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Camping World Holdings, Inc. (NYSE:CWH) 2023 Q4 Financial Report Call Record February 22, 2024
Camping World Holdings isn’t among the 30 most popular stocks among hedge funds at the end of the third quarter (Please see here for the detail).
operator: good morning. Welcome to Camping World Holdings’ conference call to discuss financial results for the fourth quarter and year ended December 31, 2023. All participants are currently in listen-only mode. After that, we will have a question and answer session, and I will give you instructions at that time. Please note that this call was recorded and may not be reproduced in whole or in part without our written permission. Also participating in today’s conference call will be Marcus Lemonis, Chairman and Chief Executive Officer. Brent Moody, President. Karin Bell, Chief Financial Officer; Matthew Wagner, Chief Operating Officer; Lindsey Christen, Chief Administrative Legal Officer; Tom Curran, Chief Accounting Officer; Brett Andres, senior vice president of investor relations; I’ll hand the phone to Kristen and start talking.
Lindsay Kristen: Thank you and good morning, everyone. A press release covering the company’s financial results for the fourth quarter and year ending December 31, 2023 was issued yesterday afternoon, and a copy of that press release can be found on the company’s website under Investor Information. section. Management’s statements on this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include statements regarding our business plans and goals, industry and customer trends, inventory expectations and the expected impact of inflation. interest rates and market conditions, acquisition pipeline and plans, future dividends and capital allocations, and anticipated financial performance.
Actual results may be the result of a variety of important factors, including those described in the Risk Factors section of our Form 10-K, Form 10-Q, and other reports filed with the SEC. Results may differ significantly from those shown in these comments. Forward-looking statements represent our beliefs only as of the date hereof, and we undertake no obligation to update them. Please also note that we will be discussing certain non-GAAP financial measures during today’s conference call, including EBITDA, Adjusted EBITDA, and Adjusted Diluted Earnings Per Share. We believe these may be important to investors in evaluating our performance. Reconciliations of these non-GAAP financial measures to our most directly comparable GAAP financial statements are included in our earnings releases and on our website.
All comparisons of our 2023 fourth quarter and fiscal year results are compared to our 2022 fourth quarter and fiscal year results, unless otherwise noted. Now, I’ll turn the phone over to Marcus.
Marcus Lemonis: good morning. Welcome to the first call of 2024. To be honest, I’m glad 2023 is over. On today’s conference call, the team will cover both his 2023 operational and financial highlights, as well as provide exciting prospects for 2024 and beyond. As for the union landscape in 2023, there is one important message that is really pervasive. We believe our industry has bottomed out in new RV sales and performance, and there are positive indicators that our bottom line will continue to improve over the next few years with increased revenue, unit sales and overall gross margins. is becoming visible. We expect him to realize 30% positive EBITDA compared to 2023. As we worked internally throughout the second half of last year to drive profitability in 2024, we identified three key elements that need to be achieved to achieve profitability in 2024. Revenue target.
Due to the ’24 model price revision, we had to eliminate the model year unit, renegotiate the ’24 model price, and then adjust the usage position and value. Executing this strategy will put us well ahead of our competitors and drive future market share growth. As we discussed on our last conference call, the majority of that is expected to be completed by the end of the first quarter, with the used goods adjustment driving much of the current period. We have chosen to temporarily slow down, take advantage of acquisitions given market value, and settle before reinvesting cash. While working on inventory processing, while inventory processing was our main focus, for the first time he achieved record revenue of over $100 million, and achieved stability and growth of the service to the installed base. We need to recognize the good Sam business that continues to show. our rv [ph].
Fundamentally, I have never seen our business adapt so accurately to microeconomic and macroeconomic headwinds. Achieving the profitability we have experienced during this difficult period is a testament to our resilience and further highlights the quality and strength of the management team we have been blessed to have assembled over the past 20 years. It has been. I would now like to turn the call over to Matthew Wagner to discuss our operations.
