Operator: Good afternoon, and welcome to Camping World Holdings Conference Call to discuss Financial Results for the First Quarter of Fiscal 2020. 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 the reproduction of the call in whole or in part is not permitted without authorization from the company.

Participating in the call today are Marcus Lemonis, Chairman and Chief Executive Officer; Brent Moody, President; Mel Flanigan, Chief Financial Officer; Tamara Ward, Chief Operating Officer; and Karen Bell, Chief Accounting Officer. I will now turn the call over to Mr. Moody to get us started.

Brent Moody: Thank you, and good afternoon, everyone. A press release covering the company’s first quarter 2019 financial results was issued this 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 contained forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These remarks may include statements regarding the impact of COVID-19 on our business, financial results and financial condition; our business goals, plans, abilities and opportunities, industry and customer trends, our 2019 strategic shift, increases in our borrowings, our future liquidity and future compliance with our financial covenants and anticipated financial performance. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the Risk Factors section in our Form 10-K, our Form 10-Qs and other reports on file with the SEC. Any forward-looking statements represent our views only as of today, and we undertake no obligation to update them. Please also note that we will be referring to certain non-GAAP financial measures on today’s call such as EBITDA, adjusted EBITDA and adjusted earnings per share diluted, which we believe may be important to investors to assess our operating performance.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release and on our website. All comparisons of our 2020 first quarter results are made against the 2019 first quarter results unless otherwise noted. I’ll now turn the call over to Marcus.

Marcus Lemonis: Thanks, Brent. We’re obviously living in a different time and so we want to start by sending our sentiments out to those people who’ve been affected by what has happened in the world, and we hope that you and your families are also safe.

We know that you’ll have a lot of questions, so we’ve made the decision to keep our prepared remarks brief, and we’re going to go right into Q&A. First off, I have to say that I could not be proud of the way our team has responded and performed during this crisis and more importantly, our changing business conditions. Resiliency is clearly in our DNA. The majority of our stores have remained open to serve and protect our customers as well as our team members. We’ve implemented a number of initiatives using advanced technology, such as curbside pickup, free home delivery, no-touch shopping, enhanced call center support and a work from home and flexible staffing program.

Overall, we are very pleased with our first quarter results and the recent directional trends in our business, especially in light of what’s happening in the world. As I mentioned on our last call, our revenue and our margin trends in January and February were very strong, in fact even in the first half of March. And we saw those trends continue. But in mid-March, we did start to feel the effects of the pandemic and saw a slowdown that lasted into mid-April. In mid-April, we began to see that trend reverse, and that trend has not only continued, but accelerated positively into mid-May.

While we do not have the final results for April, I am very encouraged with the positive trends that we saw, and we expect the results to be positive as well. Notwithstanding the slowdown in March, adjusted EBITDA for the quarter was $36 million, a 69% increase over the prior year. Gross margin was up 144 basis points to 29.5%, and total revenue was over $1 billion. And it declined slightly despite the fact that we closed a significant number of stores, and we experienced the pandemic in the last two weeks of the quarter. We ended the quarter with a strong balance sheet, $282 million of cash, including $109 million in our primary accounts and $173 million in our floor plan interest offset accounts.

We also have $151 million of unencumbered used RV inventory and $174 million of unencumbered inventory net of payables. Importantly, we believe that we have sufficient liquidity to operate the business for at least the next 12 months and beyond and do not currently anticipate any issues with the financial covenants under our credit facility. In addition, we currently plan to maintain the regular quarterly cash dividend. Lastly, let me touch on guidance. While we feel good about our first quarter, as well as the trends we’re seeing in the latter part of April and continuing into May and the way we’re managing our business, we believe it’s prudent to withdraw the guidance we provided on our last earnings call, until we have more information, and we understand the macro trends.

Please note, we are withdrawing our guidance simply because of the macroeconomic trends that we are not in control of, not because we don’t have confidence in our business. Now let me turn the call over to Mel to touch on a few more highlights.

Mel Flanigan: Thanks, Marcus, and good afternoon, everyone. In the interest of time, I won’t go through all the numeric details that we typically provide. All that information is available in the press release and 8-K that we issued today and on our website.

I do want to point out a few things that we feel are important though. First and perhaps foremost is our liquidity position and capacity to weather this storm. Over the past month, we’ve been running a multitude of scenarios, and the tenor of those scenarios continues to evolve. In March, we began taking aggressive action to preserve cash and reduce expenses. We obviously do not know what the macroeconomic environment is going to look like.

So we took a number of steps to better position ourselves. In the latter half of April, we saw encouraging signs that our business might fare better than most retail businesses as the country slowly starts to open, and we move through the summer. So our current scenario builds off a strong first quarter and assumes that our business will improve at a modest slope from here, which is supported by the directional trends over the past several weeks. As a result, we believe that we are in a strong position to take advantage of whatever level of recovery the market affords, and importantly, that we’ll be able to meet our flooring line of financial covenants for at least the next 12 months. With that, I’ll turn the call over to the operator for Q&A.

