Lazydays Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 8, 2024

There are 7 speakers on the call.

Operator

Greetings, and welcome to the Lazydays Holdings 4th 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.

Speaker 1

Good morning, everyone, and thank you for joining us. On the call with me today are John North, CEO and Amber Dillard, Vice President, Operations. Before we begin, I would like to remind everyone that we will be discussing forward looking information, including potential future financial performance, which is subject to risks, uncertainties and assumptions that could cause actual results to differ materially from such forward looking statements and information. Such risks, uncertainties, assumptions and other factors are identified in our earnings release and other periodic filings with the SEC as well as 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.

Speaker 1

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 press 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.

Speaker 2

Thanks, Kelly. Good morning, everyone. Thanks for coming in today. I'll make a couple of brief opening remarks

Operator

and

Speaker 2

I'll let Amber talk about operations. Kelly can take you through our financial results and then we're happy to have a few questions at the end. It's obviously been an eventful few months since we spoke with you in early November. We have had some important developments occurring both in the industry and within our organization. By now, we've heard from both large dealer groups and several OEM partners and we validated their comments against the market data provided by vehicle registration reporting services surrounding the Q4 and as of yesterday into January.

Speaker 2

Similar to what they reported, we saw industry wide economic pressures in November that resulted in retail sales below our expectations and has seen continued headwinds in December January as well. In the Q4, as a result, we took decisive action to increase our marketing spend and to adjust retail pricing And as a result, we saw significant improvement in sales volumes for the months of December, January February, both sequentially and year over year. Our current expectation is to report a pre tax loss for the Q1 of this year, but we anticipate being profitable and operationally cash flow positive for the full year. A liquidity perspective, Kelly and our finance team have been hard at work. They secured a $35,000,000 mortgage facility in December and more recently worked with our lender partners for additional operational flexibility with our covenants over the next few quarters as we move into the summer peak selling season.

Speaker 2

Operationally, Amber and our store leaders have been working diligently to improve the health of both our new and used inventory through disciplined management around both stocking levels and pricing actions, as well as partnering with our OEMs to obtain assistance from them wherever possible. From a cost control standpoint, we've continued to focus on finding areas of unnecessary redundant spending and have been able to reduce SG and A expense year over year despite increasing our store footprint by over 40% in 2023. In January, we also launched a complete rebranding effort with a new website, fonts, logos and colors and even a new stock symbol. We are no longer using the ticker LAZY or Lazy. Instead, we have rebranded as GORV or GO RV, which is more action inspired and true to our culture to facilitate helping our customers find the freedom to be outdoors and do the things they love, however they use their RV.

Speaker 2

Importantly, these rebranding efforts will enhance our digital retail experience, particularly on mobile devices, which account for over 80% of our website traffic every day. In terms of corporate development, as a reminder, we started 2023 with 16 locations and ended the year with 24 operating dealerships. Earlier this week, we announced the opening of our last Greenfield location, but has been development since all the way back in 2021 in Arizona, bringing our current store count to 25. Finally, we remain focused on driving integration with our newly opened or acquired locations and anticipate less acquisition activity in 2024 compared to last year. But we will still continue to look for attractive opportunities both on a tuck in and strategic basis.

Speaker 2

Given the depressed macro environment and significant number of stores we've added over the past year, we understand it can be difficult to calibrate the underlying earnings power of our business. To that end, we want to provide a picture of what we believe the business looks like in a normal year. As we think about our business in a mid cycle environment, we're confident in our ability to generate over $1,500,000,000 in annualized revenue, while delivering a high single digit EBITDA margin. While this is a challenging time for the inventory or for the industry, excuse me, strongly believe we are well positioned for 2024 and beyond with a solid balance sheet, healthy inventory, fantastic retail locations, strong operators and incredible brands. With that, I'll turn the call over to Amber.

Speaker 3

Thanks, John, and good morning, everyone. Beginning in November, laser focused on improving the health of our inventory as it became clear that we needed to maximize every retail transaction we could. From the low level of sales in November, we sold more units in December, January February, both sequentially and year over year. Furthermore, gross profit improved from December to February and current model year units are a greater percentage of our sales mix, meaning we are generating more gross profit dollars overall. As a result, I am pleased with the health of our inventory as of today and feel we are very well positioned as we move into the spring summer selling season and prepare for the 2025 model year changeover.

