Q3 2024 Camping World Holdings Inc Earnings Call
Good morning and welcome to Camping World Holding Conference Call to discuss financial results for the third quarter of fiscal year 2024. At this time, over disciplines are in Lisa and Olimode.
Later we will conduct a question and answer session and instructions will follow at that time.
Please be advised that this call is being recorded and the reproduction of the call in whole or in part is not permitted without written authorization from the company.
Joining on the call today are Marcus Lemonis, Chairman and Chief Executive Officer, Matthew Wagner, President.
Speaker Change: Tom Kirn, Chief Financial Officer, Lindsey Christen, Chief Administrative and Legal Officer, and Brett Andres, Senior Vice President in Vester Relations. I will turn the call over to Ms Christen to get us started.
Lindsey Christen: Thank you and good morning everyone. Approximately covering the company's third quarter 2020-4 financial results with issued yesterday afternoon. And a copy of that press release can be found in the investor-relation section on the company's website.
Lindsey Christen: Management's 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 plans and goals, industry and customer trends.
Lindsey Christen: Inventory expectations, the expected impact of inflation, interest rates and market conditions, acquisition, pipeline and plans, future dividend payments and capital allocations, and anticipated financial performance.
Lindsey Christen: Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the risk faster section in our form 10K, our form 10Qs and other reports on file with the SEC.
Lindsey Christen: and he forward looking statements represent our views only as of today and we undertake no obligation to update them.
Lindsey Christen: Please also note that we will be referring to certain non-gaps financial measures on today's call, such as EBITDA, Adessa EBITDA, and the Jested earnings for share deluded, which we believe may be important to investors to assess our operating performance.
Lindsey Christen: Reconciliation of these non-gap financial measures to the most directly comparable gap financial statements.
Lindsey Christen: are included in our earnings release and on our website.
Lindsey Christen: All comparisons of our 2024 third quarter results are made against the 2023 third quarter, unless otherwise noted. On now turn the call over to Marcus. Thanks, Lindsey. Good morning and welcome to our 2024 third quarter call.
Marcus Lemonis: Today's call or team will cover the operational and financial highlights of the quarter, while providing comments on 2025. Before we get started, our team would like to welcome Tom Kirn to his first official earnings call as CFO.
Marcus Lemonis: As we near the end of 2024, I am immensely proud of the progress and financial outperformance that our camping world team has accomplished.
Marcus Lemonis: Records Market Share, continued strength in our good-samb business, Bucking RV industry headwinds, and year-over-year improvements in our service and parts business.
Marcus Lemonis: As we prepare for 2025 we believe that the accelerated growth of our company is squarely rooted in three foundational drivers, distribution, product and our ability to be a market maker.
Marcus Lemonis: The first is distribution.
Marcus Lemonis: Dealership acquisitions are part of the DNA of this organization. In May of 2003 we acquired our first dealership.
Marcus Lemonis: and have now grown to over 200 locations at the end of the quarter with a clear path to 320.
Marcus Lemonis: As I sit here today, I believe we are on the precipice of one of the most opportunistic M&A environments I've seen.
Marcus Lemonis: We will execute that distribution growth through a combination of traditional camping world dealership locations.
Marcus Lemonis: Man, you factor exclusive locations, standalone youth super centers, standalone youth consignment locations, and our digital and physical camping world auction platform.
Marcus Lemonis: Secondly, is product. Just shy of 36% of our new units sales comes from the sale of contract manufactured RVs that are exclusive to camping worlds.
Marcus Lemonis: and that are manufactured between both Thor and Forest River.
Marcus Lemonis: Over a decade ago, our company started down this path with our OEM partners.
Marcus Lemonis: Today we partner with them on design and sourcing, looking for innovative ways to find new consumers through creative solutions around towing way, modernized floor plans and features.
Marcus Lemonis: with the idea of enhancing content while letting our sides and scale yield true value creation for the customer.
Marcus Lemonis: It is our plan to continue to use empirical data, market trends, and leading manufacturers to further unlevel the playing field, yielding unit gains.
Marcus Lemonis: Lastly.
Marcus Lemonis: A distribution is the key to industry influence.
Marcus Lemonis: and product is the path to consumer acquisition. Being a market maker is the cornerstone of value creation for camping worlds.
Marcus Lemonis: Over the last 15 years our company has invested in accumulating and dissecting proprietary data.
Marcus Lemonis: This highly customized data is used to initiate demand, increased lead generation, improved conversion metrics.
Marcus Lemonis: Modernized product design, create efficient inventory ordering, launch real-time market-based new and use pricing and find the white space both geographically as well as by product segment.
Marcus Lemonis: When identifying white space, nothing is more clear than the used RV market. With over 750,000 units being sold, both via dealers and private party transactions.
Marcus Lemonis: Between the Good Sam Value Editor and our recently launched National CW Auction Business, we see tremendous value in formally supplanting others as the authority or marker.
Marcus Lemonis: Around vehicle values, particularly on the use side of the industry.
Marcus Lemonis: Taking all together, we are essentially creating liquidity in the RV market, through the buying or selling of inventory, or the identification and capitalization of underserved markets.
Marcus Lemonis: This enables us to constantly address the shifting and consumer preferences, or macroeconomic environments by creating those pockets of opportunity in a nimble manner, or mitigating certain macroeconomic headwinds in favor of our investors.
Marcus Lemonis: These three growth drivers are the catalysts to exceed 15% market share of the combined new and use RV market, a goal of ours.
Marcus Lemonis: We currently sit at a record of nearly 11% share of those combined new and used RV markets.
Marcus Lemonis: Do the math with me.
Marcus Lemonis: 1% of incremental share would require us to sell an additional 10,000 units.
Marcus Lemonis: Now in addition to organic growth which we expect, we know acquisitions are required to achieve our market share goals.
