UPDATE - Wealth Management Calls for Lazydays, Inc. to form a Transaction Committee and Further Evaluate M&A Proposals

Tampa, March 22, 2022 (GLOBE NEWSWIRE) -- As you know, Kanen Wealth Management is one of the largest owners of Lazydays, Inc. (“the Company”). We are writing to express both our disappointment with the Board’s handling of B. Riley’s non-binding $25 per share offer for the Company, as well as the Company’s strategic direction. Moreover, we are deeply concerned with Board Chairman Chris Shackelton’s involvement in evaluating this offer, given the clear potential for a conflict of interest stemming from Coliseum Capital’s large holding of dividend-paying convertible preferred stock in the Company. The market apparently agrees with us, with our stock trading ~25% lower than the B. Riley offer you immediately rejected as undervaluing our Company.

Candidly, we believe this Board lacks credibility, and should hire a world class investment bank to Explore a Full Range of Strategic Alternatives for the Company to maximize value for its shareholders.

Lazydays, the “RV Authority” with the #2 dealership brand in the country, is indeed undervalued at 2.3x 2021A EBITDA, and below 2x 2022E YE EV/2022E EBITDA according to Wall Street estimates – both are inclusive of full dilution from the preferred stock, warrants, and options. The Company is also grossly overcapitalized with >$100 million of net cash (post dilution) vs. a fully diluted market cap of ~$440 million. Unfortunately, despite the significant opportunity to grow the business over the past decade, the former CEO Bill Murnane took an incrementalistic approach to growth, with an overly conservative investment and capital return policy. Management has made virtually zero investor relations efforts. Until our urging to replace the CEO, it appeared the Board was satisfied with Murnane’s lackluster effort to improve the share price.

The fact is, 3 months after Murnane’s “retirement,” this Board has still not hired a permanent CEO, and the Company has yet to present any type of strategy to its investors on how it will create meaningful shareholder value over the coming years. Accumulating cash and hoarding it is not a credible strategy. This is why we are so concerned that the Board does not have our best interests in mind, and why we are so disappointed how quickly the Board unanimously rejected B. Riley’s offer with seemingly no attempt to constructively engage with them.

We are similarly concerned Chairman Chris Shackelton’s potential conflict of interest, and outsized influence on the Board, may have inhibited a truly objective review of the B. Riley offer. Coliseum Capital, of which Mr. Shackleton is co-managing partner, owns a significant position in the Company’s high yielding convertible preferred stock, which dwarfs his position in the Company’s common equity. As you know, this preferred stock cannot be “force converted” to common stock — and continues to pay dividends — until the LAZY common stock trades above $25 per share for 30 days in a row. It is apparent to us Mr. Shackleton may have inappropriate incentives to keep the stock price under $25, so Coliseum could continue to collect this preferred dividend, at the expense of common shareholders. While we are not saying definitively Mr. Shackelton wants to keep the stock price under $25, it is certainly not unreasonable to suggest Coliseum Capital may not be entirely aligned with common shareholders, who do not benefit from this preferred dividend, but whose interests he has a fiduciary duty to protect. This potential conflict of interest, as well as an overly complicated capital structure, is one of the many reasons our stock trades at such a depressed multiple of free cash flow. In short, the market has a low confidence level that this Board, chaired by Mr. Shackleton, is unequivocally looking after the interests of common shareholders.

This is why it’s so disturbing Mr. Shackelton hasn’t recused himself from the boardroom, while evaluating the B. Riley offer.

To remedy this situation, we suggest the Board forms a “Transaction Committee” of 2 independent and non-Coliseum affiliated Directors, in addition to a representative from Kanen, to hire and oversee a world class investment bank to evaluate a Full Range of Strategic Alternatives, including a full company sale. We believe there would be significant interest by strategic and financial buyers for the Company, in addition to the B. Riley offer — at substantially higher levels. Until we run an auction for the Company, there will be no way to know what the true value of the Company is.

Dave Kanen

Kanen Wealth Management, LLC.

David Kanen

dkanen@kanenadvisory.com