Q1 2024 Lazydays Holdings Inc Earnings Call
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Operator: Greetings and welcome to the Lazydays Holdings first quarter 2024 conference call. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Kelly Porter, Chief Financial Officer. Thank you. You may begin.
Speaker Change: Greetings and welcome to the Lazy days Holdings first quarter 2024 conference call. As a reminder, this conference is being recorded its now my pleasure to introduce your host Kelly Porter Chief Financial Officer. Thank you you may begin.
Kelly Porter: Good morning, everyone, and thank you for joining us on the call. With me today are John North, CEO, and Amber Dillard, Vice President of Operations. Before we begin, I would like to remind everyone that we will be discussing forward-looking information, including potential 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. Such risks, uncertainties, assumptions, and other factors are identified in our earnings release and other periodic filings with the SEC, as well as in the investor relations section of our website.
Speaker Change: Good morning, everyone and thank you for joining us on the call with me today are John North Sea E O and Amber Dillard Vice President of operations.
Kelly Porter: 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. We can make no guarantees about our future performance, and we undertake no obligation to update or revise our forward-looking statements. On this call, we will discuss certain non-GAAP financial measures. Please refer to our earnings release, which is available on our website, for how we define these measures and reconciliations to the closest comparable GAAP measure. With that, I'd like to turn the call over to John North, our Chief Executive Officer.
Speaker Change: Before we begin I would like to remind everyone that we will be discussing forward looking information, including potential future financial performance, which are subject to risks uncertainties and assumptions that could cause actual results to differ materially from such forward looking statements and information.
Speaker Change: Such risks uncertainties assumptions and other factors are identified in our earnings release and other periodic filings with the SEC as long as the Investor Relations section of our website.
Speaker Change: Accordingly forward looking statements should not be relied upon as a prediction of actual results in any or all of our forward looking statements may prove to be inaccurate. We can make no guarantees about our future performance and we undertake no obligation to update or revise our forward looking statements.
Speaker Change: On this call we will discuss certain non-GAAP financial measures. Please refer to our earnings release, which is available on our website for how we define these measures and reconciliations to the closest comparable GAAP measures.
Speaker Change: With that I'd like to turn the call over to John North Our Chief Executive Officer.
Kelly Porter: Thanks Kelly.
John F. North: Good morning, everybody. Thanks for calling in. As usual, I'll kick things off. I'll let Amber talk about operations, Kelly can speak to the financial results, and then we'll hopefully take a couple of questions. We, along with the rest of the industry, have been working hard to adapt to the current retail environment, namely sales softness coupled with an industry-wide inventory overhang of aging 2022 and 2023 units. To that end, we've been focused on what we can control. First, inventory health.
John F. North: Morning, everybody, thanks for calling in.
John F. North: Second, increasing use procurement. Third, driving finance and insurance performance higher. And fourth, controlling costs. I'm pleased to report we've made significant progress in all these areas since we spoke to you about 60 days ago.
John F. North: As usual I'll kick things off.
John F. North: I'll, let Andrew talk about operations.
Speaker Change: All I can speak to the financial results and then will hopefully take a couple of questions.
We along with the rest of the industry have been working hard to adapt to the current retail environment, namely sales softness softness coupled with an industry wide inventory overhang of ageing 'twenty to 'twenty 2022, and 2023 units so that and we've been focused on what we can control first inventory health second increase.
Speaker Change: <unk> used procurement third driving finance and insurance performance higher than fourth controlling cost.
Speaker Change: I am pleased to report we've made significant progress in all of these areas. Since we spoke to you about 60 days ago.
John F. North: The variable in the equation that has been outside of our control is retail demand. The increase in sales velocity we expected through March and April did not materialize. Based on the most recent SSI data, nationwide new unit sales were down 17% from 2023. We performed better than the market, but we still saw year-over-year declines. We attribute this to three factors.
Speaker Change: But the variable in the equation that has been outside of our control as retail demand the increase in sales velocity, we expected through March and April did not materialize base.
Speaker Change: Based on the most recent Ssi data nationwide New unit sales were down in March over 17% from 2023, we performed better than the market, but still saw year over year declines.
John F. North: Second, is negative equity on many units purchased during the pandemic. And third, dealers that we compete against that were slower to respond and discount aging inventory did so, and that drove consumer traffic toward their better deals and away from our healthier priced offer. Fortunately, we have fantastic partners with our OEMs, lenders, and investors. We have received continued financial support on our units and inventory, flexibility on our credit facility again this month, and a further injection of liquidity, raising $15 million through an expansion of our mortgage financing.
Speaker Change: We attribute this to three factors first as lower consumer demand.
Speaker Change: As negative equity on many units purchased during the pandemic and third as dealers that we compete against that were slower to respond and discount aging inventory did so and that drove consumer traffic towards their better deals and away from our healthier priced offerings.
Speaker Change: Fortunately, we have a fantastic partners with our Oems lenders and investors. We've received continued financial support on our units in inventory.
Speaker Change: Disability on our credit facility again, this month and are further injection of liquidity raising $15 million or an expansion of our mortgage financing our cash position today is almost unchanged from where we ended the first quarter. It remains almost 20% higher than where we finished the third quarter of 2023.
John F. North: Our cash position today is almost unchanged from where we ended the first quarter and remains almost 20% higher than where we finished the third quarter of 2023. In summary, our inventory is healthy, we are driving operational improvements, and vehicle gross profit per unit continues to improve, but increasing unit volume continues to be elusive. Given the start to the year and our outlook for the rest of 2024, we are projecting a pre-tax loss but anticipate positive EBITDA and adjusted free cash flow.
Speaker Change: In summary, our inventory is healthy we are driving operational improvements in vehicle gross profit per unit continues to improve but increasing unit volume continues to be elusive given the start to the year and our outlook for the rest of 2024, we are projecting a pre tax loss, but anticipate positive EBITDA and adjusted free cash flow.
John F. North: Finally, the team is engaged, working hard together, and continues to identify ways to pursue every retail opportunity that is available in the market. I want to thank all of our employees for their hard work. And with that, I'll let Amber take it over.
Speaker Change: Finally, the team is engaged and working hard together and continues to identify ways to pursue every retail opportunity that is available in the market I want to thank all of our employees for their hard work.
Speaker Change: And with that I'll, let Andrew take it over.
Amber Dillard: Thanks, John, and good morning, everyone. As previously mentioned, we have continued to focus on improving our inventory health. To recall the journey we have been on, in early November, we had approximately 100 2022 model year units and over 2,000 2023 model year units in stock. As of yesterday, we were down to five 2022 units and just under 300 2023 units remaining. We have also reduced our on-ground new inventory from over 4,700 units in November to under 3,600 today. As of today, more than 90% of our inventory is 2024 or 2025 model years. We believe this is among the healthiest in the industry.
Andrew: Thanks, John and good morning, everyone.
Andrew: As previously mentioned, we have continued to focus on improving our inventory health to recall the journey. We've been on in early November we had approximately 120 22 model year units and over 2020 'twenty three motto here units in stock.
