Good morning, and welcome to Camping World Holdings conference call to discuss Financial Results for the Second Quarter of Fiscal Year 2023. 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 a 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; Matthew Wagner, Chief Operating Officer; Lindsey Christen, Chief Adminstrative and Legal Officer; Tom Curran, Chief Accounting Officer; and Brett Andress, Senior Vice President, Investor Relations. I will turn the call over to Ms. Christen to get us started. Please go ahead.

Thank you, and good morning, everyone. A press release covering the company's second quarter 2023 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 our business plans and goals, industry and customer trends, the expected impact of inflation, interest rates and market conditions, acquisition pipeline and plan, future dividend payments, and capital allocation, and anticipated financial performance. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the Risk Factor section in our Form 10-K, our Form 10-Q, 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, 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 2023 second quarter results are made against the 2022 second quarter results unless otherwise noted. I'll now turn the call over to Marcus.

Thanks, Lindsey, and good morning and thanks for joining us for Camping World's 2023 second quarter earnings call. 15 months ago we rang the alarm bell about our concerns with the trend lines we saw around new unit sales for our industry. We were hyper focused on the RV manufacturers production levels in the face of what appear to be major oncoming industry retail headwinds. It felt that the beginning of the cycle was here and the downturn was inevitable. In our industry, throughout history, we've been a canary in the coal mine first in and first out. But for me, the best thing about a down cycle is the end. Just like we were the first to tell you about when we knew it was going to get tough, will be the first to tell you that based on the trend lines we are seeing, we believe we may have seen the bottom. and the path up to a more stable and robust outlook seems to be around the corner. We believe growth will be the headline for 2024. Our path to growth in 2024 is focused on four things: growth through a continuing and robust dealership acquisition pace. We see more white space than even with the most active acquisition pipeline we have ever seen. Number two, we will continue to develop our used business with new technology, improving procurement methods and a revised and materially improved standardized used RV consignment process. The growth of consignments as a percentage of our used should improve turns and improve return on capital. Third, we remain steadfast in cleansing inventory for the balance of this. We want a competitive advantage going into 2024. At the exact time last year, we had 28,000 2022 models in stock. Today, we have 18,223 models…

Thank you, sir. [Operator Instructions] Our first question comes from Joe Altobello of Raymond James.

I guess a couple of questions on the new side. First, ASPs were down about $4,000 from Q1. And you mentioned earlier, Marcus, that margins and GPUs were up sequentially. What drove that margin improvement in the second quarter?

Well, let's address the ASPs because there's been a lot of inbound questions about why ASPs are dropping. And I want to remind the market that a declining ASP means that we're becoming more affordable to the consumer. And every time that ASP comes down by $1,000, we believe that the funnel of buyers is wider than when it’s higher. We can control that ASP number to some degree by continuing to modify the mix and ensure that we have lower priced items not only at the entry level price point, but in each segment subsequently. As it relates to the margin, I'm going to have Matt Wagner take that.

When you look at the margin, we are super disciplined, especially looking at the 2022 model year units and are focused in trying to cleanse ourselves of those 2022s. Understanding that we're really playing right now looking at 2024. And we understand the opportunity that lays before us and making certain that we have the right inventory balance. However, we never want to push it too far. We have a sales team that obviously is commission based, and we want to ensure that we have given them an opportunity to make a fair living. So we were very disciplined about focusing on 2022s, cleansing those to the best vulnerability, while at the same time, augmenting the sales with an opportunity to make a little bit better margin on 2023. And even as we started to bring in some 2024s in the motorized side, we saw opportunities to keep that margin profile relatively stable and healthy. And even as we look in the context of pre-COVID era, in 2016 through 2019, those margins withstood the test of Q2 historically at an excess of 15% margins. We felt very good about how we balance the overall inventory position and we feel really good heading into Q3 of having an opportunity to take advantage of perhaps discounts for manufacturers or at least reduced pricing on 2024 model year units, while at the same time making certain that we get out of 2022s and we rebalance the portfolio of 2023 model year units.