Matthew Wagner: Thank you, Marcus. As we look back on 2023, we couldn’t be more proud of our more than 12,000 team members. In 2023, Camping His World set an all-time record by selling approximately 57,000 used units and generating approximately $2 billion in revenue. Total new and used vehicle sales for the year were 115,000 vehicles. Good Sam had a record year with gross profit increasing his 12% and producing his $100 million adjusted EBITDA for the first time in company history. We also achieved our goal of significantly improving our portfolio of new units. He started 2023 with an inventory of over 16,000 of his 2022 multi-year models. Currently, we have less than 7,500 of his 2023 models in stock, significantly outpacing the industry, and nearly 80% of his inventory mix is his 2024 model.
Our new inventory position was further strengthened by successful negotiations with our OEM partners in fall ’23 to reduce invoice prices in key categories. We were successful in lowering new invoice prices, which impacted the value of used RVs. In the fourth quarter, we took decisive steps to reset used values and delay purchases of used RV inventory while market values recovered. From September to date, the used inventory we procured has decreased by 50% year-on-year. As of today, our used existing inventory is down 13%. These short-term operations will improve usage over time by putting the appropriate value of inventory back into the system. The Company expects used margins to improve sequentially over the next 60 days and normalize to historical levels by the fourth quarter.
This overall inventory strategy resulted in positive same-store new sales in December, a trend that continued through February with increases ranging from mid-single digits to low double digits. This movement and demand confirms the previously stated theory that low-cost RVs are a resilient product. In capital deployment and asset management, we have acquired, opened, or signed LOIs on the rooftops of over 30 of his dealerships. By the end of 2023, he will have 202 RV dealerships or service centers. At the same time, we optimized our selling, general and administrative expense structure, restructured our active sports business, and consolidated distribution centers and unprofitable locations. We made a number of changes in 2023 that made us even stronger. And we think this sets the stage for his EBITDA to grow by at least 30% in 2024.
As part of our 2024 growth plan, we remain focused on building on the significant progress we have made in our used RV business, Good Sam Services, as well as increasing market share in new RVs and adding aggressive acquisitions. We will continue to focus on this. Our Dealer Network. As we sit here today, we are currently planning to add 25 to 30 dealerships in 2024, and our pipeline for acquiring additional stores remains strong. Many of these new stores will open as brand specialty stores focusing on popular RV brands such as Keystone, JACO, Airstream, Forest River, Coachmen, Alliance and Grand Design. This pace of store openings and acquisitions reaffirms our confidence that we can achieve our goal of increasing our store count to 320 stores by the end of 2028.
I’d like to turn the call over to Tom Curran to talk about our financial results.
Tom Curran: Thank you, Matt. In 2023, the company’s sales decreased approximately 10% from the previous year to $6.2 billion, mainly due to new car sales, but used car sales increased by 5% from last year to $2.0 billion, and the company’s It became a record. Meanwhile, our Good Sam Services & Plans division posted record sales and gross profits for the year, with sales of $194 million and gross profits of $134 million. In the fourth quarter, the company posted revenue of $1.1 billion, down 13% year-over-year, primarily due to used sales volume. Total new vehicle sales increased by 3.2%, turning positive for the first time in 10 quarters. The rate of decline in new same-store sales improved to 2.2%. Our fourth quarter adjusted EBITDA was a loss of $8.9 million, historically the industry’s toughest quarter.
We will also reduce costs by more than $60 million annually in the second half of 2023, and will continue to pursue efficiency improvements in SG&A expenses across our business. As Matt alluded to, we aggressively managed our used inventory in the fourth quarter, returning cash to the business and realigning our inventory position for the spring. As we work to replenish lots for next season, we believe that the sales volume and profit margin of the used business in 1Q24 will be similar to the 4th quarter. On our balance sheet, we ended the quarter with approximately $185 million in cash. This includes $145 million in cash in the floor plan offset account. Additionally, we have approximately $271 million in used inventory, excluding flooring materials, and $200 million in parts inventory.
Finally, we own $175 million in real estate with no associated mortgages.
Marcus Lemonis: Thank you Tom. As you all pointed out, we think the trend lines are very clear. We expect 2024 to be an even better year, and the outlook only gets better after that. I would like to transfer the call to the operator in the Q&A section.
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