Release Date: August 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Significant improvement in gross profit per unit, with a 200% increase in new units and 150% increase in used units compared to Q1 2024.
- Successful cost reduction actions expected to save approximately $25 million annually.
- Healthy inventory levels maintained, with a focus on procuring more used units directly from consumers.
- Increased finance penetration to 75% in Q2 2024, up from 64% in Q1 2024.
- Coliseum Capital Management committed to advancing another $5 million, boosting operational flexibility.
Negative Points
- Total revenue for Q2 2024 decreased by 22.6% compared to the same period in 2023.
- New unit sales declined by 15.2% and used retail unit sales decreased by 30.7% in Q2 2024.
- Adjusted net loss of $18.4 million for Q2 2024 compared to net income of $3.9 million in Q2 2023.
- Service body and parts revenue decreased by 12.2%, with gross profit decreasing by 5.1%.
- Consumer demand for recreational vehicles remains under pressure, with no significant recovery expected until 2025.
Q & A Highlights
Q: How are you thinking about Q3 at this stage from a new and used unit sales perspective and revenue? Do you see Q3 being similar to Q2 sequentially, a little bit more challenging? How do you see it shaping up so far?
A: (John North, CEO) July was consistent with the run rate at the end of June. August is historically when you start to see seasonal slowing. Our baseline assumption is that things will bump along similarly, with normal seasonality in August and September. We have significant concentration in Florida and Arizona, where August and September are typically the slowest months.
Q: How are you thinking about adjusting your inventory further, especially given the recovery in lower-end price points? What's the right mix of high, middle, low-cost RVs versus your historic or current mix?
A: (John North, CEO) Big picture, everyone is looking for lower-priced units. Towables have seen a 24% price reduction. Motorized units are more challenging due to chassis costs. We are shifting towards more affordable travel trailers and being cautious with motorized inventory, particularly Class As. Our towable inventory is now 75%, up from 70% last year.
Q: Beyond the incremental $5 million from Coliseum, what other forms of potential financing are you contemplating?
A: (John North, CEO) We are evaluating certain transactions and appealing to long-term investors. Our lender group has been supportive, understanding our optimized inventory. We are focused on taking costs out, scaling to revenue, and seeking incremental opportunities to raise capital.
Q: Can you speak to how performance varied from a regional perspective over the quarter?
A: (John North, CEO) No specific regional variances to call out. Southern stores tend to slow in summer, and Northern stores pick up as weather changes. The hurricane in Florida cost us a weekend of sales, but no other significant geographic disruptions.
Q: What are you seeing in terms of comparable pricing for model year '25 units versus model year '24?
A: (Amber Dillard, VP of Operations) Travel trailer pricing has seen double-digit reductions due to OEM de-contenting. Motorized units, particularly Class Cs and Bs, have seen single-digit reductions. Class As have not seen much movement due to chassis prices.
Q: What are you expecting to get out of the open house next month, and any early thoughts on restocking levels as we head into the fall?
A: (Amber Dillard, VP of Operations) Our primary goal is to refine the mix in newer stores and look for affordable options. We will be judicious about stocking based on regional market demands and do not anticipate large restocking efforts.
Q: What are the primary buckets for the $25 million targeted cost savings, and what is the cash cost to achieve them?
A: (John North, CEO) The primary buckets are people, marketing, and floor plan. We have made painful personnel decisions and are aggressively managing marketing and vendor costs. There is not a significant incremental cost to achieve these savings, and the full run rate effects will be seen in the fourth quarter.
Q: How are you managing inventory and procurement of used units given the lower trade-ins on vehicle sales in 2024?
A: (Amber Dillard, VP of Operations) We are focusing on maintaining healthy inventory levels and increasing efforts to procure used units directly from consumers. Our consignment program has been successful, with over 60% of July units acquired through consignment, reducing floor plan expenses and inventory risk.
Q: Can you clarify the rumors about strategic transactions involving significant store divestitures or business combinations?
A: (Amber Dillard, VP of Operations) We are not contemplating nor in discussions regarding significant store divestitures or business combinations. Our focus is on strategic financing to maintain scale and operational flexibility.
Q: What actions are you taking to improve performance without relying solely on a market recovery?
A: (Amber Dillard, VP of Operations) We are working closely with general managers to increase volume, improve F&I, and drive incremental service revenue. We are also focused on growing and integrating stores added to the portfolio last year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
