LAZYDAYS HOLDINGS, INC. The following should be read together with our financial statements and related notes included in Part I, Item 1 of this Form 10-Q, as well as our Annual Report on Form 10-K filed with theSecurities and Exchange Commission onMarch 1, 2023 . Disclosure Regarding Forward Looking Statements Certain statements in this Quarterly Report on Form 10-Q (including but not limited to this Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations") constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including, without limitation, statements regarding the impact of the COVID-19 pandemic on our business, results of operations and financial condition, our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are "forward-looking" statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate" or "continue" or the negative of such words or variations of such words and similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements, and we can give no assurance that such forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, or "cautionary statements," include, but are not limited to: •Future market conditions and industry trends, including anticipated national new recreational vehicle ("RV") wholesale shipments; •Changes inU.S. or global economic conditions; •Changes in expected operating results, such as store performance, selling, general and administrative expenses ("SG&A") as a percentage of gross profit and all projections; •Our ability to procure and manage inventory levels to reflect consumer demand; •Our ability to find accretive acquisitions; •Changes in the planned integration, success and growth of acquired dealerships and greenfield locations; •Changes in our expected liquidity from our cash, availability under our credit facility and unfinanced real estate; •Compliance with financial and restrictive covenants under our credit facility and other debt agreements; •Changes in our anticipated levels of capital expenditures in the future; •The repurchase of shares under our share repurchase program; and •Our business strategies for customer retention, growth, market position, financial results and risk management.
Overview
We operate recreational vehicle ("RV") dealerships and offer a comprehensive
portfolio of products and services for RV owners and outdoor enthusiasts. We
generate revenue by providing RV owners and outdoor enthusiasts a full spectrum
of products: RV sales, RV repair and services, financing and insurance products,
third-party protection plans, after-market parts and accessories and RV camping
facilities. We provide these offerings through our Lazydays branded dealerships.
Based on industry research and management's estimates, we believe we operate the
world's largest RV dealership, measured in terms of on-site inventory, located
on 126 acres outside Tampa, Florida . We also have dealerships located at The
Villages, Florida ; Tucson and Phoenix, Arizona ; two near Minneapolis, Minnesota ;
Knoxville , Nashville and Maryville, Tennessee ; Loveland and Denver, Colorado ;
Elkhart and Burns Harbor, Indiana ; Portland, Oregon ; Vancouver, Washington ;
Milwaukee, Wisconsin ; Tulsa, Oklahoma , and Las Vegas, Nevada . Additionally,
Lazydays has operated a dedicated Service Center located near Houston, Texas
since early 2020, which was expanded to include a sales center in the fourth
quarter of 2022.
Lazydays offers one of the largest selections of leading RV brands in the
nation, featuring more than 4,000 new and pre-owned RVs. We have more than 575
service bays, and each location has an RV parts and accessories store. We employ
approximately 1,500 people at our nineteen dealership locations. Our locations
are staffed with knowledgeable local team members, providing customers access to
extensive RV expertise. We believe our locations are strategically located in
key RV markets. Based on information collected by us from reports prepared by
Statistical Surveys, these RV markets (Florida , Colorado , Arizona , Minnesota ,
Tennessee , Indiana , Oregon , Washington , Wisconsin , Oklahoma and Texas ) account
for a significant portion of new RV units sold on an annual basis in the U.S.
Our dealerships in these key markets attract customers from all states, except
Hawaii .
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We attract new customers primarily through Lazydays dealership locations as well
as digital and traditional marketing efforts. Once we acquire customers, those
customers become part of our customer database where we leverage customer
relationship management tools and analytics to actively engage, market and sell
our products and services.
