Good afternoon, and welcome to Camping World Holdings conference call to discuss financial results for the fourth quarter and fiscal year of 2020. [Operator Instructions]. 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 Lemonis, Chairman and Chief Executive Officer; Brent Moody, President; Karin Bell, Chief Financial Officer; and Matthew Wagner, Executive Vice President. I will now turn the call over to Mr. Moody to get us started.

Thank you, and good afternoon, everyone. A press release covering the company's fourth quarter and year ended December 31, 2020, financial results was issued this morning, and a copy of that press release can be found in the Investor Relations section of 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 measures are included in our earnings release and on our website. All comparisons of our 2020 fourth quarter results are made against the 2019 fourth quarter results unless otherwise noted. I'll now turn the call over to Marcus.

Thanks, Brent. Good afternoon, everybody, and thanks for joining us today. We also have Tamara Ward, our Chief Operating Officer, joining us on the call as well today. We had a very good 2020, and I'm pleased to share those results. Today's call is going to be broken into 2 primary sections: first, a high-level financial summary, with additional supporting information available both in today's earning release and our soon-to-be-posted 10-K from 2020. The second section will go into some of our initiatives and our updates on those initiatives, including expanding the leverage of our national infrastructure, tapping into our 48-state goal march, our advantage around full sales and service facilities, including the regulatory and licensing process around the sale and distribution of recreational products both online and in store. Business has remained strong for the 2021 first quarter at least so far with positive trends continuing into February. Adjusted EBITDA for Q4 was $91 million, a meaningful improvement over Q4 of 2019. Adjusted EBITDA for the year ended December 31, 2020, was $565 million. Continued strong demand resulted in revenue of $1.1 billion for the quarter and $5.4 billion for the year. Our balance sheet remains strong, and we continue to be pleased with our liquidity position. We ended the quarter with $300 million of cash, broken up between $166 million of cash and equivalents and an additional $134 million of cash in our floor plan offset account. Our working capital is very healthy at $459 million at the end of the year, which is up from $395 million at the end of 2019. Our net debt leverage was 1.80:1 at the end of 2020. As we think about our initiatives and updates, we continue to grow and enhance our online and our digital initiatives with investments in new…

[Operator Instructions]. And the first question is from Rick Nelson with Stephens.

Congrats, and thanks for the color on 2021. Marcus, if you could discuss the trends that you saw during the quarter and what you're seeing here in early 2021 and maybe some guideposts around that, what you see as the big drivers in 2021 to achieving those EBITDA levels.

Yes. We saw very sustainable and pretty stable growth throughout the Q4 period, and obviously, as we headed into November and December, there are seasonal adjustments that normally happen in the bell curve of our annual year. But what we didn't see is the extreme drop-off that we normally see at the back half of November after Thanksgiving and the bulk of December. As we headed into '21, I think the biggest paradigm shift for us is that we used to get our year started with a flurry of consumer shows, and we made a decision as a company to not expose our associates to any consumer shows in the beginning of '21. And while we knew that there was financial risk because other people are irresponsible in holding those shows, we decided to stay home and focus on driving a digital plan that will drive customer appointments using technology that we have to do virtual tours and to be able to transact with people online. And we saw a record January that we have not ever seen before even though we did not go to any of those shows. That trend continued in the first part of February. And we saw a slight slowdown for about 9 days, singularly and solely driven by the extreme weathers, by us having to shut down a number of stores to keep our employees home and safe in markets that we hadn't experienced before like Texas. I mean we literally lost days of business. So we expect to still see a very, very strong February and to see that continue into March. Oddly enough, we aren't seeing any spike in any one segment of our business. Our call centers continue to receive record-breaking calls. Our service centers continue to see record-breaking appointments. And…

Good to hear. We're hearing about inventory supply challenges. We see it with your inventory per store. Maybe if you could comment there. And when do you see inventory normalizing or demand not outstripping supply to the extent that it is today?

If we go back to a high school economic class circled around supply and demand, we know that the demand far exceeds the supply, and the manufacturers are doing an excellent job of both managing the products that they're making and enhancing the quality of them. We're not compromising quality. But we don't, in our estimation, see supply exceeding demand on an annualized basis anytime soon, to be totally honest. And what that does for us is that bolsters margins for both the manufacturers who make the decision to consciously not overproduce and for the retailers who make the decision to not consciously overbuy. All we can speak to is what we are doing as a company as we plan out our inventory for the balance of the year. As we sit here today, we have north of 70,000 units on order, could be a little bit more than that. And we'll continue to add to that number for a couple of reasons, not only our existing same-store sales and the growth we expect from those, not only the stores that we have under contract to buy that we need to add inventory to, but we're also in the process of acquiring land and building several stores. Today -- as we sit here today, when we look at the stores that we ended the year with and the stores that we have announced in terms of acquisitions, I think we're around 176. I think there's an outside shot, after we complete the acquisitions that we have LOI signed on, we complete the renovations of facilities that we have under control and we complete the closings of the land that we've purchased and the building of those, that we could scale 200 locations by the end of the year. I want…

[Operator Instructions]. The next question is from Ryan Brinkman with JPMorgan.

