Good afternoon, and welcome to Camping World Holdings Conference Call to discuss Financial Results for the Second Quarter of Fiscal Year 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 that 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; Tamara Ward, Chief Operating Officer; and Matthew Wagner, Executive Vice President. I will turn the call over to Mr. Moody to get us started. Please go ahead, sir.

Thank you, and good morning, everyone. A press release covering the company's second 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-Qs 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 second quarter results are made against the 2020 second quarter results, unless otherwise noted. I'll now turn the call over to Marcus.

Good morning, everybody, and thanks for joining us for what is a very exciting day. As we celebrate Camping World and Good Sam's 55th year in business, we continue to be astounded by the insatiable desire that Americans have for experiential travel, exploration of this country and most importantly a community of connection with others, that desire resulted in our company's best quarter in its history. Our incredible growth and our enduring success over the decades is proof of that demand and a testament to the 360-degree business that we have built. As we enter our 56th year as the clear leader and disrupter in this industry, we will invest heavily in our people and technological evolutions, two of our greatest, single differentiators and continue to separate ourselves as the clear industry leader. We believe our high margin, Good Sam product and service offerings such as roadside assistance, the Good Sam membership and extended service protection to name a few, strengthen our long-term relationship with our customers. To further strengthen the retention of our customers, we have begun a transformational process to meet the ever changing customer, how we transact, how we service, how we communicate along with all the other necessary resources to create a customer for life. New platforms such as the Good Sam RV Valuator, Good Sam RV Rentals, also known as peer-to-peer, Good Sam Campground reservation systems, and the Good Sam service marketplace are the types of dynamic offerings that allow us to meet the needs of new and existing customers. Today's call will be broken into two primary sections. First, a high-level financial summary with additional information available on our 10-Q, and second, an overview of the highlights of our operational progress. In regards to financial performance, demand was strong in Q2 and we have…

Thank you. [Operator Instructions]

Operator?

Yes. Just one moment sir, excuse me. Okay. So, we will now take our first question from Brett Andress from KeyBanc.

The focus here is maximizing profitability. But just a question on pricing, are you selling above MSRP now, I'm just trying to put this point okay no?

No we're not and we’ve been asked that question and thank you for asking it. We are not pricing above the MSRP and we never will ever do something like that. We understand that some competitors may be doing that. But our job is to maximize our profitability on every single transaction. And while the inventory per location is down 21%, we became very, very focused on making sure whether it was more used than we were maximizing each individual opportunity, which is why our GPU is almost double.

And so, maybe just to follow-up on that though, just the 22% increase in new vehicle prices. I guess how much of that is OEMs' passing price to you, how much of that is mix? I'm just trying to get some context around that?

I don't really think that we look at it that way to be honest as we haven't seen significant increases in pricing from the manufacturer. In fact both Thor, Forest River in Winnebago has been very conscious to try to absorb as much as they can to not obviously inflict the customer, it really is a function of us holding more margin on each particular transaction, both new and used.

Okay. And then SG&A, I think larger than most of us had in our models. Is there any way to help us with what's in that $432 million number, it seems from your prepared remarks that there is some heavy investments going on, but any dollar amount that you can put around that?

Actually our SG&A, we felt performed very well. If it's up on a raw dollar basis it's because our business is significantly bigger and commissions were also bigger because of the increases in gross. But it met and actually beat our internal expectations and I think it's probably better on the SG&A side as a percentage of growth than we had in my recent memory.

Got it. And then one quick one, it's just - I think this is a moving target in the past. But on the updated guidance, are you willing to frame-up how much of that contribution is coming from some of your recent acquisitions that you made?

We don't report it that way, but I will say that a lot of our acquisitions for this particular year have closed inside of the quarter. And so, unfortunately, we were not able to enjoy as much as we wanted to. We saw a significant delay state-by-state in securing licensing based on the COVID slowdown of processing applications. And so, unfortunately the guidance we had provided previously, we weren't able to close all of those acquisitions at the time that we wanted to. So there was a pretty significant delay.

Our next question comes from Ryan Brinkman from JPMorgan. Please go ahead.

Is there an update you can provide on the recently launched RV rental business? And what can you tell us in terms of the interest, the early interest from consumers in terms of placing reservations through the network or for making their own RVs available on that network? And has there been any thought to place in any of your own used inventory onto the network or paring with other companies? As I think might have originally been suggested that may have RVs available in addition to the peer-to-peer channel or maybe does the very low inventory environment at present make that less attractive currently? And then longer-term how are you thinking about your potential market share in that segment given leverage of the Good Sam brand and your roster of customers, et cetera?