Marcus Lemonis: From 2017 to 2023, our dealership M&A has delivered north of 20% annualized cash on cash returns, inclusive of all sources of gross profit.
Marcus Lemonis: As an example, we believe that for every $100 million that we deploy toward acquisitions, on average, that would accrate to approximately 20 additional dealership locations.
Marcus Lemonis: and based on history, those 20 ship 20 dealership locations would yield about an additional 10,000 units of volume based on the averages. That's the 1% we're looking for.
Marcus Lemonis: Much like how we gain significant market share and buss bucked industry trends in 2024.
Marcus Lemonis: Despite the interest rate in macro-headlands, we believe we have a clear path to improve profitability in 2025 without relying on any single macro metric improving materialy.
Marcus Lemonis: On now turn the call over to Matthew. Thanks Marcus. As mentioned, we continue to significantly outpace the broader RV industry.
Marcus Lemonis: We achieved material, market share gain in both July and August as the direct results of our nearly 30% increase of new sales in those months.
Marcus Lemonis: The strong results continue throughout September and into the fourth quarter. With our October month-to-date new Saint-Source sales up solidly in the devil's digits, accelerating on a stack basis, even as we began to enter more robust pumps in the months ahead.
Marcus Lemonis: Throughout the quarter, we also gained confidence in this stabilization of the use marketplace.
Marcus Lemonis: We began to thoughtfully procure a use-assets in specific segments to fulfill localized dealership needs.
Marcus Lemonis: As we did here today, we have nearly the same amount of youth units compared to last year.
Marcus Lemonis: This calculated replenishment of our use inventory is yielding improved trend lives.
Marcus Lemonis: In October, we anticipate that our used same-store-sale units will be flat, while our Marsins have improved compared to October of 2023.
Marcus Lemonis: and formerly wearing priest appetite for youth inventory is our positively evolving view on the health of the broader RV industry and our growing pipeline of dealership acquisitions.
Marcus Lemonis: We currently have multiple LOWI's in process.
Marcus Lemonis: Consistent with messaging that we conveyed earlier this year, we have been patient and pragmatic with our capital as M&A opportunities accelerate into the fall and winchers.
Marcus Lemonis: as we drive towards 2025.
Marcus Lemonis: We remain focused on judiciously reestablishing our youth business, maintaining our dominance as the market maker in the RV industry, all while expanding upon the tremendous progress we have made in good sense, service and our new unit market share.
Marcus Lemonis: We see a variety of defined factors within our control next year.
Marcus Lemonis: In the pen in the what takes place across the broader industry or the broader economy for that matter.
Marcus Lemonis: We see a path to a strong recovery in the following ways.
Marcus Lemonis: We anticipate used unit volumes to improve next year and excessive low double digits growth year over year. We expect S.E.N.A as a percentage of growth's profit to improve by roughly 600 to 700 basis points as we bring used growth's profit dollars back into the system.
Marcus Lemonis: We believe ever selling prices will modestly increase year-of-year with vehicle gross margins within our historical range. And finally, we expect a modest year-of-year increase of new units sales based on the early indication of a Monter Year 2025 inventory strategy.
Speaker Change: on the answer in the call over to Thomas, to discuss our financial results.
Thomas: Thanks Matt. Turning to the financials for the third quarter we recorded revenue of $1.7 billion roughly flat with last year. Driven primarily by a 31% increase in new unicales, offset by an 18% decline in used unicales.
Thomas: New Vehicle Drow Smgt in 13 and a half percent was primarily driven by strong performance in class Cs.
Thomas: We sold over 900 units in the quarter compared to just over 400 last year. Plus, we accelerated sales on class A gas and diesel segments as we continue to further de-inside these segments heading into 2025.
Thomas: These actions had the benefit of slightly bolstering our reported new ASP and GPU for the quarter.
Thomas: Use vehicle margins of 18.2% were in line with plan as we continue to bring fresh used inventory back into the system at a more accelerated but prudent pace.
Thomas: are goal remains to be back within our historical margin range by the time we exit the fourth quarter.
Thomas: Good Sam Services and Plans saw another quarter of solid top-lying growth. While the growth's profit comparison was impacted by a $5.5 million extra-range management benefit in last year's third quarter.
Thomas: Within Product Services and other, our core dealer service revenues continue to show growth while product sales declined primarily due to the sale of our furniture business during the second quarter.
Thomas: are adjusted to EBITDAF with 67.5 million with the primary driver of the year over year variance againstemic from our deliberate actions around use in inventory procurement earlier in the year.
Thomas: On the balance sheet, we ended the quarter with about $170 million of cash, including approximately $152 million of cash in the floor plain offset account.
Thomas: We also have about 366 million of used inventory, net of flooring, and roughly $171 million of parts of inventory.
Thomas: Finally, we own about 158 million of real estate without an associate mortgage.
Speaker Change: and I'll turn the call back over to Marcus for Final Thoughts. Thanks Tom.
Marcus Lemonis: It's important to be clear that our team's conviction stems from our current outperformance of our competitors.
Marcus Lemonis: Our growth in market share.
Marcus Lemonis: The significant white space we see and our belief that 2025 will be a much better year within our control. I'd like to now open up the call for Q&A.
Speaker Change: 2. We will now begin the question and answer session to ask the question you may say, Mar, then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then too.
Speaker Change: At this time we will pose momentarily to assemble our roaster.
Speaker Change: The question is from Joe Altabelow with Raymond James.
Speaker Change: Please go ahead.
Joe Altabelow: Thanks, hey guys, good morning. So first question, I wanted to ask you about your outlook for modest new unit growth next year. Does that assume any further surgains or is that essentially your market outlook and does this do many acquisitions?
Speaker Change: Well, we believe that the new market is going to perform for the broader industry better than it did in 2024 and we expect to have modest increases on top of that. It is our goal that we continue to chip away and gain market share.
Speaker Change: Okay, and it turns out...
