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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
or
| | | | | |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________
Commission File Number: 001-38424
Lazydays Holdings, Inc.
(Exact Name of Registrant as Specified in its Charter)
| | | | | | | | |
Delaware | | 82-4183498 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
| | | | | | | | |
4042 Park Oaks Blvd, Tampa, Florida | | 33610 |
(Address of Principal Executive Offices) | | (Zip Code) |
813-246-4999
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common stock | | GORV | | Nasdaq Capital Market |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large accelerated filer | ¨ | | Accelerated filer | x |
Non-accelerated filer | ¨ | | Smaller reporting company | x |
| | | Emerging growth company | o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
There were 14,166,046 shares of common stock, par value $0.0001, issued and outstanding as of August 14, 2024.
Lazydays Holdings, Inc.
Form 10-Q for the Quarter Ended June 30, 2024
Table of Contents
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands except for share and per share data)
| | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
ASSETS | | | |
Current assets: | | | |
Cash | $ | 42,022 | | | $ | 58,085 | |
Receivables, net of allowance for doubtful accounts of $479 and $479 | 28,806 | | | 22,694 | |
Inventories | 314,382 | | | 456,087 | |
Income tax receivable | 6,675 | | | 7,416 | |
Prepaid expenses and other | 4,907 | | | 2,614 | |
Total current assets | 396,792 | | | 546,896 | |
Property and equipment, net of accumulated depreciation of $51,624 and $46,098 | 272,297 | | | 265,726 | |
Operating lease right-of-use assets | 23,629 | | | 26,377 | |
| | | |
Intangible assets, net | 76,477 | | | 80,546 | |
Other assets | 3,173 | | | 2,750 | |
Deferred income tax asset | — | | | 15,444 | |
Total assets | $ | 772,368 | | | $ | 937,739 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 17,064 | | | $ | 15,144 | |
Accrued expenses and other current liabilities | 35,568 | | | 29,160 | |
| | | |
| | | |
Floor plan notes payable, net of debt discount | 330,967 | | | 446,783 | |
Financing liability, current portion | 2,588 | | | 2,473 | |
Revolving line of credit, current portion | 44,500 | | | — | |
Long-term debt, current portion, net of debt discount | 28,489 | | | 741 | |
Related party debt, current portion, net of debt discount | 42,749 | | | 400 | |
Operating lease liability, current portion | 4,625 | | | 5,276 | |
Total current liabilities | 506,550 | | | 499,977 | |
Long-term liabilities: | | | |
Financing liability, non-current portion, net of debt discount | 91,509 | | | 91,401 | |
Revolving line of credit, non-current portion | — | | | 49,500 | |
| | | |
Long term debt, non-current portion, net of debt discount | — | | | 28,075 | |
Related party debt, non-current portion, net of debt discount | — | | | 33,354 | |
Operating lease liability, non-current portion | 19,928 | | | 22,242 | |
Deferred income tax liability | 931 | | | — | |
Warrant liabilities | 5,244 | | | — | |
Total liabilities | 624,162 | | | 724,549 | |
Commitments and contingencies - see Note 10 | | | |
Series A Convertible Preferred Stock; 600,000 shares, designated, issued, and outstanding; liquidation preference of $60,000 | 60,208 | | | 56,193 | |
Stockholders’ Equity | | | |
Preferred stock, $0.0001 par value; 5,000,000 shares authorized | — | | | — | |
Common stock, $0.0001 par value; 100,000,000 shares authorized; 17,578,268 and 17,477,019 shares issued and 14,166,046 and 14,064,797 shares outstanding | — | | | — | |
Additional paid-in capital | 165,174 | | | 165,988 | |
Treasury stock, at cost, 3,412,222 and 3,412,222 shares | (57,128) | | | (57,128) | |
Retained earnings | (20,048) | | | 48,137 | |
Total stockholders’ equity | 87,998 | | | 156,997 | |
Total liabilities and stockholders’ equity | $ | 772,368 | | | $ | 937,739 | |
See the accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(In thousands except for share and per share data)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Revenues | | | | | | | |
New vehicle retail | $ | 143,333 | | | $ | 182,752 | | | $ | 296,024 | | | $ | 359,499 | |
Pre-owned vehicle retail | 60,908 | | | 90,991 | | | 140,484 | | | 175,766 | |
Vehicle wholesale | 3,268 | | | 1,716 | | | 9,517 | | | 3,424 | |
Finance and insurance | 16,041 | | | 17,742 | | | 34,370 | | | 34,623 | |
Service, body and parts and other | 15,144 | | | 15,179 | | | 28,885 | | | 30,724 | |
Total revenues | 238,694 | | | 308,380 | | | 509,280 | | | 604,036 | |
Cost applicable to revenues | | | | | | | |
New vehicle retail | 130,138 | | | 158,144 | | | 277,193 | | | 311,475 | |
Pre-owned vehicle retail | 49,446 | | | 72,425 | | | 119,645 | | | 139,953 | |
Vehicle wholesale | 3,597 | | | 1,685 | | | 12,057 | | | 3,406 | |
Finance and insurance | 644 | | | 810 | | | 1,337 | | | 1,503 | |
Service, body and parts and other | 7,150 | | | 7,517 | | | 13,437 | | | 14,698 | |
LIFO | 315 | | | 76 | | | 441 | | | 1,387 | |
Total cost applicable to revenues | 191,290 | | | 240,657 | | | 424,110 | | | 472,422 | |
Gross profit | 47,404 | | | 67,723 | | | 85,170 | | | 131,614 | |
Depreciation and amortization | 4,956 | | | 4,459 | | | 10,417 | | | 8,862 | |
Selling, general, and administrative expenses | 50,966 | | | 50,480 | | | 99,852 | | | 104,012 | |
(Loss) income from operations | (8,518) | | | 12,784 | | | (25,099) | | | 18,740 | |
Other income (expense): | | | | | | | |
Floor plan interest expense | (5,708) | | | (5,835) | | | (13,384) | | | (11,366) | |
Other interest expense | (5,837) | | | (2,083) | | | (10,360) | | | (3,783) | |
Change in fair value of warrant liabilities | (337) | | | — | | | (337) | | | 856 | |
Total other expense, net | (11,882) | | | (7,918) | | | (24,081) | | | (14,293) | |
(Loss) income before income taxes | (20,400) | | | 4,866 | | | (49,180) | | | 4,447 | |
Income tax expense | (23,821) | | | (1,306) | | | (17,021) | | | (1,163) | |
Net (loss) income | (44,221) | | | 3,560 | | | (66,201) | | | 3,284 | |
Dividends on Series A Convertible Preferred Stock | (2,031) | | | (1,196) | | | (4,015) | | | (2,380) | |
Net (loss) income and comprehensive (loss) income attributable to common stock and participating securities | $ | (46,252) | | | $ | 2,364 | | | $ | (70,216) | | | $ | 904 | |
| | | | | | | |
(Loss) income per share: | | | | | | | |
Basic | $ | (3.22) | | | $ | 0.12 | | | $ | (4.89) | | | $ | 0.05 | |
Diluted | $ | (3.22) | | | $ | 0.12 | | | $ | (4.89) | | | $ | — | |
Weighted average shares used for EPS calculations: | | | | | | | |
Basic | 14,374,897 | | 14,181,659 | | 14,371,787 | | 13,066,607 |
Diluted | 14,374,897 | | 14,292,064 | | 14,371,787 | | 13,188,135 |
See the accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Treasury Stock | | Additional Paid-in Capital | | Retained Earnings | | Total Stockholders’ Equity |
| Shares | | Amount | | Shares | | Amount | | | |
Balance as of December 31, 2023 | 17,477 | | $ | — | | | 3,412 | | $ | (57,128) | | | $ | 165,988 | | | $ | 48,137 | | | $ | 156,997 | |
Stock-based compensation | — | | — | | | — | | — | | | 509 | | | — | | | 509 | |
Repurchase of treasury stock | — | | — | | | — | | — | | | — | | | — | | | — | |
Issuance of vested restricted stock units, net of shares withheld for taxes | 8 | | — | | | — | | — | | | — | | | — | | | — | |
Dividends on Series A preferred stock | — | | — | | | — | | — | | | — | | | (1,984) | | | (1,984) | |
Net loss | — | | — | | | — | | — | | | — | | | (21,980) | | | (21,980) | |
Balance as of March 31, 2024 | 17,485 | | — | | | 3,412 | | (57,128) | | | 166,497 | | | 24,173 | | | 133,542 | |
Stock-based compensation | — | | — | | | — | | — | | | 595 | | | — | | | 595 | |
Repurchase of treasury stock | — | | — | | | — | | — | | | — | | | — | | | — | |
Issuance of vested restricted stock units, net of shares withheld for taxes | 56 | | — | | | — | | — | | | — | | | — | | | — | |
Shares issued pursuant to the Employee Stock Purchase Plan | 37 | | — | | | — | | — | | | 113 | | | — | | | 113 | |
Dividends on Series A preferred stock | — | | — | | | — | | — | | | (2,031) | | | — | | | (2,031) | |
Net loss | — | | — | | | — | | — | | | — | | | (44,221) | | | (44,221) | |
Balance as of June 30, 2024 | 17,578 | | $ | — | | | 3,412 | | $ | (57,128) | | | $ | 165,174 | | | $ | (20,048) | | | $ | 87,998 | |
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See the accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(In thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | Treasury Stock | | Additional Paid-in Capital | | Retained Earnings | | Total Stockholders’ Equity |
| Shares | | Amount | | Shares | | Amount | | | |
Balance as of December 31, 2022 | 14,515 | | $ | — | | | 3,403 | | $ | (57,019) | | | $ | 130,828 | | | $ | 163,203 | | | $ | 237,012 | |
Stock-based compensation | — | | — | | | — | | — | | | 797 | | | — | | | 797 | |
Repurchase of treasury stock | — | | — | | | 9 | | (109) | | | — | | | — | | | (109) | |
Exercise of warrants and options | 2,740 | | — | | | — | | — | | | 31,238 | | | — | | | 31,238 | |
Disgorgement of short-swing profits | — | | — | | | — | | — | | | 622 | | | — | | | 622 | |
Dividends on Series A preferred stock | — | | — | | | — | | — | | | — | | | (1,184) | | | (1,184) | |
Net loss | — | | — | | | — | | — | | | — | | | (276) | | | (276) | |
Balance as of March 31, 2023 | 17,255 | | | $ | — | | | 3,412 | | $ | (57,128) | | | $ | 163,485 | | | $ | 161,743 | | | $ | 268,100 | |
Stock-based compensation | — | | — | | | — | | — | | | 842 | | | — | | | 842 | |
Repurchase of treasury stock | — | | — | | | — | | — | | | — | | | — | | | — | |
Conversion of warrant, options and restricted stock units | 46 | | — | | | — | | — | | | — | | | — | | | — | |
Shares issued pursuant to the Employee Stock Purchase Plan | 27 | | — | | | — | | — | | | 265 | | | — | | | 265 | |
Dividends on Series A preferred stock | — | | — | | | — | | — | | | — | | | (1,197) | | | (1,197) | |
Net income | — | | — | | | — | | — | | | — | | | 3,560 | | | 3,560 | |
Balance as of June 30, 2023 | 17,328 | | $ | — | | | 3,412 | | $ | (57,128) | | | $ | 164,592 | | | $ | 164,106 | | | $ | 271,570 | |
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See the accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 |
Operating Activities | | | |
Net (loss) income | $ | (66,201) | | | $ | 3,284 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | |
Stock-based compensation | 1,104 | | | 1,639 | |
Bad debt expense | 76 | | | 9 | |
Depreciation and amortization of property and equipment | 6,346 | | | 5,195 | |
Amortization of intangible assets | 4,070 | | | 3,667 | |
Amortization of debt discount | 506 | | | 655 | |
Non-cash operating lease (benefit) expense | (217) | | | 93 | |
Gain on sale of property and equipment | (2,950) | | | — | |
| | | |
Deferred income taxes | 16,375 | | | (147) | |
Change in fair value of warrant liabilities | 337 | | | (856) | |
Impairment charges | — | | | 538 | |
Changes in operating assets and liabilities: | | | |
Receivables | (6,188) | | | (3,424) | |
Inventories | 141,705 | | | (4,346) | |
Prepaid expenses and other | (2,293) | | | (2,712) | |
Income tax receivable/payable | 744 | | | 1,239 | |
Other assets | (424) | | | (390) | |
Accounts payable | 1,920 | | | 3,744 | |
Accrued expenses and other current liabilities | 6,405 | | | 2,517 | |
Total adjustments | 167,516 | | | 7,421 | |
Net cash provided by operating activities | 101,315 | | | 10,705 | |
Investing Activities | | | |
Cash paid for acquisitions, net of cash received | — | | | (19,730) | |
Proceeds from sales of property and equipment | 2,950 | | | — | |
Purchases of property and equipment | (12,917) | | | (46,312) | |
Net cash used in investing activities | (9,967) | | | (66,042) | |
Financing Activities | | | |
Net repayments under M&T bank floor plan | (114,824) | | | (44,293) | |
Principal (payments) borrowings on revolving line of credit | (5,000) | | | 45,000 | |
| | | |
Principal payments on long-term debt | (111) | | | (13,286) | |
Proceeds from issuance of long-term debt and finance liabilities | 15,223 | | | 1,384 | |
Loan issuance costs | (2,812) | | | (821) | |
Payment of dividends on Series A preferred stock | — | | | (2,393) | |
Repurchase of Treasury Stock | — | | | (109) | |
Proceeds from shares issued pursuant to the Employee Stock Purchase Plan | 113 | | | 265 | |
Proceeds from exercise of warrants | — | | | 30,543 | |
Proceeds from exercise of stock options | — | | | 911 | |
Disgorgement of short-swing profits | — | | | 622 | |
| | | |
Net cash (used in) provided by financing activities | (107,411) | | | 17,823 | |
Net decrease in cash | (16,063) | | | (37,514) | |
Cash, beginning of period | 58,085 | | | 61,687 | |
Cash, end of period | $ | 42,022 | | | $ | 24,173 | |
See the accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED (UNAUDITED)
(In thousands)
| | | | | | | | | | | |
| Six Months Ended June 30, |
| 2024 | | 2023 |
Supplemental disclosures of cash flow information: | | | |
Cash paid during the period for interest | $ | 17,700 | | | $ | 2,672 | |
Cash paid during the period for income taxes net of refunds received | — | | | 4 | |
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Cash paid for amounts included in the measurement of lease liability: | | | |
Operating cash outflows from operating leases | $ | 3,635 | | | $ | 3,194 | |
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Non-cash investing and financing activities: | | | |
Dividends accrued on Series A Preferred Stock | $ | 4,015 | | | $ | 2,381 | |
Warrants issued to Coliseum Capital Partners, L.P. and Blackwell Partners, LLC | 4,907 | | | — | |
Decrease in PIPE warrant liability due to expiration of warrants | — | | | 50 | |
See the accompanying notes to the Unaudited Condensed Consolidated Financial Statements.
