Camping World Holdings, Inc.

Good morning everyone and welcome to the Camping World Holdings conference call to discuss financial results for the first quarter of fiscal year 2021. At this time all participants are in a listen only mode and later we will conduct a question and answer section. Instructions will follow at that time. Please be advised that the call is being recorded and the reproduction of this call is not permitted without prior written authorization from the company. Participating in the call today are Marcus Limones, Chairman and Chief Executive Officer, Karen Bell, Chief Financial Officer, Tamara Ward, Chief Operating Officer, Matt Wagner, Executive Vice President, and Mrs. Brent Moody, the company's president. A press release covering the company's first quarter 2021 financial results was issued this morning, 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, 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 factors section in our Form 10-K, our Form 10-Q, and other reports on file with the SEC. Any forward-looking statements, including statements regarding our long-term plans and costs related to the strategic shift 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 2021 first quarter results are made against the 2020 first quarter results unless otherwise noted. I'll now turn the call over to Marcus.

Thanks, Brent. Good morning, everybody, and thanks for joining us today. The quote really pleads with Q1 results, especially since a good chunk of the country has opened up for business. It's clear that people are out and about. Let me start by reinforcing that our business continues to have explosive growth. We expect our trajectory over the next 10 years to be similar to what we experienced over the last 10 years. As a management team, we are laser focused on how we get our company to a billion dollars of annualized earnings. Here's how we plan to get there. We will continue to expand our footprint with strategic acquisitions and new greenfield locations. We will continue to focus on and grow our high margin installed base oriented revenue, similar to our existing good sand businesses, through the expansion of our service, collision, and renovation centers. We recently acquired a campground reservation system and trip planner. This technology will support our core Good Sam annuity businesses, our Good Sam parks network, and enhance our data ecosystem. These new platforms, in combination, will also differentiate our soon-to-launch peer-to-peer marketplace. We have and will continue to invest time and money in the RV and outdoor enthusiast-oriented technology. FinTech, and other vertical integration of the supply chain in an effort to drive innovation and mostly enhance our margins. As with our last earnings call, today will be broken up into two primary sections. Let's start with our high-level financial summary, with additional supporting information in detail available in today's earnings release and our soon-to-be-filed 10-K from Q1 2021. Consumer demand was and continues to be strong. Net income for Q1 was $147.4 million, a $161.6 million improvement compared to Q1 of 2020. Adjusted EBITDA for Q1 was $189.3 million, a $153.3 million increase over the same quarter last year. Our revenue for the quarter was $1.558 billion. One of the most important metrics for us as a management team is the strength of our balance sheet, which continues to improve. At the end of the quarter, our working capital was at $541 million. We had $393.5 million of cash, broken up between $256.9 million of cash and equivalents on our balance sheet and an additional $136.6 million of cash in our floor plan offset account. We're pleased to announce that our net leverage is 1.3 times at the end of the quarter. With respect to our operational initiatives and performance, website activity across all brands continues to experience significant growth. For the recent quarter ending, website user sessions grew to 48 million sessions, an improvement of nearly 50% compared to Q1 of 2020. We have successfully launched our Good Sam RV Valuator tool, and we've already provided 30,000 customers their respective values. This tool ensures that RVers will receive greater value for their units, plus guarantee the company's long-term ability to source these inventory. As a matter of fact, for example, As of today, we are sitting north of $200 million of used inventory, compared to $142 million around the same time last year. I'm thrilled to announce that we have launched buy online and pick up from store, as well as buy online and ship from store. As we roll out these features, we expect to drive more revenue, improve our delivery times, and reduce shipping costs. Utilizing our digital footprint, we have progressed nicely in launching over 60 unique RV models that can be purchased totally online and shipped anywhere in the country. We see massive potential as we allow customers to buy nationwide, finance, and take delivery without actually stepping in foot to a physical location. With regards to the expansion of our national infrastructure into all 48 contiguous states, I'm proud to announce that we currently own a facility or are in the process of acquiring a dealership, land, or building a facility in 45 of the targeted 48 states. We will complete this at some recent time. We have made significant progress with the development of our Good Sam service network. It's one of a kind. Proprietary marketplace will be comprised of independent service operators, both mobile service providers and folks that operate brick and mortar locations, as well as our own facilities. Specific test markets will launch in early fall. As we mentioned earlier, our collision business continued to experience significant revenue growth in Q1 of 2020 with very strong margins. We currently operate 46 collision centers as part of our current footprint of locations and plan to add full collision and renovation centers to over 20 additional locations. Based on all the things that we've just talked about, we are increasing our full year adjusted EBITDA estimates to between $770 million on the low side to a high side of $810 million. Before I turn the call over to the operator for Q&A, you may have seen that last week we increased our annualized dividend to $1 a share. While the date of our Q2 dividend has not been announced, we noticed that at least one brokerage firm is showing an ex-dividend date of May 7th and a payment date of May 21st. We have no idea where this came from, but we haven't yet declared the ex-dividend or payment date for our Q2 dividend. We will announce when declared by our Board of Directors. Let me turn the call back over to the operator for Q&A.

