Thank you, and good morning, everyone. A press release covering the company's third quarter 2022 financial results was issued yesterday afternoon, and a copy of that press release can be found in the Investor Relations section on the company's website. Management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These remarks may include statements regarding the impact of COVID-19 on our business, financial results, and financial condition; our business goals, plans, abilities, and opportunities; industry and customer trends; our recently disclosed cybersecurity incidents; the expected impact of inflation and market conditions; our strategic initiatives, acquisitions, SG&A expenses, and capital expenditures; potential stock repurchases, future dividend payments, increases in our borrowings; our liquidity and future compliance with our financial covenants and anticipated future performance. Actual results may differ materially from those indicated by these statements, as a result of various important factors, including those discussed in the Risk Factors section in our Form 10-K, our Form 10-Qs and other reports on file with the SEC. Any forward-looking statements represent our views only as of today, and we undertake no obligation to update them. Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as EBITDA, adjusted EBITDA, adjusted earnings per share diluted, which we believe may be important to investors to assess our operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial statements are included in our earnings release and on our website. All comparisons of our 2022 third quarter results are made against the 2021 third quarter results unless otherwise noted. I'll now turn the call over to Marcus.

Thanks, Lindsey. Good morning, and thanks for joining us for Camping World's 2022 Third Quarter Earnings Call. On today's call, we're going to discuss our financial results, along with providing some insight into the remainder of this year and 2023. As a company, we continue to experience healthy demand, resulting in our company generating revenue for the quarter, just shy of $1.9 billion. During the quarter, we sold over 32,000 RVs, just under the record we set last year, with the big driver being our record used unit sales of 14,460 units, up over 6% compared to the third quarter last year. We have seen recent demand stay comparatively strong for this time of year, with used RV taking the lead. During the third quarter, as a result of our growing installed base of RVs and evidenced by our results, we continue to see both stability and growth in our service business, Good Sam segment, and our used business. As you'll hear today, we feel very strongly that these key areas of our business and further investments in them will help us to intelligently and profitably outperform the market over the next 12 to 24 months and beyond. One of the key things I want investors on this call to focus on is the success we're having in driving the used side of our business in the face of short-term pressure on the new side. Our goal of achieving used sales of $3 billion annually has substantial momentum. For the quarter, our record used unit sales delivered over $0.5 billion of revenue, up over a year ago, putting us at $1.9 billion on a trailing 12-month basis. More importantly, $400 million higher than the trailing 12-month figure from a year ago. As we discussed on our last call, our used margins landed in the range that we anticipated, down less than 150 basis points compared to Q2. The reason we feel so strongly about this shift in the used sector is because we now have more evidence from our results. Simply stated, the gross margin return on investment is higher than new and the churns are faster. Furthermore, each transaction contributes to the profitability of our overall business, including service, replacement in aftermarket parts, as well as our Good Sam finance and finance products. But we know that the used business is a game of scale. It requires capital, proprietary technology, like the Good Sam RV Valuator tool, and a very strong and healthy database to both buy from and sell to. We possess all of these. Much like the new side of the business, the supply chain is key to success, requiring a highly disciplined approach to procurement, reconditioning, pricing, and marketing; but a stringent approach to stocking levels, churns, and aging matter even more. We expect to maintain that discipline. Since we last spoke in August, we ramped up our procurement of used inventory, launching the Good Sam confidence program, a new consumer-facing strategy to offer current RV owners a no-hassle process, with full disclosure around their value, regardless of whether they're selling the unit outright or trading it in for another. The early results are fantastic. In the first 50-day period since launching, this has resulted in us procuring over 6,000 units, and more importantly, we sold more than that in the same period. We love the used category because it's not only a great growth agent, but we also see it as a hedge. In the last 12 months, nearly 900,000 used units changed hands, which is almost double what happens on the new side. The opportunity for us is clear. With all the success we're seeing in used, it is still our plan to remain the market leader in the sale of new RVs. For the quarter, we retailed more than 17,600 new units with a gross profit margin of 19.1%, a decline of only 180 basis points compared to the second quarter of this year. The key topic on the new side is quite frankly, inventory management, which we've been strictly controlling. Today, we're stocking around 182 units per location, down compared to the Q3 historical average of 208 units when looking at the 2016 through 2019 period. Our inventory levels in Q4 and Q1 typically ramp up in preparation for the selling season. We will continue to tightly control this number and aim to yield more with less. As the size of the installed base of RVs continues to grow, like it has for the last four decades, it's evident that our products, services, and other business, also known as our service and parts business, continues to be a steady and predictable growth engine for our company. That business generated $269 million of revenue for the quarter, and we ended the quarter with 2,639 bays and over 2,300 service technicians. An additional benefit of both the growth of RVs in America and the growth of our own database is the continuing growth of our Good Sam business. For the quarter, Good Sam generated revenue of $50.4 million, an increase of 8.1%. Jumping into the financial summary for the quarter, our adjusted EBITDA was $173.4 million. Our gross profit for the quarter was almost $595 million, a 32% margin slightly down from last year; however, it was still nicely above our historical average of 27.5% that we experienced between 2016 and 2019. Our tight control of SG&A and capital expenditures is a key component of our management philosophy. Our management team is not naive to the current macroeconomic environment, and we are currently making the hard choices regarding what to shed and where to deploy our capital. We have and will continue to significantly reduce our marketing obligations, eliminate underperforming assets, pause certain initiatives, and reduce headcount. While we're making tough decisions, our plan is to continue to focus on funding our major growth drivers and our dividend. Our plan is to deploy our capital in the foreseeable future in the following areas: our used business, our service and parts business, our Good Sam business, and opportunistic acquisitions. We ended the period with $148 million of cash on our balance sheet, plus an additional $219 million of cash in our floor plan offset account. In addition, we have about $426 million of used inventory and $294 million of parts inventory. Lastly, we also have about $278 million of real estate without an associated mortgage. As expected, our business is returning to its historical seasonal patterns. When we look at the normal pre-pandemic progression of sales from the third quarter to the fourth quarter, revenue typically declines by about one-third and adjusted EBITDA margins historically are right around the low to mid-single-digit range. In closing, as we head into 2023, we are focused on where our business is going. With that, we're planning our SG&A, CapEx, and capital allocation based on industry conditions that might be lower than some of the projections I've seen in the marketplace. If we're wrong, that will be the best time to be wrong. And if we're right, we will be well positioned to intelligently and profitably continue to outperform the market. We believe that Camping World is a unique and special business because it ultimately serves the growing installed base of RVers, and that's evidenced by the stability and/or growth in our used business, our service and parts business, and our Good Sam business. I'll now turn the call back over to the operator for questions.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from Mike Swartz with Tourist Securities. Please, go ahead.

