Q2 2022 Lazydays Holdings Inc Earnings Call

Adjusted demanded market shifts and product preferences as they occur in real time so.

So we can provide the product or service that best suits the customer.

Shifting towards strategic investments and efforts during Q2, we repurchased $38 $2 million of lazy days' common stock.

Assistant with our previously announced share repurchase program.

Our share repurchases over the last 12 months now total approximately $50 million.

Given our substantial cash resources.

We need to remain focused on growth with.

With all of our previously announced Greenfield dealerships continuing to advance.

These include new dealership locations planned in surprise, Arizona, Wilmington, Ohio Council Bluffs, Iowa, and Fort Pierce, Florida.

And subsequent to the end of Q2 and addressed as a subsequent event in our 10-Q, we completed the acquisition of Daves Claremore RV on July 23.

We have welcomed the staff and customers the lazy days R&D of Tulsa, and look forward to continuing to serve and expand this important market.

As I said in our last call. We continue to evaluate additional greenfield dealership locations and have identified and advanced our work targeting a set of attractive new markets.

We also made progress in Q2 and further advancing our dealership acquisition opportunities, we continue to see promising and actionable opportunities to enter many new markets for laser base and we will continue to share our plans as they mature.

I would also like to note. Another subsequent event that I am very pleased to reinforce with all of our stakeholders.

As previously released on July 14th 2022.

The board has appointed John North as our next Chief Executive Officer.

As Chris Shackleton, Our board Chairman has said and I'll paraphrase.

We could not be more excited with the combination of John's operational strengths.

Is disciplined growth orientation, and superb judgement unallocated capital through business cycles.

The board sees this combination of skills.

It is highly relevant as we assess a widening range of compelling investment opportunities to drive shareholder value.

We expect that John will join the company on September 6th of 2022 and at that time I will end My service as interim Chief Executive Officer and returned to my post on the board of directors.

We look forward to welcoming John to believes it as family.

I will now turn the call over to Nick Thomas Shop, who will provide a more complete overview of 2022nd quarter financial results.

Yes.

Thank you Bob Please note that unless stated otherwise the 2022 second quarter results comparisons are versus the same three months period ended June 32021.

Total revenues for the second quarter were $373 6 million up $50 8 million or 15, 7% from 2021.

Revenue for the quarter from the sale of recreational vehicles or Rvs was $337 3 million up $47 1 million or 16, 2%.

Total RV unit sales, excluding wholesale units were 4052 down 156 units for three 7%.

Q2 revenue from the sale of new recreational vehicles was $219 $2 million up $17 6 million or eight 7%.

New RV unit sales for 2000, and 455 down 325 units or 11, 7%.

The average selling price of <unk> for the quarter was $89300 up $17200 or 23, 9%.

Moving to pre owned RV sales pre owned revenue for the quarter was $118 $1 million.

Up $29 4 million or 33, 1%.

Pre owned RV units sold excluding wholesale units were 1597 up.

169 units or 11, 8%.

The average selling price of pre owned recreational vehicles was $7400 up 11000, or 18, 5% versus the second quarter of 2021.

Revenues at our other channels consisted of sales of parts accessories and related service <unk>.

Finance and insurance or F&I revenue as well as campground and miscellaneous revenue.

In total revenue from these other lines of business was $36 2 million up $3 6 million or 11, 2% compared to 2021.

The increase was driven by an F&I revenue increase of $1 $6 million or eight 3% to $21 4 million.

And our parts and service revenue increase of $2 million or 16, 8% to $14 1 million.

Q2 gross profit excluding noncash last in first out or lifestyle adjustments was $101 2 million up $14 8 million versus 2021.

Gross margin, excluding LIFO adjustments increased between the two periods to 27, 1% compared to 26, 8% in 2021 with.

With the change driven by an increase in average selling price for both new and pre owned units as well as an increase in the number of pre owned units sold relative to new units.

Including noncash LIFO adjustments, which had a net unfavorable swing between periods of $1 7 million compared to prior year.

Gross profit for the quarter was $99 3 million.

Up $13 1 million or 15, 2%.

Yeah.

Excluding transaction costs stock based compensation and depreciation and amortization SG&A for the quarter was 61 $5 million up $16 7 million compared to prior year.

This increase was primarily attributable to overhead associated with the Portland, Oregon, Vancouver, Washington in Milwaukee, Wisconsin dealerships acquired in August 2021.

<unk> associated with the Monticello, Minnesota dealership opened in 2022.

As well as increased marketing expense to support cost and investments in it infrastructure and compliance.

SG&A as a percentage of gross profit ex LIFO increased from 51, 8% in Q2, 2021% to 68% in 2022, reflecting the increased overhead from our acquisitions and additional items mentioned above.