Speaker Change: If I could just even add a couple other digital elements to that, I mean when we regard ourselves in terms of judging our market share gains, we're oftentimes looking at just same store basis.
Speaker Change: So we think of the outlook, of course, for highly-quitted business. So, naturally, by means of acquisitions, we continue to acquire a market share at their after. So, I want to make sure that's abundantly clear where we judge ourselves in the purest form possible.
Speaker Change: Okay, got it. And on using the story, how do you guys see that trending over the next few quarters? And what words I did in that that inventory coming from? How are you procuring it?
Speaker Change: So Joe and we mentioned our prepared remarks. We've been super judicious in how we've been procured and used inventory. The entirety of this year.
Speaker Change: Knowing that there was quite a bit of instability in the marketplace this time last year.
Speaker Change: We feel now with greater confidence that we have a clear line of sight of what the use of Marcus Place one yield in terms of overall return and investment.
Speaker Change: So our cadence of use procurement will largely just fall in normal seasonal trends.
Speaker Change: where we'd like to target about a 3.5 turn unused.
Speaker Change: In which case we should be providing ourselves some leeway heading into season where we have about a three or four months supply and we'll start to ramp up that procurement and then thereafter we'll continue to just sell through as we normally would.
Speaker Change: So our cadence of views and our outlook on views is such where we believe that we can actually receive and retain pretty material in the market share of Dancer.
Speaker Change: Joe, I think as you build out the model for yourself and others to we're expecting.
Speaker Change: Low-Double Digit to mid-Double Digit growth in that category, but more importantly, we're expecting to return to levels of gross margin.
Speaker Change: that are acceptable to us. And it's going to fluctuate throughout the time of year. We're hoping to exit 2024 in the 19th and 19th and a half range. And that is we get into the first and second quarter to get back to the 20% that we have enjoyed.
Speaker Change: That's a huge gap from the type of margin that we experienced this year and that's going to make up a lot of ground in terms of earnings power.
Speaker Change: God, it's okay, thank you.
Speaker Change: The next question is from Mikael Schwarz, which should please go ahead.
Mikael Schwarz: Hey, hey, good morning guys.
Mikael Schwarz: Maybe just to start on the new RV margins in the quarter.
Mikael Schwarz: They were down over year and I think the prior two quarters there were about flat year over year. I heard some commentary just on your efforts to move some of the motorized stuff. Is that the primary factor in why new margins were a little pressured in the quarter? Then I guess that's actually something about that in the fourth quarter as well.
Speaker Change: Well the way that we analyze margins in any categories we break it down by segments. So our performance on margins in our core business of travel trailers and fifth wheels was actually solid.
Speaker Change: but we didn't actually do anything other than aggressively start to gain market share in our C-Class business.
Speaker Change: That's the part of the overall motorized RV market that we believe we had lost some footing in and we wanted to re-establish ourselves as the clear leader in that.
Speaker Change: Clearly, that comes with the higher price point and it comes with a lower margin. So, when you factor in 900 units for the quarter compared to 400 in something a year ago, that's a lot of incremental unit sales at a much higher price with a lot more revenue, and it comes with a little lower margin.
Speaker Change: While the margin for percentage matters, the gross dollars matter too, and so those 900 units.
Speaker Change: and deliver some gross margin on top of that.
Speaker Change: We actually felt very good about our new margin performance.
Speaker Change: particularly in light of our exiting of some desoles in some class, a gas that, quite frankly, we'd like to maybe destock or de-emphasize going into 25. I especially feel really good about that margin profile, given the context of even pre-COVID norms, where we're right in line with those averages that have been established in 2016 through 2019.
Speaker Change: So now the rentary and more normalized environment, Michael, I didn't anticipate that Q4 margins will probably be roughly the same as where we ended Q3, especially given our profile where we'll actually have the opportunity to sell through quite a few more motorized.
Speaker Change: and we want to constantly reaffirm and re-estern our position as the largest motorized dealer, too.
Speaker Change: Okay, that's helpful. That maybe just, I know you guys have a lot of exposure to the southeast and obviously in Blades of Timber, early October and two storms that came through. Anyway, to think about...
Speaker Change: The impact of that maybe near-term on demand, on the only disruption to your retail locations, and then the longer term any thoughts on potential replacement demand from that as well.
Speaker Change: You know we're quite surprised at how real bust our new and use same store sales are in October, but to be candid it was the first time in my 20 years we had so many stores
Speaker Change: negatively affected by a back-to-back storm in the same region. There was a particular day within the month where we had 25-30 locations closed.
Speaker Change: I don't ever want to make a big deal of it, but when you do the calculus on it we probably missed out on anywhere between three and four hundred new units.
Speaker Change: would just would have obviously raised our performance.
Speaker Change: So far, not October, but I think the team did pretty well. In terms of creating additional demand, we did not see, you know, widespread devastation of people's homes. We saw a lot of power outages and we saw, you know, people coming in, but unlike Fort Myers two years ago where we saw unbelievable demand, we haven't quite seen that demand and candidly were happy that that happened because we don't, we don't need to sell on top of other people's peril.
Speaker Change: The next question is from Jamie Ardemand which city please go ahead.
Jamie Ardemand: Hey, good morning. Thanks for taking my questions.
Jamie Ardemand: seems like the guide post that you've given for 2025 are pretty.
Jamie Ardemand: Mackro independent, really industry independent, but I'm assuming within reason. Right? Is there any way you could help us think through?
Jamie Ardemand: sort of if the industry does access potential upside to the way that you're thinking about next year and conversely what the industry would need to look like from a downside perspective to prevent service some of the progress that you anticipate making.
Speaker Change: Well, we really feel like we're running an idiotic, credit business in a lot of ways and the data is really driving a lot of it.
Speaker Change: We're forecasting internally just for our own health and knowledge that the industry will probably be in the 350 to 350,000 unit retail range.
Speaker Change: and a slight uptick for both the industry and for us.