Good morning, everyone. Marcus, I want to build on your comments regarding the industry potentially performing worse than some of the numbers circulating. Generally, the consensus seems to suggest that retail sales might be closer to 400,000 units in 2023. Looking back, the industry was around that level in 2016. The question is whether we should consider your 2016 earnings levels as a reference point if we do hit that 400,000 unit figure. It's important to note that you've added about 80 locations since then, indicating some growth through mergers and acquisitions. Could you provide some insights or guidelines on how we should approach earnings in this scenario?

Well, our business is materially different than it was in 2016. It's almost double the size and a lot of parts of our business have grown nicely. I think what I'd like to always compare it to as we go into these headwinds is, a lot of people have been talking about what 2019 was like when the industry was under a lot of pressure because the manufacturers had overbuilt and margins decreased significantly. And, for us, that was really a lot of lessons learned. When I look at the 2019 results, we recognize that there were two big errors in my decision-making in that moment in time. The first was we had launched an initiative in a segment of our business that wasn't our core business. And when we look at shedding that and all the associated expenses, we don't have today that we had back in 2019, our SG&A is about $150 million lower on a comparative basis. I think, additionally, when we deployed our capital in certain categories that weren't turning fast, and that weren't giving us the margin profile we wanted, we exited all those categories and shifted into our current makeup mix, this amounts to about $100 million of gross. If I were pro formaing 2019, I'd have about a $250 million adjustment up from that low watermark. In addition to that, I believe that this business is best when it sticks to its absolute core strike zone—selling, servicing, financing, and all the associated products related exclusively to RVs. When we look at headwinds periods, in my 20 years, you have to contract your SG&A, contract your headcount, contract all your initiatives, and get hyper-focused on primarily three categories: the used business because of the margin profile and its uniqueness in the marketplace; the service business because there are over 11.5 million RVers already in the marketplace and growing; and our Good Sam business because it services that. That doesn't mean that we're going to be out of the new business; it just acknowledges that the new business is under pressure. So looking at 2016 isn't necessarily fair. But I think for our own planning purposes, we are not forecasters of any industry. We merely observe more consumers than anybody else in the industry. I really do believe that it's prudent for our company to reduce its headcount; control its cash, SG&A, and CapEx, as if there's a possibility of the shipment data going down, not to 400, which is what I've seen published, but possibly down to 360 to 370. If I'm wrong, great, but I'm not going to allow this business to have any excess waste, any excess headcount, any excess SG&A, or any new initiatives during this period because my job is to protect the investors from any downside that I possibly can and to put our capital where we think we're going to get the greatest return.