LAZYDAYS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS
Lazydays RV Center, Inc., the operating subsidiary of Lazydays Holdings, Inc. ("Lazydays," "we," "us," "our," or the "Company") is a recreational vehicle ("RV") company engaged in managing and operating RV dealerships across the United States. Our operations primarily consist of selling and servicing new and pre-owned RVs, arranging financing and extended service contracts for vehicle sales through third-party financing sources and extended warranty providers, and selling related parts and accessories.
As of June 30, 2024, we had 25 dealerships in the following locations:
| | | | | |
Location | Number of Dealerships |
Arizona | 4 |
Colorado | 3 |
Florida | 3 |
Tennessee | 3 |
Minnesota | 2 |
Indiana | 1 |
Iowa | 1 |
Nevada | 1 |
Ohio | 1 |
Oklahoma | 1 |
Oregon | 1 |
Texas | 1 |
Utah | 1 |
Washington | 1 |
Wisconsin | 1 |
NOTE 2 – BASIS OF PRESENTATION AND CRITICAL ACCOUNTING POLICIES
Basis of Presentation
These Condensed Consolidated Financial Statements contain unaudited information as of June 30, 2024, and for the six months ended June 30, 2024 and 2023. The unaudited interim financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain disclosures required by accounting principles generally accepted in the United States of America for annual financial statements are not included herein. In management’s opinion, these unaudited financial statements reflect all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the information when read in conjunction with our 2023 audited Consolidated Financial Statements and the related notes thereto. The financial information as of December 31, 2023 is derived from our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2024. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.
The Condensed Consolidated Financial Statements include the accounts of Lazydays Holdings, Inc. and Lazy Days RV Center, Inc. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.
Going Concern
Accounting Standards Codification (ASC) 205-40, Presentation of Financial Statements – Going Concern, requires management to evaluate an entity’s ability to continue as a going concern for the twelve-month period following the date on which the financial statements are available for issuance. As a part of this evaluation, management may consider the potential mitigating impact of its plans that have not been fully implemented as of the issuance date if (a) it is probable that management’s plans will be effectively implemented on a timely basis, and (b) it is probable that the plans, when implemented, will alleviate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period after the issuance date. Such an evaluation indicated certain
negative conditions and events, described further below, that raise substantial doubt about the Company's ability to continue as a going concern.
The Company has experienced a decline in its operating performance driven primarily by the continued recreational vehicle industry slowdown and consumer uncertainty. As a result, as of June 30, 2024, the Company was not in compliance with certain financial covenants under the Second Amended and Restated Credit Agreement dated as of February 21, 2023 (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “Credit Agreement”) by and among LDRV Holdings Corp., as Borrower Representative, Manufacturers and Traders Trust Company, as Administrative Agent, and the other loan parties and lenders party thereto, including a minimum consolidated EBITDA covenant, but the Company has received temporary waivers from 100% of the lenders participating in the Credit Agreement (for the defaults at issue through August 30, 2024). Due to the reclassification of our long-term debt as a current liability, the Company was also not in compliance with the current ratio covenant. The Company is not certain as to when the industry will recover and anticipates that unit sales may continue to be well below long-term averages and therefore believes the potential exists that it may continue to not be in compliance with existing financial covenants under the Credit Agreement for the twelve-month period after the issuance date of the financial statements. If the Company is not in compliance with its covenants, absent a further waiver or amendment, it will be an event of default at the end of the waiver period that would give lenders the right, but not the obligation, to accelerate amounts outstanding. In that event, the Company may need to seek other sources of capital and there can be no assurances that the Company would be able to do so on acceptable terms.
As of June 30, 2024, and excluding the reclassification of long-term debt to current, the Company had $27.7 million of working capital, which included $42 million of cash on hand. In light of the recent industry challenges the Company has faced, it implemented cost reductions with estimated annual savings of $30 million; is actively negotiating an amendment to its Credit Agreement; and is seeking to raise additional capital.
While management intends for both its cost cutting efforts and plans to enter into a new amendment to the Credit Agreement with covenants that the Company can satisfy and/or obtaining additional capital to alleviate the conditions or events that raise substantial doubt about its ability to continue as a going concern, these elements are not entirely within the Company’s control. In addition, there is no guarantee that the cost reductions will continue to be achieved or have the full value of expected benefits, that such an amendment will be agreed or that additional capital will be available on terms acceptable to the Company or at all. As a result, there is substantial doubt regarding the Company's ability to continue as a going concern.
The accompanying unaudited financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and the satisfaction of liabilities in the normal course of business for one year following the issuance of these unaudited financial statements.
Critical Accounting Policies
Our critical accounting policies have not materially changed during the six months ended June 30, 2024 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.
Reclassifications
Certain amounts in prior periods have been reclassified to conform to the current period presentation. These reclassifications had no effect on the previously reported net income (loss).
NOTE 3 – NEW ACCOUNTING PRONOUNCEMENTS
Adopted Accounting Standards
ASU 2020-06
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update simplifies the accounting for convertible debt instruments and convertible preferred stock by reducing the number of accounting models and limiting the number of embedded conversion features separately recognized from the primary contract. The guidance also includes targeted improvements to the disclosures for convertible instruments and earnings per share. We adopted ASU 2020-06 effective January 1, 2024 and it did not have a material effect on our Condensed Consolidated Financial Statements.
Accounting Standards Not Yet Adopted
ASU 2023-09
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. This ASU requires enhanced jurisdictional and other disaggregated disclosures for the effective tax rate reconciliation and income taxes paid and is effective for fiscal years and interim periods beginning after December 15, 2024. The guidance is to be applied prospectively, although retrospective application is permitted. The impact of adoption of ASU 2023-09 is expected to impact disclosures only and not have a material impact on our Condensed Consolidated Financial Statements.
ASU 2023-07
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We are currently evaluating the effects of this ASU to our disclosures.
NOTE 4 – INVENTORIES
Vehicle and parts inventories are recorded at the lower of cost or net realizable value, with cost determined by the last-in, first-out (“LIFO”) method. Cost includes purchase costs, reconditioning costs, dealer-installed accessories and freight. For vehicles accepted as trade-ins, the cost is the fair value of such pre-owned vehicles at the time of the trade-in. Other inventory includes parts and accessories, as well as retail travel and leisure specialty merchandise, and is recorded at the lower of cost or net realizable value with cost determined by LIFO method.
The current replacement costs of LIFO inventories exceeded their recorded values by $25.0 million and $24.6 million as of June 30, 2024 and December 31, 2023, respectively.
Inventories consist of the following:
| | | | | | | | | | | |
(In thousands) | June 30, 2024 | | December 31, 2023 |
New recreational vehicles | $ | 289,702 | | | $ | 385,001 | |
Pre-owned recreational vehicles | 41,034 | | | 86,517 | |
Parts, accessories and other | 8,662 | | | 9,144 | |
| 339,398 | | | 480,662 | |
Less: excess of current cost over LIFO | (25,016) | | | (24,575) | |
Total | $ | 314,382 | | | $ | 456,087 | |
NOTE 5 – INTANGIBLE ASSETS
Intangible assets and related accumulated amortization were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
(In thousands) | Gross Carrying Amount | | Accumulated Amortization | | Net Asset Value | | Gross Carrying Amount | | Accumulated Amortization | | Net Asset Value |
Amortizable intangible assets: | | | | | | | | | | | |
Manufacturer relationships | $ | 71,849 | | | $ | 30,565 | | | $ | 41,284 | | | $ | 71,849 | | | $ | 26,968 | | | $ | 44,881 | |
Customer relationships | 10,395 | | | 5,342 | | | 5,053 | | | 10,395 | | | 4,893 | | | 5,502 | |
Non-compete agreements | 230 | | | 190 | | | 40 | | | 230 | | | 167 | | | 63 | |
| 82,474 | | | 36,097 | | | 46,377 | | | 82,474 | | | 32,028 | | | 50,446 | |
Non-amortizable intangible assets: | | | | | | | | | | | |
Trade names and trademarks | 30,100 | | | — | | | 30,100 | | | 30,100 | | | — | | | 30,100 | |
Total | $ | 112,574 | | | $ | 36,097 | | | $ | 76,477 | | | $ | 112,574 | | | $ | 32,028 | | | $ | 80,546 | |
Amortization expense related to intangible assets was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(In thousands) | 2024 | | 2023 | | 2024 | | 2023 |
Amortization expense | $ | 1,799 | | | $ | 1,834 | | | $ | 4,070 | | | $ | 3,667 | |
Future amortization of intangible assets is as follows:
| | | | | |
(In thousands) | |
Remainder of 2024 | $ | 4,069 | |
2025 | 7,499 | |
2026 | 6,821 | |
2027 | 6,510 | |
2028 | 6,434 | |
Thereafter | 15,044 | |
Total | $ | 46,377 | |
NOTE 6 – LEASES
Financing Leases
We have operations at several properties that were previously sold and then leased back from the purchasers over a non-cancellable period of 20 years. The leases contain renewal options at lease termination, with three options to renew for 10 additional years each and contain a right of first offer in the event the property owner intends to sell any portion or all of the property to a third party. These rights and obligations constitute continuing involvement, which resulted in failed sale-leaseback (financing) accounting. The financing liabilities have implied interest rates ranging from 5.0% to 7.9% and have original expiration dates between June 1, 2025 and September 1, 2042. At the conclusion of the 20-year lease period, the financing liability residual will correspond to the carrying value of the land.
There were no significant financing lease additions or terminations during the six months ended June 30, 2024.
Operating Leases
We lease property, equipment and billboards throughout the United States primarily under operating leases. The related right-of-use (“ROU”) assets for these operating leases are included in operating lease right-of-use assets. Leases with lease
terms of 12 months or less are expensed on a straight-line basis over the lease term and are not recorded in the Condensed Consolidated Balance Sheets.
Most leases include one or more options to renew, with renewal terms that can extend the lease term up to 50 years (some leases include multiple renewal periods). The exercise of lease renewal options is at our sole discretion. In addition, some of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements neither contain any residual value guarantees nor impose any significant restrictions or covenants.
