LAZY - Earnings call transcript Q4 2018

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Operator

Good morning. My name is Denise and I will be your conference operator today. At this time, I would like to welcome everyone to the Lazydays Holdings Inc. Fourth Quarter and Year-End 2018 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. there a remarks, Instructions]. session speakers' the will question-and-answer be [Operator After you. Thank James Meehan, Corporate Controller.

your conference. begin may You

James Meehan

and Thank Good Relations XXXX release Form the for Murnane, page Controller call press furnished of our Financial SEC. section Events has to Officer site call. you, release our on been joining Mr. the am is our at fourth for Denise. an Web report I Presentations With A the Executive the Chief Chief & X-K quarter Officer. and available morning. Lazydays. to exhibit Bill And Investor and today this We are under the and as company’s Nick Meehan, morning. earnings year-end our Mr. James our the financial issued conference Chairman me you results Corporate current thank earnings on with us of copy Tomashot,

some future statements during of you many a please compensation that results of trends expense, expenses, note information a stock-based including statements, differ taxes, gross forward-looking discussion from As our result regarding materially margins, without limitations, operating for mix expansion. and that Actual reminder, could forward-looking geographic revenue, the or shift statements today factors. periods may product of the hear will consist as

the information, For with XX, to on SEC in filed the please X-K March refer the additional risk factors Form discussed XXXX.

that useful to of comparable discuss we reconciliations earnings We the most are financial release our of Please including performance financial non-GAAP measures. measures believe adjusted press will also these EBITDA. EBITDA to GAAP directly refer non-GAAP financial measures company, to the and for

XXXX, operating Inc. of results Lazydays information represents the presented months financial For the ended XX, Holdings, three December the

R.V. ended the Inc. information XXXX, Center, of December Days Lazy presented represents For financial the operating results months the three XX,

the XXXX year- XXth operating X, XXXX. XXXX, the December XXXX Inc. to of the Center, January XX, from XX, presented the Days Lazy combined March period For results ended to the of March Inc. operating results the R.V. Holdings, December with XX, for information represents from financial Lazydays for period fiscal

XXXX, represents For Center, operating XX, of December the fiscal results year- financial Days ended Lazy the R.V. information Inc. the presented

Now, it is Murnane. Bill to pleasure my introduce

Bill Murnane

good like give for Thank Thank an we you our overview what morning to and will details everyone. in are the us. specific I’d give and on of joining James performance. you, then Nick more markets, seeing

of execute more on prior we with another acquisition on and both both or spite selling a of those markets. our we of of XX% the As expansion you in to most what have that are slowdown we the August, seasons. recreational in and typically fourth of diversify in I'm slowness, But normal was year. in for of that follow significant became has QX In Minneapolis became rebalance spring need repeating take note not two to industry general, our aware some In demand. vehicle seasonally. our the unexpected. experienced was the so We sales a summer our others the help quarter year, lot in than Minneapolis than weakest quarter But are retail is that sure our to closed than inventories our will dealership softened more normal and dealer slowed, a higher that on geographically These important acquisitions and industry don't we Knoxville think dealership. QX retail RVs oriented Knoxville we time spend to assuming have is will closed dealership acquisition It concur demand down us slowdown. isn't versus what continue our inventories December, dealership demand that said. That's geographic we strategy. quarter the and

a on June market. dealership in market a much that we a growing have a quarters into week the minute. Nashville and Knoxville, enthusiasts, a excited moving design Moreover, in ending agreement to and a last with smaller Nashville, we outdoor have the announced the City. them dealership quarters assigned few dealership Tennessee, will RV much of expect we against economics opening and be for be will March. rapidly December Nashville an the of Nashville to I and to this, like asked been Music grand we ending this contribution a a dealership I've the and in is and be Given with September, a couldn't acquire comments bigger more lot contribution Greenfield new in contrast in like

First, the going the you Tomashot to fourth through end. financial highlights take year to and the CFO our turn of of Nick I'm call quarter to over some

Nick Tomashot

$XXX.X RV million, vehicles Bill or wholesale vehicles Total quarter, Please X.X% sales million results. million summary stated morning was $X.X quarter of and are recreational of unit the from Revenue fourth or $XX.X the million down unless excluding from sale quarter the month three of new the a our fourth ended units start $XXX.X X,XXX, QX otherwise, we're were results quarter $XX.X everyone. from or and the XXXX financial XX.X%. was XXX fiscal for you, note revenues Thank and to same million I'll XX $XX December million, XX, sale good units revenue that XXXX. down down XXXX. recreational with X.X%. comparisons for or down X.X%. the year periods