Okay. That was extremely helpful. I appreciate that, Marcus. And then just maybe—I think you made the comment in your opening commentary that demand has held comparatively strong for this time of the year. So, maybe just—maybe in the context of the cadence of the quarter and what you've seen in October? Any color you can provide there around those specific comments.

Yes. It’s really kind of crazy. When I look at the last four months, and I include October, August and September were relatively decent. We were starting to feel the margin pressure in the middle of the quarter and we obviously wanted to react. That's partially the reason that in our opinion we outperformed the retail registration data that was out there in the market. I think, we were down six or seven for the quarter on the new side, and some data that I've seen may indicate as high as a 25% or 26% decline. Therefore, when you look at SG&A and margin, we spent a little more to keep that volume wheel going because of the overall lifetime value of that transaction, and our margins came down a little as we discussed. We saw September come and our volume fell irregularly compared to what we had seen. It fell off pretty hard compared to July and August. Then we got into October, and our volume came back. Now, I don’t want to attribute that to the hurricane or anything like that, because we will never use weather as a forecaster. What I’ll attribute it to is continued pressure in the marketplace, and we had to pivot. Oftentimes, when we spend marketing money in a month, there is a slight delayed reaction to yielding that revenue. It’s not like a grocery store where we advertise tomatoes today, and somebody comes in. There’s about a 17-day lag period between us marketing something, getting a lead, and that transaction happening. That’s probably why we saw relatively flat sales in October, but we experienced a slight bit more margin compression than we had in the third quarter. And we typically do in the fourth quarter. Historically, the fourth quarter is always about one-third less volume than the third quarter, and the margins over all the years that I’ve been doing this always come down in the fourth quarter. They may come down for us a little bit more because we're stringent about our inventory discipline, so when we get into the fourth quarter, anything that had been there for over 180 days, we start to liquidate at a more rapid pace because we do not want to carry it through the winter, which is obviously the slowest period. As you think about November, December, January, and February, those are the four toughest months for recreational business, not just for our business. Over the last couple of years we've been able to repeat that a little bit, but I think we’re starting to see those traditional seasonal trend lines come back into play, which is why in the prepared remarks I talked about revenue coming down about one-third from the third quarter. And then the SG&A comes down on the variable side but there are some fixed costs still in there, which is why the EBITDA margin comes back down to historical levels as well.

Okay. Super helpful. Thanks, Marcus.

Yeah.

Next question comes from Joe Altobello with Raymond James. Please go ahead.

Thanks. Hey guys, good morning. I guess, first question Marcus, would love to get your thoughts on the promotional environment. Obviously, you haven't seen much in the way of promotion or discounting over the last two or three years. And it seems like the expectation is that we'll get back to 2019 levels in terms of promotions. So I guess, first question is, is that your outlook, or could we see even heavier promotional activity versus three years ago?

We're budgeting for something better than what happened in 2019 because there was an excess supply of new inventory in the channel, even evidenced by our current same-store sale unit stocking decline over historical levels. So we don’t think we’re going to see that level of pressure. But we are going to see pressure compared to what we’ve seen in the last 12 months. I think the manufacturers probably, because we started to call this out last February, began to pull back on their production, and we don’t believe that there’s a heavy glut of inventory in the channel today. Now the manufacturers and dealers have to stay disciplined through this next what I’m going to call six to seven months because there are headwinds that are coming at us at a pretty rapid pace. The only way profitability maintains itself at a level that we want to achieve is through very tight inventory control both on the buy and sell sides, and a robust focus on used because of the margin profile there. We are expecting there to be continued slight pressure, but I want to be clear we don’t expect, at this point unless some new information comes out, that we’re going to see margins look like they did during the fire sale in 2019.

