Good morning and welcome to Camping World Holdings Conference Call to discuss Financial Results for the Third Quarter of Fiscal Year 2024. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. Please be advised that this call is being recorded and the reproduction of the call in whole or in part is not permitted without written authorization from the company. Joining on the call today are Marcus Lemonis, Chairman and Chief Executive Officer, Matthew Wagner, President, Tom Kern, Chief Financial Officer, Lindsey Christen, Chief Administrative and Legal Officer, and Brett Andres, Senior Vice President Investor Relations. I will turn the call over to Ms. Christen to get us started.

Thank you and good morning everyone. A press release covering the company's third quarter 2024 financial results was issued yesterday afternoon and a copy of that press release can be found in the Investor Relations section on the company's website. Management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These remarks may include statements regarding our business plans and goals, industry and customer trends, inventory expectations, the expected impact of inflation, interest rates and market conditions, acquisition pipeline and plans, future dividend payments and capital allocation and anticipated financial performance. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the Risk Factors section in our Form 10-K, our Form 10-Q and other reports on file with the SEC. Any forward-looking statements represent our views only as of today and we undertake no obligation to update them. Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as EBITDA, Adjusted EBITDA and adjusted earnings per share diluted, which we believe may be important to investors to assess our operating performance. Reconciliation 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 2024 third quarter results are made against the 2023 third quarter, unless otherwise noted. I'll now turn the call over to Marcus.

Thanks, Lindsey. Good morning and welcome to our 2024 third quarter call. On today's call, our team will cover the operational and financial highlights of the quarter while providing comments on 2025. Before we get started, our team would like to welcome Tom Kern to his first official earnings call as CFO. As we near the end of 2024, I am immensely proud of the progress and financial outperformance that our Camping World team has accomplished. Record market share, continued strength in our Good Sam business, bucking RV industry headwinds and year-over-year improvements in our service and parts business. As we prepare for 2025, we believe that the accelerated growth of our company is squarely rooted in three foundational drivers: distribution, product, and our ability to be a market maker. The first is distribution. Dealership acquisitions are part of the DNA of this organization. In May of 2003, we acquired our first dealership and have now grown to over 200 locations at the end of the quarter, with a clear path to 320. As I sit here today, I believe we are on the precipice of one of the most opportunistic M&A environments I've seen. We will execute that distribution growth through a combination of traditional Camping World dealership locations, manufacturer exclusive locations, standalone used super centers, standalone used consignment locations, and our digital and physical Camping World auction platform. Secondly is product. Just shy of 36% of our new unit sales come from the sale of contract manufactured RVs that are exclusive to Camping World and that are manufactured between both THOR and Forest River. Over a decade ago, our company started down this path with our OEM partners. Today, we partner with them on design and sourcing, looking for innovative ways to find new consumers through creative solutions around towing weight, modernized floor plans and features with the idea of enhancing content while letting our size and scale yield true value creation for the customer. It is our plan to continue to use empirical data, market trends and leading manufacturers to further level the playing field, resulting in unit gains. Lastly, as distribution is the key to industry influence and product is the path to consumer acquisition, being a market maker is the cornerstone of value creation for Camping World. Over the last 15 years, our company has invested in accumulating and dissecting proprietary data. This highly customized data is used to initiate demand, increase lead generation, improve conversion metrics, modernize product design, create efficient inventory ordering, launch real-time market-based new and used pricing and find the white space both geographically as well as by product segment. When identifying white space, nothing is more clear than the used RV market with over 750,000 units being sold, both via dealers and private party transactions. Between the Good Sam Valuator tool and our recently launched National CW auction business, we see tremendous value in formally supplanting others as the authority or marker around vehicle values, particularly on the used side of the industry. Taken all together, we are essentially creating liquidity in the RV market through the buying or selling of inventory or the identification and capitalization of underserved markets. This enables us to constantly address the shifting in consumer preferences or macroeconomic environments by creating those pockets of opportunity in a nimble manner or mitigating certain macroeconomic headwinds in favor of our investors. These three growth drivers are the catalyst to exceeding 15% market share of the combined new and used RV market, a goal of ours. We currently sit at a record of nearly 11% share of those combined new and used RV markets. Do the math with me. 1% of incremental share would require us to sell an additional 10,000 units. Now, in addition to organic growth, which we expect, we know acquisitions are required to achieve our market share goals. From 2017 to 2023, our dealership M&A has delivered north of 20% annualized cash-on-cash returns, inclusive of all sources of gross profit. As an example, we believe that for every $100 million that we deploy towards acquisitions, on average, that equates to approximately 20 additional dealership locations. And based on history, those 20 dealership locations would yield about an additional 10,000 units of volume based on the averages. That's the 1% we're looking for. Much like how we gained significant market share and bucked industry trends in 2024, despite the interest rate and macro headwinds, we believe we have a clear path to improve profitability in 2025 without relying on any single macro metric improving materially. I'll now turn the call over to Matthew.