Andrew: As of yesterday, we were down to 520 22 units and just under 300 2023 units remaining we have also reduced our on ground new inventory from over 4700 units in November to under 3600 today.
Andrew: As of today more than 90% of our inventory is 2024 or 2025 model year. We believe this is among the healthiest in the industry. Additionally, our OEM partners are thoughtfully and slowly introducing 2025 model year units of which we currently have less than 50 in stock they are slowing model youre.
Amber Dillard: Additionally, our OEM partners are thoughtfully and slowly introducing 2025 model year units, of which we currently have less than 50 in stock. They are slowing the model year change where they can to preserve the pricing power on 2024 units. Another area of strength is our approach to our used inventory. We have made a concerted effort to ramp up our internal purchasing activity, and the team has acquired more units sequentially every month this year.
Andrew: Change, where they can to preserve the pricing power on 'twenty 'twenty four unit.
Andrew: Another area of strength is our approach to our used inventory we have made a concerted effort to ramp up our internal purchasing activity and the team has acquired more units sequentially every month this year.
Amber Dillard: Given our focus on reducing new inventory at year-end, we slowed our used unit acquisition cadence in the fourth quarter but have increased it significantly over the last 75 days, with an incremental effort in May that is delivering more than four times higher lead volume compared to April. A used unit typically generates 5 to 6 times more lead volume than a new unit, which therefore drives more potential customers into our sales funnel with fewer units in stock.
Andrew: Our focus on reducing new inventory at year end, we slowed our used unit acquisition cadence in the fourth quarter, but have increased significantly over the last 75 days with an incremental effort and made that is delivering more than four times higher lead volume compared to April.
Andrew: I used unit typically generates five to six times more lead volume than a new unit, which therefore drives more potential customers into our sales fellow with fewer units in stock.
Amber Dillard: Current gross profit per unit on inventory bought from consumers has been consistent with our pre-pandemic historical results, so we are doing everything we can to generate more leads, more purchases from consumers, and thereby more traffic and revenue to our stores. Another focus has been F&I.
Andrew: Gross profit per unit on inventory thought from consumers has been consistent with our pre pandemic historical results. So we are doing everything we can to generate more leads more purchases from consumers and thereby more traffic and revenue to our stores.
Amber Dillard: We have been making meaningful improvements in our results due to enhancing our people, process, and product. To provide a couple of examples, our F&I per unit on a same-store basis increased $170 per unit year-over-year, despite average selling prices on units declining by over 13%. Our financing penetration on units increased from 59% in January to 69% in March and is at 75% so far in May, without the benefit of having as many aggressively priced units that are easier to finance due to a lower loan-to-value ratio.
Andrew: Another focus that's been F&I, we have been making meaningful improvements in our results due to enhancing our people process and product to provide a couple of examples our F&I per unit on a same store basis increased $170 per unit year over year, Despite average selling prices on units declining by <unk>.
Andrew: Over 13%.
Andrew: Financing penetration on units increased from 59% in January to 69% in March and is that 75%. So far in may without the benefit of having as many aggressively priced units that are easier to finance due to a lower loan to value ratio.
Amber Dillard: I am proud of our financial services managers for the effort they have shown to increase our gross profit generation in this critical revenue stream. Finally, regarding cost control relative to last year, we are within 20 basis points of SG&A as a percentage of revenue in the first quarter, while total revenue declined 8.5%, and we have seven more locations in operations compared to 2023. The absolute change in SG&A expense is lower by almost $4 million, or over 8.5% on an absolute basis.
I am proud of our financial services managers for the effort. They have shown to increase our gross profit generation in this critical revenue stream.
Andrew: Finally regarding cost control relative to last year, we are within 20 basis points of SG&A as a percentage of revenue in the first quarter. While total revenue declined eight 5% and we have seven more locations and operations compared to 2023.
Andrew: The absolute change in SG&A expense is lower by almost $4 million or over eight 5% on an absolute basis.
Amber Dillard: Overall, the opportunities for self-help and generating optimum performance for our stores remain substantial and achievable. We look forward to providing incremental updates as the operations team has additional time to drive these improvements. Finally, I'd like to echo John's comments and thank our employees. We have a mission, culture, and focus that is second to none in the industry. We are aligned and all pulling together, and I am both humbled and honored to lead our store personnel. With that, I'll turn the call over to Kelly.
Andrew: Overall, the opportunities for self help and generating optimum performance for our stores remain substantial and achievable. We look forward to providing incremental updates as the operations team have additional time to drive these improvements.
Speaker Change: Finally, I'd like to Echo John's comments and thank our employees, we have a mission culture and focus that is second to none in the industry. We are aligned and all pulling together and I'm, both humbled and honored to lead our store personnel with that I'll turn the call over to Kelly.
Kelly Porter: Thank you, Amber. Please note that, unless stated otherwise, the 2024 first quarter comparisons are versus the same period in 2023. Total revenue for the quarter was $270.6 million, a decrease of 8.5%. From this point on, all metrics will be on a same store basis unless otherwise stated.
Kelly Porter: Thank you remember please note that unless stated otherwise the 'twenty 'twenty four first quarter comparisons are versus the same period in 2023.
Kelly Porter: New unit sales declined 11.1% in the quarter, and gross profit per unit excluding LIFO declined 75.7% as a result of our aggressive discounting of 2022 and 2023 model year units. Used retail unit sales decreased 4.6%, and gross profit per unit decreased 51.4%. Finance and insurance revenue declined 5.6% during the quarter, primarily due to a decrease in unit volume and higher chargebacks. However, as Amber mentioned, F&I per unit increased 3.3% despite lower average selling prices and fewer unit sales.
Kelly Porter: Total revenue for the quarter was $270 6 million a decrease of eight and a half per cent.
Kelly Porter: From this point on all metrics will be on a same store basis, unless otherwise stated.
Kelly Porter: New unit sales declined 11, 1% in the quarter and gross profit per unit, excluding LIFO declined 75, 7% as a result of our aggressive discounting of 2022 and 'twenty twenty-three model year units.
Kelly Porter: Used retail unit sales decreased four 6% and gross profit per unit decreased 51, 4%.
Speaker Change: Finance and insurance revenue declined five 6% during the quarter, primarily due to a decrease in unit volume and higher charge backs as Amber mentioned F&I per unit increased three 3%, despite lower average selling prices and fewer unit sales.
Kelly Porter: Our service body and parts revenue decreased 20.6%, and our gross profit decreased by 18.9%. Our gross margin on service body and parts increased 120 basis points. Adjusted net loss was $21.4 million for the quarter compared to net income of $1.2 million last year. Adjusted fully diluted earnings per share was a loss of $1.63 for the quarter compared to zero in the prior year.
Speaker Change: Our service body and parts revenue decreased 26% and our gross profit decreased by 18, 9%.
Speaker Change: Our gross margin on service body and parts increased 120 basis points.