Got it. That's very helpful. And just a follow-up on that. Maybe if you could give us an update on some of the progress that you've made on some of your recent initiatives like Peer-to-Peer RV rentals, for example, your service marketplace, etc.?

Well, I'm pleased that we launched those initiatives over the last couple of years. We've decided to almost completely cut back all spending on any initiatives other than our core business. We've made the decision that at this point our investors expect us to lock everything up, reduce SG&A at a very rapid pace; unfortunately, reduce headcount, and we can't in good conscience reduce headcount while continuing to spend on ideas. While those ideas are good, they'll be there for another day. Today, it’s about the used service, Good Sam business, and a lockdown of SG&A.

Next question comes from Daniel Imbro with Stephens, Inc. Please go ahead.

Hey. Good morning, Marcus. Thanks for taking questions. I want to start on the revenue line. I think last quarter you said you expected same-store kind of down 15% to 18% in the back half. Obviously, you outperformed that on both new and used. I guess what drove that? Was it just a stronger consumer than you expected? Was it better inventory control? And I'm guessing that's not the right level for the back half now. So can you help us frame up like what you would expect same-store decline for the rest of this year given what you've seen? I think you said October was flat.

Yes. We believe that our proprietary database, along with the way we market and our pricing strategy, a lead-based pricing strategy, is what drove some of our results. Additionally, we spent about $5 million to $6 million, probably more than anticipated, on generating activity for that revenue to be generated. When we look at the overall long-term health of our business, more transactions and more unique customers in our database gives us greater lifetime value of our customers. The best acquisition point for lifetime value of a customer and a Good Sam member is the sale of a new or used RV. It feeds our service business, parts business, and Good Sam business. We made the decision internally as we went through the quarter to continue investing in the flywheel. We understand that our SG&A was higher than anticipated. We acknowledge that we needed to make some cuts, and those started in the third quarter. What we don't want to do is stop the momentum of our flywheel. Now, as we go into the fourth quarter and the first quarter, we're going to pull that back pretty heavily. But we will not do that at the expense of breaking our flywheel, knowing that the long-term value created in those transactions will yield us income in 2023, 2024, and beyond. As we prepare for the fourth quarter and the first quarter, I will stick to my narrative of down 15% to 18%. I know that I’ve said that three quarters in a row and we've outperformed it. But I’d rather show up and have people be pleased with our outperformance than be disappointed with our over-optimism in the face of a macro environment that everybody can see. So I'm going to stick to down 15% to 18%. I’m going to tell you that I believe our new and used margins in the fourth quarter will experience a normal seasonal fourth quarter compression. Our SG&A, just so we can get it out on the table, historically was always materially higher than the second and third quarter because it's our shoulder season. We have to be clear that the fourth quarter we experienced in 2020 and 2021 is not the norm. I remember, for many years, we never made money in the fourth quarter. We started to make money because we controlled our costs and generated some revenue. We're focused on that, but projecting revenue deep into 2023 could be dangerous at this point for all of us.

No. That's really helpful. Helpful color, Marcus. As I think back on the investment, you listed the four buckets of used service and parts, Good Sam. But the fourth one was M&A. It feels like you guys have historically leaned into that during downturns. I'm curious, are you seeing more sellers come to the table? Where are we on multiples on the M&A side? Just as we look at the public stock multiple and how you weigh the decision between buybacks or M&A, I would love to hear any updated thoughts you have on the M&A channel.

We're always conflicted when we look at the low valuations that are being assigned to our company when we know the intrinsic value is higher. But our primary objective has been and will continue to be from 2016 when we went public for the foreseeable future: we are an opportunistic acquirer of RV dealerships because it is the foundation of everything else in our company. We've seen a pickup in people wanting to talk about selling their business and I can tell you with absolute conviction that those multiples have come down. Those expectations have changed. Today, in our company, we're building cash as evidenced by the working capital that we talked about, and getting ready to be opportunistic. We do not have anything materially signed that we're prepared to disclose at this time. When we went public, we told the marketplace that we like downturns for two reasons: we get better at managing our business, we tighten our SG&A, improve our processes, and we acquire a ton of revenue at a very low or no multiple. When that hockey stick turns—and it always does—we experience revenue and earnings that we paid essentially nothing for. We’re the best at buying those types of businesses because our processes and systems go into what we would call distressed or troubled businesses and we yield an unbelievable return on capital.