Thanks, Marcus. As mentioned, we continue to significantly outpace the broader RV industry. We achieved material market share gains in both July and August as a direct result of our nearly 30% increase of new sales in those months. These strong results continued throughout September and into the fourth quarter, with our October month-to-date new sales up solidly in the double digits, accelerating on a stack basis, even as we began to enter more robust comps in the months ahead. Throughout the quarter, we also gained confidence in the stabilization of the used marketplace. We began to thoughtfully procure used assets and specific segments to fulfill localized dealership needs. As we sit here today, we have nearly the same amount of used units compared to last year. This calculated replenishment of our used inventory is yielding improved trend lines. In October, we anticipate that our used same-store sales units will be flat, while our margins have improved compared to October of 2023. Informing our increased appetite for used inventory is our positively evolving view on the health of the broader RV industry and our growing pipeline of dealership acquisitions. We currently have multiple LOIs in process. Consistent with messaging that we conveyed earlier this year, we have been patient and pragmatic with our capital as M&A opportunities accelerate into the fall and winter. As we drive towards 2025, we remain focused on judiciously re-establishing our used business, maintaining our dominance as the market maker in the RV industry, all while expanding upon the tremendous progress we have made in good sales, service and our new unit market share. We see a variety of defined factors within our control next year, independent of what takes place across the broader industry, or the broader economy for that matter. We see paths to a strong recovery in the following ways. We anticipate used unit volumes to improve next year in excess of low double digits growth year-over-year. We expect SG&A as a percentage of gross profit to improve by roughly 600 to 700 basis points as we bring used gross profit dollars back into the system. We believe average selling prices will modestly increase year-over-year with vehicle gross margins within our historical range. And finally, we expect a modest year-over-year increase of new unit sales based on the early indication of a model year 2025 inventory strategy. I'll now turn the call over to Tom to discuss our financial results.

Thanks, Matt. Turning to the financials, for the third quarter, we recorded revenue of $1.7 billion, roughly flat with last year, driven primarily by a 31% increase in new unit sales offset by an 18% decline in used unit sales. New vehicle gross margin of 13.5% was primarily driven by strong performance in Class Cs. We sold over 900 units in the quarter compared to just over 400 last year, plus we accelerated sales on Class A gas and diesel segments as we continue to further de-emphasize these segments heading into 2025. These actions had the benefit of slightly bolstering our reported new ASP and GPU for the quarter. Used vehicle margins of 18.2% were in line with plan as we continue to bring fresh used inventory back into the system at a more accelerated but prudent pace. Our goal remains to be back within our historical margin range by the time we exit the fourth quarter. Good Sam services and plans saw another quarter of solid top line growth, while the growth profit comparison was impacted by a $5.5 million exit arrangement benefit in last year's third quarter. Within product services and other, our core dealer service revenues continue to show growth while product sales declined primarily due to the sale of our furniture business during the second quarter. Our adjusted EBITDA was $67.5 million with the primary driver of the year-over-year variance again stemming from our deliberate actions around used inventory procurement earlier in the year. On the balance sheet, we ended the quarter with about $180 million of cash, including approximately $152 million of cash in the floor plan offset account. We also have about $366 million of used inventory, net of flooring, and roughly $171 million of parts inventory. Finally, we own about $158 million of real estate without an associated mortgage. I'll turn the call back over to Marcus for final thoughts.

Thanks, Tom. It's important to be clear that our team's conviction stems from our current outperformance of our competitors, our growth in market share, the significant white space we see, and our belief that 2025 will be a much better year within our control. I'd like to now open up the call for Q&A.

We will now begin the question-and-answer session. The first question is from Joe Altobello with Raymond James. Please go ahead.

Thanks. Hey, guys. Good morning. So first question, I wanted to ask about your outlook for modest new unit growth next year. Does that assume any further share gains or is that essentially your market outlook? And does it assume any acquisitions?

Well, we believe that the new market is going to perform for the broader industry better than it did in 2024. And we expect to have modest increases on top of that. It is our goal that we continue to chip away and gain market share.

Okay.

If I could just even add a couple of other elements to that. I mean, when we regard ourselves in terms of judging our market share gains, we're oftentimes looking at just same-store basis. So when you think of the outlook, of course we're a highly inquisitive business. So naturally by means of acquisitions, we continue to acquire market share thereafter. So I want to make sure that's abundantly clear where we judge ourselves in the purest form possible.

Okay, got it. And on used inventory, how do you guys see that trending over the next few quarters and where is that inventory coming from? How are you procuring it?