There were no new significant operating lease additions or terminations during the six months ended June 30, 2024.
NOTE 7 – DEBT
M&T Financing Agreement
Our Senior Secured Credit Facility with M&T Bank provides a $480 million Floor Plan Line of Credit and a $50 million Revolving Credit Facility, both of which expire February 21, 2027.
On March 8, 2024, we entered into the First Amendment to the Second Amended and Restated Credit Agreement and Consent with M&T to waive and modify certain covenants. This included waiving the net leverage ratio from the fourth quarter of 2023 through the second quarter of 2024, the current ratio for the fourth quarter of 2023, and the fixed charge coverage ratio for the first and second quarters of 2024. Additionally, an additional tier was added to the definition of applicable margin of the M&T credit facilities, setting forth the applicable interest rates corresponding to a total net leverage ratio of 3.00 ≤ X. This new tier became applicable as of March 8, 2024.
On May 14, 2024, we entered into the Second Amendment to the Second Amended and Restated Credit Agreement and Consent (the "Second Amendment") with M&T to modify certain covenants through the first quarter of 2025, including those covenants that we were out of compliance with at March 31, 2024. As part of the Second Amendment, we agreed to pay down $10 million on our Revolving Credit Facility by December 31, 2024. The Second Amendment also modified certain covenants, including the net leverage ratio, the current ratio and the fixed charged ratio. Additionally, the definition of applicable margin was modified, to set forth the applicable interest rates from May 14, 2024 through June 30, 2025.
As of June 30, 2024, we were not in compliance with all of the M&T Bank financing agreement covenants as we did not meet our minimum EBITDA requirement or current ratio requirement. However, we entered into a Limited Waiver with Respect to Credit Agreement with the lenders under the M&T Credit Agreement which temporarily waived these covenants. See Note 2 - Basis of Presentation to our Condensed Consolidated Financial Statements for additional information.
At June 30, 2024, there was $331.0 million outstanding on the Floor Plan Line of Credit at an interest rate of 7.9% and $44.5 million outstanding on the Revolving Credit Facility at an interest rate of 8.8%.
Following the Second Amendment, the Floor Plan Line of Credit bears interest at: (a) 30-day SOFR plus an applicable margin of 1.90% to 2.55% based on the total net leverage ratio (as defined in the new M&T Facility) or (b) the Base Rate plus a margin of 0.90% to 1.55% based on the total net leverage ratio (as defined in the new M&T Facility). Base Rate means, for any day, the fluctuating rate per annum equal to the highest of: (a) the Prime Rate for such day, (b) the Federal Funds Rate in effect on such day plus 50 Basis Points, and (c) the one-month Adjusted Term SOFR Rate, determined on a daily basis, plus 100 Basis Points. The Floor Plan Line of Credit is also subject to an annual unused commitment fee at 0.15% of the average daily unused portion of the Floor Plan.
The Revolving Credit Facility bears interest at: (a) 30-day SOFR plus an applicable margin of 2.15% to 3.40% based on the total net leverage ratio (as defined in the new M&T Facility) or (b) the Base Rate plus a margin of 1.15% to 2.40% based on the total net leverage ratio (as defined in the new M&T Facility). Base Rate means, for any day, the fluctuating rate per annum equal to the highest of: (a) the Prime Rate for such day, (b) the Federal Funds Rate in effect on such day plus 50 Basis Points, and (c) the one-month Adjusted Term SOFR Rate, determined on a daily basis, plus 100 Basis Points.
The Revolving Credit Facility is also subject to a quarterly unused commitment fee at 0.15% of the average daily unused portion of the Revolving Credit Facility.
Borrowings under the M&T Financing Agreement are secured by a first priority lien on substantially all of our assets.
The Floor Plan Line of Credit consisted of the following:
| | | | | | | | | | | | | | |
(In thousands) | | June 30, 2024 | | December 31, 2023 |
Floor plan notes payable, gross | | $ | 331,733 | | | $ | 447,647 | |
Debt discount | | (766) | | | (864) | |
Floor plan notes payable, net of debt discount | | $ | 330,967 | | | $ | 446,783 | |
Other Long-Term Debt
Other outstanding long-term debt consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
(In thousands) | Gross Principal Amount | | Debt Discount | | Total Debt, Net of Debt Discount | | Gross Principal Amount | | Debt Discount | | Total Debt, Net of Debt Discount |
Term loan and mortgages | $ | 73,869 | | | $ | (2,631) | | | $ | 71,238 | | | $ | 64,870 | | | $ | (2,300) | | | $ | 62,570 | |
Less: current portion | 73,869 | | | (2,631) | | | 71,238 | | | 1,141 | | | — | | | 1,141 | |
Total | $ | — | | | $ | — | | | $ | — | | | $ | 63,729 | | | $ | (2,300) | | | $ | 61,429 | |
Mortgages
In July 2023, we entered into two mortgages for total proceeds of $29.3 million secured by certain real estate assets at our Murfreesboro and Knoxville locations. The loans bear interest between 6.85% and 7.10% per annum and mature in July 2033.
Term Loan
On December 29, 2023, we entered into a $50 million term loan (the "Loan") with Coliseum Holdings I, LLC as lender (the “Lender”). The Lender is an affiliate of Coliseum Capital Management, LLC ("Coliseum") and Christopher Shackelton. The Loan has a maturity date of December 29, 2026. Certain funds and accounts managed by Coliseum held 81% of Lazydays common stock (calculated as if the preferred stock has been converted into common stock) as of June 30, 2024 and is therefore considered a related party. The Loan bears interest at a rate of 12% per annum, payable monthly in cash on the outstanding loan balance. For any quarterly period during the Loan term, we have the option at the beginning of each quarter to make pay-in-kind elections, whereby the entire outstanding balance would be charged interest at 14% per annum and interest amounts will be added to the outstanding principal. The Loan is secured by certain of our assets. Issuance costs of $2 million were recorded as debt discount and are being amortized over the term of the Loan to interest expense using the effective interest method. The Loan is carried at the outstanding principal balance, less debt issuance costs and is included in Related party debt, current portion and Related party debt, non-current portion, net of debt discount in our Condensed Consolidated Balance Sheets.
On May 15, 2024, we entered into a First Amendment to the Loan (the "Amendment"). The Amendment provides for an additional $15 million mortgage loan (the "Advance"). As additional security for the Advance, we delivered to Coliseum an assignment of mortgage, leases and rents (and related security documents) for real property located in Fort Pierce, Florida.
In connection with the Advance, we issued warrants to clients of Coliseum Capital Management to purchase 2,000,000 shares of our common stock at a price of $5.25 per share, subject to certain adjustments. The warrants may be exercised at any time on or after May 15, 2024 and until May 15, 2034.
Under the terms of the Loan, for any repayments and prepayments that occur prior to January 1, 2025, we will owe a prepayment penalty of 1% on the outstanding principal balance being repaid and a make whole premium equal to the remaining interest owed on such balance repaid from date of repayment through January 1, 2025. For repayments and
prepayments that occur after January 1, 2025 through maturity, we will owe a prepayment penalty of 2% on the outstanding principal balance being repaid.
The Loan contains certain reporting and compliance-related covenants. The Loan contains negative covenants, among other things, related to borrowing and events of default. It also includes certain non-financial covenants and covenants limiting our ability to dispose of assets, undergo a change in control, merge with, acquire stock, or make investments in other companies, in each case subject to certain exceptions. Upon the occurrence of an event of default, in addition to the lender being able to declare amounts outstanding under the Loan due and payable or foreclose on the collateral, the lender can elect to increase the interest rate by 7% per annum during the period of default. In addition, the Loan contains a cross default with M&T Bank. As of June 30, 2024, we were not in compliance with all of the M&T Bank financing agreement covenants as we did not meet our minimum EBITDA requirement or current ratio requirement. However, we entered into a Limited Waiver with Respect to Credit Agreement with the lenders under the M&T Credit Agreement which temporarily waived these covenants.
Future maturities of long-term debt are as follows:
| | | | | |
(In thousands) | |
Remainder of 2024 | $ | 5,578 | |
2025 | 771 | |
2026 | 45,326 | |
2027 | 886 | |
2028 | 950 | |
Thereafter | 20,358 | |
Total | $ | 73,869 | |
The above schedule reflects contractual maturities, but for financial reporting, the Revolving Line of Credit, long-term debt, and related party debt have been classified as current as described in Note 2 and Note 7 to the Condensed Consolidated Financial Statements.
NOTE 8 – REVENUE AND CONCENTRATIONS
Revenue Recognition
Revenue from the sale of vehicle contracts is recognized at a point in time on delivery, transfer of title, and completion of financing arrangements.
Revenue from the sale of parts, accessories, and related service is recognized as services and parts are delivered or as a customer approves elements of the completion of service.
We receive commissions from the sale of insurance and vehicle service contracts to customers. In addition, we arrange financing for customers through various financial institutions and receive commissions. We may be charged back (“charge-backs”) for financing fees, insurance, or vehicle service contract commissions in the event of early termination of the contracts by our customers. The revenues from financing fees and commissions are recorded at the time of the sale of the vehicle and an allowance for future charge-backs is established based on historical operating results and the termination provision of the applicable contracts. The estimates for future chargebacks require judgment by management, and as a result, there is an element of risk associated with these revenue streams.
We have an accrual for charge-backs which totaled $9.3 million and $8.8 million at June 30, 2024 and December 31, 2023, respectively, and is included in Accrued expenses and other current liabilities in the accompanying Condensed Consolidated Balance Sheets.
Revenues by State
Revenues by state that generated 10% or more of total revenues were as follows (unaudited):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Florida | 32 | % | | 39 | % | | 36 | % | | 45 | % |
Tennessee | 14 | % | | 16 | % | | 14 | % | | 13 | % |
| | | | | | | |
Colorado | 10 | % | | * | | * | | * |
*Less than 10%
These geographic concentrations increase the exposure to adverse developments related to competition, as well as economic, demographic, and weather conditions.
Supplier Concentrations
Suppliers representing 10% or more of our total RV and replacement parts purchases were as follows:
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | |
| 2024 | | 2023 | | | | |
Thor Industries, Inc. | 41 | % | | 39 | % | | | | |
Winnebago Industries, Inc. | 31 | % | | 34 | % | | | | |
Forest River, Inc. | 21 | % | | 24 | % | | | | |
We are subject to dealer agreements with each manufacturer. The manufacturer is entitled to terminate the dealer agreement if we are in material breach of the agreement’s terms.
NOTE 9 – EARNINGS (LOSS) PER SHARE
We compute basic and diluted earnings (loss) per share (“EPS”) by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.
We are required in periods in which we have net income to calculate EPS using the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders but does not require the presentation of basic and diluted EPS for securities other than common stock. The two-class method is required because our Series A convertible preferred stock (“Series A Preferred Stock”) has the right to receive dividends or dividend equivalents should we declare dividends on our common stock as if such holder of the Preferred Stock had been converted to common stock. Under the two-class method, earnings for the period are allocated to the common and preferred stockholders taking into consideration Series A preferred stockholders participation in dividends on an as converted basis. The weighted-average number of common and preferred shares outstanding during the period is then used to calculate basic EPS for each class of shares.
Diluted EPS is computed in the same manner as basic EPS except that the denominator is increased to include the number of contingently issuable share-based compensation awards that would have been outstanding unless those additional shares would have been anti-dilutive. Dilutive common stock equivalents include the dilutive effect of in-the-money stock equivalents, excluding any common stock equivalents if their effect would be anti-dilutive. For the diluted EPS calculation, the if-converted method is applied and compared to the two-class method and whichever method results in a more dilutive impact is utilized to calculate diluted EPS. In periods in which we have a net loss, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation.
In periods in which we have a net loss, basic loss per share is calculated by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. The two-class method is not used because the Preferred Stock does not participate in losses. As such, the net loss was attributed entirely to common stockholders.