revenue million. of first-out lines of adjustments parts was was The the X.X% compared or profit to gross Gross two to or favorable these $X.X was by decrease average down XX in XX.X%. finance quarter, price New million $XX,XXX. parts, was or decline at total, million revenue. average periods pre-owned the down $XX,XXX, X.X%. to unit up quality vehicle The excluding units X.X% pre-owned or units, revenue X.X% of $X.X non-cash with price relatively down including driven million, XX.X% last-in in driven sales. the margins million, limits vehicle the in adjustments or sold. $X.X was $XX.X XXXX from units. and QX a XX.X% million, was new down and and was swing service as The units decrease of margin In campground flat from the or primarily from to or for were driven selling and by $XX,XXX, from vehicle in up $XX.X of $X.X XXXX. million of increase wholesale $X.X million Gross $X.X was majority million other excluding QX our profit, non-cash well XXXX. or X.X%. Revenue and miscellaneous revenue availability XX.X%. adjustments down pre-owned improved insurance, XXX, improved of and as LIFO to increase compared Pre-owned units increase recreational business the and from consists $X.X pre-owned vehicles was motorized The versus F&I revenue $XX.X $X,XXX LIFO LIFO channels $X pre-owned F&I million $XX.X XXX an were revenue, XX motorized sales or by vehicles F&I compared of between improved sold, service, million, excluding fourth vehicle XX.X% XXXX new million net was and unit This the selling per of revenues compared vehicles which year related million other quarter with accessories to for XXXX. prior $X.X change

the down by streams. vehicles in XXXX. $XXX.X XX million The in quarter, million release by improved on million recently million the for quarter which compared million overhead Minnesota fourth cost, certain $XX.X of was my year. to $X.X wholesale for $X.X the million, down loss Revenues adjustments EBITDA and to million loss was my summary X.X%. including $X.X I the year fourth amortization, still vehicles mentioned million This GAAP we $X.X $X.X million, to or acquired our XXXX, Gross our Gross or stock-based Days’ shown from EBITDA. up year to March F&I $X.X net margin R.V. and compensation favorably quarter, primarily recorded the change our non-cash These of refer and $X.X expenses $X.X transaction were to net prior compensation result between down million. excluding intangible per to table, million now margin expenses, LIFO of in of partially for between a primarily transaction issued and X.X%. X.X% to compared LIFO increased due the an tax options the adjustments primarily Center, of sold. Revenue in for other $X.X million to related earnings Adjusted compared decreases $X.X million to excluding and or revenue the million related prior offset respectively sales XXXX. providing X,XXX, pretax two recreational results. our asset improved Excluding adjustments net SG&A improved adjustments the the have million, for a increased was in loss income gross vehicle improvement periods in our impact were end by increase LIFO periods million anticipated Please or gross up to driven merger Unit Acquisition decrease offset Corp. for and improvement LIFO periods. income XX.X% compensation $X.X quarter points Andina in pivot $XXX.X attributed profit, XX.X% going primarily prior XXXX was loss on $XXX.X EBITDA R.V. million, by million year. impact $XXX.X Net compared by Incorporated, revenues by $X.X in the X.X%. offset of which includes discussion. and Despite industry new amortization $X.X from Lazy the two recreational non-deductible excluding compensation the increase stock-based SG&A non-cash for more from of in effective $X.X margins LIFO profit million, favorable an and expenses gross XX year, profit additional year-end and adjusted the was mentioned and $X.X was from up rate was the expense tax which X.X%. The the increases units sales for management $X.X XXXX expenses I'm between to or sales basis which versus reconciliation costs of down depreciation for in locations. impacted from Stock-based as than the the sheet. $X.X profit million, net of increased year, the for was tangible vehicle a XXXX. balance discussion million Year million Adjusted year to depreciation to II Tennessee stemming costs, included to XXXX the valuations of adjustments was units

decline offset transaction Tennessee stock-based to million, Excluding was year. compared acquired and which to March gross the the by were compensation X.X% based XXXX. expense increased the XXXX. and a $XX.X asset overhead Adjusted SG&A revenue contributed contributable reduced is XXXX Acquisition year across million compared R. $X.X driven to and $X.X the overhead personnel Andina the incorporated, and percentage the up and slightly up depreciation in partially $X.X measure, locations, increases financial costs, recently X.X% million issue for Minnesota This and tangible million management $X.X respectively which increases Adjusted included and non-cash costs in year, the depreciation Lazy revenue offset and stem amortization for $XX.X units increased between This compensation and a company. was non-GAAP from margins, of other EBITDA, amortization, compared by Stock by to valuations. million primarily to and additional to year. the year for prior II partially a expense compared was as prior in merger Corp. These options to center V. Days sold. intangible approved EBITDA by and

million to turning of Now, cash $XX.X vehicles, sheet million hand million of balance million. and was $XXX.X and in December dividend RV $XX.X in $X.X financial $XX.X the paid XXXX. on payment preferred with to inventory the reserves million cash in We’ve parts million down and the position. compared approximately primarily XX, October September Tennessee consisting driven million $X $X.X of We million LIFO to of acquisition the for new $XX.X had million XXst of vehicles inventory in XXXX. in pre-owned $XXX.X supercenter by This and cash our capital approximately $X.X shareholders million networking

with some LIFO Supercenter attributable the fourth in for the the inventories increase acquisition related QX to inventory this increased remaining of our $XX.X that than planned the end combined September. from of higher $XX.X levels Excluding quarter. to RV with Tennessee end resulted December guild in seasonal XXXX the compared reserves, million softening demand inventory to the million of increase at of was

