Lazydays (LAZY) - 2022 Q4 - Annual Report

PART I Item 1. Business Lazydays Holdings, Inc. operates RV dealerships across the U.S., offering a full range of products and services including new and pre-owned RV sales, parts, service, financing, and insurance. The company's strategy focuses on operational excellence, growth through acquisitions and greenfield locations, and leveraging its scale. As of December 31, 2022, it operated 18 locations across 11 states - Lazydays Holdings, Inc. operates Recreational Vehicle ("RV") dealerships across the U.S. and offers a comprehensive portfolio of products and services for RV owners and outdoor enthusiasts, including new and pre-owned RV sales, RV-parts and service, financing and insurance products, third-party protection plans, after-market parts and accessories, and RV camping facilities[18] - As of December 31, 2022, the company operated 18 locations, representing more than 30 original equipment manufacturers ("OEM's") across 11 states[19] - The company's long-term strategy includes driving operational excellence across existing stores, growth through acquisitions and greenfields (with four future greenfield sites planned), and leveraging scale and cost structure to create operational efficiencies[21][23][24][25] - The RV industry saw total wholesale shipments end 2022 at 493,268 units, a 17.8% decrease compared to 600,240 units in 2021. Towable RVs were down 20.1%, while motorhome shipments were up 3.9%[29] Company History A brief overview of the company's historical development and key milestones Overview A general description of the company's operations and market position Business Strategy The company's strategic approach to achieving its business objectives, including growth and operational efficiency Community Involvement Details on the company's engagement and contributions to the communities it serves Customers and Markets An analysis of the company's target customer base and the markets in which it operates Competition An overview of the competitive landscape and the company's position within it Marketing and Advertising The strategies and activities employed by the company to promote its products and services Trademarks and Other Intellectual Property Information regarding the company's proprietary assets and their protection Government Regulation An overview of the regulatory environment impacting the company's operations Environmental, Health and Safety Laws and Regulations Details on compliance with environmental, health, and safety regulations Insurance Information regarding the company's insurance coverage and risk management Employees An overview of the company's workforce and employment practices Seasonality and Effects of Weather An analysis of how seasonal patterns and weather conditions impact business operations Principal Executive Offices The location of the company's main executive offices Available Information Details on where public information about the company can be accessed Item 1A. Risk Factors The company faces material risks including financial reporting control weaknesses, manufacturer dependence, industry cyclicality, debt, and potential stock dilution - A material weakness in internal controls related to ineffective information technology general controls (ITGCs) was identified as of December 31, 2022, which could affect the accuracy of financial reporting[53] - The company's financial results may fluctuate due to recurring fair value measurement of warrants, which are accounted for as liabilities and are primarily driven by changes in stock price[52] - The company is highly dependent on three manufacturers (Thor Industries, Inc., Winnebago Industries, Inc., and Forest River, Inc.), which supplied approximately 96.6% of new RV inventory purchases in 2022, making it vulnerable to their well-being and supply chain disruptions[58][153] - The RV industry is cyclical and seasonal, influenced by economic factors, consumer confidence, and weather, leading to fluctuations in sales and revenues, with higher volumes typically in the first half of the year[76][77][78] - The conversion of Series A Preferred Stock, exercise of warrants, options, and restricted stock units could lead to substantial dilution for existing common stockholders[113][114] Risks Related to Lazydays Business Specific risks inherent to the company's operational model and industry Risks Associated with Our Debt Obligations Potential financial risks arising from the company's debt structure and covenants Risks Related to Our Capital Stock Risks concerning the company's equity securities, including dilution and shareholder influence General Risk Factors Broad risks that could impact the company's overall business and financial performance Item 1B. Unresolved Staff Comments The company has no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[133] Item 2. Properties The company primarily leases its retail properties, owning only five of its locations. The largest leased dealership is in Tampa, Florida, a 384,000 square foot facility on 126 acres with a lease term expiring in 2035 - The company owns property at five of its locations but typically leases all other real estate properties where it operates[134] - The largest leased dealership property is located in Tampa, Florida, spanning 384,000 square feet on 126 acres, with a lease term expiring in 2035[135] Item 3. Legal Proceedings The company is