Lazydays Holdings(GORV) - 2022 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements This section presents Lazydays Holdings' unaudited condensed consolidated financial statements for Q1 2022, including balance sheets, income, equity, cash flows, and detailed accounting policy notes Condensed Consolidated Balance Sheets Total assets increased to $752.8 million from $698.1 million, liabilities to $481.4 million from $437.0 million, and equity to $216.4 million from $206.1 million Condensed Consolidated Balance Sheet Data (in thousands) | | As of March 31, 2022 | As of December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $752,826 | $698,128 | | Total Current Assets | $427,794 | $375,635 | | Inventories | $283,997 | $242,906 | | Total Liabilities | $481,402 | $437,019 | | Total Current Liabilities | $315,438 | $266,350 | | Floor plan notes payable, net | $230,347 | $192,220 | | Total Stockholders' Equity | $216,441 | $206,126 | Condensed Consolidated Statements of Income Q1 2022 saw total revenues grow 38.8% to $376.2 million, net income more than tripled to $28.3 million, and diluted EPS increased to $1.17 from $0.35 Q1 2022 vs. Q1 2021 Income Statement (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total Revenues | $376,161 | $270,993 | | New and pre-owned vehicles | $340,460 | $244,881 | | Other | $35,701 | $26,112 | | Income from Operations | $38,629 | $22,423 | | Net Income | $28,284 | $8,844 | | Diluted EPS | $1.17 | $0.35 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $17.4 million in Q1 2022, a shift from $24.8 million provided in Q1 2021, while financing provided $16.8 million Cash Flow Summary (in thousands) | Cash Flow Activity | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--- | :--- | :--- | | Net Cash (Used In) Provided By Operating Activities | $(17,433) | $24,823 | | Net Cash Used In Investing Activities | $(7,896) | $(6,167) | | Net Cash Provided By (Used In) Financing Activities | $16,767 | $(2,699) | | Net (Decrease) Increase In Cash | $(8,562) | $15,957 | Notes to Condensed Consolidated Financial Statements Detailed notes explain accounting policies, including revenue recognition upon delivery, LIFO inventory valuation, and specifics on debt, leases, and stock repurchase programs - Revenue from vehicle sales is recognized at a point in time upon delivery, transfer of title, and completion of financing arrangements[34] - Vehicle and parts inventories are valued at the lower of cost or net realizable value, using the last-in, first-out (LIFO) method[38] - An immaterial misstatement in EPS calculations for Q1 and Q2 2021 was identified and corrected in Q4 2021[46][47] - The Board authorized a $25 million stock repurchase program in September 2021, with an additional $45 million authorized in February 2022[124] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial results, highlighting 38.8% revenue growth to $376.2 million, 54.7% gross profit growth to $99.2 million, and margin expansion to 26.4%, alongside liquidity and growth strategies Results of Operations Q1 2022 total revenue increased 38.8% to $376.2 million, driven by vehicle sales, while gross profit surged 54.7% due to higher unit sales and expanded margins, despite increased SG&A Revenue Breakdown (in millions) | Revenue Source | Q1 2022 | Q1 2021 | Change (%) | | :--- | :--- | :--- | :--- | | New Vehicles | $217.4 | $167.4 | +29.9% | | Pre-owned Vehicles | $123.0 | $77.5 | +58.8% | | Total Vehicle Revenue | $340.5 | $244.9 | +39.0% | | Other Revenue | $35.7 | $26.1 | +36.7% | | Total Revenue | $376.2 | $271.0 | +38.8% | - New vehicle revenue growth was driven by increased units sold (from 2,125 to 2,270) and a higher average selling price per unit (from $78,400 to $95,600)[183] - Gross profit margin expanded from 23.7% in Q1 2021 to 26.4% in Q1 2022, driven by vehicle sales margin expansion due to inventory scarcity[169][170] - SG&A as a percentage of gross profit improved from 58.8% in Q1 2021 to 56.4% in Q1 2022, reflecting better operating leverage despite new location overhead[172] Non-GAAP Financial Measures Adjusted EBITDA increased to $44.8 million in Q1 2022 from $27.8 million in Q1 2021, with margin improving to 11.9% from 10.3%, after various adjustments to net income Reconciliation of Net Income to Adjusted EBITDA (in thousands) | | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net income | $28,284 | $8,844 | | Interest expense, net | $2,912 | $1,866 | | Depreciation and amortization | $4,084 | $3,225 | | Income tax expense | $8,973 | $5,477 | | LIFO adjustment | $2,460 | $1,887 | | Change in fair value of warrant liabilities | $(1,540) | $6,468 | | Stock-based compensation | $523 | $372 | | Other adjustments | $40 | $172 | | Adjusted EBITDA | $44,760 | $27,822 | - Adjusted EBITDA Margin improved from 10.3% in Q1 2021 to 11.9% in Q1 2022[201] Liquidity and Capital Resources As of March 31, 2022, the company had $89.6 million in cash and $112.4 million in working capital, with primary funding from operations and its M&T credit facility, supporting future growth - As of March 31, 2022, the company had $89.6 million in cash liquidity[207] - The company's M&T Bank credit facility was amended to $369.1 million in July 2021, including a $327 million floor plan facility and a $25 million revolver[220] - Short-term cash requirements for 2022 include $3.4 million for debt service, $1.5 million for lease payments, and capital spending of $7 million for maintenance, $3.6 million for Elkhart, and $5.6 million for land purchases[209][211] - Long-term growth will be funded by cash flow, lease financing for greenfield developments, and the floorplan facility for inventory[214][215] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Lazydays has elected not to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Lazydays has elected not to provide disclosures about market risk[234] Controls and Procedures A material weakness in IT general controls was identified, specifically in program change-management and user access, but management is implementing remediation actions by fiscal 2022 - A material weakness was identified in IT general controls related to program change-management and user access permissions[234] - The identified material weakness did not result in any misstatements to the financial statements[234] - Management is implementing remediation actions, including enhanced risk assessment and improved monitoring, with expected completion by the end of fiscal 2022[234] PART II – OTHER INFORMATION Legal Proceedings The company is involved in various ordinary course legal proceedings, which management does not expect to have a material adverse effect on financial condition - The company is involved in multiple legal proceedings from its ordinary course of business but does not expect them to have a material adverse impact[238] Risk Factors No material changes to risk factors have occurred since those disclosed in the company's Annual Report on Form 10-K for 2021 - The report refers to the detailed discussion of risk factors in the Annual Report on Form 10-K for the year ended December 31, 2021[239] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2022, the company repurchased 1,086,797 shares for $18.6 million under its stock repurchase programs, with an additional $45 million authorized in February 2022 Issuer Purchases of Equity Securities (Q1 2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2022 | 314,484 | $16.97 | | February 2022 | 459,076 | $17.24 | | March 2022 | 313,237 | $18.91 | - On February 24, 2022, the Board authorized an additional stock repurchase program of up to $45.0 million[242] Exhibits This section lists exhibits filed with the Form 10-Q, including the interim CEO's employment agreement and CEO/CFO certifications - Key exhibits filed include the employment agreement for Interim CEO Robert DeVincenzi and CEO/CFO certifications pursuant to Sarbanes-Oxley[251]