Congrats on another strong quarter. Maybe just starting with the trend in used versus new RV sales. I think used sales are typically less cyclical. And in 2019, your used sales trended stronger while the new market was softer. Obviously, a big reversal of that in 2020, but also sort of increasingly as the year progressed. So I'd love to get your thoughts on what is driving that trend, presumably, I imagine the lower supply of used vehicles, what your strategy is to source those vehicles. And I think the ASPs and the margins on the used side were really incredible in the fourth quarter. Is that primarily a function of the overall tighter industry supply or maybe the supply of used RVs is even tighter at competitor stores? I'm not sure. And I would just love to your thoughts on the used business, how long these conditions might continue. What happens next? Does volume go up as supply normalize and then ASPs and gross margins come down? And if so, what do you think would happen to used RV gross profit dollars in that scenario?

Wow, that was a lot, Ryan. That was awesome, by the way. We -- I've said for years since we've been public that I'm agnostic to what the consumer purchases. I want to make sure that our thousands of associates are selling the customer what's best for them in that moment and we're not shoving people into things. But we also made a conscious decision, led by Matt Wagner's philosophy, and Matt will speak to this in a second, to not get ourselves in a situation where we're deploying capital and not maximizing our margins. And what I mean by that is we're not going to chase used inventory. We're going to be very strategic about it. And we did launch our algorithm in the summer, early fall of 2020 on used values. And we like where our margins and we like where our turns are. And what we don't want to do is hurt our margins or hurt our turns by going out and just chasing the used values at the auctions, on the curb or in any other place because we have a new alternative that gives us a great return on capital. So when a customer comes into our store, we get a lead, we have seen an uptick in our closings and our conversions. If we hadn't, we may have gone out and chased the used. But I'm going to have Matt speak a little bit more on the used trends.

Yes. So I think it's important to point out that while we reported in that supplementary information that we were down on a same-store basis on used unit sales, our used unit inventory was actually down a commensurate amount regardless of what we were, up, on a same-store dollar basis. So in other words, we are reinvesting in more inexpensive units at different points in the fourth quarter, and what we have is real place market dynamics at play, where we have enough proprietary tools that we lean upon for pricing as well as for our trade-in value that we assign to each unit, as Marcus just alluded to. So as we roll into this upcoming year, as Marcus also said, we're agnostic to what we're selling, new versus used. But we also acknowledge that we're not quite where want to be just yet on new unit inventory on a same-store basis, so we've been much more aggressive in our pursuit of used units on a same-store basis. I continue to have an appetite to pay up a little bit more to ensure that we're procuring as much used units from the consumers and providing the Good Sam members that loyalty and that reward that they should have being a part of our ecosystem. And that's where we ultimately see our innate advantage over all of our competitors, to be able to dive into our data set using our proprietary technology to actually make sure that we're not overpaying but rather paying what we would regard as fair market pricing.

Okay. And then just lastly for me. How are you thinking about the potential for organic versus inorganic store count growth? Given how strong the industry is, I have to imagine that the acquisition multiples being discussed must be trending higher. Maybe you can just remind us about how you think about organic versus inorganic generally. And then I know they're not the same type of obstacles for you to organically grow store count like in the case of the new vehicle retailers. Maybe you can just talk about the decision matrix that goes on there. And then are there certain geographies -- I heard you talk about 48 states. Are there certain states or areas that you're more seriously evaluating for organic store count growth in the current environment?

So every decision we make either to acquire an RV dealership or to acquire a Pizza Land or building an open store is based on very deep data analysis on what the market looks like, what the trends are, what our overall offering looks like, what Good Sam members exist there, where do we see white space and all the obvious things. The multiples that we're seeing, quite frankly, are similar to and in some cases, even less than what we've seen historically. And I think part of that is that our dominance in the space has led us to lead the procurement of inventory on the supply chain side, and our investments into things like furniture or air conditioning or a number of other things that have not been announced yet give us the ability to also put ourselves at the front of the line with the OEMs. So I'll start with that. A number of dealers have really struggled in December and January to procure inventory and have reached out to us as an opportunity to sell their business. Obviously, those multiples are being suppressed. Additionally, we're finding that commercial real estate on the land side has been suppressed as well, and we have, I think, 9 or 10 locations on the docket today where we have either signed an LOI or closed on the land or building to open up de novo stores. We're only doing that in cases where we feel like we can be profitable in those markets within 12 to 18 months. That is our own standard. It will be true that in 2021, we will have an abnormal, abnormal amount of new locations added to our footprint than we traditionally have. We're traditionally 8 to 10. We will exceed that number by a…

The next question is from Bret Jordan with Jefferies.