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, press star 1 to ask a question. We'll pause for a brief moment to allow everyone an opportunity to signal for questions. As a reminder, that is star 1 to queue for a question. Star 1. We will move on to our first question from Rick Nelson of Stevens. Please go ahead. Your line is open.

Thanks. Good morning. Congrats on a great start to 2021. Mark has liked to address the inventory situation. I see inventories are down 35% per dealer location. If you could speak to the flow of inventory when you expect supply to catch up with demand and these outsized GPUs that you're earning today, where do you see those trending as inventories improve?

Yeah, look, there's no doubt that there is an inventory shortage based on the explosive demand that we are seeing every single day that we wake up. And I think a lot of people thought that the demand was solely tied to a COVID reaction. But, you know, for the last several months, many, many parts of the country have been opened up and people are back to business. And the demand doesn't seem to be taking a breath. We're disappointed that we don't have more new inventory, but because of the strength of our balance sheet, because of our RV evaluator tool, because of the size of our database, we're able to tap into other unique proprietary systems that allow us to grow our inventory on the use side, which is up about 20-plus percent. We have no idea where the manufacturers are going to land for the 2021 year as it relates to shipments, but we're confident that they're doing everything they can to produce products at a rate that is as good as it can be to keep up with demand. And where there are some shortages on the raw material side, I think we're hearing that in every industry in America. The good news is that we placed our orders six, seven, eight months in advance and we probably have a competitive advantage in receiving the new inventory. As we look at the margins, Rick, it's really important to understand that while the margins are at an all-time high, they're a function of a simple supply and demand curve. So if the supply was greater, we'd be meeting that demand, and the margins may come down. And so we feel like we're either going to trade volume or we're going to trade margins on a per-unit basis. But keep in mind that when we talk about margins, there are two components to margins. There's the margin that we make on the front end of the unit. That's the gross profit directly attributable to the unit itself. And there's the margin that we make on the back end. That's the financing portion. And so as volume increases and we start to get more inventory, we may have a smaller front end margin, but we'll have a larger back end margin. So the combination of the two will be in a similar range. We expect that as the balance of the year progresses, we're going to have to continue to be aggressive in our used procurement. We're going to have to do the best we can at managing every single transaction in every single dealership every single day to maximize the opportunity. We are not in a volume game. We are in a make a lot of money game. And so I don't know if that helps address that.

That's terrific. I appreciate that, Kelly. Acquisitions, I've noticed things are really ramping. I think I counted 17 acquired stores or Springfield openings today. If you could speak to the acquisition environment, the pipeline, what you're seeing in terms of valuations, that would be helpful.

