Camping World Holdings, Inc. (CWH) Q3 2025 Earnings Report, Transcript and Summary

Good morning, and welcome to the Camping World Holdings conference call to discuss financial results for the third quarter ended September 30, 2025. [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. Joining on the call today are Marcus Lemonis, Chairman and Chief Executive Officer; Matthew Wagner, President; Tom Kirn, Chief Financial Officer; Lindsey Christen, Chief Administrative and Legal Officer; and Brett Andress, Senior Vice President, Investor Relations. I will turn the call over to Ms. Christen to get us started.

Thank you, and good morning, everyone. A press release covering the company's third quarter ended September 30, 2025 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, macroeconomic, industry and consumer trends, future growth of our operations, capital allocation and future financial results. Actual results may differ materially from those indicated by these remarks as a result of various important factors, including those discussed in the Risk Factors section in our Form 10-K, Form 10-Qs and other reports on file with the SEC. Any forward-looking statements represent our views only as of today, and we undertake no obligation to update them. Please also note that we will be referring to certain non-GAAP financial measures on today's call such as EBITDA, adjusted EBITDA and adjusted earnings per share diluted, which we believe may be important to investors to assess our operating performance. Reconciliations to 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 2025 third quarter are made against the 2024 third quarter results, unless otherwise noted. I'll now turn the call over to Marcus.

Great. Thanks, Lindsey. Leading our company on today's call are Matt Wagner, our President; Lindsey Christen, Chief Administrative and Legal Officer; Brett Andress, Senior Vice President of Corporate Development; and Tom Kirn, our Chief Financial Officer. On today's call, we're going to cover both the operational and financial highlights of the quarter, while providing some initial insights on the year ahead. Look, our mandate remains clear: improve revenue and earnings, while improving net leverage. I'm encouraged by our company's financial performance in the quarter, growing adjusted EBITDA by over 40% to $95.7 million. The team drove record volume on a year-to-date basis and sold nearly 14% of our new and used RVs in North America. This sales milestone further intensifies and proves out our thesis that consumers are focused on value and affordability across every single segment in the RV industry. Consumers build their monthly financial models around monthly payments, period. We anticipate entering 2026 with consumer sentiment and labor markets uneven and OEM new pricing rising on like-for-like models. While we see signs of resistance on the new side of the business, with our proven track record to address affordability and on used, I believe we can have another record year of combined new and used unit volume growth. I'm extremely confident in our ability to once again outperform the RV industry in 2026 and grow our earnings, thus reducing leverage. Our business has made tremendous strides on improving our net leverage position over the last several quarters, reducing net leverage by nearly 3 turns since the beginning of the year. We accomplished this through a combination of debt paydown, earnings improvement and cash generation. As we plan our cash flow for 2026, I believe it is appropriate to set expectations conservatively. Our company will continue to rely on our market-leading used sales, service and Good Sam businesses as our differentiators. Look, it's still early in our forecasting, and we see another consecutive year of earnings growth with an adjusted EBITDA floor of around $310 million. Now, this floor deliberately does not incorporate several sources of cost takeouts upside, used unit upside, M&A upside or upside that could come from our conservative new unit forecast. Now, I'm going to turn the call over to my teammate, Matt Wagner.

Thanks, Marcus. While I appreciate the conservative approach to our 2026 outlook, we certainly have a plan to exceed this starting point through 3 -- through 4 sources, excuse me, of upside: SG&A, used RV sales, dealership acquisitions and new RV sales. Over the last 12 months, our team has made meaningful improvement to our cost structure, but we constantly reevaluate efficiency opportunities. We see $15 million of additional cost takeout opportunities next year through marketing technology, the launch of 2 additional CRMs and implementation of agentic AI across portions of our business. This estimate is not included in our preliminary models. The second potential driver of upside is used RV sales. I remain the most optimistic about the capabilities and scalability we've built into our used RV supply chain. Model year 2026 prices have a direct positive impact to our used industry outlook. If our used business exceeds our high-single-digit outlook, we expect to yield roughly $6 million of adjusted EBITDA for every 1,000 additional used units sold. We also see potential upside in the dealership acquisition space. While we are driving record volumes with fewer, more productive rooftops, we know there still exists significant white space in the North American RV market, and we are seeing a pipeline of activity percolating that we intend to pursue. We conservatively do not have any M&A activity embedded in our preliminary models. Finally, we are purposely modeling a conservative outlook on the new RV market, given the OEM prices passed along to dealers. Our track record of developing exclusive products tailored to consumer preferences and desired monthly payments suggest that we may yield additional upside beyond the current outlook. These 4 idiosyncratic sources create clear path to upside in 2026, but our long-term objectives remain clear. Our used RV sales, Good Sam and service businesses remain the bedrock of our company, and we believe they will enable us to achieve our mid-cycle adjusted EBITDA target of $500 million on today's store base. I'll now turn the call over to Tom.