The following table summarizes net loss attributable to common stockholders and participating securities used in the calculation of basic and diluted loss per common share:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(In thousands except share and per share amounts) | 2024 | | 2023 | | 2024 | | 2023 |
Basic (loss) earnings per share: | | | | | | | |
Net (loss) income attributable to common stock and participating securities used to calculate basic (loss) earnings per share | $ | (46,252) | | | $ | 2,364 | | | $ | (70,216) | | | $ | 904 | |
Weighted average common shares outstanding | 14,074,540 | | 13,881,302 | | 14,071,430 | | | 12,766,250 |
Dilutive effect of pre-funded warrants | 300,357 | | 300,357 | | 300,357 | | | 300,357 |
Weighted average shares outstanding for EPS | 14,374,897 | | 14,181,659 | | 14,371,787 | | | 13,066,607 |
Basic (loss) earnings per share | $ | (3.22) | | | $ | 0.12 | | | $ | (4.89) | | | $ | 0.05 | |
| | | | | | | |
Diluted (loss) earnings per share: | | | | | | | |
Net (loss) income attributable to common stock and participating securities used to calculate diluted (loss) earnings per share | $ | (46,252) | | | $ | 2,364 | | | $ | (70,216) | | | $ | 904 | |
Weighted average common shares outstanding | 14,074,540 | | 13,881,302 | | 14,071,430 | | | 12,766,250 |
Weighted average pre-funded warrants | 300,357 | | 300,357 | | 300,357 | | | 300,357 |
| | | | | | | |
| | | | | | | |
Weighted average options | — | | | 110,405 | | | — | | | 121,528 | |
Weighted average shares outstanding for EPS | 14,374,897 | | 14,292,064 | | 14,371,787 | | | 13,188,135 |
Diluted (loss) earnings per share | $ | (3.22) | | | $ | 0.12 | | | $ | (4.89) | | | $ | — | |
The following common stock equivalent shares were excluded from the calculation of diluted loss per share since their impact would have been anti-dilutive for the periods presented:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
Shares underlying warrants | 2,000,000 | | | — | | | 2,000,000 | | | — | |
Stock options | 295,038 | | | 243,958 | | | 295,038 | | | 243,958 | |
Restricted stock units | 370,114 | | | 291,739 | | | 370,114 | | | 291,739 | |
Shares issuable under the Employee Stock Purchase Plan | 31,938 | | | 27,266 | | | 31,938 | | | 27,266 | |
Share equivalents excluded from EPS | 2,697,090 | | | 562,963 | | | 2,697,090 | | | 562,963 | |
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Lease Obligations
See Note 6 - Leases to our Condensed Consolidated Financial Statements for lease obligations.
Legal Proceedings
We are a party to multiple legal proceedings that arise in the ordinary course of business. We have certain insurance coverage and rights of indemnification. We do not believe that the ultimate resolution of these matters will have a material adverse effect on our business, results of operations, financial condition, or cash flows. However, the results of these matters cannot be predicted with certainty and an unfavorable resolution of one or more of these or other matters could have a material adverse effect on our business, results of operations, financial condition, or cash flows.
We record legal expenses as incurred in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
NOTE 11 – PREFERRED STOCK
Our Series A Preferred Stock is cumulative redeemable convertible preferred stock. Accordingly, it is classified as temporary equity and is shown net of issuance costs and the fair value of warrants issued in conjunction with the issuance of the Series A Preferred Stock.
On May 15, 2024, in connection with the issuance of warrants and pursuant to the Company’s Certificate of Designations of Series A Convertible Preferred Stock, because the Company issued and sold warrants at a price less than the prior $10.0625 conversion price of the Company’s Series A Convertible Preferred Stock (the “Preferred Stock”), the conversion price of the Preferred Stock was adjusted to $9.65 per share. After this adjustment to the conversion price of the Preferred Stock and taking into account accrued dividends on the Preferred Stock as of May 15, 2024, the currently outstanding 600,000 shares of the Preferred Stock would convert into a total of 6,651,198 shares of Common Stock (adjusted from 5,962,733 as of on the original issue date of the Preferred Stock and adjusted from 6,378,540 as of immediately prior to the issuance of such warrants after taking into account such accrued dividends).
We did not declare a dividend payment on the Series A Preferred Stock totaling $2.0 million for the quarter ended June 30, 2024. As a result, the amount was added to the carrying amount of the Series A Preferred Stock and the dividend rate is currently at 13% until such dividends are paid. Total undeclared and unpaid dividends were $5.2 million at June 30, 2024.
NOTE 12 – STOCK-BASED COMPENSATION
Stock-based compensation expense is included in Selling, general and administrative expense on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).
We recognized stock-based compensation expense as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
(In thousands) | 2024 | | 2023 | | 2024 | | 2023 |
Stock-based compensation | $ | 595 | | | $ | 842 | | | $ | 1,104 | | | $ | 1,639 | |
2018 Long-Term Incentive Equity Plan
Our 2018 Long-Term Incentive Equity Plan, as amended (the “2018 Plan”) provides for awards of options, stock appreciation rights, restricted stock, restricted stock units, warrants or other securities which may be convertible, exercisable or exchangeable for or into our common stock. As of June 30, 2024, there were 832,860 shares of common stock available to be issued under the 2018 Plan.
2019 Employee Stock Purchase Plan
We reserved a total of 900,000 shares of our common stock for purchase by participants in our 2019 Employee Stock Purchase Plan (the “ESPP”). Participants in the ESPP may purchase shares of our common stock at a purchase price which will not be less than the lesser of 85% of the fair value per share of our common stock on the first day of the purchase period or the last day of the purchase period. As of June 30, 2024, 570,999 shares remained available for future issuance.
ESPP activity for the six months ended June 30, 2024 was as follows:
| | | | | |
Shares purchased pursuant to the ESPP | 37,295 | |
Weighted average per share price of shares purchased | $ | 3.03 | |
Weighted average per share discount from market value for shares purchased | $ | 0.53 | |
Stock-based compensation related to ESPP | $ | 112,855 | |
Stock Options
Stock option activity was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Shares Underlying Options | | Weighted Average Per Share Exercise Price | | Weighted Average Remaining Contractual Life | | Aggregate Intrinsic Value (In Thousands) |
Options outstanding at December 31, 2023 | 376,940 | | | $ | 11.21 | | | 1.91 years | | $ | (1,566) | |
| | | | | | | |
Cancelled or terminated | (81,902) | | 8.83 | | | | | |
| | | | | | | |
Options outstanding at June 30, 2024 | 295,038 | | | 11.87 | | | 2.78 years | | (2,312) | |
Options outstanding and vested at June 30, 2024 | 253,626 | | | 11.78 | | | 1.15 years | | (2,997) | |
Restricted Stock Units
Restricted stock unit activity was as follows:
| | | | | | | | | | | |
| Number of Restricted Stock Units | | Weighted-Average Grant Date Fair Value |
Outstanding at December 31, 2023 | 238,275 | | | $ | 13.35 | |
Granted | 211,926 | | | 4.31 | |
Vested | (65,055) | | | 10.97 | |
Forfeited | (15,032) | | | 11.86 | |
Outstanding at June 30, 2024 | 370,114 | | | 8.67 | |
Warrants
In connection with the Advance on our Coliseum Loan as discussed in Note 7 - Debt, we issued warrants to clients of Coliseum Capital Management as follows: | | | | | | | | | | | |
| Shares Underlying Warrants | | Weighted Average Exercise Price |
Warrants outstanding December 31, 2023 | — | | | $ | — | |
Granted | 2,000,000 | | | $ | 5.25 | |
| | | |
| | | |
Warrants outstanding June 30, 2024 | 2,000,000 | | | $ | 5.25 | |
Prefunded Warrants
As of June 30, 2024, there were 300,357 perpetual non-redeemable prefunded warrants outstanding with an exercise price of $0.01 per share. There was no activity during the six months ended June 30, 2024.
Unrecognized Stock-Based Compensation
As of June 30, 2024, unrecognized stock-based compensation costs for unvested awards was approximately $49 thousand, which is expected to be recognized over a weighted average period of 1.7 years.
NOTE 13 – RELATED PARTY
We have a $50 million term loan outstanding with Coliseum, a related party, with a maturity date of December 29, 2026. See Note 7 - Debt to our Condensed Consolidated Financial Statements for additional information. NOTE 14 – SUBSEQUENT EVENTS
On July 30, 2024, the Company entered into a Limited Waiver with Respect to Credit Agreement with the lenders under the M&T Credit Agreement to temporarily waive the covenants we were not in compliance with as of June 30, 2024. See Note 2 - Basis of Presentation to our Condensed Consolidated Financial Statements for additional information.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following should be read together with our financial statements and related notes included in Part I, Item 1 of this Form 10-Q, as well as our 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2024.
Disclosure Regarding Forward Looking Statements
Certain statements in this Quarterly Report on Form 10-Q (including but not limited to this Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations”) constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, reflecting our or our management team's expectations, hopes, beliefs, intentions, strategies, estimates, and assumptions concerning events and financial trends that may affect our future financial condition or results of operations. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, are “forward-looking” statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate” or “continue” or the negative of such words or variations of such words and similar expressions. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements, and we can give no assurance that such forward-looking statements will prove to be correct. Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, or “cautionary statements,” include, but are not limited to:
•Future market conditions and industry trends, including anticipated national new recreational vehicle (“RV”) wholesale shipments;
•Changes in U.S. or global economic and political conditions or outbreaks of war;
•Changes in expected operating results, such as store performance, selling, general and administrative expenses (“SG&A”) as a percentage of gross profit and all projections;
•Our recent history of losses and our ability to continue as a going concern;
•Our ability to obtain further waivers or amendments to our Credit Agreement
•Our ability to procure and manage inventory levels to reflect consumer demand;
•Our ability to find accretive acquisitions;
•Changes in the planned integration, success and growth of acquired dealerships and greenfield locations;
•Changes in our expected liquidity from our cash, availability under our credit facility and unfinanced real estate;
•Compliance with financial and restrictive covenants under our credit facility and other debt agreements;
•Changes in our anticipated levels of capital expenditures in the future;
•The repurchase of shares under our share repurchase program;
•Our ability to secure additional funds through equity or financing transactions on terms acceptable to the Company;
•Dilution related to our outstanding warrants, options and rights; and,
•Our business strategies for customer retention, growth, market position, financial results and risk management.
Non-GAAP Financial Measures
This Quarterly Report on Form 10-Q contains adjusted net cash provided by operating activities, a non-GAAP financial measure. Adjusted net cash provided by operating activities is defined as GAAP net cash provided by operating activities adjusted for net (repayments) borrowings on floor plan notes payable. Non-GAAP measures do not have definitions under GAAP and may be defined differently by and not comparable to similarly titled measures used by other companies. As a result, we review any non-GAAP financial measures in connection with a review of the most directly comparable measures calculated in accordance with GAAP. We caution you not to place undue reliance on such non-GAAP measures, but also to consider them with the most directly comparable GAAP measures. As required by Securities Exchange Commission (“SEC”) rules, we have reconciled this measure to the most directly comparable GAAP measure reported in this Quarterly Report on Form 10-Q. We believe the non-GAAP financial measure we present improves the transparency of our disclosures; provides a meaningful presentation of our results from core business operations because items are excluded that are not related to core business operations and other non-cash items; and improves the period-to-period comparability of our results from core business operations. This presentation should not be considered an alternative to a GAAP measure.
Overview
Lazydays has been a prominent player in the RV industry since our inception in 1976. We operate recreational vehicle dealerships and offer a comprehensive portfolio of products and services for RV owners and outdoor enthusiasts. We generate revenue by providing RV owners and outdoor enthusiasts a full spectrum of products: RV sales, RV repair and services, financing and insurance products, third-party protection plans, and after-market parts and accessories.
We operate 25 dealerships in 15 states. Based on industry research and management’s estimates, we believe we operate the world’s largest RV dealership, measured in terms of on-site inventory, located on approximately 126 acres outside Tampa, Florida. With a strategic approach to rapid expansion, we are growing our network through acquisitions and new store openings. See Note 1 - Business Organization and Nature of Operations to our Condensed Consolidated Financial Statements for additional information.
Lazydays offers one of the largest selections of leading RV brands in the nation, featuring more than 3,900 new and pre-owned RVs. We have more than 400 service bays, and each location has an RV parts and accessories store. We employ approximately 1,500 people at our 25 dealership locations. Our locations are staffed with knowledgeable local team members, providing customers access to extensive RV expertise. We believe our locations are strategically located and, based on information collected by us from reports prepared by Statistical Surveys, account for a significant portion of new RV units sold on an annual basis in the U.S. Our dealerships attract customers from all states except Hawaii.
We attract new customers primarily through Lazydays dealership locations as well as digital and traditional marketing efforts. Once we acquire customers, those customers become part of our customer database where we use customer relationship management tools and analytics to actively engage, market and sell our products and services.