involved in multiple legal proceedings arising in the ordinary course of business, but does not anticipate that their ultimate resolution will have a material adverse effect on its financial condition or operations - The company is a party to multiple legal proceedings that arise in the ordinary course of business[136] - Management does not believe that the ultimate resolution of these matters will have a material adverse effect on the company's business, results of operations, financial condition, or cash flows[136] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[138] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock is listed on the Nasdaq Capital Market under 'LAZY', and its warrants are traded on the OTC Pink marketplace under 'LAZYW'. As of February 24, 2023, there were 40 holders of common stock. The company has not paid cash dividends on common stock and does not plan to in the foreseeable future. A stock repurchase program was extended and expanded, authorizing up to $50.0 million in additional repurchases through December 31, 2024 - Common stock is listed on the Nasdaq Capital Market under 'LAZY', and warrants are quoted on the OTC Pink marketplace under 'LAZYW'[140] - As of February 24, 2023, there were 40 holders of record of common stock, 4 holders of Series A Preferred Stock, and 12 holders of warrants[140] - The company has not paid and does not plan to pay cash dividends on its common stock in the foreseeable future[141] Equity Repurchase Program Activity (2022) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) | | :--------------------------------- | :------------------------------- | :--------------------------- | :-------------------------------------------------------------------------------------------------------- | | October 1, 2022 - October 31, 2022 | 90,200 | $12.31 | $13,655 | | November 1, 2022 - November 30, 2022 | - | $- | $13,655 | | December 1, 2022 - December 31, 2022 | 14,700 | $11.91 | $63,479 | - On December 15, 2022, the Board of Directors approved an extension of the existing stock repurchase program (remaining balance of $13.7 million) and authorized an additional $50.0 million in repurchases, both through December 31, 2024[144] Recent Sales of Unregistered Securities Information regarding the company's recent issuances of securities not registered under the Securities Act Purchases of Equity Securities by the Issuer Details on the company's programs and activities for repurchasing its own equity securities Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Net income decreased to $66.4 million in 2022, with revenue up 7.4% to $1.327 billion, driven by acquisitions and higher SG&A, while liquidity improved with expanded credit facilities Key Financial Highlights (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Net Income | $66,393 | $82,021 | ($15,628) | (19.1)% | | Total Revenue | $1,326,961 | $1,235,048 | $91,913 | 7.4% | | Total Gross Profit | $328,691 | $323,490 | $5,201 | 1.6% | | Selling, General and Administrative Expenses | $222,218 | $184,985 | $37,233 | 20.1% | | Adjusted EBITDA | $113,921 | $144,909 | ($30,988) | (21.4)% | Same Store Operating Data (2022 vs. 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | :------- | | Total Revenue | $1,181,750 | $1,235,048 | ($53,298) | (4.3)% | | New Vehicle Retail Units Sold | 7,361 | 8,930 | (1,569) | (17.6)% | | Used Vehicle Retail Units Sold | 4,847 | 5,283 | (436) | (8.3)% | | Average Selling Price per New Vehicle Retail Unit | $92,661 | $81,200 | $11,461 | 14.1% | | Average Selling Price per Used Vehicle Retail Unit | $74,308 | $70,522 | $3,786 | 5.4% | | F&I per Retail Unit | $5,349 | $4,937 | $411 | 8.3% | - Net cash used in operating activities was ($72.0 million) in 2022, a significant decrease from $2.8 million provided in 2021, primarily due to a $127.6 million increase in inventory[182][184] - A new credit agreement was entered into on February 21, 2023, increasing floorplan capacity to $525.0 million and revolving credit facility capacity to $50.0 million, and extending the term to February 21, 2027[180][384] Business Overview A summary of the company's business model and operational context for financial analysis Results of Operations An analysis of the company's financial performance over the reporting period Same Store Operating Data Performance metrics for stores that have been operational for comparable periods, excluding new acquisitions New Vehicles Analysis of sales, revenue, and profitability related to new vehicle transactions Pre-owned vehicles Analysis of sales, revenue, and profitability related to pre-owned vehicle transactions Finance and Insurance Performance and revenue generated from financing and insurance product sales Service, Body and Parts Revenue and profitability from vehicle service, body repair, and parts sales Other Revenue Additional revenue streams not categorized under primary business segments Selling, General and Administrative Expenses Detailed breakdown and analysis of the company's operational overhead costs Interest Expense The cost of borrowing incurred by the company on its outstanding debt Change in Fair Value of Warrant Liabilities Impact of fair value adjustments on warrant liabilities on the company's financial results Income Taxes Analysis of the company's tax expenses and effective tax rates Non-GAAP Reconciliations Reconciliation of non-GAAP financial measures to their