Q4 2022 Camping World Holdings Inc Earnings Call
Speaker 2: Good morning and welcome to Pinton Ward Holdings Conference College to discuss financial results for the torque quarter and year ended this summer 2022.
Speaker 2: As assigned, all participants are in a decent only mode. Later, we will conduct a question-and-air concession and instructions you will follow at the time. Please be advised that this call is be recorded. And the reproduction of the call in whole or in part is not permitted without writing out of authorization from the company. Participating is there in the call today or. Michael D. Mollie, Chairman and Chief Executive Officer.
Speaker 2: Brent Moody, President, Torin Bell, Chief Financial Officer, National Geogner, Chief Operating Officer, including Secretary-President, Director Vice President, and General Counsel, Tom Kern, Chief Accounting Officer, and Brent Sanders, Senior Vice President, Vice Director, Relation. I will turn the call over to make Kristen together the stars. Please go ahead.
Speaker 3: Thank you and good morning everyone. A press release covering the company's fourth quarter and year ended December 31, 2021-22 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 remarks on this call may contain forward-looking statements within the meaning of the Private Security's litigation reform act in 1995. These remarks may include statements regarding our business goals, plans, abilities and opportunities, our strategic initiatives, acquisitions and planned capital expenditures, anticipated uses of capital, anticipated cost reduction initiatives and related cost savings, industry and customer trends, the expected impact of inflation, interest rates and market conditions, the expected impact of the subsidiary LLC conversions on our ongoing income tax expense and tax distribution requirements, future dividend payments 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 factor section in our form 10K.
Speaker 3: Our reform can queues 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 update them. 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 for Share Deluded, which we believe may be important to investors to assess our operating performance. Reconciliation 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 2020-24th quarter and fiscal year results are made against the 2021-24th quarter and fiscal year results, respectively, unless otherwise noted. I'll now turn the call over to Marcus. Thanks, Lindsay. Good morning and thanks for joining us for Camping World. Today's call, I'm going to lay out our financial results for both the year and the quarter, discuss our action plan for the current economic environment, and provide some early insights into 2023. Once that's done, I'll turn the call back over to the operator for questions. Because many of you are aware, the last several years have been great, while the industry reached new heights. All souls with RVs grew at a historical level.
Speaker 3: I just follow up on that point. Are you starting to see OEMs rethink their pricing strategy with respect to rebates and discounting? You know, we've seen a little bit more discounting than we have in the last couple years. That's obvious, but we're very proud of how the manufacturers have wound down production in the fourth quarter and even at the beginning of this current year. As I was in Elkhart a couple of days ago, I was pleased with driving through some of those yards and not seeing thousands and thousands of units. I give the manufacturers particularly for Forest River and Winnebago a lot of credit for working more closely with the dealers, but this is an everyday thing and we have to stay disciplined to ensure that the orders that dealers like ourselves are placing and the units that RV manufacturers are making are closer together. And I think in the short term, the manufacturers have recognized that for the next three, four, five months, they need to have RV retail registrations outpaced the number of units that are being delivered. So we expect that RV retail registrations should and hopefully will outpace the RV shipments for 2023, bringing those stocking levels back in line. We believe in the next three to four months. Got it. Thank you. Our next question comes from my Swarth with trust security. Hey, good morning, everyone. And I apologize if I missed this, but I think I'm on the third quarter call mark as she said you were into.
Speaker 3: I think a retail market of around 360 to 370,000 units for 2023. Has that changed at all since we last spoke with you and maybe give us a sense of how the fourth quarter played out from a retail perspective and maybe how that's carried into early 23? Yep. And so that number of 360,000 was our best estimate as a company of what we thought shipments would be from the manufacturers. We're hoping that the retail numbers are better than that so that we can fix the stocking levels. But our number that we predicted quite frankly last summer when associations and manufacturers were calling for 20, 400 still remains in that 360 range and it could be up five or down five. But for the most part, we believe that we've seen an unbelievable amount of discipline. But frankly, discipline that I haven't seen in my 22 years, but I think that's a great example of how we're going to be able to do that. We're hoping that the manufacturers have instituted to ensure that we write size that. So we're pretty comfortable with that original in that 360 range shipment. As it relates to retail registrations.