I'll answer one of the questions first just to get that out of the way. And unfortunately, as we've grown our used inventory double from a year ago, we look at the margins on that used and the turns on that used. And we will continue to grow our used inventory until we see a material break in either of those. Unfortunately, that hasn't happened and as we've grown, inventory sales have grown. So, we don't have any available inventory to put on to that platform, because when it's coming in its leaving pretty quickly. As we mentioned in the previous call, our plan was to launch, fully launch the peer-to-peer model, Good Sam RV rental business in early fall. And while we have taken the site live we haven't put the necessary marketing funds behind it. Because, we want to really control that user experience. The early indications are very good, we're actually very pleased. But at this time for competitive reasons, we will not be breaking that business up and disclosing how we're doing in comparison. I'll remind everybody of this, we have 2.2 million Good Sam members who stayed with us for a very long time. And our job is to educate them on the pluses of owning an RV, and it's not only about enjoying the lifestyle, but it's monetizing their investment in this particular space. And our job as a company is to maximize particularly for our members, every single investment that they make with us, and whether they are buying roadside or a warranty or putting their unit on the platform. We are seeing that they're seeing the value in doing that. We know that our ability to add units to the sites has a lower cost than any competitor in the marketplace. We also know that our necessity to charge high fees, like our competitors aren't necessary for our business, because our monetization of that platform isn’t a singularly fee-based business model. It is also based on selling the ancillary products and services that go along with that rental, like warranties on a daily basis, roadside assistance and all the soft goods that somebody could buy in anticipation of their trip. So we think about it as a holistic return for our company and we expect to win in this space in the very short-term and really disrupt what we believe is a very aggressive fee structure by some of the competitors.

And then I see that you both purchased nine dealership locations during the quarter and also the 46 million of buyback you referenced. Could you talk a little bit about the M&A environment at present given that, now appears to be one of the best times ever to be in the RV business? What trends are you seeing in terms of the multiples that you might be - being asked to pay? And given those multiples, how are you currently weighing that opportunity against the potential to buy back shares or pay down debt, which I think is less of a priority given the increase in EBITDA or any of the other various different organic initiatives that you have available before you?

We look at our free cash flow like we have for - since the inception of the company, whether it was public or private. And when we hear things like, are you being asked to pay higher premiums, we don't really enter into that dialog. We don't deal with brokers, we don't operate our acquisition model the same way and our ability to buy dealerships across the country is quite frankly more plentiful than it's ever been. And we're not seeing a dramatic modification in the pricing structure to buy those dealerships. The most important part about acquiring dealerships, and I think the smaller newer competitors will learn over time is that the key, that the art and science in making acquisitions, is the integration and the implementation of our best practices. And over the years, over the 20 years we've learned what it takes to actually make that acquisition. And for us the return on that acquisition isn't just buying the historical trailing 12 earnings that the dealership had. It's implementing our service process, implementing our S&I process, installing the Good Sam RV Valuator, and really understanding how to monetize the entire return including, but not limited to selling memberships, selling roadside, selling warranties. So our overall return is much higher than a typical RV dealer or auto dealer consolidator. We can buy as much as we want, we have the cash to do it, we have the know-how how to do it and we know how to create that environment when we think it's appropriate. But we are opportunistic buyers. And what that means is, we don't overpay ever, that is not our business model. While we acquired a ton we also want to digest what we have bought and as we look at the businesses that we bought. And we look at the ones that could potentially be on deck, we want to make sure that our human capital and our ability to train and integrate and setup those best practices is clear and easy and sustainable for the long-term. So in summary, it's never been a better time to buy a dealership, but the pricing is the same as it's always been.

That's helpful, thanks. And then just lastly, is there any update to the opportunity that was discussed last December with Lordstown Motors, whether in terms of the timing or likelihood of servicing any electric pickup trucks that they might bring to market? Or separately any thoughts that you might have on the electrified RV space generally?

So, as we have noted previously, we will have our Investor Conference in Salt Lake City on the evening of September 14. On the morning of September 15, we will unveil a product offering that the outdoor and recreational space have never seen before all-in-one place. Now we know that it's a long road and a lot of these electric companies have popped up with ideas and with concepts. But we want to show the market is that these ideas are very real, and there is a variety of products. We are not linked in the electrification. Our leadership and disruption in the electrification of the recreation space is not linked to any one company. It is going through our company and our ability to distribute through our 40 some odd states and our 187 locations and our e-commerce platforms, the products and services on the electrification side that make our company money and add value to the consumer. We know that we're the only one with the national platform. And what we've noticed since the launch of the idea of Electric World, that we've had more inbound requests for us to be their distributor, for us to be their dealer of record. But our affinity is for not one single company, it's for the customer and to our shareholders.