So Joe, as we mentioned in our prepared remarks, we've been super judicious in how we've been procuring used inventory the entirety of this year, knowing that there was quite a bit of instability in the marketplace this time last year. We feel now with greater confidence that we have a clear line of sight of what the used marketplace will yield in terms of overall return and investment. So our cadence of used procurement will largely just follow a normal seasonal trend where we'd like to target about a three and a half turn on used, in which case we should be providing ourselves some leeway heading into season where we have about a three or four months supply and we'll start to ramp up that procurement and then thereafter we'll continue to just sell through as we normally would. So our cadence of use and our outlook on use is such where we believe that we could actually receive and retain pretty material market share gains here.

Joe, I think as you build out the model for yourself and others too, we're expecting low double-digit to mid-double-digit growth in that category, but more importantly, we're expecting to return to levels of gross margin that are acceptable to us. And it's going to fluctuate throughout the time of year. We're hoping to exit 2024 in the 19 to 19.5 range. And then as we get into the first and second quarter to get back to the 20% that we have enjoyed. That's a huge gap from the type of margin that we experienced this year. And that's going to make up a lot of ground in terms of earnings power.

Got it. Okay. Thank you.

The next question is from Michael Swartz with Truist. Please go ahead.

Hey, hey, good morning guys. maybe just to start on the new RV margins in the quarter. They were down year-over-year, and I think the prior two quarters, they were about flat year-over-year. I heard some commentary just on your efforts to move some of the motorized stuff? Is that the primary factor in why new margins were a little pressured in the quarter? Then I guess, how should we think about that in the fourth quarter as well?

Well, the way that we analyze margins in any category, we break it down by segment. So our performance on margins in our core business of travel trailers and fifth wheels was actually solid, but we didn't actually do anything other than aggressively start to gain market share in our C-class business. That's the part of the overall motorized RV market that we believe we had lost some footing in, and we wanted to reestablish ourselves as the clear leader in that. Clearly that comes with a higher price point and it comes with a lower margin. So when you factor in 900 units for the quarter compared to 400 and something a year ago, that's a lot of incremental unit sales at a much higher price with a lot more revenue, and it comes with a lower margin. While the margin percentage matters, the gross dollars matter too. And so those 900 units deliver some gross margin on top of that. We actually felt very good about our new margin performance, particularly in light of our exiting of some diesels and some Class A gas that quite frankly, we'd like to maybe de-stock or de-emphasize going into '25. I especially feel really good about that margin profile, given the context of even pre-COVID norms, where we were right in line with those averages that had been established in 2016 through 2019. So now that we're entering a more normalized environment, Michael, I'd anticipate that Q4 margins will probably be roughly the same as where we ended Q3, especially given our profile, where we'll actually have the opportunity to sell through quite a few more motorized. And we want to constantly reaffirm and reassert our position as the largest motorized dealer too.

Okay. That's helpful. Then maybe just, I know you guys have a lot of exposure to the Southeast and then obviously in late September, early October, we had two storms that came through. I mean, any way to think about the impact of that, maybe near term on demand, on any disruption to your retail locations, and then longer term, any thoughts on potential replacement demand from that as well?

We're quite surprised at how robust our new and same-store sales are in October, but to be candid, it was the first time in my 20 years that we had so many stores negatively affected by back-to-back storms in the same region. There were particular days within the month where we had 25 to 30 locations closed. I don't ever want to make a big deal of it, but when you do the calculus on it, we probably missed out on anywhere between three and four hundred new units, which just would have obviously raised our performance so far in October, but I think the team did pretty well. In terms of creating additional demand, we did not see widespread devastation of people's homes. We saw a lot of power outages and we saw people coming in, but unlike Fort Myers two years ago where we saw unbelievable demand, we haven't quite seen that demand and candidly, we're happy that happened, because we don't need to sell on top of other people's peril.

Perfect. Thank you, Marcus.

The next question is from James Hardiman with Citi. Please go ahead.

Hey, good morning. Thanks for taking my question. So it seems like the guideposts that you've given for 2025 are pretty macro independent, really industry independent, but I'm assuming within reason, right? Is there any way you could help us think through sort of if the industry does X, that's potential upside to the way that you're thinking about next year and conversely, what the industry would need to look like from a downside perspective to prevent sort of some of the progress that you anticipate making?

Well, we really feel like we're running an idiosyncratic business in a lot of ways, and the data is really driving a lot of it. We're forecasting internally just for our own health and knowledge that the industry will probably be in the 350,000 to 360,000 unit retail range, a slight uptick for both the industry and for us. One of the factors in determining the health of the overall industry is to understand the health of the consumer and partially what has really helped us in the last 12 to 15 months is our knowledge of how payment-sensitive buyers are. And there are really two inputs to drive that as we've talked about in the past, interest rates and the price of the units. One of them we can control. We did a really good job of driving down ASPs while still providing tremendous value to people. But as we saw the 10-year start to wiggle around through the year, we saw reductions in retail finance rates in advance of any Fed modification. In our model for 2025, we are taking a very conservative approach in our own financial statement and our own forecasting that we're only forecasting a quarter of a point rate cut in 2025. Now, many have told us that that's far too negative. Our response to that is we need to build the business model that is resistant to what that possible outcome could be. But other than that, I don't know, Matt, you want to add anything to that?

