Lazydays Holdings, Inc. (NASDAQ:LAZY) Q2 2023 Earnings Call Transcript

Lazydays Holdings, Inc. (NASDAQ:LAZY) Q2 2023 Earnings Call Transcript July 28, 2023

Lazydays Holdings, Inc. beats earnings expectations. Reported EPS is $0.22, expectations were $0.11.

Operator: Greetings, and welcome to the Lazydays Holdings Second Quarter 2023 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.

Kelly Porter: Good morning, everyone, and thank you for joining us. Before we begin, I would like to remind everyone that we will be discussing forward-looking information, including potential 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 the Investor Relations section of our website. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results, and any or all of our forward-looking statements may prove to be inaccurate.

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 measures. With that, I’d like to turn the call over to John North, our Chief Executive Officer.

John North: Thank you, Kelly. Good morning, everyone, and thanks for joining today. As usual, I’ll make a few opening comments. Kelly will give you our financial results, and then we’ll answer some questions. As I reflect upon the second quarter, I would characterize the current environment as one where notwithstanding the operational complexities every retailer is facing, Lazydays continues to make significant progress around the strategic initiatives that will set us up for both growth and success in the future. Obviously, the market dynamics continue to be difficult. The pandemic pulled forward significant demand. Supply chain pressures resulted in cost inflation across our product lines and led to increases in both invoice and retail price of vehicles, and central bankers’ efforts to counteract inflationary pressure through interest rates are now at more than a 20-year high and have affected financing costs and availability.

However, underlying retail demand has been stable and has not experienced further deterioration. Both consumer and wholesale credit remains available, and the more challenging operational environment has catalyzed the marketplace, generating significant acquisition opportunities. There are also significant improvements available in both our used and service body and parts business lines. In the words of Churchill, our recent mantra has been to “Never let a good crisis go to waste.” We have spent the last number of months focusing on optimizing our corporate overhead and reducing costs, improving the effectiveness of both our technology and marketing spend, and preparing the organization for significant growth in scale and operational efficiency.

While many of these endeavors are just beginning to develop the green shoots that can be demonstrated externally, I am pleased with our progress and confident that we have laid significant groundwork that will become observable to our analysts and investors in the coming quarters. Kelly will take you through the details in a few minutes, but we have improved our SG&A expense through rigorous cost control. We have a much healthier inventory both in quantity and age and have begun to unlock some of the capital tied up in our real estate through mortgage financing. We’ve also been diligently working on growth and scale, including the acquisition of Las Vegas, Nevada and the opening of Council Bluffs, Iowa earlier this year. We also completed the relaunching of our Monticello, Minnesota store as Airstream Minneapolis, which should be a top 5 dealer in the United States by sales volume; and just this week, completed our segment acquisition of 2023 with the purchase of Buddy Gregg RVs in Knoxville, Tennessee.

We remain on track to open Wilmington, Ohio and Ft. Pierce, Florida greenfield this quarter and are Surprise, Arizona greenfield in the fourth quarter. Given the robust activity in the industry around store acquisitions, we anticipate an active cadence in the back half of the year. In short, the team continues to strengthen and gel around our strategic initiatives. First, we will be relentless in our execution and efficiencies. Secondly, we will aspire to be the dealer of choice with our OEM partners. Third, we will act like an owner and allocate capital responsibly and with a long-term mindset. Finally, we will grow and leverage our infrastructure to deliver above-average performance metrics and superior return on invested capital. In closing, I always want to acknowledge the hard work of our team.

Photo by Nima Sarram on Unsplash

It has not been an easy environment to operate in. The degree of difficulty is high and the landscape is competitive. Time and again, I’m impressed by the dedication and wherewithal of this team. I sincerely thank each and every one of our fantastic employees. And with that, I’ll let Kelly take it away.

