Camping World Holdings, Inc.

Good morning and welcome to Camping World Holdings Conference call to discuss financial results for the third quarter of fiscal year of 2021. 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 written authorization from the company. Participating in the call today are Marcus Lamonis, Chairman and Chief Executive Officer, Brent Moody, President, Karen Bell, Chief Financial Officer, Tamara Ward, Chief Operating Officer, and Matthew Wagner, Executive Vice President. I will turn the call over to Mr. Moody to get us started.

Thank you and good morning, everyone. a press release covering the company's third quarter 2021 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 the impact of covert 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-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 statements are included in our earnings release and on our website. All comparisons of our 2021 third quarter results are made against our 2020 third 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 in the room not only are the folks that the operator announced, but a dozen of our other senior leaders. And throughout the Q&A and the analyst calls, you'll be hearing from some of them if the appropriate question is asked. They'll introduce themselves because you may not have heard of them before, but we're excited to have them here and plan on having them here going forward. What an amazing year it's been for all of us here at Camping World and, quite frankly, in the RV lifestyle in general. Demand is at an all-time high. As with our prior calls, we're going to break it down into two primary sections. First, we'll take a high-level financial summary look at with additional information available in our 10Q and our earnings release. And then second, we'll do an overview and the highlights of our operational progress. Adjusted EBITDA for Q3 was a record $288 million, a 33% improvement compared to a previous Q3 that was also a record in 2020. Our adjusted EBITDA for the trailing 12 months as of September 30th, 2021, reached an all-time record high of $902 million. We couldn't be more excited about that. Record Q3 revenue was $1.9 billion for the quarter, an increase of 14% over the previous record. Our balance sheet improved nicely for the quarter. with $515 million of working capital. We ended the quarter with nearly $312 million of cash, consisting roughly of $133 million of cash in equivalents and nearly $179 million of available cash in our floor plan offset account. And lastly, approximately $201 million of real estate without related mortgage financing. In the third quarter, we repurchased just over a million shares for about $41 million. And over the last 12 months, we've purchased north of 3 million shares for approximately $108 million. Look, over the next three to five years, our goal is for our annual revenue to exceed $10 billion with our adjusted EBITDA surpassing $1 billion, assuming no material adverse changes in market conditions. Our plan is pretty simple. Grow our good spam revenue 10% plus per year. continue our brisk pace of acquisitions and new store openings, targeting 12 to 15 per year. Significantly increased our used sales, looking to double the annual revenue from 1.5 billion to 3 billion. We currently operate 2,600 service and collision bays, and we plan to add nearly 500 to our existing locations. not including what we'll add through acquisitions and new store openings. We believe our performance will further strengthen our balance sheet to enable us to return meaningful dividends to our shareholders, as we do today, and to continue to make opportunistic stock repurchases. As we head into the next five years, we have several short-term goals that we believe will improve our overall performance and most importantly, expand our ecosystem. As I mentioned, starting in 2022, we plan to ramp up our annual expansion goal to 12 to 15 locations per year. And again, that assumes no material market change conditions. This growth should further enhance our relationships with the key and core RV manufacturers. In the last 12 months, we purchased over $2.3 billion collectively from Thor, Forest River, and Winnebago. These manufacturers will enjoy market share growth with our growth as a result of our ability to identify and grow underserved markets through our internal predictive modeling. We feel strongly that these three manufacturers have the right mindset around innovation, product discipline, and a renewed commitment to improving the industry service infrastructure. The advancements over the last five years by them have far exceeded what I had seen in my previous 15 years. The optimism for all sectors of this industry has never been higher. From the manufacturers to the suppliers, to the dealers, and to the campgrounds, We are feeling an excitement that I can't remember in my 20 plus years in the industry. This growth is being driven by an expanded demographic, more sophisticated engineering, and a marketplace that has been reminded how much it loves the outdoors. I also believe that the consumer has changed. They expect transparency and value as they should. One way that value is enhanced is with tools and programs that drive it. For current customers, I believe they want their asset protected, their value supported, and they want to have an ability to monetize their investment. Over the last 15 months, we have ramped up the Good Sam RV Valuator tool and have successfully and profitably grown our used inventory to nearly $400 million at the end of Q3. That resulted in a 29% increase of used sales for the third quarter. Our trailing 12-month basis of our used revenue is $1.5 billion. It is our plan to deploy more human capital, technological and financial capital toward continued growth in our used business while it complements our new. We believe that technology and process could grow that number to $3 billion annually in the next 36 months. For context, we believe there are over 950,000 pre-owned units sold annually between private party sales and dealer sales. Our robust balance sheet, service network, procurement process, and web presence are ingredients to achieving our $3 billion in annual used revenue goal. We plan to launch multiple marketplaces to achieve this, including a fully digital and financing marketplace. We're proud to announce that we have selected RVs.com, as the pre-owned, fully digital experience brand. We did this for simplicity, search optimization, and most importantly, domain authority. Today, the Good Sam branded park network, which is the largest branded campground network in America, consists of over 2,000 parks. Our plan is to continue our expansion of this network, leveraging all the available assets of our company. this network supports the installed base of the rv community it entices first-time buyers and it improves our cost of acquisition for new customers and adds significantly to our overall database our park network is very important both to the rv lifestyle as well as the financial performance of our company We're in the process of exploring strategic opportunities to expand and enhance our presence in this lucrative vertical. Renting an RV through our new Good Sam RV peer-to-peer platform provides a ton of opportunity for us. We see multiple benefits from this platform. ranging from expanding our Good Sam Park Network, ramping up our mobile service initiative, sourcing additional used inventory through our renter relationships, and increased sale of Good Sam products and services. It is our current plan to operate this peer-to-peer platform and in select markets during certain times of the year to have a rental fleet of our own. That fleet not only grows our relationship with our key manufacturers through purchases, but once RV units retire from the rental fleet, they'll fuel our pre-owned pipeline. This company has over 55 years of experience, and we feel that the future looks way brighter than we've ever seen before. Our trailing 12 months adjusted EBITDA as of September 30th, 2021, was $902 million. We're now increasing our full year 2021 adjusted EBITDA estimates between $915 million and $930 million. We will be providing our 2022 financial guidance early next year, but we are very optimistic that we will outperform 2021. Our focus as a management team is to lead the RV industry in profitability. It's well within our sights. I'd like to turn the call over to the operator for Q&A.