This is Mark Jordan on for Bret. Just thinking about the company's collision strategy. Can you maybe talk about the progress that's been made there and how that might progress throughout the year?

Matt Wagner will talk about that.

Yes. We've made a tremendous amount of improvements to our overall existing service infrastructure, and we've been actively engaged in a number of different negotiations, conversations, and we anticipate -- I know later in the fall of this year, we'll have an additional 8 collision centers set up. And we're proceeding to further investigate other opportunities within our overall dealer network, where I wouldn't be surprised if we were able to find another 4 to 5 before the end of the year. More will be forthcoming. But we have recently hired a new leader of the entire business, which comes from a collision background from a larger company within the industry. So we're very confident about continuing to improve our overall position. And that collision business, I think, will continue to be a very accretive proposition for the business moving forward.

That 70%-plus margin business is our justification additionally for adding new locations in 48 states. Because when we add those locations, we're adding service bays and collision centers. And we know that as the RV installed community continues to get bigger every single day, it just builds and builds and builds, we know that our competitors are not investing in service facilities and collision facilities at a rate that we are. Unfortunately, the industry is still made up of some smaller dealers that don't have the capital to build 10,000-, 12,000-, 20,000-square-foot service facility, and we're going to go ahead and take the lead on that. While we may not sell every RV in America, our goal is to at least provide a service opportunity for every RV in America, and you have to have a footprint to do that.

Okay. Great. And I guess this is a bigger-picture question. So thinking about the announcement with Lordstown and the Electric World strategy mentioned today, how do you see the future of electrified powertrains in the RV space? And how does this strategy evolve over time?

One of the things that I realized, as I mentioned in my prepared remarks, is that we've been sitting on this asset but we never really looked at it as one, and that's our ability to secure a DMV license. And a DMV license is a bit of a moat because you can't just get it at your local gas station. You got to have all the proper instruments in place and you got to have the facilities in place and you got to meet all the requirements to receive that license. I would expect that over the next several years as we launch Electric World as a shop-in-shop experience at our existing 170-some-odd locations and growing, that a customer will be able to go online to Electric World and look at everything recreational that is electric powered. I want to be clear about that, everything that is electrified, and that will not be limited to RVs. Today, we sell electric bikes. We may be selling electric pontoons. We hope to be selling other electric apparatuses that are recreational in nature. We are not an electric car company, but we may have the opportunity at some point in the future to sell electric trucks, and that fits for us because we sell travel trailers that need to be pulled. We are working also to create a fully electric RV that incorporates the frame, not just adding a battery pack. We are in the process of coming up with other things. But I would expect, when you come to our first launch in late July of 2021, that you're going to see a full assortment with us as the pioneers and the collectors of everything that's out there. One of the challenges that every electric manufacturer in America has today that…

Okay. Great. And I guess last question for me. I think it's something we ask or try to ask every quarter, but do you have a read on what the mix might be of first-time buyers?

We're starting to finally see an uptick in our trade volume as we sit here today. We did see a low point in the summer. Do you want to give that number, Matt?

Certainly, yes. We bottomed out at about 18% trade-in rate. That was around the time frame of about June, July. And since then, we've seen a nice improvement at least year-over-year and sequentially, month-to-month. We're not quite where we hope to be, which actually is quite uplifting for the future prospects of consumers going back into the lifestyle or trading in and trading up, which I'm confident, by next year, we'll see a higher trade-in rate, which means that you'll see, in many respects, that average sale price continue to improve in these lower entry segments, and we can then, therefore, yield a greater used inventory level moving forward, too.

The internal debate in our company, and I really want to just make this point, is that I'm not intimidated by a high first-time buyer rate. It means that we're executing on the things that we want to do internally in our company. And we're going to double down on that. And a good example of that is we announced this week a language initiative to put all of our e-commerce and our store experience in full Spanish. And then we're also, in the latter part of the year, going to do the same thing on the front side as we stand at the border, staring at Canada, looking at that as our next white space opportunity. It is important to us, through language, through product development, both on our own and in partnership with manufacturers, and our electrification of things, to continue to drive down the average age of the buyer that enters our space. And we want to lead that charge and have a lower average age than the rest of the industry, and we know we need to spend money and take on certain product development initiatives to do that. If that first-time buyer number starts to go up too high, that means we're not attracting new people that we really want. And the long-term prospects of this industry look like they did 10 years ago. They're growing every single year. And we believe and we want to remind people that while this may be perceived as the greatest RV year in history, it's still only 0.5 million RVs in a 330 million-plus populated country. So we just want to give everybody that scope here. RV is not a COVID reaction. People have been RV-ing for 40 years. And yes, maybe we saw some first-time buyers. And we're happy to see them, and we're happy to see more of them. And it is our goal to try to find more of them as we mine different diversities and different areas of the country and, quite frankly, of the North American continent in the next 24 to 36 months.