Operator, please go ahead.

Operator: Yes, sir. [Operator Instructions] We can now pass to the first question from Rick Nelson of Stephens. Please go ahead.

Rick Nelson: Hi, thanks.

Good afternoon. Nice quarter in a tough environment. Okay. Marcus, can you quantify the sales trends that you spoke about, what you saw in March, particularly the back end, early and late April and May.

Marcus Lemonis: So Rick, I’ll break down the quarter, and I’ll even take you into the second quarter.

During the first, call it, 75 days of the quarter, we were sitting with a positive same-store sales on a unit basis and feeling like that momentum is only accelerating. Unfortunately, with us trying to protect our customers and protect our associates, most importantly, we did have to pay everything back. And in the last two weeks of March, we believe that we missed out on about $140 million of revenue that we would have seen had the trends just continued through the period. The financial results that you see in the first quarter, while they are supported by largely January, February and the first part of March, we believe that they were more supported by our proving our thesis out about our variable cost structure. And we talked about it in the years past.

We believe we got away from it in maybe the last 18 months. We worked hard in the fourth quarter to return ourselves to that and the combination of margin improvement and SG&A improvement really got us to the EBITDA performance. As we entered the second quarter, that same sort of slowdown that we experienced in the back half of March and maybe even a little deeper of a slowdown happened for the first 12 to 15 days of the month. And as those days went on, through the back half of April, we started to see modest gap closing. We weren’t obviously positive on a trend basis, but we started to see the gap of year-over-year start to close.

As we sit here today, I’m proud to tell you that last weekend, our Friday, Saturday and Sunday in May was the biggest weekend in our company’s history, period, end of story, in all aspects, every part of our business. And so we feel good about where those trends are going. However, we are very thoughtful about what EBITDA we missed out in the back half of March and the front part of April, and we’re being very careful about the SG&A expenditures, our levels of staffing, and our levels of expenditures in all areas because our goal is to try to make up what we lost during that 30 to 40-day period. But we are feeling very positive about our trends as we sit here today.

Rick Nelson: Okay, got you.

And when you speak about these trends, are you referring to EBITDA or, say, same-store sales trends?

Marcus Lemonis: Well, I kind of see them hand-in-hand. Obviously, as the sales trends accelerate and our SG&A stays tighter than it’s been in many, many years, we believe that, that will translate to positive results. Keep in mind, we’re digging out of a very rough first 15 days of April. So we have a lot of ground to make up. That same $140 million that I believe we missed out on in the latter part of March is probably not too dissimilar to what we missed out on in the first 15 days of April.

Rick Nelson: Got you. And is it possible to put that on a same-store unit basis, what’s happening to sales?

Marcus Lemonis: Look, I think it’s – unfortunately, much like you guys are, we’re making decisions by the hour, and we’re doing analysis by the hour. What I can tell you is that the negative sales trends that existed in the first 15 days were pretty dramatic. They were in the 50% range, and we have been able to climb out of that day-by-day-by-day. But the challenge that we have in this moment is we don’t understand the macroeconomic trends that are happening outside of our control.

We know that our web leads are up, we know that our foot traffic is down, we know that our appointments are up and our conversions are up. And so we’re doing a better job of making more with less opportunities, particularly coming through the front door because in most cases, some of our showrooms who sell are closed, and our salespeople are working remotely through the technology that we have. I don’t think we’ll be able to provide any more clarity around same-store sales, unfortunately, till the end of the second quarter because it’s moving too fast.

Rick Nelson: Got you, okay. Fair enough.

Good Sam memberships and profits, I’m curious how that performed in the quarter and how it’s holding up since the outbreak?

Marcus Lemonis: The Good Sam business has always been our go-to annuity business with predictable cash flow, a very stable customer base that deals specifically with the installed community. It’s important to note that the analysis as it relates to our Good Sam memberships needs to be apples-to-apples. And so when you look at it on a global basis, we are going to have a decline in memberships because we closed the number of stores that we closed. But on a relatively apples-to-apples basis, we feel very good about the way our Good Sam Club is performing. We feel very strongly about the reorganization that we took – that took place in Q1 around our ventures business, putting Robyn Barnes and Mary Heneen in charge of those two segments underneath Tamara Ward.

And we feel very good about the stability and the predictability of that cash flow, we expect that to continue through the second quarter and beyond.

Rick Nelson: Great, thanks for the color, and good luck.

Marcus Lemonis: Thank you.

Operator: We can now pass to the next question from Brett Andress, KeyBanc Capital Markets. Please go ahead.

Brett Andress: Hey, good afternoon.

Marcus Lemonis: Hey, Brett.

Brett Andress: So Marcus, a lot of attention has been put on the staycation theme. The consumers will stay close to the home for the foreseeable future, which makes sense to me. But have you seen any empirical evidence of that? Or do you expect that to play out in your business here in the coming months?

