Business Overview and History
Lazydays Holdings, Inc. (GORV) has been a prominent player in the recreational vehicle (RV) industry since its inception in 1976. The company has weathered numerous challenges, including the recent industry-wide downturn, and is now embarking on a transformative journey to reshape its future. With a series of strategic transactions, Lazydays has emerged with a significantly strengthened financial foundation and a more focused dealership portfolio, positioning it for long-term success.
Lazydays operates a network of 23 RV dealerships across 14 states, offering a comprehensive portfolio of products and services to RV owners and outdoor enthusiasts. The company’s operations primarily consist of selling and servicing new and pre-owned RVs, arranging financing and extended service contracts, and selling related parts and accessories. Lazydays maintains an extensive inventory of over 4,250 RV units and provides service through more than 400 service bays across its locations.
Lazydays has earned a stellar reputation for delivering exceptional RV sales, service, and ownership experiences. The company’s largest dealership, located near Tampa, Florida, is believed to be the world’s largest RV dealership in terms of on-site inventory. This flagship location showcases the company’s commitment to providing customers with an extensive selection of RVs and related products.
Throughout its history, Lazydays has faced various challenges, including industry-wide economic pressures and fluctuations in consumer demand. In 2020, the company experienced a decline in revenue and profitability due to the COVID-19 pandemic, which significantly impacted the RV industry. However, Lazydays demonstrated its resilience by implementing cost-saving measures and focusing on maintaining healthy inventory levels to navigate the challenging environment.
Despite these obstacles, Lazydays has remained a prominent player in the RV industry, leveraging its extensive experience, strong relationships with RV manufacturers, and unwavering commitment to customer service. The company has consistently invested in its people, fostering a culture of innovation and strengthening its partnerships with valued original equipment manufacturer (OEM) partners to provide the best RV experience in the industry.
Financial Performance and Liquidity
Lazydays’ financial performance has been impacted by the challenging industry conditions in 2024, with both revenue and net income declining year-over-year. In the third quarter of 2024, the company reported total revenue of $213.5 million, a decrease of 23.9% compared to the same period in 2023. Net loss for the quarter was $19.8 million, or $1.37 per share, compared to a net loss of $6.8 million, or $0.48 per share, in the prior-year quarter.
For the most recent fiscal year (2023), Lazydays reported revenue of $1.08 billion, net income of -$110.27 million, operating cash flow of -$36.48 million, and free cash flow of -$131.72 million. The company’s financial position has been further impacted by economic headwinds and natural disasters, including Hurricane Helene in September 2024, which resulted in an estimated loss of 10 sales days, and Hurricane Milton, which affected the company’s three Florida stores shortly after the quarter ended.
Despite these challenges, Lazydays has taken significant steps to strengthen its financial position. In November 2024, the company announced a comprehensive recapitalization and asset sale transactions, which are designed to provide it with a significantly strengthened financial foundation and a more focused dealership portfolio.
The key highlights of these transactions include:
Equity Raise: The company closed a $30 million common equity private placement (PIPE) with two of its supportive investors, Alta Fundamental Advisors and Coliseum Capital Management, providing immediate additional liquidity to support operations.
Rights Offering: Lazydays plans to launch a $25 million rights offering, allowing all shareholders to purchase common stock at the same price as the PIPE investors and Camping World.
Preferred Stock Exchange: The company agreed to exchange all of its outstanding convertible preferred stock for common stock, eliminating the preferred stock’s $68 million liquidation preference and $9 million in annual dividend requirements.
Credit Facility Amendment: Lazydays executed an amendment to its credit facility with its lender group led by M&T Bank, providing significant financial covenant flexibility through the first quarter of 2026.
These transactions are expected to result in a meaningful reduction in Lazydays’ debt, interest, and preferred stock dividend payments, as well as substantial added cash to the balance sheet. The company is anticipated to have approximately $35 million in cash, bringing its net debt down to $26 million.
As of September 30, 2024, Lazydays had $13.54 million in cash and $41 million outstanding on its $41 million revolving credit facility. The company also has a $400 million floor plan credit facility, of which $316.55 million was outstanding. The company’s debt-to-equity ratio stands at 3.51, while its current ratio is 1.01 and quick ratio is 0.18.
It’s worth noting that Lazydays was not in compliance with certain financial covenants under its credit agreements as of September 30, 2024, but obtained temporary waivers from its lenders. On November 15, 2024, the company entered into an amendment to its credit agreement providing financial covenant flexibility through Q1 2026.