You know, we have always said that we want to acquire our open 8 to 10 new stores a year, and when the opportunity presents itself and it's attractive and accretive to our business, we'll obviously accelerate that. The acceleration of that is tempered with our ability to absorb that from a human capital standpoint. You know, we obviously want to continue to improve that process. As we continue to invest in more technology platforms and more systems, It's making it easier for us to integrate and open and operate these locations at a quicker pace than we were able to, let's say, 10 years ago. Our ability to buy stores is probably more robust than I can remember seeing it, maybe other than the 2010 coming right out of the recession. We have not seen... any dramatic movement in the overall blended multiples that we're paying for these deals. In some cases, though, we are quite surprised that we're seeing a high volume of calls coming in as opposed to us going out of people looking to sell their business. I think people are struggling. The smaller dealers are struggling to get the kind of inventory they need to be successful, and we're sensing that we're seeing a little bit more of that. Our game plan is very clear and very focused. We want to make sure that we're in the top 150 markets or more. We want to make sure that we're achieving our goal of being in the 48 contiguous states. And we want to make sure that we're buying businesses or building locations in markets that we believe are ripe for growth, particularly in the outdoor space. And so as we had told you about all the deals that we've announced, there are a series of additional transactions that have either been signed but not announced or in discussions and not signed, as well as land that's under a contract or about to be under contract. So you could expect over the next couple of months there'll be an additional cadence of announcements We'll probably take a slight pause as we go through the summer, which, as everybody knows, our key selling season, and then we'll get back at it late summer in anticipation of adding new locations in the back half of the year and the beginning of 2022. As we said earlier, my goal and the team's goal is to try to find our way to a billion dollars of earnings. And while there are organic things that we can do to grow our margins and to grow our business in each location and to grow our technology and to grow our good sand business and add peer-to-peer and grow our collision networks, acquisitions still are the biggest generator of revenue pops on a quarter-by-quarter basis. We think we're the best in the business at it, and we'll continue to execute it in the foreseeable future.

That's great. Thanks and good luck. Thank you.

We will now move on to our next question from Brad Salfalo of PAA Research. Please go ahead. Your line is open.

Thanks for taking my questions. I really had two. First, on the rental platform, you've provided us with some rough timeline. Can you talk about the level of investment that will be required as you ramp up and then how you're thinking about the national economics of that business as it grows?

We're not going to be disclosing any information regarding the peer-to-peer until we launch. We know that this is a very competitive space. We know that some of these competitors are out in the market trying to do different things with their business, and we're going to keep our cards very close to the vest. But here's what I will tell you. We are going to use every single corner of our business to launch this company. And we are going to use every resource inside of our tool belt to ensure that our cost of acquisition, our retention, and all the resources that our consumers have are made readily available. We are a different business because of our 360-degree ability to reach into many different boxes. And whether that's the campground reservation platform that we purchased, whether that's our 200 existing, roughly 200 existing locations that we have that we operate, whether that's our mobile service platform, whether that's our two call centers nationwide, whether that's our buy online, ship from store, or pick up in store, whatever it may be, I think that the marketplace can expect us to tap into every one of those. We don't expect this venture to be profitable in the first couple of years, but we have already factored into our guidance both for what we had done previously and what we have done for the balance of 2021, the costs associated with launching it. I want to be clear. It's not a death-defying number. And the reason that it's a lot easier for us to launch a business like this is because we already have north of 5.5 million customers in our database, 2.2 million Bitsan members. and websites that, quite frankly, as we mentioned earlier, generate more traffic than most websites combined in the RV space. So we'll tap into all of those things. But we want to be very prudent about the launch. We want to make sure that the customer experience to load their units onto the system is clear and clean and right. And we want to make sure that when we launch it fully nationwide that we've tested and gotten rid of as many bugs as we possibly can before we take control of the market.

Okay, thanks for that detail. And then my second question is more of a high-level question, and it's one that I speak with investors about frequently, and it's really understanding. What you view as the baseline EBITDA of the company, let's say, I don't want to call it normal because I do think the demand for RVs and the demand for camping experiences is going to continue to grow for a period of time. But let's just say we have some retrenchment in demand for whatever reason for a period of time. I think a lot of investors want to understand that. What do you think the baseline EBITDA generation of the company is now, given that you've gone through all these cost changes, you have a much bigger dealership base, you've broadened out the recurring revenue streams, and you will do so, obviously, with the rental platform and the service network? I think having investors understand what you think baseline EBITDA would be in a year, let's say that shipments are... Let's say RV shipments are $450,000 or $400,000 instead of what we're seeing currently. What is the earnings power of the business in that kind of scenario given all the changes that have happened to the organization?

It's hard for me to predict what that would look like because I don't see RV demand going backwards anytime soon. And so my short answer is that the guidance that we've provided, we believe, is our baseline, and we want to grow it from here. When you look at our numbers and you look at the profitability that we have in our Good Sam business and how that continues to bolster the foundation of this entire company, and then you layer on the recurring revenue that we get from that business along with the stable installed base oriented revenue that comes from service parts collision our pre-owned our finance the risk in our model is simply the sale of new rvs into the marketplace assuming that the overall installed community goes down which it never has in the history of the industry So we can't really speak to whether the business will go back to 400,000 units or not. But if you required me to answer scientifically, I would say look at the new business, maybe drop it by 10%, just the new business, and take out the relevant growth, but then assume that some of that will be made up with used business. And so for us to forecast what we think the model would look like if the business dropped, We just don't have that anywhere in our internal documents because we're planning on what today looks like and what tomorrow looks like.