We feel very confident with what we've put out there in the atmosphere given the fact that really we are so risk-averse in the used segment. So, James, as you're starting to even plug into your model just the concepts that we've thrown out there today, it's really just a recovery of our used business going back to what we had built throughout all of 2023. And we see a lot of upside there and we see a very clear target to just replenish our stocking levels while at the same time on the new side just maintaining what we focused on this year.

I think one last thing, James, is as we look at the landscape of other dealers, we are pleased to tell you that it looks like a large chunk of the RV market is much healthier than it was a year ago. They have the right disciplines, the good inventory strategy, and I compliment both THOR and Forest River for helping drive that process through discipline by not overproducing inventory. Unfortunately, there is still a subset of dealers that may be in a little bit more vulnerable shape. And so, as we head into 2025, we are excited to be opportunistic about doing what this company does very well, which is making acquisitions that on a long-term basis have 20-plus percent returns on a cash-on-cash basis. We have a number of LOIs that are working, and the way we think about growing market share and growing volume is first organically. We believe that on a same-store basis from a new unit and used unit volume standpoint, we have room to grow and room to improve on a standalone basis. We're not pleased with the number of units that each individual store is selling, and we know that as we drive towards the mid-cycle, that will start to ratchet up, and that will be great. On the growth side, we see a ton of opportunities. In fact, I think one of the things that has really benefited us well is that a number of deals that we looked at the end of 2023, we paused on. We pulled back because we really did believe that value would only get better. We're starting to reengage with those folks now and look for other opportunities and expect that as we head into 2025, we'll have a more traditional list of opportunities much like we did in the past.

There are several follow-ups I could address, but I want to focus on the last point. You reported a net decline in dealerships during the third quarter. Can you provide insight on the store count for the end of 2024 and, more importantly, for 2025? Additionally, could you give us an update on your progress towards reaching 320? It seems that as the industry improves, underperforming dealers might be less inclined to sell, yet you appear to suggest the opposite. Please share your updated thoughts on the mergers and acquisitions progress and trajectory.

Well, Matt, Lindsey, Tom, and I have a very, very disciplined approach to how our existing operations perform, and if the working capital and inventory deployed in those locations is not yielding us something, we unfortunately part ways with that location and dispose of that real estate, and we've done that over the course of the 20 years, time in and time out. We don't ever have pride of authorship. As we look at opportunities, and I'd like Matt to weigh in here, as we look at opportunities, we really want to find out where the white space is. And so Matt and Lindsey have been instrumental in looking at the market share reports and where that white space exists.

James, as we said in the prepared remarks, we obviously have clear-cut targets in terms of our market share gains, growth, a new and used combined, and markets also allow approach or multifaceted approach to having not only traditional Camping World stores, but also perhaps used-only stores as well, our exclusive stores, our consignment stores, so this opened up the breadth of possibilities within all these local marketplaces, and furthermore, opened up the breadth of acquisition targets. So as we head into this year, we feel like we're back into this cadence of being able to target, as we've said previously, at least 12 to 15 stores every year, and in certain years, there's going to be opportunities that will present more beyond that 12 to 15.

I'd like to be a little more optimistic than Matt. It's something that we go back and forth with, and Lindsey kind of mediates, but I think we can probably do.

I think we've historically said 12 to 15 stores, and in past years we've surpassed that, and done upwards of 18 stores, like we saw last year. So we're excited about the growth opportunities that present and the different ways we can get into the channel.

And I just to put a finer point on it, and I don't want to put words in your mouth, but it sounds like you're saying that 2025 is going to be one of those sort of better than 12 to 15 types of years?

As long as the transactions that are put in front of us are materially accretive to our business, they add value to our market share, they don't cannibalize what we have, and we feel comfortable deploying that capital.

Got it.

Yes.

Thanks, guys.

The next question is from Noah Zuckin, KeyBanc Capital Markets. Please go ahead.

Hi, thanks for taking my question. Maybe this is more of a qualitative question, but when you think about like how your inventory on the new side was positioned kind of this time last year and your plans kind of positioning ahead of selling season, how has your inventory positioning kind of adjusted year over year? And what's kind of your approach to the new business that gives you confidence that you'll be able to kind of drive modest growth? And then on the margin side, should we expect margin improvement on new? Thanks.

No, we reflect upon the entirety this year in our inventory management, I feel like we've done a very effective job at managing playing into market share gains, playing to certain segments, actually bending those curves of affordability for our consumer base. And as such, we sit here today with nearly the exact same mix of model year '25 to '24, as compared to last year model year '24 to '23, where over half of our new inventory right now is model year 2025, as we're heading in towards the back quarter of the year. As we prepare for next year, we have further confidence that manufacturers will not be subjecting us to the same deflationary type of environment that we experienced last year. As such with pricing stability, we don't have to worry about our model year 2024's to the same extent that we did our model year 2023's this time last year.

