Yahoo Finance Camping World Holdings, Inc. (NYSE:CWH) Q1 2024 Earnings Call Transcript
Camping World Holdings, Inc. (NYSE:CWH) Q1 2024 Earnings Call Transcript May 2, 2024
Camping World Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Ladies and gentlemen, good morning, and welcome to Camping World Holdings Conference Call to discuss Financial Results for the First Quarter of Fiscal Year 2024. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. Please be advised that this call is being recorded and the reproduction of the call in whole, or in part is not permitted without a written authorization from the company. Joining on the call today are Marcus Lemonis, Chairman and Chief Executive Officer; Brent Moody, President; Karin Bell, Chief Financial Officer; Matthew Wagner, Chief Operating Officer; Lindsey Christen, Chief Administrative and Legal Officer; Tom Curran, Chief Accounting Officer and Brett Andress, Senior Vice President, Investor Relations. I will turn the call over to Ms. Christen to get us started. Please go ahead.
Lindsey Christen: Thank you, and good morning, everyone. A press release covering the company's first quarter 2024 financial results was issued yesterday afternoon and a copy of that press release can be found in the Investor Relations section on the company's website. Management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These remarks may include statements regarding our business plans and goals, industry and customer trends, inventory expectations, the expected impact of inflation, interest rates and market conditions, acquisition pipeline and plan, future dividend payments, and capital allocation, and anticipated financial performance.
Actual results may differ materially from those indicated by these remarks as a result of various important factors, including those discussed in the Risk Factor section in our Form 10-K, our Form 10-Q, and other reports on file with the SEC. Any forward-looking statements represent our views only as of today, and we undertake no obligation to update them. Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as EBITDA, adjusted EBITDA, and adjusted earnings per share diluted, which we believe may be important to investors to assess our operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial statements are included in our earnings release and on our website.
All comparisons of our 2024 first quarter results are made against the 2023 first quarter unless otherwise noted. I'll now turn the call over to Marcus.
Marcus Lemonis: Thanks Lindsey and good morning, and welcome to our 2024 first quarter call. On today's call, the team will cover both the operational and financial highlights of the quarter, while providing comments on the exciting future ahead. As we entered the quarter, we had very specific targets to execute on, gaining market share on new, while improving year-over-year margins, the recalibration of our used inventory levels, driven by the unparalleled reduction of new pricing, open up 14 new locations and eliminate non-performing assets. The double digit same-store sales momentum and market share growth during both the first quarter and the second quarter to date, proves our thesis around demand and its interdependency on lower priced units, essentially affordability.
We continue to feel strongly about driving our efforts towards the intersection of strong demand and affordability. We expect the average selling price of new units in our company to be at or below $38,000 and could see flexibility up slightly once interest rates retreat in 2025. Consumers ultimately build their monthly financial models around monthly payments. So in addition to change in mix and average selling price, we continue to be successful in working with retail lending partners in a higher rate environment to provide intelligent and thoughtful solutions around financing. This strategy has led to delivering another successful quarter, both in finance income and product penetration, which ultimately enhances the total gross profit per unit.
In working to achieve our 2024 earnings growth, we identified the need to continue to eliminate underperforming or non-core assets. Through the quarter, we have sold one RV dealership location and signed a definitive agreement to sell our furniture manufacturing business. These moves are not only unleashing locked up capital, but have evolved in one case into a holistic strategic partnership that we believe will provide material sales and margin improvement in our parts and aftermarket business. The sale and entrance into a new parts and aftermarket supplier agreement will positively impact our financial results going forward. In addition to the above, our earnings growth goals have required us to make tough cuts around SG&A in the last six months.
Our target on SG&A as a percentage of gross has and always will be rooted in the low 70% range. We believe that we have made the cuts that allow us to return to that level, once gross profit sequentially returns to normal levels. As we unpack the quarter on SG&A, only our January and February results were outside of our standards, but it was exclusively driven by the temporary compression on RV margins caused by our rigorous inventory management plan. March started to return to a more acceptable range, and we expect that to improve in Q2 and then seasonally sequentially improve as margins normalize. As a reminder, our business is largely built around the installed base of RV-ers and that is evidenced by our continued solid performance in Good Sam and our parts and service business.