Results of Operations
Three months ended March 31,
(In thousands, except per vehicle data) 2023 2022 Change % Change
Revenues
New vehicle retail $ 176,747 $ 217,436 $ (40,689) (18.7) %
Pre-owned vehicle retail 84,775 116,500 (31,725) (27.2) %
Vehicle wholesale 1,708 6,524 (4,816) (73.8) %
Finance and insurance 16,881 21,635 (4,754) (22.0) %
Service, body and parts and other 15,545 14,066 1,479 10.5 %
Total revenues $ 295,656 $ 376,161 $ (80,505) (21.4) %
Gross profit
New vehicle retail $ 23,416 $ 44,831 $ (21,415) (47.8) %
Pre-owned vehicle retail 17,247 28,217 (10,970) (38.9) %
Vehicle wholesale (13) (55) 42 (76.4) %
Finance and insurance 16,188 20,938 (4,750) (22.7) %
Service, body and parts and other 8,364 7,346 1,018 13.9 %
LIFO (1,311) (2,460) 1,149 (46.7) %
Total gross profit $ 63,891 $ 98,817 $ (34,926) (35.3) %
Gross profit margins
New vehicle retail 13.2 % 20.6 % (740) bps
Pre-owned vehicle retail 20.3 % 24.2 % (390) bps
Vehicle wholesale (0.8) % (0.8) % - bps
Finance and insurance 95.9 % 96.8 % (90) bps
Service, body and parts and other 53.8 % 52.2 % 160 bps
Total gross profit margin 21.6 % 26.3 % (470) bps
Total gross profit margin (excluding
LIFO) 22.1 % 26.9 % (480) bps
Retail units sold
New vehicle retail 1,980 2,270 (290) (12.8) %
Used vehicle retail 1,304 1,478 (174) (11.8) %
Total retail units sold 3,284 3,748 (464) (12.4) %
Average selling price per retail unit
New vehicle retail $ 89,266 $ 95,787 $ (6,521) (6.8) %
Used vehicle retail 65,012 78,823 (13,811) (17.5) %
Average gross profit per retail unit
(excluding LIFO)
New vehicle retail $ 11,826 $ 19,749 $ (7,923) (40.1) %
Used vehicle retail 13,227 19,091 (5,864) (30.7) %
Finance and insurance 4,929 5,586 (657) (11.8) %
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Same Store Results of Operations We believe that same store comparisons are an important indicator of our financial performance. Same store measures demonstrate our ability to grow operations in our existing locations.
Same store measures reflect results for stores that were operating in each comparison period, and only include the months when operations occurred in both periods. For example, a store acquired inFebruary 2022 would be included in same store operating data beginning inMarch 2023 , after its first complete comparable month of operations. The first quarter operating results for the same store comparisons would include results for that store in only the month of March for both comparable periods. Three months ended March 31, ($ in thousands, except per vehicle data) 2023 2022 Change % Change Revenues New vehicle retail$ 167,966 $ 217,436 $ (49,470) (22.8) % Pre-owned vehicle retail 81,961 116,500 (34,539) (29.6) % Vehicle wholesale 1,708 6,524 (4,816) (73.8) % Finance and insurance 16,129 21,635 (5,506) (25.4) % Service, body and parts and other 14,950 14,066 884 6.3 % Total revenues$ 282,714 $ 376,161 $ (93,447) (24.8) % Gross profit New vehicle retail$ 22,336 $ 44,831 $ (22,495) (50.2) % Pre-owned vehicle retail 16,672 28,217 (11,545) (40.9) % Vehicle wholesale (13) (55) 42 (76.4) % Finance and insurance 15,466 20,938 (5,472) (26.1) % Service, body and parts and other 8,032 7,346 686 9.3 % LIFO (1,311) (2,460) 1,149 (46.7) % Total gross profit$ 61,182 $ 98,817 $ (37,635) (38.1) % Gross profit margins New vehicle retail 13.3 % 20.6 % (730) bps Pre-owned vehicle retail 20.3 % 24.2 % (390) bps Vehicle wholesale (0.8) % (0.8) % - bps Finance and insurance 95.9 % 96.8 % (90) bps Service, body and parts and other 53.7 % 52.2 % 150 bps Total gross profit margin 21.6 % 26.3 % (470) bps Total gross profit margin (excluding LIFO) 22.1 % 26.9 % (480) bps Retail units sold New vehicle retail 1,841 2,270 (429) (18.9) % Used vehicle retail 1,248 1,478 (230) (15.6) % Total retail units sold 3,089 3,748 (659) (17.6) % Average selling price per retail unit New vehicle retail$ 91,236 $ 95,787 $ (4,551) (4.8) % Used vehicle retail 65,674 78,823 (13,149) (16.7) % Average gross profit per retail unit (excluding LIFO) New vehicle retail$ 12,132 $ 19,749 $ (7,617) (38.6) % Used vehicle retail 13,359 19,091 (5,732) (30.0) % Finance and insurance 5,007 5,586 (579) (10.4) % 24
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Revenue and Gross Margin Discussion