Marcus Lemonis: I think because of our web dominance, and we see over on a daily basis from a visitor standpoint through our website, we’re seeing millions of traffic on a daily basis.

What we have seen our key indicator to tell us that we believe that staycation idea is real is we look at the percentage of transactions that we have – that have traded with them. So on a historical basis, we’re in the 30% to 35% range. In the last, call it, three weeks, four weeks, we’ve seen that number drop to closer to 20%. Please don’t be alarmed by that drop from 30% to 20% and, in fact, we would ask you to be the opposite of that, which is encouraged by the number of first-time buyers that we believe we’re getting a crack at, but we can’t be sure other people are getting a crack at. Our lead volume online is up substantially, on some days as much as 50%.

In terms of our web traffic, it’s up substantially as much as 30%. And we’re seeing that convert into a first-time buyer that we have never seen before, largely driven by, a, the way we’re advertising; b, our focus on lower-priced units, and you’ll see that in our average selling cost in the quarter, expect that to continue to drop through the second quarter, and that’s really driving towards the widest part of the funnel, which is at $169 a month and below payments to make up the bulk of our business. We have continued to decelerate our presence in expensive motorhomes, particularly on the diesel side, not only because the market has dictated it, but because our team decided to invest more down the funnel into lower-priced units. So we want people to pay attention to the average price of units, which has dropped, the percentage of trades that we’re seeing, and we’ll obviously report more detailed numbers as we get through the second quarter, but just the overall feel of our business, we’re seeing a lot of first-time buyers.

Brett Andress: Very helpful, thank you for that.

And then last question here, just the positive trends that you saw in late April and early May, can you maybe break that down any more in terms of was that both new and used same-store units? And then if you could do it a little further, I guess, what geographical or regional differences have you seen here in the last few weeks similarly across the board?

Marcus Lemonis: I’ll answer the second one first. The geographical disparities are really dictated not by demand because we’re seeing demand universally across the country, but in certain states like Michigan, Pennsylvania and New York, we have a difficult time executing with the same fluidness that we do in some of the other states. We’re operating remotely, we’re delivering home, we’re doing paperwork electronically, and we’ve almost – not to say we’ve perfected that model, but we’ve gotten materially better at capitalizing on the investments that we’ve made over the last two years. In terms of the same-store sales trends, they are both positive in recent weeks. But we are seeing a disproportionate amount skewed towards new travel trailers, which is what’s leading us to believe that, that $169 a month and under category is going to be the gateway for potential industry growth over the next two years to three years.

We feel like this is just the tip of the iceberg, where people are realizing that a cruise, a trip to a theme park, international travel, while those are both expensive, they also don’t provide the security, the safety and the isolation that we’re hearing that families of two, four, six and eight are looking for, and we’re making sure that our new assortment of inventory going forward is addressing the two, four, six and eight size families and making sure that we’re matching up for that. We’ve seen a bump really everywhere, but mostly in there.

Brett Andress: Yes, thank you.

Operator: We can now pass to the next question from Craig Kennison from Baird. Please go ahead.

Craig Kennison: Hey, good afternoon. So I think, Marcus, you touched on this a little bit, but could you add more detail into how you’ve adapted your buying process for this new environment?

Marcus Lemonis: Well, some of it is proprietary, and we’ve invested in technology that our competitors don’t have. And so I want to be very careful to hold on to the value of investment. But we are using technology to communicate with consumers differently and be able to show them things electronically and to do tours with them in a way that is a 360-degree experience. So the sales process starts very differently than it ever did before.

But the walk around process, the features and benefits process and our ability to discuss financial arrangements with them is happening on a different stage, as I would say. What’s even different than that, Craig, is our ability to actually transact. And so not only is the sales process being done differently, mostly through video and through texting, through other technology, but our finance process is also happening electronically and then lastly and most importantly, we know that there are significant regulations around transporting units across state lines and city to city and all the regulations that go along with that, we’ve spent years building a model that allows for home delivery, while being compliant with all the state and regulatory requirements that most dealers aren’t even familiar that they have to comply with. And so we put a lot of work into the last several years, and we believe that three-step process is what’s given us that advantage to sell 1,000 units on a Saturday.

Craig Kennison: That’s great.

And then obviously, trends have improved a lot in the last week or so. To what extent would you credit the staycation theme that you mentioned versus your own execution? In other words, are we seeing the industry come back, or is this mostly driven by Camping World execution?

Marcus Lemonis: I can’t comment on how other dealers are doing. We’re hopeful that the industry as a whole is performing nicely. We’re hoping that other dealers are experiencing the same things. We believe that right now, our job is to execute on the original plan that we started the year with.