Thanks, Matt. For the third quarter, we recorded revenue of over $1.8 billion, an increase of 5%, driven by unit volume increases in used in excess of 30%. New ASPs improved sequentially to just under $38,000, a decline of roughly 9% year-over-year, better than our initial expectations. ASPs benefited from a richer mix in the quarter, while this weighed slightly on our gross margin percentages. On a GPU basis, we were pleased with our gross profit performance. Within Good Sam, the business continues to post positive top line growth with the organization positioned for margin improvement in 2026 as we continue to make additional investments in our roadside business. Within product services and other, our core dealer service revenues and our accessory business continued to show stable margins. We reported adjusted EBITDA of $95.7 million compared to $67.5 million last year. SG&A as a percentage of gross profit improved 360 basis points year-over-year as we start to fully realize more of the run rate savings from earlier in the year and the sequential improvement in new ASPs. Lastly, as we think about the remainder of 2025, we expect our fourth quarter to experience impacts from the previously mentioned new unit trends, and we will be lapping a couple of important items to call out from last year. These include Good Sam loyalty breakage benefits of [ $4 million to $5 million ] experienced in Q4 of last year and [ $4 million to $5 million ] of F&I actuarial benefits that we experienced last year. That said, we ended the quarter with stronger unit sales per rooftop, improved fixed cost leverage and $230 million of cash on the balance sheet. We also have $427 million of used inventory owned outright, another $173 million of parts inventory and nearly $260 million of real estate without an associated mortgage. I'll now turn the call back over to Marcus.

Thank you. We'll turn into the Q&A section. But before we do that, I think it's important to just sit with the improvement on the balance sheet in 2025. As we started the year, improving our cash position and deleveraging our business was really key initiatives for our management team. And as we head into 2026, continuing to improve our net leverage through performance, through operating efficiency, through improved sales is absolutely the focus for our team. So we'll turn it over for questions. Thank you.

[Operator Instructions] Our first question comes from Joe Altobello with Raymond James.

First question, I guess, on new RV demand. Marcus, you talked about rising prices weighing on that. And I think at least some of the industry data during the summer seemed to indicate that retail was stabilizing. What have you guys seen so far, maybe September and October, that would indicate that that's starting to soften again?

Joe, this is Matt. I would argue the fact that, yes, we saw some stabilization so much as we are seeing high-single-digit declines in the new RV industry up until that summer time frame, but we are still seeing declines year-over-year. So while it's not nearly as severe, we've obviously been outperforming this, and we feel like we've had more of a purview and line of sight into what's happening real time within the marketplace. And we've been speaking with all of you over the last few months suggesting that we had a line of sight on the 5% to 7% price increases on invoice prices. And we knew that there could be some opposition from consumers to be able to absorb that. However, we know through our very creative mechanisms of our exclusive products, brands that we oftentimes are able to buck trends that exist in the broader RV industry. And that's where we've been able to yield material market share gains over the last 2 years, leveraging that strategy. But as we sit here today and we think of the exit rate of new sales in September and we think of what's happening currently in October, there's a couple -- or a few factors really that have weighed on the consumer perhaps a little bit more than we anticipated. And when I think about them, the evolving job market that we're seeing more and more headlines, which naturally will just bleed into the psyche of different consumers, really the uncertainty resulting from the government shutdown, and then finally, when we think of the general inflation environment out there, we're seeing within certain price points, there's a dispersion of activity and customer demand where consumers are able to yield whatever they need in terms of a product and a relating price point to ultimately be able to afford this lifestyle. The RV lifestyle is alive and well, and we know that consumers want to participate in this lifestyle. And that's really where our used strategy has continued to take hold. Our September used results were very good, perhaps amongst the best comps year-over-year on a used same-store sales basis. That trend has also continued within October. So while we're very cautious and cautiously optimistic on our strategy on the new side of the business, we know that the used side of the business will continue to be our buoy, whereby we could satisfy consumer demand that still exists out there.

Joe, the one thing that I think Matt and the team have done very well in acknowledging the potential resistance on the new side is, if you look at the stocking of used, we've become far better at that side of the supply chain. And part of the really intentional conservatism for '26 is that we really start to build out our cash flow and our inventory positions. And when we think about placing orders 3, 6, 9 months in advance on the new side, it was more judicious for us to build that model with a lower expectation, knowing that if we wanted to take on more new at any time, if we were wrong about our calculus, that would be easy to get inventory. But I think what I really appreciate about our strategy is, if we are right about our strategy, if the new is going to have a little bit of resistance, we're not going to be kicking the can on new aging into the next 12 to 24 months. And when we look back on what happened over history, we may have gone into the years with just because we were outperforming everybody else, a little bit of a delusion about what was happening, and we would go for it on the inventory side and then find out 18 months later that we have to discount our way out of stuff. So what you're hearing from us today is just a more tempered approach to stocking and to forecasting and that we know that if we outperform like we always do, it's easy for us to get more inventory. It's really hard to get rid of inventory that we miscalculated.

