Camping World Holdings, Inc. (CWH) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to Camping World Holdings Conference Call to discuss the Financial Results For the Second Quarter of Fiscal 2020. [Operator Instructions] Please be advised that this call is being recorded, and that the reproduction of the call in whole or part is not permitted without written authorization from the company. Participating in the call today are Marcus Lemonis, Chairman and Chief Executive Officer; Brent Moody, President; Karin Bell, Chief Financial Officer; and Tamara Ward, Chief Operating Officer. I'd now like to turn the call over to Mr. Moody to get us started. Please go ahead, sir.

Thank you, and good afternoon, everyone. A press release covering the company's second quarter 2020 financial results was issued this afternoon, and a copy of that press release can be found in the Investor Relations section on the company's website. Management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These remarks may include statements regarding the impact of COVID-19 on our business, financial results and financial condition; our business goals, plans, abilities and opportunities; results and financial condition; industry and customer trends; our 2019 strategic shift; increases in our borrowings; our liquidity and future compliance with our financial covenants; and anticipated financial performance. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the Risk Factors section in our Form 10-K, our Form 10-Qs and other reports on file with the SEC. Any forward-looking statements represent our views only as of today and we undertake no obligation to update them. Please also note that we will be referring to certain non-GAAP financial measures on today's call such as EBITDA, adjusted EBITDA and adjusted earnings per share diluted, which we believe may be important to investors to assess our operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release and on our website. All comparisons to our 2020 second quarter results are made against the 2019 second quarter results unless otherwise noted. I'll now turn the call over to Marcus.

