Lazydays Holdings, Inc. (NASDAQ:GORV) Q3 2024 Earnings Call Transcript November 19, 2024
Operator: Greetings, and welcome to the Lazydays Holdings, Inc. Third Quarter 2024 Earnings Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Lazydays management. Thank you. You may begin.
Jeff Huddleston: Good morning, everyone, and thank you for joining us. On the call with me today is Ron Fleming, our Interim CEO. 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 with the Investor Relations section of our website. Accordingly, forward-looking statements should not be relied upon as prediction of actual results and any or all of our forward-looking statements may prove to be inaccurate.
We can make no guarantees about 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 press release, which is available on our website for how we define these measures and reconciliations to the closest comparable GAAP measures. On this call, we will briefly mention a planned rights offering, but such offering is subject to the SEC declaring a registration statement on Form S-1 effective. Nothing in this discussion constitutes an offer to sell or a solicitation of an offer to buy any rights common stock or any other securities. At the conclusion of this call, we will not be doing Q&A as we normally do.
We will resume Q&A on our next investor call after reporting year-end earnings in March of 2025. And with that, I’d like to turn the call over to Ron, our CEO.
Ronald Fleming: Thank you, Jeff. Good morning, everyone, and thank you for joining us today. I’m pleased to be speaking with you all for the first time since my appointment just two months ago. As a prior 11-year executive at the company, where I managed our flagship Tampa dealership before overseeing all Lazydays locations, I have deep familiarity with and admiration for Lazydays storied history and brand. I am excited to be working with my colleagues to return the company to its industry leadership position. To that end, as you know we’ve embarked on a significant journey to reshape Lazydays for the future. We kickstarted this journey last Friday with the announcement of a series of transformative transactions, including changes to our capital structure and sales of certain assets which together provide the company with a significantly strengthened financial foundation and more focused dealership portfolio.
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Specifically, we agreed to sell seven dealerships and issue common stock to certain indirect subsidiaries of Camping World Holdings, Inc. for a combined $65.6 million plus additional cash for inventory and service work in progress. We also agreed to sell one additional asset of a previously closed dealership to a separate buyer for $8 million. These sales and the associated de-levering of our balance sheet when finalized, will streamline our operational footprint and in turn, improve the underlying earnings power of the business. With respect to our capital structure, we closed a $30 million common equity PIPE at $1.03 per share with two of our supportive investors, Alta Fundamental Advisors and Coliseum Capital Management and accounts each of them manages, providing the company with immediate additional liquidity to support operations.
We also announced plans to launch a $25 million rights offering at $1.03 per share allowing all of our shareholders as of a future record date, the opportunity to purchase common stock at the same price as the PIPE investors and Camping World. We will soon be filing a registration statement on Form S-1 with the US Securities and Exchange Commission. And after it is declared effective and we set a record date, we will be contacting shareholders of record with additional information. Importantly, we also agreed to exchange all of our outstanding convertible preferred stock for common stock at $1.03 per share. This is an important enhancement to our capital structure as it eliminates our preferred stock liquidation preference of $68 million, annual preferred dividend requirements of $9 million and other preferred stockholder rights.
We will now have one class of common stock with all shareholders having the same rights. Lastly, we executed an amendment to our credit facility with our lender group led by M&T Bank, providing significant financial covenant flexibility through the first quarter of 2026. In addition to a meaningful paydown of our revolver balance, this amendment gives us the flexibility we need to continue to execute our operational turnaround. Collectively, we believe that these transactions mark a turning point for the trajectory of Lazydays. To be sure, these steps were taken with careful consideration for all stakeholders, including our shareholders, lenders, creditors, customers, OEM partners and especially our dedicated employees. I know change can be challenging, but I’m incredibly optimistic about the future of our business.
This recapitalization allows us to emerge stronger, more agile and better equipped to navigate the evolving RV landscape. Today, we begin a new chapter in building a stronger Lazydays, one that’s poised for long-term growth and success. We continue to be committed to investing in our people, fostering a culture of innovation, deepening our relationships with our valued OEM partners and providing the best RV experience in the industry from sales and service to financing and beyond. Looking ahead with a streamlined and simplified balance sheet and dealership network, and an acute focus on our operational performance, we believe we can do just that while charting a path back to profitability. I want to thank our entire team for their hard work, resilience and unwavering commitment to Lazydays.