Speaker 3

To put things in perspective, in early November, we had around 12022 model year units and over 20 2023 model year units in stock. As of yesterday, we were down to 17 20 22 units and just over 750 2023 units remaining. Overall, more than 80% of our inventory is current model year, and we are well positioned to maintain the inventory health we have spent the last 4 months diligently working on. We believe we have an incredibly healthy inventory position relative to the industry at the current time. We received amazing support from many of our OEM partners as they have contributed additional incentive dollars to help us to continue to deliver units.

Speaker 3

We are stretching to make every retail sale we can and to overcome some of the industry headwinds associated with higher interest rates, negative equity and lower consumer demand given the post COVID sales environment. We have also made the strategic decision to emphasize a faster turn and higher volume by more aggressively adjusting pricing on new units and expanding our lower price point product offerings. We know our OEM partners appreciate the focus to deliver more sales volume and increased velocity, both as it helps to achieve their volume objectives as well as incremental F and I attachment and downstream service work as we increase units and operations in the markets we serve. Thankfully, our OEM partners remain disciplined in terms of production levels and have matched their output to consumer demand. Maintaining the right balance of healthy inventory levels at the dealership level, while still keeping plants in production is critical to the partnership we have with our OEMs and we appreciate them for it.

Speaker 3

Additionally, we have to continue to emphasize our used vehicle procurement function to augment the units we receive via a trade in from customers. We have an incredible team of buyers that has been able to source high demand units that allow us to provide consumers with a more affordable price point while maintaining healthy gross margins upon sale. We believe there is even more opportunity to increase the volume of units we source in the market and have increased our marketing spend in this area to drive more leads and conversion. Over the past 180 days, we've made substantial leadership changes in our store network, both due to new locations as a result of dealership and opening greenfield locations and to address underperforming store leadership. We remain relentless on finding the optimum general manager talent pool and are working to further develop and enhance the caliber and capabilities of our most crucial resource, our people.

Speaker 3

We continue our efforts around external recruiting and internal promotion to source world class operational talent across the country. In closing, I want to thank our team, especially our store personnel. They come to work each day with a singular mission to provide the best sales and service experience in the industry. Importantly, they have responded to the current industry environment with optimism and determination, and we are making significant progress every day, week and month as we continue to focus on 2024. With that, I'll turn the call over to Kelly.

Speaker 1

Thank you, Amber. Please note that unless stated otherwise, the 2023 Q4 comparisons are versus the same period in 2022. Total revenue for the quarter was $198,000,000 a decrease of 18.7%. Total revenue for the full year was $1,100,000,000 a decrease of 18.4 percent over the prior year. From this point on, all metrics will be on a same store basis unless otherwise stated.

Speaker 1

New unit sales declined 26% in the quarter and gross profit per unit excluding LIFO declined 31.6%. Used retail unit sales increased approximately 1% and gross profit per unit decreased 30.2%. Finance and insurance revenue declined 31.3% during the quarter, primarily due to a decrease in unit volume combined with higher charge backs. Our service body and parts revenue decreased 20.1 percent and our gross profit decreased by 26.3%. Our gross margin on service body and parts decreased 4.50 basis points.

Speaker 1

During the quarter, we reduced total adjusted SG and A expense by 1 point $1,000,000 despite increasing our network from 16 locations to 24 year over year. Adjusted net loss was $13,800,000 for the quarter compared to net income of $936,000 last year. Adjusted fully diluted earnings per share was a loss of $1.09 for the quarter compared to a net loss per diluted share of $0.02 in the prior year. Moving on to liquidity and capital allocation. As of year end, we had $58,000,000 of cash and we remained operationally cash flow positive during the 4th quarter and for the full year.

Speaker 1

On December 29, we closed on a $35,000,000 mortgage facility secured by approximately $110,000,000 of owned real estate. The facility has a 3 year term and is structured to allow us to obtain alternative financing on a location by location basis with other lending partners. We estimate that we can generate an additional $47,500,000 in mortgage loan proceeds by refinancing these properties at a 75% loan to

Speaker 2

value rate similar

Speaker 1

to other properties we financed during 2023. In addition, we have other unencumbered real estate that we estimate can provide additional liquidity of $18,000,000 Working with our syndicated lenders, we received a waiver of our financial covenants for the Q4 of 2023 as well as the 1st 2 quarters of 2024 with modified thresholds for the Q3 and a return to our standard covenant package as of the end of 2024. I want to thank our syndicated lenders led by M&T Bank for their partnership to allow us the room to navigate the current economic environment and focus on improving operating results throughout 2024. Now I'll turn the call back over to John for some closing comments.