That's very helpful, Matt. I appreciate that. And maybe secondly, in terms of new RV demand. You obviously sound a little bit more optimistic today than three months ago. How did that progress throughout the quarter? And into the summer, did you see any sort of inflection throughout the quarter? Was the improvement largely promotion driven?

No, oddly enough. We've been pretty promotional for the year as the industry has been. And while we may become more promotional in Q3, we started to see a change in trend lines as we've started to work through the beginning of July. And we always use how many units we're starting the month with and what happens on a week by week basis. And the total same store sales number just started to get better every single week. And while we don't think we're at a level where we're comping on a year-over-year basis, we're down less. And we're seeing that materially get better every week, and we anticipate that that is going to continue to happen here over the next several months barring something happening outside of our control.

Got it. Okay. Thank you.

The next question comes from Daniel Imbro of Stephens, Inc.

Hi. Good morning, everybody. Thanks for taking our question. Marcus, I want to start on the used side of the business. Obviously, it keeps growing as a percent of the mix. You guys are gaining, it feels like share there. I think you mentioned investing in technology and better consignment. I guess, are there any capital investments needed to support that future growth? And can you talk about the trajectory you envision to use business taking -- as you embark on this kind of $11 billion revenue journey. Where does the step function change there? How should we think about that growth relative to the rest of the business?

Yes. I think one of the challenges historically we have told people that we're agnostic to whether the consumer buys newer use. And while it's more profitable overall for us to sell a used transaction, we want to make sure the customer's getting what they want. In terms of investment, we don't see any material investment in the technology. The real investment in growing the used business is the investment in the used inventory itself. And as everybody can tell, we're hovering around that $700 million mark of inventory. And we believe that we can continue to tighten that up, which is why you heard me make some comments around consignment. Karen and Tom are not totally satisfied with where the turns are and where the returns are on capital, but they like the volume that we're generating in used. So as a management team, we're working on a new plan to improve the amount of consignments in our inventory and deploying a little bit less cash so we can get that turn and that ROI right. As we march towards 2024, we expect the new business to return at a fairly decent rate, but we also know that when the new business returns, it could put pressure on our used business. That doesn't mean that we expect that business to go backwards, but we think that we may be trading dollars a little bit as consumers tend to go for potentially a more attractively priced 2024 in lieu of the used unit. The used business wasn't just a fad for us. It's a foundational pillar in our company now. Our salespeople make more money doing it, and our customers enjoy the opportunity to have better value for a lower price. From the company's standpoint, the return on investment is clear. It's better for us to sell the used than anything else, but we want to get back into the new game but we want to do it intelligently, which is why you're seeing the number of new units on our lot today at probably, gosh, other than the dark sort of empty periods of COVID where we couldn't get inventory, we haven't been that low in any time that I can remember. It probably cost us a little bit of business, but we believe that all of the work and discipline in managing our new inventory right now and for the next four months is going to set us up for a much better 2024.

That's helpful. And then maybe if I could follow-up on the new side, it's encouraging to hear you kind of call more of a true bottom. As I think about the OEM relationships, how are those conversations going? How are they positioning for -- you just mentioned strong growth next year. Is there still a risk of [indiscernible] overproduction or how do you think if this is the bottom on demand that you're calling for, do we stay in this rational backdrop going forward, or how do you foresee that balance of inventory to sales moving forward next year?

Yes. As everybody remembers, I was hypercritical last spring about the manufacturers overproducing. And they unfortunately continue to produce through the summer of 2022, which is what we believe caused the oversupply of 2022s that the industry overall had to deal with. But as a counter argument to that, I believe that they were unbelievably disciplined in the 2023 calendar year and we worked closer with them than ever to ensure that the right forecasting was done, that they had the right data available to them, that they could see retail trend lines on a more real time basis. And while it was painful to the manufacturers and painful to all of us, where there had to be some shutdowns for extended periods of times, I believe that that discipline has helped dealers cleanse their inventory. It's helped manufacturers rightsize some of the costs on their units and it's helped manufacturers prepare for what looks like a more robust 2024, which is why we were also the first ones to tell you that we think that the shipments in 2024 will be better than 2023.