Speaker 3: The first part of the fourth quarter was not terrible, but as we got to the middle of November and Thanksgiving and December , things started to decelerate pretty quickly. Now we had to remind ourselves that the acceleration was nothing more than potentially a reminder of what the fourth quarters were historically like in this industry. And whether it's any manufacturer, any dealer, the fourth quarter always had a pretty material drop-off.
Speaker 3: The other piece that's important to note is that that rocket ship that takes us back into selling season didn't necessarily start in January or even quite frankly February . We saw that maybe the last week of February and then accelerated it through March and then took off in April .
Speaker 3: In the previous two or three years, we experienced January and February that this industry hadn't seen quite frankly ever before. We believe that we've seen a return to the normal seasonality that exists. But in this particular calendar year 2023,
Speaker 3: That seasonality also came with slightly more margin compression than we had historically seen. We know that that's really a cleansing of 2022 that the industry has to go through. And we think the manufacturers are being far more thoughtful about bringing 2024's in.
Speaker 3: pushing it into mid to hopefully late summer, but we think those things are gonna correct themselves. So, information, the fourth quarter was softer, but it accelerated at the end. The first quarter has quite frankly not taken off as the industry had hoped. And while there seems to be a lot of demand, and I call demand, I'm excited.
Speaker 3: has an industry and a compression on the margin side. We hope that we're outperforming the market, but at this point, other than our fourth quarter outperformance of the market, we don't have any data to support yet that we're doing the same in the first quarter.
Speaker 4: That's helpful. Thank you, Marcus. And maybe I think you would mention a number of cost reduction issues that were undertaken later in 22, including store closures and headcount reductions and cutting back on, I think cap-axing, advertising, things of that nature.
Speaker 4: If you give us a sense of the actions you've taken today, you know, to sit here in late February , how do you think about the annualized run rate, maybe, for the cost reductions that you've put through the system?
Speaker 3: I obviously want to be careful because we don't provide guidance as a company and we don't take and tie these sort of cost reductions in our disclosures.
Speaker 3: But to give you a little bit of context, we unfortunately and sadly had to have a pretty significant reduction in headcount, almost a thousand people. And while we made acquisitions in the fourth quarter, the net net effect of it all was pretty material in terms of size. And if it netted out in somewhere at 850 range.
Speaker 3: at an average wage, it's a pretty significant number. And we prefer not to quantify it just because, you know, there's obviously human capital involved in this discussion. As part of that process, though, we did redeploy some of those savings into investing into our remaining talent pool.
Speaker 3: both in attracting new talent and retaining it. And we had to quite frankly put a lot of wage increases through our system as our employees, which happen to be consumers in the marketplace we're experiencing pretty high inflation. So we raised a pretty significant amount of our base wages.
In doing so we did not see a drop in values or a drop in demand even when we pulled back our values a little bit that further supported our thesis and then the first 10 days of January we re instituted or acceleration.
We think that 30 to 45 day slowdown in acquisition. It may have cost us three four or 500 units, but the knowledge that we gained from it and the risk that we believe we avoided from it will pay us much greater dividends than three or 400 units that may have evolved from it.
That's really helpful. And then on the F&I side, just another category, where you've been able to maximize your youre kind of F&I profit per unit.
Is that something that we should see revert back to historical levels as well or find its way somewhere in between where it peaked and where it was pre pandemic.
You know I I have to be honest. This is one part of our business that I don't see a lot of risk in.
Very similar to the good Sam business I think what has really driven the growth of this business is not only the process that we have in F&I, but when youre presenting products that are driven by and enforced by an administered by a brand like good Sam we have seen the attachment.
Dramatically improve and every single time, we make an acquisition.