Operational Initiatives and Outlook
Lazydays has implemented various operational initiatives to navigate the industry challenges. The company has focused on maintaining healthy vehicle inventory levels, improving finance and insurance (F&I) performance, and achieving substantial total gross margin improvement.
In the third quarter, the company’s F&I revenue remained relatively flat, decreasing by only 0.8% year-over-year. However, F&I average gross profit per unit increased by 15.9%, highlighting the success of Lazydays’ efforts to demonstrate the value of its finance and insurance offerings to customers.
The company’s performance across its key business segments in the third quarter of 2024 was as follows:
Pre-Owned Vehicle Retail: Revenue decreased 19.8% year-over-year, driven by a 6.7% decrease in retail units sold and a 14.1% decrease in average selling price per retail unit. Pre-owned vehicle retail gross profit decreased 28.7% due to the decline in units sold and a 230 basis point decrease in gross margins.
Finance and Insurance (F&I): Revenues were relatively flat year-over-year, decreasing 0.8% in the quarter, primarily due to the 14.3% decrease in total retail units sold, partially offset by a 15.7% increase in F&I revenue per unit.
Service, Body, and Parts: Revenue decreased 9.5% in the quarter, while gross profit increased 0.3%, reflecting lower demand but improved cost control.
Looking ahead, Lazydays’ management is optimistic about the company’s future. With the strengthened financial foundation and streamlined dealership network, the company believes it is better equipped to navigate the evolving RV landscape and deliver on its commitment to providing the best RV experience in the industry.
The broader RV industry is showing signs of recovery, with the RV Industry Association reporting that total wholesale shipments of new RVs for the nine months ended September 30, 2024, were 256,410 units, compared to 238,120 units for the same period in 2023, an increase of 7.7%. The industry is forecasting continued growth through 2025, which could provide tailwinds for Lazydays’ operations.
Risks and Challenges
Lazydays faces several risks and challenges that may impact its future performance. The RV industry is cyclical and heavily influenced by general economic conditions, consumer confidence, and fuel prices. Any downturn in the economy or a significant increase in fuel costs could adversely affect the demand for RVs and, consequently, Lazydays’ sales and profitability.
Additionally, the company’s operations are subject to seasonal fluctuations, with higher sales typically occurring in the first half of the year. Severe weather events, such as hurricanes, could also disrupt the company’s operations and impact its financial results, as evidenced by the recent impacts of Hurricanes Helene and Milton on the company’s Florida stores.
Lazydays also faces competition from other RV dealers, as well as from online retailers and direct-to-consumer sales channels. The company’s ability to maintain its competitive edge and market share will be crucial to its long-term success.
The company’s geographic concentration, with six stores in Florida and a primary focus in the Southeastern United States, exposes it to regional economic fluctuations and weather-related risks. Diversifying its geographic footprint could help mitigate some of these risks in the future.
Leadership Changes
In September 2024, Lazydays announced a significant leadership change as part of its efforts to return to growth. John North stepped down as CEO, and Ronald Fleming was appointed as Interim CEO. This transition underscores the company’s commitment to adapting its leadership strategy to navigate the current industry challenges and position itself for future success.
Conclusion
Lazydays Holdings, Inc. has demonstrated its resilience and adaptability in the face of industry challenges. The company’s recent strategic transactions have strengthened its financial foundation and positioned it for a more focused and profitable future. While the road ahead may not be without obstacles, Lazydays’ commitment to innovation, customer service, and its strong brand reputation position it well to navigate the evolving RV landscape and deliver value to its shareholders.
The company’s focus on growing its pre-owned vehicle and F&I businesses, as well as managing costs in the service segment, has helped to partially offset the declines in new vehicle sales. As Lazydays continues to navigate industry headwinds, its strategic initiatives, including the recent recapitalization and asset sales, should provide a more stable platform for future growth and operational improvements.
With a strengthened balance sheet, a more focused dealership portfolio, and a commitment to operational excellence, Lazydays is poised to capitalize on the anticipated growth in the RV industry. However, the company will need to remain vigilant in addressing ongoing challenges, including economic uncertainties, weather-related risks, and intense competition in the RV market. By leveraging its strong market position, extensive inventory, and commitment to customer service, Lazydays has the potential to emerge as a stronger player in the RV industry in the years to come.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.