Speaker Change: Adjusted net loss was $21 4 million for the quarter compared to net income of $1 2 million last year.
Justin: Justin fully diluted earnings per share was a loss of $1 63 for the quarter compared to zero in the prior year.
Kelly Porter: Moving on to liquidity and capital allocation, on May 15, we raised an additional $15 million of capital generated through mortgage financing on owned real estate. The mortgage facility has a current balance of $50 million and includes real estate with a basis of approximately $127 million. We estimate we can generate an additional $45 million in mortgage proceeds by refinancing these locations at a 75% loan-to-value rate, similar to the other properties we financed earlier in 2023.
Justin: Moving on to liquidity and capital allocation.
Justin: On may 15th we raised an additional $15 million of capital generated through mortgage financing on owned real estate.
Justin: The mortgage facility has a current balance of $50 million and includes real estate with a basis of approximately $127 million.
Justin: We estimate we can generate an additional $45 million in mortgage proceeds by refinancing these locations at a 75% loan to value rate similar to the other properties. We financed earlier in 2023.
Kelly Porter: Working with our syndicated lenders, we received a modification of our financial covenants through the first quarter of 2025. I want to thank our bank partners for their partnership to allow us the room to navigate the current economic environment and focus on improving operating results throughout 2024. With that, we can open the call to questions. Operator?
Justin: Working with our syndicated lenders, we received a modification of our financial covenants through the first quarter of 2025.
Justin: I want to thank our bank partners for their partnership to allow us the room to navigate the current economic environment and focus on improving operating results throughout 2024.
Speaker Change: With that we can open the call to questions operator.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to be placed in the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. One moment, please, while we poll for questions. Our first question is coming from Steve Dyer on behalf of Craig Hallam. Your line is now live.
Speaker Change: Thank you will now be conducting a question and answer session if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: Press Star two if he'd like to remove your question from the Q1 moment. Please while we poll for questions.
Speaker Change: My first question is coming from Steve Dyer from Craig Hallum. Your line is now live.
Steven Lee Dyer: Thanks, good morning. Thanks for taking my question. Just kind of a question on new vehicle gross margin at a level that I don't think... I've seen or you've probably imagined, is that just a function of kind of blowing out the old model year or fixed cost absorption or all of the above?
Steve Dyer: Oh. Thanks. Good morning, Thanks for taking my question I'm, just kind of a question on new vehicle gross.
Speaker Change: Gross margin at a level that I don't think.
Steve Dyer: I've seen or you've imagined probably is that just a function of it was kind of blown out old model year or fixed cost absorption or all of the above.
John F. North: Hey, Steve, good to hear from you. I think, in short, you described it well, probably lower than anybody could imagine.
Steve Dyer: Hey, Steve good to hear from you.
Speaker Change: I think in short [laughter] you described it well.
Speaker Change: Robert will be lower than anybody could imagine.
Speaker Change: But but yes, that's exactly what happened I mean, we've seen our new vehicle gross margins recover pretty dramatically in April and so far into may.
John F. North: But, but yes, that's exactly what happened. I mean, we've seen our new vehicle gross margins recover pretty dramatically in April and so far into May. You know, I think the big change for us in the first quarter was really needing to get through a lot of that inventory and get healthy. And, and, you know, we saw the writing on the wall and took our pain and moved through it. And that's what happened.
Speaker Change: I think I think the big the big change for us in the in the first quarter. It was really needing to get through a lot of that inventory and get healthy and we saw the writing on the wallet and took our pain.
Speaker Change: And move through it and that's what happened you know I think what we were hoping would happen in March and April as we would see seasonality pick up and we saw some more units. The grosses are there on the 20 fours in particular.
John F. North: And, you know, I think what we were hoping would happen in March and April is that we would see seasonality pick up, and we'd sell some more units. The grosses are there on the 24s, in particular. You know, we're paying a lot of attention to the quantity of inventory. And, you know, Amber talked about that.
Speaker Change: We're paying a lot of attention to the philosophy of inventory and Amber talked about that we're down to $30 700 units less than I think as of today, which is which is way light even compared to where we were this time last year with a lot more stores now and.
John F. North: We're down to 3,700 units less than, I think, as of today, which is, which is way too few, even compared to where we were this time last year with a lot more stores now. And, you know, we did that for a couple of reasons. Number 1, we want to make sure we're really careful with the high end and the motorized pieces because those have been even slower to move. I think everybody's seen that the low end towables are where it's at.
Speaker Change: And we did that for a couple of reasons number one.
Speaker Change: We want to make sure we're really careful with the high end in the motorized pieces, because those who didn't even slower to move I think everybody has seen the low end tables are whereas that Andrew was sharing with me. This morning over 30% of what we sold this year in travel trailer segment is under 30 Grand.
Speaker Change: Which is which is way different than our mix has been historically and we've been focused on that intentionally but that's also where the market is to be Frank I mean, I think Goldman has been the number one trailer from Ssi three months in a row this year.
John F. North: Amber was sharing with me this morning that over 30% of what we sold this year in the travel trailer segment is under 30 grand, which is, which is way different than our mix has been historically and, you know, we've been focused on that intentionally, but that's also where the market is, to be frank. I mean, I think Coleman's been the number 1 trailer from SSI for 3 months in a row this year, you know, and that's like a 12 or $15,000 unit.
Speaker Change: That's like a 12 or $15000 unit.
Speaker Change: So we've been we've been thoughtful about the high end heavy product is while the motorized product and that doesn't generate the grosses than it has historically because we've been trying to turn it faster with floor plan financing at 8% you know what.
Funding of 500 or $700000 unit gets pretty costly.
Speaker Change: Every month, if youre not turning them. So it's a combination of all those things.
John F. North: So, we've been thoughtful about the high-end heavy product as well, the motorized product, and that, you know, doesn't generate the grosses that it has historically because we've been trying to turn it faster with floor plan financing at 8%. Funding a $500 or $700,000 unit gets pretty costly every month if you're not turning them. So, it's a combination of all those things, you know, I think in short, we feel really good about the inventory. The grosses are there, you know, we're just, we're just hoping and trying to do everything we can to drive more retail sales and really lead into use because that's where the market is.
Speaker Change: I think.
Speaker Change: In short we felt really good over the inventory is the grosses are there you know we're just we're just hoping in and try and do everything we can to drive more retail sales and really leaning into use access where the market is.
John F. North: Yeah, that's really helpful. Thanks, John. I mean, as it relates to mix, it sounds like you have the late model stuff where you want it. But do you have the mix for the Coleman's of the world where it needs to be relative to demand right now?
Speaker Change: No that's really helpful. Thanks, Jon I mean as it relates to mix.
Speaker Change: It sounds like you have about the late model stuff, where you want it do you have the mix to the coal mines in the world a world where it needs to be relative to demand right now.
John F. North: Yeah, I mean, fortunately, Amber's run our supply chain for the better part of a decade and has really good relationships with OEMs and is able to get product at the right price points. I mean, I should call out a couple of things.