Thanks, Brent. Good afternoon, everyone. As we all know, we are living in unprecedented times. Our focus, as a nation and as a company, is rooted in doing our best to ensure that everyone is safe and protected as we look forward into the future. What we have reaffirmed over the last 5 months is that Americans are resilient. They learn to adapt to everything, but the path to get there isn't always a straight road. As a company who feels strongly about inclusivity, diversity and kindness, our close to 11,000 employees demonstrated that in a meaningful way. Their collective dedication to the customer, each other, and the company has never been stronger and it shows in our results. Over the years, we've always prided ourselves as being the leader in the RV space. Being leaders isn't defined singularly by revenue, but more importantly, our employee experience, our customer experience and our performance for our shareholders. The accountability to our shareholders, which includes close to 2,000 of our associates, must be rooted in a number of metrics, both financial and operational. As the single largest shareholder, with beneficial ownership of over 36 million shares, and it's steward for a nearly 11,000 associates, I feel strongly that our goals and focus as shareholders are aligned. My focus, as this company's leader, is to deliver a solid financial performance with world-class margins, heighten our intention to improving the customer and associate experience, a thoughtful capital allocation, including balance sheet improvement, and stable and quarterly dividends -- and growing quarterly dividends. While I'm generally pleased with our second quarter results, I do believe we have significant opportunity for improvement to drive customer engagement, leverage our assets, expand our footprint and grow our market share. For the quarter, demand was strong and revenue was slightly over $1.6 billion. Our balance sheet is strong and we are pleased with our liquidity position. In our company, we primarily keep cash in 2 places: our ordinary deposit account and operating accounts for treasury management purposes; and a floor plan offset account which works to reduce our borrowing costs. We ended the quarter with $228 million of cash in our ordinary deposit account and operating accounts, an additional $217 million in our floor plan offset account, most cash we've ever had. Gross profit was $489 million and gross margin increased 260 basis points to 30.4%, driven by a combination of our RV unit and retail margin improvement and our high-margin recurring Good Sam branded businesses. Adjusted EBITDA was $221 million, up 122%. Our adjusted EBITDA margin for the quarter was 13.7% and 9.7% year-to-date. These results put us back on track towards achieving our adjusted annualized EBITDA margin goals. We ended the quarter with our leverage ratio as determined under our senior credit facility below 3.5x, and we expect to be below 3x at the end of the third quarter. We are very comfortable with our existing LIBOR plus 2.75% bank debt with a 75 basis point LIBOR floor and our expected anticipated debt-to-EBITDA levels. We ended the quarter with 2,067,000 Good Sam members, which is a key metric in our business because each member spends roughly $1,850 annually. We sold a record 38,786 RVs for the quarter. Website activity across all brands experienced significant growth in the second quarter of 2020. Unique website user sessions were 57.6 million in the second quarter of 2020, an improvement of nearly 14 million sessions the last year. For the 6-month period, ended June 30, 2020, user sessions grew to 94.4 million, an improvement of over 16 million sessions. Our SG&A, which is a big focus for us, our SG&A expenses as a percentage of gross profit for the company were 56% for the quarter and 68% for the 6-month period ended June 30, 2020 compared to 74% and 81%, respectively, for the same period in 2019. While we are pleased with the year-to-date direction, we strongly believe we always have opportunity for improvement. One point we want to be crystal clear on. Our results are not singularly a function of COVID-related demand. Our results for the first 70 days of 2020, which were not affected by COVID either way, had strong momentum and metrics. While we struggled as a nation and an industry during the back half of March and all of April, we were able to make up much ground in May and June to bring our year-to-date numbers to an annualized level that we hope to largely experience going forward. With the strategic shift we initiated in 2019, we outlined a number of key initiatives our team felt would move us directionally where we knew we wanted to be for the long term. These include, but are not limited to: an extreme focus on efficiency improvements, including refining our process and our cost structure; a deep focus on improving retention across all of our high-margin Good Sam recurring revenue files; and lowering our cost of customer acquisition through the digitizing process and most importantly growing sales. We believe that these initiatives will lead to solid, stable free cash flow generation for the next 3 to 5 years. We believe there is a realistic chance that 2020 will be the company's most profitable year ever. And over the next 3 to 5 years, we see no reason other than items outside of our control that we would ever look backwards. It is estimated that approximately 11 million households in the U.S. own an RV. And as more people experience the outdoors, we believe there is an opportunity for significant growth in this number. We feel that this growth is more likely today than ever based on the number of first-time buyers we see showing an interest in entering the RV and outdoor lifestyle, and we believe our company and its wide array of products and services would be a significant beneficiary of this potential growth. We currently operate in 36 states through 164 retail operations, and we see significant whitespace for profitable expansion, which we plan to take advantage of through new greenfield locations and opportunistic acquisitions. These new locations should grow our footprint and our market share. Our plan, absent circumstances outside of our control, is to return to our historical growth levels by opening or acquiring 8 to 10 locations per year. All of this fuels our Good Sam file size growth. Our multiyear or annual renewal Good Sam branded products, including insurance, roadside assistance, extended warranties and TravelAssist provides the protection and services needed for the RV lifestyle. And they generate stable, high-margin recurring and predictable revenue and cash flow. As we announced several weeks ago, we proudly promoted Karin Bell to the CFO position and she officially took over her role on July 1. Karin and I have worked together at Camping World for more than 17 years. She is a diligent financial steward and trusted adviser who will hold our team accountable for how we're allocating capital to maximize returns and drive long-term profitable growth. Now it's my pleasure, let me turn the call over to Karin for her commentary.

