7% compared to seven 2% in 2020.
Now turning to the December 31 balance sheet, and our financial position, we had cash on hand of $98 1 million and net working capital of $109 3 million.
Which with cash $34 6 million higher than December 31, 2020.
This increase in cash includes proceeds from financing liabilities for leases of $26 2 billion.
Proceeds from the exercise of warrants of $11 6 million and proceeds from the exercise of stock options of $30 7 million.
Offset by cash used for stock repurchases of $12 million.
The change in cash also includes the impact of cash used to invest in growth initiatives, including three acquisitions as well as the payment of $4 8 million in dividends to the series a preferred stock holders.
At the end of 2021, we had $242 9 million in inventory.
<unk> of $177 7 million in new vehicles.
$66 million in pre owned vehicles.
Proximately $7 6 million in parts inventory and LIFO reserves of $8 4 million.
As of December 31, 2021, we had no borrowings under our 25 billion revolving credit facility Ken.
$10 1 million of term loans outstanding and $192 $9 million in gross notes payable on our floor plan facility.
We also had approximately $2 7 million outstanding on notes payable related to acquisitions.
$8 million of PPP loans outstanding.
And then mortgage on a property of approximately $5 7 billion.
We have one additional item to discuss that we'll be disclosing in our 10-K filing.
And our review of internal controls management identified a material weakness related to ineffective information technology general controls our ITC.
We identified weaknesses in two areas.
The first area was regarding program change management over certain it systems that support the Companys financial reporting processes.
These control deficiencies were result of our inability to systematically identify all changes made to our financial reporting system.
Although we havent change process in place system limitations prevent us from systematically being able to identify all changes made to our systems.
In addition, we found that some users have the ability to facilitate changes beyond what was necessary for their specific job responsibilities.
The second area was regarding the review of access of user permissions and separation of duties.
Our current technology platform makes provisioning and maintenance of user permissions difficult to categorize and assess possible conflicts that could weaken controls.
Based on this material weakness the company's management concluded that at December 31, 2021, the company's internal control over financial reporting was not affected.
This material weakness did not result in any identified misstatements to our financial statements and there were no changes to previously released financial results.
Following identification of the material weakness and prior to filing. This annual report on Form 10-K , we completed substantive procedures, expanding and strengthening our testing.
Based on these procedures, we believe that our consolidated financial statements included in our Form 10-K have been prepared in accordance with U S GAAP and that the financial statements and other financial information included in our Form 10-K fairly present in all material respects the financial condition results.
As of operations and cash flows of the company as of December 31, 2021.
Management has been designing and ample binding and continues to implement measures intended to ensure that control deficiencies contributing to the material weaknesses are remediated.
The remediation actions include first developing enhanced risk assessment procedures and controls related to changes in it systems, including the development and deployment of reporting and tools that allow for improved controls and monitoring of changes in our it environment.
Second developing and maintaining documentation underlying <unk> to promote knowledge transfer upon personnel and function changes.
Third implementing an it management review and testing plan to monitor itg's fees with a specific focus on system supporting our financial reporting processes.
Fourth designing and implementing role based access and permissions supported by implementing technology that provides for improving controls and monitoring around signing and changing the assignment of roles that permissions to users.
And finally fifth we will be providing enhanced quarterly reporting on the remediation measures to the audit Committee and the board of directors.
We believe that these actions will remediate the material weakness.
The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded through testing that these controls are operating effectively we expect that the remediation of this weakness will be completed prior to the end of fiscal 2022.
Thank you and now I would like to turn the call over to Bob the Vincenzi.
Thanks, Nick.
I wanted to address a couple of final topics before we open up the call for Q&A.
First let me address our strategy to continue to grow the business.
As we have been in the past we continue to be focused on both greenfield and acquisition opportunities to grow the lazy days footprint and increase our contact with a growing number of RV enthusiasts across the country.
Given our leadership transition, we are refining our pipeline of opportunities in target markets.
With respect to our Greenfield expansion methodology, we continue to identify and act on promising markets and expect to be in a position to make some additional announcements in the coming weeks.
With regard to acquisitions of existing dealerships.
We continue to evaluate these opportunities.