Great. I appreciate all the color and best of luck.

Thank you. The next question comes from Noah Zatzkin of KeyBanc Capital Markets.

Hi. Thanks for taking my question. Just one for me on the M&A front. It sounds like you're ahead of where you thought you'd be in terms of the opportunity set that's materialized, so just any color on the timing cadence and impact of acquisitions to the P&L in the back half, and moving through 2024 would be helpful. Thanks.

Yes. So when we announce acquisitions there is usually anywhere from a 90 to 120 day and there may be exceptions to that, but 90 to 120 day time between we announce and we close. And so that four month gap sometimes throws people off. If you go back and look at what has opened or closed thus far, we should see some positive revenue results in the third quarter. Obviously, in the fourth quarter when things were a little softer, that contributes as well. But when we get into 2024, we would encourage people to use a $25 million average per acquisition as a foundational base case for looking at revenue going forward on each single transaction. As we look at getting the 320 transact -- 320 rooftops, by the end of 2028, we want people to use somewhere between $31 million and $33 million of top line revenue. And the reason I bumped that number up from $31 million, which is where we are today is that we expect those same store sales numbers to improve, which would allow that revenue to go up. So that's how we're really arriving at how we see that happening. And if you modeled out when the acquisitions happen, when they close and when they're dropping in, you should be able to use $25 million in your forecast and give you a pretty good revenue projection off of our base.

Thank you. Very helpful.

The next question comes from John Healy of Northcoast Research.

Thank you for taking my question. Just wanted to kind of stick on the acquisition topic. Obviously, you're talking about more revenue and growing the business, but when you look at kind of the other side of it from an internal operation standpoint, any color you could give us of where the synergy would be kind of internally from an efficiency standpoint? We've seen this in other areas of automotive with consolidators being able to become more self-sufficient and do more things within its own ecosystem. So just love to get your thoughts about maybe the margin or backend synergies that this incremental scale could bring to you guys?

When we started this so called roll up strategy many, many years ago, we were very clear to tell people that there is no benefit in buying toilet paper when you grow your business. But what there is a benefit of and what we believe we have proved as a thesis is that, we are better operators of locations than a lot of independents are. We have a different level of technology and a different level of training and a different level of resources, but more than that, we have a playbook of best practices that we're able to develop and really mature in our existing stores. And when we make an acquisition, we see the increased efficiency or the increased profitability of those locations really coming from three to four 4 different functions. We tend to do much better in the finance and insurance department. We tend to do much when we deploy our strategy on used, because most traditional dealer are not heavily invested in the used business and we tend to do much better on the fixed operations side, the parts and service side of our business. And so, when we make these acquisitions and we talk about the multiples that we’re paying, keep in mind that the multiples that we have disclosed historically are based on that dealer's historical performance. We don't go in and pro form any things that we're going to do to the business and then arrive at that multiple, so the published multiple that we've discussed over the years is before we get in and lay in our best practices. Simply stated, the efficiency of our business and the benefit of us making acquisitions is that, we believe that history has proven that we're better operators than an independent are in all of the areas. Are there some benefits in terms of how we borrow our floor plan or what the types of volume discounts that we get? Sure. But we also believe that that's a little added bonus. The best practice is implementation, well, that's really the true efficiency that we put in place.

Great. And then just one question on the parts and service side that seems like that was the area in our model that might have been off a little bit this quarter. We'd just love to get some thoughts on kind of if there are any nuances to the performance of that business in Q2? And maybe, anything you could add there? Thank you.