Makes a lot of sense. Thanks so much for the color, Marcus, and best of luck.

Thank you.

Next question comes from Craig Kennison with Baird. Please go ahead.

Hey good morning. Thanks for taking my question. Marcus, you talked about the used business being a scale business and I certainly appreciate that, and then you talked about one node in that process being the reconditioning process. I'm just curious if you could just comment on the scale you have in that particular function and maybe what it costs to recondition the average unit?

Matt, take that Craig.

Good morning Craig. Great question. When we think about the scale that Marcus is alluding to, it’s more in reference to our ability to actually source used inventory better than any other entity. Part of my apprehension over the years of getting involved more in used is the uncertainty associated with that supply chain. I’d like to think based on all of our proprietary technology, the experience we’ve amassed over the years regarding how our consumers behave in the trade-in cycles, and our ability to drive down the cost associated with the lead to procure a used unit. Right now, we’re averaging about 2,000 leads per day to buy used units. Extrapolate that out, that’s in excess of 700,000 used units that we could potentially buy on an annualized basis. I can tell you, no one else out there has the access or the amount of capital information that we do to be able to procure these assets at a severely reduced value compared to our competitors out there. Regarding reconditioning, that's another great question. That's been top of mind as we’re determining the best methodology for us to optimize every single transaction, every single reconditioning effort while ensuring we put our brand behind these used assets we’re selling to consumers. On average, we’re looking at a range of anywhere from 5% to 10% on reconditioning for those assets we want to recondition. I say that, as we acknowledge there are certain model years and certain ages of units where frankly, it’s just not worth reconditioning. We’re continuously getting better at parsing out the ways we approach used. We're learning and I'm really confident in the long-term outlook of what we should be able to accomplish over the next year.

Thanks. And as a follow-up, is there a sweet spot for you in the used market, whether it's the age of the unit, the model, the brand, or are you able to be successful at a pretty broad range of used product?

Honestly, that’s where we’ve been able to fine-tune our methodology to such an extent that we can optimize the gross margin return on investment, because we know exactly which model years yield the most lucrative return for us as an enterprise. Generally, we see about 2016 to 2020 model years as that range we often target, understanding that consumer will likely remain within the lifestyle thereafter. Hopefully, that turns into a trade or we can purchase it at a significant opportunity where other competitors simply just don't see that. We can see that opportunity.

Craig, to Matt's credit, the secret sauce in the valuator tool that Matt built has multiple layers inside of it. It’s an evolving process too. When you go in as a 2014 owner, you’re going to go through a different experience than you would as a 2017 owner. The values ascribed to specific units do vary, and part of the reason that Matt doesn't want to disclose all of it is because it’s part of our competitive advantage. It’s all the way down to values fluctuating based on model year, floor plan, make, model, and, significantly, our experience selling these units over a decade. As we’ve seen this growth in our used inventory, we'll continue to see growth in our used inventory, and it isn’t some haphazard walking-around thing. I want to clarify something I’ve been asked in the past regarding used values: the valuator is a daily dynamic formula. That means every single day, those values are coming up and down, like for commodities. When we buy something today, we potentially pay materially less than we did yesterday. Most importantly, regarding our current inventory position, which everyone should think about, is that we adhere strictly to an aging policy. If there might be changes in the marketplace, we turn our inventory quickly enough that we rarely get caught flat-footed. That does not mean we don’t make mistakes. That does not mean there aren’t times we put too much reconditioning into a unit. When we get to the fourth quarter, that’s usually when we flush the toilet on certain things, as we have for years. I want investors to feel confident that we’re deploying capital into used inventory cautiously. It’s not just buy as much as possible for whatever price you want; it doesn't function that way.

That’s helpful. Thank you.

Next question comes from John Healy with Northcoast Research. Please go ahead.