And while we definitely had a huge bump in the road, and we know that, that was about $250 million to $300 million of revenue that got sucked out of our business, right now, we’re focused on how do we make up that ground on the bottom line, not just the top line but on the bottom line through tight SG&A control and solid execution. Most of the people on the phone know me well enough to know that we’re not going to leave any rock unturned in terms of capturing as much market share as we can, particularly since everybody called us dead for the last two years. And so we are a company that likes to be dead again. We like to come from behind. We believe right now, we need to stay focused on executing our plan, improving our margins, controlling our SG&A and making sure that we improve on the customers’ expectation of their experience.

While doing all that, we hope the industry at large is doing well as well. We just hope we’re doing better.

Craig Kennison: Thanks. And then finally, just what are you doing with respect to your orders to prepare for the next few months? Have you made any big changes to what you’re ordering?

Marcus Lemonis: What I will tell you is we have special relationships with key manufacturers. We are making sure that we have enough inventory to satisfy the demand and in certain categories, we are going to chase that demand to ensure that we are the leader in the marketplace.

Today, as we sit here, we believe we’re properly inventoried. We believe that our order system is giving us the right amount of inventory to come. Is there a possibility that if demand accelerates, that we could be marginally understocked? Yes, potentially. But we’re working day by day, week by week, month-by-month with the manufacturers to ensure that we are putting the orders in, not falling off units. And I do know that a number of dealers have had to fall off units in the last 60 days, and we’ve worked closely with those manufacturers to gobble that inventory up, and we will continue to do that.

Craig Kennison: Great, thank you.

Operator: [Operator Instructions] I will now pass to the next question from Tim Conder, Wells Fargo Securities. Please go ahead.

Tim Conder: Thank you, and good afternoon, gentlemen. A couple here.

Marcus, and I apologize if I missed this, your first-time buyer mix year-over-year, just if you could repeat or just give us if I missed it, I apologize again, that what it is for new and then used, the buyers coming in for each new and used who are the first-time buyer and maybe where that was a year ago?

Marcus Lemonis: So we’re not prepared to discuss the details of that as it relates to the second quarter until the second quarter completes. The only metric that we have available to us that we use as an internal guide to determine our auction buys, our consignment pushes, the way we trade for units is the number of transactions that are happening with trade in comparison to what historically happened with trades. So we’re about 10 to 12 points less in the number of transactions with trade than we historically have seen, which could only lead us to believe that when people come in with trade, we’re seeing some level of bump. Do we think it’s 5% or 10%? We don’t have the data yet to support it, but that trade analysis, Tim, is what we use to determine how we’re going to manage our used strategy, and we’ve had to crank up our used strategy and deploy in the last 30 days, about $50 million to go out and secure as much of the used marketplace as we can. As an example, we were able to buy about $30 million of inventory used from dealers/companies that we’re either closing or going out of business.

So we’re out in the marketplace grabbing it, but we don’t necessarily have specific data around the number we use at this moment.

Tim Conder: Okay. So just to make sure I understood that right. So you’re seeing a drop of 10 to 12 points of the deals that are occurring, a drop of 10% to 12% less are coming in with trade. So you would infer that, that, in turn, then a decent portion of that is a first-time buyer?

Marcus Lemonis: I would have to assume so unless that person solds it on a private party.

And we don’t ask that question when people are doing it. But when we look at the positive trends we’re also seeing in our retail business, the positive trends we’re seeing in our Good Sam business, we noticed that when there’s a first-time buyer, we do get a nice bump in retail. In fact, our retail business in the last two weeks has been positive comp as well. And our website business is up double-digit positive comp. And so when we see those types of trends, we have to believe that, that first-time buyer is experiencing all the goodies that Camping World has that they may not have had if they were a returning buyer.

Tim Conder: Okay, okay. And you touched on it just a little bit in your answer there. But if we looked at the new versus used gross margins, new was up 170, used was up 10 on a year-over-year basis. Is that a function of, I guess, maybe two things. One, last year on the new, you were clearing new – aged inventory, so to speak and so that was an easy comp.

But on the used side, just to what you said, it sounds like you’re having to be more aggressive given the tight used market that’s out there. Are those the two reasons? Or is there something else going on the growth in the new relative to the used gross margin year-over-year?

Marcus Lemonis: I think you hit on two things. One, our new margins were not what we wanted them to be a year ago, and we committed to our investors to get those up over the 2020 calendar year. So we needed to fulfill our commitments to do that. As part of that, we have changed the way we market today, and we’re getting the customer focus on a holistic experience with our company, and we’re going to be less fighting on price and more about service and experience and changing the way we’re going at the community because we understand that they need to get out on the road, they need a variety of products and services.

Second, we didn’t believe that our used margins were bad last year. And so even a modest increase in used, we’re pleased with. Remember that we have very, very tight constraints around our aging policy as it relates to used. And I know our team and myself included, have a zero tolerance policy for aged inventory. And so whatever the loss is going to be to turn it, so be it.

And so in the latter part of March, we still wanted to move used inventory at the same pace to not allow agings to blossom. We may have been slightly more aggressive in keeping those things moving to keep our cash turning, to keep our inventory fresh. And what we decided to do is stay focused on what our original plan was and not let the outside effects manipulate our discipline.