Those categories provide unparalleled stability and predictability, unmatched by anyone else, as one would expect, our management team has the responsibility of always looking at ways to improve and unlock value in the company. We've been working with Goldman Sachs to explore alternatives, as it relates to our Good Sam business, which was coming off a record year in 2023. Through that process, we have been pleased by the number of interested parties who see the strength of the brand and the opportunity and the value associated with it. Our team has continued to discuss this internally and we believe that our ability to grow this business by allowing our Good Sam team the flexibility to expand into the larger recreational space, not just RVs, with not only yield-enhanced earnings, but would allow us to widen our spot prospect audience from the boating and power-sports categories, while we continue to explore alternatives.
As we continue through the balance of the year, our focus is simple. Continue to see material sales and profit improvement in our existing 211 RV dealership locations, find ways to continue our new market share expansion, expanding our market making ability on use, which Matt will discuss further and return to our internal expectations on SG&A, while maintaining the same opportunistic approach to acquisitions as we drive towards our goal of 320 locations by 2028. I'd like to turn the call over to Matt Wagner to discuss the operations.
Matthew Wagner: Thank you, Marcus. As mentioned, we are experiencing meaningful new unit sales growth to start the year, with same-store new units increasing 16% and momentum continuing through April. Our new unit trends are significantly outpacing the broader industry, resulting in material market share gains in both January and February, based on the most recently reported that survey information. We attribute this performance to our intentional and disciplined inventory management, supporting our previously stated thesis that lower priced RVs are a highly elastic good. Today we are sitting with less than 3,800 model year 2023, continuing to significantly outpace the industry with almost 90% of our new inventory and current model year 2024s.
We sold nearly 16,900 new units in the first quarter, an increase of over 20%. As we move throughout the year, we anticipate that new average selling prices will hover around the $38,000 range. Against this backdrop, we maintained a regimented approach to procuring used inventory, having purchased 60% less used through the first four months of this year. As we sit here today, we have 35% fewer used in inventory compared to last year. We largely did this because the used RV market lacks the infrastructure and institutional participation needed to create an efficient market. We responded to this need and we launched CW auctions in December. We witnessed immediate interest from consumers, wholesalers, banks and manufacturers alike. Over the course of the last five auctions, we amassed over 2.2 million unique views and hundreds of unit sales during the soft launch period.
As this business matures over the coming quarters, we see this serving as a profitable, cost effective remarketing channel that has never existed in this industry at scale, allowing for greater used procurement flexibility, while improving the velocity of our sales. We continue to expect our used volumes to improve over time as appropriately valued inventory is intelligently brought back into the system. We expect our used margins to improve sequentially starting the second quarter and to normalize to historical levels by the fourth quarter. As part of our growth plan for 2024, we'll continue to focus on expanding upon the tremendous progress that we have made with Good Sam, service our used RV business, all while focusing on market share growth of new RVs and continuing to add accretive acquisitions to our dealer network.
We opened 13 net dealership locations in the first quarter, five of which were manufacturer exclusive locations, and we plan to continue to remain acquisitive with the goal of growing our store count to 320 stores by the end of 2028. I'll now turn the call over to Tom Curran to discuss our financial results.
Tom Curran: Thanks Matt. For the first quarter, we recorded revenue of $1.4 billion, a decline of roughly 8% from last year, driven primarily by used unit volume, while new vehicle revenue of $656 million marked the first year-over-year increase in six quarters. Our Good Sam services and plan segment continued to post record quarterly gross profit of $30.5 million. Within our product, services and other revenues, our core service revenues showed continued growth, while product sales declined primarily due to lapping our active sports restructuring from last year and lower retail attachment due to fewer used vehicles being sold. Our adjusted EBITDA for the first quarter was $8.2 million, with the primary drivers of the year-over-year decline stemming from used vehicle gross profit pressure, about $10 million to $20 million of which was related to rebalancing HG's [ph] inventory as Matt mentioned.
We also incurred a couple of additional expenses worth highlighting, including new store and auction start-up costs as well as professional fees that represented approximately $7 million of impact to the quarter. As we remain focused on extracting additional value from certain non-core and underperforming assets and returning cash to our business, on the balance sheet, we ended the quarter with about $177 million of cash, including $148 million of cash in the floor plan offset account. We also have about $220 million of used inventory net of flooring and roughly $219 million of parts inventory. Finally, we own about $116 million of real estate without an associated mortgage. Marcus?
Marcus Lemonis: Thanks Tom. Our strategy and execution is keeping us well ahead of our competitors and the trend lines are clear. We expect 2024 to be a much better year. I'd like to turn the call over now to the operator for Q&A.
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