I think one thing that Tom has done very well in this role is he's helped us identify. Matt and I get excited because we're happy that our same-store sales are up. But Tom has done a nice job of pointing out deficiencies that we have and whether that was in the $25,000 to $30,000 travel trailer, every single segment is getting analyzed to see where do we gain market share? Where do we lose market share? I think a lot of people look at it holistically. We go all the way down the floor plan, type code, price point, segment, et cetera. And I think having a finance team partner with the inventory team has really shown us where there's opportunity in '25 that give us the confidence for a modest increase in '25, which is stacked on top of year after year of growth.

Thank you.

The next question is from Scott Stember with ROTH. Please go ahead.

Good morning. Thanks for taking my questions.

Sure.

Marcus, you touched briefly on the competitive environment, talking about some dealers seemingly having more aged inventory than they need. Could you talk about a little bit more granular of what you're seeing in the competitive marketplace and how that's affecting your business?

Yes, I don't think there's anything that's happening in the general marketplace that is putting any pressure on demand, margin, or anything of the sorts. When I look at the haves and the have-nots between the dealers who have disciplined approaches to inventory, understanding that the ASPs needed to drop, there's a subset of dealers who may not have joined with that same conviction. And when you look at inventory and we study other dealers on a minute-by-minute basis to understand market pricing and how it's affected, we notice that some dealers have continued to rely on segments that could either be contracting or are softer. We're a little concerned about where the overall diesel motorhome market is, but there are some top performers in that category. But the facts don't lie. That segment continues to contract. Start thinking about how we're going to allocate our dollars month after month, quarter after quarter, seasonally adjusted. We continue to move away from the diesel motorhome and down into the Class A gas entry-level segment, the C class and B class entry-level segments, and really understanding that the difference between our performance and those who may be struggling is that delta in approach as it relates to ASP and stocking categories. I don't think there's a ton of inventory still in the channel that gives us much pause other than maybe what's in the motorized segment. But when you look at the traditional travel trailer business, which is the core of the RV market or the entry-level fifth-wheel business, as we study every single dealer out there and look at their inventory and accumulate that information, we're not troubled by anything that we see that directly competes with us.

Got it. And can you remind us how a 1% move by the Fed is how much that benefits for you guys and whether it's floor plan versus your traditional debt?

It could be up to $30 million, obviously. It depends on a floor plan rate that fluctuates a little bit throughout the year and our floor plan balance throughout the year because it does adjust seasonally.

I think from a cash flow standpoint and from a net income standpoint and from an EBITDA standpoint, any cut in rate is a super benefit to our business from a floor plan standpoint, from a senior credit facility standpoint. But I think secondarily, the silver lining in a rate cut is improved consumer confidence and that silver lining in a rate cut is that because our customers are payment sensitive, and price and rate are the two inputs, a reduction in rate could allow the ASP to go up slightly. And when we look at gross profit per unit in raw dollars, not percentages, any increase in ASP, even $1,000, is incremental gross profit on a per unit basis that we have been missing for the last 15 to 18 months. As that ASP comes back, even if the margin percentage remains constant, and let's call it between 13.5 and 14.5, that 1%, I mean that $1,000 increase in ASP is still $140 to $150 just in gross profit. When you're selling 60,000 to 70,000 new units a year, that starts to add up. I think the most important takeaway from that is there is no incremental cost on the fixed cost side to running our business when those GPUs go up. Yes, we pay a little more commission, but everything else remains constant, and that's where we get the scale out of our business.

Got it. And just one last quick one on the parts and service side. I think you guys said that the pure service side, I guess customer pay was up in the quarter. Could you quantify how much it was up and anything that's driving that?

Sure. We don't report it that way, but I mean, I would say it was up on a single digit percentage basis year-over-year in the quarter. We felt really good about where our customer pay work was in addition to how the teams performed on managing new inventory that's come in and managing the warranty process with the manufacturers and making sure that we're working to get units, the front line ready and customer facing and ready.

One of the things that's always a huge benefit from any slowdown, if there is any benefit, we try to find the happiness in all of it, is that we refine our process and we get better at some of the blocking and tackling that sometimes good times, really good times, maybe we get a little bit of amnesia. And I think the finance team did a really good job of pointing out to Matt and me where they saw gaps and white space and opportunity. Our collision business continues to perform at a nice level and we continue to expand that. But at the end of the day, we want to see customers in our service base, because customers in our service base demonstrate usage of the product and the enjoyment of the lifestyle. So we look at our overall piece. One thing that is definitely a sore spot for us or an opportunity for improvement is we do need to see our customers that we sell to more often. We have recognized that our retention of customers who buy from us has room for improvement in the second, third, and fourth year of their ownership. We know that customers trade between 3.5 and 4.5 years. We're not pleased. We're not pleased and we'll be developing some strategies and rolling them out in early '25. We are not pleased in our ability to retain those people at the rate that is consistent with how we do everything else in the company.