Looking forward to it. Thank you.

Our next question comes from Joe Altobello from Raymond James. Please go ahead.

So, first question on new unit sales. Despite strong demand it looks like units were down year-over-year, obviously very likely a reflection of the lack of inventory. But what do lead times generally look like right now, have you seen any improvement in July with OEMs restarting after the summer break?

So, there was actually a shutdown in July, which created more of a gap. And as we continue to see record-breaking website activity and record-breaking lead volume and demand like we've never seen there before unrelated to COVID, related to the fact that people are now saying, hey this RV thing is a real thing in the mainstream. We can't continue to have the suppliers be way behind, and I don't see that as a criticism, I think that as an encouraging piece. We don't think the supply chain from a filling our shelves again, will be repaired anytime soon to be quite honest, because we don't see the demand slowing down anytime soon. Now that bodes well for both the manufacturers and for us because it allows margins to stay where we believe that quite frankly they should be. And if the dealers and the manufacturers could really ever make sure that they don't what the market, we will have healthy margins and a healthy customer experience for years to come. But as we mentioned previously, our same-store inventory as on a unit -- like a location basis was down 21%. And what we realized at the end of last year, while we talked about the RV Valuator we needed to relieve our dependence exclusively on new manufacturers, meeting our customers' demand. And so we deployed an additional $112 million for the quarter and we will continue to invest cash from our balance sheet, because when you look at the overall return, if you look at the margins that we achieve on the used unit and the number of times we turn that unit in a given year, it could be quite frankly one of our best investments. And so we look at how we think about our cash, please note that we are going to continue to grow our units and the RV Valuator tool, the proprietary technology that we developed using 20 years of data has given us a clear competitive advantage. And as you do dealer checks around the country. You'll probably hear that people can't find and get used inventory, and a lot of that is because of us. We will continue to be aggressive to ensure that the customer is training their unit in the marketplace gives a fair and appropriate value, and we want to make sure that we are the leader in providing that value to the customer, so they see us not only as a short-term relationship, but a long-term relationship. Remember our Good Sam members expected from us, and so we'll continue to do that. But we don't see the new vehicle inventory supplies. I'm not even sure it fixes itself in 2020 to be totally honest with you.

I guess if I could kind of springboard off of that. You're obviously not giving guidance on '22 today. But at a high level, how are you thinking about next year directionally, you've given the lead inventory, given the ASP improvement you've seen this year and what would keep you from growing EBITDA next year I guess is the best way to ask it?

Unfortunately, there are things outside of our control. But let me be very clear about something. We understand the headwinds that the industry as a whole is experiencing on the supply side. And whether that's receiving a window or finding labor we're very, very proud of how the manufacturers have handled those challenges, but we cannot be subject to those kinds of issues. And so if we need to invest in our used, we're adding more service base by the day across the country. We're looking for ways to cut costs, we're looking for ways to develop better margins on our retail business and most importantly and loudly and clearly, we are doubling down on our Good Sam business. We believe that we can start to see double-digit growth and what we love as a high-margin recurring revenue that differentiates us even more. If the supply fixes itself, well of course the direction is up by a lot. But if it doesn't, we still believe we're doing all of the right things to continue moving forward up. We don't anticipate moving back. But we're not prepared at this time because we're going through our budget process, should you have any real substantive guidance other than we're excited and we don't see demand slowing down and we're enjoying the way we're running our business today and will continue to deliver the results.

The next question comes from Rick Nelson from Stephens. Please go ahead.

Thanks, good morning. Terrific quarter. Like to follow up on inventory, if Marcus you could discuss how inventories track during the quarter and where you see them here early third quarter? Are things getting more challenging or in fact, are you getting more supply to meet demand?