Amortization of stock based compensation increased $4 million and depreciation and amortization increased <unk> 7 million compared to prior year.

Net income for the second quarter was $31 8 million as compared to $25 3 million in 2021.

Adjusted EBITDA for the quarter was $38 4 million.

Down $2 8 million or six 8%.

Adjusted EBITDA margin decreased by 250 basis points to 10, 3% from 12, 8% in 2021.

Please refer to our earnings release for a cable which includes a reconciliation of net income to adjusted EBITDA.

Now turning to our June 30 balance sheet and our financial position.

Cash on hand of $105 $4 million and networking capital of $121 $2 million with.

With cash of $7 $2 million higher than December 31, 2021.

This increase includes the impact of cash used in operating activities of $31 7 million in cash paid for the purchases of property and equipment and acquisitions of $12 7 million.

Offsetting by cash provided by financing activities of $51 7 million.

Operating cash flow includes the negative impact of a $79 $2 million increase in inventory as RV inventory continued to recover from depleted levels.

The cash impact of this inventory increase was offset by an $89 5 million more.

Floor plan cash inflow reflected in cash provided by financing activities.

Cash provided by financing activities also includes cash outflows of $38 2 million for the repurchase of over $2 2 million shares of common stock at an average price of approximately $16 94.

As of June 32022, we had $321 $7 million in inventory consisting of $268 million in new vehicles.

The $8 5 million of pre owned vehicles.

Approximately $8 million in parts inventory and LIFO reserves of $12 8 million.

As of June 32022, we had no borrowings under our $25 million revolving credit facility.

$8 6 million of term loans outstanding and 280 to $2 3 million in gross notes payable on our floor plan facility.

We also had approximately $1 8 million outstanding on notes payable related to acquisitions and a mortgage on property of approximately $5 5 million.

Thank you I'd now like to turn the call back over to Bob <unk> Bob.

Thanks, Nick.

In closing I would like to say that the board myself continue to be appreciative of the commitment and performance of the executive team and all of <unk> partners.

The recent period is called upon us to adapt to changing conditions in our industry and in the macroeconomic environment.

I am pleased to be agile and athletic team that we have to both compete in the marketplace and meet the needs of prospective RV owners and customers.

Let's open the call up to questions.

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

First question comes from the line of Steve Dyer from Craig Hallum. Your line is open.

Thanks, Good morning, guys.

Good morning.

Question, So you talked about inventory.

<unk> normalizing curious to see what you are.

Here, what youre seeing on the on the trading environment, specifically are you seeing an abnormal amount of tribune's from people who.

<unk> decided to try our viewing during COVID-19 and Thats been a fun couple years, another going back to getting on planes anything abnormal there in the trade environment.

Nothing that really no not even anecdotally.

Okay.

You had talked.

A little bit about expecting sort of lower gross margins going forward, which clearly I think is understandable given everything that's going on are you able to sort of I guess directionally or quantify or quantify that at all for modeling purposes.

Yes.

We're actually.

Targeting a trend we do a lot of sensitivity analysis around this and.

19, 2019 assessed in the second half was exceptionally low and so we model normalization to be more around where we were prior to that compression that we took in the middle of 2019.

So kind of a 'twenty, one 'twenty, 2% area, but if I'm looking correctly.

Yes.

And would you expect that to start sort of right away in Q3 or is there some run off and just some good pricing youre getting still on motorized.

Yes, we were.

We were up quarter on quarter compared to prior year, but we were trending down.

Call it more normalizing.

For the second quarter, and we're seeing that continue in July and then in.

And it's not across the board too I mean, we're really being selective about which brands.

Which product that at which locations were.

The margins down.

Okay.

You gave a buyback number of like $2 2 million shares and change just so that I'm clear was that a Q2 number or a first half of the year number.

Okay.

Okay.

Yes.

I'll check my math here it looks like the first half of the year I'm, just just want to make sure. It is first it as first half.

Got it.

And then lastly for me and I'll pass it along you guys have.

<unk> balance sheet and.

And you've still been able to deploy it.

Quite a bit of it in the way of Greenfield and acquisitions and buybacks I guess going forward with the industry normalizing is there sort of a level of cash that you feel like you need or want to run the business and then sort of what's the methodology for the for the excess in terms of deployment is it I mean is there a specific sort of.

Thinking around ROI.

On buybacks with your stocks at certain levels versus greenfield versus acquisitions or is there sort of particularly with the new CEO is there sort of more of a tilt towards growing and consolidated any color there would be helpful.

So Steve I will take that up to this is Bob I'll take that question I think the way the board thinks about.

About capital allocation is.

It's not formulaic specifically because the.

The Greenfield returns that we're modeling.

Our fairly constant and we think our ability to predict them predict the performance of the Greenfields is very high.