But our careful to maintain our focus on the operational and financial filters and metrics that we use to determine our interest.
Seller expectations for price.
Have been and are quite high and.
And we continue to be very disciplined in evaluating deal flow.
Lastly, let me address the topic of capital allocation.
<unk> remains a focus of our leadership team and.
And the board of directors.
As many of you know on February 24th of 2022, we announced the completion of our previously authorized common share buyback of up to $25 million in common stock.
At the same time, we announced the authorization of an additional $45 million of buyback.
To be put in place through December 31 of 2022.
We will continue to allocate capital to various investments.
Support the long term growth of lazy days' shareholder value.
We are mindful of balancing investments in our core business to generate future cash flow growth with opportunities to invest through share buybacks.
This balance will continue to be a focus of the leadership team.
The board of directors.
We'd now like to open up the call for questions.
To ask a question. Please press star one on your telephone keypad.
Last question from Fred Wightman of Wolfe Research. Please go ahead your line is open.
Hey, guys. Good morning. Thanks for the question I wanted to follow up on the gross margin commentary that you had Bob started the call. It sounds like Youre seeing similar gross margins in the first quarter relative to the fourth quarter, but you also hinted at some expected softening later in the year. So could you just build out on that and maybe talk about how you think gross margins.
Will trend as we move through the year and inventory hopefully normalizes a bit more.
Yes. Thanks for your question, it's a difficult and complex question to answer I did I did provide the information about what we're currently seeing in the financial period, thus far and let me ask Nick to give a little bit more color from his perspective.
Yes.
Im sure Youre, asking because camping world had commented that they were starting to see some margin compression in Q4, but so far we havent, but.
But I will point out that we skew.
Heavier towards motorized at the higher end.
<unk> products and those.
No.
Haven't really reached the targeted inventory levels yet so.
Up to this point, we've been able to hang onto margins and maintain of course that will erode over time as the.
Supply and demand gets back in balance and I can't predict when that will be.
Yes.
Yes.
Sorry go ahead.
A lot of opinions about that and I am not sure.
Fair enough could.
Could you guys just comment on sort of pre sold today, maybe where that stands either quarter to date or what you saw in the fourth quarter, just relative to history, whether it's qualitative or quantitative.
We haven't we haven't really disclosed that but we have been and are maintaining what we see internally as record levels of.
Units that are on order did not delivered and that's something that has been consistent it hasnt eroded okay. Great and then if we just look at the inventory on the balance sheet exiting the fourth quarter. It looks like that was pretty big sequentially, just a step up in <unk> versus <unk>.
Could you give a bit more detail on sort of new versus used how much of that seasonality.
If you're comfortable with sort of where you stand today and how that would say we purpose employee were loading up on used and.
Our mix was skewing in the inventory was skewing much heavier towards us, especially when the supply chain was tight.
Now, we're starting to see the new product come in when we look at our inventory levels.
We're not looking at absolute number of units or dollars. What we do is we monitor while our turns are sell through.
<unk>.
We're still seeing higher levels of turns than we typically would if we get to our appropriate inventory levels.
It makes sense.
And then just broader thoughts on discounting I know that you guys have a little bit of a unique mix versus the industry, but are you seeing or hearing any incremental signs of discounting whether that's at retail or.
From Oems.
But I think I think what I expect is we'll start to see things happen in different locations and different timing because because we're in different markets have different <unk>.
Competitive composition.
We'll see.
Probably see that happening in some markets before others.
Okay.
Then just last one any thoughts on the DRP ice lowered wholesale production forecast do you think that that's prudent just based on what youre seeing in the market today.
Personally I preferred to.
Half.
Production linked to demand as much as possible.
Having lived through 2019, where there was too many units.
In stock, it's not detrimental to margins to have oversupply.
Perfect. Thanks, guys. Good luck.
Thanks, Greg.
There are no further questions at this time I will now turn the call over to Bob David Kenny for closing remarks.
Great. Thank you all for your participation in our quarterly conference call. We look forward to updating you next quarter and wish you all a good day. Thank you.
This concludes today's conference call. Thank you for your participation you may now disconnect.
Okay.
Okay.