And we'll take the next question from the line of Gerrick Johnson with BMO Capital Markets.

Great. I wanted to ask, do you see what the trade-in number is now? I think you said 18% in June, July. Then I have a follow-up on used.

Matt?

It was 25% to end the year. And heading into this year, it's been pretty consistent right around that number.

Okay. Great. And then how do you account for your used inventory? Is it LIFO or FIFO?

How do we account for used inventory?

It's FIFO. It is a specific identification FIFO.

And your next question is from the line of Brett Andress with KeyBanc.

So I'm not too familiar with state-by-state regulations, but how many states can you actually sell online-only in today? And then I think you alluded to this earlier, but what is the margin differential between online-only sale and a traditional sale?

If you do not possess a Department of Motor Vehicle license in that respective state, you are not permitted to tag, title or sell a unit into that customer's residing state. And so it's not like buying a pack of gum and shipping it online or putting it in a box. There are tag and title requirements in every single state. And so that is, in our opinion, a big barrier that we're trying to make sure we put up -- not put up in front of us.

And then the margin differential?

The same. And quite frankly, it could even be higher, but not lower than. I'll just leave it at that. So not -- the historic expectations, not lower than what we would experience at the store level. And by the way, we've been perfecting that buy and have delivered to your home model for about 18 months now. And it's not as easy as one would think because you're crossing state lines in some cases and there is a whole delivery process. And I think COVID accelerated a little bit of it. Because we have to get better on the technology side with making an appointment, doing the walk-through, doing the inspection, doing the delivery, having the paperwork shipped to people, and what we realized is that the consumer actually preferred to buy that way. They prefer to do it in the confines of their own driveway. They prefer to have a one-on-one experience that may be digital and thus, paperless for them. And so we're doubling down on that experience and realizing that people who to buy everything online, they want to learn everything online. And RVs shouldn't be any different.

We'll take the next question from the line of Craig Kennison with Baird.

One of the metrics that really stood out in the quarter was the really amazing gross profit per unit on the new side and the used side. How sustainable is that? And what really drove those figures?

Well, ultimately, I think a good chunk of it has to do with the supply and demand of units. And if the manufacturers can stay disciplined not in '21, not in '22, but beyond that point, where they're making what the market is asking for, I think that everybody is starting to realize that these margins are sustainable, particularly on the used side. When the popularity of RV-ing has grown exponentially and the supply and the ability to manufacture on the new side and the amount of units available on the used side continues to be constrained, we think we'll see these types of margins within a range for the foreseeable future. We don't know what investments the manufacturers are making to ramp up factories and buildings and things of that nature, which could lead to an overproduction and then lead to margin deterioration both for the manufacturer and us in the future. But we don't anticipate any of that in the foreseeable near future from our perspective nor are we forecasting that in our numbers.

And then with respect to your 2025 outlook. Super helpful that you provided 2021. And the EBITDA guidance you've provided for 2021 already exceeds what, I think, we thought you could do in 2025. How should we reset our expectations for 2025? Is it still an expectation for mid-single-digit EBITDA growth? And should we just reset the base at $650 million to $690 million in 2021 and grow from there?

I think we're living in a world -- we obviously know, and you know this, Craig, we're living in a very cyclical industry, and we don't ever -- we're not able to ever predict where we think the soft spot is. And so we tend to internally look at it in 5- and 10-year chunks. And we look at like how did we do on average over the last 5 years or how did we do on average over the last 10 years, knowing that there's peaks and valleys. And on average, we've been able to grow pretty nicely on the bottom line every single year. And I think what we're left with right now is a tremendous amount of free cash flow and a leverage calculation that we're very, very comfortable with. We will be using that free cash flow to continue to grow and acquire and invest in growing the base of our business. And if you go back and you look at how the company grew out of 2010 and then out of 2016, we made these big swaths when there's a softness in the market and we grow the base of the company pretty significantly. If the new market slows down a little bit, if margins come down a little bit, then there's a dip for a year. But as we continue to build the size of the installed base of our customers and expand the product offering for our customers and continue to get better at digital efficiency and distribution efficiency and private label efficiency and now we start to enter into the supply chain side of things that the manufacturers are buying from us and we're selling aftermarket, we think we can continue to grow our EBITDA base, on average, over the long haul. That's actually how we look at it as a company. And while The Street always looks to guide -- for guidance from us and we had to give it, we believe that the growth of our EBITDA over the long term will be north of what we're telling you today.

No further questions at this time.

Okay. Thank you very much, and we look forward to reporting our Q1 results in May. Take care.

This concludes today's call. Thank you for your participation. You may now disconnect.