Yes. So there are two very specific nuances. And thank you for asking the question. One is, we exited active sports business that had a considerable amount of revenue in it for the quarter. We were out of that business. The second thing is this, as we grow our used inventory that used inventory comes into our dealerships, either through a purchase or a trade, and we recondition that unit. Meaning that, we put it through our shop and put parts and service and labor into that unit so that we're delivering a quality used unit to the market. GAAP rules require us to suspend that revenue until that unit is actually sold. And because we had such a dramatic increase in our used business and in our used inventory levels, we suspended more revenue in the quarter. We eliminated it so that until that unit is sold that revenue isn’t recognized. So that too is a bit of a nuance because we follow those GAAP rules so that we are not recognizing revenue or profitability inappropriately.

Got it. So it's more about the reconditioning to retail aspect and then any sort of kind of change in attach rates or penetration?

It's the setup of the reserve of the revenue that was generated from the reconditioning that we're not able to recognize that revenue while the inventory is continuing to grow and is still in stock.

Understood. Make sense. Thank you, guys.

The next question comes from Brandon Rolle of D.A. Davidson.

Good morning. Thank you for taking my questions. Just quickly on a new vehicle gross profit margins. Could you talk about your expectations for those margins moving forward? Obviously, 2Q was stronger than I think a lot of people expected. Does that continue? Or is there anything we should be aware of for the back half of the year?

Yes, that's a great question. And thank you. So right now, as a management team and an inventory modeling team, we are getting ready for 2024. And as I mentioned earlier in the call, Last year, at the same time, there were 28,000 2022 models in stock. Today, we are 10,000 units ahead of that same curve with 18,000, But, Matt, myself and the rest if the team have made a concretive decision to even accelerate that drop even more, because what we don't want to be doing is having 2023s rule the headline for 2024. So I would expect that in the third quarter and potentially in the fourth, we could see 1 point to 1.5 points of margin compression in the new segment because we're going to accelerate the disposition of the 2023s in favor of 2020, largely because we also believe that the 2024s could come in at a lower cost than the 2023s and we don't want to be left holding the 2023 that's more expensive than the 2024. We believe our competition is behind that eight ball still dealing with, in some cases, 10%, 15%, 20%, 30% of their inventory in 2022's, even though our 2022's are down to 5%. We still have to work through that, and we want to continue to work through our 2023s. So I would predict for the balance of this year, a slight reduction in margin with a return in 2024 to something that could potentially be even a quarter of a point to a 0.5 point higher than what you saw in Q2 of 2023. So a dip, slight, slight dip, and then a return that could even be above the second quarter's 2023 number.

Great. And then, just on new retail trends, could you talk about the cadence of the year-over-year trends throughout the quarter and maybe what you're seeing in July?

I'll try to make it as simple as possible. We just continue to see an improvement throughout Q2 in terms of new same store declines year-over-year. So it became slightly better with each month that passed. And then even through July, we felt very good that we started to see this uptick now where the reduction year-over-year in same store sales had declined so greatly from June to July where we start to see light now, where we can actually expect growth heading into Q4 year-over-year on a same store basis. Q3, I would anticipate new same store sales would probably be about flat, slightly down, slightly up. But by Q4, I could see us -- seeing the other side of this and understanding the opportunity that could exist in 2024.

And the same store sales that we're seeing flat to slightly down is up slightly up is new and used combined. With used being ahead and new still being a little behind, but not as exaggerated as it has been in the first six months of 2023.

Okay, great. And just lastly, it was encouraging to see Grand Design having or you guys having a store, just with Grand Design products. Could you talk about your relationship with Winnebago and how that could evolve over the coming years? Thanks.