Speaker 2

Thanks, KP. So in summary, we feel well positioned for the remainder of the year based on the financial and operational actions we have taken in response to the current environment. I'd like to leave you with 4 main points. First, we have significantly improved the health of our inventory and have more than 80% of our new units in the current model year. 2nd, we're operationally cash flow positive year to date and expect to be profitable and operationally cash flow positive for the remainder of this year.

Speaker 2

3rd, as of today, we have liquidity of $45,000,000 which is actually $13,000,000 higher than where we were at the end of the Q3 of last year. And finally, we sold more units in December, January February, both sequentially and year over year and anticipate further improvement in March based on early results this month. We've also seen increasing gross margin on the current model year product. These trends increase our conviction that we are well positioned as we move into a seasonally stronger spring and summer selling season. With that, we're happy to open up the call and take some questions.

Operator

Thank you. We'll now be conducting a question and answer session. Our first question is coming from Daniel Moore from CJS Securities. Your line is now live.

Speaker 4

Good morning, John. Good morning, Kelly. Amber, thanks for taking the questions and all the color. Maybe start with just a the sequential improvement in shipments that we saw from December through February now into March. Can you maybe just delineate a little bit between kind of higher end motorized and 5th wheels versus lower priced entry level travel trailers?

Speaker 4

And whether there was much of a difference in the cadence or the rate of improvement between kind of new and used units as well?

Speaker 2

Nice to hear from you. Thanks for the question. I think in general, motorized has been a little bit weaker than towable. And when we look at the market data and compare that to our results, we're certainly probably a more concentrated motorized dealer as a historical kind of reference point than the broader industry. And I would say that our experience has been similar.

Speaker 2

We've seen a more I would say a more healthy recovery on the lower end and with the total product than we have on the motorized side. And within motorized, I would say the Class As in particular have been probably where we've seen additional weakness relative what the market is. Now we're still selling them. There's still definitely customers that are interested in them. But overall, I would say they were the motorized piece was probably the last to roll over at the end of COVID and has been slower to recover as we come out of that and we've seen probably more recovery at the lower end, which I think is consistent with what we've heard from other dealers.

Speaker 2

And we're not really any different, but all of them were better and we saw improvement in all categories sequentially each month.

Speaker 4

Certainly consistent with what we're hearing as well. That's helpful. And then you touched on it at the end of the prepared remarks. Obviously, you're seeing improvements in gross profit per unit. But maybe just talk about your expectations for gross profit per unit on new and used for Q1 sequentially relative to what we just saw in Q4 and how we should think about the cadence throughout the year embedded in the expectation of being I believe the expectation is to be net income positive for the year.

Speaker 4

So just how you see that playing out? Thanks.

Speaker 2

Sure. I mean, I first want to definitely comment on the used piece, but I think that's a very astute observation for you to bring up. Amber's team and the buyers led by Red and his crew has done a phenomenal job. And I would say over the last 5, 6 months, we've seen a pretty marked improvement in our ability to go source used vehicles as a result of our centralized buying efforts. Remarks, we've ramped up our marketing spend to really aggressively go after that.

Speaker 2

And you've seen, I would say, better margins on the used vehicle side as a result of those efforts. And we had some legacy buying decisions that we had to work through at the end of last year and that depressed our used vehicle margins as we move through some of those aged pieces and decisions that have been made a number of months before we really had to at some of those things. And what I would say more recently is that continues to be a really healthy avenue for us where we can find some of those key pieces for operating profit and we're leaning into that pretty heavily. On the new vehicle side, as we get into the 24s, the margins look really good. There's not anything that would indicate to me that there is inventory is healthy.