Thanks, Marcus, and good afternoon, everyone. I'm excited to be in this new role, and I'm proud to have been part of our company for the last 17 years. Together, we have built the company to withstand the ups and downs of the industry and generate long-term growth. My job is to ensure that our growth is profitable, that we are allocating our capital efficiently with focus on our return on investment and we continue to strengthen our balance sheet with sufficient cash reserves. Generally, I'm pleased with the results of the quarter, which I believe demonstrates the unique nature of our business. Demand has been strong across all of our business units and our team has done a nice job in managing inventory and our supply chain. Gross margins have improved, and we have controlled expenses, and the combination has led to a significant improvement in our EBITDA and adjusted EBITDA margins year-over-year. We have spent considerable time reviewing our expense structure. Our expenses as a percentage of gross profit have improved and while partially reflective of expense reductions during the pandemic, the progress in our expense control is also a result of our efforts started prior to the middle of March. While we are generally pleased, we recognize we still have room for improvement. Our working capital is healthy at $475 million as of the end of the quarter. And as Marcus has mentioned, our balance sheet is strong with $228 million in cash and cash equivalents and $217 million in our floor plan interest offset account at the end of the quarter. Our leverage ratio is calculated using our senior secured credit facility definition was under 3.5x at the end of the quarter and should continue to improve. We are pleased with the direction and anticipate lower leverage in the coming quarters. The attachment to the earnings release will provide other metrics and details of our performance in the quarter. Please refer to the release. Those are our prepared remarks. We are now happy to take your questions. Operator, please go ahead.

[Operator Instructions] And first from Stephens, we have Rick Nelson.

Marcus, could you speak, or Karin, to the cadence of sales as the quarter progressed and what you're seeing in July and early August thus far?

When we look at our overall business, web traffic, our call center volume, our service traffic, our retail volume, we clearly saw a pretty dark and gloomy time in at least the first 20 days of April. And as we got into the last week of April, when we decided to press the gas and take in inventory, we started to see that accelerate, starting largely with online activity. May and June were progressively stronger. But as I have to remind everybody, May and June are typically pretty strong. And when you look at the performance of RV sales on a year-over-year basis, it really is relatively consistent from a percentage standpoint of what we were already experiencing in January and February, which we thought were strong. We're seeing the same type of activity for all of our channels in July and we don't see any reason why that would slow down in the near future.

Do you have an idea of what the industry is growing? It appears like you're taking quite a bit of market share, if you could comment there?

Yes. As we've said over the last several years, we as a company and as a management team do not think about what the rest of the industry or competitors are doing. We're very focused on what sort of performance we have at each 1 of our locations, do we have the right inventory on the ground? Is our process refined? Are we capturing the maximum amount of margin so the supply/demand curve works? Are we taking the calls in the call center properly? We are hopeful that the industry overall is healthy because we are a big part of the industry. And we haven't heard of anything that would make us believe that everybody isn't just getting fantastic, quite frankly.

You mentioned inventory per location down 29% year-over-year. Do you feel like you have enough product at this point to continue to grow at this pace or are you supply constrained?

Yes. As a consummate salesperson, I can never have enough inventory, but we want to find the balance between the proper amount of inventory and maximizing margin and churns. And as we look at the industry, we have approximately 35,000 travel trailers on order, and we have not seen many bumps in the row, at least from our company's perspective in working with Thor and Forest River to secure the inventory necessary. If you talk to some of our general managers at our locations, I would imagine that they all would like more inventory. But we have to be realistic about the fact that we are coming into the back half of the year, and we seasonally start to bring our inventory down. This is the silver lining. We dramatically improved our consignment process, our use process. And as we look at where the inventory is coming in, we've also increased our churns. We don't seem to have a terrible concern about inventory. But clearly, we would all like more. Doesn't seem to be hurting our volume much.

And if supplies come back for the industry, curious how long you think you can hang on to these GPUs, which are above peers?

I missed that, Rick, I'm sorry, there was a little bit of disruption on your...

The gross profit per unit. Do you think you're going to be able to hang on to that as we push forward and the inventories across the industry start to come back?

Our internal goals when we started the year, one of our key initiatives was to improve our gross profit over the previous 2 years. And we knew that we needed to lean into our used inventory and our consignments. We knew that we needed to go deeper down into the travel trailer segment and expand that. So we expect our gross margins to be materially better than 2019 as we get into the back half of 2020 on a comparative basis.

Okay. And finally, if I could ask you if you do hit a record EBITDA here in 2020, do you think there's enough demand out there or other initiatives where you can grow, top that in 2021?