Kelly Porter: Thank you, John. Please note that unless stated otherwise, the 2023 second quarter comparisons are versus the same period in 2022. Total revenue for the quarter was $308.4 million, a decrease of 17.4%. While we continue to face difficult year-over-year comparisons, we are closer to the inflection point of the third quarter of 2022, which marks the end of the benefits associated with COVID demand. From this point on, all metrics will be on a same-store basis unless otherwise stated. New unit sales declined 25.2% in the quarter, and gross profit per unit excluding LIFO declined 29%. Compared to the first quarter of 2023, new unit sales were relatively consistent, and gross profit per unit increased 5% to $12,744 per unit.

Used unit sales excluding wholesale units declined 18.3%, and gross profit per unit declined 24.8%. Compared to the first quarter of 2023, used unit sales increased 4.5% and gross profit per unit increased 1.5% to $13,566 per unit. Finance and insurance revenue declined 22.7% during the quarter primarily due to lower unit volume and lower financing penetration as higher interest rates incentivize more consumers to pay in cash. F&I per unit was $5,020 for the quarter, a decrease of 1%. As it relates to current pricing and consumer demand, we are experiencing more typical seasonal discounting on 2023 model year units because of the 2024 model year changeover. The prior model year discounting should be far less acute than what we experienced in 2022 as the OEMs have taken a more balanced approach to production over the last few quarters.

Dealers continue to destock as wholesale production remains far below current retail sales volumes. Model year 2024 pricing is flat to modestly lower than 2023 units as our OEM partners work to normalize input costs and achieve more efficiencies in their manufacturing operations. Our stores continue to actively manage inventory levels, ending the quarter with less than 5% of our current inventory as model year 2022 units. We ended the quarter with 180 days supply of new vehicle inventory, a decrease of 27 days compared to the first quarter of the year; and 83 days supply on used inventory, a 6-day increase over the first quarter. As a reminder, we calculate days supply on a trailing 90-day average. Our service body and parts revenue decreased 3.4%, and our gross profit increased by approximately 0.5%.

Our gross margin on service body and parts increased 180 basis points primarily related to increased warranty rates. We maintained our laser focus on cost control and optimizing every dollar spent below the line. We continue to make meaningful progress to reduce costs as we experience sequential improvement each month of the quarter. Total SG&A as a percentage of gross profit in the quarter was 74.5% excluding the impact of LIFO, and adjusted SG&A for the quarter was 73.7%, a 600 basis point improvement over the first quarter. Adjusted net income was $3.9 million for the quarter, down from $23.5 million last year. Adjusted fully diluted earnings per share was $0.14 for the quarter, down from $0.87 last year. Shifting to liquidity and capital allocation.

As of June 30, we had cash and cash equivalents of $24.2 million with $56.4 million of immediate availability on our new and used Floorplan line as well as $4.6 million available on our revolving credit line. We also had approximately $72 million of unfinanced real estate that we estimate could provide approximately $61 million of additional liquidity. At quarter end, we were comfortably in compliance with all debt covenants. During the quarter, we generated adjusted operational cash flows of approximately $2.1 million, and we deployed $32 million in capital expenditures primarily related to construction of our greenfield locations. Since quarter end, we completed the mortgage financing of both our recently acquired store in Knoxville and our Murfreesboro location, both in Tennessee, generating proceeds of $30.6 million.

With that, we can open the call to questions. Operator?

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Q&A Session

Operator: [Operator Instructions] Our first question today is coming from Steve Dyer from Craig-Hallum Capital Group. Your line is now live.

Ryan Sigdahl: Good morning, John, Kelly. It’s Ryan on for Steve.

John North: Hi. Good morning.

Ryan Sigdahl: Curious if there’s any deviation in monthly trend intra-quarter and then also as we’ve gotten into July to comment on?

John North: Trends in what regard?

Ryan Sigdahl: Just overall business, whether it be demand side, new used, certain categories, et cetera?

John North: Yes. I mean there’s always some volatility in unit volume month-to-month. I’m not sure – but I would call it a trend one way or the other. It’s hard to maybe totally isolate the signal from the noise. We’ve seen pretty consistent unit volume on the new side with some level of probably normal fluctuation. It’s just timing and where weekends fall at month end and that sort of thing. Obviously, our business is skewed more towards weekends. So the calendar can have an effect in the month. And so I don’t want to read too much into that. In terms of used, I think we’ve continued to try to source more used procurement, purchasing direct from consumers in the marketplace. And so that’s been an area where I think we’ve seen maybe some secular improvement for the first six months of the year as we’ve leaned into that.