In January 2024, we launched a complete rebranding effort with new websites, logos, fonts and colors, as well as a new stock symbol ("GORV"). We believe these rebranding efforts will enhance our digital retail experience, particularly on mobile devices, which account for over 80% of our website traffic.
Results of Operations
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Variance |
(In thousands, except per vehicle data) | 2024 | | 2023 | |
Revenue | | | | | | | |
New vehicle retail | $ | 143,333 | | | $ | 182,752 | | | $ | (39,419) | | | (21.6) | % |
Pre-owned vehicle retail | 60,908 | | | 90,991 | | | (30,083) | | | (33.1) | % |
Vehicle wholesale | 3,268 | | | 1,716 | | | 1,552 | | | 90.4 | % |
Finance and insurance | 16,041 | | | 17,742 | | | (1,701) | | | (9.6) | % |
Service, body and parts and other | 15,144 | | | 15,179 | | | (35) | | | (0.2) | % |
Total revenue | $ | 238,694 | | | $ | 308,380 | | | $ | (69,686) | | | (22.6) | % |
| | | | | | | |
Gross profit | | | | | | | |
New vehicle retail | $ | 13,195 | | | $ | 24,608 | | | $ | (11,413) | | | (46.4) | % |
Pre-owned vehicle retail | 11,462 | | | 18,566 | | | (7,104) | | | (38.3) | % |
Vehicle wholesale | (329) | | | 31 | | | (360) | | | NM |
Finance and insurance | 15,397 | | | 16,932 | | | (1,535) | | | (9.1) | % |
Service, body and parts and other | 7,994 | | | 7,662 | | | 332 | | | 4.3 | % |
LIFO | (315) | | | (76) | | | (239) | | | 314.5 | % |
Total gross profit | $ | 47,404 | | | $ | 67,723 | | | $ | (20,319) | | | (30.0) | % |
| | | | | | | |
Gross profit margins | | | | | | | |
New vehicle retail | 9.2 | % | | 13.5 | % | | (430) | | bps |
Pre-owned vehicle retail | 18.8 | % | | 20.4 | % | | (160) | | bps |
Vehicle wholesale | (10.1) | % | | 1.8 | % | | NM | |
Finance and insurance | 96.0 | % | | 95.4 | % | | 60 | | bps |
Service, body and parts and other | 52.8 | % | | 50.5 | % | | 230 | | bps |
Total gross profit margin | 19.9 | % | | 22.0 | % | | (210) | | bps |
Total gross profit margin (excluding LIFO) | 20.0 | % | | 22.0 | % | | (200) | | bps |
| | | | | | | |
Retail units sold | | | | | | | |
New vehicle retail | 2,036 | | | 1,979 | | | 57 | | | 2.9 | % |
Pre-owned vehicle retail | 1,149 | | | 1,388 | | | (239) | | | (17.2) | % |
Total retail units sold | 3,185 | | | 3,367 | | | (182) | | | (5.4) | % |
| | | | | | | |
Average selling price per retail unit | | | | | | | |
New vehicle retail | $ | 70,458 | | | $ | 92,346 | | | $ | (21,888) | | | (23.7) | % |
Pre-owned vehicle retail | 53,009 | | | 65,555 | | | (12,546) | | | (19.1) | % |
| | | | | | | |
Average gross profit per retail unit (excluding LIFO) | | | | | | |
New vehicle retail | $ | 6,412 | | | $ | 12,552 | | | $ | (6,140) | | | (48.9) | % |
Pre-owned vehicle retail | 9,976 | | | 13,461 | | | (3,485) | | | (25.9) | % |
Finance and insurance | 5,084 | | | 5,029 | | | 55 | | | 1.1 | % |
| | | | | | | |
F&I per unit | $ | 4,834 | | | $ | 5,029 | | | $ | (195) | | | (3.9) | % |
| | | | | | |
*NM - not meaningful
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Variance |
(In thousands, except per vehicle data) | 2024 | | 2023 | |
Revenues | | | | | | | |
New vehicle retail | $ | 296,024 | | | $ | 359,499 | | | $ | (63,475) | | | (17.7) | % |
Pre-owned vehicle retail | 140,484 | | | 175,766 | | | (35,282) | | | (20.1) | % |
Vehicle wholesale | 9,517 | | | 3,424 | | | 6,093 | | | NM |
Finance and insurance | 34,370 | | | 34,623 | | | (253) | | | (0.7) | % |
Service, body and parts and other | 28,885 | | | 30,724 | | | (1,839) | | | (6.0) | % |
Total revenues | $ | 509,280 | | | $ | 604,036 | | | $ | (94,756) | | | (15.7) | % |
| | | | | | | |
Gross profit | | | | | | | |
New vehicle retail | $ | 18,831 | | | $ | 48,024 | | | $ | (29,193) | | | (60.8) | % |
Pre-owned vehicle retail | 20,839 | | | 35,813 | | | (14,974) | | | (41.8) | % |
Vehicle wholesale | (2,540) | | | 18 | | | (2,558) | | | NM |
Finance and insurance | 33,033 | | | 33,120 | | | (87) | | | (0.3) | % |
Service, body and parts and other | 15,448 | | | 16,026 | | | (578) | | | (3.6) | % |
LIFO | (441) | | | (1,387) | | | 946 | | | (68.2) | % |
Total gross profit | $ | 85,170 | | | $ | 131,614 | | | $ | (46,444) | | | (35.3) | % |
| | | | | | | |
Gross profit margins | | | | | | | |
New vehicle retail | 6.4 | % | | 13.4 | % | | (700) | | bps |
Pre-owned vehicle retail | 14.8 | % | | 20.4 | % | | (560) | | bps |
Vehicle wholesale | (26.7) | % | | 0.5 | % | | NM | |
Finance and insurance | 96.1 | % | | 95.7 | % | | 40 | | bps |
Service, body and parts and other | 53.5 | % | | 52.2 | % | | 130 | | bps |
Total gross profit margin | 16.7 | % | | 21.8 | % | | (510) | | bps |
Total gross profit margin (excluding LIFO) | 16.8 | % | | 22.0 | % | | (520) | | bps |
| | | | | | | |
Retail units sold | | | | | | | |
New vehicle retail | 4,091 | | | 3,959 | | | 132 | | | 3.3 | % |
Pre-owned vehicle retail | 2,616 | | | 2,692 | | | (76) | | | (2.8) | % |
Total retail units sold | 6,707 | | | 6,651 | | | 56 | | | 0.8 | % |
| | | | | | | |
Average selling price per retail unit | | | | | | | |
New vehicle retail | $ | 72,389 | | | $ | 90,806 | | | $ | (18,417) | | | (20.3) | % |
Pre-owned vehicle retail | 53,702 | | | 65,292 | | | (11,590) | | | (17.8) | % |
| | | | | | | |
Average gross profit per retail unit (excluding LIFO) | | | | | | |
New vehicle retail | $ | 4,569 | | | $ | 12,189 | | | $ | (7,620) | | | (62.5) | % |
Pre-owned vehicle retail | 7,966 | | | 13,347 | | | (5,381) | | | (40.3) | % |
Finance and insurance | 5,044 | | | 4,980 | | | 64 | | | 1.3 | % |
| | | | | | | |
F&I per unit | $ | 4,925 | | | $ | 4,980 | | | $ | (55) | | | (1.1) | % |
| | | | | | |
*NM - not meaningful
Same Store Results of Operations
We believe that same store comparisons are an important indicator of our financial performance. Same store measures demonstrate our ability to grow operations in our existing locations.
Same store measures reflect results for stores that were operating in each comparison period, and only include the months when operations occurred in both periods. For example, a store acquired in May 2023 would be included in same store operating data beginning in June 2024, after its first complete comparable month of operations. The first quarter operating results for the same store comparisons would include results for that store in only the month of June for both comparable periods.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Variance |
($ in thousands, except per vehicle data) | 2024 | | 2023 | |
Revenues | | | | | | | |
New vehicle retail | $ | 120,041 | | | $ | 172,156 | | | $ | (52,115) | | | (30.3) | % |
Pre-owned vehicle retail | 50,041 | | | 86,900 | | | (36,859) | | | (42.4) | % |
Vehicle wholesale | 2,857 | | | 1,591 | | | 1,266 | | | 79.6% |
Finance and insurance | 13,741 | | | 16,930 | | | (3,189) | | | (18.8) | % |
Service, body and parts and other | 12,617 | | | 14,371 | | | (1,754) | | | (12.2) | % |
Total revenues | $ | 199,297 | | | $ | 291,948 | | | $ | (92,651) | | | (31.7) | % |
| | | | | | | |
Gross profit | | | | | | | |
New vehicle retail | $ | 10,194 | | | $ | 23,250 | | | $ | (13,056) | | | (56.2) | % |
Pre-owned vehicle retail | 9,077 | | | 17,771 | | | (8,694) | | | (48.9) | % |
Vehicle wholesale | (312) | | | 31 | | | (343) | | | NM |
Finance and insurance | 13,187 | | | 16,146 | | | (2,959) | | | (18.3) | % |
Service, body and parts and other | 6,530 | | | 6,883 | | | (353) | | | (5.1) | % |
LIFO | (316) | | | (76) | | | (240) | | | 315.8% |
Total gross profit | $ | 38,360 | | | $ | 64,005 | | | $ | (25,645) | | | (40.1) | % |
| | | | | | | |
Gross profit margins | | | | | | | |
New vehicle retail | 8.5 | % | | 13.5 | % | | (500) | | bps |
Pre-owned vehicle retail | 18.1 | % | | 20.4 | % | | (230) | | bps |
Vehicle wholesale | (10.9) | % | | 1.9 | % | | NM | |
Finance and insurance | 96.0 | % | | 95.4 | % | | 60 | | bps |
Service, body and parts and other | 51.8 | % | | 47.9 | % | | 390 | | bps |
Total gross profit margin | 19.2 | % | | 21.9 | % | | (270) | | bps |
Total gross profit margin (excluding LIFO) | 19.4 | % | | 21.9 | % | | (250) | | bps |
| | | | | | | |
Retail units sold | | | | | | | |
New vehicle retail | 1,556 | | | 1,834 | | | (278) | | | (15.2) | % |
Pre-owned vehicle retail | 901 | | | 1,300 | | | (399) | | | (30.7) | % |
Total retail units sold | 2,457 | | | 3,134 | | | (677) | | | (21.6) | % |
| | | | | | | |
Average selling price per retail unit | | | | | | | |
New vehicle retail | $ | 77,147 | | | $ | 93,580 | | | $ | (16,433) | | | (17.6) | % |
Pre-owned vehicle retail | 55,539 | | | 66,342 | | | (10,803) | | | (16.3) | % |
| | | | | | | |
Average gross profit per retail unit (excluding LIFO) | | | | | | |
New vehicle retail | $ | 6,552 | | | $ | 12,744 | | | $ | (6,192) | | | (48.6) | % |
Pre-owned vehicle retail | 10,075 | | | 13,566 | | | (3,491) | | | (25.7) | % |
Finance and insurance | 5,367 | | | 5,020 | | | 347 | | | 6.9 | % |
| | | | | | | |
F&I per unit | $ | 5,367 | | | $ | 5,152 | | | $ | 215 | | | 4.2 | % |
| | | | | | |
*NM - not meaningful
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Variance |
(In thousands, except per vehicle data) | 2024 | | 2023 | |
Revenues | | | | | | | |
New vehicle retail | $ | 250,866 | | | $ | 341,930 | | | $ | (91,064) | | | (26.6) | % |
Pre-owned vehicle retail | 116,756 | | | 168,425 | | | (51,669) | | | (30.7) | % |
Vehicle wholesale | 7,903 | | | 3,249 | | | 4,654 | | | 143.2 | % |
Finance and insurance | 29,280 | | | 33,283 | | | (4,003) | | | (12.0) | % |
Service, body and parts and other | 24,482 | | | 29,136 | | | (4,654) | | | (16.0) | % |
Total revenues | $ | 429,287 | | | $ | 576,023 | | | $ | (146,736) | | | (25.5) | % |
| | | | | | | |
Gross profit | | | | | | | |
New vehicle retail | $ | 15,091 | | | $ | 45,730 | | | $ | (30,639) | | | (67.0) | % |
Pre-owned vehicle retail | 16,806 | | | 34,328 | | | (17,522) | | | (51.0) | % |
Vehicle wholesale | (1,838) | | | 15 | | | (1,853) | | | NM |
Finance and insurance | 28,120 | | | 31,827 | | | (3,707) | | | (11.6) | % |
Service, body and parts and other | 13,039 | | | 14,882 | | | (1,843) | | | (12.4) | % |
LIFO | (441) | | | (1,387) | | | 946 | | | (68.2) | % |
Total gross profit | $ | 70,777 | | | $ | 125,395 | | | $ | (54,618) | | | (43.6) | % |
| | | | | | | |
Gross profit margins | | | | | | | |
New vehicle retail | 6.0 | % | | 13.4 | % | | (740) | | bps |
Pre-owned vehicle retail | 14.4 | % | | 20.4 | % | | (600) | | bps |
Vehicle wholesale | (23.3) | % | | 0.5 | % | | NM | |
Finance and insurance | 96.0 | % | | 95.6 | % | | 40 | | bps |
Service, body and parts and other | 53.3 | % | | 51.1 | % | | 220 | | bps |
Total gross profit margin | 16.5 | % | | 21.8 | % | | (530) | | bps |
Total gross profit margin (excluding LIFO) | 16.6 | % | | 22.0 | % | | (540) | | bps |
| | | | | | | |
Retail units sold | | | | | | | |
New vehicle retail | 3,192 | | | 3,707 | | | (515) | | | (13.9) | % |
Pre-owned vehicle retail | 2,092 | | | 2,530 | | | (438) | | | (17.3) | % |
Total retail units sold | 5,284 | | | 6,237 | | | (953) | | | (15.3) | % |
| | | | | | | |
Average selling price per retail unit | | | | | | | |
New vehicle retail | $ | 78,592 | | | $ | 92,406 | | | $ | (13,814) | | | (14.9) | % |
Pre-owned vehicle retail | 55,811 | | | 66,016 | | | (10,205) | | | (15.5) | % |
| | | | | | | |
Average gross profit per retail unit (excluding LIFO) | | | | | | |
New vehicle retail | $ | 4,728 | | | $ | 12,438 | | | $ | (7,710) | | | (62.0) | % |
Pre-owned vehicle retail | 8,033 | | | 13,465 | | | (5,432) | | | (40.3) | % |
Finance and insurance | 5,322 | | | 5,013 | | | 309 | | | 6.2 | % |
| | | | | | | |
F&I per unit | $ | 5,322 | | | $ | 5,103 | | | $ | 219 | | | 4.3 | % |
| | | | | | |
*NM - not meaningful
Revenue and Gross Margin Discussion
New Vehicles Retail
We offer a comprehensive selection of new RVs across a wide range of price points, classes and floor plans, from entry level travel trailers to Class A motorhomes at our dealership locations and on our website. We have strong strategic alliances with leading RV manufacturers. The core brands that we sell, representing 93% of the new vehicles that we sold during the quarter ended June 30, 2024, are manufactured by Thor Industries, Inc., Winnebago Industries, Inc., and Forest River, Inc.