Okay, thank you. That's great. Thank you. I'll turn it over.

We'll now move on to our next question from Ryan Brinkman of J.P. Morgan. Please go ahead. Your line is open.

Hi. Congrats on another strong quarter, and thanks for taking my questions. You know, just given the materially higher 21 EBITDA outlook, I'm curious if you have any updated view on the outlook for free cash flow or you know, for the deployment of that cash flow. I'd be interested in particular if you could maybe delve a little bit more into your opening remarks regarding possible fintech acquisitions or supply chain vertical integration. And I realize you did just increase the quarterly dividend, but how are you kind of weighing those type of alternative acquisition opportunities relative to, you know, still further return of capital to shareholders such as the opportunistic share repurchase program that I recall being discussed at the investor day?

Okay. I'm going to break that up into two specific answers. Obviously, as a management team and as a board, we work very hard to really figure out what the best and highest use of our free cash flow is. It's clear to me that we as a team want to continue to grow our footprint, but we also want to improve the performance of our existing footprint. And so we have spent a disproportionate amount of money and time investing in infrastructure and systems, hiring new, really qualified people that make our management team, quite frankly, much better. And as we look at continuing to invest in that technology, you know, we expect, as we mentioned I think two or three calls ago, that it was about $30 million that we wanted to really be looking at in investing into that platform. We get the question all the time about share buyback, and it's one of those flipper's hope ones. You know, we've already issued, I think, just north of $20 million of the $100 million that was authorized last fall. But de-levering the company, making acquisitions that are accretive to the business, both dealerships and non-dealerships, continuing to improve the amount of cash on our balance sheet, Those types of things are really at the forefront. That doesn't mean that we're ruling out a shared buyback, but we want to make sure that we're doing all the other things. And I think the most important thing that we want to continue to do is differentiate ourselves from what the analysts like to call our peers, all those folks that are trading at 12 and 13 times in the public auto space. We have to differentiate ourselves by having better EBITDA margins than them, better growth margins than them, and more importantly trying to achieve higher return on capital through dividends than our peers as well. So I don't think we have an answer other than we're always looking at it. But right now we're very focused on just trying to get to, you know, to beat our numbers for the year. And whatever capital we need to use to either acquire or invest or buy more used inventory, we're going to do that in the short term. You asked another question about the type of other investments that we're making. And we're really trying to think about ways to enter the supply chain side to ensure that, A, we're procuring product at a better rate, two, we're getting better margins, and three, we become part of the landscape of innovation and design into the next generation of RVs. And whether that's through furniture or whether that's through appliances or whether that's through some sort of other technology, we want to be part of that process. And we feel like we have a responsibility to be part of that process since we represent a big chunk of the entire industry. We know that we have the ability to take a new idea, like an electric vehicle, and really set the tone and the pace for the industry. We know that we have the ability to set the tone for selling RVs completely online without ever having to step into a dealership. So we made an investment, I think it was last fall, into a company called LoanSnap. And that's a simple finance platform, fintech platform, that teaches customers and sellers how to transact and finance completely online. We made that investment largely to learn. because we want to see what opportunities are out there. But we make other investments, and we own a furniture business, and we're making a number of other ones. We don't really want our competitors to understand what acquisitions we're making that are non-material to the investment size, but material to the future of our business. And so as we feel the comfort level of disclosing those, we will definitely do that. But at this point, we're keeping those close to our vests.

Okay, thanks. And then just lastly, you know, I remember around the time of the IPO, some structural drivers of higher than historical RV demand were being discussed, including younger people being more interested in RVs and more emphasis on experiences versus things on the outdoors, et cetera. Just curious if the experience over the past year you think might create another shift? If you're thinking any differently about normalized demand for RVs well beyond the pandemic, perhaps as maybe people who might not have otherwise purchased an RV were kind of newly attracted to the lifestyle in 2020 or 2021. And do you have any sort of active plans or programs to try to keep these customers for life?