New Vehicles Retail We offer a comprehensive selection of new RVs across a wide range of price points, classes and floor plans, from entry level travel trailers to Class A motorhomes, at our dealership locations and on our website. We have strong strategic alliances with leading RV manufacturers. The core brands that we sell, representing 99.9% of the new vehicles that we sold in the first quarter of 2023, are manufactured by Thor Industries, Inc., Winnebago Industries, Inc., andForest River, Inc. Under our business strategy, we believe that our new RV sales create incremental profit opportunities by providing used RV inventory through trade-ins, arranging of third-party financing, RV service and insurance contracts, future resale of trade-ins and parts and service work. New vehicle revenue decreased$40.7 million , or 18.7%, in the first quarter of 2023 compared to the same quarter of 2022 due primarily to a 12.8% decrease in units sold and a 6.8% decrease in average selling price per retail unit. The decrease in units sold was primarily due to a contracting market after coming off a year of all time highs. The decrease in average selling price per retail unit was primarily due to a shift towards more towable units and less high price-tag motorized units. New vehicle gross profit decreased$21.4 million , or 47.8%, in the first quarter of 2023 compared to the same quarter of 2022 due primarily to less units sold and 740 basis point decrease in gross margins. The decline in gross margins was primarily driven by discounted pricing of 2022 new vehicle model year units.
On a same store basis, new vehicle retail revenue decreased
New vehicle retail gross profits on a same store basis decreased$22.5 million , or 50.2%, in the first quarter of 2023 compared to the same quarter of 2022 due primarily to less units sold and a 730 basis point decrease in gross margins. Although supply chain and inventory continued to normalize in the first quarter, our stores continued discounted pricing on 2022 new vehicle model year inventory to limit the percentage of previous model year inventory by year end. We ended the first quarter of 2023 with approximately 87% of our inventory as current model year. Pre-Owned Vehicles Retail Pre-owned vehicle retail sales are a strategic focus for growth. Our pre-owned vehicle operations provide an opportunity to generate sales to customers unable or unwilling to purchase a new vehicle, to sell models other than the store's new vehicle models, access additional used vehicle inventory through trade-ins and increase sales from finance and insurance products. We sell a comprehensive selection of pre-owned RVs at our dealership locations. We have established a goal to reach a used to new ratio of 1:1. Strategies to achieve this target include reducing wholesale sales, procuring additional used RV inventory direct from consumers and selling deeper into the pre-owned RV spectrum. We achieved a used to new ratio of 0.67 :1 in the first quarter of 2023. Pre-owned vehicle retail revenue decreased$31.7 million , or 27.2%, in the first quarter of 2023 compared to the same quarter of 2022 due primarily to a 11.8% decrease in retail units sold and a 17.5% decrease in average selling price per retail unit. The decrease in retail units sold was primarily due to a contracting market after coming off a year of all time highs. The decrease in average selling price per retail unit was primarily due to a shift towards more towable units and less high price-tag motorized units, along with dealer discounts. Pre-owned vehicle retail gross profit decreased$11.0 million , or 38.9%, in the first quarter of 2023 compared to the same quarter of 2022 due primarily to less units sold and a 390 basis point decline in gross margins. The decline in gross margins was primarily due to supply normalizing after increased demand during 2022 saw inventories depleted, which led to higher margins in 2022. On a same store basis, pre-owned vehicle retail revenue decreased$34.5 million , or 29.6% due to a 16.7% decrease in average selling prices and a 15.6% decrease in retail units sold. Pre-owned vehicle retail gross profits on a same store basis decreased$11.5 million , or 40.9% in the first quarter of 2023 compared to the same quarter of 2022 due primarily to the decrease in units sold and a 390 basis point decrease in gross margins. 25 -------------------------------------------------------------------------------- Table of Contents Finance and Insurance We believe that arranging timely financing is an important part of providing access to the RV lifestyle and we attempt to arrange financing for every vehicle we sell. We also offer related products such as extended warranties, insurance contracts and other maintenance products. Finance and insurance ("F&I") revenues decreased$4.8 million , or 22.0%, in the first quarter of 2023 compared to the same quarter of 2022 primarily due to a decrease in total retail units sold of 12.4% and an 11.8% decrease in F&I per unit. The decreases in F&I per unit was driven by a decrease in penetration rate due to rising interest rates resulting in more cash buyers. On a same store basis, finance and insurance revenue decreased$5.5 million , or 25.4%, primarily due to a 17.6% decrease in units sold, as well as a 10.4% decrease in F&I per unit due to rising interest rates resulting in more cash buyers.