Under our business strategy, we believe that our new RV sales create incremental profit opportunities by providing used RV inventory through trade-ins, arranging of third-party financing, RV service and insurance contracts, future resale of trade-ins and parts and service work.
New vehicle revenue decreased $39.4 million, or 21.6%, in the quarter ended June 30, 2024 compared to the same period in 2023 due primarily to a 23.7% decrease in average selling price per retail unit, offset by a 2.9% increase in new vehicle retail units sold.
New vehicle revenue decreased $63.5 million, or 17.7%, in the six months ended June 30, 2024 compared to the same period in 2023 due primarily to a 20.3% decrease in average selling price per retail unit, offset by a 3.3% increase in new vehicle retail units sold.
The decreases in average selling price per retail unit were primarily due to heavy discounting of 2023 model year units. The increases in units sold were primarily due to acquisitions and new store openings since June 30, 2023.
New vehicle gross profit decreased $11.4 million, or 46.4%, in the quarter ended June 30, 2024 compared to the same period in 2023 primarily due to the above mentioned factors impacting new vehicle revenue. New vehicle gross margin decreased 430 basis points primarily due to compression from the higher cost per new unit sold and the lower average selling price of new vehicles.
New vehicle gross profit decreased $29.2 million, or 60.8%, in the six months ended June 30, 2024 compared to the same period in 2023 primarily due to the above mentioned factors impacting new vehicle revenue. New vehicle gross margin decreased 700 basis points primarily due to compression from the higher cost per new unit sold and the lower average selling price of new vehicles.
On a same store basis, new vehicle retail revenue decreased $52.1 million, or 30.3%, in the quarter ended June 30, 2024 compared to the same period in 2023 due primarily to a 15.2% decrease in retail units sold and a 17.6% decrease in average selling prices per retail unit.
On a same store basis, new vehicle retail revenue decreased $91.1 million, or 26.6%, in the six months ended June 30, 2024 compared to the same period in 2023 due primarily to an 13.9% decrease in retail units sold and a 14.9% decrease in average selling prices per retail unit.
On a same store basis, new vehicle retail gross profits decreased $13.1 million, or 56.2%, in the quarter ended June 30, 2024 compared to the same period in 2023 due primarily to a 15.2% decrease in units sold and a 500 basis point decrease in gross margins.
On a same store basis, new vehicle retail gross profits decreased $30.6 million, or 67.0%, in the six months ended June 30, 2024 compared to the same period in 2023 due primarily to a 13.9% decrease in units sold and a 740 basis point decrease in gross margins.
During the second quarter of 2024 we sold through substantially all of our 2022 and 2023 model year inventory. As of June 30, 2024, approximately 10% of our inventory was 2025 model year, 78% was 2024 model year, and 11% was 2023 model year.
Pre-Owned Vehicles Retail
Pre-owned vehicle retail sales are a strategic focus for growth. Our pre-owned vehicle operations provide an opportunity to generate sales to customers unable or unwilling to purchase a new vehicle, to sell models other than the store’s new vehicle models, access additional pre-owned vehicle inventory through trade-ins and increase sales from finance and insurance
products. We sell a comprehensive selection of pre-owned RVs at our dealership locations. We have established a goal to reach a pre-owned to new ratio of 1:1. Strategies to achieve this target include procuring additional pre-owned RV inventory direct from consumers and selling deeper into the pre-owned RV spectrum. We achieved a pre-owned to new ratio of 0.6:1 in the quarter ended June 30, 2024.
Pre-owned vehicle retail revenue decreased $30.1 million, or 33.1%, in the quarter ended June 30, 2024 compared to the same period in 2023 due primarily to a 17.2% decrease in retail units sold and a 19.1% decrease in average selling price per retail unit.
Pre-owned vehicle retail revenue decreased $35.3 million, or 20.1%, in the six months ended June 30, 2024 compared to the same period in 2023 due primarily to a 2.8% decrease in retail units sold and a 17.8% decrease in average selling price per retail unit.
The decreases in retail units sold and average selling price per unit were primarily due to a contracting market and high interest rate environment which may affect financing for customers.
Pre-owned vehicle retail gross profit decreased $7.1 million, or 38.3%, in the quarter ended June 30, 2024 compared to the same period in 2023 due primarily to an 160 basis point decline in gross margins and 17.2% decrease in units sold.
Pre-owned vehicle retail gross profit decreased $15.0 million, or 41.8%, in the six months ended June 30, 2024 compared to the same period in 2023 due primarily to an 560 basis point decline in gross margins and a 2.8% decrease in units sold.
The used vehicle market has experienced pricing pressures from the discounting of new vehicle units.
On a same store basis, pre-owned vehicle retail revenue decreased $36.9 million, or 42.4%, in the quarter ended June 30, 2024 compared to the same period in 2023 due to a 16.3% decrease in average selling prices and a 30.7% decrease in retail units sold.
On a same store basis, pre-owned vehicle retail revenue decreased $51.7 million, or 30.7%, in the six months ended June 30, 2024 compared to the same period in 2023 due to a 15.5% decrease in average selling prices and a 17.3% decrease in retail units sold.
On a same store basis, pre-owned vehicle retail gross profits decreased $8.7 million, or 48.9% in the quarter ended June 30, 2024 compared to the same period in 2023 due primarily to the decrease in units sold and an 230 basis point decrease in gross margins.
On a same store basis, pre-owned vehicle retail gross profits decreased $17.5 million, or 51.0% in the six months ended June 30, 2024 compared to the same period in 2023 due primarily to the decrease in units sold and a 600 basis point decrease in gross margins.
Finance and Insurance
We believe that arranging timely financing is an important part of providing access to the RV lifestyle and we attempt to arrange financing for every vehicle we sell. We also offer related products such as extended warranties, insurance contracts and other maintenance products.
Finance and insurance (“F&I”) revenues decreased $1.7 million, or 9.6%, in the quarter ended June 30, 2024 compared to the same period in 2023 primarily due to a decrease in total retail units sold of 5.4%.
F&I revenues decreased $0.3 million, or 0.7%, in the six months ended June 30, 2024 compared to the same period in 2023 primarily due to a 1.1% decrease in F&I per unit.
On a same store basis, F&I revenues decreased $3.2 million, or 18.8%, in the quarter ended June 30, 2024 compared to the same period in 2023 primarily due to a 21.6% decrease in units sold, partially offset by a 4.2% increase in F&I per unit.
On a same store basis, F&I revenues decreased $4.0 million, or 12.0%, in the six months ended June 30, 2024 compared to the same period in 2023 primarily due to a 15.3% decrease in units sold, partially offset by a 4.3% increase in F&I per unit.
F&I per unit increased primarily as a result of increased finance and extended warranty penetration. Finance penetration increased to 75% for the quarter ended June 30, 2024, compared to 62% for the same period in 2023 and extended warranty penetration increased to 52% compared to 46% for the same period in 2023.
For the six months ended June 30, 2024, finance penetration was 69% compared to 61% for the same period in 2023 and extended warranty penetration was 49% compared to 45% for the same period in 2023.
Certain information regarding our F&I operations was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Variance |
| 2024 | | 2023 | |
Overall | | | | | | | |
F&I per unit | $ | 4,834 | | | $ | 5,029 | | | $ | (195) | | | (3.9) | % |
| | | | | | |
| | | | | | | |
Same Store | | | | | | | |
F&I per unit | $ | 5,367 | | | $ | 5,152 | | | $ | 215 | | | 4.2 | % |
| | | | | | |
| | | | | | | |
| Six Months Ended June 30, | | Variance |
| 2024 | | 2023 | |
Overall | | | | | | | |
F&I per unit | $ | 4,925 | | | $ | 4,980 | | | $ | (55) | | | (1.1) | % |
| | | | | | |
| | | | | | | |
Same Store | | | | | | | |
F&I per unit | $ | 5,322 | | | $ | 5,103 | | | $ | 219 | | | 4.3 | % |
| | | | | | |
Service, Body and Parts and Other
With approximately 400 service bays, we provide onsite general RV maintenance and repair services at all of our dealership locations. We employ over 300 highly skilled technicians, many of them certified by the Recreational Vehicle Industry Association (“RVIA”) or the National RV Dealers Association (“RVDA”) and we are equipped to offer comprehensive services and perform Original Equipment Manufacturer ("OEM") warranty repairs for most RV components. Earnings from service, body and parts and other have historically been more resilient during economic downturns, when owners have tended to hold and repair their existing RVs rather than buy a new one.
Service, body and parts and other is a strategic area of focus and area of opportunity to grow additional earnings.
Our service, body and parts and other revenue decreased 0.2% and our gross profit increased 4.3% during the quarter ended June 30, 2024 compared to the same period in 2023.
Our service, body and parts and other revenue and gross profit decreased 6.0% and 3.6%, respectively, during the six months ended June 30, 2024 compared to the same period in 2023.
Our same store service, body and parts and other revenue decreased 12.2% and our gross profit decreased 5.1% during the quarter ended June 30, 2024 compared to the same period in 2023.
Our same store service, body and parts and other revenue decreased 16.0% and our gross profit decreased 12.4% during the six months ended June 30, 2024 compared to the same period in 2023.
The decreases in service, body and parts and other revenue both overall and on a same store basis were primarily due to lower demand, offset by an increase in gross profit for the quarter ended June 30, 2024 due to lower costs associated with service, body and parts and other.
Depreciation and Amortization
Depreciation and amortization was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Variance |
($ in thousands) | 2024 | | 2023 | | $ | | % |
Depreciation and amortization | $ | 4,956 | | | $ | 4,459 | | | $ | 497 | | | 11.1 | % |
| | | | | | | |
| Six Months Ended June 30, | | Variance |
($ in thousands) | 2024 | | 2023 | | $ | | % |
Depreciation and amortization | $ | 10,417 | | | $ | 8,862 | | | $ | 1,555 | | | 17.5 | % |
The increases in Depreciation and amortization were primarily related to the increase in Property and equipment as a result of acquisitions, improvements in existing dealerships, and the opening of new stores.