Tim Conder: Okay. And then lastly, staying on the new/used margins.

The spread there is, it looks like about 640 basis points used higher than new in Q1 and on an annualized basis, if you look back several years, that was maybe as wide as 1,000, maybe a little bit more than 1,000 basis points. How do you see that spread, I mean this year is a hard year to call anything, I get that. But how do you see that spread over the next couple of years? Should that narrow? Should that stay kind of what we saw in 2019 or go back to 1,000 plus? Just any thoughts on that over the next two to three years, so to say – so to speak.

Marcus Lemonis: In a very odd way, the gap that you’re seeing in the first quarter is probably the healthiest of gaps because it means we’re performing relatively well on the new side, and it means the market is so strong that the used inventory is at a premium. The wider that gap gets, it doesn’t always necessarily speak to the health of the industry, in fact, it could speak to the unhealthiness of the industry because the new margins get compressed because there’s an overstock and the industry isn’t healthy, which means that the price for used for us to procure them drops and our ability to make a little bit more money, a point here or point there is easier.

We like it where it is right now. And in fact, if you looked at the used marketplace, it is very competitive. We’re leaning heavily into our 5 million person active database that continues to grow to be able to tap into that. But we’ve also deployed a proprietary algorithm that only our company has that our stores use to put the appropriate value on used and it throws out any historical NADA Blue Book number that is fully based on 20 years of historical data that we’ve used along with marketplace scraping of data. So our used process is very different today.

And the reason you’ve seen an acceleration in the velocity of our business, along with the relatively maintaining of margins is the way we’re actually trading for units today, which is helping our new business and giving us the ability to procure more used than most dealers in America.

Tim Conder: Okay. Okay, thank you.

Operator: We can now go to our next question from Ryan Brinkman from JPMorgan. Please go ahead.

Ryan Brinkman: Hi, thanks for taking my questions. First, could we just get your thoughts on how the RV lifestyle might be impacted longer term by the pandemic now as we think about RV relative to other options of travel, recreations and vacations, et cetera, in light of social distancing and infection risk? So do you think that makes RV lifestyle income to be more attractive even after the immediacy of the public health crisis has passed?

Marcus Lemonis: I think there’s a couple of things. I think number one, we already started to see an influx of new buyers and younger buyers into the RV lifestyle in the last 24 months. And I complement manufacturers like THOR and Forest River for being really proactive in designing units that have smaller sizes and smaller weights that allowed a person with a Prius to be able to enjoy the lifestyle. So that – I’ll start with that.

Two, if I could pick any business in the world to be in right now, as I sit here, the RV business is the one that I want to be in because I can’t think of both financially and from a risk profile, what other industry provides the affordability, $169, $139, $129 a month, while allowing for social distancing to be at its maximum. And so I don’t need to go to an airport, I don’t need to go to a hotel, I don’t need to go into a foreign country, I don’t need to go on to a cruise ship. And I’m separating the economic battle that we believe the RV industry will win, time in and time again. But separate from that, with the pandemic, we know how important moms in our households are wanting to protect kids and parents and grandparents and RV provides the isolation, while allowing for people to be outdoors and be with their families. And if they’re going to enjoy a community of people in a campground, campgrounds today, if you’ve ever been to them, they’re already laid out with way more than six feet of distancing inside of them.

The distance between one camp site and another is at least six feet because of the slides. And so this lifestyle provides seeing the country, seeing it affordably, doing it in isolation, doing it on your own dime, doing it on your own time. There is no other leisure industries in America, none, zero, not boating, not anything else that provides the same freedom that the RV industry provides and the affordability.

Ryan Brinkman: Great, thanks. That was very helpful.

And it sounds quite positive. Clearly, the economic battle, as you say, based by itself is a big headwind for industry unit sales. Beyond the broad macroeconomic activity, though, I think there were some other drivers that were contemplated having potentially contributed to the soft industry sales in the recent years when the economy was strong, like higher price for manufacturers because of metal tariffs, higher interest rates for 2022 – in 2018 that seemed to have leveled off. Now although you got metal prices down hard, you got interest rates down hard, much lower gas and diesel costs, it’s hard to add all this stuff, I know. But if you had the headwind from unemployment and lower wages and stuff with some of these other tailwinds and then possibly incrementally more attractive RV lifestyle you just talked about, what do you think that all implies for industry RV this year and next?

Marcus Lemonis: I can’t speak to the overall industry, but we are hopeful for two primary reasons.