As outstanding facility, under gross December borrowings million of payable credit XX, million no and revolving had of $XX.X plan $XX.X in floor $X on XXXX, our or we million notes facility. term loans

related We also the over turn on notes had Murnane. acquisitions. I'll approximately $X.X Thank to now you. payable million outstanding Bill call And back

Bill Murnane

you, Thank Nick.

As economics of a acquired to of to I Greenfield compared briefly a questions said, I've want because an on on number dealership, I that. the elaborate gotten dealership

For similar sized it estate an real the acquired or investment is and the dealership dealership. typically whether is a in dealerships, Greenfield inventory same

this having dealership, acquired pay to an the flows, we will stream added cash need be cost for dealership. For existing of to so also an would an

cash can to three Theoretically, Rate of dealership very same flow cash than we achieve IRR, that a Return, will to the Greenfield a on higher hand get for On which cash Greenfield Greenfield a in acquired dealership. still on acquired flow up for basis, returns dealerships. dealership an the also acquired should it attractive can although discounted shareholders a have Internal if dealership, in level one to normalized a three flow higher us may the IRR, mention typically typically I one to achieve we years ramp take other dealerships we of do. years, might

availability past, As decision on in design, come have strong brand dealership. of most strong the markets. I the taking significant acquire brands Greenfield by to did said are are has impact in strongest of brands brands hard best the the versus a to the best including industry's Greenfield available, our of The most given good Nashville opportunities of brands. one

relatively and So that made Nashville to Greenfield our decision easy.

likely into gone integration in has dealerships markets acquire the that family very acquisitions final the where these well. more our not recent are remark to One We brands strong on dealerships are is of Lazydays' available.

achieved fully goal also XX dealership. each This days this in to teams integration teams is that and great the dealership or our into but goal Our only cases. not in both at credit the exists the a we integrate systems and processes exceeded is to to

the XXXX, quarter in to point that think at slowness we it market safe this say Regarding one continues. is

QX but also all As so company we for I will we XXXX earnings you quarters one it the remind you guidance of very know, tough in remarks. our the we don't that prepared will was of XXXX expect and strongest than say the you. for lower have should history please is give revenue QX, a XXXX. QX and the the Denise, That's comparable. industry, open line questions. Thank that

Operator

Instructions] question [Operator Whiteman first Citi. Your comes Fred with from

is line open. Your

Fred Whiteman

I margins? sales was you release any the But Tennessee the didn't impact mentioned on in there Minnesota quarter. that know in meaningful impact and

Bill Murnane

clear have have impact it on no didn't had No. margins to impact and it be that smaller a impact, just meaningful either. on

Fred Whiteman

any use change tougher the importance given share? is just you're the there about thinking sales, of then new And in backdrop to from unit how

Bill Murnane

in years, use importance high Fred. all a on put We

don't So, high it's we in or big more important business part -- less because I have year. would of any put our a say on no, use, a every we

Fred Whiteman

just then for across the And inventory industry.

and you're what of did in a think normalized. in expect that than expected or more a aligned? When things think are was walk retail the to see I maybe the quarter you two increase mention I through to a guys prepared more the the seeing, another detail also look you you've bit said could we due industry, But can remarks, until across XQ. you bit when inventory portion softer wholesale

Bill Murnane

but guessing, there industry do be they two is. what that's delayed. the see everybody's know gotten months stats know We what everybody's as again again Yes, don't are or come just sale We Fred. We out don't we'd there.

us right Those now. just be again So of Based really got it's the stronger or slower our so in and period dictate. we've be most are going going But we've what balance remember is period, own heard to from everything south summer industries on think. know dealerships, we’re our we we in certainly we’d in on guessing a think more the the before in of two analysis, what to out. a quarter for our we country,

QX So up. end to really QX important where going be and to are inventories

Fred Whiteman

a And you above I assuming retail -- made for you that think then just you that? decline Can tweaking industry, being behind was guys into XX% assuming the are comment what aligned, in retail. comments, we're retail just more a decline XX% about the

Bill Murnane

to experiencing We're We you. can And assuming the That's inventory. and I from somewhere we're think XX% based between that's and tell the zero hearing business excess of on best and if work-off that partners tell and we're what others. probably it's going it's our what best we the just obviously more partners, can than XX%, you. slow that's

Operator

Dyer question Craig next Hallum. from comes Your with Steve

Your open. line is

Steve Dyer

Just to inventory little dig a into question bit more. the

about talked You it a in still little procuring quarter used change difficulty good last bit there had of is Any inventory. tough? or

Bill Murnane

Modest change, quarter easier than it's Steve, little little to were think get we used inventory. that. a positioned better on I last We're a

it's opportunity think we’re a easing inventory I bit, little little better So, seeing unused.