Selling, General and Administrative
Selling, general and administrative (“SG&A”) expenses consist primarily of wage-related expenses, selling expenses related to commissions and advertising, lease expenses, corporate overhead expenses, transaction costs, and stock-based compensation expense, and do not include depreciation and amortization expense.
SG&A expense was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Variance |
($ in thousands) | 2024 | | 2023 | | $ | | % |
SG&A expense | $ | 50,966 | | | $ | 50,480 | | | $ | 486 | | | 1.0 | % |
SG&A as percentage of gross profit | 107.5 | % | | 74.5 | % | | 3,300 | bps |
| | | | | | | |
| Six Months Ended June 30, | | Variance |
($ in thousands) | 2024 | | 2023 | | $ | | % |
SG&A expense | $ | 99,852 | | | $ | 104,012 | | | $ | (4,160) | | | (4.0) | % |
SG&A as percentage of gross profit | 117.2 | % | | 79.0 | % | | 3,821 | | bps |
SG&A for the three months ended June 30, 2024 was relatively flat over the same period of 2023 primarily related to increased marketing expense offset by reduced headcount and lower commissions paid due to decreases in average selling prices and gross profit per unit.
The decrease in SG&A for the six months ended June 30, 2024, was primarily related to reduced headcount and lower commissions paid due to the decreases in average selling price and gross profit per retail unit.
The increases in SG&A as a percentage of gross profit were primarily related to lower gross profit.
Stock-based compensation was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
($ in thousands) | 2024 | | 2023 | | 2024 | | 2023 |
Stock-based compensation | $ | 595 | | | $ | 842 | | | $ | 1,104 | | | $ | 1,639 | |
The decreases in stock-based compensation were primarily due to fewer awards granted and vested during the periods.
Floor Plan Interest Expense
Floor plan interest expense was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Variance |
($ in thousands) | 2024 | | 2023 | | $ | | % |
Floor plan interest expense | $ | 5,708 | | | $ | 5,835 | | | $ | (127) | | | (2.2) | % |
| | | | | | | |
| Six Months Ended June 30, | | Variance |
($ in thousands) | 2024 | | 2023 | | $ | | % |
Floor plan interest expense | $ | 13,384 | | | $ | 11,366 | | | $ | 2,018 | | | 17.8 | % |
The decrease in Floor plan interest expense for the three months ended June 30, 2024 was primarily due to a lower average principal balance compared to the same period in 2023. The increase in Floor plan interest expense for the six months ended June 30, 2024 was primarily due to increases in the average floor plan borrowing rate.
Other Interest Expense
Other interest expense was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Variance |
($ in thousands) | 2024 | | 2023 | | $ | | % |
Other interest expense | $ | 5,837 | | | $ | 2,083 | | | $ | 3,754 | | | 180.2 | % |
| | | | | | | |
| Six Months Ended June 30, | | Variance |
($ in thousands) | 2024 | | 2023 | | $ | | % |
Other interest expense | $ | 10,360 | | | $ | 3,783 | | | $ | 6,577 | | | 173.9 | % |
The increases in other interest expense were primarily due to higher average principal balances from borrowings on our real estate facilities. See Note 7 - Debt to our Condensed Consolidated Financial Statements for additional information. Income Tax Expense
Income tax expense was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Variance |
($ in thousands) | 2024 | | 2023 | | $ | | % |
Income tax expense | $ | (23,821) | | | $ | (1,306) | | | $ | (22,515) | | | NM |
Effective tax rate | (116.8) | % | | (26.8) | % | | | | |
| | | | | | | |
| Six Months Ended June 30, | | Variance |
($ in thousands) | 2024 | | 2023 | | $ | | % |
Income tax expense | $ | (17,021) | | | $ | (1,163) | | | $ | (15,858) | | | NM |
Effective tax rate | (34.6) | % | | (26.2) | % | | | | |
*NM - not meaningful
The tax expense differs from the statutory rate primarily due to the establishment of a valuation allowance during the three months ended June 30, 2024.
Liquidity and Capital Resources
Our principal needs for liquidity and capital resources are for capital expenditures and working capital as well as for growth through acquisitions and greenfielding. We have historically satisfied our liquidity needs through cash flows from operations, borrowings under our credit facilities as well as sale-leaseback arrangements. In addition to these sources of
liquidity, potential sources to fund our business strategy include financing of owned real estate, construction loans, and proceeds from debt or equity offerings. We evaluate all of these options and may select one or more of them depending upon overall capital needs and the availability and cost of capital, although no assurances can be provided that these capital sources will be available in sufficient amounts or with terms acceptable to us.
As of June 30, 2024, we were not in compliance with all of the M&T Bank financing agreement covenants as we did not meet our minimum EBITDA requirement or current ratio requirement. However, we entered into a Limited Waiver with Respect to Credit Agreement with the lenders under the Credit Agreement which temporarily waived these covenants. The Company is not certain as to when the industry will recover and anticipates that unit sales may continue to be well below long-term averages and therefore believes the potential exists that it may continue to not be in compliance with existing financial covenants under the Credit Agreement for the twelve-month period after the issuance date of the financial statements. If the Company is not in compliance with its covenants, absent a further waiver, it will be an event of default that would give lenders the right, but not the obligation, to accelerate amounts outstanding. In that event, the Company may need to seek other sources of capital and there can be no assurances that the Company would be able to do so on acceptable terms.
As of June 30, 2024, we had cash of $42.0 million and our revolver was fully drawn. As of August 14, 2024, we hold approximately $126.5 million of real estate financed under our mortgage facility that we estimate could provide approximately $45 million of additional liquidity at an estimated 75% loan to value as we refinance these properties.
Cash Flow Summary
| | | | | | | | | | | |
| Six Months Ended June 30, |
(In thousands) | 2024 | | 2023 |
Net (loss) income | $ | (66,201) | | | $ | 3,284 | |
Non-cash adjustments | 25,647 | | | 10,793 | |
Changes in operating assets and liabilities | 141,869 | | | (3,372) | |
Net cash provided by operating activities | 101,315 | | | 10,705 | |
Net cash used in investing activities | (9,967) | | | (66,042) | |
Net cash (used in) provided by financing activities | (107,411) | | | 17,823 | |
Net decrease in cash | $ | (16,063) | | | $ | (37,514) | |
Operating Activities
Inventories are the most significant component of our cash flow from operations. As of June 30, 2024, our new vehicle days’ supply was 203 days which was 177 days less than our days’ supply as of December 31, 2023. As of June 30, 2024, our days’ supply of pre-owned vehicles was 91 days, which was 41 days less than our days’ supply at December 31, 2023. We calculate days’ supply of inventory based on current inventory levels and a 90-day historical cost of sales level. We continue to focus on managing our unit mix and maintaining appropriate levels of new and pre-owned vehicle inventory.
Borrowings from and repayments to the M&T Floor Plan Line of Credit related to our new vehicle inventory floor plan financing are presented as financing activities. Additionally, the cash paid for inventory purchased as part of an acquisition is presented as an investing activity, while the subsequent flooring of the new inventory is included in our floor plan payable cash activities.
To better understand the impact of these items, adjusted net cash provided by operating activities, a non-GAAP financial measure, is presented below:
| | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Variance | |
(In thousands) | 2024 | | 2023 | | $ | |
Net cash provided by operating activities, as reported | $ | 101,315 | | | $ | 10,705 | | | $ | 90,610 | | |
Net repayments on floor plan notes payable | (114,824) | | | (44,293) | | | (70,531) | | |
Minus borrowings on floor plan notes payable associated with acquired new inventory | — | | | (4,271) | | | 4,271 | | |
Plus net increase to floor plan offset account | — | | | 40,000 | | | (40,000) | | |
Net cash (used in) provided by operating activities, as adjusted | $ | (13,509) | | | $ | 2,141 | | | $ | (15,650) | | |
Investing Activities
During the six months ended June 30, 2024, we used $12.9 million for the purchase of property and equipment, primarily related to improvements in existing dealerships.
Financing Activities
During the six months ended June 30, 2024, significant financing activities included net repayments under our M&T Bank Floor Plan credit facility of $114.8 million, borrowings under revolving line of credit of $5.0 million, proceeds from issuance of long-term debt and finance liabilities of $15.2 million, loan issuance costs of $2.8 million and $0.1 million used for repayments on long-term debt.
M&T Financing Agreement
Our Senior Secured Credit Facility with M&T Bank provides a $480 million Floor Plan Line of Credit and a $50 million Revolving Credit Facility both of which expire February 21, 2027.
On March 8, 2024, we entered into the First Amendment to the Second Amended and Restated Credit Agreement and Consent with M&T to waive and modify certain covenants. This included waiving the net leverage ratio from the fourth quarter of 2023 through the second quarter of 2024, the current ratio for the fourth quarter of 2023, and the fixed charge coverage ratio for the first and second quarters of 2024. Additionally, an additional tier was added to the definition of applicable margin of the M&T credit facilities, setting forth the applicable interest rates corresponding to a total net leverage ratio of 3.00 ≤ X. This new tier is applicable as of March 8, 2024.
On May 14, 2024, we entered into the Second Amendment to the Second Amended and Restated Credit Agreement and Consent (the "Second Amendment") with M&T to waive certain covenants. As part of the Second Amendment, we agreed to pay down $10 million on our Revolving Credit Facility by December 31, 2024. The Second Amendment also modified certain covenants, including the net leverage ratio, the current ratio and the fixed charge coverage ratio. Additionally, the definition of applicable margin was modified, to set forth the applicable interest rates from May 14, 2024 through June 30, 2025.
As of June 30, 2024, we were not in compliance with all of the M&T Bank financing agreement covenants as we did not meet our minimum EBITDA requirement or current ratio requirement. However, we entered into a Limited Waiver with Respect to Credit Agreement with the lenders under the M&T Credit Agreement which temporarily waived these covenants.
At June 30, 2024, there was $331 million outstanding on the Floor Plan Line of Credit at an interest rate of 7.93% and $44.5 million outstanding on the Revolving Credit Facility at an interest rate of 8.83%. We were in compliance with all financial and restrictive covenants at June 30, 2024.
Following the Second Amendment, the Floor Plan Line of Credit bears interest at: (a) 30-day SOFR plus an applicable margin of 1.90% to 2.55% based on the total net leverage ratio (as defined in the new M&T Facility) or (b) the Base Rate plus a margin of 0.90% to 1.55% based on the total net leverage ratio (as defined in the new M&T Facility). Base Rate means, for any day, the fluctuating rate per annum equal to the highest of: (a) the Prime Rate for such day, (b) the Federal Funds Rate in effect on such day plus 1 Basis Points, and (c) the one-month Adjusted Term SOFR Rate, determined on a daily basis, plus 1 Basis Points. The Floor Plan Line of Credit is also subject to an annual unused commitment fee at 0.15% of the average daily unused portion of the Floor Plan.
The Revolving Credit Facility bears interest at: (a) 30-day SOFR plus an applicable margin of 2.15% to 3.40% based on the total net leverage ratio (as defined in the new M&T Facility) or (b) the Base Rate plus a margin of 1.15% to 2.40% based on the total net leverage ratio (as defined in the new M&T Facility). Base Rate means, for any day, the fluctuating
rate per annum equal to the highest of: (a) the Prime Rate for such day, (b) the Federal Funds Rate in effect on such day plus 1 Basis Points, and (c) the one-month Adjusted Term SOFR Rate, determined on a daily basis, plus 1 Basis Points. The Revolving Credit Facility is also subject to a quarterly unused commitment fee at 0.15% of the average daily unused portion of the Revolving Credit Facility.
Borrowings under M&T Financing Agreement are secured by a first priority lien on substantially all of our assets other than real estate.