Got it. That's all I have. Thank you.

The next question is from John Kelley with Northcoast Research. Please go ahead.

Thanks for taking my question. I wanted to ask a big picture strategy question. I think early on in the call, you guys gave us some stats on the private label penetration. I was hoping you could just give us those again and where they were historically, but really wanted to get your thoughts on how you use private label going forward from here. Because I feel like there's a lot of focus on store accounts and the market and what you're going to grow. But I feel like this private label business that you guys have is differentiated and an advantage. We're just curious for 2025 how you're planning on using private label to distinguish yourself in the market and maybe augment those share gains? Thanks.

Yes, I think this is a little bit of an inside joke inside of our company. But 20 years ago, when I was the only person here in this room today, I had this idea of private label. And back then, private label meant going to a manufacturer, looking at a model they already make, and changing a graphic or changing a small feature. I think the introduction of Matt Wagner into our business 17 years ago and his deep dive on all parts of the business, particularly inventory, really evolved our perspective. We no longer even call it private label. We call it contract manufacturing. And the reason that we do it that way is because we really look at the relationship between the product that we want to bring to market and the expertise that the manufacturers have as an unbelievable resource. And if you could take a step back and study what Matt has done in that business. And at some point, we're going to want to show people that of understanding how to use key data and metrics to develop the right floor plan at the right price at the right time with contenting the product up, not decontenting it down, and then using our size, our scale, our relationship with suppliers that feed into those manufacturers, our intensity around ordering with those manufacturers when we know they have soft spots to be a good partner with them. Matt, do you want to add anything to that?

First, I want to clarify, Marcus is being far too kind. We're the team of us over years that assembled all this research and information. We think of how much we had to gather in terms of providing insights to better inform us and our OEM partners as to what floor plan solutions, manufacturer solutions we need to bring to the overall marketplace to satisfy that demand that in some situations, no one was satisfied. When we think about the number one selling floor plan in the industry, the Coleman Lantern 17B, on first glance, it looks like a relatively utilitarian concept or idea. It was something that hadn't even existed in the marketplace until 2019. And that came off of years of research to understand what was that actual price point or those features that consumers required, where we used what was at the time, goodness, about a decade plus of information to target certain floor plans, content features, et cetera. And this has been an evolution over two decades now, where to Marcus credit, he's really put us all in a stranglehold to say, okay, I understand that we have a concept floor plan. We also need to go out and find the right manufacturing partner, as well as the right brands to put on these units. So over the last couple of years, we've been introducing not only Coleman, as people have understood that for many years, but like the Eddie Bauer product, where the Eddie Bauer is actually a licensed product to us as a company that we sub licensed to different manufacturing partners based upon their ability or capability to satisfy certain segments price points. And John, your question is very insightful in so much as by means of us expanding to all these different categories, which by the way, we're up to 36 different manufacturer private label brands, we're able to enter into a number of different marketplaces that traditionally we would be confined by different OEM brands. So what I mean by that is there's certain OEM brands that are franchised within Dallas, Texas, by means of having a full offering of all of our private label and contract manufacturer brands, we're able to enter into any marketplace within the United States.

I think as we look at it, we talked earlier in the call that distribution is key, and we have established distribution and want to ramp that up. But product is more important than anything. And I think that when you look at our company overall, most people don't realize that we have an entire department dedicated to product development, product development, and that you don't see that in a retailer. And the reason that we want to do that is we want to always have a competitive advantage against everybody else, and then use our scale and our relationships with manufacturers to deliver a superior product. Many people have challenged us as they see us driving down ASP that other competitors are going to follow that. And we welcome that competition because when they go left, we're going to go right, and we're going to stratify that product offering in a very different way. And that doesn't always mean going cheaper. That means being more innovative, focusing on tow capacity, looking at different floor plans. Because for us, if the industry isn't capable of widening its own total addressable market, we have to take matters into our own hands and find a way to widen the total addressable market for our business, which is what we believe the team accomplished in growing our market share so robustly and why we think we can compound on top of that.

Great. Thank you guys.

The next question is from Tristan Thomas-Martin, BMO Capital Markets. Please go ahead.

Hey, good morning.

Good morning.

I just want to follow up kind of quickly on John's question about kind of historical new RV margins. I think you said Q4 kind of flattish compared to Q3, but then how should we think about kind of the cadence of new RV margins next year?

Our historical goal in more recent times is 14 to 14.5. And that fluxes during different times of the year. As you would imagine in the fourth quarter when it's cold outside and a guy's trying to make a commission, he's going to take a shorter deal. In the middle of the summer, it's better. But one thing that is very important to note, as we drive towards a mid-cycle environment, which we believe is coming here in the very near future, margins tend to get a little bit more robust. They get more robust because there isn't excess inventory sitting everywhere. And while that sounds obvious to some, the reason we're so pleased with our 13.5 in Q3 is that we're still not in a robust market. We accelerated our motorized business. And so as we look at 2025, we would strongly encourage anybody building a model to anchor in that 14% range.