And we’ve made a concerted effort to reduce wholesales, which you can see in our results, trying to convert more of that into new. Service business is the bedrock. It doesn’t fluctuate all that much. The opportunity for us there is really around capacity, specifically technicians, to try to get more ability to turn wrenches and bill hours to consumers. There’s significant demand that is on an unfulfilled basis just given where we are there. So we have work to do. But overall, as I said in the prepared remarks, I would say trends have been fairly consistent. I wouldn’t say there’s been a big inflection that I would call out one way or the other. It’s not as robust as we’d like to see. I think everybody is well aware of that. But I wouldn’t say that it’s necessarily really deviating from the kind of run rate that it’s been on, including normal seasonality in northern and southern markets, which sort of work inverse of each other.

Ryan Sigdahl: Yes. That’s helpful. It was mainly if you’ve seen any change. We know the ongoing challenges with the industry. It’s just if you’ve seen any break spots get any better or worse was the main question. Switching over to some of your dealer or network expansion. So your Maryville store, you shut down. I guess, how much did you get for that from presumably the state? And then how much did you pay for Buddy Greg or, I guess, kind of what’s the net-net there from a financial standpoint?

John North: Yes. That store has not yet closed, but the Department of Transportation in Tennessee is expanding a highway. And when I joined the organization, the original plan was to allow that store to close and then relocate the operations to our existing store, which is on the east side of Knoxville. But as I talk to Ron and the operational team, we decided that trying to find an alternative site would make more sense. And so we were fortunate to identify Buddy Greg. And given Ron’s contacts, we were able to make that acquisition happen. So it’s probably additive. The Marysville store was not insignificant in terms of revenue. I think some of that revenue will move over to Buddy Greg. In my experience, typically, when you take two stores and push them into one, it’s not a 100% combination.

I would say, net-net of the $40 million run rate we gave for Knoxville, I wouldn’t assume that 100% of that will be incremental. I think there’ll be some erosion, but it’s hard for me to quantify exactly how much that is. It’s somewhat of a guess. And frankly, I’m – we’re just not that smart. So I think we’ve tried to hedge accordingly. I wouldn’t anticipate the full $40 million will come in there. In terms of the benefit from the state, it’s fairly immaterial. They give us some assistance in terms of relocation, but we’ll also incur cost to move everything around and shut things down. And so I don’t anticipate a significant windfall there. More importantly, we’re keeping our store count intact, and we’re allowing the employees that are at the Marysville location to have alternatives in terms of where they go.

That will be helpful just in terms of maintaining their employment, which is important to us culturally.

Ryan Sigdahl: Good. One more for me just on the exclusive Airstream store in Monticello. Curious, just customer perception, I know it’s very early since that opened. But just if there’s different customers, perceptions, if there’s different OEM allocations, OEM support discounts, et cetera, given it’s an exclusive store? And then if there’s any opportunity to do that at other locations?

John North: In short, I think, yes. Airstream is a little bit of a different animal, in my view, relative to other potential RV brands. I would say that the demographics and the consumers are typically very Airstream-focused. They’re not necessarily down looking at a different brand and then convert over to Airstream or vice versa. So I think it’s a little bit of a different customer base than you might encounter in a more traditional RV dealership. And so as we analyze the market, we have a dealership about, I guess, 20, 30 minutes away in Ramsey as well. Both of those are northwest of downtown Minneapolis on the way up to the lakes, which you probably know better than me, Ryan, given your proximity. But we had two dealerships there, both of size and scale.

We have the Airstream’s product being sold out of Ramsey. And so we made the strategic decision to go to Airstream and offer them an exclusive location. And Airstream has a handful of these superstores, I’ll call them. There’s one in Tampa. There’s a few in the Pacific Northwest. And they do significant volume in the 300 to 400 range. And so we were able to partner with Airstream. I think we’re able to increase our allocation a little bit there, and more importantly, create a really immersive experience for that customer. And so we’re pretty excited about it. There’s actually a Airstream camp ground about 20 minutes from the store with 150 spots dedicated only to Airstream consumers. And so we think it’s going to be a really powerful partnership, and we’re really excited to grow with Airstream.