Look, we think we have a chance at having our most profitable year ever. But we also know that we're making certain steps inside of our business to not have to look back as we get into '21, '22 and beyond. We're sort of really thinking about our 3- and 5-year plan. Some of the stores that we have today, for example, the stores that are branded Gander for the first 6 months had revenue of approximately $500 million and an EBITDA contribution of roughly $28 million. While that EBITDA margin doesn't meet our overall company goals, some of those stores are less than 12 months old. And so we're getting a combination of our newer stores that we built in the last few years maturing, which has given us the confidence to get back to making acquisitions and doing greenfield openings 8 to 10 a year over the next 3 to 5 years. We also have a number of other initiatives that we're not prepared to disclose today that we believe are going to dramatically change the digital strategy for our company, which will give us a larger share of wallet for the overall customer.

From KeyBanc we have Brett Andress.

So clearly, a lot of new buyers entering the lifestyle here over the last few months. But can you give us any update on the data that you track, like trade in ratios, lead generation, just how many new buyers is the industry attracting, trying to put some numbers around it?

We definitely saw more first-time buyers than we had ever historically seen. And we think there's a combination of things that led to that. We want to be very careful for the industry at large and the analysts who study the industry to not put so much focus on COVID being the new magic pill that sort of made everything better. When you look at manufacturers like Thor and Forest River, who have spent millions of dollars developing and creating units that are lighter and smaller and less expensive, we really have seen that, that funnel has opened up. So you look at entry-level travel trailer, single axle travel trailer, that historically was not a big part of the marketplace, it now makes up a sizable part of the marketplace and we think that's going to continue to grow. The Motorhomes business continues to be suppressed overall, which is why we continue to drive more money into the entry-level travel trailer market. In terms of how we analyze it, we look at the percentage of units that are bought and what the trade-in ratio is. And we're about 8 to 9 points lower than we've historically been. And so while we have reason to want to be concerned for about a minute about that, we all -- we actually know that, that number isn't as stunning as one would think because the overall number is bigger. And so we're seeing our existing installed base return at the same pace that they were before, same trade-in cycle, so we haven't lost any folks there. And the only reason that our trade-in rate is slightly lower is because we are seeing first-time buyers in that entry-level travel perspective. We hope that doesn't go away. And if 18% continues to be the number, when the number is higher overall, we're okay with that because we have a unique ability that no competitor in the industry can get anywhere near, which is our ability to procure consignments, which is our ability to use our Good Sam database and our digital strategy to buy used and to use the strength of our balance sheet going forward to control the marketplace unused. As I've said before, we're agnostic whether somebody buys a new unit or a used unit. We want to sell them what works for them and for their budget. That's how we're thinking about it going forward.

Got it. No, makes sense. And then just a question, I guess, building off of that, thinking about the sustainability of this demand going forward. I mean, this environment has been compared to the multiyear growth that happened around September 2001 and all of the air travel disruption that, that caused. I mean so do you think that using history in that context is fair, is an analog or how do you -- what did your business do around that time frame? Just trying to kind of put that in perspective.

The odd statistic that I think you'll find interesting is as Rick Nelson pointed out, we have grabbed significant market share over the last several months. But the same-store sales number over those last several months is actually, on a percentage basis, lower than what we were trending in January and February. And so it's really important to note that our strength of our business was very solid and we believe that we were headed for a fantastic year absent COVID. I think in the first 2.5 months of the year, we were up about 11%. And when you look at our same store numbers, from that moment in time, when you include the March dip and the April dip and then the May and June and July clawbacks, I think we're probably closer to 9.2% or 9.3%. So we haven't even been able to get back to the levels that we were in January and February, even with us grabbing a ton of market share. So we know that the market share is there. We believe our digital strategy is what put us in the catbird seat. When everybody else was retreating, we were pressing the gas and now that we've had a successful quarter, and our balance sheet is rightsized, I think the market could expect me to put the company into overdrive as it relates to going after market share and going after growth, but we'll not compromise our SG&A or our margins to get there.

Maybe my question was more around just historical context. I guess, what does your business do in around 9/11?

