Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Lazydays Holdings, Inc. Third Quarter 2020 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Debbie Harrell. Thank you, and please go ahead.

Debbie Harrell: Thank you. Good morning, and thank you for joining us for our third quarter 2020 financial results conference call. I'm Debbie Harrell, Corporate Controller at Lazydays. We issued the company's earnings press release this morning. A copy of the earnings release is available under the Events and Presentations section of the Investor Relations page of our website and has been furnished as an exhibit to our current report on Form 8-K with the SEC. With me on the call today are Mr. Bill Murnane, our Chairman and Chief Executive Officer; and Mr. Nick Tomashot, our Chief Financial Officer. As a reminder, please note that some of the information that you will hear today during our discussion may consist of forward-looking statements, including, without limitation, statements regarding unit sales, revenue, gross margins, operating expenses, stock-based compensation expense, taxes, product mix shift and geographic expansion. Actual results or trends for future periods could differ materially from the forward-looking statements as a result of many factors. For additional information, please refer to the risk factors discussed in the Form 8-K filed with the SEC on November 4, 2020. We will also discuss non-GAAP measures of financial performance that we believe are useful for understanding the company's results, including EBITDA and adjusted EBITDA. Please refer to our earnings press release for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For the three months ended September 30, 2020 and 2019, the financial information presented represents the operating results of Lazydays Holdings, Inc. Now, it is my pleasure to introduce Nick Tomashot, who will provide an overview of the 2020 third quarter financials.