Speaker Change: Yeah, I mean, Fortunately <unk> run our supply chain for a better part of a decade and has really good relationships with Oems and is able to get.
Speaker Change: Product at the right price points, I mean, I call out a couple of things we've got the product the Catalina stop it that's done for us.
John F. North: We've got the product, the Catalina stuff that's done for us. You know, that's a really good price point, pretty competitive at that at that entry level, first time buyer price point. And then even like Grand Design, you know, they're coming out with the low-end stuff that's more affordable because they see where the market is. And they're, you know, our number one partner in terms of units. I mean, I think 40% of what we sold in 23 was Grand Design. So, yes, we can get it.
Speaker Change: Really good price point pretty competitive at that at that entry level first time buyer.
Speaker Change: Price point, and then even my Grand design, you know theyre coming out with the low end stuff, that's more affordable because they used to where the market is in there you know our number one partner in terms of units I mean, I think 40% of what we sold in 23 with Grand design. So yes, we can get it that's where the market is you.
John F. North: That's where the market is. You know, you see the margin differences when you look at us versus Camping World. So obviously, you know, on a much lower ASP, you can see a margin in the teams. But there's a balance there because, you know, we are also a really good partner with an Integra, a Newmar, a Tiffin, you know, that sells the higher-end motorized stuff. Thor has been phenomenal to us.
Speaker Change: You see the margin differences when you look at us versus camping world. So obviously on a much lower asps you can see a margin in the teens, but theres a balance there because we are also a really good partner with at Integra Newmar of Tiffin that sells about the higher end motorized stuff Thor has been phenomenal to us and you know.
John F. North: And, you know, we want to keep everybody happy as best we can. We're trying to buy units and keep their factories moving and be a good partner. And also be really careful to protect ourselves because when you get heavy on inventory, it starts to age. You end up having, you know, the last six months that we've had. And, you know, that's not very much fun. And I think that's where the industry has been. I just think, you know, a lot of dealers do it in private because they don't put their quarterly results out like we do.
Speaker Change: So we want to keep everybody happy as best we can we're trying to buy units and keep their factories moving and be a good partner and also it'd be really careful to protect ourselves because when you get heavy on inventory starts to age you ended up having the last six months that we've had and you know that that's not very much fun and.
Speaker Change: I think that's where the industry has been I. Just think you know a lot of dealers do it and drive it because they don't put their quarterly results out like we do.
John F. North: Aren't you happy you get to do that?
Speaker Change: Or do you have to you got to do that.
John F. North: You know, when you started, just kind of with your background and so forth, parts and service was sort of a focus, and I don't know to the degree you've been able to do what you want to do, just given you've been triaging in some of these other areas, but can you kind of give a little bit of color about what you're working on there and how that's going relative to expectations?
Speaker Change: [laughter].
Speaker Change: You know when you start I was just kind of lift your background and so forth parts and service was sort of a sort of a focus and I don't know to the degree you have been able to do what you want to do just given you've been triaging in some of these other areas, but can you kind of give a little bit of color kind of what you're working on there and how that's going relative to X.
Speaker Change: Mutations.
John F. North: Sure. I mean, I think you're right. We've had to focus on the sales side of the organization. And, you know, we leaned in pretty heavy starting about, I would say, August of last year, and we're really laser focused on sales. You know, obviously, there's always incremental things you're doing on the sales side, or any part of the business, you know, but in particular, like F&I, which was such an opportunity for us, we needed to start there.
Speaker Change: Sure I mean, I think youre right.
Speaker Change: We had to focus on the sales side of the organization and you know we leaned in pretty heavy starting about.
Speaker Change: I'd say August of last year and were and we're really laser focused on sales.
Speaker Change: I think.
Speaker Change: Obviously, there is always incremental things you're doing on the sales side. You know are already part of the business you know, but in particular like F&I was just such an opportunity for us we needed to start there I mean, there's thousands of dollars per unit being left on the table. If we can continue to drive important immuno performance and improvement there.
John F. North: I mean, there are thousands of dollars per unit being left on the table if we can continue to drive performance and improvement there. But I think as we got through the end of the year and into January, we've been pivoting our focus now into service, and you're exactly right. I mean, that, to me, is one of the foundational things that is more consistent in this business. And, you know, there's a reason that we call it fixed operations. It's supposed to help cover your fixed costs.
Speaker Change: But I think as we got through the end of the year and into January.
Speaker Change: We've been pivoting our focus now into service and you're exactly right. I mean that to me is one of the foundational things that is more consistent in this business and you know there's a reason that we call. It fixed operations as opposed to help cover your fixed costs and if you think about sizing. It I mean, I think rough justice Youre at five five.
John F. North: And if you think about sizing it, I mean, I think rough justice, you're at five and a half percent of revenue. It was just a service of the total. That should be 10 plus.
Speaker Change: Set of revenue. It was was serviced out of the total and.
Speaker Change: That should be 10, plus.
John F. North: So that's an area where there is tremendous opportunity and capacity. And we've done so many things behind the scenes. We just brought in new recruiters, technical recruiters.
Speaker Change: So you know that's that's an area, where there is tremendous opportunity in capacity and you.
We've done so many things behind the scenes. We just brought in you know new recruiters technical recruiters, we're partnering with trade schools to get more technicians theres so much.
John F. North: We're partnering with trade schools to get more technicians. There's so much low-hanging fruit there and opportunity. But, you know, anytime you're making people changes at any level, it always takes longer, you know, to really see that pay off. And so, you know, it's probably not going to be something we're going to turn on in a quarter.
Speaker Change: The low hanging fruit, there and opportunity, but anytime you're making people changes at any level it always takes longer.
Speaker Change: Really see that pay off and so you know.
Speaker Change: It's probably not going to be something we're going to turn on in a quarter and so as everybody is thinking about their model.
John F. North: And so, as everybody's thinking about their model, you know, I think be gentle. But in terms of where the long-term future for this business could be, I think it could easily be 10 plus. And the gross margin is higher than an automotive company. I mean, it's typical to see a 60% gross margin. And in a well-run service department, you can achieve a 25, 30% operating margin. I mean, that's a really, really good consistent business.
Speaker Change: Be gentle, but in terms of where the the long term for this business could be I think you could easily be 10, plus and the and the gross margin is higher than in automotive I mean, it's typically to see is typical to see a 60% gross margin and in a well run the service Department you can do a 25% 30% operating margin I mean, that's a really.
John F. North: And, you know, I think for whatever reason where we find ourselves, we just haven't emphasized it the way that we should. And, you know, what we kind of jokingly say in the business is, you know, sales sells the first one, and service sells the second and third. And if you take care of customers and you make their product usable, and, you know, unfortunately, these are homes on wheels, they get towed at 75 miles an hour, and, you know, things go wrong. If you can overcome those things, you create really good value for customers. The OEMs love you, the customers are happy, and there's really good recurring revenue.
Speaker Change: Really good consistent business and you know I think for whatever reason, where we find ourselves. We just haven't emphasized at the way that we should and that what.