Speaker 2

I think what we've been dealing with is the fact that our inventory, we had some pools of it that got a little bit unbalanced and we had to work through those. And we did that through the pricing actions that we needed to take and thankfully we got some really good incentives from some of our OEM partners that helped a ton. And I think our inventory looks really good and we were looking at it yesterday and obviously preparing for this call and are very, very pleased with where it is and think it's probably among the healthiest that's out there, especially when we look at other larger dealer groups and you can go in there and filter by year as many investors do. We do the same thing. And I would say if you go look at ours, we feel really good about where things sit and we're well positioned.

Speaker 2

And as we move into March and then into the second quarter, the mix is going to continue to improve into the more balanced 2024s. And then eventually, as we get into the summer in July, we'll see the 2025s really start to hit and be delivered and we feel like that's positioned well. So, I think the probably the punch line here is that we recognize like many people in the industry do as the expression goes, your first loss is your best one. We had some inventory that we needed to discount into the Q4 and into January February and we did that. And we saw nice improvement in terms of our February gross profit even despite the fact that our mix was definitely skewed toward more prior model year than we're going to see in March and then beyond and feel like we're in good shape as we go forward.

Speaker 2

We're operating 25 locations now. I'm really happy with the composition of our stores. We've made a bunch of decisions in terms of capital investment to really position our stores for scale. You're not going to see us operate facilities that are smaller. We look for bigger revenue opportunities in really key markets.

Speaker 2

And we've got, I think, some operational leaders that we've really tried to think about how to find the optimum balance of those GMs that we can look for that really are going to take us to the better performance that we think is out there. And as we're excited for 2024 and we think that we can have a profitable year and certainly operationally cash flow positive year. And as our CapEx really starts to drop off and most of those investments are behind us, that's going to continue to build our liquidity position and allow us then to pick our head up and look for more acquisition opportunities as we think about the rest of this year. And so that's going to be exciting and we can't wait to show that to you guys.

Speaker 4

Great. Appreciate the color. Maybe just one more on that line of thought that string of thought, but the attachment rates of procuring used units or trade ins attached to the new and used unit sales, obviously, a big focus for you. Steady increasing, any color in terms of momentum that you are having on that end as well? Thanks.

Speaker 4

And I'll jump back with any follow

Operator

ups. Thanks.

Speaker 2

It's interesting. I'm used to automotive and in general, you'd probably expect 75% of the vehicles you sell to have a trade in and that's not the case in RV, it's lower. And I would say what we saw in 2023 was an even lower than normal percentage. And if normal is rough justice, 40% of the units we sell would have a trade. I mean, we were seeing low 30s in terms of the trade ratio on the new vehicle sale.

Speaker 2

And some of that's first time buyers and different reasons. But we also really think negative equity was a big issue. And if anybody bought a unit in 2020 or 2021, they paid probably full price and financed it at a 3 handle interest rate and all of a sudden now you're looking at current model year stuff is discounted 10% or 15%. And if you're willing to go to a prior model year, you can find stuff at 35%, 40% discounted out there. And that helps in terms of affordability, but the flip side of that is you get negative equity because what you're trading in obviously is going to be reduced commensurate because if you can buy a new one for a discount, the used ones are worth less too.

Speaker 2

And that was reflected in what we saw in terms of the NADA guide and the book changes that came out at year end and that sort of thing. And we were really careful. And I think in January in particular, we really slowed down our purchasing to try to anticipate the fact that this was coming. And more recently, we've been able to take some stuff to auction. We've seen some decent pricing in terms of the wholesale market.

Speaker 2

And I would say demand is coming back. And in addition, I would say, we're not the only dealer that's been dealing with these situations and there's a lot of private guys that aren't buying stuff right now or frankly can't buy stuff right now. And so that gives us an opportunity if we can play in that wholesale market and buy stuff direct from consumer to find some pretty attractive stuff if we're judicious. And so we've ramped up February, it was significantly higher than January. I think March is going to be even better.

Speaker 2

And as I mentioned earlier, Amber and Red and the team are really leaning into that to augment the trade ratios that we're seeing, which are back up in the 40% range in terms of the new vehicle sales. And that's all kind of found opportunity in terms of retail sales we can go get and is a big focus for us. So I think you're going to see hopefully more consistent performance on the used vehicle side. We certainly believe there's a ton of opportunity there and you hit that affordability price point for some consumers that are probably on the sidelines in terms of the new market. We kind of see where interest rates end up and we continue to see OEMs get some pricing concessions, which hasn't happened in motorized.