Certain information regarding our F&I operations was as follows:
Three months ended March 31,
Overall 2023 2022 Change % Change
F&I per unit $ 4,929 $ 5,586 $ (657) (11.8) %
F&I penetration rate 61.2 % 65.0 % (380) bps
Same store
F&I per unit $ 5,007 $ 5,586 $ (579) (10.4) %
F&I penetration rate 61.3 % 65.0 % (370) bps
Our gross margin on finance and insurance revenues is approximately 95.9%.
Service, Body and Parts With approximately 575 service bays, we provide onsite general RV maintenance and repair services at all of our dealership locations. We employ over 300 highly skilled technicians, many of them certified by theRecreational Vehicle Industry Association ("RVIA") or theNational RV Dealers Association ("RVDA") and we are equipped to offer comprehensive services and perform OEM warranty repairs for most RV components. Earnings from service, body and parts have historically been more resilient during economic downturns, when owners have tended to hold and repair their existing RVs rather than buy a new one. Service, body and parts is a strategic area of focus and area of opportunity to grow additional earnings. Our service, body and parts revenue and gross profit increased 10.5% and 13.9%, respectively, during the first quarter of 2023 compared to the same quarter of 2022 primarily due to more units in operation and an increase in warranty rates.
Our same store service, body and parts revenue increased 6.3% and our gross profit increased 9.3% during the first quarter of 2023 compared to the same quarter of 2022.
Depreciation and Amortization
Depreciation and amortization was as follows:
Three months ended March 31,
($ in thousands) 2023 2022 Change % Change
Depreciation and amortization $ 4,403 $ 4,084 The increase in Depreciation and amortization in the first quarter of 2023 compared to the same quarter of 2022 was primarily related to the increase in Property and equipment as a result of several acquisitions, the expansion of several dealerships, and opening of new stores sinceMarch 2022 . 26 -------------------------------------------------------------------------------- Table of Contents Selling, General and Administrative Selling, general, and administrative ("SG&A") expenses consist primarily of wage-related expenses, selling expenses related to commissions and advertising, lease expenses, corporate overhead expenses, transaction costs, and stock-based compensation expense, and do not include depreciation and amortization expense. SG&A expense was as follows: Three months ended March 31, ($ in thousands) 2023 2022 Change % Change SG&A expense$ 53,532 $ 56,104 $ (2,572) (4.6) % SG&A as percentage of gross profit 83.8 % 56.8 % 2,700 bps The decrease in SG&A in the first quarter of 2023 compared to the first quarter of 2022 was primarily related to decreased marketing expenses, reduced headcount and lower commissions paid due to fewer units sold. Offsetting these decreases was an impairment charge of$0.6 million related to the write-off of capitalized software that we determined we would not utilize. The increase in SG&A as a percentage of gross profit in the first quarter of 2023 compared to the first quarter of 2022 was primarily related to lower gross profit and the impairment charge mentioned above.