And let's say, we buy that acquisition at a historical two times three times four time earnings multiple when we install our process and when we install the good Sam products the growth that we see in F&I is pretty dramatic I don't see a lot of risk with this number and even with Asp's moving around.
Round.
Even going up or slightly down through discounting or whatever contraction of mix may happen I.
Predict that this will stay within a tight band.
Could there be a half a percent of flexibility inside that number in terms of like the range sure, but we havent experienced that.
Even in the back half of 2022 or even the start of 2021 by 2023.
Super Helpful. And then just on the dividend I think you've commented on that in your prepared remarks, but.
Just what's your level of conviction behind maintaining that dividend.
And most foreseeable environments.
The management team spends a lot of time with the board talking about capital allocation and where we think our shareholders are going to get the best return on capital and clearly our historical path towards acquisitions and towards <unk>.
<unk> debt or making opportunistic stock buybacks, that's all in the equation, but returning value to our shareholders on a regular basis is also part of that equation and win with long term holders invest in our stock they like to see a level of predictability with their returns and they understand that there are.
Our small segments of our business or segments of our business that have some volatility to that when they look at the predictability of good Sam and the predictability of service and the predictability of US. It's our expectation that they're also looking for at the predictability of returns and so at this moment in time, we don't see anything in front of anything in.
Front of us that would cause us to modify our strategy, but it is important to note that we do have this conversation on an annual basis.
Yeah.
Perfect. Thank you.
Our next question comes from Joe.
Mark Little perch.
I had a quick question for me just wanted to ask.
The use side of things.
What do you think the relationship is between discounting on the new side and when you may see risk to the values on the used side I understand the comments that you made about the pullback early this year and how the lessons learned but just seems like to be that.
That could be an item that has some variability to it as the year plays out and just wanted to get your thoughts on whats the right spread between the new price and it used pricing and maybe the timing of when those.
Separate markets make converged to each other.
Morning, John This is Matt speaking great question and.
It's a question that we have worked very diligently to ensure that we have the solutions for given that the RV evaluated was designed in such a way where we are predicting what the retail value will be so that is to suggest that we are anticipating the residual value of what a retail consumer would be buying.
That asset for and we're factoring in short term modifications short term trends as well as long term trends to suggest that we're anticipating exactly what those results should be in these tight windows. We know that used assets are traditionally going to sell in about 60 to 90 days. We now have different times there is certain.
Assets, whereas market suggested earlier in the Q&A, we could potentially make mistake and it could potentially take a little bit longer to sell through those assets, but we are so disciplined about keeping a close eye on understanding that first loss will be our best loss. When we have an opportunity to sell an asset that perhaps we are a little bit overvalued how's.
Over as you brought up this spread between new and used is certainly a consideration where we are very closely monitoring what that could be in the future. These changes are far more gradual than people realize oftentimes when you look at our industry, where it's not actually going to be an overnight sensation.
Understand that we have to project out based upon the current trends of what could happen over the next two years.
Generally speaking it takes about two years, though for said multi years to actually start to hit circulation in the used market. So we generally have a lot more time to understand what sort of information are we collecting in gathering to start to predict what those future residual value calix would be typically a sweet spot but.
New and used that just one multi year removed is about 15% or so give or take five percentage points, depending upon the asset pending upon the type code multi year, what have you and general supplies of what we like to have is the spread between new retail pricing and used retail pricing.
But as Mark spoke earlier about when we were entering into Q4, we noticed some of the trends started to be a little bit shaky within the new end use market and we wanted to be very conservative as you suggested earlier just to learn what the opportunity will be and to test our thesis out through that process, we realized that we could toggle that.
Value the actual value that we as a dealer or assigning to it and figure out what that spread should or shouldn't be just to afford ourselves some flexibility heading into this year, we feel very confident with what our used inventory position is and that's where we've really changed gears here over the past month month and a half to ensure that we are starting to ramp back up.
It used effort because we feel like we have a very firm grasp on what the opportunity is within the used marketplace. This year.