Okay. Thank you. And then just quickly kind of this may be a re-emphasis there on Class Cs. Previously, you mentioned kind of going left when everyone's going right. Is this kind of just looking even further out if we get some rate cuts, the portability improves that we're going to planning for maybe a mixed shift up in the next year or two? Thanks.

I don't think we want to chase the up market. I think we want to acknowledge that every single segment has to be viewed independently. And so what we would ask the market to study the way we do is travel trailers in its own, fifth wheels, C classes, B's, Class A gas and diesel. And we try to find the white space inside of each one of those. As it relates to the diesels, we're going to leave that white space at this point to other folks. That's just not a great return on investment for us. But on the Class C side, we know we have to do a better job of driving down to a value point where monthly payments become real. Not too long ago, maybe a decade ago. And I know that sounds like a long time. We would have a $399 Class C payment. That was $499. That same unit today is $699 or more. So we have a lot of inflation over the last decade. And we have to work hard with our very distinct manufacturers to buy in a way that allows us to drive that number down to be ahead of the market. But more importantly, and I'll say this again, we don't want to get there by de-contenting. We want our customers to see high value when they buy from us and high features and benefits at a great price.

Tristan, if I could even just piggyback off that and relate back to John's question from earlier about our contract manufacturing products, where we felt like we missed the mark in our Class C segment in fulfilling certain segments, price points and floor plans. And this is where our exclusive brands come into play, where we've been working diligently over the last, goodness, six, seven months, identifying that there's a certain subset of the marketplace that no one was satisfying. So I would anticipate as we head into next year, that we'll start to replenish the shelves and start to pick up more material gains than the Class C segment, especially.

Awesome. Thank you.

Next question is from Brandon Rollé with DA Davidson. Please go ahead.

Good morning. Thank you for taking my question. Just briefly on the fourth quarter, you had mentioned margins would stay kind of flat. Could you touch on your expectations for SG&A as a percentage of gross profit and maybe any adjusted EBITDA expectations? Thank you.

Well, we don't provide guidance in any quarter. So I want to just start with that. But we obviously are looking to continue to improve. As we think about the SG&A as a percentage of growth, the fourth quarter is always a tough quarter. It's like in the mid-90s. That's a quarter where in December, I mean, it's rough out there. As we head into 2025, which is what we're really focused on, we're looking for those 600 to 700 points of improvement based on where we think we're going to finish this year. And we think we're going to finish this year probably around 85, way higher than we're comfortable being at. But we know the reason for that. And the reason is principally the evaporation of used volume and used growth that we elected to inflict on ourselves to mitigate risk. As that comes back and margins start to normalize and we take away the stores that we eliminated and some of the businesses that we got rid of that didn't make money, we're expecting that to come down into that 77 to 78 range. I will tell you that as a management team in a normal mid-cycle environment, we have a goal of being in the low 70s. That is the gold standard. So 78, while we're happy it's not 85, that isn't good enough for us.

All right. Thank you.

The next question is from Bret Jordan with Jefferies. Please go ahead.

Hey, good morning guys.

Good morning.

You talked a couple of times with a pair of marks about sort of being a market maker in the used category. Is that a change of strategy at all? And I guess the margin impact, if you're going to provide liquidity in that market and buying used units, you're probably not going to resell, put them back into the wholesale market. Is that something that's either going to be changing capital allocation or margin as you expand the market-making strategy?

Well I could even start, I guess, at the top, I don't think that there's really a deviation in terms of overall strategy. I would maintain that we've largely been able to push the market in different ways that perhaps we just had to step in and intervene to actually grow the over available addressable market within this marketplace. That goes back to Marcus comments about contract manufacturing. And within the used marketplace, I see us being really that market maker and we established that last year. It just so happens this year our risk aversion played into an overall decline in our gross margin profile on the used side and our gross profit profile. And then also to take a stab at your next question, I do see actually an opportunity for us to buy in the open market from consumers and just as well resell to wholesalers. And we've seen the success of that through our auction network. In fact, I mean, we could reflect upon a number of anecdotes most recently where we were able to go to other different auctions, buy units, turn around and resell them through our auction and pick up the arbitrage to other wholesalers. So there's this whole robust marketplace that exists out there and we're only about 7% of the entirety of the used marketplace. What's lost in that 7% is the amount of units that are sold from consumer to consumer. In another marketplace that exists out there where neighbors disconnect with other neighbors or Facebook marketplace or Craigslist, we feel like we could insert ourselves in that overall environment, provide the safety and security and comfort of dealing with a dealer that is going to be specialized in not only title transfer and any sort of payoff information but just as well financing opportunities to make it more affordable to these consumers.