Speaker Change: One of the factors in determining the health of the overall industry is to understand the health of the consumer.
Speaker Change: and partially what has really helped us in the last 12 to 15 months is our knowledge of how payment sensitive buyers are. And there are really two inputs to drive that as we've talked about in the past. Interest rates and the price of the units.
Speaker Change: One of them we can control, we did a really good job of driving down ASP as well, still providing tremendous value to people.
Speaker Change: But as we saw the 10-year starts a week-old around through the year, we saw reductions in retail finance rates in advance of any fed modification.
Speaker Change: in our model.
Speaker Change: for 2025. We are taking a very conservative approach in our own financial statement, in our own forecasting.
Speaker Change: The Worldly Forecasting, a quarter of a point rate cut in 2025. Now many have told us that that's far too negative. Our response to that is we need to build the business model that is resistant to what that possible outcome could be.
Speaker Change: but others in that I don't know if Matt, you want to add anything to that? We feel very confident with what we've put out there in the atmosphere, given the fact that really we were so risk-averse in the use segment. So James, is your starting to even plug into your model just the concept that we've thrown out there today? It's really just a recovery of our use, just as it's going back to what we had built throughout all of 2023.
Speaker Change: and we see a lot of upside there and we see a very clear target to just replenish our stocking levels. While the same time on the new stud just maintaining what we focus on this year.
Speaker Change: I think one last thing James is as we look at the landscape of other dealers, we are pleased to tell you that it looks like a large chunk of the RV market is much healthier than it was a year ago.
Speaker Change: They have the right disciplines, the good inventory strategy and I compliment both Thor and Forest River for helping drive that process through discipline by not overproducing inventory.
Speaker Change: Unfortunately, there is still a subset of dealers.
Speaker Change: that may be in a little bit more vulnerable shape.
Speaker Change: and so as we head into 2025.
Speaker Change: We are excited to be offered to NISTIC about doing what this company does very well, which is making acquisitions that on a long-term basis have 20 plus percent returns on a cash on cash basis.
Speaker Change: We have a number of L.O.I.s that are working and the way we think about growing market share and growing volume is first organically.
Speaker Change: We believe that on a same store basis.
Speaker Change: from a new unit and use unit volume standpoint. We have room to grow and room to improve on a standalone basis. We're not pleased with the number of units.
Speaker Change: that each individual store is selling. And we know that as we drive towards the mid cycle, that will start to ratchet up.
Speaker Change: That'll be great. On the growth side, we see a ton of opportunities.
Speaker Change: In fact, I think one of the things that has really benefited us well is that a number of deals that we looked at at the end of 23, we've caused God.
Speaker Change: People back because we really didn't believe that value would only get better.
Speaker Change: We're starting to re-engage with those folks now and look for other opportunities and expect that as we head into 2025, we'll have a more traditional list of opportunities much like we did in the past.
Speaker Change: and so I think there's a number of followups but let me stick to that last point.
Speaker Change: You had a nest of climb in dealerships in the third quarter.
Speaker Change: Maybe help us think about what your storehouse looks like in 2024 and more importantly, 2025. And then maybe just an update on the past to 320. How does that, you know, certainly is it feels like...
Speaker Change: The industry is getting better, it would seem to suggest that
Speaker Change: You know?
Speaker Change: Underperforming dealers might be less interested in selling at this point, but it seems less you're saying the exact opposite. So maybe you know, update is thoughts on the M&A progress and introductory.
Speaker Change: Well Matt Lindsey, Thomas, I have a very, very discipline approach to how our existing operations perform.
Speaker Change: and if the working capital and inventory deployed in those locations is not yielding to something, we unfortunately part ways with that location and dispose of that real estate. And we've done that over the course of the 20 years time and in time out, we don't ever become proud of, we don't ever have pride of authorship.
Speaker Change: and we look at opportunities and I'd like Matt to weigh in here. We look at opportunities. We really want to find out where the white space is. And so, Matt and Lindsey have been instrumental in looking at the market share reports and where that white space exists.
Speaker Change: James, as we said in the prepared remarks, we obviously have clericats targets in terms of our market share gains growth, a new and used combined. And Marcus also allowed.
Speaker Change: and Brent Procher multi-fast as a approach to having not only traditional capital stores, but also perhaps used only stores as well, or exclusive stores, or consignment stores. So this opened up the breath of possibilities within all these local marketplaces, and furthermore, open up the breath of acquisition targets.
Speaker Change: So as we head into this year we feel like we're back into this cadence of being able to target as we've said previously at least 12 to 15 stores every year and in certain years there's going to be opportunities that will present more beyond that 12 to 15.
Speaker Change: I'd like to be a little more optimistic than that, it's something that we go back and forth with and Lindsey kind of mediation, but I think we can probably do
Speaker Change: You know, I think we've historically said 12 to 15 stores and past years we've surpassed that and done upwards of 18 stores like we saw last year. So we're excited about the growth opportunities that present in the different ways we can get into the channel.
Speaker Change: and I just, just a footer fighter point on it and I don't want to poke words to your mouth, but it sounds like you're saying that 2025 is going to be one of those sort of better than 12 to 15 types of years.
Speaker Change: As long as the transactions that are put in front of us are materially accreted to our business, they add value to our market share, they don't cannibalize what we have, and we feel comfortable deploying that capital.
Speaker Change: Come here, we can start.
Speaker Change: i
Speaker Change: The next question is from Noah Tuftskin, Keybank's Capital Market. Please go ahead.
Noah Tuftskin: Hi, thanks for taking my question. Maybe this is more of a qualitative question, but when you think about like how your inventory on the new side was positioned.
Noah Tuftskin: kind of this time last year, your plans kind of positioning ahead of selling season.
Noah Tuftskin: How has your inventory positioning kind of adjusted year over year? And what's kind of...