Very helpful. Maybe just a follow-up on that. If you look toward '26, the more bullish view was that lower rates would help to drive unit growth. It sounds like what you're saying is that the price increases we're seeing would offset any impact from lower rates and basically, affordability doesn't get any better next year.

So Joe, a good way to think about it is, our combined average sale price is roughly in the range of about $36,000. If we're to add about $1,000 of cost and the interest rate drops for a consumer about 50 basis points, that would actually create the same exact monthly payment. So yes, there is the opportunity for consumers to be able to absorb more cost or more features with -- while paying the same money or less, depending upon the pricing and segment. However, we're not quite seeing that take hold just yet where the retail lending rates have really not materially changed in any capacity. But next year, there is a possibility that they could come down, in which case, this could be a more conservative outlook in the new space [ what ] we believe a very pragmatic view.

Yes. When we look at -- Joe, when we look at the lack of predictability around what the Fed is going to do compared to previous years and decades and the lack of predictability on the tariff side, that's probably the 2 most imposing factors that are causing us just to be really conservative just because we don't know. When we went into '25, we never would have expected Liberation Day. And while we were able to make a lot more money by reacting to different things in the market, we just want to go in and set the expectation low and hope that our performance and our -- I guess, our track record of idiosyncratically operating comes to fruition. I think our track record proves that. We don't want to have any missteps.

Our next question comes from James Hardiman with Citi.

So I like the sort of framework that you've given us with respect to 2026. I just want to make sure we're on the same page from a starting point perspective. The Street is at about $280 million for this year with 1 quarter left. I don't know if you'd sort of disagree with that number meaningfully. But that would sort of assume, call it, a $30 million expansion, right, to get to that $310 million floor that you've laid out. If that's all right, sort of how are you thinking about the building blocks of getting there? It sounds like overwhelmingly sort of the used business driving that extra $30 million. And then, I don't know, maybe order of magnitude of the 4 upside drivers that you laid out, like which of those are you really -- I guess, the $15 million of cost saves are pretty straightforward. But which of those are you most excited about? At the end of the day, the Street is looking at more like, I don't know, $100 million of EBITDA growth, which it sounds like is not all that realistic as we sit here today.

Well, we're hopeful that we can have that sort of upside growth. But as we mentioned earlier, we just really don't know what's happening in the macro, and I think that's caused it. When I think back over the 20 years, the fourth quarter, quite frankly, has rarely, if ever, been a quarter where we've made money. And in this particular year, we're still dealing with high floor plan rates, and we're still dealing with other tariff issues around pricing. I will be candid with you and tell you that the optimistic nature that I have on the fourth quarter is that we will still grind hard to try to get anywhere close to breakeven, which would be really a big size improvement over like even the last decade of averages. It's a little early in the quarter for us to predict where things are going to land. As Matt mentioned earlier, we have seen resistance on the new side. Nothing that alarms us, but it is a resistance where we're starting to comp year-over-year-over-year growth. On the used side, we're continuing to see performance there. I have sort of laid down the gauntlet with the team on wanting to make sure that we're going into 2026 with, again, clean inventory, no excuses in 2026. So I've been a little bit more aggressive in pushing them to liquidate out of inventory, and that's probably a little dangerous of a word, liquidate, sell-through a little inventory just to make sure we go in a little cleaner.

This is Tom as well. We also noted a couple of laps as well. We had -- last year, we had kind of a onetime benefit on the Good Sam Club side. It was our first year really with experience on the new loyalty program, and we had some adjustments that were in that [ $4 million to $5 million ] range in the fourth quarter. And then, on the F&I side, we always go through with our actuaries and review cancellation rates and estimates on certain products and all the products we sell. And in the last couple of years, we've had a benefit from that because we've seen continued utilization of those products. And when we looked at things in the third quarter of this year, we started to see a little bit of an uptick in those cancellation rates. And so, [ that's where ] we called out the benefit that we got last year in the fourth quarter. I don't know that we'll necessarily see that same benefit this year.

Yes. Again, we're taking that conservative approach. But on the upside...