most directly comparable GAAP financial measures Liquidity and Capital Resources Assessment of the company's ability to meet short-term obligations and fund operations and growth Cash Flow Summary A concise overview of cash inflows and outflows from operating, investing, and financing activities Net Cash from Investing Activities Cash flows related to the acquisition and disposal of long-term assets and investments Net Cash from Financing Activities Cash flows related to debt, equity, and dividend transactions M&T Credit Facility Details of the company's credit arrangements with M&T Bank Inflation Discussion of the impact of inflationary pressures on the company's financial performance Cyclicality Analysis of how economic cycles affect the company's business and financial results Seasonality and Effects of Weather Impact of seasonal variations and weather conditions on the company's sales and operations Critical Accounting Policies and Estimates Key accounting policies and significant management judgments that affect financial reporting Item 7A. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company has elected scaled disclosure requirements available to smaller reporting companies - Information requested by this Item is not applicable as the company has elected scaled disclosure requirements available to smaller reporting companies[211] Item 8. Financial Statements and Supplementary Data Audited consolidated financial statements for 2022 and 2021 are presented, with an unqualified auditor opinion despite a noted material weakness in IT internal controls - The independent auditor issued an unqualified opinion on the consolidated financial statements for the years ended December 31, 2022 and 2021[218] - A material weakness in internal control over financial reporting related to ineffective information technology general controls (ITGCs) was identified as of December 31, 2022[219][233][236] Consolidated Balance Sheet Highlights (in thousands) | Metric | December 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------------ | :------------------ | | Total Assets | $830,718 | $698,128 | | Cash | $61,687 | $98,120 | | Inventories | $378,881 | $242,906 | | Total Liabilities | $538,723 | $437,019 | | Total Stockholders' Equity | $237,012 | $206,126 | Consolidated Statements of Operations Highlights (in thousands, except per share) | Metric | Year ended Dec 31, 2022 | Year ended Dec 31, 2021 | | :-------------------------------- | :---------------------- | :---------------------- | | Total Revenues | $1,326,961 | $1,235,048 | | Income from Operations | $89,715 | $124,094 | | Net Income | $66,393 | $82,021 | | Diluted EPS | $2.42 | $3.93 | Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Year ended Dec 31, 2022 | Year ended Dec 31, 2021 | | :-------------------------------- | :---------------------- | :---------------------- | | Net Cash (Used In) Provided By Operating Activities | ($71,960) | $2,771 | | Net Cash Used In Investing Activities | ($54,542) | ($84,126) | | Net Cash Provided By Financing Activities | $90,069 | $115,963 | | Net (Decrease) Increase In Cash | ($36,433) | $34,608 | Report of Independent Registered Public Accounting Firm The auditor's opinion on the fairness of the financial statements Opinion on the Internal Control Over Financial Reporting The auditor's assessment of the effectiveness of the company's internal control over financial reporting Consolidated Balance Sheets A snapshot of the company's assets, liabilities, and equity at specific points in time Consolidated Statements of Operations A summary of the company's revenues, expenses, and net income over a period Consolidated Statements of Stockholders' Equity Changes in the equity section of the balance sheet over a period Consolidated Statements of Cash Flows A summary of cash inflows and outflows from operating, investing, and financing activities Notes to Consolidated Financial Statements Detailed explanations and additional information supporting the financial statements NOTE 1 – BUSINESS ORGANIZATION AND NATURE OF OPERATIONS Description of the company's structure and primary business activities NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES Explanation of the key accounting principles and methods used in financial reporting NOTE 3 – BUSINESS COMBINATIONS Details on acquisitions and their financial impact NOTE 4 – RECEIVABLES, NET Information on the company's outstanding receivables, net of allowances NOTE 5 – INVENTORIES Details on the valuation and composition of the company's inventory NOTE 6 – PROPERTY AND EQUIPMENT, NET Information on the company's tangible long-term assets NOTE 7 – GOODWILL AND INTANGIBLE ASSETS Details on the company's intangible assets, including goodwill NOTE 8 – FINANCING LIABILITY Information regarding the company's financing obligations NOTE 9 – ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES Details on the company's short-term financial obligations NOTE 10 – LEASES Information on the company's leasing arrangements and related accounting NOTE 11 – DEBT Details on the company's various debt instruments and obligations NOTE 12 – INCOME TAXES Information on the company's income tax provisions and related balances NOTE 13 – EMPLOYEE BENEFIT PLANS Details on the company's employee retirement and other benefit plans NOTE 14 - COMMITMENTS AND CONTINGENCIES Information on the company's contractual obligations