Noah Tuftskin: You're a approach to the new business that gives you confidence that you'll be able to kind of drive modest growth. And then on the margin side, should we expect margin improvement on new. Thanks.
Speaker Change: No, we reflect upon the entirety of this year in our inventory management. I feel like we've done a very effective job at managing, playing into market share gains, playing the certain segments that actually bend those curves of affordability for our consumer base.
Speaker Change: and as such we sit here today with nearly the exact same mix of Modular 25-24s as compared to last year, Modular 24s to 23s.
Speaker Change: We're over half of our new inventory right now, is Modier of 2025, as we're heading in towards the back quarter of the year.
Speaker Change: As we prepare for next year, we have further confidence that many factors will now be subjecting us to the same deflationary time environment that we experienced last year.
Speaker Change: As such with pricing stability, we don't have to worry about our monitor of 2024s to the same extent that we did, our monitor of 2023s this time last year.
Speaker Change: I think one thing that Tom has done very well in this role is he's helped us identify, Matt and I get excited because we're happy that our same source sales are up at Tom has...
Speaker Change: Down a nice job of pointing out deficiencies that we have. And whether that was in the $25 to $30,000 travel trailer.
Speaker Change: Every single segment it's getting analyzed to see where do we gain market share, where do we lose market share? I think a lot of people look at it holistically. We go all the way down to floor plan, tight code, price point.
Speaker Change: Segment, et cetera. And I think having a finance team partner with the Inventory team has really shown us where there's opportunity in 25 that give us a confidence for a modest increase in 25, which is a stacked on top of year after year of growth.
Speaker Change: The next question is from Scott Stember, with the rocks, please go ahead.
Scott Stember: Good morning, thanks for taking my questions.
Scott Stember: Third.
Scott Stember: Marcus, you touched briefly on the competitive environment talking about some dealers, seemingly having
Scott Stember: and more aged inventory than they need. If you talk about a little bit more granular of what you're seeing in the competitive marketplace and how that's affecting your business.
Marcus Lemonis: Yeah, I don't think there's anything that's happening in the general marketplace that is putting any pressure on demand, margin, or anything of the sorts.
Marcus Lemonis: When I look at the have and the have-not between the dealers who have disciplined approaches to inventory, understanding that the ASP needs it to drop, there's a subset of dealers who maybe didn't necessarily join with that same conviction.
Marcus Lemonis: and when you look at inventory and we study other dealers on a, on a, on a, minifiminibase is to understand market pricing and how it's affected. We noticed that some dealers have continued to rely on segments that could either be contracting.
Marcus Lemonis: or our softer.
Marcus Lemonis: We're a little concerned about where the overall diesel motorhome market is, but there are some top performers in that category, but the facts don't lie. That segment continues to contract.
Marcus Lemonis: and Thomas. Start thinking about how we're going to allocate our dollars, month after month, quarter after quarter, seasonally adjusted. We continue to move away.
Marcus Lemonis: from the diesel motorhome and down into the class A gas entry-level segment, the C-Class and B-Class entry-level segment.
Marcus Lemonis: and really understanding that the difference between our performance and those who may be struggling is that Delta in approach as it relates to ASP and stocking categories.
Marcus Lemonis: I don't think there's a ton of inventory still in the channel that gives us much pause.
Speaker Change: Other than maybe what's in the motorized segment?
Speaker Change: But when you look at the traditional travel trailer business, which is the core of the RV market, or the entry level fifth wheel business, as we study every single dealer out there and look at their inventory and accumulate that information, we're not troubled by anything that we see that directly competes with us.
Speaker Change: Music
Speaker Change: God, can you remind us how one percent moved by the Fed, how much that benefits to you, guys, and whether it's floor plan versus your traditional debt?
Speaker Change: Good job!
Speaker Change: It could be up to $30 million, obviously it depends on a core plan rate that fluctuates a little bit throughout the year and our core plan balance throughout the year because it does the job season only.
Speaker Change: I think from a cash flow standpoint and from a net income standpoint and from an EBITDA standpoint, any cut in rate is a super benefit to our business.
Speaker Change: from a floor-planned standpoint, from a senior credit facility standpoint. But I think, secondarily, the silver lining in a rate cut is improved consumer confidence. And that silver lining in a rate cut is that because our customers are payment sensitive.
Speaker Change: and Price and Ray are the two inputs.
Speaker Change: A reduction in rate could allow the ASP to go up slightly and when we look at gross profit per unit in raw dollars, not percentages, any increase.
Speaker Change: in ASP even $1,000 is incremental gross profit on a per unit basis that we have been missing for the last 15 to 18 months.
Speaker Change: As that ASP comes back, even if the margin for Sen. remains constant and let's call it between 13 and a half and 14 and a half.
Speaker Change: That 1%
Speaker Change: I mean that $1,000 in increase in ASP is still $150,000, not $140 to $150,000 just in gross profit. When you're selling the $70,000, $60,000 new units a year, that starts to add up.
Speaker Change: I think the most important takeaway from that is there is no incremental cost on the fixed cost side to running our business when those GPUs go up. Yes, we pay a little more commission, but everything else remains constant and that's where we get the scale out of our business.
Speaker Change: Got to end just one last quick one on the Parks and Service side. I think you guys said that the pure service side, I guess customer pay was up in the quarter, could you quantify how much it was up and anything that's driving that?
Speaker Change: Good.
Speaker Change: Sure, we don't report it that way, but I mean, I would say it was up on a single digit percentage basis, your reviewer in the quarter. We thought really good about where our customer pay work was in addition to...
Speaker Change: How the team's performed on managing new inventory that's come in and managing the warranty process with the manufacturers and making sure that we're working to get units that's online ready and customer-based thing in ready.
Speaker Change: One of the things that's always the huge benefit for many slow down, if there is any benefit, we try to find the happiness and all of it, is that we refine our process and we get better at some of the blocking and tackling.
Speaker Change: that sometimes good times, really good times.