Okay. Just wanted to ask a couple of questions about the financing side. I would just love to get some perspective on what you're seeing there. Obviously, you're outperforming the industry, but would just love to understand the sales process, how it's become more elongated, and what you're seeing in the cost of financing for these consumers as they're coming in to shop for a unit?

Well, the process to buy with our company is relatively straightforward. We prequalify many, many people before they even come in. When they do, our finance process is very stringent and has a very tight structure to it. But we haven't seen any change in lenders' willingness to lend credit out there. We’ve seen no headwinds, and I think that’s primarily because the RV consumer typically has a better credit profile historically compared to the auto customer, averaging a 700 credit score with a household income over $100,000. It’s a different type of buyer. The delinquencies that lenders experienced back in '08 and '09 were a small fraction compared to the auto business. The second thing is we learned over the last ten years that having fewer banking partners making credit available to our customers yields better results. When a bank is going to make an exception or stretch on a particular customer, they do it with us, because the overall portfolio we give them is very rounded out and robust compared to having a finance office with 30 banks; we may have one with five or six, plus a local credit union. That process took us a decade to refine. This may be one reason why we’re potentially outperforming on the new side.

That's super helpful. Another question I wanted to ask was just any color on what's going on in the State of Florida. I mean, obviously, a big market for you guys. Are you expecting any sort of governmental purchases for RVs as we close out the year or any thoughts on how supply was impacted in the market?

Well, obviously, we're all terribly devastated by what happened in South Florida. I visited all of our South Florida stores over the last ten days, and demand is strong. It’s unfortunate that the demand is strong for the reason that it is. We expect that demand to continue here in the foreseeable future. The advantage we have as a company is our ability to mobilize inventory from the entire Southeast U.S. and continue to feed those locations regularly. Regarding governmental acquisitions of inventory, we’re not seeing much FEMA activity. We have heard about some activity issued by the state of Florida, but right now we are putting bids in through the process, focusing on the general consumer who shows up with insurance checks and in some cases no home at all, and transacting normally. We’re not anticipating any significant bulk sales in the fourth quarter, but if that happens, we'll let everyone know.

Great. Thank you so much.

Next question comes from Ryan Brinkman with JP Morgan. Please go ahead.

Hi. Thanks for taking my questions. Wanted to ask about where you think the industry overall may be in terms of RV inventories on dealer lots. I know you’ve been disciplined on new unit stock turn and aging while focusing on used. But do you have a sense of where your competitors may be with regard to new inventory? And what’s the latest in terms of your thinking regarding the balance of supply and demand for new units and the implication for new RV retail gross margin?

I don't ever like to forecast what other RV dealers are doing because we're not forecasters of other people's businesses. However, I believe that other dealers and manufacturers have displayed a discipline that I haven’t seen in my 20 years in this business. It may be because we raised the flag early in February, or maybe because everybody realizes that margin protection is a function of inventory discipline. There will be dealers who won't be able to compete in this environment. They don't have the digital strategy or database and they won't enjoy the business. It's possible that in specific markets, some dealers may become far more undisciplined about their pricing strategy. As the industry continues to consolidate with large retailers, there is a sophistication at play that didn’t exist three or four years ago. However, we are all capitalists at heart. When we want to create transactions, generating revenue means we need to incentivize the customer. I expect that promotional activity and margins will fluctuate over the next four, five, and six months, as headwinds arise. This is standard business to move your inventory. Everyone should recall that this industry has always had these small cycles. The business always comes back.

Okay, great. Thanks. That's encouraging. And then, what do you think the latest is in terms of the consumer? Of course, interest rates, asset prices, sentiment that may impact new and used units. But what about like gas prices and whatnot for participation in the lifestyle, such as miles driven or trips taken in RVs anecdotally of course, I don't think that data really exists. But how do you think demand at your retail store for the consumables and sundries, collision and service is likely to track through 2023 et cetera even if we have one of those downside 360 or so new unit forecasts that you threw out there?

When we look at the downside shipment forecast of 360,000, we still feel comfortable that people are already in the lifestyle. For 40 years, the installed base of RVs has always increased. Certain years see growth, while others see a dip, but on average, we do not see declines in overall participation in the lifestyle. What happens is there’s a slight pause for new entrants, creating the drop-off from 460,000 to 360,000. The $100,000 price tag is significant, but not across 330 million people. We must adapt as an industry, which I think we've done. The consumer will respond to a good structure during down years; our cash flow and returns on capital in past overs have always performed exceptionally well. The same applies to our business.