Nick Tomashot: Thanks, Debbie. Please note that unless stated otherwise, the Q3 2020 results comparisons are to prior year Q3 2019. Total revenues across all lines of business for the third quarter were $215.7 million, up $57.3 million or 36% versus prior year. Revenue from the sale of recreational vehicles, or RVs, was $194.6 million for the quarter, up $55.7 million or 40%. New RV sales revenue was $130.3 million, up $43.5 million or 50%. And preowned sales revenue was $64.2 million, up $12.2 million or 23%. Looking at our RV unit sales, excluding wholesale units, total unit sales were 2,595, up 731 units or 38%. New vehicle unit sales were $1,645, up 397 or 32%. Preowned vehicle unit sales, excluding wholesale units were up 950 or 263 units or 38%. Average selling price for new vehicles for the quarter was $76,900, up $7,800 or 11% versus prior year. The average selling price of preowned vehicles was $62,900, down $2,600 or 4%. These lower preowned ASPs reflect the shift in mix for the quarter towards towables and lower-priced units. Revenues from our other channels consist of sales of parts, accessories and related service, finance and insurance or F&I revenue as well as campground and other miscellaneous revenue. In total, revenue from these other lines of business was $21.1 million, up $1.6 million or 8% compared to 2019. The increase was driven by an F&I revenue increase of $1.8 million or 20% to $11.1 million, and a parts and service revenue increase of $0.7 million or 8% to $9.5 million. These increases were partially offset by a $0.9 million decrease in campground, rental and miscellaneous revenue and includes the impact of our rental business being phased out in 2019. Total Q3 gross profit, excluding the impact of noncash last-in-first-out or LIFO adjustments, was $47.9 million, up $16.5 million or 53% versus 2019. Gross margin, excluding LIFO adjustments, increased between the 2 periods, coming in at 22.2% versus 19.9% in 2019, with a change attributable to improved RV sales margin and mix of business. Noncash LIFO adjustments had a net favorable swing, improving gross profit by an additional $2.3 million compared to prior year. So including LIFO adjustments, gross profit for the quarter was $49.3 million, up $18.8 million or 62% versus 2019. SG&A for the quarter, which excludes transaction costs, stock-based compensation and depreciation and amortization was $28.6 million, up $3 million compared to prior year. This increase is attributable to the additional overhead expenses associated with the The Villages dealership we acquired in August 2019, our new service center near Houston that we started up in mid-February, the Phoenix dealership we acquired in May 2020 and increased performance wages driven by our strong sales and profit performance for the quarter, partially offset by overhead cost reductions the company took in the second quarter of 2020. SG&A as a percentage of gross profit improved from 83.7% in Q3 2019, down to 58% in 2020. Amortization of stock-based compensation was down $1.1 million versus prior year, and depreciation and amortization were approximately flat, down $0.03 million. Net income for the third quarter was $11.6 million, more than 5x Q3 2019's net loss of $2.5 million. Earnings per share improved from $0.55 from a loss of $0.41 per share in Q3 2019. This was $14.1 million improvement in net income was primarily driven by the favorable increase in the net of our increased gross profit and SG&A expense discussed above, lower amortization of stock-based compensation as well as $0.6 million reduction in interest expense driven by mainly a reduced Floorplan interest. Adjusted EBITDA was $19 million for the quarter, up $13.7 million versus prior year. This set the new quarterly EBITDA record for Lazydays, exceeding the record we just set last quarter of $14.9 million. Adjusted EBITDA margin increased by 540 basis points to 8.7%. Please refer to our earnings release for a table, which includes a reconciliation ofnet income to adjusted EBITDA. Now turning to our September 30th balance sheet and our financial position. We had cash on hand at the end of the quarter of $81.7 million and net working capital of $39 million, with cash up $50.2 million compared to December 31, 2019. This increase in cash includes the impact of cash provided by a $6 million mortgage on the new service center and property near Houston, Texas we had self-funded. $4.9 million provided by the first quarter consummation of a sale-leaseback of property we had self-funded for the greenfield in Nashville, Tennessee, and $8.7 million provided by Paycheck Protection Program loans we have taken out in the second quarter of 2020. It also includes the cash outflow for the cash acquisition of our Phoenix dealership location which we closed on in May 2020. As of September 30, 2020, the company has declared the cash payment of Series A preferred dividends of $11 million which are included in dividends payable on the accompanying balance sheet for the period ended September 30, 2020. This dividend was paid on October 7, 2020. Dividends on the Series A preferred stock accrue and are payable quarterly in arrears at an initial rate of 8%. Accrued and unpaid dividends until paid full in cash accrue at the applicable 8% dividend rate plus 2% or a 10% annual rate. This October 7 payment pays down the company's accrued dividend balance in full. As of September 30, 2020, we had approximately $71.5 million in inventory, consisting of $50.6 million in new vehicles, $19.1 million in preowned vehicles and approximately $4 million in parts inventory, less LIFO reserves of $2.2 million. Total inventory is down approximately $89 million compared to the same time prior year, reflecting the strong recent demand we've experienced and the manufacturer's temporary suspension of production in response to COVID-19. As of September 30, 2020, we had $13.5 million of term loans outstanding, $59.2 million in gross notes payable on our Floorplan facility, $6.1 million on the Houston M&T mortgage and no borrowings under our $5 million revolving credit facility. We also had approximately $5.7 million outstanding on notes payable related to acquisitions and $8.7 million borrowed under Paycheck Protection Program loans. This concludes my summary of the results. Thanks for your time. And I'll now turn the call over to Bill Murnane.

