Lazydays (US:LAZY)2020-05-08 20:06PART I – FINANCIAL INFORMATION Financial Statements For the quarter ended March 31, 2020, the company reported total revenues of $190.9 million, a 10.3% increase year-over-year, and a net income of $3.0 million, up from $1.8 million in the prior year period. Total assets increased to $428.1 million from $406.6 million at year-end 2019, primarily driven by an increase in cash. The company adopted the new lease accounting standard (ASC 842) as of January 1, 2020, resulting in the recognition of $17.8 million in operating lease assets and liabilities Condensed Consolidated Balance Sheets As of March 31, 2020, total assets were $428.1 million, an increase from $406.6 million at December 31, 2019. The increase was primarily due to a rise in cash from $31.5 million to $43.3 million. Total liabilities increased to $288.3 million from $270.3 million, mainly due to the adoption of operating lease liabilities ($17.6 million) and an increase in the current portion of long-term debt. Stockholders' equity saw a slight increase to $77.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash | $43,269 | $31,458 | | Inventories | $153,284 | $160,864 | | Total current assets | $216,071 | $211,672 | | Operating lease assets | $17,953 | - | | Total assets | $428,130 | $406,636 | | Liabilities & Equity | | | | Floor plan notes payable, net | $133,425 | $143,949 | | Operating lease liability (current & non-current) | $17,569 | - | | Total liabilities | $288,285 | $270,313 | | Total stockholders' equity | $77,308 | $75,430 | Condensed Consolidated Statements of Income For the three months ended March 31, 2020, total revenues increased by 10.3% to $190.9 million compared to $173.1 million in the same period of 2019. Net income grew to $3.0 million from $1.8 million year-over-year, and basic and diluted EPS doubled to $0.08 from $0.04 Statement of Income Summary (in thousands, except per share data) | Metric | Q1 2020 | Q1 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Total revenues | $190,854 | $173,057 | +10.3% | | Gross Profit (Total revenues - Total cost) | $41,473 | $36,947 | +12.2% | | Income from operations | $6,784 | $6,058 | +12.0% | | Net income | $2,987 | $1,844 | +62.0% | | Basic and diluted income per share | $0.08 | $0.04 | +100.0% | Condensed Consolidated Statements of Cash Flows For the first quarter of 2020, net cash provided by operating activities was $16.1 million, a decrease from $28.9 million in Q1 2019, primarily due to smaller favorable changes in working capital, specifically inventories. Net cash from investing activities was $3.2 million, a reversal from a $3.1 million use in the prior year, driven by proceeds from a property sale. Net cash used in financing activities decreased significantly to $7.5 million from $21.3 million, due to lower net repayments on the floor plan facility Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Cash Provided By Operating Activities | $16,127 | $28,904 | | Net Cash Provided By (Used In) Investing Activities | $3,158 | $(3,108) | | Net Cash Used In Financing Activities | $(7,474) | $(21,339) | | Net Increase In Cash | $11,811 | $4,457 | Notes to Condensed Consolidated Financial Statements The notes detail the company's accounting policies, business combinations, debt structure, and equity components. Key highlights include the adoption of the new lease standard (ASC 842), details of the M&T credit facility, terms of the Series A Convertible Preferred Stock, and the impact of the COVID-19 pandemic, which led to cost-saving measures and the application for PPP loans subsequent to the quarter's end - The company operates RV dealerships in seven locations across Florida, Colorado, Arizona, Tennessee, and Minnesota, with a new service center in Texas opened in February 202024 - The company adopted the new lease standard (ASC 842) on January 1, 2020, using the modified-retrospective method, which resulted in recording operating lease assets and liabilities of $17.8 million6061 - Subsequent to the quarter end, in response to COVID-19, the company reduced its workforce by 25%, cut senior management salaries, and applied for and received approximately $8.7 million in PPP loans under the CARES Act5556205 - On April 16, 2020, the company amended its M&T credit agreement to temporarily suspend principal payments on term and mortgage loans and curtailment payments on the floor plan facility from April through mid-June 2020 due to the COVID-19 pandemic54 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 10.3% revenue increase in Q1 2020, driven by higher unit sales of both new and pre-owned vehicles, despite a lower average selling price. Gross profit grew 12.5% to $41.5 million. The report highlights the significant uncertainty and operational adjustments made in response to the COVID-19 pandemic, which began impacting the business in late March. These adjustments include workforce reductions, salary cuts, delayed capital projects, and securing PPP loans. Liquidity remains a focus, with $43.3 million in cash at quarter-end and amended credit terms to provide near-term flexibility Results of Operations For Q1 2020 versus Q1 2019, total revenue increased by $17.8 million (10.3%) to $190.9 million. This was driven by a 9.5% increase in new and pre-owned vehicle revenue, resulting from higher unit sales (1,367 new and 1,049 pre-owned) which offset a decrease in average selling prices. Other revenue, including finance, insurance, and parts, grew 16.1%. Gross profit increased by $4.6 million (12.5%) to $41.5 million. SG&A expenses rose 17.4% due to overhead from a new dealership and service center, and performance-based wages Revenue Breakdown (in millions) | Revenue Source | Q1 2020 | Q1 2019 | Change (%) | | :--- | :--- | :--- | :--- | | New Vehicles | $102.4 | $97.8 | +4.7% | | Pre-Owned Vehicles | $64.7 | $54.8 | +18.1% | | Other | $23.7 | $20.4 | +16.1% | | Total Revenue | $190.9 | $173.1 | +10.3% | - The increase in new vehicle revenue was due to a rise in units sold (1,367 from 1,216), offset by a lower average selling price ($74,400 from $80,000)158 - The increase in pre-owned vehicle revenue was driven by a significant rise in units sold (1,049 from 758), offset