Camping World Holdings, Inc.

Good afternoon, ladies and gentlemen, and welcome to Camping World Holdings, a conference call to discuss the financial results for the second quarter of fiscal 2020. At this time, all participants are in a listen-only mode, and later we'll conduct a question-and-answer session, and instructions will follow at that time. Please be advised that this call is being recorded, and that the reproduction of the call, in whole or part, is not permitted without written authorization from the company. Participating in the call today are Marcus Limones, Chairman and Chief Executive Officer, Brent Moody, President, Karen Bell, Chief Financial Officer, and Tamara Ward, Chief Operating Officer. I'd now like to turn the call over to Mr. Moody to get us started. Please go ahead, sir.

Thank you, and good afternoon, everyone. A press release covering the company's second quarter 2020 financial results was issued this 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 the impact of COVID-19 on our business, financial results, and financial condition. Our business goals, plans, abilities, and opportunities, results in financial condition, industry and customer trends, our 2019 strategic shift, increases in our borrowings, our liquidity and future compliance with our financial covenants, and anticipated financial performance. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the risk factor sections in our Form 10-K, our Form 10-Qs, 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 measures are included in our earnings release and on our website. All comparisons to our 2022 quarter results are made against the 2019 second quarter results unless otherwise noted. I now turn the call over to Marcus.

Thanks, Brent. Good afternoon, everyone. As we all know, we are living in unprecedented times. Our focus as a nation and as a company is rooted in doing our best to ensure that everyone is safe and protected as we look forward into the future. What we have reaffirmed over the last five months is that Americans are resilient. They learn to adapt to everything, but the path to get there isn't always a straight road. As a company who feels strongly about inclusivity, diversity, and kindness, our close to 11,000 employees demonstrated that in a meaningful way. Their collective dedication to the customer, each other, and the company has never been stronger, and it shows in our results. Over the years, we've always prided ourselves as being the leader in the RV space. Being the leader isn't defined singularly by revenue, but more importantly, our employee experience our customer experience, and our performance for our shareholders. The accountability to our shareholders, which includes close to 2,000 of our associates, must be rooted in a number of metrics, both financial and operational. As the single largest shareholder with beneficial ownership of over 36 million shares and the steward for our nearly 11,000 associates, I feel strongly that our goals and focus as shareholders are aligned. My focus as this company's leader is to deliver a solid financial performance with world-class margins, heighten our intention to improving the customer and associate experience, a thoughtful capital allocation, including balance sheet improvement and stable and quarterly dividends and growing quarterly dividends. While I'm generally pleased with our second quarter results, I do believe we have significant opportunity for improvement to drive customer engagement, leverage our assets, expand our footprint, and grow our market share. For the quarter, demand was strong and revenue was slightly over $1.6 billion. Our balance sheet is strong, and we are pleased with our liquidity position. In our company, we primarily keep cash in two places, our ordinary deposit account and operating accounts for treasury management purposes, and a floor plan offset account, which works to reduce our borrowing costs. We ended the quarter with $228 million of cash in our ordinary deposit account and operating accounts, an additional $217 million in our floor plan offset account, most cash we've ever had. Gross profit was $489 million and gross margin increased 260 basis points to 30.4, driven by a combination of our RV unit and retail margin improvement and our high margin recurring Good Sam branded businesses. Adjusted EBITDA was $221 million, up 122%. Our adjusted EBITDA Margin for the quarter was 13.7 and 9.7 year-to-date. These results put us back on track towards achieving our adjusted annualized EBITDA margin goals. We ended the quarter with our leverage ratio as determined under our senior credit facility below 3.5 times, and we expect to be below three times at the end of the third quarter. We are very comfortable with our existing LIBOR plus 275 bank debt with a 75 basis points LIBOR floor and our expected anticipated debt to EBITDA levels. We ended the quarter with 2,067,000 good SAM members, which is a key metric in our business because each member spends roughly $1,850 annually. We sold the record 38,786 RVs for the quarter. Website activity across all brands experienced significant growth in the second quarter of 2020. Unique website user sessions were 57.6 million in the second quarter of 2020, an improvement of nearly 14 million sessions to last year. For the six-month period ended June 30, 2020, user sessions grew to 94.4 million, an improvement of over 16 million sessions. Our SG&A, which is a big focus for us, our SG&A expenses as a percentage of gross profit for the company were 56% for the quarter and 68% for the six-month period ended June 30, 2020. compared to 74% and 81% respectively for the same period in 2019. While we are pleased with the year-to-date direction, we strongly believe we always have opportunity for improvement. One point we want to be crystal clear on, our results are not singularly a function of COVID-related demand. Our results for the first 70 days of 2020 which were not affected by COVID either way, had strong momentum and metrics. While we struggled as a nation and an industry during the back half of March and all of April, we were able to make up much ground in May and June to bring our year-to-date numbers to an annualized level that we hope to largely experience going forward. With the strategic shift we initiated in 2019, we outlined a number of key initiatives our team felt would move us directionally where we knew we wanted to be for the long term. These include, but are not limited to, an extreme focus on efficiency improvements, including refining our process and our cost structure, a deep focus on improving retention across all of our high-margin GoodSAM recurring revenue files, and lowering our cost of customer acquisition through the digitizing process, and most importantly, growing sales. We believe that these initiatives will lead to solid, stable, free cash flow generation for the next three to five years. We believe there is a realistic chance that 2020 will be the company's most profitable year ever. And over the next three to five years, we see no reason other than items outside of our control that we would ever look backwards. It is estimated that approximately 11 million households in the U.S. own an RV. And as more people experience the outdoors, we believe there's an opportunity for significant growth in this number. We feel that this growth is more likely today than ever based on the number of first-time buyers we see showing an interest in entering the RV and outdoor lifestyle. And we believe our company and its wide array of products and services would be a significant beneficiary of this potential growth. We currently operate in 36 states with 164 retail operations and we see significant white space for profitable expansion, which we plan to take advantage of through new greenfield locations and opportunistic acquisitions. These new locations should grow our footprint and our market share. Our plan, absent circumstances outside of our control, is to return to our historical growth levels by opening or acquiring 8 to 10 locations per year. All of this fuels our Good Sam file size growth. Our multi-year or annual renewal Good Sam branded products, including insurance, roadside assistance, extended warranties, and travel assist, provide the protection and services needed for the RV lifestyle, and they generate stable, high-margin recurring and predictable revenue and cash flow. As we announced several weeks ago, We proudly promoted Karen Bell to the CFO position, and she officially took over her role on July 1st. Karen and I have worked together at Camping World for more than 17 years. She is a diligent financial steward and trusted advisor who will hold our team accountable for how we're allocating capital to maximize returns and drive long-term profitable growth. Now, with my pleasure, let me turn the call over to Karen for her commentary.