Your dedication is the driving force behind our success. And to our partners, investors and lenders, thank you for your continued confidence and support. We are excited to embark on this journey together. With that, I’d like to turn the call back to Jeff, who will provide more details on our most recent quarterly results and the financial impacts of our strategic transactions.
Jeff Huddleston: Thank you, Ron. Please note that unless stated otherwise the 2024 third quarter comparisons are versus the same period in 2023. Total revenue for the quarter was $213.5 million, a decrease of 23.9%. By comparison, total revenue for the nine-month period was down 18.3%. The third quarter continued to be impacted by economic and other demand headwinds in 2024 that we have discussed before and that are being experienced both by us and others in the industry. Additionally, from the perspective of an RV dealer that has six stores in the Southeastern US, including our largest store located in Tampa, the third quarter was also negatively affected by Hurricane Helene, during the closing days of September and the third quarter.
Most people familiar with the industry know that the final days of any month tend to be the strongest sales days for dealers, so the timing of that event in terms of sales days was unfortunate. And then not long after the quarter ended in just about two weeks after Helene, the Greater Tampa area in all of Central Florida took a direct hit from Hurricane Milton, which impacted all 3 of our Florida stores to varying degrees. The combined impact of both storms, we estimate was a loss of 10 sales days with effects both before and after the storms. However, we did not suffer any serious casualty losses from either storms, and we are very proud of how our team pulled together to help our affected stores, as well as helping our employees, partners and their families and communities recover from the impacts of these storms.
New unit sales declined 18.6% in the quarter and gross profit per unit excluding LIFO declined 26.1%. Average selling price or ASP for new units declined 13.1% for the quarter, a result of the continued shift in 2024 towards towables with the bigger ticket motorized units being on less customer shopping list in 2024. Pre-owned retail unit sales were down 6.7% during the quarter and gross profit per unit decreased 23.6%. Demand for the quarter and the year has continued to trend towards pre-owned units and the primary limiting factor for us as a dealer in capturing more sales has been the availability of pre-owned units in the market. In other words, we feel there is less of a demand headwind for pre-owned and it’s a bit more of an issue of supply.
We do expect the supply picture to improve in the future. And with our announced transactions and having better access to capital, we see a margin improvement opportunity here as that market shifts to more of a buyer’s market for dealers with more customers ready and able to sell their pre-owned units. Finance and insurance, or F&I revenue was slightly down with a reduction of only 0.8% for the quarter and F&I average gross profit per unit increased by 15.9% for the quarter. We are very encouraged to have achieved almost flat revenue and strong per unit margin growth in this category, particularly with the unfavorable trends on unit volumes, and we credit our sales team in gaining customers’ trust and demonstrating the value that Lazydays and its finance and insurance partners can bring when a customer purchases their RV.
Total gross profit for the quarter was $45.3 million, a decrease of $9.1 million or 16.8% versus last year. Gross profit margin was 21.2% during the quarter, an increase of 180 basis points compared to last year’s third quarter. Excluding LIFO adjustment, the improvement in gross margin was slightly less at 80 basis points over last year. Moving on to liquidity and capital structure. We ended the quarter with $13.5 million in cash. However, as Ron just discussed, this past Friday, we closed a comprehensive recapitalization in asset sale transactions that upon full funding of the initial equity investments, the company will have approximately $35 million of available cash on its balance sheet with additional cash expected as the real estate divestitures and the rights offering are finalized.
The transactions when finalized, will also result in debt reduction of approximately $65 million and a reduction of interest expense and preferred dividends of approximately $16 million annually, and that excludes the floor plan debt and interest. When we reported results in the second quarter, we made the decision that our financial condition at the time warranted presenting our financials, in such a form that reflected doubt in the company’s ability to continue as a going concern. As a result of the recapitalization and asset sale transactions, we are now able to remove that going concern as we report results from the third quarter, which includes reclassifying some of our debt balances, including a portion of the revolving credit facility balance from current liabilities back to long-term liabilities.
In closing, we are very encouraged by the completion of the recapitalization transactions. Despite challenging financial results during the quarter, which included one Hurricane Helene impacting the end of the quarter and another Milton showing up in Tampa just two weeks later, we’re very grateful for the support we received from our lenders and the strong vote of confidence in the form of the new equity capital we received from our investors. We look forward to continuing to build on the strong legacy of the Lazydays brand and achieving the success that we know the company is capable of. Thank you for your time. That is all we have for today.
Operator: Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
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