There are two proof points that I think substantiate our position around being a market maker. The first is the Good Sam Valuator and its use of historical data, current new invoice pricing, and a variety of other factors that give consumers and other dealers and banks and insurance companies a better proof point on what units are worth. And we often find that other dealers are using that tool, quite frankly, not only to get a value but to sometimes send customers to us. When you look at our used turns at the 3.5 rate, that encompasses everything that we buy, whether we buy it to wholesale it or we buy it to retail it, that's part of creating that cycle of bringing units in and out. The second proof point is our achievement of a high percentage of NADA when other dealers and banks drive units through our auctions. The example that Matt was mentioning around auctions is we went to a particular auction and we're buying something at 65%, 70%, or 71% of what is this so-called book. And then that same unit, one week later in the same geographic area, is running through our auction and bringing 8 to 12 points more one week later selling the same unit. When we see banks validate that position in our mind, that is the definition of being a market maker.

Okay. So is this something we'd expect to increase sort of at the P&L? Will the wholesale volumes be going up? I mean, is it something that strategically is shifting or is this something that you just generally have been doing and we're talking about it more now?

We're expecting to continue to ratchet that up, because our online auction business and our physical auction business give us the ability. But because we're capitalists, anytime we can buy something for one price and sell it for more than what we bought it for, we're going to extract as many opportunities as we can. And when we look at driving volume and driving market share, one of the principles of getting to 15%, which is an incremental, we'll call it for this discussion, 40, 50,000 units. One of the ways that we have to do that is to find all the different avenues in which we can buy and sell new and used units. This is really us shooting for a goal, making sure that it's profitable, and recording the transaction.

And as we previously declared about a year ago, we realized that as we entered back into the used marketplace, that we needed to create a more efficient marketplace. So in December of last year, we hosted our first auction. As we sit here today now, we have just shy of 20 under our belt, where we've gotten into a nice cadence now where we're routinely, oftentimes twice a month, if not three times a month in certain time periods, hosting an auction somewhere in the country, while at the same time over the last five months, we've been hosting online virtual auctions into perpetuity, where they're just timed auctions. Think of like an eBay type of model. So I don't think it's necessarily deviation at all. It's rather just continued evolution of this opportunity to remarket and build our market share.

And one last piece before we go is if you take a look at RVs.com, it's really been established for us to supplant other marketplaces. And whether that's some of our inventory, other dealers' inventory, private parties' inventory, we're looking to create this marketplace where private parties can go to a trusted source without paying egregious fees and be able to transact with other consumers and generate leads.

Okay, great. And I guess quick follow up, any updates on the Good Sam process? I think you talked about it last January, the capitalists selling things for more than you paid for them. Is that still for sale?

So because we're capitalists, and that's a great point, we had a lot of discussions both with our board and as a senior management team. And what we really realized through that process is Good Sam, particularly in 2024 and '23, proved to be the absolute rock and the stable part of our business that despite all the industry headwinds, just really wasn't getting phased. So that was one bright spot. The second thing is, is that the superb management team at Good Sam has just said to us, look, we want to be part of this organization. We just don't want to be limited to only being in the recreational space as it relates to RVs. Give us a chance to explore marine and power sports and auto. As a reminder, that's an asset-like business with no real contingent liability on its books other than a little bit of claims on roadside assistance. So when they ask for permission to go explore other markets, auto, marine, power sports, we really realized that the future of that business could be far more robust if we allow that team to do that. After seeing those two proof points, we've made the decision and the board has signed off on it that Good Sam is here to stay.

Okay, great. Thank you.

The next question is from Alice Wycklendt with Baird. Please go ahead.

Yes, good morning guys. Thanks for taking my question. Maybe just want to touch on the F&I segment. I mean, nice performance there, but as we look into 2025, how should we be thinking about that maybe in the context of, is there any substantial difference between the attachment rates for new and used as you look for use to outgrow new?

You're spot on. Oftentimes with a used asset, that F&I as a percent of that total revenue will actually be slightly lower. So I would anticipate that F&I percent, I'd tweak down a little bit compared to this 13 plus percent that we've been seeing this year. And we've been overly indexing throughout the entirety of this year towards the new segment. So as we start to reach more parity between new and used, which we actually like that segment being more leaning in that favor, I would anticipate as you start to model on next year, I'd tweak it down maybe like 12.5-ish percent.

The only counterbalance to that is a slight increase in ASPs. And so with a slight increase in ASPs, while Matt's percentage is definitely accurate, you're applying that to a larger ASP. And so the total gross dollars that we will actually bring in should be relatively consistent on a per unit basis.

Great. That's helpful. That's it for me. Thanks, guys.

This concludes our Q&A question session. I would like now to turn the conference back over to Mr. Lemonis.

Great. Thank you so much for supporting our business. We look forward to reporting Q4 in the coming months. Take care.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect.