Camping World Holdings, Inc. (NYSE:CWH) Q4 2023 Earnings Call Transcript
Camping World Holdings, Inc. (NYSE:CWH) Q4 2023 Earnings Call Transcript February 22, 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: Good morning, and welcome to Camping World Holdings Conference Call to discuss Financial Results for the Fourth Quarter and Year Ended December 31, 2023. 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.
Lindsey Christen: Thank you, and good morning, everyone. A press release covering the company's fourth quarter and year ended December 31, 2023 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 2023 fourth quarter and fiscal year results, are made against the 2022 fourth quarter and fiscal year results unless otherwise noted. I'll now turn the call over to Marcus.
Marcus Lemonis: Good morning, and welcome to the first call of 2024. I got to be honest, I'm glad '23 is over. On today's call, the team will cover both the operational and financial highlights from 2023, while providing an exciting outlook for 2024 and beyond. As the state of the union for 2023, there's really one key message that prevails. We believe our industry has seen the bottom of new RV sales and results, and are seeing positive indicators that the next several years will produce growth in revenue, unit sales, overall gross profit, and sequentially an improving bottom line for our company. We expect to deliver 30% plus EBITDA, compared to 2023. As we worked internally through the back half of last year, in an effort to raise our profitability in '24, we identified three key factors needing to be accomplished, to achieve our 2024 earnings goals.
We needed to eliminate age model year units, renegotiate model year '24 pricing, and subsequently adjust our use position and values, resulting from the revised new model year pricing on '24s. The execution of this strategy puts us well ahead of our competitors and drives market share growth going forward. As we discussed on our last call, we will have completed the bulk of this by the end of Q1, with our adjustments on used driving the bulk of our current period. We elected to temporarily slow down, used acquisitions to allow for market pricing, to resolve before reinvesting our cash. While we worked through the inventory, while working through the inventory was our primary focus, we must recognize the Good Sam business, which delivered record earnings over $100 million for the first time and continues to show stability, and growth in servicing the installed base of our RVs [ph].
Fundamentally, I've never seen our business adjust with such precision to micro and macro-economic headwinds. Being able to achieve the profitability we experienced during this difficult period, has proven the resiliency of our company and puts a finer point on the quality and strength of the management team that have had the privilege of assembling over the last 20 years. I'd like to now turn the call over to Matthew Wagner to discuss our company's operations.
Matthew Wagner: Thank you, Marcus. As we reflect upon 2023, I cannot be more proud of our 12,000 plus team members. In 2023, we sold nearly 57,000 used units and generated nearly $2 billion of revenue, marking an all-time record for Camping World. Total new and used unit sales volume for the year totaled 115,000 units. Good Sam had another record year with 12% growth in gross profit and generating $100 million of adjusted EBITDA for the first time in company history. We also achieved our goal of significantly improving our new unit portfolio. We started 2023 with over 16,000 multi-year '22s in stock. Today, we're sitting with less than 7,500 multi-year 2023s, significantly outpacing the industry, with close to 80% of our inventory mix now in 2024 models.
Our new inventory position was further enhanced by our successful negotiations in the fall of '23 with our OEM partners to reduce invoice prices in key categories. We were so successful in lowering new invoice prices, our used RV values were impacted. In Q4, we took decisive actions to reset used values and slow down the purchases of used RV inventory while market values corrected themselves. Between September through today, we procured 50% less used inventory year-over-year. As of today, our used same-store inventory is down 13%. These short-term maneuvers will allow our used volumes, to improve over time, as appropriately valued inventory is brought back into the system. We expect our used margins to improve sequentially starting over the next 60 days, and to normalize to historical levels by Q4.
This overall inventory strategy has resulted in positive same-store new sales in December and this trend continued throughout February, increasing in the mid-single to low double-digit range. This movement and demand supports, our previously stated thesis that lower-priced RVs are a highly elastic product. In the way of capital deployment and asset management, we acquired, opened, or signed LOIs on over 30 dealership rooftops. We ended 2023 with 202 RV dealerships, or service centers. At the same time, we optimized our SG&A cost structure, we restructured our active sports business, and we consolidated, or exited distribution centers, and underperforming locations. We made a number of changes in 2023 and it made our company stronger. And we believe this sets the stage, for at least 30% EBITDA growth in 2024.
As part of our growth plan for 2024, we will continue to focus on expanding upon the tremendous progress that, we have made with Good Sam Service, our used RV business, while focusing on market share growth of new RVs and adding accretive acquisitions, to our dealer network. As we sit here today, we are currently planning to add 25 to 30 dealerships in 2024, and the pipeline to acquire additional locations, remains robust. Many of these new locations will be opened, as exclusively branded stores focused on popular RV brands like Keystone, JACO, Airstream, Forest River, Coachmen, Alliance, and Grand Design. This cadence of store openings and acquisitions reaffirms our confidence, in hitting our 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. In 2023, we recorded revenue of $6.2 billion, a decline of roughly 10% from last year, driven primarily by new unit volume, while used vehicle revenue of $2 billion increased 5% from last year, and was a record for the company. Meanwhile, our Good Sam Services & Plans segment posted record revenue and gross profit for the year with $194 million in revenue and $134 million of gross profit. In the fourth quarter, we recorded revenue of $1.1 billion, down 13% from last year, driven primarily by used unit volume. Total new unit sales increased 3.2% turning positive for the first time in 10 quarters. The decline in new same-store unit sales improved to down 2.2%. Our adjusted EBITDA for the fourth quarter, was a loss of $8.9 million during what is historically, our industry's toughest quarter.
During the back half of 2023, we also reduced costs, by north of $60 million annually and will continue to look for SG&A efficiencies, throughout our business. As Matt alluded, we aggressively managed used inventory in the fourth quarter, to return cash to the business and recalibrate our inventory position heading into spring. We see our used business experiencing volume and margin trends in the first quarter of '24 that are similar to the fourth quarter, as we work to restock our lots, for the upcoming season. On the balance sheet, we ended the quarter with about $185 million of cash, including $145 million of cash in the floor plan offset account. We also have roughly $271 million of used inventory net of flooring and $200 million of parts inventory.
Finally, we own $175 million of real estate, without an associated mortgage.
Marcus Lemonis: Thanks Tom. Look, as we all have indicated, we believe the trend lines are very clear. We expect 2024 to be a much better year, with the outlook after that only getting better. I'd like to turn the call over to the operator for the Q&A section.
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