Speaker Change: But we kind of jokingly say in the businesses.
Speaker Change: Sales cells. The first one answer and service sales of second and third you know and if you take care of customers and you make their product usable and unfortunately these are homes on wheels, they get toed at 75 miles an hour and you know things go wrong. If you can if you can overcome those things you create really good value prop and the Oems Love you. The customers are happy there is.
Speaker Change: Really good recurring revenue. So you know we're working on it. It's just you know to your point, we've had to triage and some other things, but it's been a it's been a big focus area. The last 30 45 days for us and I can tell you. There's there's just as much opportunity. There. There's there's a there's a lot. We can go get it's just going to take time.
Steven Lee Dyer: So, you know, we're working on it. It's just, you know, to your point, we've had to triage some other things, but it's been a big focus area the last 30, 45 days for us. And, you know, I can tell you there's just as much opportunity there. There's a lot we can do, it's just going to take time.
Speaker Change: Okay.
Operator: Thanks a lot for all the color. I'll hop back in.
Speaker Change: Thanks, a lot for all the color I'll hop back in queue.
Steve Dyer: Thanks, Steve.
Operator: Thank you. The next question today is coming from Dan Moore from CJS Securities. Your line is now live.
Speaker Change: Thank you. Your next question today is coming from Dan Moore from CJS Securities. Your line is now live.
Will: Hi, this is Will on behalf of Dan. Has there been any noticeable pickup in demand for used units relative to what you and the industry are experiencing in terms of retail demand for new units?
Speaker Change: Hi, this is a well on for Dan.
Has there been any noticeable pick up in demand for used units relative to what you and the industry is experiencing in terms of retail demand for new units.
John F. North: Oh, 100%. I mean, there is so much demand for used units, and in particular, if you can find them from 2016 to 2021, that stuff is liquid gold. And, you know, we're seeing gigantic grosses, you know, really, really quick turns. I was looking at our sales reports last night, and the buying team bought a 2018 Tiffin bus, you know, and I think we made a $30,000 gross profit on it sold in five days. And that's just on the front.
Speaker Change: Oh, 100% I mean that there is so much demand for used units.
Speaker Change: In particular, if you can find by 2016 to 2021.
Speaker Change: That stuff is liquid gold and you know we're seeing gigantic grosses.
Speaker Change: You know really really quick turns I was looking at our sales reports last night and in the buying team bought a.
Speaker Change: 2018 tip in bus.
Speaker Change: I think we made a 30000 dollar gross profit on it sold in five days.
John F. North: That's not even the financing piece. So, I mean, when you can buy those units the right way, that's what customers want. That's where affordability is much better. You know, they don't have the price inflation that you saw through the pandemic and through today. You know, and on the motorized side, in particular, I mean, the chassis manufacturers haven't dropped their prices. And so, you know, total costs are coming down on the new vehicle side, but the motorized piece has been a lot tougher not to crack.
Speaker Change: And that's just on that front, that's not even the financing piece. So I mean, when you can buy those units the right way, but that's what customers want that's where affordability is much better you know they don't have the price inflation that you saw through the pandemic and through today you know what on the motorized side in particular, I mean, the chassis manufacturers haven't dropped their pricing and so.
Speaker Change: Yeah total costs are coming down on the new vehicle side that the motorized piece that's meant a lot tougher nut to crack so yes in short without being too long winded all they use we can buy it or we can buy right is is getting snapped up really really quickly and for healthy gross margin and that's why we're so focused on it.
John F. North: So, in short, without being too long-winded, all the stuff we can buy that we can buy right is getting snapped up really, really quickly and for a healthy gross margin. And that's why we're so focused.
John F. North: All right, that's very helpful. Thank you for the color. And then, relative to Q1, what are your expectations for gross profit per unit for both new and used cars in Q2?, and then how should we think about, you know, the cadence over the balance of the year?
Speaker Change: Alright, that's very helpful. Thank you for the color.
Speaker Change: And then what are your expectations for gross profit per unit for both new and used for Q2.
Speaker Change: Relative to Q1, and then how should we think about the cadence over the balance of the year.
John F. North: Well, that's a tough question. I mean, we typically don't provide detailed guidance. And I would say in this environment, that's an even tougher question to answer, because I think the balance that we're trying to figure out here is volume versus price and what happens in the market. You know, what we talked about in April and March, in particular, as we started to put pricing back up, because inventory got healthy on the new side, you know, demand wasn't where we wanted it to be. And, you know, I think that's because there are still a lot of dealers that have 2022s and 2023s on the ground. And, you know, they're significantly discounted, in many cases below the dealer's cost.
Speaker Change: Boy, that's a tough question I mean, we typically don't provide detailed guidance and I would say in this environment, that's even tougher.
Speaker Change: Question to answer because I think the balance that we're trying to figure out here is volume versus price and what happens in the market.
Speaker Change: What we talked about it you know.
Speaker Change: April than in March in particular, you know as we started to put pricing back up because inventory got healthy on the new side, you know demand it wasn't where we wanted it to be and you know I think that's because theres still a lot of dealers that have 2022s and 2023s on the ground and you know there are significant.
John F. North: And, you know, that problem is not getting any better every month. And so I think the incremental marginal customer that doesn't have a preference for a new unit that's a current model year is going to go take those bargains. And so that's been the part we've had to really balance, because as we started to bring grosses up on the new side, you know, what we saw is that volume started to suffer.
Speaker Change: We discounted and in many cases below the dealer's cost and.
Speaker Change: And you know that problem is not getting any better every month and so I think the incremental marginal customer that doesn't have a preference for a new unit. There's a current all year is going to go take those bargains and so that's been the part we had to really balance because as we started to bring grosses up on the new side.
John F. North: And, you know, that's kind of a difficult question to answer going forward, because I don't know how long the inventory issue is going to be in the competitors' lot traffic, you know, so I'm going to be careful on that one. You know, I think what I said was, we saw improvement in April, and we saw improvement in May. You know, our inventory is very healthy, so I don't think it's going to be anything like what we saw in Q1. I'm not sure it's going to go back to where it was in the second quarter of last year.
Speaker Change: Thought as the volume started to suffer and you know that's that's kind of a difficult question to answer going forward because I don't know how long that that inventory issue is going to be in the competitors a lot traffic you know so so I'm gonna be careful on that one.
Speaker Change: I think what what I said is we saw improvement in in April we saw improvement in May.
Speaker Change: Our inventory is very healthy so I don't think it's going to be anything like what we saw in Q1 I'm not sure. It's going to go back to where it was in the second quarter of last year on the used side you know that feels a lot a lot more like it has been historically you know we had some aged used pieces that we needed to work through in the first quarter or two and so that.
John F. North: On the use side, you know, that feels a lot more like it has historically. You know, we had some aged use pieces that we needed to work through in the first quarter, too. And so that suppressed our usage margin a little bit as well. And I think we're in really good shape there, too. And I mean, we took our long, so you can see on the wholesale line, on the P&L, and we took losses in the first quarter to move through some stuff that we needed to get rid of.
