Lazydays Holdings Inc. Q1 2023 Earnings Call

Speaker 2: Hello and welcome to the LazyDate Holdings first quarter 2023 financial results conference calling webcast. If anyone would require operator assistance please press star zero on your telephone key pad. A question and answer session will follow the formal presentation.

Speaker 2: As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Kelly Porter, Chief Financial Officer. Go ahead, Kelly.

Speaker 3: Thanks. Good morning, everyone, and thank you for joining us. Before we begin, I would like to remind everyone that we will be discussing forward-looking information, including potential for future financial performance, which is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from such forward-looking statements and information.

Speaker 3: Such risks, uncertainties, assumptions, and other factors are identified in our earnings release and other periodic filings with the FCC, as well as the investor relations section of our website. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results and any or all of our forward-looking statements may prove to be inaccurate.

Speaker 3: We can make no guarantees about our future performance, and we undertake no obligation to update or revise our forward-looking statement. On this call, we will discuss certain non-GAAP financial measures. Please refer to our earnings press release, which is available on our website, for how we define these measures and reconciliation for the closest comparable GAAP measures.

Speaker 2: With that, I'd like to turn the call over to John North, our Chief Executive Officer. Thanks, Kelly. Good morning, everybody, and thank you for joining us today. As usual, I will make a few opening comments. Kelly can take us through our financial results and then we're happy to have some questions.

Speaker 4: I usually find the first quarter earnings call to be a bit anticlimactic. It's been only nine weeks to the day since we spoke to you in February , and typically not much changes in such a short amount of time. Of course, this year has been different with the collapse of both Silicon Valley and Signature Bank.

Speaker 4: Having experienced the great financial crisis of 2008 at Lithia and the COVID-19 pandemic at Avis, my observation has been that second derivative effects of these events often take time to work through. We will remain vigilant.

Speaker 4: However, so far, these broader market dynamics have not affected our business, both in terms of our ability to borrow money to fund our operations, and more importantly, in our ability to find financing options for our customers.

Speaker 4: Despite higher interest rates impacting some customers' willingness to take out loans when purchasing a vehicle from us, we continue to see credit as available and lenders remain open for business.

Speaker 4: During our previous call, we mentioned that our store leadership team has been aggressively managing our inventory for the past few quarters, particularly focusing on units from prior model years. As of today, we only have around 400 units left from the 2022 model year. Although gross profit dollars on 2022 units have been deteriorating sequentially each month for the last three quarters.

Speaker 4: The small number of units remaining relative to overall sales will inflect to make up a smaller contribution causing overall gross margin on new unit sales to stabilize.

Speaker 4: Furthermore, we are still generating healthy profits for 2023 and some 2024 units that have recently arrived, so we are pleased that the worst is behind us.

Speaker 4: I'm also quite happy with the velocity of our unit sales volume, which has been the most resilient part of our performance in the first quarter, despite macroeconomic headwinds.

Speaker 4: revenue, fewer full sales, lower adjusted S-Tinated gross.

Speaker 4: and growth in our service body and parts business. We've also seen month on month improvement in operations each month from January through April .

Speaker 4: While it's impossible to predict exactly where the market will go in the balance of the year, we remain committed to improving our operations and profitability, and we are optimistic about our future performance.

Speaker 4: We continue to make exciting strides in corporate development. We open a new location and Council Bluffs Iowa this week, which is the second addition to our store network this year after the acquisition in Las Vegas in February . We remain focused on growing the number of locations we operate to expand our footprint in new markets.

Speaker 4: to create economies of scale in our operations, and to leverage the network effect of clusters of yesterday's stores.

Speaker 4: To that end, we have three more locations under construction that will be completed in the third quarter of this year, and we remain active in pursuing acquisition opportunities.

Speaker 4: Alongside our physical expansion, we are also prioritizing the development of our digital capabilities to enhance the customer experience and promote growth.

Speaker 4: We have welcomed a new VP of Marketing, Jake Barron, who brings extensive experience and knowledge to our team.

Speaker 4: Previously, he led marketing efforts for one of the top 25 largest dealer groups in the US and has a deep understanding of the intersection of digital retail, web design, and vehicle sales and service.

Speaker 4: I'm enthusiastic about the future of our company as we expand our digital presence in advance our marketing strategies with Jake on board.

Speaker 4: Finally, I want to express my gratitude to our organization for their exceptional work during the past few months.

Speaker 4: It has been a challenging period as we had to make tough decisions about people and projects, and we need to accomplish more with fewer resources.

Speaker 4: Nevertheless, I'm impressed with how we have responded. From our store leaders and field personnel to the team here at our headquarters, everyone has risen to the occasion, making a significant impact.

Speaker 4: Witnessing this level of dedication and commitment is both inspiring and motivating. I am honored to be a part of such an energetic and capable organization, and I sincerely thank each and every one of our fantastic employees.

Speaker 4: With that, I'll turn the call over to Kelly.

Speaker 3: Thank you, John . Please note that unless otherwise stated, the 2023 first-quarter comparisons are versus the same three-month period in 2022.

Speaker 3: Total revenue was $295.7 million, a decrease of 21.4%, reflecting a continued softening of sales volumes in the quarter and discounting of our 2022 model year inventory. We ended the quarter with a 207-day supply of new vehicle inventory, a decrease of 43

Speaker 3: over the year end and a 77 days supply on used inventory, a one day decrease over year end. As a reminder, we calculate day supply on a trailing 90 day average.