Speaker 2

The biggest cost for motorized is on the chassis side, as you know, Dan, and the producers of those chassis are taking price increases yet still. And so that's been one of the things that's been, I think, an affordability question and that's where the used market lets us really come in and try to meet that consumer demand and we're excited about that.

Operator

Thank you. Our next question is coming from Mike Swartz from Truist Securities. Your line is now live.

Speaker 5

Hey, guys. Good morning. Maybe John, just to start with your commentary around mid cycle and I think you had thrown out $1,500,000,000 in revenue on your current store base and high single digit EBITDA margins. But help us think about how we get there in terms of new used product margins and maybe just SG and A as a percentage of broad kind of maybe give us a sense of the just the broad kind of building blocks of how you get there?

Speaker 2

Sure. Good to hear from you, Mike. Thanks for the note this morning. Nice to see you picking up and following us. Appreciate that very much.

Speaker 2

I think we've talked about a couple of pillars and I'm glad you brought up SG and A. I'll talk about that in a moment because it's really important and pretty I think structurally different than what the team here inherited 6 or 12 months ago. But in general, I want to start with the stores that we operate. What you're not going to see us do is operate some dirt lot somewhere in rural Florida and try to sell a bunch of used units or something like that. It just isn't our play.

Speaker 2

That's not what we do. And there's nothing wrong with that. That's fine. You can make a business around it and there's certainly demand for that. But what we really believe is that this is an intended purchase.

Speaker 2

This is something that customers have saved their entire lives for buying a $1,000,000 Class A bus or a $50,000 5th wheel. This is a meaningful and important investment that is their hobby, their dream, something they're doing for their lifestyle and we want the experience to reflect that. And so when I look at our 25 locations, I'm really proud of what we have, which is a fantastic brand, a great reputation and a team that really is trying to go above and beyond deliver an exceptional customer experience. What that also does is gives us a minimum revenue size of I'm going to say on average $50,000,000 So if you just take $50,000,000 of route, dollars 5,000,000 you get $1,200,000,000 in revenue. We obviously have Tampa, which is the big mother ship and that's probably equivalent to 4 or 5 dealerships.

Speaker 2

And so you can pretty easily triangulate to a $1,500,000,000 plus in terms of revenue in a normal operating environment. And we've had a couple of smaller stores. We closed the store late last year in rural Indiana, a suburb of Gary. And it was like a $20,000,000 roof. And what we did is consolidate it into our Elkhart store.

Speaker 2

And I'll give a shout out to Chip Gore, our GM in Elkhart. He's doing a phenomenal job of really improving operations and kind of the mecca of RVs. And we look at a store like that and it's easily a $45,000,000 $50,000,000 roof even in Elkhart, Indiana. So, the first thing for us is we want to operate meaningful stores of size and scale, which we think allows us to have a better customer experience, but also attracts higher caliber leaders and better operators because the income opportunities are greater. There's basically more swings at the back if you think of it that way.

Speaker 2

And you can run more of a volume play and have a great service operation to move both new and used units and then put them in operation and fix them as they need maintenance and repair. So that's probably the top line piece. I don't think we have any secret sauce in terms of gross margin. If you look at blended gross margin of 21%, 22%, that's pretty typical and I think that's what you're going to see from us. And if anything, as Amber talked about, we're going to continue to focus on the volume side of things, both because it's good for our OEM partners and also because it allows us more touches with consumers, more F and I attachment and importantly more service work downstream.

Speaker 2

So that's probably the rudimentary model to think about, which is, hey, we're going to run these roofs, each one of them is going to be $45,000,000 $50,000,000 minimum and the gross margin contribution should be 20%, 25%, somewhere in there. And then SG and A, which you pointed out, I'm really impressed with our 4th quarter SG and A and I don't want to blow by that. I mean, we were actually $1,600,000 lower in SG and A with 40% more stores. If you let that sink in for a minute, it shows you what we've been doing as a team and it's certainly not me. I mean across our organization, everybody is doing more with less and working so hard and I'm so thankful for what everyone has done because it's been a challenge and we've found tons of opportunity and regrettably we've had to make some difficult decisions and we've had to downsize in certain circumstances, but we've also been investing and we've been growing the team in other areas to really prepare ourselves for the future.