So we have a relationship with Winnebago Industries today. We proudly sell them in a number of locations. But the Grand Design relationship is something that we're very happy that we've started and we should have them in actually several locations here in very short order. But we were also really happy to accelerate our relationship with Coachmen, which we haven't done business with for years, with Tiffany, with Newmar, and with Alliance. And so as we look to grow our footprint across the country, as we look to develop more manufacturer exclusive stores, And as we look to grow our new sales in 2024, we knew we needed to expand our relationships with certain manufacturers. And so this is a really, in our opinion, really spectacular way to do it.

Great. Thank you.

The next question comes from Tristan Thomas of BMO Capital Markets.

Good morning. You talked a lot about clearing the 2023s to be clean to 2024s, how are you going to approach order around open house from the end of the year and into next year?

So we don't ever manage our inventory based on some moments in time like open house. We work with the manufacturers to help them and to help companies like [Lipper] (ph) forecast their inventory planning six to eight months in advance. As we sit here today and Matt can speak to it more specifically, we have a bulk of our inventory planned out through the end of the year. Matt, you want to jump in?

We see opportunities within very specific segments, specifically on the towable side and more inexpensively priced travel trailers and fifth wheels where we believe that we are under stocked. And we've been working very diligently with manufacturers to make certain that we're hitting certain price points that have been vacated in large part over the past two years. And it's through a means of either de-contenting some trailers with manufacturers giving some pricing sessions, but not too much. And that's just getting a little bit more creative with hitting price points that we know consumers are seeking, especially given our improvement in used sales. This whole used initiative has really just shed further light that consumers are agnostic in a lot of ways to new or used. They're looking for a floor plan and a price point. And I used to push back on that notion to suggests, if you're a new customer or new owner or used vice versa, then largely don't crossover. But I think what we've begun to see is that there is an opportunity for new to improve and for used to remain relatively stable as opposed to seeing the growth that we've seen from 2019 unused to today. So we'll continue to work with the manufacturers to ensure that we're hitting the right price points, right segments heading into next year, in particular. And then it's really to be determined exactly what other manufacturers we want to work with at scale, especially in the Class C segment and motorized as we're working more disciplined with Winnebago and a variety of other manufacturers to satisfy whatever the market demands.

Let me address something that we haven't talked about so far. Matt and I feel very strongly that driving down that ASP for the consumer is priority number one. And when you look at the consumer having experience rate hike after rate hike after rate hike creating an affordable option for them is our absolute charter as we get into 2024. And we believe that our used business was driven by understanding that whole principle of driving down average selling price providing value in the face of a rising interest rate environment. As we look at 2024, we want to be very clear that you should expect us to try to push down ASPs as much as we can. And we've created this visual before of an inverted funnel, where we know at the bottom of the funnel where the prices are lower, the widest swath of the market exists. And as you climb that price ladder, you get into a smaller subset of buyers. And so, when you see ASP starting to come down, pay attention to the gross margin percentage. If you drive ASPs down, in theory, volume should go up. But it is true that the raw gross dollars of margin will also reduce if the selling price is reduced. And so, people sometimes talk to us about the GPU per unit, and we would encourage people to focus on the GPU margin. Look at the margins on the unit, because if you drop the average selling price by $3,000 and your margin stays constant, by definition, you would have lower gross profit in dollars on that unit. And so we would ask people not to react to that and understand that we are making a conscious decision to drive down that ASP in the hopes that it drives up volume, which leads to better F&I, more used, more parts, more Good Sam products, et cetera.

Okay. Thank you. That's very helpful. Just one more. Can you maybe remind everyone that the economics behind buying a dealership costs any of them, what you have to put into it? And then how is that different than some of these manufacturer's exclusive stores?