SG&A included stock-based compensation of
Floor Plan Interest Expense
Floor plan interest expense was as follows:
Three months ended March 31,
($ in thousands) 2023 2022 Change % Change
Floor plan interest expense $ 5,531 $ 976 $ 4,555 466.7 %
Of the increase in Floor plan interest expense in the first quarter of 2023 compared to the same quarter of 2022 was primarily related to increased inventory levels to normalize inventory, higher interest rates, and the flooring of inventory related to several acquisitions.
Other Interest Expense
Three months ended March 31,
($ in thousands) 2023 2022 Change % Change
Other interest expense $ 1,700 $ 1,936 $ (236) (12.2) %
The decrease in other interest expense was primarily due to the pay off of our
Mortgage loan facility and our Term loan in February 2023 for $12.1 million as
well as the purchase of our Nashville and Elkhart dealership properties in
December 2022 . These properties were previously recorded as finance leases.
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Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities represents the mark-to-market fair
value adjustments to the outstanding PIPE warrants issued in connection with our
SPAC merger in March 2018 . The decrease in the fair value of the outstanding
warrants was $0.9 million and $1.5 million for the three months ended March 31,
2023 and 2022, respectively. The fair value of the warrants fluctuated with
changes in the value of our Common stock. All of the warrants were exercised or
expired during the first quarter of 2023 and, accordingly, as of March 31, 2023 ,
no PIPE warrants remained outstanding.
Income Tax Expense
Income tax expense was as follows:
Three months ended March 31,
($ in thousands) 2023 2022 Change % Change
Income tax benefit (expense) $ 143 $ (8,973) $ 9,116 (101.6) %
Effective tax rate 34.1 % 24.1 %
The tax benefit differs from the statutory rate primarily as a result of state
income taxes and the excess tax benefits on stock awards vesting and options
exercised in the current period.
Liquidity and Capital Resources
Our principal needs for liquidity and capital resources are for capital expenditures and working capital as well as for growth through acquisitions and greenfielding. We have historically satisfied our liquidity needs through cash flows from operations, borrowings under our credit facilities as well as occasional sale-leaseback arrangements. In addition to these sources of liquidity, potential sources to fund our business strategy include financing of owned real estate, construction loans, and proceeds from debt or equity offerings. We evaluate all of these options and may select one or more of them depending upon overall capital needs and the availability and cost of capital, although no assurances can be provided that these capital sources will be available in sufficient amounts or with terms acceptable to us. As ofMarch 31, 2023 , we had total estimated liquidity of$175.1 million , including cash of$41.0 million ,$20.0 million of availability on our M&T Revolving Credit facility,$62.5 million available from undrawn floor plan capacity and our floor plan offset account. Additionally, we hold unfinanced real estate of$60.8 million that we estimate could provide liquidity of approximately$51.6 million . Cash Flow Summary Three months ended March 31, (In thousands) 2023 2022 Net (loss) income $ (276) $ 28,284 Non-cash adjustments 5,002 3,154 Changes in operating assets and liabilities (33,558) (48,871) Net cash used in operating activities (28,832) (17,433) Net cash used in investing activities (33,644) (7,896) Net cash provided by financing activities 41,838 16,767 Net decrease in cash $ (20,638) $ (8,562) Operating Activities Cash used in operating activities in the first quarter of 2023 was primarily for the build up of inventory. Inventories are the most significant component of our cash flow from operations. As ofMarch 31, 2023 , our new vehicle days' supply was 207 days which was 43 days lower than our days' supply as ofDecember 31, 2022 . As ofMarch 31, 2023 , our days' supply of pre-owned vehicles was 77 days, which was 1 day lower than our days' supply atDecember 31, 2022 . We calculate days' supply of inventory based on current inventory levels and a 90 day historical cost of sales level. We continue to focus on managing our unit mix and maintaining appropriate levels of new and used vehicle inventory. 28 -------------------------------------------------------------------------------- Table of Contents Borrowings from and repayments to the M&T Floor Plan Line of Credit related to our new vehicle inventory floor plan financing are presented as financing activities. Additionally, the cash paid for inventory purchased as part of an acquisition is presented as an investing activity, while the subsequent flooring of the new inventory is included in our floor plan payable cash activities.