Bill Murnane: Thanks, Nick, and thank you, everyone, for joining us today. Good morning. Nothing short of a great quarter is -- there's no other way to describe it. It's the best quarter Lazydays has ever had and just a fantastic quarter. So I want to start by thanking the Lazydays employees. The volume increases that we've experienced recently and their dedication and effort to support the -- those increases to meet this unprecedented demand is nothing short of remarkable. They're truly a very unique and wonderful group of people, and we're fortunate to have them supporting all of our efforts. So great job to everyone who works with us at Lazydays. We have and continue to experience very strong demand for RVs. We believe this strong demand is primarily related to the lifestyle changes caused by the pandemic and the limited options people have to enjoy vacation and leisure activities that allow for social distancing. In addition, inventory continues to be tight. Tight inventory likely causes us to miss some sales, but has a very positive impact on our margins. Demand continued to be strong, and inventory continued to be limited in October. Our inventory position is beginning to improve, and we expect it to continue to improve through the end of the year. Demand also remains strong. And although our inventory levels are improving, they are still well below where we would like them to be. OEM production levels continue to recover from the impact of the pandemic and we expect OEM production to continue to improve through the rest of the year. We are hopeful that inventory levels will begin to normalize sometime in mid-2021, but we are still in a wait and see mode given the fluid nature of current demand and production. We believe we continue to outperform the market. Through September, our unit volume is up close to 30%. Stat survey shows that the market is up through August, approximately 6%. So we believe Lazydays continues to outperform the market. Our growth pipeline remains robust, and is the most active it has been since we began our geographic expansion strategy a few years ago. We recently closed on the acquisition of our new dealership in Elkhart, Indiana. And we expect to close on Camp-Land acquisition in the Chicagoland area before year-end. We are very excited about the markets these acquisitions will open up for us in Indiana, Illinois and Michigan. And we believe they will generate significant future growth and returns for Lazydays. We are in the process of adding new dealer integration resources so we can add up to 8 acquired or greenfield dealerships per year. Historically, we have had capacity to add 4 dealerships per year. We believe we will increase our capacity to add 8 stores per year by Q1 2021. In 2021, we expect to generate substantial growth from our 4 new stores located in Phoenix, Arizona; Elkhart, Indiana; Chicagoland; and Nashville, Tennessee. The growth from these 4 stores will be in addition to planned growth from existing stores. Moreover, we are currently evaluating numerous acquisition opportunities and new greenfield dealership sites around the country and expect to add many more new stores in 2021 and 2022. As we grow, we continue to focus on improving our ability to provide a best-in-class customer experience and service excellence. We have several new initiatives in place and are investing sizable human and financial resources into people, processes and technology that will help us deliver the best RV purchasing and service experience in the country to all of the wonderful customers. That is all for my prepared remarks. Operator, please open up the line for questions.

Operator: [Operator Instructions] Your first question comes from the line of Steven Dyer.

Steven Dyer: Thanks. Good morning, guys. Nice work as has been the case all year. I guess, just in the quarter, Bill, are you seeing anything sort of, of note regionally? I think you've got a little bit more regional footprint than you had maybe back when you first went public. Are you seeing anything sort of unique there? I know in Florida, we're coming into a stronger time of the year weather wise? Any commentary around that?

Bill Murnane: Not really, Steve. In all of our dealerships across all of our locations, we've just seen continued strong demand. We think some of that we're generating by just finding ways to get closer to our customers. But we haven't really -- any differences in dealership performance seems to be things that are under our control, not necessarily market-driven. So we don't see anything in our numbers that indicates that 1 market is performing significantly different than the other.

Steven Dyer : Got it. And then sort of the move more towards towables and so forth. Is that something that you anticipate continuing lower price points, et cetera? Do you feel like that's sort of driven by COVID pushing people to this lifestyle? How much of that do you feel like it's sustainable?

Bill Murnane: Yes. I think it's sustainable, certainly, for the next couple of years. We believe the new entrants to the market is definitely sustainable. The market is -- the new entrants are typically looking for lower-priced new products or used products because they have -- they tend to be a little younger and looking for a little lower price point. Let's not forget that one of the biggest generations in the history of this country is entering retirementage right now and will be for the next 10 years. So there's a massive group of retirees also. That would normally -- that's always been a good demographic for us and the industry, and it's going to continue to perform well. But we do think that, especially as we add more dealerships because the dealerships we add tend to index closer to the industry average, which roughly is 80% towable, 20% motorhomes. So as we add more dealerships, we're certainly going to index a little more that way because the smaller dealerships in other parts of the country don't have as big a focus as maybe Florida does on motorhomes and specifically our Tampa dealership. Having said that, we're still very bullish on motorhome. Somebody's got tosell them. They may not be growing as fast as towable product, but they carry very nice margins, so we can turn them very quickly, both new and used. So we will continue to focus on both the towable and motorhome market.

Steven Dyer : Great. Very helpful. And then I guess, maybe if I could, a question on capital allocation. You guys have accumulated a nice chunk of cash on the balance sheet over the last few quarters for sure. And you obviously have a lot of options, whether it's addressing the warrants, whether it's greenfield opportunities. It sounds like you are sort of increasing infrastructure to be able to do more acquisitions. Just big picture, how do you guys look at that sort of on an ongoing basis and allocating capital going forward?

Bill Murnane: Thanks, Steve. Yes, good question. Our cash is precious, and we manage it very closely. Our strong focus and priority is to deploy our cash towards our highest return investments. And we continually analyze different uses for our cash. And we consider many alternatives, including some of the ones that you mentioned. The alternative that went out are always the investments with the highest shareholder return. Currently, none of the many investment opportunities we have evaluated, including stock buybacks and buying back warrants come anywhere close to the returns we can get on new or acquired dealerships. The returns on new and acquired dealerships are through the roof. At present, the returns we can get on new and acquired dealerships are, I would say, multiples higher than any other investment that we have considered. Conditions, of course, will change over time, and we'll continue to evaluate all investment opportunities. But at this time, we don't foresee any near-term change in our focus to invest most of our available cash into new or acquired dealerships. Of course, we will also invest in people, processes and technologies that enhance our customer sales or service experience, but these investments are small compared to the investment in growing our dealership network, which will remain our focus for the foreseeable future.

Steven Dyer : That's great. Great color. I guess, lastly, just as a tag on yesterday or earlier this week, one of your larger public competitors has said the best M&A environment he's seen. It's increased even significantly in the last 30 days. Is that sort of consistent with what you're seeing and the comments you've made about adding resources there?

Bill Murnane: Yes. We won't argue with that position. We feel very good, and our pipeline is very robust.

Operator: Your next question comes from the line of Fred Wightman.

Fred Wightman: In the release, you mentioned that the OEMs are shipping units slightly ahead of retail demand. I think that was a bit of a change versus what you said in the pre-release back in mid-October. So can you just dig into that a little bit more? Is it better shipments, slower retail? What's sort of driving that change in the language?

Bill Murnane: Better shipments from the OEMs. We've seen our numbers continue to go up on what we're getting in. Now keep in mind, we have a big presence in the south, and I think we're going to get served first because we're coming into season across the southern U.S. So I think it's a priority. We are also a larger player, so we may get some priority there as well. But it's coming. It's because of the increase in shipments, not because of any change in demand.

Fred Wightman: Really helpful. And then just to follow-up on that. I mean, are you seeing or hearing anything as far as the supply chain impact on those shipments? Totally fair points on your size and the geographical mix that you guys have. But do you think that supply chain issues that have been a bit of an Achilles heel here for the industry could be resolved in the next few months and sort of drive more normalized shipments?

Bill Murnane: Yes, it's really hard for us to predict that. What I can say is they continue to put out fires and solve problems that are disrupting their supply chain. We have every confidence that our OEMs will resolve those problems and continue to increase production in the coming months, but we don't have a crystal ball.

Fred Wightman: And then just one final one. I think you mentioned, Bill, that you think inventory levels could normalize sometime in mid '21. Can you just sort of talk about the retail and wholesale assumptions that you're including in that time frame?

Bill Murnane: Yes. So we're continuing to expect strong demand next year. And we're also continuing -- we're expecting to see continued increases in our shipments from the OEMs. Again, we don't have a crystal ball. Is it going to be May or June, or is it going to be September, October, we don't know, but we think somewhere around the middle of the year we should start to get back to normal according to the information we have today, which is always subject to change in this environment.

Operator: Your next question comes from the line of Charles McDoulan [ph].

Unidentified Analyst: Congrats on the quarter. Just trying to understand a little bit more about capital allocation and how you guys think about potentially cleaning up the capital structure while pursuing M&A because we're generating $6.5 million in EBITDA per month, we have $82 million in cash, just $25 million in non-floor plan debt, potentially a refinance coming in a couple of quarters could add even more cash to bring maybe debt to 1x. So basically, we're trading at 2.5 to 3x EV-to-EBITDA. We're very excited about the M&A opportunity. But should we have a lot of cash in just a couple of quarters and plenty of ammo for M&A over the next 2 years? So just kind of trying to understand why we're not trying to reduce dilution at 2.5, 3x EV-to-EBITDA?

Bill Murnane: Yes. So we -- as I said before, we look at capital allocation very carefully. And when we do that, we're evaluating the return we can get on that capital. So we're in unprecedented times now. And yes, we've generated a lot of cash, but anybody that's been around this industry for any amount of time, certainly 11 years that I've been around it know that it's very cyclical. And we don't know how long the good times will last. So we -- our approach to that is to be conservative to limit the debt. I have a very strong background in distressed debt, so I understand debt very well and I understand its benefits and its risks. So we're -- we take a very conservative approach. Now as far as our investments today, we've had a number of people ask us about stock buybacks and warrant buybacks. We have numerous questions about that from shareholders. We have evaluated these programs, buyback program or a warrant purchase or exchange program. We've evaluated them extensively. And we've built the model to help us fully understand the shareholder value that such a program could create. And it's not that complicated to run that analysis. Our detailed analysis shows that a warrant buyback or exchange program has a relatively low single-digit return to shareholders. Comparatively, the return on new or acquired dealerships is in order of magnitude higher than the return on a payback or exchange program according to our analysis. Given this, we believe it is in the very best interest of our shareholders to invest our available cash in growing our dealer network. We will continue to analyze and compare investment opportunities and make investment decisions based on whatwe believe are the highest available returns to shareholders. But right now, there just isn't an investment opportunity that comes anywhere close to expanding our dealer network. If you -- I hope we have a lot more cash in a year or 2, but we can't plan on that, and we don't want to find ourselves in a position a year or 2 from now where we're tight on cash because we made a low single-digit investment -- return investment in buying warrants or buying back shares, and now we can't execute on this is very, very powerful geographic expansion strategy.

Operator: [Operator Instructions] Your next question comes from the line of Greg Cohen [ph].

Unidentified Analyst: Yes, I'd like to second what people have said, the earnings and the performance is incredible for the third quarter. So congratulations on that. It seems to me, and I think it's clear to everyone that the business is firing all cylinders and the runway is going to be quite long, and the RV expansion is nice to flash in the pan. So I guess the question that I kind of have, right, is why do you guys think that -- I guess the stock is not reacting more favorably to these amazing results and sort of what is the company going to do from an investor relations perspective to sort of bridge the valuation gap between where we trade, that's sort of 2.5x 2021 EBITDA versus our publicly traded larger peer?

Bill Murnane: Yes. So we communicate as best we can with our shareholders. Our focus really stays on the things we can control. And we can't control the market. We can't control what investors do. What we can control is how our business performs to some extent, within -- given what the market gives us, we can perform -- we can control how we perform. We can control dealerships that we open -- new dealerships we open. New dealerships will require how we deploy our capital. We fundamentally believe that if we continue to perform well the market will understand and reward us. And we're not looking for a 1 month or a 3-month or a 6-month results from that. We're patient. We're in this for the long haul. And we're going to continue to focus and execute on our strategy. And we have every confidence that the market will reward us for that performance. It may not reward us as fast as we would like. But I think we've proven, at least in the past 6 months that it will reward us. And we think that it will continue to reward us, provided we continue to execute. So that's where -- and are smart with the deployment of our capital, and that's what we continue to try to do.

Unidentified Analyst: Yes, I think these points are well taken, Bill. I think one thing, though, that could be a pretty sort of simple thing you could do is to post the investor deck online. The deck that you put out for the roadshow a few weeks ago was fairly comprehensive, but that was only seen by a select group of investors. So if you could just post that presentation on the website for the broader public to see, I think that would be incredibly helpful in disseminating the story. So if you can just consider that, that would be great. The second question I had is around some of the ancillary opportunities to grow the business. As you know, the peer-to-peer segment is growing incredibly fast. You have stand-alone companies such as Outdoorsy, which have very, very high valuations. These are high-growth, low-CapEx, high-margin, high-multiple businesses, and obviously, Camping World is rolling out a similar program. Secondarily, it looks like we're not really doing RV rentals anymore. And that business also seems to have a very high ROI. So as I kind of think about the multiple on the stock, right, it seems like we're being punished because we don't have as many of these high-growth, high-margin, high-multiple segments of our business. So I guess, like how are you thinking about those type of things so that we can be valued closer to a typical dealership and Camping World in particular.