So typically, there is a range anywhere between two times and four times on the multiple side. And there are exceptions outside of both of them. Sometimes we pay five times, sometimes we pay less than one time. But on average, it's between two and four times. When we go into these locations historically, we have given the option of either buying the real estate and putting it on -- putting using our cash or putting a mortgage on it or flipping it to a third party REIT or having the selling dealer stay the landlord in a long term lease for us. The other things that go into it are the working capital associated with it. Typically, there's around $5 million number that goes with each transaction on average associated with goodwill. But as a result of that, you pick up about a $25 million revenue store on average. And once those stores are mature, they generate anywhere between a 6.5% and an 8% EBITDA margin on that revenue. So from a cash on cash standpoint, we feel really good about it. That really leads me to this one clear point that I want to make. When we look at the acquisitions and deploying $5 million on average, and picking up $25 million of revenue on average and having it once mature via 6.5% to 8% EBITDA margin on that $25 million, that is the reason why we had a modification in our capital allocation, because the return on that capital is clearly better for our shareholders doing it that way. In reflection, in reflection as we move forward, it's important to note that when we think about our capital allocation, this isn't something that we think about once a year. We think about it every single day. We look at the cash that's being generated. We look at the opportunities that are in front of us, and we look at the mandate to give our shareholders the best return of capital. If acquisitions dried up, which we don’t expect it to ever happen or if they slow down and we had excess cash, the board and the management team would look at that excess cash and make a decision to either modify or increase the dividend or issue a special dividend. We take very seriously what we do with the shareholders' cash, but at this moment in time, we feel very confident that growing the company and investing it with those kind of returns is the best use of the capital.

And then the manufacturer's exclusive stores, is that still $5 million…

Yeah. So the manufacturer exclusive stores tend to have a lower cost to all of it. They're usually smaller footprints, four to five acres. They have less inventory, so they require less working capital and typically the cost to buy them are less as well. We also see the ability to open those de novo ground up to be pretty easy as well. So the cash on cash returns should be at a minimum, equal to maybe even slightly better than what we see in a traditional acquisition.

Awesome. Thank you.

The next question comes from Alice Wycklendt of Baird.

Yes. Thanks. Good morning, guys. Just wanted to ask on the F& and I side. F&I per unit came down to, just over $45,000. What are the drivers that have been coming down both sequentially and year-over-year? And then how should we think about that going forward?

Good morning, Alice. Really what I'd attribute that to in particular is our emphasis on used sales over the past couple of quarters where traditionally we do not sell as many used finance products nor do we attach as many actual financing deals to the sale of a used asset. And we've been working very diligently internally to make certain that we stabilize that and head that off. And we've seen a lot of success within regions where even with cash deals, we're still able to add value by selling a number of finance products within the finance office. These consumers that are buying used still need to protect their asset with tire and wheel protection, roadside assistance and a variety of other finance products. And that's where I believe you've seen a stabilization of it. But really over the past couple of quarters, it's just based upon historic norms of selling used. And traditionally, the actual rate that associated with used is also going to contribute to overall consumers, not necessarily taking that opportunity to finance their assets. So if the rate environment is stable here, we don't see anything changing whatsoever. However, rates even continue to drop in the broader economy, I could see this actual PBR finance per vehicle increasing over the ensuing year. So we continue to monitor that every day, but I'd attribute that to used.

Great. That's helpful. And then in 2024, I think earlier in your comments, you noted an expectation for, I think, industry shipments of 370,000 to maybe 400,000. What's the retail assumption that underpins that outlook, or how should we think about consumer demand in that context?

Typically, when the market is in a down spiral, the shipments right out of the gates look much higher than retail. And then when you get into the middle of the cycle, the retails look higher than the shipments because people are destocking. So we think that there is some restocking that may happen here at the end of 2023 and the beginning part of 2024. But we think the gap between, what the shipments will be and what the retails will be will be a lot tighter, Matt?

As of this moment, Alice, I'm estimating that trailing 12 month retail industry is probably about 400,000-ish, a little north of that maybe like 404,000, 405,000. And trailing 12 month wholesale shipments were about 330,000. So there's a disconnect that exists in the industry right now where there's been a destocking in excess of 70,000 plus units over the past 12 months. There needs to be a reconnection of those points. And we're projecting out for retail next year, I think it's going to be roughly in the range of where wholesale could shake out at a minimum because I'd anticipate that re-sale through the balance of July, August, and the broader industry will still probably decline. And I think that it'll still continue to level off here in Q4 or so. So by the end of 2023, retail will decline below 400,000 and then by 2024 I’d anticipated it start to actually increase again.