Great No I appreciate that thank you and then just one question on the new inventory could you give us some perspective on what it looks like from a model year standpoint percentage at 22 versus <unk> 23, and maybe how that compares to any given normal year.
One thing that I want to mention right we're sitting.
At the end of <unk>.
Call. It January with about 185, new units per location and when I look back over the last five years, we have I cant think of ever been this low other than December of 2020, when the supply chain was just shut off so from a per store new.
New unit standpoint, we're pleased from a model year standpoint, we have been very confident that we'll be able to work through this however, we have more 2022 model year unit than we traditionally would have in terms of about one Marty you remove sequence we're entering.
Into the year typically our mix would be about 20 ish percent of one model year removed. However, entering into this period, we have a little bit more that we're you know we're going to have to work through Luckily the manufacturers and US have worked very closely to ensure that we are working together to sell through.
These aged asset and the manufacturers have had a willingness to help offset what could potentially be some margin degradation to ensure that we will make certain that we are prepared for the introduction of 2020 fours. There's been some chatter amongst some industry insiders and outsiders about one is this model year change.
Going through actually occur heading into 2020 for multi year.
We've worked closely with the manufacturers to ensure that it is going to be in the middle of the summer I've heard some other suggestions that it could be a little earlier that is not the case I can assure everyone that by 20 by July August timeframe, we will start to see the introduction of those model year 2020 for us and it starts to take a little bit more.
For those productions to even ramp up so it's always a gradual cycle by which those newer model years of 2024 will be introduced which will afford us ample time in the selling season to sell through 2022 model years.
I appreciate it thank you guys.
Okay.
Next question. Our next question comes from Greg, Florida Jeffrey.
Hey, good morning, guys.
Gordon on the.
Prior topic, I guess as far as model your inventory and I guess you guys are a little bit overweight 22 versus normal could you talk about how you see the broader retail market.
Model year exposure do you think most of your peers are more overweight in 'twenty twos than you are.
We never want to speculate.
Where their position is but from the research and the Intel that we've done we seem to be far outpacing everybody's.
Ratio of 'twenty, two to 'twenty threes, and so we are aware that we need to be first to market in terms of exiting those 2020, twos, which gives us the competitive advantage once we get past that the reason that we have been so clear about continuing to aggressively sell down.
New inventory, both in the fourth quarter, and the first quarter and potentially in a good chunk of the second quarter is because we want to actually get to the point, where we can get back to some normalized margin. We think that the elimination of those 2020 twos, while it may have some short term temporary pain the other side of that range.
Both looks pretty damn good because our used business continues to be strong and our ability to opportunistically restock with planning in an environment, where manufacturers are looking to earn business should help mitigate margins for the full year.
Okay, and then I guess from a consumer standpoint are you seeing any sort of differentiation between the consumer who is at the lower end tolerable product versus maybe the <unk>.
Fifth wheels, or motor home products as far as just sort of strength or an or.
Consumption trends.
We believe the long time ago that the entry level a portion of the market that 20000 to 35000 is really the sweet spot of the industry and the funny thing about being in the industry for 22 years is that you see all these events happened and you see the segments that get the most.
Affected by then unfortunately motorized is usually the first to get affected particularly in a rate rising environment, because that monthly payment gets more expensive when you're financing of $25000 a unit, while the rate increases matter the modification of payments between at 25.
$5000 unit at 6% or $25000 unit at seven 9% is it material enough to dissuade them part of that part of our ability to fight that is when you go out and you look at other vacation alternatives or other family activity alternatives, a $200 or 250.
Monthly payment is still far less than a $250 night out at the ballpark.
And so for us we.
We arent seeing that that customer go away and more importantly, because it hasnt been asked yet we haven't seen the retail lenders change their credit approvals on that consumer at this time either.
From that standpoint, I guess as negative equity impacting affordability are these customers who are coming in maybe the trade in a unit.
Are they being a are they from an affordability standpoint able to finance that negative equity into the next rate with.