I mean, just as well, James, when we're thinking of Q4, this is really a setup time period for us where there could be some additional OpEx that has to flow through our balance sheet -- our income statement really to set the stage nicely for next year to truly yield those 4 upside opportunities that I laid out in the prepared remarks. Most specifically, we're making quite a bit of investments in different agentic AI functions, as well as enterprise AI functions, which we do view this as an opportunity for us to yield even greater cost savings potentially than the $15 million that I laid out earlier. And that's really going to be by means of just looking at different components of our business that will not only help the consumer experience, but really our employees to yield more efficiencies of actually being able to get to a customer quicker, be able to sell them quicker and be able to be much more intelligent about all of these complicated products that we sell throughout our entire industry. And that's really been, in many ways, a handicap of this industry at large. We don't necessarily have as much insight as we need to in the product, the repair event cycle time. So we have been aggressively and quietly pursuing this in the background, and we haven't spoken as boldly about all of these different AI initiatives because this has been a test-and-see environment. We know that all these AI implementations can quickly spiral out of control in terms of AI actual usage and different advancements in what we're going to be pulling on these LLMs. So by means of that, we've been setting the stage nicely. We know that we'll be able to make some nice implementation guidelines set out here pretty quickly, and we know we'll be able to take advantage of this opportunity that's before us.

Over the next several years -- and I really applaud our team's very aggressive and progressive approach to looking at how AI can create staffing efficiency, and that's really top to bottom. And when you think about the efficiency that AI has already started to create in portions of our business, where we're able to spend a little less and convert a little better, we're able to take care of our customers a little faster and avoid other things. But I think the next 12 to 24 months could create significant, maybe more than I've seen in 20 years, significant upside to staffing efficiency and more importantly, a better customer experience through all of the learnings that we have over 2 decades. When we compare what we have that nobody else has, that is lots of data. And as Matt puts that data to work in the way that he is exceptionally skilled for, I think the SG&A upside opportunity plus the revenue and conversion opportunity could be unmatched to anything we've seen in years past.

Got it. That's all really good color. And then -- so if I think about -- it sounds like if you did, at best, flat EBITDA in the fourth quarter, so we're maybe looking at closer to, I don't know, $269 million, $270 million number, and then -- for this year, and then, call it, $310 million for next year, how do we think about leverage in the context of year-end '25 and '26? And then, specific -- maybe more specifically, there was some discussion about reengaging M&A. Sort of what's the decision criteria around that in the context of leverage?

As a management team, we talked about it in our prepared remarks that we've seen a significant improvement in our overall net leverage. We have not seen the kind of cash on the balance sheet that we showed at the end of third quarter in a long time. And as we continue to sell properties and sell down the mortgage and use some of our free cash flow to pay down debt, we know that those are parts of the building blocks to deleveraging the business. As a team, we want to get back into the neighborhood of 4 and below. And so, as we think about capital allocation in 2026, yes, we are investing a significant amount in AI. That's going to unfortunately partially go through OpEx, but there is some CapEx associated with some of the things that we're doing as well. And as we look at the capital allocation, our goal would be to get into that 4 or below neighborhood by the end of '26. That's a very lofty goal, but it's a goal that we're committed to. And we know that when we do that, we have to make tough choices about staffing, about acquisitions, et cetera. And so, the only acquisitions that we're truly looking at are ones that we believe are going to be accretive, ultimately accretive to not only the earnings profile, but the leverage. In looking at small dealerships, we know that we can buy dealerships at 1x, 2x, 2.5x, clearly accretive to our business. But as we start to look at other bolt-ons inside the RV industry, any kind of bolt-on, we are probably going to have to be a little more aggressive, still staying inside of the dilution versus accretion. We think it will still be accretive. But we need to start to build a bigger business with bigger tentacles reaching different parts of the industry.

Our next question comes from Patrick Scholes with Truist.

My first question concerns market share. I know year-to-date, you were tracking 13.5% and you had previously given a medium-term target of 20%. For next year, 2026, do you have a target to reach for market share percentage?

Just for clarity's sake, we have been very clear over the last 2 years that 15% was our goal.

I'm sorry. Okay.

That's okay. But because we started to accelerate from the 11.3%-ish that we were a year ago, we moved our own goalpost, and maybe that's our greed in just wanting to dominate the space more.

That's certainly a fair observation. Well, Patrick, it was really about 4 months ago, we woke up and realized that we were on a clear-cut trajectory to hit that 15% a lot quicker than we anticipated. I would anticipate over the next year that a very realistic goal is to achieve another 50 basis points to 100 basis points of market share improvement on a combined basis. And a lot of this is really going to hinge upon the creativity that we're able to deploy on the new side of the business to yield even more market share gains, which has been compounding substantially over the last 2 years. But we're trying to be as realistic as possible, understanding that market share gains on the new side could continue to be a little bit more difficult, whereas on the used side of the business, we see a very clean and clear path for us to continue to achieve that compounded growth.