Speaker 3: From this point on, all metrics will be on a same-store basis unless otherwise stated.

Speaker 3: New unit sales declined 18.9% in the quarter and gross profit per unit excluding LIFO declined 38.6% to $12,132 per unit.

Speaker 3: Used unit sales, excluding wholesale units, declined 15.6% and gross profit per unit declined 30% to $13,359 per unit.

Speaker 3: Finance and insurance revenue declined 25.4% during the quarter, primarily as a result of declines in unit volume to bind with lower financing penetration.

Speaker 3: F and I per unit was $5,074 for the quarter, a decrease of 10.4%.

Speaker 3: We continue to see overall F&I product penetration as a significant opportunity in our stores.

Speaker 3: Our service funding and parts business continues to grow with revenue increasing 6.3% to $15 million. Our services funding and parts business continues to grow with revenue increasing 6.3% to $15

Speaker 3: Now to discuss a few items below the line. Total SDNA as a percentage of gross profit in the quarter was 82%, excluding the impact of LIFO. An adjusted SDNA for the quarter was 79%, a sequential improvement from the fourth quarter of 2022. We have more work to do, but I am encouraged by the hard work the team has put into control costs. Hopefully you like this image allied with my yard.

Speaker 3: Adjusted net income was $1.2 million for the quarter, down from $28.2 million last year.

Speaker 3: Adjusted fully diluted earnings per share was zero for the quarter compared to $1.27 in 2022. As a reminder, adjusted net income is reduced by the preferred dividend for the quarter to arrive at income allocable to common and participating securities.

Speaker 3: After accounting for the dividend, adjusted net income was break-even, resulting in zero adjusted earnings per share for the quarter. Shifting to liquidity and capital allocation, we had cash in cash equivalents of $41 million as of March 31, with 60 inventory balances, and a total of $

Yeah, Hi, good morning, guys I'm, just kind of curious how consumer demand for while you're twenty-three has has been trending okay, but they aren't giving us much promotional support is the 20 twos.

Good morning, Griffin is nice to hear from you.

Thanks to you and the theme for picking up coverage.

We really appreciate it nice to have another analysts on the line here. This morning. So thanks again.

I think you've got a couple of dynamics when it comes to 22 versus twenty-three you know I would say.

20 twos.

Require quite a bit of discounting at this point.

And if you look at the.

The gross profit that we make on the on the front end as we would call us so before F&I.

You know every month, it's gone down.

And I think it was.

And the and the and the low triple digits, maybe by the time you get to March I mean, it's a pretty small number.

And then you're still paying commissions and things on top of that to your salespeople because obviously there.

They need a commission to eat as the expression goes so.

You end up in a situation, where they're dilutive to margin by the time you get your your selling cost in there.

I think the 20 threes are still bringing pretty good money.

Obviously that will be inflicting as we move into the summer and you start to see certain Oems moving to model year 2004.

So you know, we're being really vigilant on 20 threes in terms of.

What's coming in already.

So really working with our manufacturer partners around trying to be really thoughtful about when the body of changeovers are gonna come in to make sure. We don't continue to have twenty-three is arriving alongside 20 fours because that just perpetuates the.

The same issue been dealing with with 2022 model year.

And I think it's probably going to be more normal you just didn't have that shocking and supply that came in last summer that really I think made the dealer body you know.

Two heavy in terms of 2022 model year for for the sales velocity and it seems like Oems have been pretty rational in terms of continuing to idle production.

So I feel like we need to just work through it you know I think the wildcard for me is there are some dealers have significantly.

Unhealthy inventory in my opinion, just in terms of the percentage of 2022 that the overall and I know what we're having to do to move those you know and so what does that do does that cause any <unk>.

Natural reactions are rational behavior when it pertains to the new model. Your stuff you know just because people need to light lighten up [noise].

But so far so good we're seeing good grosses on the 20 threes yet still.

You know you're discounting certainly your advertising significant discounts but.

We buy even significantly back of that for a lot of our inventory and so there's still room to make some nice margin there.

And more and more managing through it.

Okay, that's great Super helpful and then I guess.

<unk> I guess.

You know can you give kind of your current appetite to order more inventory given what you've been see at retail so far I got through rape O'hare.

Our appetite to order inventory I mean, I think it's it's still there you know I think we're seeing pretty good unit velocity I mean, we've sold.

11, or 1200 units, a month and and more than that in March.

So our days supply came down quite a bit because of the sales velocity is kind of on the new site and we went from 277 to 205 or something is a pretty significant change in terms of day supply. So we will continue to order and we're trying to be helpful to the <unk> as well and where we can maybe take a little bit more figure out ways to partner with them and.

Buy in bulk to get some additional help you know we're willing to do that like I think other dealers are so it's it's manageable.

Okay, well I guess just.

Quick follow up on that are you seeing Williams make any changes to their pricing strategy as it relates to rebates and discounts on the twenty-three themselves.

No I mean, not in a material way.

I think there's always.

There is always programs in ways that they tried to help dealers and I don't think that's any different than in years past.

Okay, Alright, I appreciate it thanks a lot.

Thanks.

Thank you <unk> of our question and answer session I'd like to turn the floor of October for any further closing comments.

Thanks for joining US we'll talk to you soon.

Thank you that does conclude today's teleconference. A webcast should we disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.