Speaker Change: Suppressor I use margin is a little bit as well and I think we're in really good shape, there too and I mean, we took our took our law. So you can see on the wholesale why on the P&L and we took losses in the first quarter to move through some stuff that we needed to get rid of them and we did all of that so you know us I would say, it's going to be more normal as you're thinking about the modeling but new.
John F. North: And we did all that. So, you know, used, I would say, is going to be more normal as you're thinking about the modeling. But, you know, new is probably worth still being a little bit conservative on just because we've got to continue to work the volume piece, and that's why we're so focused on F&I.
Speaker Change: Is probably worth still being a little bit conservative on just because we've got to continue to work the volume piece and that's why we're so focused on F&I.
John F. North: What are your expectations for operating cash flow as well as CapEx for Q2 and the balance of the year?
Speaker Change: Okay, great. Thank you for the color.
Speaker Change: And then what are your expectations for operating cash flow as well as Capex for Q2 on the balance of the year.
John F. North: CapEx We've got some, you know, pieces that we're working through that were in flight. That's tapering off, and, you know, I would suspect that you'll see something similar in the second quarter to what you saw in the first, and then it should be pretty much done.
Speaker Change: Our capex, we've got some pieces that we're working through that were in flight.
Speaker Change: That's tapering off and you know I would suspect that you'll see something similar in the second quarter to what you saw in the first and then it should be pretty much done.
John F. North: You know, from a cash flow perspective, you know, I think our expectation is that we're going to be, on an operating cash flow basis, adjusted operating cash flow. That's where you take into effect the floor plan financing, and we break that out in our earnings release. You can see that calculation, but our expectation is that it's positive for the year. I'm not sure that I can give you a quarter-by-quarter breakdown because some of it's timing related to floor plan and AP and, you know, things that can swing and fluctuate just depending on, you know, when a month ends or whatever happens.
Speaker Change: You know from a cash flow perspective.
Speaker Change: You know I think our expectation is that we're gonna be a on a on an operating cash flow basis. The adjusted operating cash flow, that's where you take into effect the floorplan financing and we break out that in our AR and our earnings release, you can see that calculation, but our expectation is that positive for the year I'm not sure that I can give you a quarter by quarter.
Speaker Change: Because some of it is timing related with floor plan and AEP and things that can swing and fluctuate just depending on you know when a month ends or whatever happens.
Will: Alright, great. Thank you for taking my question.
Speaker Change: Alright, great. Thank you for taking my questions.
Speaker Change: Sure.
Operator: Thank you. The next question today is coming from Mike Swartz from Truist Securities. Your line is now live.
Speaker Change: Your next question today is coming from Mike Swartz from truly Securities. Your line is that a lot.
Michael Arlington Swartz: Hey. Good morning, guys.
Michael Arlington Swartz: Hey, Good morning, guys, maybe John just just to follow up on the answer that you had to a prior question maybe just a strategic level you know in terms of your new <unk> new.
John F. North: And maybe, John, just to follow up on an answer that you had to a prior question, maybe at just a strategic level, you know, in terms of your, you know, new product portfolio, I guess, how do you think about the balance between, you know, motorized versus towable? And I know this is a business that has gone and leaned more heavily into towables over the past decade, certainly. But just given some of the challenges in motorized, it seemed maybe a little more structural near term in terms of, you know, cost inflation, affordability, residual values. How do you think about the right way to kind of balance towable motorized stocking going forward?
Speaker Change: New product portfolio I guess, how do you think about the balance between motorized versus towable and I know this is a business that has gone and lean more heavily into total over the past decade, certainly, but just given some of the challenges in motorized it seems maybe a little more structural near term and in terms of cost.
Speaker Change: Cost inflation and affordability.
Speaker Change: Residual values, how do you think about the right way to kind of balance total motorized stocking going forward.
John F. North: Well, I think it depends. It's a pretty nuanced question. So, I can try to unpack it a couple of ways.
Speaker Change: Well I think it's I think it depends it's a pretty nuanced question.
Speaker Change: So I mean I can try to unpack it a couple of ways I think if you take a dealership like our store in Tampa, that's been known for literally decades as one of the places the Premier places to buy motorized units you know I think something like 30% of what Tampa selves as to out of state customers and people will travel and.
John F. North: I think if you take a dealership like our store in Tampa, that's been known for literally decades as one of the places, the premier places to buy motorized units, you know, I think something like 30% of what Tampa sells is to out-of-state customers. And people will travel and destination shop for this product and come a long way. And so I think in a store like that, you know, having a 25 or 30% motorized mix is totally fine.
Speaker Change: And destination shop for this product and come a long way.
Speaker Change: And so I think in a in a store like that you know having a.
Speaker Change: 25, or 30% motorized mix is totally fine I think Conversely, if you take our store in Tulsa, Oklahoma I'm not sure that stocking a lot of motorized units. There makes as much sense as you know really leaning into the totals and travel trailers and fifth wheels.
John F. North: I think conversely, if you take our store in Tulsa, Oklahoma, you know, I'm not sure that stocking a lot of motorized units there makes as much sense as, you know, really leaning into the towables and travel trailers and fifth wheels. So I think it depends a little bit on where we are in the country, the brands that we represent, you know, and what the store has been known for So that's how I think about it in our kind of business.
Speaker Change: So I think it depends a little bit on where we are in the country. The brands that we represent you know and and what the store has been known for.
Speaker Change: So that's how I'd think about it in our kind of business, but as it pertains to like the more industry wide conversation what I would say is there are still some pockets of motorized that are that are really really important for.
John F. North: But as it pertains to like the more industry-wide conversation, what I would say is there are still some pockets of motorized transport that are really, really important. You know, for example, if you look at like C, class C stuff, which is like, a larger unit than a B-Van, which is kind of unusual to me, not being super familiar with the industry. But the C-Stuff, you know; it's been really profitable for us the whole time.
Speaker Change: For example, if you look at like C. C class stuff you know.
Speaker Change: Which is like.
Speaker Change: A.
Speaker Change: A larger unit that it'd be van which is kind of unusual to me not be super familiar with the industry.
Speaker Change: But the C stuff, it's been really profitable for us the whole time I wouldn't say, we've seen as you know the big diesel pushers in particular have been really really slow. This year no. Those are really typically very expensive units and I think we're being very careful there.
John F. North: I would say we've seen A, you know, the big diesel pushers in particular have been really, really slow this year. You know, those are really typically very expensive units, and I think we're being very careful there. And then the B-Vans were historically incredibly profitable, and there were a couple of OEMs that were early to come out with, you know, the Sprinter van that they converted into a unit you could camp in. But I would say over the last 24 months, that's become very saturated, and everybody has a B-Van product. And so, you know, I think you've got to be very careful in that segment, too.
Speaker Change: And then the B vans, where historically incredibly profitable and there were a couple of Oems that were early to come out with you know the sprinter van that they converted into a into a you need to get campaign, but but I would say over the last 24 months, that's become very saturated and everybody has the van product and so you know I think you've gotta be.