and potential liabilities NOTE 15 – PREFERRED STOCK Details on the company's preferred stock issuances and characteristics NOTE 16 – STOCKHOLDERS' EQUITY Detailed breakdown of the components of the company's equity NOTE 17 – FAIR VALUE MEASURES Information on assets and liabilities measured at fair value NOTE 18 – SUBSEQUENT EVENTS Significant events occurring after the balance sheet date Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with its accountants on accounting and financial disclosure matters - There are no changes in and disagreements with accountants on accounting and financial disclosure[385] Item 9A. Controls and Procedures Disclosure controls were ineffective as of December 31, 2022, due to a material weakness in IT general controls, with remediation expected by fiscal 2023 end - As of December 31, 2022, the disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting[386] - The material weakness is related to ineffective information technology general controls (ITGCs) in logical access, change management, and security administration over IT systems supporting financial reporting processes[389] - The material weakness did not result in any identified misstatements to the financial statements, and there were no changes to previously released financial results[390] - Remediation actions include improving processes and documentation for access provisioning and reviews, and modifying controls for application change approvals, with expected completion by the end of fiscal 2023[392][393] Evaluation of Disclosure Controls and Procedures Assessment of the effectiveness of the company's controls for financial disclosure Management's Annual Report on Internal Control Over Financial Reporting Management's assessment of the effectiveness of the company's internal control over financial reporting Changes in Internal Control Over Financial Reporting Reporting on any material changes in the company's internal control over financial reporting Item 9B. Other Information The company reported no other information required by this item - No other information is reported under this item[397] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - This item is not applicable[397] PART III Item 10. Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance, including the Code of Business Conduct, is incorporated by reference from the company's definitive proxy statement for its 2023 annual meeting of stockholders - Information on directors, executive officers, and corporate governance is incorporated by reference from the definitive proxy statement for the 2023 annual meeting of stockholders[401] - The company has adopted a Code of Business Conduct applicable to all directors, officers, and employees, available on its corporate website[400] Item 11. Executive Compensation Information concerning executive compensation is incorporated by reference from the company's definitive proxy statement for its 2023 annual meeting of stockholders - Information on executive compensation is incorporated by reference from the definitive proxy statement for the 2023 annual meeting of stockholders[402] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Details regarding security ownership of certain beneficial owners and management, as well as related stockholder matters, are incorporated by reference from the company's definitive proxy statement for its 2023 annual meeting of stockholders - Information on security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the definitive proxy statement for the 2023 annual meeting of stockholders[403] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships and related transactions, and director independence, is incorporated by reference from the company's definitive proxy statement for its 2023 annual meeting of stockholders - Information on certain relationships and related transactions, and director independence, is incorporated by reference from the definitive proxy statement for the 2023 annual meeting of stockholders[404] Item 14. Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the company's definitive proxy statement for its 2023 annual meeting of stockholders - Information on principal accounting fees and services is incorporated by reference from the definitive proxy statement for the 2023 annual meeting of stockholders[405] PART IV Item 15. Exhibits, Financial Statement Schedules This section lists all exhibits and financial statement schedules filed as part of the Form 10-K report, including agreements, certificates, and various certifications. Financial statements are incorporated by reference from Part II, Item 8 - Financial statements are incorporated by reference from Part II, Item 8 of this Report[408] - The report includes a comprehensive list of exhibits, such as merger agreements, certificates of incorporation, bylaws, warrant agreements, employment agreements, credit agreements, and various certifications[408][409][410] Item 16. Form 10-K Summary This item indicates that no Form 10-K summary is provided - No Form 10-K Summary is provided[412] Signatures This section contains the required signatures of the registrant's Chief Executive Officer, Chief Financial Officer, and Directors, certifying the filing of the Form 10-K report - The report is signed by the Chief Executive Officer, Chief Financial Officer, and Directors, certifying compliance with the Securities Exchange Act of 1934[414][415][416]