With negative equity Unfortunately doesn't just affect affordability it affects accessibility and your ability to take that negative equity with very little money down and convert that into a new transaction is tougher one of the things that we've worked very hard with is to work with manufacturers.
On creating special units big runs with more sizable discounting that allows us to take some of that negative equity and allow for the consumer to to finance that transaction. The manufacturer has been very aware and very helpful in helping us solve that.
<unk>, but we're having to commit to large batch orders in the 345 600, 701000 unit orders to give us that flexibility.
But negative equity is something that a traditional dealer definitely would be struggling with right now.
Great. Thank you.
Our next question comes from Brandon Hall.
Bold pattern.
Good morning, Thank you for taking my question.
One just on you know you had mentioned that the Oems are helping you guys out.
So kind of soften the blow of the margin deterioration on the elevated model. Your 2022 inventory could you talk about what youre seeing there and the magnitude maybe of the support you're seeing from the Oems and also.
Their urgency to help you out milling you know theres cheaper, maybe decon intended product coming down the pipeline.
Well I think there's I think there's two separate issues one the manufacturers have been very responsive all of them and identifying any aging issues that exists not only in our business, but every RV dealer in America I don't think were special in that regard and they're bifurcated their assistance to specific ways.
In one form, they're providing floorplan assistance or marketing co op or assistance for sales persons incentives really recognizing that we have to move through what's already on the ground on the other side. They are starting to recognize the need to be slightly more promotional to entice orders.
And that's no different than were being slightly more promotional to entice transactions with retail customers. The one thing that I am noticing that is different than any other soft period that I've seen in the 20 years is that theyre, not just making inventory on speculation, hoping that they're going to be able to discount their way through.
Flushing it through the system Theyre, taking a more measured approach to manufacturing more to just in time retail demand that in my opinion is helping mitigate some of that.
<unk> if I were speculating that November December January timeframe for manufacturers, we're probably exaggerating the slowdown in exaggerating the losses or compression that they may be taking because they decided to take a finite period of time to give the RV dealers some breathing room to exit some of that inventory.
Without piling inventory on top of it I would expect that as we get through the spring and the summer their level of management that their level of temperance will pay dividends in the back half both for them and for us.
Okay, Great and another question Theres been a lot of consolidation in the industry over the last two years with a lot of regional dealership roll ups and now it seems like you know maybe their balance sheets could be stressed here to cleared model your 2022 inventory.
How are you planning the business in these markets.
You know where you overlap with maybe some of these more stress trains and on the other side of this cycle could you know some of these.
Dealership chains.
Additional stress be potential acquisition targets.
We built this entire business model off the premise that we are a growth company and we always can't rely on just growing through different channels and different segments of our business acquisitions and new store openings really the founding principles of how this business is built and those founding principle.
<unk> come to the forefront more often in a time like this and so when you see us start eliminating categories liquidating certain non nonperforming assets closing locations. It isn't because we're feeling the stress it's because we're looking to collect acorns, we're looking to tighten up capex and build <unk>.
Cash reserves, both in our inventory in our bank account, we are a business that will continue to grow based on acquisitions and in these periods of time, we like to accelerate that.
I think that if we continue to see some level of normalization in the marketplace and we accept the fact that the new margins are going to be softer for a while and the new demand is going to be softer for a while but as long as we continue to see some level of stability unused on service and good Sam you could expect us to continue.
To accelerate that as I mentioned earlier, we have four locations under LOI and or definitive agreements. We have nine locations that are built they're ready to build and you could expect us to continue to be very inquisitive, but.
We're going to be far more opportunistic and work with those dealers on ways to help them exit stage left without a lot of maybe disruption to their family or to their own personal balance sheet getting them out in a clean and safe way.
Great. Thanks.
Our next question comes from Tristan Thomas BMO capital Michael.
Hey, good morning.
Good morning Ali.