You know unfortunately, [indiscernible] for the quarter and the inventory even as you start the new quarter is a challenge. And we continue to see a drop, we do believe that it will start to stop falling some point in the late fall, early winter like it normally does. But as demand continues to be explosive and we continue to take orders out into later in the fall and early winter and even early next year, we believe that it's going to continue to be a challenge for the industry. We also believe that we get our fair share and then some reallocation from the manufacturers. But please know that whatever challenges exist on the new side as they exist for the industry not as good to the Camping World, within our control is we will continue to deploy significant capital on the used side as long as the margins are acceptable to us as the management team, showing that we're getting a good return on capital and returns continue to be materially in the same range quite frankly they are a little high now, we'd like to actually bring them down. We will continue to invest and that means investing an additional $100 million into used as long as margins don't compress, in terms don't we will, that's our hedge against any challenges that the manufacturers have. And our ability to dip into our database, our ability to use our valuator tool is what we believe is our competitive advantage we talked about last year is what has resulted in a $333 million record quarter and we're hopeful that we can deliver similar type results from a percentage basis or improvement basis in Q3 and Q4 and beyond.

Okay. Thanks for that color. Also looks like to know if you could hang on to the result margins as we move into the fall and to winter selling season?

It's a very natural graph to be honest, and it's a deal that it's just supply and demand. And as long as supply continues to be constrained much like it is in the auto manufacturers. We will continue to maximize every single transaction. We could have had way more volume for the quarter. But our focus is maximizing profitability and margin to improve our leverage, to improve our cash and give us the excess cash to either pay down our debt more, make more acquisitions, buy more used inventory or buy stock back, that's how we think about maximizing margin. And that's a golden ticket that we've been given, and it's our obligation to seize that. We continue and expect to do.

The next question comes from Gerrick Johnson from BMO Capital Markets. Please go ahead.

On your used inventory, is more of that coming from outright buys or you seeing an uptick in trade-ins? And related to that, are you seeing your first timers through the last call it 15 months coming into trade up to the next RV?

We're seeing pretty stable and consistent trade-in rates. It's our ability to go out into the marketplace with not only our proprietary tool, but a dedicated team who scours the country, not only through a sound room through technology through the web, through auctions, through knocking on doors, through walking through Campground, we have a dedicated very large team that wakes up in the morning with one goal and one goal only, to make money for themselves by being paid to acquire inventory using the technology they have been provided. I think the thing that we were most about the RV evaluator tool is it takes the human element of guess work out of the equation. And our ability to automate that process, our ability to use the technology, to drive leads with it, to put pressure on our competitors to give the customer the fair value is the competitive advantage. We also know that the most important thing that allows the RV evaluator tool to work is the strength of our balance sheet. And while other dealers may have the appetite to buy, we're not sure that they have the size of the bank account to be able to be competitive. And we were at an auction, our hands stand tall and proud and we make sure that if it's the unit that we want, that we believe we can buy, we go home with it.

And I wanted to ask one more question. You're probably not going to like this question, but I'm going to ask about the industry itself, your position and it's - I know you look at things holistically. But in terms of same-store unit sales did you gain or lose share in new and did you gain or lose share in new?

Well. We don't really look at our business that way and I don't mind that question at all. And that question quite frankly is very obvious if you look at the queue. We were down in same-store sales on the new side. So, we were down less than our inventory was down and our margins were up. So there was a daily art and signs about how we managed our national pricing model. And we can go in and move pricing by the minute to drive up demand or to drive up profitability. We elected on the new side to drive up profitability because there is risk that the replacement unit may cost us more and we don't know when we're going to get it. On the used side, I can't speak to market share and particularly I don't know what stats that I would necessarily rely on and be comfortable with. But here's what I do know. We know that if you do dealer check around in the country, people are struggling to find deals, but we are not. Our used business was actually up 14%. And so we believe that, as we've always said we're agnostic of whether the transaction is new or used, but we are concerned that we want to grow our new inventory because we know the demand is there and we want to grow our new inventory forward but when that happens, we're not going to slow down growing our used. That question doesn't bother us at all.

Excuse me, this is the operator. I'm very sorry for the inconvenience. Because my Internet is currently down just one moment. I'm very sorry once again.

I think our next question is from Ethan Huntley from Jefferies.

I'm very sorry. Just one moment, sorry.