And frankly, I think they’re excited to have another stand-alone dealership to represent Minneapolis and in the broader state of Minnesota. And so our relationship with them is certainly strong and we appreciate the support and we’re excited about that, especially given that it should be, hopefully, a top 5 store in terms of sales volume in the country, which is not insignificant. So we feel really positive about that change.

Ryan Sigdahl: Very good. And yes, it’s in an excellent location off Interstate 94 catching all that north traffic going to lake. So that’s it for me. Thanks John. Thanks Kelly. Best of luck, guys.

John North: Thanks, Ryan.

Operator: Thank you. Next question is coming from Daniel Moore from CJS Securities. Your line is now live.

Daniel Moore: Thank you. Good morning, John. Good morning, Kelly. Thanks for taking the questions. Maybe start with just a little bit more color on the inventory destocking process. How much discounting should we be thinking about or expect on the remaining ’23s, for the next two quarters? And just talk about your confidence that we won’t necessarily be in the same place six to 12 months from now with the ’23s that we’ve kind of gone through with the ’22s. I appreciate it.

John North: Good morning, Dan, thanks for the question. And I wouldn’t – I’d be remiss if I didn’t acknowledge that we appreciate the recent initiation of coverage and the partnership with CJS, and you and Bob, and whole new team. So thanks for that. As it pertains to inventory I think it’s important to delineate between what we experienced last year, which was really the breaking of the log jam in terms of the backlog of orders and a significant oversupply of 2022s versus what I think is happening this year, which is as we move through the summer and model year ’24s are introduced, you’ll start to see more aggressive discounting at ’23s. But that’s normal. That happens every year. And I think whether you’re talking automotive or whether you’re talking RV, at least in the 10 or 11 months that I’ve been here and Kelly has been here a few months shy of that, so it’s still early for us in terms of our experience.

But that should be normal, right? You’re going to have that model year changeover and you’re going to see discounting move up. And typically, the discounting gets more aggressive as the year progresses, but it becomes a smaller percentage of the mix. I certainly don’t think it’s going to be as acute as last year. I think, according to the pundits that I look at and the industry data that’s released in terms of where we’re going, most people are triangulating around a 300,000 or so wholesale delivery number for this calendar year compared to a 350,000 retail delivery number. And so that would imply 50,000 units of destocking. And so I think, in short, we’ve done a good job of being ahead of getting through the 2022s. Kelly mentioned, it’s less than 5% of our inventory at this point, and we’re down to 100-and-some units, I think.

So that’s pretty much behind us. Now we’re starting to see the ’24s. And we have a few hundred on the ground. It’s not a significant number. But we’re starting to obviously prioritize some of the discounting and partnering with the OEMs around ways to keep that momentum moving. When I look at our bottom line gross profit per deal, I think our expectation is that you’re not going to see it move dramatically from here. It’s going to fluctuate as it would normally. But I don’t anticipate the pressure that we saw in the back half of last year at all. And I do think the ’24s are going to come on and help, I guess, adjust the mix or balance the mix more quickly than what happened last year, which should help to hold grosses more consistent. So I think it’s very different than last year and manageable.

Daniel Moore: Really helpful. I think you stole my next question, which is gross margins despite being a lot of flux have actually held up quite well. And I know you think of it more gross profit per unit. But any additional color on likely direction of gross margin either on a percentage basis or per unit basis as we think about the balance of this calendar year beyond what you just described?

John North: It’s a nuanced question, and it’s an interesting point to call out. I think if I take a step back, we’re a lot more interested in selling more units than making more gross because of the knock-on effects. Every unit that we sell has an F&I opportunity, obviously. But importantly, many of them come with trades and all of them become then potential customers in our service department down the road. And so this is a unique retail business in that there aren’t many retailers that sell stuff and then fix them too down the road. And that all creates a flywheel effect, where you can improve the velocity of the business and maintain the customer, and the life cycle value of the customer is much more significant than just the transaction where you shake hands and have a deal.