To better understand the impact of these items, adjusted net cash provided by operating activities, a non-GAAP financial measure, is presented below:
Three months ended March 31,
(In thousands) 2023 2022 Change
Net cash used in operating activities, as
reported $ (28,832) $ (17,433) $ (11,399)
Net (repayments) borrowings on floor plan
notes payable (6,495) 38,066 (44,561)
Minus borrowings on floor plan notes payable
associated with acquired new inventory (4,271) - (4,271)
Plus net increase to floor plan offset account 40,000 - 40,000
Net cash (used in) provided by operating
activities, as adjusted $ 402 Investing Activities We used$19.7 million for the acquisition of one dealership in the first quarter of 2023 and$13.9 million for the purchase of property and equipment, primarily related to the construction of our greenfield locations inArizona ,Ohio andFlorida , as well as the purchase of real estate inTennessee . Financing Activities Significant financing activities included the payoff of our term and mortgage loans inFebruary 2023 of$12.1 million and the receipt of approximately$30.5 million from the exercise of warrants. M&T Credit Facility OnFebruary 21, 2023 , we amended our$369 million Senior Secured Credit Facility with M&T Bank. The material provisions of the amendment were to (i) increase the capacity under the Floor Plan Line of Credit to up to$525.0 million from$327.0 million and increase the capacity under the Revolving Credit Facility to up to$50.0 million from$25.0 million ; (ii) remove the Mortgage Loan Facility and Term Loan Facility; (iii) extend the term of the Floor Plan Line of Credit and the Revolving Credit toFebruary 21, 2027 ; (iv) lower interest rates on the Floor Plan Line of Credit and the Revolving Credit facility; and (v) remove certain guarantors.
At the time of the amendment, we paid off the
AtMarch 31, 2023 , there was$383.3 million outstanding on the Floor Plan Line of Credit at an interest rate of 6.82% and$30.0 million outstanding on the Revolving Credit Facility at an interest rate of 7.06%. We were in compliance with all financial and restrictive covenants atMarch 31, 2023 .
Inflation
We have experienced higher than normal RV retail and wholesale price increases as manufacturers have passed through increased supply chain costs in their pricing to dealers. We monitor the health of our inventory and focus on discounting prior model year units as needed. We cannot accurately anticipate the effect of inflation on our operations from possible continued cost increases, the introduction of 2024 model year units into inventory and the related pricing of those units, consumers' willingness to accept higher prices and the potential impact on retail demand and margins.
Cyclicality
Unit sales of RV vehicles historically have been cyclical, fluctuating with general economic cycles. During economic downturns the RV retailing industry tends to experience similar periods of decline and recession as the general economy. We believe that the industry is influenced by general economic conditions and particularly by consumer confidence, the level of personal discretionary spending, fuel prices, interest rates and credit availability.
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Seasonality and Effects of Weather Our operations generally experience modestly higher volumes of vehicle sales in the first half of each year due in part to consumer buying trends and the hospitable warm climate during the winter months at ourFlorida andArizona locations. In addition, the northern locations inColorado ,Tennessee ,Minnesota ,Indiana ,Oregon ,Washington andWisconsin generally experience modestly higher vehicle sales during the spring months. Our largest RV dealership is located nearTampa, Florida , which is in close proximity to theGulf of Mexico . A severe weather event, such as a hurricane, could cause severe damage to property and inventory and decrease the traffic to our dealerships. Although we believe that we have adequate insurance coverage, if we were to experience a catastrophic loss, we may exceed our policy limits and/or may have difficulty obtaining similar insurance coverage in the future. Critical Accounting Policies and Estimates There have been no material changes in the critical accounting policies and use of estimates described in our 2022 Annual Report on Form 10-K filed with theSecurities and Exchange Commission onMarch 1, 2023 .
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