While the operator is trying to get connection back. It's really important to look at this business in a very different way than you have historically. We know that the addressable market has expanded dramatically and as you look at technology that's been created or investments that we've made or innovations that are happening, the market just continues to get wider. And we made an investment during the quarter in June, that we called Happier Camper, which has adaptive technology. As we look to grow the marketplace, we have to continue to find new ways to generate revenue, new ways to attract new customers to the marketplace. The good old fashion historical installed base is alive and well and healthier than ever. And hopefully over the next year or two, we'll start to see the trade cycle, use that historical installed base pickup again. A lot of the demand that we've seen is from new entrants into the marketplace, particularly in the first and second quarter. And what gives us such optimism about where we're going is that we haven't seen the historical buyer trade at the same rate because the amount of inventory that's out there is impaired. So we believe there will be pent-up demand, even once the first-time buyer barely really starts to get a little more satisfied that installed consumer will also be now ready for a trade-in, trade-up situation, which will also allow us to grow our used inventory as well. Operator, if you don't have connection unfortunately, we're going to need to wrap the call up.

Oh I'm very sorry. But at the moment I don't have connections. There may be another operator on the way. But currently for myself, I don't have connection I'm extremely sorry.

For anybody that was unable to answer the question, the only one that's in queue now is Ethan Huntley we'll obviously take that call during our one-on-one that are coming in the next half hour.

Excuse the interruption. I may be back, just one more moment.

Okay Ethan Huntley.

Ethan Huntley from Jefferies, please go ahead.

This is Ethan Huntley on for Bret Jordan, thanks for taking my questions. Just one here on the Good Sam membership, can you sort of provide us with a conversion rate of acquired stores customers to the Good Sam platform?

I’m not sure I understand the question, I apologize.

Yes, so just, I guess sort of what percentage of customers from acquired stores are you converting into Good Sam members on your platform?

So the number for the quarter and the year-over-year comparison doesn't really have that much impact from the acquisitions. But when we do acquire a store and we install the Camping World retail location and we installed a POS and implement the training for our crew members to sell the variety of products that Good Sam has. We experienced pretty consistent conversion in our new stores. And sometimes even better conversion because we're offering something new to the marketplace. And so, when we go in and look to either acquire a store or open a store from scratch, in the back of the napkin as we're doing our pro forma analysis, we definitely calculate and consider in our overall thesis what sort of return we're going to see some increased membership, increased credit card, increased warranty, increased roadside assistance, increased insurance and all of the other products. That has always been our secret sauce which is why our EBITDA margins outperform any public auto manufacturer and any RV retailer with public information, not by a little, by a lot. And so, when you look at our standalone location performance and you look at how our two segments report. Our retail segment and our products and services segment, please know that for the most part, our retail segment doesn't have much if any Good Sam revenue or earnings in it at all. So those EBITDA margins are pretty much pure to the performance of that business. Our Good Sam business and its growth, both on the file size and the profitability are not only a function of its ability to penetrate the market outside of our stores, through online, through the call center, through campgrounds. But it also gets the added benefit of every time if company makes an acquisition it’s gets a nice little job. So our goal in growing locations eight to 10 units a year on average is supercharging the Good Sam business as much as it’s supercharging our dealership and our retail business.

Okay, that's helpful, thank you. And then on the service side of the business, is there any sort of color you can provide, are you seeing sort of a pickup in that business and people sort of up to refurbish a used unit given sort of the new supply constraints that you're experiencing?

Our service business continues and will continue for as long as I'm alive to be very robust and here's why. Unfortunately, the number of RVs in circulation dwarfs the number of technicians and the number of service base that exists on a ratio basis. We have made a decision internally to continue to invest significantly over the next several years in building out more service base, developing more enhanced training, and increasing the attractiveness that it is for technicians to work for us. One that will add is nugget that we have not discussed, and will in later calls is what we're developing to become the home depot of the RV business. Over the next several years as we look at our retail footprint, we will continue to extract those low margins, low churn products from our floor, no matter what they are, and reinvest in high churn, high margin, high demand products that are going to give our shareholders the kind of return they want their money being spent on. If we’re investing in the short for example, and it has a 32% margin or 42% margin and it's picking up floor space. And we can extract apparel from that floor and implement furniture, cabinetry, lighting, appliances all of the things that go on with that we will continue to do that. We have launched approximately seven thus far, and we have seen unbelievable growth in those specific locations and the profitability of those specific location, when we extract low margin, low churning products with these kinds of things. And you're talking about couches, chairs, mattresses, cabinets, counters, lighting, flooring, toilets, sinks and all of the related things that go on with it. We know that consumers expect to us to be everything for their RV and we're finding…

Thank you so much to everybody for joining our second quarter call. We expect to continue to execute at the same rate, the same pace with even better precision as we move forward. We look forward to talking to you on September 14, in the evening for our investor conference and showing you just a sampling of where the recreational space is going on the electrification side. Take care.

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