Okay. Thanks. And then lastly, I heard you say that you're being more selective with the allocation of capital, locking down SG&A to focus on the core business, etc. I'm sorry if I missed it, but how does that translate to the RV sharing initiative, which is clearly in an investment mode. But I recall you were interested in this business not just for the longer-term profit potential of renting or brokering the renting of RVs but also, because of the synergy potential with the core business, including used RV acquisition, etc. So is investment in RV sharing still a priority?

Investment in anything at this point that doesn't yield us a premium margin and a substantial return, like our used, service, and Good Sam business, will be paused, and it has been paused. That doesn’t mean we’re abandoning the idea; it doesn’t mean we are not going to revise it at some point. But when I review the total capital available in our company, we need to focus. We must ensure our employees remain healthy, safe, and stable because they are our most important asset. We’ll assess their benefits, pay sufficiently, check that our inventory is solid, ensure lenders and debts are satisfied, keep dividends being paid regularly, and store enough cash to make opportunistic acquisitions. I want to make this clear: if in a given 12-month period, we were to invest $4 million into any initiative—like RV share or another—we would prefer holding that $4 million, waiting to secure a location in the wide market to buy that land, pick up $15 million of revenue and $1 million of earnings when the market turns, because the return on capital for that $4 million would be better than any investment into RV share.

Okay. Got it. Thanks for all the color.

Next question comes from Brandon Rollé with D.A. Davidson. Please go ahead.

Thank you for taking my question. First, just on your mix. This quarter you were 55% new to 45% used. I know you want to get closer to a 50-50 balance. Do you feel like you would reach that balance next year? And is there a chance moving forward that maybe it tilts in the favor of used in the future?

It’s essential to me that we maintain our number one ranking as the new RV retailer in America, and I plan to hold that until my last day. Reaching a 50-50 used goal is an objective, and it forces us to focus more on used. However, we would never want to cannibalize or harm our new business to achieve another goal. The intent is to grow both our new and used business because we believe the addressable market for used is double that of the new market. Last year, the number of new RVs shipped out of the marketplace was more than 400,000. Still, the number of used transactions at trade-ins neared 900,000. We have to enhance our market share across used in every market, but without impairing our new business. If we reach 50-50, it will mean we continued to innovate on the new side while refining the used business without neglecting either.

Okay. Great. And then just on affordability, it seems like average selling prices for new vehicles continue to trend higher. Obviously, we’re in a higher interest rate environment. How do you feel about affordability moving forward, and maybe where pricing goes over the next 12 months?

The reason we made a strategic shift into used in the third quarter last year is when we exited all those non-core RV categories from the outdoor space. We allocated that capital into our used business because we noticed a strong return. We did this because we started feeling pressure around new pricing increases. To maintain dominance in the marketplace, we needed to provide an alternative. If you can buy an asset that’s one or two years older in a high-interest-rate environment, we can offset that payment increase by selling units at $2,000, $3,000, $5,000, or even $7,000 less than the new unit. We believe that new manufacturers are doing an excellent job controlling costs from their vendors and not passing on additional expenses to us. However, we also see their filings and margins, and we are not naive to the fact that their margins have expanded. As the largest retailer of new RVs, we will continue to negotiate the best deal since we are the largest customer, and we expect to pass those savings along to both our customers and our bottom line.

Great. And just one last question. Given your greater focus on used vehicles, how do you feel about your new vehicle inventories right now? And are they where you want them to be, or do you feel like you're a little under-inventoried or over-inventoried? Thanks.

As we mentioned, we're sitting at around 182 units per location, new on the ground. That's down from over 200. To be candid, I believe that Matt, who is the genius architect of our inventory strategy, would probably want it to be five or six units less this time of year. So in the fourth quarter, we have the tough challenge of preparing for the selling season where inventory will increase. We aim to widen the gap between our historical levels, versus where we are now. Are we overstocked by a couple of thousand units? Sure. Are we going to burn them and take a no-margin approach? No, we will be judicious about what we buy and reorder, but we are not over-inventoried even slightly.

Great. Thank you.

Next question comes from Tristan Thomas-Martin with BMO Capital Markets. Please go ahead.