That's a great question. So we felt over the last five years, maybe even more than that, that the buyer continued to shift younger and to be a different buyer than we saw 25, 30 years ago when Good Sam was really starting to build momentum. As we think about how to capture more of the younger buyer, we know that the younger buyer expects a completely different experience. They expect more of a digital experience. This is why you hear us talking so much about 48 states and the online platform and our ability to finance without coming into a store. But it also requires us to have more innovative products. And we've seen really our appetite to co-develop with traditional manufacturers in the RV space and co-develop with non-traditional manufacturers outside of the RV space, new and innovative products that we think are going to really set the tone for the next decade. In our goal of getting to a billion dollars of earnings, there is no way we'd get there without finding new buyers. And we spend a disproportionate amount of our digital currency, our digital money, going out and finding people. And so part of, we believe, not only attracting those younger buyers, those newer buyers, but retaining them is giving them a different experience, whether that's through curated content, both digitally and in print, or coming up with new experiences like peer-to-peer or campground booking systems or We know that we have to do things differently. And we made an investment in audio technology not too long ago because we know that people want experiential things tied to their purchase. They don't want to just buy something and drive away. They want to know how they're supposed to use it and what recipes they're supposed to have and what places they're supposed to visit. And I think you'll see a shift over the next five to ten years into largely being our core business but adding content as a necessary platform for our company, both audio, video, digital, print, to really attract these customers. I think lastly and most importantly, one way that we have to continue to do that is we have to bring in new talent. fresh talent to this company as we have demonstrated in the last 90, 120 days that sees the world differently than we do, that understands things from experiences from other companies that we haven't experienced to take us really around the corner into something more modern. The RV industry has always been seen as archaic, and we believe that we're sort of setting the trail and trying to revolutionize it to attract them. One thing I will say to you that, you know, Ryan, that we talked about when we did go public, I want to remind everybody that the new census data that came out is there's 331 million people in America, and who knows if everybody even filled out their form. There's only 500,000 RVs manufactured, and we're sort of raising the roof because we're selling 500,000. We think that this industry is just scratching the surface. We're seeing the demand be so robust that 750,000 units produced may not even satisfy that demand. So we don't really know where we're going in terms of how big this can get, but we're fairly confident that, yeah, sure, every once in a while there's a slight dip backwards. That's typical. But if you look at it over a five- or ten-year period, as you study our business since we went public, we don't see any reason why the CAGR isn't always going to be positive over the long run.

Very helpful. Thank you.

We will now move on to our next question from Brett Jordan of Jefferies. Please go ahead. Your line is open.

Good morning. This is Ethan Hunley on from Brett. Thank you for taking my questions. Just one here on the service business. Are you seeing sort of any pickup in that business as, you know, current RV owners are choosing to sort of, you know, fix their older units as opposed to buying new ones?

An excellent question. You know, the current RVers are not only repairing their units, but they're renovating them. And we're seeing a really accelerated pace for people to want to put in new floors and new cabinets and new furniture, largely because they know that the jewel they have in their hand is going to be hard to replace. This break in the supply-demand curve doesn't just exist from manufacturers selling new units. It exists with private party transactions, and you can see it in the used values growing so rapidly. And much like the housing growth, people are saying, like, look, I don't want to get rid of my unit. My wife's not going to let me. My husband's not going to let me. But I'm willing to put $3,000, $4,000 into my unit. About three weeks ago, we launched deferred payments. with our GoodSan credit card, and we've seen really nice growth in that overall card. And we're seeing people start to take advantage of investing in their RV on wheels, or their home on wheels, like they're investing at their home and land. And so renovations at Home Depot and Lowe's are starting to really accelerate. They have over the last 12 months. You're seeing strong numbers. We're starting to see the same thing, which is resulting in nice improvements in the retail portion of our location business. I think more than anything else, we are seeing that the consignment business, our ability for people to want to sell them, has been a little bit tougher, and we're seeing that our ability to procure units has been a little tougher, and we're having to pay up for them because I think the consumer knows the value in their hand today. And if they don't get the price they want, they'll just spend money picking it up, fixing it up.

Okay, great. And then just one here on sort of any color you can provide on the sales cadence throughout the quarter, and then anything sort of you can provide on how things are looking thus far in Q2?