So I think overall, I think we would like to see more volume as opposed to more gross profit. I don’t think that means that the gross per unit on the new and used side has to change a lot. I just think we’re prioritizing hopefully making more customer relationships as opposed to trying to make more off of each customer relationship. And I would be remiss if I didn’t point out that I think we have opportunity in our F&I and in our service department to really drive improvement beyond kind of what the market is going to give us. And when I step back, I don’t think that there’s huge opportunity to sell more units that we’re missing. But I do think there’s a lot of opportunity to try to attach more value to consumers in the F&I department, and then importantly, to try to maintain and improve our ability to service vehicles downstream.

And that’s going to be much more meaningful to our overall gross margin than trying to hold a little bit more profit when we sell a newer used unit.

Daniel Moore: That’s great color. Obviously consistent but certainly helpful. Lastly, just in terms of liquidity, I appreciate the color, Kelly as well. You bought back a decent amount of stock over the last few quarters. Just talk about your capacity and appetite either for further buybacks given kind of current liquidity versus your expansion plans in the current demand environment. Thanks again.

Kelly Porter: Hi Dan, this is Kelly. Thanks for the question, and good to hear from you again today. From a liquidity standpoint, I would say we would want to reiterate our focus on really a couple of different areas. All things being equal, we’d like to deploy capital first to real estate buybacks and then to continue expansion through acquisitions. With all that said, depending on where the market goes and where our stock goes at any – at some price, we will buy back stock. It just depends on kind of where things go and what the market looks like for acquisition appetite versus where our stock price goes. Would prefer to allocate towards real estate and acquisitions. But again, if something happened and our stock price dropped, we would look to allocate towards buybacks again.

Daniel Moore: Very good. Appreciate the color. Best of luck in the coming quarter. Talk to you soon.

Kelly Porter: Thank you.

Operator: Thank you. Next question is coming from Mike Swartz from Truist Securities. Your line is now live.

Mike Swartz: Good morning, guys. More of a housekeeping question to start. When I look at the ASPs for the new vehicle business, they were actually up year-over-year, and I think that’s a material change from the down year-over-year in the first calendar – or first calendar quarter. So is that some kind of accounting nuance? Is there mix playing into that? I guess, what’s driving that?

John North: Hi Mike, nice to hear from you. I don’t know if I necessarily deconstructed everything to give you a specific answer, so I will caveat appropriately. We’re a lot more concerned with gross and unit sales than revenue. I really spend very little time looking at our revenue, but understand the question and as you model things. My intuition is that it really is just a function of inflation. Pricing has gone up overall both on the wholesale and the retail side. And I mean, if I had to guess, I would say 2019 compared to 2023, you’re probably looking at a 30% to 40% increase in the cost of most everything. And so my suspicion is just as we worked through – and I think we were ahead of maybe others in the industry in terms of the 2022s, and so the ’23s have become a greater percentage of our mix in the second quarter in particular.

And I think you’re seeing just, frankly, inflationary cost, which is probably what’s driving that. Because when you look at the grosses and the margins, you’re not seeing a commensurate growth there. And so I think it’s really just kind of raising the overall transaction value as a function of ’23s comprising more of the mix.

Mike Swartz: Okay. That’s great. Thank you. And then just – I think you had mentioned the model year ’24 pricing is kind of flat to down versus model year ’23. I assume you’re talking about invoice pricing from the OEMs. But I guess a broader question is, how do you think about affordability in the RV space? And I guess, is there kind of a sweet spot for where you think kind of net pricing needs to go before we start to really see a rebound or a pickup in the retail environment?

John North: Yes. I think you’re correct in your first statement. What we were alluding to was the invoice cost of the units appear to be flat or down in most cases as it pertains to ’24. So that is correct as a clarifier. What’s the right price for the consumer? I guess I look at that through a couple of lenses. The first is that one of the reasons we’ve been focused on used is because in times where affordability is more difficult for a consumer, you see a natural shift toward more used demand. People effectively trade down to match to a payment. And I don’t know the absolute percentage, but my suspicion is 90-plus percent, 85-plus percent of people are thinking of a payment when they’re thinking of a purchase here. So I think there’s that lever that gets pulled first.