Good morning, everyone. Just one question. I think you called out you’re getting 2,000 used leads a day. Do you have any data on whether these leads come from buyers looking for a new RV, another used RV, or perhaps exiting the lifestyle altogether?

It's almost impossible to always discern exactly what the motivation is for every single customer. However, looking at our sourcing volume, customers appear to be looking to either reenter the lifestyle or avoid costs of storing a vehicle. For instance, if an asset or consumer comes in around August or September, we can conclude that the customer does not want to incur storage expenses and opts to sell that asset to us in anticipation of possibly reentering next year. There are always customers who choose to exit the lifestyle for a time. However, reentrance into RV ownership happens consistently. They may be attracted to different RV styles as their kids age out.

I want to clarify at this point and drive home a little more: nearly 900,000 used RVs changed hands in this country last year, with a very small subset happening at the dealer level. Because of the transparency of our process, the lead volume we are experiencing is increasing as customers prefer a straightforward transaction rather than negotiating with strangers. Historically, dealers have tried to 'steal' the trade or purchase. We’ve opted to present our process openly. If you visit goodsam.com and create a name and unit model, you will experience the straightforward process we offer. I think consumers are recognizing the ease and fairness of our approach, which has led to growing lead volume. This idea that many people are leaving the industry is simply not accurate; it hasn’t occurred for 40 years. RVs are not a fad. They existed when interest rates were at 19%, during gas shortages, and wars. They will always exist, and our market will continue to grow with innovations from manufacturers investing in products that appeal to younger consumers.

Got it. Thank you. If I can sneak in two more. What’s your used units per location, and are you still expecting to reach 12 to 18 new locations next year? Is that still the target, or has that gone down?

Matt is going to look up the number of used units per location, but he will punctuate with we remain understocked per location compared to where we would like to be. In terms of opening locations, we will open stores. We have some built, but we are not going to spend any money or open stores until we have clearer visibility into our future. If opportunistic acquisitions arise, we will lock that transaction up contractually. However, we are currently in cash build mode and monitoring acquisition opportunities. If we have stores finishing construction today, which we do, or some finishing construction last month, which we do, we will lock that door and wait until we have visibility to prevent unnecessary cash outflows.

Tristan, just to follow up on that inventory level per store, we’re at about 79 used units per store on a same-store basis right now, which is flat year-over-year.

It's not enough. We're probably 10 to 15 units short per location, and one of the strategies when considering store openings includes the idea that we will be opening standalone used stores. We’ve made the decision on this without any additional investment. This just represents a mix and margin profile modification, and we believe returns on those stores will be strong.

Hi, good morning. Thanks for taking my question. I want to follow up on the last question. So, you reduced used vehicle inventory in 2Q, before starting to build back in Q3. What, if any, impact did that pullback have on your used sales in Q3, and what’s the timeline to reach that 10 to 15 more units per dealership you’d like to have?

I maintain that we gave up some opportunity on used sales, especially in the early part of Q3. However, by the latter part of Q3, we began to build momentum in used sales, which transitioned into October. I hope, as we proceed throughout the entirety of next year, we will yield significant results as we continue to acquire more used units. However, for the past 12 months, we've been able to procure just slightly more used units than we’ve been able to sell. So, we remain in this ongoing challenge to rebuild these channels while expanding into more stores too. We understand that this is just the beginning of our aggressive pursuit of used assets in the name of capturing more market share.

Rather than providing a specific timeline, which everyone anticipates, let me reaffirm that we're currently $400 million higher on a TTM basis than we were before, showing substantial momentum toward our target. If you ask Matt and we weren't on a public call, he’d probably estimate a couple of years for achieving that target. I think we should remain realistic about the uncertainty of the next five to six months. The used business will remain strong, but we are looking for some tailwinds to help us reach that goal. More clarity could be provided in the next six to eight months.

There are no further questions at this time. I would like to turn the floor over to Marcus Lemonis for closing comments.

Thank you so much for joining us. I just want to reconfirm that our company is committed to making whatever changes it needs to make to our headcount, SG&A, overall to deal with whatever headwinds are in front of us. In my 20 years of being in this business, headwinds happen—all things show—they do not last as long as expected. When they come back, they usually do so rapidly. We look forward to reporting our next quarter here in February. Have a great holiday.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Have a great day.