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Lazydays Holdings(GORV) - 2021 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements Unaudited financial statements for Q3 and YTD September 2021 show significant growth in assets, revenue, and net income, including a 2020 restatement Condensed Consolidated Balance Sheets Total assets increased to $562.3 million by September 30, 2021, driven by acquisitions and inventory, with equity more than doubling Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 (Unaudited) | Dec 31, 2020 (Restated) | Change (%) | | :--- | :--- | :--- | :--- | | Total Current Assets | $242,754 | $203,881 | +19.1% | | Inventories | $140,741 | $116,267 | +21.0% | | Goodwill | $81,473 | $45,095 | +80.7% | | Total Assets | $562,319 | $443,998 | +26.6% | | Total Current Liabilities | $170,541 | $174,177 | -2.1% | | Total Liabilities | $327,647 | $303,499 | +8.0% | | Total Stockholders' Equity | $179,689 | $85,516 | +110.1% | Condensed Consolidated Statements of Income Q3 2021 revenue grew 47.7% to $318.7 million with net income surging to $31.0 million, reflecting strong year-over-year growth Financial Performance Summary (in thousands, except EPS) | Metric | Q3 2021 | Q3 2020 (Restated) | YoY Change | Nine Months 2021 | Nine Months 2020 (Restated) | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $318,728 | $215,723 | +47.7% | $912,512 | $620,538 | +47.0% | | New/Pre-owned Vehicles | $285,781 | $194,552 | +46.9% | $820,875 | $553,245 | +48.4% | | Other Revenue | $32,947 | $21,171 | +55.6% | $91,637 | $67,293 | +36.2% | | Income from Operations | $38,139 | $17,532 | +117.5% | $97,867 | $36,936 | +164.9% | | Net Income | $30,969 | $3,700 | +737.0% | $65,125 | $12,409 | +424.8% | | Diluted EPS | $1.16 | $0.11 | +954.5% | $2.75 | $0.40 | +587.5% | Condensed Consolidated Statements of Cash Flows Operating cash flow decreased to $86.2 million for YTD September 2021, while investing activities significantly increased due to acquisitions Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 (Restated) | | :--- | :--- | :--- | | Net Cash Provided By Operating Activities | $86,232 | $141,901 | | Net Cash Used In Investing Activities | ($79,804) | ($7,005) | | Cash paid for acquisitions | ($63,036) | ($2,749) | | Purchases of property and equipment | ($16,907) | ($9,219) | | Net Cash Used In Financing Activities | ($2,913) | ($84,700) | | Net repayments under floor plan | ($23,995) | ($96,199) | | Proceeds from exercise of warrants/options | $19,898 | $40 | | Net Increase In Cash | $3,515 | $50,196 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, business combinations, and financial instruments, highlighting the 2020 restatement for warrant accounting and 2021 acquisitions - The company restated its financial statements for the three and nine months ended September 30, 2020, due to adjustments in warrant accounting. This resulted in a $10.2 million decrease in net income for the nine-month period, from a previously reported $22.7 million to a restated $12.4 million29 - In 2021, the company completed acquisitions of Chilhowee, BYRV, and Burlington. The total consideration for 2021 acquisitions was $63.0 million, resulting in the recognition of $36.0 million in goodwill and $21.3 million in intangible assets747576 - On July 14, 2021, the company entered into an amended and restated credit agreement with M&T Bank for an aggregate facility of approximately $369.1 million, consisting of a $327 million floor plan facility, an $11.3 million term loan, a $25 million revolving credit facility, and a $5.8 million mortgage loan facility97 Revenue Disaggregation (in thousands) | Revenue Source | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | New vehicle revenue | $181,395 | $130,297 | $550,366 | $362,139 | | Preowned vehicle revenue | $104,386 | $64,255 | $270,509 | $191,106 | | Parts, accessories, and services | $12,233 | $9,470 | $34,571 | $29,400 | | Finance and insurance revenue | $20,130 | $11,073 | $54,476 | $35,108 | | Campground and other revenue | $584 | $628 | $2,590 | $2,785 | | Total | $318,728 | $215,723 | $912,512 | $620,538 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights strong Q3 2021 performance driven by consumer demand, acquisitions, and improved operating leverage, supported by a new credit facility Results of Operations Q3 2021 revenue grew 47.7% to $318.7 million and gross profit surged 82.9% to $90.3 million, driven by strong vehicle sales and acquisitions Q3 2021 vs Q3 2020 Performance (in millions) | Metric | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $318.7 | $215.7 | +47.7% | | New Vehicle Revenue | $181.4 | $130.3 | +39.2% | | Pre-Owned Vehicle Revenue | $104.4 | $64.2 | +62.6% | | Other Revenue | $32.9 | $21.2 | +55.2% | | Gross Profit | $90.3 | $49.3 | +82.9% | | Income from Operations | $38.1 | $17.5 | +117.7% | - The increase in new vehicle revenue for Q3 2021 was driven by a rise in units sold (from 1,645 to 2,192) and a higher average selling price (from $76,900 to $82,800)189 - SG&A as a percentage of gross profit, a key metric for monitoring overhead, improved to 52.7% in Q3 2021 from 58.0% in Q3 2020, indicating better operating leverage as gross profit growth outpaced SG&A expense growth181 Non-GAAP Financial Measures Adjusted EBITDA for Q3 2021 increased 118% to $41.5 million, with margin improving to 13.0%, reflecting strong operational performance Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q3 2021 | Q3 2020 (Restated) | Nine Months 2021 | Nine Months 2020 (Restated) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $30,969 | $3,700 | $65,125 | $12,409 | | Interest, Taxes, D&A | $11,049 | $6,944 | $38,308 | $22,350 | | Subtotal EBITDA | $44,018 | $12,393 | $103,433 | $34,759 | | Other Adjustments* | ($2,554) | $6,627 | $7,129 | $8,657 | | Adjusted EBITDA | $41,464 | $19,020 | $110,562 | $43,416 | | Adjusted EBITDA Margin | 13.0% | 8.8% | 12.1% | 7.0% | - *Other adjustments primarily include non-floor plan interest, LIFO adjustments, transaction costs, PPP loan forgiveness, and change in fair value of warrant liabilities218222 Liquidity and Capital Resources As of September 30, 2021, the company maintained strong liquidity with $67.0 million cash and a new $369.1 million credit facility - The company's liquidity as of September 30, 2021, included $67.0 million in cash and $72.2 million in working capital230 - Key uses of cash in the first nine months of 2021 were $63.0 million for acquisitions and $16.9 million for capital expenditures226230 - The company's new M&T credit facility provides approximately $369.1 million in total credit, including a $327 million floor plan facility and a $25 million revolver, supporting its growth strategy235 Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, the company has opted out of providing market risk disclosures - As a smaller reporting company, Lazydays has opted out of providing quantitative and qualitative disclosures about market risk250 Controls and Procedures Disclosure controls were ineffective due to a material weakness in warrant accounting, leading to a restatement, but a remediation plan is in place - A material weakness was identified in internal control over financial reporting related to the accounting for warrants, rendering disclosure controls and procedures ineffective251 - The weakness stemmed from the failure to correctly apply accounting guidance (ASC 815-40) for warrants, as clarified by an SEC Staff Statement on April 12, 2021251 - A remediation plan has been implemented, which includes a new control to reassess the classification of warrants at each reporting date by experienced personnel251253 PART II – OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings not expected to materially impact financial condition or operations - The company is party to multiple legal proceedings arising from the ordinary course of business, which are not expected to have a material adverse effect256 Risk Factors No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for December 31, 2020 - The report refers to the detailed discussion of risk factors in the Annual Report on Form 10-K for the year ended December 31, 2020, indicating no material changes257 Unregistered Sales of Equity Securities and Use of Proceeds A $25.0 million stock repurchase program was authorized in September 2021, with no shares repurchased during the quarter - A stock repurchase program was authorized on September 13, 2021, allowing the company to buy back up to $25.0 million of its common stock through December 31, 2022259 - No stock repurchases were made under the new program in the period from its announcement through September 30, 2021259 Other Information No other information is reported under this item for the period - The company reported no information under this item262 Exhibits The report lists various exhibits, including acquisition agreements, credit facilities, and CEO/CFO certifications - Key exhibits filed include the asset purchase agreement for the BYRV acquisition and the amended credit agreement with M&T Bank dated July 14, 2021263 - Standard CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906 were also filed as exhibits263