Speaker Change: Very careful on that and that segment too, but in short I mean, we're pretty committed to motorized I think what we're seeing right now is that a lot of people who've been in the lifestyle are locked out because they have negative equity and so youre seeing a shift to the low end stuff because it's first time buyers. They can just come in and they want it.
John F. North: But in short, I mean, we're pretty committed to motorized. I think what we're seeing right now is that a lot of people who've been in the lifestyle are locked out because they have negative equity. And so you're seeing a shift to the low-end stuff because it's first-time buyers that can just come in and, you know, they want to camp for $5 a day or whatever the advertisement is. And that's why they've been taking share, but I don't think that's a structural change in the market.
Speaker Change: <unk> for $5, a day or whatever they they advertisement is.
Speaker Change: And that's why they've been taking share, but I don't think that's a structural change in the market I think motorized and will always be there I. Just think you know we have to be really thoughtful in terms of how we pursue it and you know, we'll see how the market develops but but I don't think you're going to see us move away from it I think we just start being careful because you know there's there's definitely a.
John F. North: I think the motorized will always be there. I just think, you know, we have to be really thoughtful in terms of how we pursue it, and, you know, we'll see how the market develops. But I don't think you're going to see us move away from it. I think we just are being careful because, you know, there's definitely a slowdown in some of those segments in terms of demand right now. But, you know, that's not any different than high-end fifth wheels or really expensive travel trailers, either. I mean, that stuff, too, you need to be careful with.
Speaker Change: Slowdown in some of those segments in terms of demand right now, but you know that's not any different than the high end fifth wheels are it really extensive travel trailers to I mean that stuff I'll also need to be careful.
John F. North: Okay, thank you. And just maybe to parse some of the commentary, I think you may do another question previously on the retail environment as we've gone into April and May. I think it sounds like nothing has really changed, maybe, but is there a way to think about, you know, the comparable new unit volume was down 11% in the first quarter. Is there any way to think about, you know, how that looks thus far in the second quarter relative to that first quarter number? Oh, I think it's...
Speaker Change: Okay. Thank you and just maybe to parse some of the commentary I think you made another another question previously on the retail environment as we've gone into April May I think it sounds like.
Speaker Change: Uh huh.
Speaker Change: Nothing has really changed maybe but is there a way to think about you know the the comparable new unit volume was down 11% in the first quarter is any way to think about you know how that looks less far in the second quarter relative to that first quarter number.
John F. North: What I would say is that, you know, we're seeing definitely some improved traffic as we move into the summer and, you know, seasonally, as you get into the spring and May, in particular, you do see a pickup, and I would say, just anecdotally, that, relative to April, May feels like it's a little stronger in terms of demand. But I don't know if that's because there are fewer deals out there for other dealers that we didn't see, or if the market is getting better.
John F. North: Oh, I think it's too soon to tell. And to be frank with you, it's not something that I monitor on a daily basis in terms of that percentage change. So I'm not sure I can even commit it to memory.
Frank: Oh I think it's too soon to tell I think it's too soon to tell and to be Frank with you. It's.
Frank: It's not something that I monitor on a daily basis.
Frank: In terms of of that percentage change so I'm not sure I could even be committed to memory. What I would say is that you know we're seeing death.
Frank: Definitely some improved traffic as we move into the summer and you know seasonally as you get into the spring and in May in particular, you do see a pickup in I would say just anecdotally you know I would say relative to April may feels like it's a little.
Frank: Stronger in terms of a demand, but I don't know if that's because there are fewer deals out there for other dealers that we didn't see or if the market is getting better I mean, you know we're just we're just one data point here and are in a pretty rich tapestry. So you know I don't know that I want to call a trend, we'd obviously like to see see more demand I think you know.
John F. North: I mean, you know, we're just one data point here in a pretty rich tapestry. So, you know, I don't know that I want to call a trend. You know, we'd obviously like to see more demand, and I think, from what I've read, at least from the OEM side, it seems like they're all, you know, 325 to 350 in terms of retail sales, and those numbers seem to tick down every time they talk about it. They have a better perspective than we do because they see the whole country.
Frank: From what I read at least from the OEM side. It seems like they're all you know $3 25 to $3 50 in terms of retail sales and you know that those numbers seems to tick down and every time they talk about it they've got a better perspective than we do because they see the whole country, but we remain optimistic that we'll continue to see the strength that we've seen so far in may and we're off.
John F. North: But we remain, you know, optimistic that we'll continue to see the strength that we've seen so far in May. And we're obviously pushing and pivoting and trying new strategies with marketing and other things that could hopefully differentiate our results relative to the competition as well. So we're going to keep going. I think there's an opportunity for us to continue to see the momentum improve. That's what we're focused on.
Frank: Sleep, pushing and pivoting and trying new strategies with marketing and other things that could hopefully differentiate our results relative to the competition as well. So we're going to keep grinding on it I think there's I think there's an opportunity for us to continue to see them a massive improve that's what we're focused on.
Speaker Change: Thank you.
Operator: Sure. Thank you. The next question is coming from Brandon Roll from D.A. Davis Head. Your line is now live.
Speaker Change: Sure. Thank you next question is coming from Brandon Rolle from D. A Davidson your line is now live.
Brandon Roll: Good morning. Thank you for taking my question. Sure.
Good morning, Thank you for taking my questions.
Brandon Roll: First, just on restocking in this environment, could you talk about your rationale for kind of leaning into taking on more new and used inventory ahead of the model year 25 rollout? I know on the used side, it seemed like one of your larger competitors has actually been pulling back on used procurement throughout the first part of the year. But on the new side, it seemed like you guys were, I think you had talked about, you know, helping the OEMs continue to run their factories. Could you just talk about the rationale there on both sides?
Speaker Change: Sure.
Brandon Roll: First just on the restocking and this environment could you talk about your rationale for kind of leaning into taking on more new and used inventory ahead of the model year 'twenty five rollout I know on the used side. It seemed like one of your larger competitors has actually been pulling back on us procurement throughout the first part of the year, but on on the new side. It seemed like you.
John F. North: Thank you.
Speaker Change: Where I think you had talked about you know, helping the Oems continue to run their factories can you just talk about rationale there on both sides.
Speaker Change: Sure.
John F. North: I would say we're being pretty careful on the new side. I mean, we're at, you know, 3,600 units on the ground today, and you know, compared to November of last year, we were 4,700. So that's a pretty significant change.
I would say, we're being pretty careful on the new side, I mean, where are you.
Speaker Change: You know 3600 units on the ground today, new and you know compared to.
Speaker Change: In November of last year, we were at 4700.
Speaker Change: So that's a pretty significant change.
John F. North: If you don't have it, you can't sell it, and so you've got to be thoughtful about that. And a lot of our partnerships with our OEMs at this point stretch decades, and they're doing their best to try to be thoughtful and cut production where they can and give us incentives. And we try to be thoughtful and where we can commit to taking certain models that we think we can turn around and keep that spirit of partnership alive.