Speaker 2

And it's no different. I mean, look at January results, January, I think we were down 10% in SG and A for the month year over year. And again with 9 more stores in full than we had in the prior January. And so, what we've been able to do is really rationalize and optimize what I would say were frankly some investment decisions in the past that I disagree with. And I think we've seen that play out and we're going to continue to see it play out.

Speaker 2

And so what that means from a modeling perspective is and I appreciate what Marcus said on his call, I'll certainly pay attention to him. I think he talked about being in the low 70% range and I don't see any reason why structurally we wouldn't be there or better. And I go back to my automotive days and remember thinking sub-seventy SG and A in the dealership model, it was never going to be possible. And if you look at the public auto groups today, they all do in the low 60s. So I don't know what's possible.

Speaker 2

We can dare to dream a little bit. I don't want to get too far over my skis. Let's start with putting together a profitable year and some operational cash flow and continuing to scale our business with meaningful dealerships and we'll let the chips fall. I don't see any reason that we can't be in the low 70s to start with and then hopefully we can do better than that over time.

Speaker 5

Okay. That's helpful. And just a point of clarification on, I guess, how the first quarter has played out. I mean, is the expectation that comparable units and unit margins would be up year over year just based on what you're seeing today?

Speaker 2

Unit volume will be up for sure in absolute terms. On a same store basis, I think the jury is still out. We've seen some mixed results there, to be frank. The market is still down. You saw the stat survey data that came out yesterday.

Speaker 2

I think the market was off 19% from memory. I don't have the numbers right in front of me, but that's real time industry data and we're not any different. I wish we had some special sauce that would allow us to do things differently than what the market is, but that's kind of the environment we're operating in. And I think in general, what we've seen is improvement in our volume every month and the operators and Amber's teams are looking at pricing and volume and we're getting support from OEMs. And so the trends have been positive.

Speaker 2

We're what 9 days into March. So it remains to be seen in terms of where March is going to end up. And as you know, the Q1 is hard to predict because March is such an important piece of it. January is not the best month and then February is short and then you come into March and you do some shows and the weather changes and things start to pick up. So, I think what we are comfortable saying is that we think unit volumes are going to be up.

Speaker 2

We're continuing to work through our inventory and as 2024 has become a greater part of the mix, you're going to see margin improve. I probably wouldn't get heroic in terms of margin improvement assumptions in the Q1. And I think from our perspective, we're going to get through this and we're operationally cash flow positive, which is exciting and it's going to prepare us for the Q2 and a lot of our stores in the north are going to then wake up and see that spring and summer selling season and it should really accelerate from there.

Speaker 5

Okay, great. Thank you so much.

Operator

Thank you. Next question is coming from Griffin Bryant from D. A. Davidson. Your line is now live.

Speaker 6

Yes, thanks. So it seems like you're getting some OEM promotional support here in Q1. Can you just talk about the magnitude of those promotions and maybe break that out by towables versus motorized?

Speaker 2

Well, good to hear from you. Thanks for the call, Griffin. I think we want to be careful here. Obviously, there are different OEM promotions that you can see, right. And in certain circumstances, you see OEMs that are putting consumer tasting rebates on units, which isn't necessarily typical, but you'll see that advertised on our website from time to time and those are things that we can dangle in front of the consumer if they're willing to buy a particular unit on the motorized piece in particular, we've seen some of those.

Speaker 2

We've seen some promotions from other OEMs motorized and towable as well that are consumer facing. And then the flip side of that is the dealer facing rebates and what we would call in the industry as a march. And some of those are predicated off of a reorder. So it's like, hey, we're going to sell this 2023, can you give us some incentive? And they're like, sure, we can do that if you order at 2024.

Speaker 2

So some of that is predicated off of a reorder, but we've seen support across the board. It's been over many brands and to be frank with all of our key partners, they've really stepped up and I don't want to name all of them specifically and I don't want to get into the details in terms of dollar value. But I would say in general, the industry has done a phenomenal job of 2 things. Number 1, they're not overbuilding and they recognize where the demand is for consumers and you've seen this from Thor, from Winnebago, from Forest River and beyond, right. They understand that you can't just build all this stuff and put it on dealer lots.