Speaker Change: and maybe we get a little bit of amnesia. And I think the finest.
Speaker Change: You did a really good job of pointing out the matty night where they saw gaps in white space and opportunity.
Speaker Change: Our Collision Business continues to perform at a nice level and we continue to expand that. But at the end of the day, we want to see customers in our service base because customers in our service base demonstrates usage of the product and the enjoyment of the lifestyle.
Speaker Change: So we look at our overall peace. One thing that is definitely a source spot for us, or an opportunity for improvement, is we do need to see our customers that we sell on Tuesday more often. We have recognized that our retention.
Speaker Change: of customers who buy from us has room for improvement in the second, third and fourth year of their ownership.
Speaker Change: We know the customers trade between three and a half and four and a half years, we're not pleased.
Speaker Change: were not pleased and will be developing some strategies and rolling them out in early 25s. We are not pleased in our ability to retain those people at the rate that is consistent with how we do everything else in the company.
Speaker Change: God, that's all I have, thank you.
Speaker Change: The next question is from John Halley with North Coast Research. Please go ahead.
John Halley: Thanks for taking my question. I wanted to ask a kind of a big country strategy question. I think there are really a lot of them to call you guys the evidence staff on the private label penetration. It was hoping you could just give us those again in kind of where they were historically, but really kind of wanted to get your thoughts on.
John Halley: How you use private laboral going forward from here, because I feel like there's a lot of focus on
John Halley: and the market and what you're going to grow. But I feel like this private label doesn't so you guys have is differentiated in an advantage. We're just curious for 2025, how are you planning on using private label to distinguish yourself in the market and maybe augment those share games. Thanks.
Speaker Change: Yeah, I think this is a little bit of an inside joke inside of our company, but 20 years ago, when I was the only person here that's in this room today, I had this idea of private label, and back then private label meant going to a manufacturer, looking at a model they already make, and changing a graphic or changing a small feature.
Speaker Change: I think the introduction of Matt Wagner into our business 17 years ago and his...
Speaker Change: Deep dive on all parts of the business, particularly inventory, really evolved our perspective. We no longer even call it private label.
Speaker Change: We call it contract manufacturing and the reason that we do it that way is because
Speaker Change: We really look at the relationship between the product that we want to bring to market and the expertise that the manufacturers have as an unbelievable resource.
Speaker Change: and if you could take a step back and study what Matt has done in that business and at some point we're going to want to show people that of understanding how to use key data and metrics.
Speaker Change: to develop the right floor plan at the right price at the right time with contenting the product up, not decontencing it down and then using our size.
Speaker Change: Our scale, our relationship with suppliers that feed into those manufacturers, our intensity around ordering with those manufacturers when we know they have soft spots to be a good partner with them.
Speaker Change: and Matthew on to add anything to that.
Matthew Wagner: First I want to clarify, Marcus being far through guys. We're with a team of us over years that assembled all this research and information. We think of...
Matthew Wagner: How much we have to gather in terms of providing insights to better inform us and our early emp partners as to what floor plan solutions many Factor solutions we need to bring to the overall marketplace to satisfy that demand that in some situations no one would satisfy.
Matthew Wagner: When we think about the number one cell in the floor plan in the industry that Coleman Lantern 17B, while on first glance it looks like a relatively utilitarian concept or idea. It was something that hadn't even existed in the marketplace until 2019. And that came off of years of research, understand what was an actual price pointer those features that consumers required.
Matthew Wagner: where we used what was the time, goodness about a decade plus of information that targets certain floor plans, content features, etc. And this has been an evolution over two decades now.
Matthew Wagner: where Samarce's credit, he's really put it all in a struggle hole to say, okay, I understand that we have a constant floor plan. We also need to go out and find the right manufacturing partner as well as the right brand to put on these units.
Matthew Wagner: So over the last couple of years we've been introducing not only Coleman as people have understood that for many years, but like the Eddie Bauer product. Where the Eddie Bauer is actually a licensed product that us as a company that we sublites in different manufacturing partners based upon their ability or capability to satisfy certain segments of price points.
Speaker Change: and John, your question is very insightful and so much as by means of us expanding to all these different categories which by the way we're up to 36 different manufactured private label brands.
Speaker Change: We are able to enter into a number of different marked places that traditionally would be confined by different OEM brands.
Speaker Change: So what I mean by that is there's certain OEM brands that are franchise within Dallas, Texas. By means of having a full offering of all of our private label and contract manufacturer brands, we're able to enter into any marketplace within the United States.
Speaker Change: I think as we look at it, you know, we talked earlier in the call that distribution is key and we have established distribution and want to ramp that up.
Speaker Change: But product is more important than anything. And I think that when you look at our company overall, we most people don't realize that we have an entire department dedicated to product development.
Speaker Change: Product development and you don't see that in a retailer and the reason that we want to do that is we want to always have a competitive advantage against everybody else and then use our scale and our relationship with manufacturers to deliver a superior product.
Speaker Change: Many people have challenged us as they see us driving down ASP that other competitors are going to follow that. And we welcome that competition because when they go left we're going to go right and we're going to stratify that product offering in a very different way. And that doesn't always mean going cheaper.
Speaker Change: That means being more innovative, focusing on tocapacity, looking at different floor plans because for us, if the industry isn't capable of widening its own time, we have to take matters into our own hands and find a way to widen the time for our business.
Speaker Change: which is what we believe the team accomplished in growing our market share so robustly and why we think we can compound on top of that.
Speaker Change: Great, thank you guys.
Speaker Change: The next question is from Tristan Thomas Martin BML Capital Mark.
Speaker Change: and Markets. Please go ahead.
Speaker Change: Hey, come on in.
Speaker Change: We're on a follow-up kind of quickly on John Questen about kind of historical New RV margins. I think he said for a cue kind of flat-ish compared to three cue, but then how should we think about trying to decay to the New RV margins next year?