The other one that comes to mind is just our financing penetration. So pre- kind of Fed interest rate moves, we were north of 70% in terms of the financing penetration on the units we sold. And that number is now in the mid-60s. And so I think for the higher-end purchaser or the more affluent consumer, I think we’re seeing a natural inclination to pay cash. And certainly, if someone can finance at 4%, they may decide to leave more money in their retirement account or in their equity portfolio or in their home equity line of credit. Now that interest rates on an RV are going to have a seven or eight handle even for the best credit quality customer, I think you’re seeing more people elect to just pay cash where they have that optionality. So I think for them, the affordability is probably less important.

I do think the ’24 model year is moderating will help. And then I just think there is probably a longer-term thing here, which is consumers getting used to money not being free. And I don’t know how long that takes. But if you step back, and I’m old enough to remember, I mean, a 7% or 8% auto loan isn’t bananas. It’s just that for the last decade, if you didn’t have 0.9% financing or 1.9% financing, it seemed really expensive. And so how long it takes for that to socialize across the buyer base, I don’t know, but my suspicion is eventually people will sort of forget that money used to be that cheap. And then I think that it will be easier for people to accept. We financed a lot of RVs for 180 or even 240 months if they’re over $50,000. So in terms of the absolute payment, I just don’t think it’s that material.

I think you’re talking in the 10s, not in the hundreds, of dollars. And so I don’t think that most consumers can’t avoid that. I think it’s also just more of the sticker shock.

Mike Swartz: Got you. Okay. That’s helpful. And then just one final one for me with you guys freeing up some additional liquidity. And I think you made the comment that you’re maybe more aggressively seeking out acquisition opportunities in the back half of the year. Maybe just give us a refresher on kind of some of your core acquisition criteria.

John North: Yes. I think, in general, we’re focused on a few different things. Number one is probably size. So I think you’ll see us be focusing on larger revenue opportunities in terms of the individual dealership or box. I think from our perspective, it’s as much effort to run a $50 million revenue box as a $15 million revenue box. But obviously, the earnings potential is significantly higher in the former than the latter. So we probably defer to larger. There’s lots of dealerships in the country that are probably below those thresholds. And those are the ones, I would say, that have been more recently coming to market or there’s been a more – a greater quantity of those. So that’s first. Second is real estate ownership. So we’re very focused on locations where we can own the dirt, and the acquisition we did in Knoxville this week is a good example of that.

We were able to buy the real estate there as well. So we have site control, which is critical. The third consideration is OEM relationships. And there are certainly good relationships with all of our OEM partners, but I think we’re focused on trying to be a little bit selective and look for some of the OEM partners and relationships and expanding those because we have very good relationships with certain OEMs. And so I think we’re prioritizing some of that. And then probably the last is just thinking about geography. And there’s value in the network effect of having dealerships clustered because you can share the benefits of marketing and personnel, and people can move around and support more easily. But there’s also a benefit in diversification.

And so as I think about Florida, we have stores in Tampa, we have a store in The Villages and a store under construction in Fort Pierce. I’d love to diversify away from Florida, not because we don’t like the market, but just because it’s prudent for us to have roofs elsewhere and to create more of a nationwide network, particularly as we look to build our brand and our reputation with consumers coast to coast. So it’s probably that order, and those are the considerations for us as we think about going forward.

Mike Swartz: Okay. Great. Thanks.

Operator: Thank you. Next question is coming from Brandon Rollé from D.A. Davidson. Your line is now live.

Brandon Rollé: Good morning. Thank you for taking my questions. Just quickly on inventory. Could you talk about your appetite for taking on more new inventory in the back half of the year maybe versus pre-owned inventory given current retail fundamentals?