The M&T Floor Plan Line of Credit consisted of the following:
| | | | | | | | | | | |
(In thousands) | June 30, 2024 | | December 31, 2023 |
Floor plan notes payable, gross | $ | 331,733 | | | $ | 447,647 | |
Debt discount | (766) | | | (864) | |
Floor plan notes payable, net of debt discount | $ | 330,967 | | | $ | 446,783 | |
Other Long-Term Debt
Other outstanding long-term debt consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| June 30, 2024 | | December 31, 2023 |
(In thousands) | Gross Principal Amount | | Debt Discount | | Total Debt, Net of Debt Discount | | Gross Principal Amount | | Debt Discount | | Total Debt, Net of Debt Discount |
Term loan and mortgages | $ | 73,869 | | | $ | (2,631) | | | $ | 71,238 | | | $ | 64,870 | | | $ | (2,300) | | | $ | 62,570 | |
Less: current portion | 73,869 | | | (2,631) | | | 71,238 | | | 1,141 | | | — | | | 1,141 | |
Total | $ | — | | | $ | — | | | $ | — | | | $ | 63,729 | | | $ | (2,300) | | | $ | 61,429 | |
Mortgages
In July 2023, we entered into two mortgages for total proceeds of $29.3 million secured by certain real estate assets at our Murfreesboro and Knoxville locations. The loans bear interest between 6.85% and 7.10% per annum and mature in July 2033.
Term Loan
On December 29, 2023, we entered into a $50 million term loan (the "Loan") with Coliseum Holdings I, LLC as lender (the “Lender”). The Lender is an affiliate of Coliseum Capital Management, LLC ("Coliseum") and Christopher Shackelton. The Loan has a maturity date of December 29, 2026. Certain funds and accounts managed by Coliseum held 81.0% of Lazydays common stock (calculated as if the preferred stock has been converted into common stock) as of June 30, 2024 and is therefore considered a related party. The Loan bears interest at a rate of 12% per annum, payable monthly in cash on the outstanding loan balance. For any quarterly period during the Loan term, we have the option at the beginning of each quarter to make pay-in-kind elections, whereby the entire outstanding balance would be charged interest at 14% per annum and interest amounts will be added to the outstanding principal. The Loan is secured by certain of our assets. Issuance costs of $2 million were recorded as debt discount and are being amortized over the term of the Loan to interest expense using the effective interest method. The Loan is carried at the outstanding principal balance, less debt issuance costs.
On May 15, 2024, we increased the Loan by an additional $15 million (the "Advance"). The terms of the Advance are substantially similar to the terms on the Loan, and the Advance is secured by the inclusion of another dealership facility in the collateral.
Under the terms of the Loan, for any repayments and prepayments that occur prior to January 1, 2025, we will owe a prepayment penalty of 1% on the outstanding principal balance being repaid and a make whole premium equal to the remaining interest owed on such balance repaid from date of repayment through January 1, 2025. For repayments and prepayments that occur after January 1, 2025 through maturity, we will owe a prepayment penalty of 2% on the outstanding principal balance being repaid.
The Loan contains certain reporting and compliance-related covenants. The Loan contains negative covenants, among other things, related to borrowing and events of default. It also includes certain non-financial covenants and covenants limiting our ability to dispose of assets, undergo a change in control, merge with, acquire stock, or make investments in other
companies, in each case subject to certain exceptions. Upon the occurrence of an event of default, in addition to the lender being able to declare amounts outstanding under the Loan due and payable or foreclose on the collateral, the lender can elect to increase the interest rate by 7% per annum during the period of default. In addition, the Loan contains a cross default with M&T Bank. As of June 30, 2024, we were not in compliance with all of the M&T Bank financing agreement covenants as we did not meet our minimum trailing twelve-month EBITDA requirement, however because the Company received a waiver under the Credit Agreement, there is no event of default on the Loan for the period ended June 30, 2024.
Future maturities of long-term debt are as follows:
| | | | | |
(In thousands) | |
Remainder of 2024 | $ | 5,578 | |
2025 | 771 | |
2026 | 45,326 | |
2027 | 886 | |
2028 | 950 | |
Thereafter | 20,358 | |
Total | $ | 73,869 | |
The above schedule reflects contractual maturities, but for financial reporting, the Revolving Line of Credit, long-term debt, and related party debt have been classified as current as described in Note 2 and Note 7 to the Condensed Consolidated Financial Statements.
Industry Trends
We monitor industry conditions in the RV market using a number of resources including its own performance tracking and modeling. We also consider monthly wholesale shipment data as reported by the RV Industry Association (“RVIA”), which is typically issued on a one-month lag and represents manufacturers’ North American RV production and delivery to dealers. According to the RV Industry Association’s survey of manufacturers, total wholesale shipments of new RVs for the six months ended June 30, 2024 were 85,941 units, compared to 78,600 units for the same period in 2023, an increase of 9.3%.
In June 2024, RVIA issued a revised forecast for calendar year 2024 and 2025 wholesale unit shipments. The new forecast projects 2024 RV wholesale shipments to range between 329,900 to 359,100 units with a median of 344,000 units. Additional growth is expected through 2025 with wholesale shipments increasing to a range of 374,200 to 408,600 with a median of 391,400 units.
We believe that retail consumer interest remains high due to an ongoing interest in the RV lifestyle. While we anticipate that near-term demand will be influenced by many factors, including consumer confidence and the level of consumer spending on discretionary products, we believe future retail demand over the longer term will exceed historical, pre-pandemic levels as consumers continue to value the perceived benefits offered by the RV lifestyle.
Inflation
During the six months ended June 30, 2024, we experienced the impact of inflation on our operations, particularly with the increased cost of new vehicles. The price risk relating to new vehicles includes the cost from the manufacturer, as well as freight and logistics costs. Each of these costs have been impacted, to differing degrees, by factors such as high demand for product, supply chain disruptions, labor shortages, and increased fuel costs.
Inflationary factors, such as increases to our product and overhead costs, may adversely affect our operating results if the selling prices of our products and services do not increase proportionately with those increased costs or if demand for our products and services declines as a result of price increases to address inflationary costs. We finance substantially all of our new vehicle inventory and certain of our used vehicle inventory through revolving floor plan arrangements. Inflationary increases in the costs of new and/or used vehicles financed through the revolving floor plan arrangement result in an increase in the outstanding principal balance of the revolving floor plan arrangement. Additionally, our leases require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary increases. Further, the cost of remodeling acquired RV dealership locations and constructing new RV dealership locations is subject to
inflationary increases in the costs of labor and material, which results in higher rent expense on new RV dealership locations. Finally, our credit agreements include interest rates that vary based on various benchmarks. Such rates have historically increased during periods of increasing inflation.
Cyclicality
Unit sales of RV vehicles historically have been cyclical, fluctuating with general economic cycles. During economic downturns the RV retailing industry tends to experience similar periods of decline and recession as the general economy. We believe that the industry is influenced by general economic conditions and particularly by consumer confidence, the level of personal discretionary spending, fuel prices, interest rates and credit availability.
Seasonality and Effects of Weather
Our operations generally experience modestly higher volumes of vehicle sales in the first half of each year due in part to consumer buying trends and the hospitable warm climate during the winter months at our Florida and Arizona locations. In addition, the northern locations in Colorado, Tennessee, Minnesota, Indiana, Oregon, Washington and Wisconsin generally experience modestly higher vehicle sales during the spring months.
Our largest RV dealership is located near Tampa, Florida, which is in close proximity to the Gulf of Mexico. A severe weather event, such as a hurricane, could cause severe damage to property and inventory and decrease the traffic to our dealerships. Although we believe that we have adequate insurance coverage, if we were to experience a catastrophic loss, we may exceed our policy limits and/or may have difficulty obtaining similar insurance coverage in the future.
Critical Accounting Policies and Estimates
There have been no material changes in the critical accounting policies and use of estimates described in our 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information requested by this Item 3 is not applicable as we have elected scaled disclosure requirements available to smaller reporting companies with respect to this Item 3.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) or our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of the controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error and mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of effectiveness of controls and procedures to future periods are subject to the risk that the controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the controls and procedures may have deteriorated.
In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, and due to the previously identified material weakness in our internal control over financial reporting that is described below, which is still being remediated, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2024.
As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 12, 2024, we previously identified a material weakness related to ineffective design and implementation of Information Technology General Controls ("ITGC") in the area of user access, program change management and security administration that are relevant to the preparation of the financial statements. Primarily, we did not design and maintain controls to ensure (a) access provisioned matched the access requested, (b) user access reviews were performed with complete and accurate data, (c) changes to internally developed applications were approved prior to deployment to production and (d) security administration was appropriately maintained. As a result, our related process-level IT dependent manual and automated controls that rely on the affected ITGCs, or information from IT systems with affected ITGCs, were also deemed ineffective. Additionally, management identified a material weakness in our internal control over financial reporting that existed due to turnover of certain accounting positions during the fourth quarter of 2023 which resulted in the lack of sufficient documentation to support the effective performance of our internal control over financial reporting. These material weaknesses did not result in any identified misstatements to our financial statements, and there were no changes to previously released financial results.
Notwithstanding the previously identified material weaknesses, which continues to be remediated, management, including our Chief Executive Officer and Chief Financial Officer, believes the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
Ongoing Remediation Efforts to Address the Previously Identified Material Weaknesses
Management has enhanced, and will continue to enhance, the risk assessment process and design and implementation of internal control over financial reporting. The remediation measures to correct the previously identified material weaknesses include enhancing the design and implementation of existing controls and creating new controls as needed to address identified risks and providing additional training to personnel including the appropriate level of documentation to be maintained to support internal controls over financial reporting. The previously identified material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control over Financial Reporting
Other than with respect to the remediation efforts described above in connection with the previously identified material weaknesses, there were no changes in our internal controls over financial reporting during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1A. Risk Factors
The information in this Form 10-Q should be read in conjunction with the risk factors and information disclosed in our 2023 Annual Report on Form 10-K, which was filed with the SEC on March 12, 2024. There have been no material changes to the primary risks related to our business and securities as described in our 2023 Annual Report on Form 10-K, under “Risk Factors” in Item 1A.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
Issuer Purchases of Equity Securities
We repurchased the following shares of our common stock during the quarter ended June 30, 2024:
| | | | | | | | | | | | | | | | | | | | | | | |
Period | Total Number of Shares Purchased(2) | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plan or Program | | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(1) |
April 1 - April 30, 2024 | — | | | $ | — | | | — | | | $ | 63,370,543 | |
May 1 - May 31, 2024 | — | | | — | | | — | | | 63,370,543 | |
June 1 - June 30, 2024 | 9,322 | | | 3.87 | | | — | | | 63,370,543 | |
| 9,322 | | | 3.87 | | | — | | | |
(1)On September 13, 2021, our Board of Directors authorized the repurchase of up to $25 million of our common stock through December 31, 2024. On December 15, 2022, our Board of Directors authorized the repurchase of up to an additional $50 million of our common stock through December 31, 2024. These shares may be purchased from time-to-time in the open market at prevailing prices, in privately negotiated transactions or through block trades.
(2)All of the shares repurchased in the quarter ended June 30, 2024 were related to tax withholding upon the vesting of RSUs and none related to our repurchase authorization.
Unregistered Sales of Equity Securities
As partial consideration for the Advance (as defined above), we issued warrants (the “Warrants”) to purchase in the aggregate up to 2,000,000 shares of our common stock, to Coliseum Capital Partners, L.P. and Blackwell Partners LLC – Series A (each, a “Holder”), each an advisory client of Coliseum Capital Management, LLC, an affiliate of the Lender (as defined above). Each Warrant may be exercised to purchase Common Stock for $5.25 per share at any time on or after May 15, 2024 and until 5:00 p.m. (New York City time) on May 15, 2034. The warrants have not been exercised and there has been no proceeds received for them. The Warrants are not registered under the Securities Act and were offered pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) thereof.
Item 5. Other Information
During the second quarter of 2024, none of our officers or directors adopted or terminated any "Rule 10b5-1 trading arrangement" or any "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.
Item 6. Exhibits
| | | | | |
3.1 | |
3.2 | |
10.1 | |
10.2 | First Amendment to Loan Agreement, dated as of May 15, 2024, by and among LD Real Estate, LLC, Lazydays RV of Ohio, LLC, Airstream of Knoxville at Lazydays RV, LLC, Lone Star Acquisition LLC, Lazydays Land of Phoenix, LLC, the guarantors party thereto and Coliseum Holdings I, LLC (filed as Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on May 15, 2024 and incorporated herein by reference). |
10.3 | |
10.4 | |
10.5 | |
31.1* | |
31.2* | |
32.1** | |
32.2** | |
101* | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2024, formatted in inline XBRL, include: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) the Notes to the Condensed Consolidated Financial Statements. |
104* | Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101) |
*Filed herewith
**Furnished herewith
Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act or the Exchange Act, except as otherwise stated in any such filing.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | |
| Lazydays Holdings, Inc. |
| |
Date: August 14, 2024 | /s/ Kelly A. Porter |
| Kelly A. Porter |
| Chief Financial Officer |
| Principal Financial and Accounting Officer |