Acquisition modeling there is little more variable.

Acquisition.

Pricing is changing in the marketplace and that drives.

A different return profile and a different IRR.

And then the share buybacks that we're doing.

When we're buying an open market conditions are influenced by.

The deliberations of the board and defining the price thresholds at which the.

The company will purchase.

No I wouldn't I can't tell you that's formulaic, it's fairly dynamic and it relates to how each of those three investment choices are changing on a periodic basis.

Got it fair enough. Okay. Thanks, Good luck guys.

Thanks, Steve.

Our next question comes from the line of Mike Swartz from Truest Securities. Your line is open.

Sure.

Okay.

I hope you're well.

Just a quick question.

Looking at the segment margins here, New news product that you held up fairly well in the quarter, but I would assume some of that just sequentially was.

Greater mix heavier mix of use so can you maybe talk about the new unit margins during the quarter and maybe what the.

Hit rate looked at just as we think about modeling that going going forward.

We really don't break those margins out.

I will I will say, though that the.

Quarter on quarter, I mean compared to prior year, our new margins were up.

<unk>.

We were for the quarter down less than 100 basis points sequentially versus Q1, but our exit rate was definitely lower than that and I'll. Just reiterate what I mentioned is key is that we're we're still well above what we would call normal margins and.

Have been trying to be very purposeful managing the trade off between margins and moving volumes are where we want our inventory debate, but I can't get specific.

Okay. That's helpful. I appreciate that.

I think we've all heard from others in the RV space that retail demand improved as the quarter progressed and it sounds like it got better into July as well, so maybe just talk about it.

Is that something that you saw in A&D discuss what youre seeing from your.

Core consumer just in terms of their appetite to buy rvs.

Yes, I would just say we did see a strengthening in.

Lead generation and order activity going into July I think one of the factors is you're starting to see more promotion not just by us but by other dealers.

Really nice bird survey that kind of shows the trend on dealers that are saying they are offering promotional activity and so youll just see across the industry manufacturing and are allowing us to advertise map pricing.

So this promotion activity I believe is driving interest and we've actually seen a correlation with <unk>.

Brands, we were targeting for promotion and a bump in lead generation.

Okay. Thank you.

Your next question comes from the line of Fred Wightman from Wolfe Research. Your line is open.

Hey, guys. Good morning. Thanks for the question, maybe just to follow up on that it seems like promos are driving demand for new but if you think about the shifts that you're seeing to used that unit number was meaningfully higher for us relative to <unk> like what is the consumer feedback that youre getting is it just price sensitivity is the increased availability.

For some of these motorized unit on the used side, what do you think is sort of driving that.

I think probably the <unk>.

This differential between the new and the used.

Costs are being stepped up and we're passing those through.

Sure.

We love the pre owned business and in fact, I don't even call it use that call Korea.

But.

And in fact, we were very thoughtful about loading up on us as much as we could to augment.

The lack of being able to find new product and in fact, we're.

Rebalancing a little bit between between the new and the used as we get our stock levels, where we won on the newer product.

Yeah.

Sort of a go forward basis right. So that the used inventory, yes, okay that makes sense.

And then I guess, just lastly, overall thoughts on sort of what youre hearing or seeing in terms of shipment levels from the manufacturers do you feel like they're being prudent do you feel like they are sort of cut production more quickly than they had in sort of 18 to 19, what is sort of your wholesale feedback or commentary yes.

I'll, just I'll echo what camping world shared yesterday are.

Our backlog of orders that were waiting on is lower than it would typically be at this time of the year and.

We're working on really rebalancing, our inventory and getting the assortment of our we want angle.

Camping World <unk> mentioned.

Taking down inventories a bit between now and the next few months and then just remember we're are cyclical different because of the large Tampa operation, we won't be seeing some stocking up at the end of the calendar year as we move into Super show, which is in January .

Great and then just lastly, I know that it's not a big piece of the business, but anything that youre seeing on the campground demand that you guys own and operate.

Uptick in cancellations or demand relative to the past few years on the booking front.

Sure.

No.

Nothing unusual sequentially that we've seen in terms of activity.

Yes.

But I.

I will point you to some of the KLA.

Statistics that were shared and Youre still seeing people are being active in using their rvs based on the bookings information that we've seen from KLA.

And what we've seen internally is a much different.

Perfect. Thanks, guys.

Thanks, Rick.

And there are no further questions at this time, Mr. Bob Devin <unk> I turn the call back over to you for some closing remarks.

Thank you very much the only thing I'd like to add to conclude the call is to thank everyone for participating in our second quarter 2022 conference call. We look forward to speaking to you at our next opportunity. Thank you all very much.

This concludes today's conference call. Thank you for your participation you may now disconnect.

Okay.

Okay.