As a reminder, the used business is essentially double the size of the new market. And when we look at our own penetration of used, the amount of white space that we believe exists, not only in the affordable categories, but all the way up through motorhomes, is unbelievable. And we've been very thoughtful in how we've allocated capital in the last 12 months to growing that used business, and quite frankly, don't see any barriers of any kind that would prevent us from continuing to grow that used business as much as high-single digits to low-double digits every single year for the next several years. Yes, we are very good at it, but B, the market is much bigger. And if the consumer is going to continue to be under pressure for the foreseeable future, we will absolutely allocate the bulk of our working capital towards where we know that business will take us and the margins that come with it.

Okay. And then, a follow-up question related to where you talked about setting the stage for a return to measured and accretive M&A, certainly laid out improvements in your business and wanting to add stores and a better balance sheet. Regarding potential M&A targets, with those targets, are you seeing some financial stress in potential targets where they might be more willing sellers at this juncture because of that financial stress?

Yes, Patrick, it's Brett. So what I would say is, it's a bit of a barbell when you think about how that pipeline is unfolding. I think we have several opportunities on the distressed end, as you can imagine, in this industry backdrop over the last couple of years. And on the other end, there's still a good amount of, I'd say, high-quality, very good performing opportunities out there. So we feel good about that. I would tell you that when we talk about the word measured on the M&A, I think the bite size and the priority is going to be at least on that smaller end and where the white space is very, very clear to us, given the consolidation that we've done in the footprint in the last 12 to 18 months.

Okay. And just one -- I got a question from an investor right now. You didn't put out any guide points that we kind of think about -- you talked about sort of flattish EBITDA. But with those...

No, no. We didn't say flattish.

No, no, no. I apologize. You didn't. But sorry, I think you said -- well, anyway, with those guide points not provided anymore, would there be -- if you were to give them, excuse me, guidepost, any material changes or updates in those -- from those previous guideposts as we think about the rest of the year?

What we decided to do rather than providing guideposts and having people sort of figure out what the calculus was, we established the most conservative, what we believe, number that we could hurdle of $310 million on the EBITDA side. And then, Matt outlined and outlaid all of the building blocks, those 4 specific building blocks, and certain numbers attributable to those that he believed we would be able to achieve on top of that floor. I think there's one thing that we want to make sure that everybody takes away from this. The single biggest driver in us having a very ultra-conservative approach is our reluctance to be aggressive on the new side. And so, when we think about the outcome of new in 2025, the band of possibilities in 2026 on the new side is wide. And we happen to be stocking and forecasting towards the lower end of that band, knowing that in a matter of 60 to 90 days, if things pan out the way we hope they do, that we'd be able to stock more inventory. We want to set an expectation that we know we can hurdle, that we can build our cash flow around and we can build our leverage targets towards. And I think that's probably a bit of a shift for us. That shift largely happens because when we entered 2025, we did not expect this administration to create the kind of unpredictability around the economy that we dealt with. And we don't know what next year looks like. We don't know if there's a new Liberation Day of some kind. And that's why we just are sitting in this number hoping that it doesn't look like that.

And Patrick, I think I believe part of that question related back to 2025 and the guideposts that we had previously out there. I would point back to Tom's commentary around 4Q, our evolving view on the new market going into the year-end. I would tell you the biggest change, while we didn't formally update those, would be to that kind of that new volume assumption that we had made for that full year for 2025, and that would be the biggest driver, I would say, as you think about 4Q.

Our next question comes from the line of Craig Kennison with Baird.

I wanted to start on price. Can you just remind us of the average price increase that OEMs have pushed through for model year 2026?

So Craig, on average, it's panning out to about 5% to 7%. There's a handful of outliers that exist out there just as well, as there's a handful that we're able to keep prices down. But across the blended portfolio or bag of goods, it's roughly that 5% to 7% price increase.

Is that a like-for-like comparison? Or is there some change in content?

That's like-for-like. Great question. And so much as we look at a specific basket of goods that we've been tracking now for going on 15 years, where we modify those goods based upon the like-for-like nature of it, so if there's something that materially changes from year-to-year, we extract that altogether. So we feel this is the most clean pure view of roughly where we're settling in. However, just as well, I mean, there's always going to be certain segments where, for whatever reason, there's going to be a chassis price increases in certain segments that are just going to be unavoidable or where there's going to be a chassis change altogether, which might significantly modify features and price points. So sometimes we have to remove these assets from our basket of goods. We're still playing a game, though, where we have roughly like 10% to 12% of the consumers that exist out there, up and down all the different [ types of ] price point segments. So we tried to distill it down to a very simple number, but in reality, it's far more complex.

Yes, Craig, as we built out our conservative model, we anticipated that those 5% to 7% increases would stick for 12 months. But you and I have been around this industry for 20 years, and the manufacturers are going to need to spur demand. And if they feel like the price increases aren't going to do that, it wouldn't surprise me if, in the spring or the summer of 2026, there tended to be some reprieve on that. We're not factoring that into any of our assumptions, but it's highly possible. The offset to that, and Matt talked about all the data that we've been collecting for several decades, is that when those price increases happen on the new side, they do bolster the value of used units, not only the inventory we have in stock, but our ability to meet the customer where they want to be on a monthly payment. And so, as we're very scientifically and surgically issuing certain marketing tactics to drive the purchase of used, we're going to identify those segments on the new side that are maybe experiencing the most friction and lean into that on the used side to help mitigate that floor plan or that segment in our business so we can outperform everybody else.

And maybe just following up on contract manufacturing, you've been able to lean into that strategy to keep your prices in check. I'm curious what your mix looks like for model year '26 versus model year '25.

As of this moment, we're leaning in a little bit more for '26 compared to '25, and we'll probably end up 2025 with all of our new sales, about 40% or so being derived from our exclusively branded products and contract manufactured products. We are going to have additional segments roll out that we believe satisfies different consumers that have either been avoiding to buy in the short term because of price increases or that we believe we're offering different feature sets floor plans we'd be able to induce additional consumers to actually come into the lifestyle. So we still feel very confident. However, we're really tempering back expectations because there's a lot of unknowns.

I think Craig, Matt misses sometimes patting himself on the back on the innovation side. And I want to make sure that the market doesn't believe that the only reason that our market share on new has grown and the only reason that our unit volume has grown is because we're just selling cheap products. That's just not the case. And we saw a nice ASP improvement in Q3 and hope to see it again in Q4. I think the real reason that we've been really outhustling everybody is, the contract manufacturing opportunity provides a sandbox for innovation, provides a sandbox for testing out new segments, new floor plans and new ideas. And when you look at 2025's results, a giant portion of the outperformance on new came from the innovative ideas across the board. I actually think that what's happened is that's now accelerated. And in '26, you could expect more of that from our company. Private label started as a way to advertise the same kind of floor plan as everybody else at a lower price. It's turned into something much different. And the R&D side of that part of our business has evolved into something that has given us the ability to outperform everybody else, not just on price.

Our next question comes from Noah Zatzkin with KeyBanc Capital Markets.

I guess, first, I know this has been touched on, but maybe if you could kind of rank order the size of the 4 opportunities above and beyond kind of the $310 million floor? And within that, if you could just maybe touch on how you're thinking about M&A? Is it possible that you kind of get back to the 10 to 15 kind of run rate of acquisitions? And if so, like how meaningful could that be within the upside?

No, I tried to thoughtfully rank those 4 in sequential order in terms of either order of magnitude or order of opportunity in terms of additional upside. However, embedded with each one of those 4 between the cost savings that exist between different implementation of marketing technology and agentic functions between our used RV sales, M&A activity or new RV sales, there's obviously going to be some additional elements that could come into play here over the next few months that would lend itself to this order of events or magnitude to actually shuffle out of order one way or the other. But we do feel confident in these numbers that we laid out here that they're relatively conservative. So when we say $15 million of cost savings in terms of SG&A, there's always the opportunity for more, depending upon the opportunity of these different agentic functions, marketing technology, CRM launches, et cetera.

Yes. And Noah, I would say, on the M&A pipeline, our confidence and our line of sight into returning to that 10-plus door growth per year, I would say, the activity in the pipeline would support that today. I would also note, it's probably going to lean at least initially a little bit smaller on the door size, just given the opportunity set. But you're normally looking at an EBITDA opportunity anywhere from $500,000 incremental to $2 million. It really depends on the size. I mean, every dealership is different, but I would [ err ] towards the smaller size just initially in the modeling.

Got it. Really helpful. And then, maybe if I could just touch on -- new gross margins in the quarter were maybe a bit softer even with the kind of maybe better-than-expected new ASPs. So just what kind of happened there? And then, how should we think about new gross margins going forward?

Purely a byproduct of mix where -- we've spoken about this previously, but as average sale price goes up historically, our gross margin typically will be a little bit more pressured, which is why we saw that gross margin figure remain relatively elevated or at least in a nice suitable range as the ASPs came down. And it's just the very nature of the RV industry. If you think about -- and you're a consumer that's shopping for a $120,000 Class A gas, you're going to have a higher willingness or likelihood to travel outside of your local area to buy that asset to yield perhaps $5,000 of savings, in which case, the higher-end price points in the RV industry are generally much more competitive, where you're competing much more on a national or regional at a minimum level, in which case, there's going to be more people that will actually compete for that same deal. Whereas in the travel trailer space, that consumer largely remains within a 50 to 75-mile radius and lives within a 50 to 75-mile radius of the dealership from which they'll actually transact with, where as I said a Class A gas, that could be upwards of about 150 to 175 miles. So the dealer management areas just become totally different scale size. So when you look at our ASPs improving, part of that comes to the detriment of that gross margin profile, albeit it was still very healthy, [ plus ] sitting right around or just shy of 13% front-end gross margin on the new side, while coming out of season and while generating a higher ASP, we felt very good with that number.

Our next question comes from Tristan Thomas-Martin with BMO Capital Markets.

I think you guys have kind of mentioned a couple of times the bands of your assumption of new RV retail demand next year. Can you maybe -- maybe I missed this -- let us know what those are in terms of the industry and kind of your own expectations, what's embedded in that $310 million number?

Tristan, we believe it's conservative to estimate that as the RV industry has trended this year, low-to-mid single digits down year-over-year, that we anticipate that trend line and that slope to continue at the relatively same rate heading into next year. So, as such, given the material market share gains that we've been able to post over the last 2 years, we're also suggesting that new on our side could be potentially down low-to-mid single digits. As we've maintained, though, if you look at the collective sum of new and used sales combined, we are still very confident that we'll post additional gains and another record volume year when you look at the summation of the 2. I don't want to go too far down this rabbit hole of the new side, but we also know that this is a big portion of our business, but we know that used has become an even more material portion of our business. In fact, for the first time over the last 2 months, we were able to hit a 50-50 split between new and used sales. So when we think of the amount of gains that we made on the used side, we're really just setting the stage to offset any sort of new shortcoming or shortfall next year by means of continuing to pump the used business.

Tristan, the silver lining in all of this, because we always try to find it in our own business, is that we don't control the OEMs pricing and we don't control the rates in the environment. But nobody really cares because we have an obligation to make more money and sell more units and delever our business. And the silver lining for me is that as we look back at the violent swings that have happened in this industry over the last 10 years, we know that for investors to continue to want to be invested in our business, we have to take out some of those swings. And our used business, our service P&S business, our Good Sam business provide that road map. We aren't just leaning into used because we're concerned about the new. We're leaning into used because we want to eliminate these wild swings in earnings, and we believe that the trough of earnings is behind us. Every single time that we can grow our used business, we further substantiate a floor in our business, and that's kind of the theme of this call. We have to give people a floor. Matt also mentioned on the call that mid-cycle at $500 million-plus isn't something that's outlandish. It is something though that will require the new business to be more stable. What does that mean? You need interest rates to be lower than they are today, and you need pricing to really settle out at a payment range that people can afford. This move to used is structural. It's not temporary. It's philosophically, I think, what our management team believes makes sense.

Okay. Got it. And then, just because you mentioned the $500 million-plus mid-cycle target, I think it's on the same store count as today. Can you maybe just go over some of the other building blocks that gets us from the $310 million to $500 million?

From $310 million to $500 million, it really has to do with increased industry volume, right? So I think if you think about the $500 million, you're looking at an industry that's in the 400,000 range. That's down previously from prior estimates of 425,000 to 450,000, and that's really a testament to our market share gains. And then, from there, there's a slight increase in assumed ASP over the next, call it, 1, 2, 3 years, whatever you want to pick for your mid-cycle time frame, that would drop down to really SG&A percent of growth in that mid-70s. Those are really the building blocks outside of it, and really it's based on historical trends and not any assumptions that we haven't built in the model before.

And the math model is pretty simple. If it goes to 400,000 and we maintain some level of market share, we'll be selling north of 80,000 new units. And I don't know where that is in terms of like is it 82,000 or 84,000, just north of 80,000 units. Those things help because everything else flows with it. Service flows with it. P&S flows with it. And so, as we see that new business stabilize, we'll be in pretty good shape.

Our next question comes from Scott Stember with ROTH Capital.

Can you talk about what you're seeing on the financing front? Have you seen rates coming down, given the recent drop in short-term rates? And what does the credit profile of the consumer look like? Has it deteriorated at all?

Scott, it's Brett. So when you think about where the 10-year has been really over the last 1 to 1.5 months, it's kind of been hanging sustainably below that 4%. We've seen a handful, a select handful of retail bank moves within them. But when you think about -- and this just goes back to the conversations that we always have with our lenders, thinking about their appetite and their propensity to take advantage of those lower rates and pass them on to the consumers. This time of year, I think you're possibly going to have a little bit more of a time lag, I would expect, as you get into a more retail-heavy period like 1Q, January, February, March, April. I think that's when we'll start to see the fruition of a lot of the rate cuts that are out there. So right now, I think the setup for retail lending rates to come down is very constructive. It's just a matter of does it happen in November or does it happen in January, February around show season.

Got it. And the credit profile?

Yes. No, credit profile has been very stable for us when we think about our F&I trends over the last couple of months, couple of quarters. The consumer credit profile has been stable and so have the approval rates. And that's really how we judge credit availability in those 2 contexts.

Got it. And then, just last question, just putting some finer points to '26. What would you predict the new and used margins or the ranges should be for '26?

I would anticipate that our new margins should be within that historical range still that we suggested earlier of like that 13% to 14% range even. And then, on the used side, I would factor in somewhere within that like 18% to 20% range. I mean, there's going to be some months, some quarters where we might have to get a little more aggressive, in which case, we could veer towards the lower end of that spectrum. And then, once we're in peak periods and we feel like we've optimized certain inventory levels, we could push it closer to 20%. But I would say throughout the summation of the year, I mean, that's obviously somewhat of a wide band. But when you look contextually and historically, it's really pretty tight, 18% to 20% on the used side.

Our next question comes from Bret Jordan with Jefferies.

This is Patrick Buckley on for Bret. Looking at the parts and service decline versus the continued momentum in used, I guess, is there a goal or target moving forward for what customer pay service growth and margin should be?

I think what we're seeing -- this is Tom. I think what we're seeing right now is kind of that trend that we saw in Q2, where as we build used inventory, we have to reallocate that technician time to reconditioning the units and getting it frontline ready. So, as you've seen that sequential increase in new vehicle inventory on our balance sheet quarter-to-quarter, we've had to allocate more of that time to the internal work that doesn't necessarily flow through that PS&O line. It bolsters rather our used volume and our used margins. So I think heading into next year, I do believe that at this point, we see that -- we feel like we have a lot of initiatives out there to continue to grow. And Matt talked about use of agentic AI and some other things that we're thinking about in service. When we think about some other programs that we're looking at in the online marketplaces and trying to kind of continue to bolster our margins with some other programs on the parts and accessories side, I do think that we have some upside opportunities there to grow from where we are today.

And Patrick, we'll be the first to acknowledge that there's been a lot of noise in that revenue line item over the last few years, more than a few years, even at this point, of either divestitures or different acquisitions or different movements in different categories. However, we believe that we're at a point now where we have a nice, clean baseline. And the entire focus of this line item now is to really induce more usage of RVs. And we could oftentimes do that by means of obviously, service and the reconditioning to ensure that people have assets that are ready to be on the road again, but more importantly, having all the retail products and install items that these consumers need to actually enjoy this lifestyle more and more frequently. And as Tom referenced, we obviously are diving quite deeply into the Amazon marketplace. We've been very effective at working with different partners like [indiscernible] and Lippert and Dometic and Camco, where those are the 4 largest names within the RV aftermarket space. And it's through those relationships, partnerships that not only do we think we could gain more market share in the parts business, especially, but also yield that additional upside when we actually install those items within our service channel.

I do want to have one big takeaway on the P&S. It really does prove out how strong the base of our business is. And while it may go up or down 1% or 2%, the same consumer pressures that people may feel on price, they feel on any money leaving their wallet. And what I'm really proud of what this team has been able to do is to hold the line on that revenue line in the face of a consumer saying, I can't afford things. They're still able to induce people to come in for the proper maintenance and all the other items. But in certain cases, much like a lawyer may have to, you sometimes have to discount rates to make it affordable for people. When you look at the stability and the strength of that particular segment, regardless of what's happening in the macro, it really is that and Good Sam are the 2 differentiators of our business that nobody is able to or nobody will ever be able to penetrate. And that for me is what we're trying to do on the used side as well, just to build a very strong foundation. So the P&S business is just fantastic. It's just resilient.

Got it. That's helpful. And then, on the Good Sam Club, it does seem like there's been a bit of a slowdown there. Is that decline at all related to less usage?

No. So, a few things to note, Patrick. We had announced maybe about 1.5 years ago that we were migrating our Good Sam memberships to a loyalty program. By means of that introduction, we actually created a whole new free tier, and we don't report the free tier in those numbers because we've only historically reported a paid membership. So we didn't want to mislead people by means of bolstering this free tier. But we do have nearly 1 million additional members that are part of our free tier that are not reported in numbers. I call attention to that because through a free tier, you're also earning points when you shop at our facilities, however, not as many points compared to the paid memberships, never mind, an elite membership. And if you look quarter-to-quarter at this line item, we've actually seen a stabilization where we're able to actually offset now any sort of detraction or any sort of depression of that membership growth. And we do believe now we're at this inflection point of being able to stack on gains now because we've been able to stabilize it. Never mind the gains that we yielded within the free tier of the loyalty program.

I think that's the remainder of our questions.

Yes. This concludes our question-and-answer session. And I would like to turn the conference back over to Marcus for any closing remarks.

Great. Thank you so much. We hope you heard the confidence in our ability to deliver these results, and most importantly, as Matt laid out, the building blocks for a much better performance than the floor we've set out. So we look forward to delivering better results and talk to you soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.