Speaker Change: Our historical goal and in more recent times
Speaker Change: is 14 to 14 in the half. And that flux is during different times a year. As you would imagine in the fourth quarter when it's cold outside and a guy's trying to make a commission, he's going to take a shorter deal. And the middle of the summer, it's better. But one thing that is very important to note.
Speaker Change: As we drive towards a mid-cycle environment, which we believe is coming here in the very near future, margins tend to get a little bit more robust.
Speaker Change: They get more robust because there isn't excess inventory sitting everywhere. And while that sounds obvious to some...
Speaker Change: The reason we're so pleased with our 13 and a half and two, three is that we're still not in the robust market. We accelerated our motorized business. So as we look at 2025, we would strongly encourage anybody building a model to anchor in that 14% range.
Speaker Change: i
Speaker Change: Okay, thank you. And it's quickly kind of this, called, maybe a remphysis on class. These, and previously mentioned kind of go legged left whenever one's gone, right? This is kind of just looking even further out if we get some red cuts and further building proves that we're going to, for kind of planning for maybe a mix-up in the next year. Thanks.
Speaker Change: I don't think we want to chase the upmarket. I think we want to acknowledge that every single segment has to be viewed independently.
Speaker Change: and so what we would ask the market to study the way we do is travel trailers in its own fifth wheel, C classes, B's, Class A, gas and diesel and we try to find the white space inside of each one of those.
Speaker Change: as a relates to the deals we're going to leave that white space at this point to other folks that's just not a great return on investment for us.
Speaker Change: But on the class C side, we know we have to do a better job of driving down to a value point where a monthly payment has become real.
Speaker Change: Not too long ago, maybe a decade ago and I know that sounds like a long time. We would have a $399 class seapayment. That was $49. That's saying unit today is $69 or more.
Speaker Change: So we have a lot of inflation over the last decade and we have to work hard with our very distinct manufacturers too.
Speaker Change: by in a way that allows us to drive that number down to be ahead of the market, but more importantly, and I'll say this again, we don't want to get there by decontenting.
Speaker Change: We want our customers to see high value when they buy from us and high features and benefits at a great price.
Speaker Change: Truth and a bucket of even just piggyback off that and relate back to John's question from earlier about our contract manufacturing products.
Speaker Change: or we felt like we missed the mark in our class C segment and it's a feeling certain segments pride to improve plans.
Speaker Change: and this is where our exclusive brands come into play, or we've been working diligently over the last good and six, seven months identifying that there's a certain subset of the marketplace that no one was satisfied.
Speaker Change: So I would anticipate as we head into next year that we'll start to replenish the shells and start to pick up more material gains in the class C segment especially.
Speaker Change: Awesome, thank you.
Speaker Change: Thank you.
Speaker Change: Next question is from Brando Raleigh with...
Speaker Change: The A-Davision, please go ahead.
Brando Raleigh: Thank you for taking my question. Just briefly on the fourth quarter you'd mentioned margins would say kind of flat. Could you touch on your expectations for SGA as a percentage of growths profit and maybe any adjusted ebit dye expectations? Thank you.
Speaker Change: Well, we don't provide guidance in any quarter, so I want to start with that.
Speaker Change: But we obviously are looking to continue to improve.
Speaker Change: As we think about the SGA as a percentage of growth, the fourth quarter is always a tough quarter. It's like in the mid-90s, that's a quarter where in December, I mean, it's rough out there. As we head into 2025, which is what we're really focused on.
Speaker Change: We're looking for those six to seven hundred points of improvement based on where we think we're going to finish this year. We think we're going to finish this year probably around 85.
Speaker Change: Wei Heier than work comfortable being at. But we know the reason for that and the reason is principally the evaporation of use volume and use gross that we elected to inflict on ourselves to mitigate risk.
Speaker Change: as that comes back.
Speaker Change: and Margin starts to normalize and we take away the stores that we eliminated and some of the businesses that we got rid of that didn't make money. We're expecting that to come down into that 77-78 range. I will tell you that as a management team.
Speaker Change: and a normal mid-cycle environment. We have a goal of being in the low 70s. That is the goal of standard. So 78 while we're happy it's not 85, that isn't good enough for us.
Speaker Change: Thank you.
Speaker Change: The next question is from Brett Jordan, which referees please go ahead
Speaker Change: Thank you, morning guys. Good morning.
Brett Jordan: You talked a couple times with a parent of Marx about sort of being a market maker and to use categories that it changes gradually at all, I guess.
Brett Jordan: The margin impact, if you're going to provide liquidity in that market and buying used units, you're probably not going to resale. Put them back into the wholesale market. Is that something that's either going to be changing capital allocation or margin as you expand the market making strategy?
Speaker Change: Well, if I could even start out against the top, I don't think that there's really a deviation in terms of our overall strategy where I would maintain that we've largely been able to push the market in different ways that perhaps we just had to step in and intervene to actually grow the over-available addressable market.
Speaker Change: within this Mark play. Zachos Vacke, Mark's comments about contract manufacturing, and within the use marketplace, I see us being really that market maker and we established that last year. It just so happens this year, our risk of version played into an overall decline and our gross margin profile on the use side and our gross profit profile.
Speaker Change: and then also take a stab at your next question, I do see actually an opportunity for us to buy in the open market from consumers and just as well resell to wholesalers.
Speaker Change: and we've seen the success of that through our auction network.
Speaker Change: In fact, we could reflect upon a number of anecdotes, most recently where we were able to go to other different options by units, turnaround and resell them through our option and pick up the arbitrage to other whole failures.
Speaker Change: So there's this whole robust marketplace that exists out there and we're only about 7% of the entirety of the used marketplace
Speaker Change: What's lost in a 7% is the amount of units that are sold from consumer to consumer. In another marketplace that exists out there where neighbors, disconnected with other neighbors, Facebook, Marketplace, or Craigslist,
Speaker Change: We feel like we can insert ourselves in that overall environment, provide the safety and security and comfort of dealing with the deal and that it's going to be specialized and not only title transfer and I sort of pay off information, but just as well, financing opportunities to make it more affordable to these consumers.