Bill Murnane: Yes. So I'll go back to the comments I think I made to Steve's question. We consider all investments. Not all investments, we consider a lot of different investment opportunities. We have certainly considered those 2 opportunities at great length, in fact, we were in the rental business for a number of years. And the rental business is hard. It does not get returns anywhere close to the returns we're getting on acquired or greenfield dealerships. It's a best case, kind of a low double-digit return on capital, the rental business. So we have evaluated those. There the return targets did not meet our hurdle, especially given the other investment opportunities that we have. And we determine that it's just not the best deployment of our capital. If that changes sometime down the road because we don't have other opportunities to invest in, we will certainly look at those and invest in those if they are the best opportunity we have and they meet our hurdle rate. But at this point in time, neither one of them does. In the rental business, we don't want to do is react to a potentially shorter-term trend in the market and build infrastructure to support that. We're not going to -- we don't want to chase opportunities that may not be long term. We're in the business of selling servicing, selling financing and servicing RVs. That's our core business. And we have a fundamental belief that a focused management team that stays focused on their fundamental businesswill drive the ultimately best results. And if we distract ourselves chasing things that aren't our core business, and right now rentals are not our core business, then we will distract ourselves from capturing the highest return on our core business. And so I think, a, rentals don't meet the hurdle rate, and they're not even close to the return we can get deploying that capital elsewhere; and b, we're very careful about distracting this management.

Unidentified Analyst: Okay. And just one last question. That was incredibly helpful. I guess like if you continue to go on this path of buying dealerships, opening greenfields and kind of staying focused as you're laying out here, and were generating tons of cash every month, and the business continues to boom. But for whatever reason, the market does not want to give us a real multiple. Kind of at what point is management, and I guess the Board going to start thinking about sort of broader strategic alternatives to recognize value because, I mean, clearly, Bill, you know this with having your private equity background and distressed debt background, that this franchise that we're building with its national scale and scope is worth multiples of where the stock is trading today to private equity buyers who could lever this thing up and pay almost nothing for interest and generate massive amounts of free cash flow on a levered basis. So I guess, like this strategy, if it works, that's great. But at some point, the stock has to work, too. And if you don't want to buy the warrants, you don't want to buy the stock, that's your decision, obviously, as being CEO. But at the same time, right, like the stock kind of needs to work at some point. And you've been the CEO for, I think, 3 or 4 years now, and the company has been public for quite a long time. And the performance of the stock has been okay, but it hasn't -- but it's still dramatically undervalued to where it would trade in the private markets, which may be $30, $40, $50 a share today. So I think we're all in this for the long term. But I guess I'm just wondering what your thoughts are on sort of how you think about strategic alternatives review, if the stock doesn't end up working, kind of how we all want it to work out over the next sort of 6 months, as you say?

Bill Murnane: Well, 6 months is a very short time frame. And our horizon is much longer than that. And all of our Board, and we think the majority of our shareholders have a much longer-term view than that. And like I said before, we're not going to be impatient to rush to try and capture value. I can tell you that your opinion on the private equity market and the valuation of this business and this industry is wrong. I was -- I have very direct experience. I've been Chairman of this company for 11 years. While it was private equity owned, we -- I joined as CEO in 2016, so it will be 4 years in December. And we went public 2 years ago, which really isn't that long ago. And I think we have a much longer-term view than apparently you do, and we think valuation will take care of itself. If we get years down the road and we still can't seem to get what we think is a fair market value for the company, of course, we'll consider other alternatives. But given the opportunity that's in front of us and the value we think we're creating now -- and it wasn't that long ago. The original shareholders 2 years ago paid $8.75 for the -- and I'm one of them for the shares of Lazydays. I think they've gotten -- they doubled their money in 2 years or close to it. So I think they've gotten an okay return in 2 years on that money. So, I wouldn't say it’s okay. I say, it's pretty good in that time frame. And we think we can continue to do better, and we will certainly work hard to do it. But I don't think we're going to be considering strategic alternatives in 6 months. That would be a mistake. And anyway, so it's all I got to say on that.

Operator: There are no further questions at this time.

Bill Murnane: Great. Well, thank you, everyone. We're really excited about what's going on right now. We thank you for your support. And we'll look forward to talking to you next quarter. Have a great rest of your week. Thank you.

Operator: Ladies and gentlemen, this does conclude today's conference call. You may now disconnect your lines.