We know the demand from the consumer for the reasons I said previously continues to be strong, but we also complement our manufacturing partners for being very prudent through this entire process and shutting down the manufacturing plants to not allow the inventory to swell overall. I’m here to tell you, and I don’t have any data to support it, that from my vantage point, the manufacturers are clearly in a good position to take orders, to manufacture product and to do it in a just-in-time basis as opposed to two years ago where the factory was sitting with yards and yards of inventory, and we were falling on the short as the margins were falling. We feel like we’re in an opposite effect right now, much complements go to the manufacturers, for being very thoughtful with what they were going to make and what they were going to order and how they were going to enter 2020. And to those dealers who were smart enough to take the gas in 2019, like we did, to be sitting here with fresh inventory, with rising margins and good manufacturer relationships, I think you’re going to see a clear separation between the have and the have-nots in the dealer community, but the overall RV industry will be plus-plus overall.

Ryan Brinkman: Very helpful.

Thank you.

Operator: We can now pass to the next question from Mark Jordan from Jefferies. Please go ahead.

Mark Jordan: Good afternoon. Thinking about the industry landscape, in general, are you seeing any other dealers maybe acting irrationally? Or are distressed dealers maybe discounting inventory in the current environment?

Marcus Lemonis: No, I haven’t – I don’t have any empirical data to support it.

My guess is there could be. I would imagine that any dealer that struggled in 2019, that isn’t sitting with a sufficient amount of cash and the ability to have a floor plan facility that’s healthy, could be in trouble because usually, you would make enough acorns in March and April to be able to get through the summer and then break for the winter again. Many dealers, unfortunately, from what we’re hearing, may be struggling because they suffered with margin compression, like we all did in 2019, didn’t have enough cash in the coffers going into 2020 and then maybe didn’t get the full weight of the March, April months that they normally bank on. We’re just blessed that we had a lot of cash, but we hope that everybody survives and they can get through this.

Mark Jordan: Okay, great.

And not to be too downbeat, but kind of looking at recent economic conditions, how do you feel the industry is positioned if we’ve seen sort of a prolonged recession, maybe where do you feel demand might go?

Marcus Lemonis: I’d bifurcate that into

three buckets: number one, the installed community has made it through wars, recessions, depressions, whatever it may be, and they don’t ever recede in terms of the file size of people that are in the lifestyle. It’s a way of living, not a hobby. So that’s number one. Number two, I would split it between the lower-priced units and the more expensive units. And I think if you are a dealer that carries a lot of motorhomes, gas on the higher end, diesel through the spectrum, it could be a little harder push than it will be if you’re driving your average cost down.

If you’re strong in your used game, functioning a lot like CarMax was from an algorithm standpoint, from a trading standpoint, from a presentation standpoint, from a standing behind the unit standpoint, and if you understand that the $199, $169 a month and lower bucket is less sensitive to, can I afford this, then I think you’ll be okay. If you’re outside of those chalk lines, I guess I wish you luck.

Mark Jordan: Okay, great. And just one last one, if I could clarify some of the previous comments. Is it correct to say that same-store sales were maybe negative through mid-April and have since turned positive?

Marcus Lemonis: For the first quarter, our total unit sales on a same-store basis were down, I think, around 7%.

Let me just look at my sheet real quick. In the first quarter, it was closer – excuse me, between 5% and 6%, I don’t have that number exactly handy, but that was driven specifically down because of what happened in the last two weeks of March. We would have been positive on a same-store basis had that not happened. And then obviously, on a same-store basis, through the first couple of weeks of April, we were significantly negative. While we’re optimistic as heck, we’re going to try like heck, we’re hoping to get back to close to flat, maybe even a little bit up or down, just try to get that as close to flat for the second quarter.

That is our internal plan. We’re probably maybe too optimistic, but we’re going to try like heck to get there.

Mark Jordan: Okay, thank you very much for taking my question. Thank you.

Operator: [Operator Instructions] We can now take our next question from Tristan Thomas, BMO Capital Markets.

Please go ahead.

Tristan Thomas: Hey, good afternoon. I was just wondering, the $350 million to $300 million of sales, which you think you lost at the end of March, beginning of April, what percentage do you think you’ve recaptured already? And then what do you expect to recapture?

Marcus Lemonis: I apologize. I missed the second half. I heard the $300 million of loss, but I missed the last part.

I apologize.

Tristan Thomas: Yes. I was just wondering how much you have recaptured already? And then how much you’re expecting to recapture kind of moving forward?

Marcus Lemonis: My hopeful nature thinks I’m going to recapture some of it, but in being a realist, it could just be business that’s gone. And right now, we’re sort of looking forward saying can we get to the positive type numbers that we planned on for the back half of the year. You can hear the enthusiasm in my voice, and I’m definitely optimistic about what the last couple of weeks have looked like.

But I’m also prudent enough to know that much like the virus came and smack us in the side of the head, we don’t understand what those macro trends could be. We don’t know what a potential resurgence in the virus could cause. We just don’t have enough information. I think as we get to – through the second quarter and we’re on our second quarter earnings call, we should be able to give you a little bit more clarity through the back half of the year. But as we sit here right now, we just don’t have the ability to do that because we got beat up pretty bad in the first two weeks of April.