by a lower average selling price ($59,000 from $65,400)159 - SG&A expenses increased by $4.6 million (17.4%), primarily due to overhead from the newly acquired The Villages dealership, the new Houston service center, and higher performance wages166 Non-Gaap Financial Measures The company uses Adjusted EBITDA as a key non-GAAP measure to evaluate financial performance. For the three months ended March 31, 2020, Adjusted EBITDA was $9.5 million, a slight increase from $9.4 million in the prior-year period. The Adjusted EBITDA margin decreased slightly from 5.4% to 5.0%. Adjustments to net income to calculate Adjusted EBITDA include adding back interest, taxes, D&A, stock-based compensation, and transaction costs Adjusted EBITDA Reconciliation (in thousands) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net income | $2,987 | $1,844 | | Interest expense, net | $2,495 | $3,027 | | Depreciation and amortization | $2,637 | $2,695 | | Income tax expense | $1,300 | $1,185 | | Stock-based compensation | $680 | $1,514 | | Other adjustments (LIFO, transaction costs, etc.) | $453 | $634 | | Adjusted EBITDA | $9,523 | $9,430 | Liquidity and Capital Resources As of March 31, 2020, the company had $43.3 million in cash and $34.5 million in working capital. The company believes its existing cash, available credit, and cash from operations will be sufficient to fund operations for at least the next twelve months, despite the challenges posed by COVID-19. In response to the pandemic, the company has implemented significant cost-saving measures, including a 25% workforce reduction, salary cuts for senior management, suspension of the 401k match, and delaying non-critical capital projects. Additionally, the company secured temporary debt payment suspensions and obtained PPP loans to bolster liquidity - The company's liquidity position as of March 31, 2020, included approximately $43.3 million in cash181 - To manage the impact of COVID-19, the company has taken several actions: reduced workforce by 25%, senior management forgoing 25% of salary, suspending 2020 pay increases and 401k match, and delaying non-critical capital projects180 - The company amended its M&T credit facility to temporarily suspend principal and curtailment payments from April to June 2020 and has been approved for $8.7 million in PPP loans180191205 Quantitative and Qualitative Disclosures about Market Risk The company, as a smaller reporting company, has elected not to provide the information requested by this item - The company has elected scaled disclosure requirements available to smaller reporting companies and is not providing quantitative and qualitative disclosures about market risk200 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2020. There were no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2020, the CEO and CFO concluded that the company's disclosure controls and procedures were effective201 - No changes occurred in internal controls over financial reporting during Q1 2020 that have materially affected, or are reasonably likely to materially affect, internal controls202 PART II – OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings that arise in the ordinary course of business. Management does not believe the resolution of these matters will have a material adverse effect on the company's financial condition or results of operations - The company is a party to multiple legal proceedings from the ordinary course of business but does not expect them to have a material adverse effect203 Risk Factors This section introduces a significant new risk factor related to the COVID-19 pandemic. It details the severe disruptions to economic activity and the adverse impacts on the company's business, including significant declines in sales and service operations. The company highlights the high uncertainty of the pandemic's duration and severity and notes that cost-saving measures and government loans may not be sufficient to offset the negative financial impact - A new material risk factor has been added concerning the COVID-19 pandemic, which has caused severe economic disruptions and significant declines in the company's sales and service operations since late March 2020205 - The extent of the pandemic's future impact is highly uncertain and depends on developments like its severity, duration, and government actions. The company warns that even after the pandemic subsides, it may face adverse effects from a global economic recession205 - Despite cost-saving measures and securing $8.7 million in PPP loans, the company's liquidity could be negatively impacted if adverse conditions persist, potentially requiring additional financing which is not guaranteed205 Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2020, the company repurchased a total of 44,729 shares of its common stock for approximately $145,000 under its stock repurchase program. The program, authorizing up to $4.0 million in repurchases, was announced on November 7, 2019, and is effective through December 31, 2020. As of March 31, 2020, approximately $3.54 million remained available for future repurchases under the plan Issuer Purchases of Equity Securities (Q1 2020) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value Remaining for Repurchase | | :--- | :--- | :--- | :--- | | January 2020 | 1,000 | $4.28 | $3,682,000 | | February 2020 | 12,405 | $4.22 | $3,630,000 | | March 2020 | 31,324 | $2.81 | $3,541,000 | - The Board of Directors authorized a stock repurchase program of up to $4.0 million, effective through December 31, 2020206 Defaults Upon Senior Securities None reported - No defaults upon senior securities were reported for the period207 Mine Safety Disclosures None reported - No mine safety disclosures were reported as this item is not applicable208 Other Information None reported - No other information was reported under this item209 Exhibits This section lists the exhibits filed with the Form 10-Q, including the Third and Fourth Amendments to the Credit Agreement, CEO and CFO certifications, and XBRL data files - Key exhibits filed include the Fourth Amendment to the Credit Agreement dated April 16, 2020, and certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act212