This is alluded to a couple of times in the questions. How do you think the RV Oems are going to handle new model your pricing in that 'twenty for model year 'twenty four.
And the discussions that we've had I want to remind everybody that the Oems, which are great innovators in great creators are assemblers and theyre subjected to a lot of the supply chain and so I would imagine that the relationship that they have with some of their suppliers is probably where some of that pressure is going to exist and it.
With things like frames and fiberglass and all those other pieces.
It is our opinion that we hope that the manufacturers don't find their way to simply lowering prices by D. Contents in units, we think that takes away some of the system for the consumers. However.
Our company is uniquely positioned more than any other company in the RV marketplace to take advantage of any content that would happen.
The lion's share of our parts and accessory business is the installation of those items that historically get the content it and whether that's electronics our earnings our furniture, our cabinetry or whatever it may be we believe that we have a hedge to play on both sides.
We are encouraging the manufacturers to look for innovation, we're encouraging to have the manufacturers find items to eliminate that don't necessarily takeaway value for the customer.
Technology shrink hits that may add value in the long term, but don't add margin in the short term association fees that pay into associations that may provide value in the long term, but don't provide value in the short term look for the intangible things that are attached to the cost of goods on those units that don't take value.
<unk> away from the end consumer.
I believe every single manufacturer not with pressure, but with thought are looking at all of those intangible adds on every single invoice $100 here $200 there to extract expenses to bring those units to market.
Inflation is inflation and whether it's happening at a rapid rate or the smallest of rates rarely do prices go backwards.
And if they do they only do to correct the supply and demand curve and once that's corrected they maintain themselves.
They grow over time, so I'm not sure that we're going to see dramatic reductions in asps.
Might see a normalization, we may see some temporary discounting off of that but at the end, it's going to settle and unfortunately right.
From our perspective.
Okay.
One more what are you seeing in terms of trading activity and then also headwinds arby's dotcom doing.
Sorry, I thought there was going to be an additional question there really.
Related to your first question about trade in activity.
Come a relatively predictable science over the past few years, where we understand the ebbs and flows of trading activity generally accelerates during what we would regard as motorized our high profile fifth wheel season, which is in the fall, which we saw that and that normally translates into continued elevated trade and <unk>.
In January February March and then buy back half of March April May that's where we start to see the trading rates start to decline slightly but it always remains within the 20% to 30% range throughout the course of the year month by month.
The assets that we sell we can anticipate a trade in on roughly 1% to 30% of the assets. It will largely be contingent upon though whatever season, we're in and the rate at which we are going to be selling certain assets like the bunkhouse travel trailer as an example.
And the way of <unk> Dot Com, which you cut off for a moment, but I believe that was your second question Tristan.
Correct, Yeah, that's correct.
RV Dot com, we have made that a live site for going on goodness about seven to eight months now and we've been modifying it on an ongoing basis and constantly iterating.
We understand the value that this is going to bring which is why we've been so cautious about ensuring that the customer experience is absolutely impeccable before we go through a marketing rollout that's more widespread I can tell you just last week, we made certain that we cleaned up all of our product listing pages and our product display pages.
And we have all of our used assets over the entire enterprise listed there we have been generating on a weekly monthly basis hundreds of thousands of unique visitors without even any marketing efforts behind it we understand that the appetite exists out there for the online digital.
Retailing by experience and we are alive right now in two states, and Texas, and Tennessee with digital retailing, where a consumer can set up their own login and profile and transact completely online secure their financing online and accept a home delivery, we have the documents and the information in.
<unk> gone through all of the diligence to understand the risk as well as the rewards that have digital financing capabilities in 38 of the 48 contiguous states we will have those 38.
<unk> completely uploaded and are prepared to accept digital financing of retail financing.
Middle of this summer and I would anticipate by the end of the year, we will be prepared for a full nationwide aggressive strategy. So that by 2024, we will start to yield more incremental business to tap into those white space opportunities outside of our local markets and that's really the thesis here is that.