Overall sales data, you know, continues to be strong, both for the quarter and, you know, as we had in the first couple days of May. I think for us, as I said earlier, it's really maximizing the profitability of each transaction. We expect that there's going to be, you know, a difficult time procuring inventory for the next three, four months. We think that's a reality, which is why you see our focus on use. But if I showed you our demand and our leads on a daily basis, they're stunning. And we're frustrated by our inability to take care of every single customer that wants to buy an RV. And hopefully over the next several months as the supply chain fixes itself, we'll see a nice uptick hopefully in the third, fourth quarter in some of those sales members. But for the second quarter, we're feeling good about our numbers. We obviously are tempering our tone by the fact that, you know, inventory is not as easy to get. I want to be clear also that in the guidance that we've provided, there's a low end and a high end, and we factored in the fact that the supply curve is, you know, it's got some pressure on it.

Great. And then just the last one here, if you don't mind, just sort of a general housekeeping question, but is there any call you can provide on the percentage of sales that are to first-time buyers?

We don't track it that way internally. It's difficult. I mean, we can make assumptions based on the number of trades and, you know, if we've seen them in our system before. But we'll work harder to provide more color. But, you know, with privacy rules and things like that, we don't necessarily collect all of the information that we would like.

Got it. Got it. Thank you very much for taking my questions.

You're welcome.

Once again, if you would like to ask a question, please signal by pressing star followed by one. We'll take our next question from Jerick Johnson of BMO Capital Markets. Please go ahead. Your line is open.

Great. Thank you. I'm going to get new vehicle prices are up 10%. Is that next to bigger vehicles or pricing on your side?

I would say it's a combination of two things. It's margin improvement. And in addition to margin improvement, we have seen the manufacturers be required to pass through some of those commodity increases. You know, when the supply curve is broken, prices go up both on metal, wood, things of that nature. We've been working very closely with them to ensure, and they've been very focused on it, to ensure that we're not stunning the customer and we're not shoving all of those through the channel. But it's a combination of both margin improvement and some commodity price increases.

Okay. And curious on the used vehicle inventory, if you had a number in units, you gave us the dollar amount, but wondering what that looks like in units used.

And how many we sold for the quarter or how many we have in stock?

Well, the comparison year over year, let's put it that way. Your inventories on use were up 26% in dollars, but what would that look like in units? In terms of our revenue being up or down?

I don't think we've reported.

No, no, no, not revenue, inventory, inventory, used inventory.

We have 8,000 units in stock right now. And that's up. We were $141 million approximately this same time last year. We're north of $200 million today. And so our count is up. One thing that we are starting to do is expand our pre-owned B, C, Class A business so the average cost may be up by $1,000 or $2,000 as we continue to destock on the new diesel side. largely based on allocation from the manufacturers.

Okay, so your used vehicle inventory is up year over year.

$141 million last year, $200 million today.

Okay, and lastly, wondering what the trade-in rate has been on your new unit sales. Last quarter you said it was about 25%, up from 18% over the summer. Wondering what it looks like in this most recent quarter. 28%. Perfect. Thank you.

Yes, sir. Thank you.

We'll move on to our next question from Brent Andres of KeyBank Capital Markets. Please go ahead. Your line is open.

Hey. Good morning. I hopped on late here, so apologies if these are redundant. But With the new vehicle inventory per location down 35%, do you feel like you lost any sales in the quarter? And is there any way to maybe quantify what you left on the table?

I don't think we can quantify it, but the answer is definitively yes. We definitely did. But we also, in some cases, made that decision our own while we're holding margin, right? So when you have a valuable commodity that you don't know if you can get replaced readily, we're looking at every single transaction to maximize the profitability. Had we had more inventory, we would have sold more. but I don't know what we actually left on the table. I think we'll have a better indication of that as we get through the balance of the year. And the only thing that we essentially see right now is that we have a tremendous, tremendous amount of demand, and we're really struggling to try to figure out how to satisfy it, which is why you see this heavy lean-in, and then you'll see a continued lean-in on pre-owned.

Got it. Okay. And then as we look at the updated guidance, is there any way to frame up what the contribution is from the recent dealer acquisitions that you made?