Speaker Change: There are two proof points
Speaker Change: that I think substantiate our position around being a market maker. The first is a good-sim valueator and it's use of historical data, current new invoice pricing and a variety of other factors that give consumers and other dealers and banks and insurance companies a better proof point on what units are worth. And we often find that other dealers are using that tool.
Speaker Change: You know, quite frankly, not only to get a value, but to sometimes send customers to us.
Speaker Change: When you look at our use turns at the three and a half rate, that encompasses everything that we buy and whether we buy it to wholesale it or we buy it to retail it, that's part of creating that cycle of bringing units in and out.
Speaker Change: The second proof point is our achievement of a high percentage of NADA when other dealers and banks drive units through our auctions.
Speaker Change: The example that Matt was mentioning around auction is we went to a particular auction and we're buying something at 65 or 70 or 71% of what is this so-called book.
Speaker Change: and then that same unit one week later in the same geographic area is running through our auction and bringing 8 to 12 points more.
Speaker Change: One week later selling the same unit, when we see banks validate that position in our mind that is the definition of being a market maker.
Speaker Change: Okay, so is this something we'd expect to increase the sort of the PNL, the whole sail volume is going up, it's something that's strategically as shifting or is this something that you just generally have been doing and we're talking about it more now.
Speaker Change: We're expecting to continue to ratchet that up because our online auction business and our physical auction business give us the ability.
Speaker Change: But because we're a capitalist, anytime we can buy something for one price and sell it for more than what we bought it for, we're going to extract as many opportunities as we can.
Speaker Change: and when we look at driving volume and driving market share, one of the principles of getting to 15% which is an incremental, we'll call it for this discussion, 40, 50,000 units. One of the ways that we have to do that is to find all the different avenues in which we can buy and sell new and use units.
Speaker Change: This is really us shooting for a goal making sure that it's profitable and recording the transaction. And as we've previously declared about a year ago, we realized that as we entered back into the use marketplace, that we needed to create a more efficient marketplace.
Speaker Change: So, in December of last year we hosted our first auction, as we sit here today now we have just shouts 20 under our belt, where we've gotten into a nice cadence now, we're routinely oftentimes twice a month, if not three times a month, and certain time periods, host the in an auction somewhere in the country, while at the same time over the last five months we've been hosting online virtual auction.
Speaker Change: Interperbatuity, where there's just time to auction thinking of like an eBay type of model.
Speaker Change: So I don't think it's naturally deviation at all, it's rather a just continued evolution of its opportunity to remark it and build our market share. At one last piece before we go is, if you take a look at RVs.com
Speaker Change: It's really been established for us to supplant other marketplaces.
Speaker Change: and whether that some of our inventory, other dealers inventory, private parties inventory, we're looking to create this marketplace that private parties can go to a trusted source without paying a greasiest fees and be able to transact with other consumers in generate leads.
Speaker Change: Okay, great. And I guess quick follow up. Many updates on the good Sam process. I think you talked about it last January. The capitalist selling things for more of the EPA forum is that still for sale.
Speaker Change: But because we're a capitalist and that's a great point, we did, we had a lot of discussions both with our board and as a senior management team. And what we really realized through that process is good Sam, particularly in 2024 and 23, proved to be the absolute rock.
Speaker Change: and the stable part of our business that despite all the industry headwinds.
Speaker Change: just really wasn't getting phased. So that was one bright spot. The second thing is is that the superb management team at Good Sam has just said to us, look, we want to be part of this organization, we just don't want to be limited to only being in the recreational space as it relates to our bees.
Speaker Change: Give us a chance to explore Marine and power sports in auto. As a reminder, that's an asset-like business with no real contingent liability on its books other than a little bit of claims on roadside assistance.
Speaker Change: So when they ask for permission to go explore other markets
Speaker Change: Otto Marine power sports. We really realized that the future of that business could be far more robust if we allow that team to do that. After seeing those two proof points, we've made the decision and the board has signed off on it that good Sam is here to stay.
Speaker Change: Okay, great, thank you.
Speaker Change: Next question is from Alice Wickland, Wickbride, please go ahead.
Alice Wickland: Yeah, I'm more in guys thanks for taking my question. Maybe you want to touch on the F and I say, man, I mean, nice performance there, but as we look into 2025, I'm not sure we'll be thinking about that, you know, maybe in the context of is there any substantial difference between the attachment rates for new and use, is it look for use to outgrow new.
Speaker Change: You're spot on. Often times with a youth asset that F and I, as a percent of that total revenue will actually be slightly lower.
Speaker Change: So I would anticipate that F and I for St. I tweaked down a little bit compared to this 13 plus percent that we've been seeing this year. And we've been overly indexing throughout the entirety of this year towards the new segment.
Speaker Change: So, as we start to reach more parity between new and used, which we actually like that segment being more leaning in that favor, I would anticipate as you start to model out next year, I'd tweak it down maybe like 12.5-ish percent. The only counterbalance to that...
Speaker Change: is a slight increase in ASPs. And so with a slight increase in ASPs, while Matt's percentage is definitely accurate...
Speaker Change: you're applying that to a larger ASP and so the total gross dollars that we will actually bring in should be relatively consistent on a per unit basis.
Speaker Change: Great, that's helpful. That's it for me. Thanks, guys.
Speaker Change: John , John , John , John
Speaker Change: This concludes our Q&A question session. I would like now to turn the conference back over to Mr. Lemonis.
Speaker Change: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect.
Speaker Change: … ….. …
Speaker Change: Thank you for watching!
Speaker Change: Mark Cross James Rolland William Chamberlain Rupert Murdoch 2nd Room