We understand there is a contingency of consumers that live beyond 100 miles or so that customers travel on average to buy a newer used asset and we're trying to satisfy that customer base that has a specific interest in our used assets.
And our new private label assets, especially where we can deliver all new private label and used assets all across the country and that is truly what differentiates us from any of these other online buying experiences.
Okay got it thank you.
Yeah.
Our next question comes from Joe <unk>.
Both models.
Target.
Good morning, Thanks for taking my question.
I just want to talk about used so.
Sales were down to the youth business, but inventory grew and continues to grow and you talked about kind of flattish comps for next year. So how should we think about inventory turns and used for 'twenty three and beyond.
Our goal is to have used inventory turns that range from three five to four times. Obviously, there are certain quarters, where that will look more accelerated when we get into the FERC fourth quarter remember that we're always building inventory as we head into the top of the year and so it exaggerates a slowdown in the term.
When we get into the middle of summer. It also exaggerates the acceleration of that turn and so the blended annual average is anywhere between three and a half before the reason that I've created that much of a wide.
Window inside of that turn is because were testing certain markets and as we launch potentially standalone used stores or we flipped certain locations to be 70% use as opposed to 70% new we want to try some things and so it may drag that turned down to three and a half as we learn we expect that to accelerate.
Once we understand where that rate level is.
Great and then historically, you've talked about SG&A to gross profit ratio being between 60 and 70%.
The high end of that 22, how are you thinking about that for 'twenty four yes, we have never in the history of having this business ever talked about having a range of 60% to 70% for SG&A. It's always been 70% to 72, we were very blessed that there were periods in 2000 and.
21, and 'twenty, two where we saw.
62%, we also in historical years pre pandemic years like 19, 87%, 88%. It is our expectation that in 2023 based on the compressed margins that were experiencing that our SG&A on an annualized basis could be between the mid to high <unk>.
We could out surprise that but from a forecasting standpoint, that's how we're thinking about it more.
Most people have come out and be very hard on that particular topic, saying just let go as more people cut this cut that I want to remind people that in order to make lots of acquisitions and to order open lots of stores and to keep our service parts employees engaged in our business when it's typically a high turnover.
We tend to have to spend a little bit more money in those periods. We also want to remind people that the softening that exists on new demand and the softening that exist in new margins in my 20 year history as a very finite period of time and so we want to cut the flash, but not break the bone and so while we will continue.
<unk> to look how to drive that number down we want to set that expectation properly.
I believe that after we get through 'twenty, three and margin stabilized, we'll be right back in that 68% to 72% range, which is where we believe that our EBITDA margins perform at the highest level by the way materially better than any public auto has ever performed even at an average level for us.
Alright, thank you.
Our next question comes from Joseph Darling.
Okay.
Hey, good morning, guys. Thanks for taking the question.
Looking at parts service another I heard the comment around growth for the full year.
Stitcher, but she noted back in <unk> that you would have to work.
And revenue associated with the divestiture through <unk> this year.
So with the decline again in parts service and others cleansing of those customers taking longer than expected or are we seeing another headwind impact results.
Are we speaking specifically about the club or the revenue.
The revenue.
Yes, so so what we were lapping.
From 'twenty two from 'twenty, one over 'twenty two was we actually had that full assortment.
Our entire business through the bulk of 2000 and.
'twenty two we started that liquidation process at an aggressive level at the end of Q3, but at least over into some of Q4 in 2002, we had some of those pieces out there in 'twenty three those are big numbers to lap I think as we get into it.
Excuse me is 22 those are big numbers to lap as we get into 2023, we don't have the headwind of those categories like we did in the previous year and we're expecting that the purest most accurate depiction of our service parts and other business will exist in 2023, because theres no 2021 and 2023.
<unk> in those numbers.
Thank you that's super helpful. That's all for me.
Okay. If there are no more questions. Thank you very much for joining today's call.
We'll obviously be prepared for the follow up calls from here. Thank you so much.
This concludes our conference for today. Thank you for your participation and have a good day.
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