You know what? No, actually not really today. And part of the challenge, and I know you can appreciate this, is we make the acquisition announcement, but they fade in over time. And so some of the ones that we've announced are going to be closing in the next 30 to 60 days. And unfortunately, with the DMV and some of the last 12 months working from home, the ability to get licensing has been a much longer process. What used to be 60 days now could be 120 days. So it's hard for us to really... map out what that looks like. But, you know, we think it's meaningful. But as we get through the latter part of the year, I think we'll be able to provide more color on that because they'll have been baked in for a period of time. So we'll do our best to try to give you clarity maybe in the third or fourth quarter.

So is it maybe safe to say that you don't really have much baked into your guidance from those right now?

No, we have it baked into our guidance. I just am not prepared to give you exactly what that breakdown is.

Got it. Okay. Thank you.

Yes, sir.

Once again, that is star one. If you wish to queue for a question, star one. And we'll take our next questioner from Mark Rhodes of Alder Lane. Please go ahead. Your line is open.

Well done, Marcus. Very well done. Isn't one way... To answer Sappho's question is that things are very different now, that the demand is far outpaced anything that people can manufacture. And in this window of shortages, it's a huge plus for the top end of your funnel.

I think ultimately, you know, demand is clearly increasing. materially outpacing the manufacturer's ability to produce. And it isn't just material shortages, because those will resolve itself. I think we're dealing with manufacturers, at least on our end, that are responsible in the way they're growing. They're thoughtful in the kind of products they're making. They're being, you know, considerate to the quality of the units. And when you look at Forest River and Winnebago, their reputations rely on them making really good products. And so as we get through the balance of the year and materials start to come back in, we'll pick up a pace again. But the current infrastructure will need to be built just like we need to build stores to build our business. We need to invest. And so I would imagine that In the boardrooms of those three companies, they're already talking about building new factories and building new facilities, but they're doing it in a way that is responsible and thoughtful to the quality of the unit and the innovation. So demand clearly is outpacing the manufacturer's ability to supply. I don't see that, in my opinion, I don't see that slowing down anytime soon.

And a follow-up, where do you see and in what year supply-demand equilibrium with all the factors you mentioned? And two, I heard through some people who've seen things that outdoorsy just did a private round at $1.7 billion in valuation. And your thoughts on that versus what good SAM may be worth?

I'm really happy for anybody else's business that achieves a valuation that works for them. You know, I've always believed that our business is undervalued, and the only way to prove that up is to put numbers on the board and let the market tell us if they agree or disagree with that number. If the market disagrees with our ability, we have the ability to use our share buyback and other mechanisms to deal with that. And so I can't really speak to that. In terms of your first question, you know, I'm the eternal optimist, but I also believe that we are good scientists. I think that the RV lifestyle, which has existed since the 50s, by the way, is not a new thing. It's not like a fad that just happened because of COVID. We told people that a year ago. It's here to stay, but in a different way. And we think with the development of new, smaller, lighter products and the van life and V-vans and hybrids and a variety of other products, that the $500,000 we should be laughing at years from now. We should be laughing at it. And, you know, as we talk about it as a management team and we look at buying dealerships or opening new locations or developing new products, we believe that this industry – in the next decade should be making a million RVs a year. And that's still a scratch as it relates to the penetration of 330 plus million people. I know it sounds like a lot for an industry that was small many, many decades ago. But from our perspective, you know, we're going to continue to invest. And we believe that this industry is not only ripe, but we know that we are the leader, we have been the leader, and we will always be the leader in this space. The moat that we built around our company, in our opinion, is unbeatable. And we think our numbers in the first quarter and our guidance for the year prove that. I think if you look at our EBITDA margins, That tells you what kind of team we are. Our top line tells you that the industry is strong. Our margins tell you that the supply-demand curve is good. Our performance and the margins, both gross and EBITDA margins, it tells you the kind of business we're running. And that's ultimately what matters. And so when you look at us against our peers, and whether it's another public boat or RV or auto dealer, or you look at even the manufacturers, just look at our EBITDA margins. That's the story that people need to focus on. And what drives a lot of that is our good SAM business, our high margin, recurring, very stable business that focuses on the installed base. We are not an RV dealer. People need to stop thinking that we're just an RV dealer because our margins tell a very different story. Our EBITDA margins tell a very different story. And so hopefully over the next several years, as we continue to perform and we march towards a billion dollars of earnings, we'll get the value that we believe we deserve. Until then, we'll just keep working. I think that's the end of our prepared remarks and our Q&A, and we look forward to reporting our second quarter earnings in the coming months. Thank you so much.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.