Speaker Change: You know if you don't have it you can't sell it.
And so you got it you got it.
Speaker Change: Be thoughtful about that and.
Speaker Change: You know a lot of our partnership with our Oems at this point stretch decades back and you know they are doing their best to try to be thoughtful and cut production, where they can't even give us incentives and you know we try to be thoughtful in where we can commit to take certain models that we think we can turn and and keep that spirit of partnership alive, but I would say a journey.
John F. North: But I would say in general, we've been really careful. Our inventory is really healthy, and we've been thinking a lot about making sure that when 25s do hit, we've got the capacity to take those on. On the use side... I'm not sure I understand behind the curtain what our competitors do, and that's always a dangerous thing to speculate about.
Speaker Change: We've been really careful our inventory is really healthy and we've been thinking a lot about making sure that when 20 fives do hit we've got the capacity to take those on on the used side.
Speaker Change: I'm not sure I understand you know behind the curtain at our competitors and that's always a dangerous thing to speculate about what I can tell you. We've experienced is six times. The lead volume on used units that are on our website versus new and customers that are looking for affordable options as long as you can buy things.
John F. North: What I can tell you we've experienced is six times the lead volume on used units that are on our website versus new, and customers that are looking for affordable options as long as you can buy things correctly. And so I think we're being really targeted around the used inventory we are purchasing. I would say, in general, you're not seeing us buy a lot of really late-model used stuff. We're tending to avoid that.
Speaker Change: And so I think we're being really targeted around the used inventory. We are purchasing you know I would say in general you know you're not seeing us by a lot of really late model used stuff, we're tending to avoid that and has a little bit of a maybe overhang on it in the consumers' mind in terms of quality that was built during the pandemic.
John F. North: It has a little bit of an maybe overhang in the consumer's mind in terms of quality if it was built during the pandemic, but the stuff that's earlier than that is, like I said earlier, I think I used the expression liquid gold.
Speaker Change: But the stuff that that's earlier than that is like I said earlier I think I used the expression liquid gold I mean that stuff goes quick. So you know that that's I would say a little more nuanced. It's not just buy used or don't buy used and you know we don't make crazy whipsaw adjustments here I mean this is targeted in.
John F. North: I mean, that stuff goes quick. So that's, I would say, a little more nuanced. It's not just buy used or don't buy used. And we don't make crazy whipsaw adjustments here. I mean, this is targeted. I mean, literally, Amber approves.
Speaker Change: I mean literally amber approves almost every used unit, we buy especially when you get into the higher end stuff is certainly go into her. So I mean this is like a tactical thing that's executed literally piece by piece and our inventory that's how much of a laser focus we have on it.
John F. North: Almost every used unit we buy, especially when you get into the higher-end stuff, it's certainly going to hurt. So, I mean, this is like a tactical thing that's executed literally piece by piece in our inventory. That's how much of a laser focus we have on it.
John F. North: Okay, great. And just on the model year 25 rollout, I know the model year 25 bidding process is going on right now or closing relatively shortly. What's your best guess on where pricing is going for the new model year based on what you've heard from your OEM partners and given the current retail environment, obviously a very price-conscious consumer?
Speaker Change: Okay, great and just on the multiyear twenty-five rollout are I know the model year 'twenty five bidding processes going on right now or closing a relatively shortly.
What is what's your best guess on where pricing is going for the new model year based on what you've heard from your OEM partners and are given the current retail environment. Obviously, you are very price conscious consumer.
John F. North: Yeah, I think on the total side, we expect maybe a couple percent increase, at least from what we've heard early on from some of our partners. So not a significant increase, but definitely, excuse me, a little higher, and then on the motorized side, boy, I'm dying. Walmart.
Speaker Change: Yeah, I think I'm, a tolerable side, we expect maybe a couple of percent increase.
Speaker Change: At least from what we've heard early on from some of our partners.
Speaker Change: You know so so not not a significant increase but definitely.
Speaker Change: Excuse me.
Speaker Change: A little higher and then on the on the on the motorized side.
Speaker Change: Dying here.
Speaker Change: Uh huh.
John F. North: On the motorized side, it'll be higher than that just because of the chassis prices. The chassis manufacturers, I think, are still trying to build to their capacity, and they haven't yet restocked their channel. And so those prices haven't come down, and that's the majority of the cost in that motorized unit. So I would expect that it's gonna be higher, and so that's why you're seeing some new
Speaker Change: Excuse me.
Speaker Change: On the motorized side.
Speaker Change: It'll be higher than that just because of the chassis practices. The chassis manufacturers I think are still trying to build to their capacity and they haven't yet restock their channel and so you know those prices havent come down and that's the majority of the cost of that motorized unit. So you know I would expect that I expect that's going to be higher and so.
Speaker Change: You know that's that's why you're seeing some new models come out and that's why we're really focused on used in the total side.
John F. North: Okay, okay, great. And just finally, you have exposure to grand design. Obviously, there's been more publicity about the flex frame issues and people seeing their chassis crack or the welding in the frames. Could you comment on your experience with the flex frame issues and any, I guess, service or, I guess, maintenance concerns from it?
Speaker Change: Okay, Okay, great and just finally do you have exposure to Grand design, obviously, there's been more publicity about the flex frame issues and kind of.
Speaker Change: People sitting there a chassis cracker the welding and the frames could you comment on your experience with the flex frame issues and any I guess service or Oh, I guess maintenance concerns from it.
John F. North: No, I don't know if you saw this, but Grand Design just came out with a five-year warranty retroactive for all their customers. And you know, I tip my hat to Don and the whole team there. I mean, they really stepped up and handled things exactly the way that they should have. And you know, to whatever extent it's an issue, and I'm not sitting in the service department to see it every day, but I think they took a lot of the concerns off the table because they stood behind their product.
Speaker Change: No I don't know if you saw that as the Grand design just came out with a five year warranty retroactive for all of their customers and you know I tip my hat to dawn and the whole team. There I mean, they really stepped up and handle things exactly the way that they showed up and I think to whatever extent, it's an issue and I'm not sit in the service Department.
See it every day, but I think they took a lot of the concerns off the table because they stood behind their products and that's why there's such an important partner to us and we have a lot of important partners, but you know Grand design is near or at the top of the list for us.
John F. North: And that's why they're such an important partner to us. We have a lot of important partners, but you know, Grand Design is near or at the top of the list for us. And you know, it's because they do things like that, and they stand behind their product, and they make good stuff. And so we remain supportive and fans of Grand Design.
Speaker Change: They do things like that and they stand behind their product they make good stuff and so we remain supportive and fans of Grand design.
Speaker Change: Great. Thank you.
Operator: Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to you for any further or closing comments. Thanks for tuning in. We'll talk to you guys soon.
Speaker Change: Thank you we reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.
Speaker Change: Thanks for tuning in and we'll talk to you guys soon.
Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation today.