Speaker 2

You've seen dealers stocking down, which is good. And then they've been helping financially and you saw some erosion in gross margin from some of the publics that have reported on the OEM side because they have been incentivizing. So I'm going to probably leave it there and just say that we're very thankful for the support we get from the OEMs. It's been appreciated and those partnerships are paramount to what we do and we thank every one of them for it.

Speaker 6

I appreciate that. Thank you. And then, total results this week saying that deal performance has been mixed this year. So, I guess my question is, are you seeing anything from a geography standpoint for your dealerships and maybe any regions that might be outperforming or underperforming on a year over year basis?

Speaker 2

Good question. Just trying to do a quick inventory in my head. I think there's obviously the seasonal component for us. Our mix is different than probably what you'd see industry wide because of our concentration in Arizona and Florida, which are markets that have some counter seasonality relative to the broader demand curve that's typically going to be April to July. And I'd say that's held true this year.

Speaker 2

Florida was definitely stronger. Florida like the rest of the country was weaker year over year. We do our big super show in Tampa and it was not as strong as last year. It just wasn't. Attendance was down, I think marginally at that event and our sales were down as well, which is not inconsistent.

Speaker 2

And that's what we heard from others, both OEMs and the dealers that we talked to that are willing to share some of that information and intelligence with us. So I wouldn't say there's any pockets to highlight that are tremendously different than what you've seen overall. The market's been down, I would say low double digits pretty much across the board. We had a trade show up in Milwaukee and a shout out to our store up in Wisconsin that was at that trade show. Amber and I went and visited the floor last week.

Speaker 2

I think we saw again a decline year over year, call it like low single low double digits, excuse me, but that was kind of in line with the tenants. So I think overall, we haven't seen any particular divergence geographically. It's just the market that continues to anniversary these difficult comps. I think by the time we get into the Q2, that's going to be mostly behind us and then we should start to hopefully see some positive comps year over year finally, which is my whatever 19th month here and I can't wait for some positive comps to finally come. I feel like we always got done and dealt with the declining market as we got through the COVID piece.

Speaker 2

And I think we're doing everything we can to be well positioned for the summer and we're optimistic that the market is going to recover. And hopefully we get some interest rate relief from the Fed on the back end of things and things pick up, which is what RVIA and a lot of the OEMs that are smarter than me are talking about. So we'll see.

Speaker 6

Got it. And then just lastly, so you mentioned that you're seeing continued inflationary pressures from suppliers and chassis. So I guess, are you just spotting any chance of some relief there as the affordability issues still seems to be front and center for consumers and then still having higher for longer interest rates?

Speaker 2

Yes. I think it's I always think it's dangerous when you say it's different this time. And if you look at the industry in industry in general, there was all this discussion around just in time dealer inventory and how lots were not going to be stopped the way they were pre COVID and everybody realized that delivering inventory to consumers that match the demand that was there was amazing. But no OEM goes into their board and says, hey, we're going to seed X percent share to this electric vehicle manufacturer this year. So the reality is the capital cycle is much longer than the consumer demand curve can be anticipated.

Speaker 2

And as a result, I think you're going to see inventory levels recover, which is what's been happening. And if you look at dealers for the most part, day supply is back up and it's continuing to be that way. And as the Fed continues to drown inflation here with higher interest rates, I think you're seeing consumer demand start to peter off a bit. And that means that stocks are improving. And so by extension, what's going to happen is the OEMs are going to start to prioritize the other distribution channels, be it rental cars or be it chassis that they're giving to RV manufacturers or whatever.

Speaker 2

And I think as that happens, you're going to see price relief. I'm not sure that we're quite there yet. And so I think you've seen some chassis increases that have come, but my expectation is that as these retail channels that are the highest profitability, places that OEMs can put product start to slow down a bit and as those inventories normalize, then you're going to see the natural regression as these OEMs look for places that they can put chassis in. And I was in Elkhart last week and I can tell you there are plenty of E vans parking deals around there. So I think you're starting to see some of that and my expectation is that will help.

Speaker 2

I don't think we've seen it yet.

Speaker 6

Appreciate it. Thank you.

Operator

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over for any further or closing comments.

Speaker 2

Appreciate everybody's interest. Thanks to the team for a phenomenal effort and we look forward to continuing to update you as we move through 2024. Thanks.

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.

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Earnings Conference Call
Lazydays Q4 2023
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