Steve Dyer

color Just Any just parts on about slowness the side, service, more or focus in you I on parts And then in the little to given side of segment service of some gross talk any guess the the F&I bit margin typical was initiatives sales. that? below to can noticed improve more and a in secondly, that that that I the just mix. quarter. range Any

Bill Murnane

we help of to yes, we know a focus us. help to customer focus areas three want to strategy business. going three services our you, volatility in important and the experience, think going put the lot It's We really for the the parts great is we our means are expansion. service next business. the best-in-class, on you of the our or excellence of over as on a Service into significant forward. So that. energy in areas and one that continue experience, best one improve have customer be it's fairly improve the part excellence remind geographic provider margins, two And will industry. think our service impact years, To And

there. don’t we merchant comment Nick, know I the want So keeping the are focus you question? to do on

Nick Tomashot

look If of each are individual up you on lines business, other them. of the at margins

when is down that seeing together that put you're the it's what they're So aggregate all a bit. in they're

Steve Dyer

or us And help help two perspective can give to a or any in if out contribution modeling from acquisitions there, then you contribution just XXXX? us of the around commentary the expected

Nick Tomashot

point time, Steve. not out giving this at in that We're

Operator

Your Instructions] from Paul comes with question [Operator next Penny Securities. Northland

is line Your open.

Greg Gibas

This on is for Paul. Thanks for the Greg taking questions.

Just the inventory. increased up power think down capacity with inventory? and Do you on bargaining has bringing your their improved given follow challenges OEMs their

Bill Murnane

Yes and no.

we'd our all typically to business I a balance to you more slow do and that take seeing take on run to turns at that want products to want But inventory happens you what demand is think our product, on of and like products inventory moving That's with in well. lower we're to is slower of you have a have typically moving it our balanced product. exist. like opportunities where mix with do cost we

So an standpoint to it any a to better attractive well if we we cheap that not that than turns not from return it's do on product going get that product something investment we're do that because necessarily can discounted on faster. with isn't that's on turning wasn't and really us,

isn't not moving opportunities product, which we there on it. discounts view product getting. be but out well, want are something to opportunities, type that on would tend they of necessarily into. slower turns are we the we are say select how to others maybe going seen that's So get there, I that But to

Greg Gibas

do you negotiating pretty detail has the to your that know of does And than in lot acquisition weakness improved remain think But want a on you I this. anyone? robust? power industry pipeline then And don't give general,

Bill Murnane

power. it's negotiating second whether hard question, to it's The answer improved our

we're we're with to most We pipeline. with lot is see comfortable at. have things comfortable a paying. prices, of and at. look the And the And with we're in we in look a comfortable to I have we're say, pretty would lot plate -- our we with the the but a not prices comfortable we're interested there lot very the

Greg Gibas

for obviously or that in challenges the control. the to What currently most the be with next one given me XX your Last factors macro so? months just you significant besides are beyond would consider

Bill Murnane

That’s a question. tough

want want don't to we I think because focus has margins we just race on slowed. into maintaining to to bottom, the margins demand maintaining get a

been pretty acquired And a making just we've do just far And that going dealerships. in I so to That ourselves don't, well. on. right We early XXXX sure just a have overextend dealership we We're core probably say, lot on. either challenge late a is ourselves, with And or because probably third key likely then management say, lot a remaining now. combines we opening would do we two would able focused overextending got don't and we more learning lot XXXX. I our going business is a and

Operator

Fred with Your next Whiteman Citi. question from comes

is line Your open.

Fred Whiteman

quick one Just follow-up.

tendency Given show that seen even Can the far? retail here. we’re people Is about closure the what at the have to you seen? end from a other you bit the of were you've what weather about Some season rates similar lower. that little talk talked excluding March so

Bill Murnane

Yes, agree that. with we would

Operator

are over I [Operator instructions] time, turn call back the no Murnane. to Bill questions. There At this further

Bill Murnane

you day. We for again next forward a great to meeting quarter. us Great, thanks joining Thank everyone with Denise. today. Have look Thanks you.

Operator

you This conference disconnect. And may now concludes today’s call.

Lazydays (GORV) 21 Mar 192018 Q4 Earnings call transcript