John North: Good morning, Brandon. Nice to hear from you. I think we are really focused on a couple of different things. Inventory is a very broad bucket. What I mean by that is we stock everything from a $40,000 stick-and-tin towable trailer up to $800,000 or $900,000 Class A diesel pusher with a tag axle. And so I would say, as it pertains to new, I think it’s different. We’ve certainly seen a little bit more slowdown on the motorized side of things. I think that, that had been undersupplied longer than the total and fifth wheel segments just given supply chain issues around getting chassis and that sort of thing. And so as I think about the last couple of quarters, I would say, we’ve seen less of a slowdown externally. But I would say, as it pertains to consumer demand, the channel certainly has caught up, which I think was a slower catch-up than we saw on the towable side.

So I think we’re being prudent there just in terms of moderating. We are certainly thinking about trying to run with a lower days supply. You saw that we sequentially improved in Q1 to Q2 in terms of days supply. And so we’re thoughtful around that. And then, in particular, trying to be cautious with a lot of the 2023s coming and now the 24s around the corner. I don’t anticipate significant changes in either direction. I think you’ll see us maintain inventory. We do need to start ordering up. One-third of our business is in Tampa, and the Super Show is a gigantic event for us in January. And so we need to be ordering now to take that stuff in and given the lead times required for some of that, motorized product in particular, to stock up for that.

So I don’t anticipate big changes there. On the used side, it’s a good call-out and thank you for allowing us to talk to it, we’ve grown our used inventory. From memory, Kelly, I think, $15 million so far. And that’s been a very concerted effort. That obviously – we don’t borrow against all of our used inventory. We tend to pay cash for it, and then Florida is required. And so our operational cash flow has also been optically lower than it would have been if we hadn’t been building used inventory because we didn’t put the associated flooring on for it. But we’ve made a concerted effort to stock more used. We do think that there is more healthy underlying demand there because of the affordability topics we’ve talked about earlier. And frankly, I think there’s more of a market to be had there.

And so we’ve leaned into that. We’ll see if that grows. Some of it’s market-dependent. What’s for sale, can we find things purchase them attractively relative to where the market is today, which is really, I mean, literally a piece-by-piece decision. Our wholesale team and our operational leaders buy those actually unit by unit. And so it’s hard for me to predict if that’s going to build or not. If there are opportunities, we’ll take advantage of them. And if they’re not, they won’t. But in general, I’m pleased that we have more used inventory in inventory. It’s interesting. I mean 50% of our used inventory turns in less than 30 days. So there’s really healthy demand for that in the marketplace if you can find the right pieces, and so we’re focused on that.

Brandon Rollé: Great. And just quickly on the used market. What are you seeing in terms of used inventory availability? And then maybe just overall competition maybe from other retailers to procure those used units?

John North: It’s competitive for sure. Certainly within the marketplace, we’re not the only retailer that’s aware of the opportunities in used and touting the benefits of trying to focus on it. That’s not lost on Lazydays. So everybody’s certainly working hard to find stuff. I think it’s an interesting time. You have some subset of consumers that bought the product in the pandemic that weren’t probably traditional RV-ers. And I’m sure some of them are, now that the world is, I guess, “more normal”, maybe looking to sell. I think the counterweight to that is that I think many of the people who are in the lifestyle and have been in the lifestyle might have upgraded in ’19, ’20, ’21. And in particular, if you were buying to model year ’20, ’21, ’22, you’re probably paying MSRP or more, and that’s certainly not where the market is today.

And you probably were potentially financing it in the 4s, and that’s not where the market is today. And so I do think there is some amount of probably longer hold periods in the future as it pertains to used just because I think a similar dynamic to what we’re seeing in the housing market, where given where interest rates have gone, people are looking at the relative ability to trade up and given the increased payment, they are deferring and just electing to stay where they are. And so I think some of that’s in play in the used market as well. And it’s going to take a little bit of time to work through that. But overall, I think there’s opportunities. We’ve seen an uptick in the number of trade-ins coming in our use side, which has been good to see.

And it’s like a single-digit percentage change. But nonetheless, it’s improving. So I think that’s healthy and very manageable.

Brandon Rollé: Great. Thank you.

Operator: Thank you. We reached the end of our question-and-answer session. I’ll turn the floor back over for any further or closing comments.

John North: Thanks, everybody. Have a great day.

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.