So much tighter band than we've seen in the last, call it, 15, 18 months.

Great. Thanks for that context. That’s it from me.

Thank you. The next question comes from Bret Jordan of Jefferies.

Hey, good morning guys. Could you talk about the used consignment model impact on the economics? I assume you don't book the revenues just to consignment fee. So what would you see that doing to average rooftop sales? And I guess, what would the unit economics be in consignment?

Yes. So the misnomer around our consignment program is that, the only thing that's different about the revenue is that, we don't buy the unit from the consumer and use our cash and hold that on our balance sheet. When that unit sells to a customer, at that moment in time right prior to the new customer buying the unit, we buy the unit from the consignor and we sell it. So from a revenue margin, et cetera, there is no modification. What we're trying to do is, can we decrease our inventory cash allocated by $40 million, $50 million, $60 million and get the same revenue out of it, improving our turns and improving our return on capital. So simply stated, the only difference is, we just -- we want to have less of our cash in our used inventory, but it doesn't change the revenue, the margin profile or any of the economics of any rooftop.

Okay, great. And then a question on new, I think in your earlier remarks you talked about a 1 point to 1.5 point of margin compression on new units in 2024 and then said you were also focusing on driving down ASP.

No, no, no. We're projecting -- excuse me, margin compress on the new sides in Q3 of this year and a little bit in Q4 of this year. And then in 2024, a return to something that would be even better than what we performed at in Q2 of 2023. So it's going to dip a little as we make the choice to cleanse our shelves even more to get a competitive advantage for 2024 so that in 2024, we can see an improvement of margin even over Q2 of 2023.

Okay. All right. And then one question on the parts and service. Do you -- what's the customer paid service growth number? I guess I get their used referb revenues aren't being booked and the exit of the active sports business. So what would we use for sort of comparable on up and down the street service demand?

We don't break it out that way.

We don't break it out that way.

Okay. All right. Thank you.

Thank you. We have a follow-up question from Noah Zatzkin of KeyBanc Capital Markets.

Hi. Thanks for thanks for taking my follow-up. Just curious between the color you gave on hitting certain price points along with lower ASPs. How does that play into your private brand strategy? Where is mix now and where do you see it going? Maybe said another way, is that something important to the calculus of 2024 ordering and beyond? Thanks.

That's a great question and very insightful and so much is that will be a key component of hitting those price points because we understand we need scale to receive price concessions that would allow us to be competitive. And these private brands do provide us that scale. I mean, as we've stated publicly, our private label sales account for almost 40% of all of our new sales. I don't know if that percent changes too much in so much as I see it's growing the overall portfolio and that percent remaining relatively consistent, if not even maybe declining, because I've also recognized and this is lessons learned over doing this a number of years realizing that you need OEM brands to bolster the value of private label brands. So while we'll have that investment in private label brands to a greater extent, we'll also increase our investment in OEM brands that come close to hitting that certain price point. I'm a firm believer in having a good, better, best pricing strategy in those entry level travel trailers and fifth wheel segments. In which case, you probably need three floor plans modeled from different manufacturers to compete in a lot of our bigger lots. On a small lot, maybe it's just a good and better type of strategy.

Thank you.

Ladies and gentlemen, we have now reached the end of our question-and-answer session. I will now hand it back to Mr. Marcus Lemonis for closing remarks.

Thank you so much for joining today's call, and we look forward to reporting our information on the next quarter in about 90 days. Take care.

Thank you, sir. Ladies and gentlemen, that concludes today’s event. Thank you for attending. Any may now disconnect your lines.