Tristan Thomas: I appreciate that. Makes sense. And then one more question. Just regarding campground. Do you know what percentage you’re open? And then how that’s been trending recently?

Marcus Lemonis: Campgrounds around the country are open, county by county, state by state, and we’ve worked hard for our members to create some sort of matrix that will give them information.

As you know, much like we’re all learning, this information is changing by the minute. And so we’re updating as often as we can, we know that national parks are starting to open up again, we know that certain campgrounds are opening up, but we are, particularly even our good sand parks, which there’s thousands of, we know that they’re working hard to put the social distancing measures in place to make sure that their guests are safe and secure. We’re hearing that they’re opening them up but they’re doing it prudently, and they’re doing it responsibly. I think it will be a good solid couple of weeks to a month before we see that the majority of campgrounds have opened. And even when they do, there will be limits to capacity based on social distancing measures that we would want them to have, the consumers going to want to have and the states or the local counties are going to enforce.

So when do I think we’ll be back to full capacity with campgrounds, I don’t know.

Tristan Thomas: Okay, got it. Then one last quick question. Regarding sales to really like local government organizations or other kind of synergies of that in the quarter?

Marcus Lemonis: We had a reasonable amount, nothing that would make our quarter go up or down anything materially.

Tristan Thomas: Okay, thank you.

Operator: We can now move to the next question from Jim Chartier, Monness, Crespi and Hardt. Please go ahead.

Jim Chartier: Thanks for taking my questions. Marcus, in the past, I think you’ve talked about an 8% EBITDA margin as a target. Where – I guess where is the big opportunity to get back to that? Is it sustaining the current gross margin on the vehicles? Do you need a significant increase in sales to get there? What are the drivers to get back to that?

Marcus Lemonis: Well, look, I think we demonstrated in the first quarter that even with suppressed revenue, we were able to improve our EBITDA margin pretty considerably.

And the first quarter is always one of our tough, first and our fourth aren’t our best quarters. We’re going to get a pretty good picture in the second quarter of our opportunity to continue to look for ways to get back to the EBITDA margin that we believe the investors deserve and expect for us, we being one of those investors. And at the end of the day, it is hard at this moment, and I know you can appreciate it, with the sort of whiplash in revenue and all these other things that are moving, it’s going to take us a minute. Here’s what I will tell you. We believe we have an outside shot of being profitable in the month of April.

That’s with being almost virtually shut down for the first two weeks of April. We believe that, that possibility is only a possibility because of what we’ve done to our cost structure to make it more variable than ever and to return to the thesis that we had when we went public and had the 7% EBITDA margins on an annual basis. Do we think we can get back there in 2020? I think it’s going to be tough. I think it’s going to be tough to get back to where we want to get to, not because of anything that we’re doing inappropriately or any swappings on our part, granted, there’s always room for improvement because those just general macro trends are just outside of our control. If the marketplace returns to a level of demand that we would have hoped it would have been at for 2020, then there’s a possibility that we get back to those EBITDA margins.

However, the one thing that I am confident about is when the marketplace returns, to a level of consistency, 400,000 plus units delivered for the calendar year out of the industry, we believe that we have adjusted our cost structure, adjusted our pay plan, adjusted our fixed costs, eliminated those poor performing locations, and we closed them in the first quarter, that all those moves that we’ve made, coupled with a normalized retail environment, should yield us a return to the range of EBITDA margin that I expect as the largest shareholder and investors expect as shareholders themselves.

Jim Chartier: Great. And then if I could ask another. F&I has just kind of flattened out over the last couple of quarters. Is that peak penetration? Or are there any factors you think that can drive that higher? And is the F&I rate better on first-time buyers with no trade than your historical buyer? Thanks.

Marcus Lemonis: I’ll regurgitate what I have for the last couple of years. We look at the transaction with the consumer as a holistic transaction. And we look at the profitability of that transaction in the sum total, not the parts and pieces, and so when we look at the advance rates from our banks and the marketplace of competitiveness, we know that there’s only one way to make money, and that’s in the single transaction. We worked hard in the first quarter and the back half of last year to improve our front-end margins, and we’ve worked with our manufacturing partners to do things to improve it. We’ve worked with our inventory team to avoid and eliminate aging, which obviously helps that.

We’ve gotten out of segments that we believe were not giving us the type of annualized turns. All of those things combined create a single transaction. If your F&I number grows much from here, it may come at the cost of the front end margins. If the front end margin grows materially from here, it could potentially impact the F&I margin. It could.

The way that we counterbalance that is we have a strong focus on used, which we’re doing. We continue to drive down the average cost of units, which we’re doing. We continue to exit those segments that we believe have terrible turns and terrible margins, which we have done, and we continue to train our staff with the tools and the technology they need to get better. Because in whatever number you look at, front end margin and low end and F&I margin, we look at our 150 stores plus, there are top performers, there are bottom performers. What we’re focused on right now is looking at the bottom 30% and either changing the management, retraining the management or changing the process or eliminating the market.

But we will not operate stores or operate with people that are performing at a subpar level.

Jim Chartier: Great. I appreciate the colore.

Operator: We can now move to the next question from John Lovallo from Bank of America. Please go ahead.

John Lovallo: Hey, guys. Thank you for giving me in here. Maybe just starting, if we think about the pickup in demand over the past few weeks, which is clearly encouraging, I mean how much of these markets would you think is sort of pent-up demand from the stay-at-home orders over the past month? And then as we move forward, I think tomorrow in the payroll numbers, we’ll probably see that unemployment is at 15% or greater and the economy is arguably heading into the teeth of a recession, how do you think that, that kind of plays into discretionary purchases, such as an RV?

Marcus Lemonis: Well, discretionary purchases are definitely part of the psyche of the consumer. But I don’t really see us as discretionary as most people do, particularly when it’s $139 a month. So that’s number one.

Number two, what I think is also working in our favor is people’s pent-up demand to get outside, not pent-up demand to spend money. And so when you look at the alternatives available, while we’re devastated by the amount of unemployment, we’re hopeful that as businesses start to open up again when states allow them to, many of those employees hopefully will be going back to work. So we don’t want to play financial predictor on the global markets. What we want to focus on is what do we need to do to capture business away from other leisure industries, number one. What do we need to do to capture the consumer’s attention and either educate them or remind them about the affordability of our lifestyle; and number three, and maybe most importantly, after doing one and two, how do we win against our competition.

And at the end of the day, those are the things we’re worried about because when we sit here in May and have the biggest weekend in the company’s history, while unfortunately, 40 million people are unemployed, and shelter-in-place orders exist, and I think still more than half the states, we were scratching our heads because people are home and they’re not working. And they’re buying RVs. And so we think that our educational message digitally and our educational message through social media that we’ve been very active on and our ability to have the right inventory at the right place at the right time, along with the technology to communicate to consumers unlevels the playing field. Does that mean that we can withstand a deeper recession? Sure. We’ll go down.

The question is, will we go down less than other leisure industries that are riskier, that are more expensive and that our moms and grandmas and daughters and sisters aren’t going to want to put the kids and expose them to them. I don’t know if we’re stealing business from Walt Disney or from any cruise line or from Europe, I have no idea. All we’re doing is focusing on our numbers, and we feel like our numbers have great possibilities in light of the environment that we’re in.

John Lovallo: Okay, that’s helpful. And then if we think about RV versus traditional vacations or getting on an airplane, going somewhere, most people who go on a traditional vacation, don’t buy a vacation home.

So to the extent that more folks are embracing the RV lifestyle in lieu of these traditional vacations, I mean how do you think that RV rentals kind of factor into the equation, similar like renting a vacation home?

Marcus Lemonis: Historically, RV rentals have been fueled by foreign visitors, largely fueled by foreign visitors and modestly supported by the tailgater who wants to go to the football game. That’s not where the RV rental business has been. And the reason we know that is we were in it years ago, and we exited it because of the poor return on capital. As we think about the possibilities of it, it wouldn’t surprise me if we – it wouldn’t surprise me if we stayed away from the rental business, but we looked at alternative technology platforms that allow us to enter that space in a different way. Good Sam is the most trusted brand in America, along with Camping World when it comes to the average consumer thinking about RV.

And if you’re going to enter the RV lifestyle, you’re going to come to Camping World. If you’re going to want to educate yourself about the RV lifestyle or get information or look for advocacy, you may look to Good Sam. It wouldn’t surprise me in the next 12 months, if we as a company unveil technology and a platform that make it easier for nontraditional RVers to enter the lifestyle in a different kind of way. And so we don’t want to enter the capital requirements that a rental company provides, but we do have over 20 million people in our database that love the RV lifestyle, 2 million Good Sam members and 5 million active customers that do own inventory today that they may want to think about doing something different with, and we want to be the leader in that space.

John Lovallo: Got it.

And one final one, if I may. You’ve run a number of scenarios for your business based on different economic outcomes that I think you mentioned. Do you have a base case assumption for new industry retail units this year?

Marcus Lemonis: We don’t because we don’t have enough visibility into the rest of the marketplace or the manufacturers. We’re really only focused on our business.

John Lovallo: Okay.

Thank you, guys.

Operator: There are no further questions at this time. I would like to hand the call over, please, to Mr. Lemonis for concluding remarks.

Marcus Lemonis: Great.

Thank you very much for continuing to support our company. As the largest shareholder, we are clearly aligned in our goals, which is preserving cash, building earnings, continuing to improve the customer experience, and most importantly, taking care of our associates. We believe the second quarter is off to a relatively odd start. We’ve never seen anything like this. We expect to perform through the balance of the quarter and report favorable results as we continue through the year.

So thank you for your support.

Operator: This concludes today’s call. Thank you for your participation. You may now disconnect.