We didn't exist back then as a company. So I don't have any comments.

Moving on, from Jefferies we have Bret Jordan.

When you think about seasonality this year, obviously, a lot of the manufacturers are talking about pretty extended backlog. Do you think that you will hold more inventory going into the fall and winter season, just given customers that are waiting for product or maybe interested in buying what was not normally a seasonal strong period? Or are you really not seeing this COVID demand being significant enough to justify holding inventory off-season?

I want to try to answer this as best I can. Our inventory science is a proprietary formula that we have built over the last 12 years. And we want to make sure that we continue to have the kind of aging on new and used that we do, which is infantile. I know it's small as an exaggeration. But as we head into the back half of the year, we're working very closely by the hour, by the day with each one of the manufacturers and their subsidiary brands to ensure that we are properly stocked for the end of 2020 and loaded for bear going into '21. But we will not make the mistakes that the industry has made in years previous to load it to a point where it feels irresponsible. We have built some forecasting models. And as I said, we don't see any reason why we will be looking backwards. So at a minimum, we would expect our stocking levels to be equal to or greater than they were at the same time last year as we go into the fall. We will be prepared for '21 and our size and our leverage and our relationships with the manufacturers have put us in a position that makes us very comfortable that we are prepared today and will be prepared next year.

Okay. And then a follow-up to your comp trend comments. They were plus 11% in the first 2 months and then decelerated to a plus 9% more recently. What do you see being the cause of that? Is conversion down at a lower rate? Or is it a shortage of inventory issue? I would have expected like a just deeper channel comment from you...

Yes, neither of those. What everybody is forgetting is that April was an absolute disaster, right? And so when you look at April, for the first 21 days of the month, the world was literally locking down, things were coming to an end. That was a big number to call out of. When you look at the days following April 21, our numbers were plus 25, plus 30, plus 35, plus 50 in some markets, but we want to be realistic. Now we know that there's been some stats provided by some very small players in the space, talking about up 30 and up 40. Let me remind you, there are no comps to Camping World, not Lazydays, there's nobody else. And in fact, our competitors, which are a fraction of our size, also made a significant number of acquisitions. So their year-over-year numbers are not authentic in our opinion. Our plus number factors in the absolute disaster that was the first 21 days of April.

Okay. So if we just look at May, June, though, the comp trends would be higher than the January, February comp trend, right? So should -- it does appear that there was a COVID benefit to demand.

No, sir, I could argue that, that demand was delayed.

[Operator Instructions] We'll move on to Gerrick Johnson with BMO Capital Markets.

I was just hoping you could talk about the Good Sam membership role. Looks like it dropped a little bit. So what's going on there?

So the only reason that the Good Sam membership file looks like it's optically down over last year is when we made the strategic shift in September of 2019, we eliminated all of the members from the file that were associated with the 39 stores we closed. We wanted to level set to make sure that we were comparing apples-to-apples. That was about 200,000 members, plus or minus. And so when we look at our number today, on a same-store basis, on a same file basis, when you extract out the stores and the markets we exited, we're actually up about 2%.

Next question will come from Craig Kennison with Baird.

And congratulations, Karin. Question, Karin, for you on the SG&A expense line, much better than we expected. And something you called out in terms of your efficiency. Is there any way to shed light on where you found efficiencies and how sustainable those would be?

That's a good question. I mean, some of the things that we've been looking at is Marcus was talking about the digitization of our advertising and our processes to reach in and help our customers. That versus traditional advertising is substantially less money, so that was a very big change. There were some changes in the quarter related to some compensation changes, but most of those people have been hired. And there have been other avenues that we've been looking at, mostly in technology, as I mentioned, and in advertising.

Craig, let me be more direct than Karin about it. In the back half of '19, we flattened out the organization in a way that was draconian, to be quite candid with you. And as we got into 2020, we only added things that we felt were going to be accretive to us. And so we went individual by individual to ensure that their productivity and their contribution to our profitability made sense for us. We eradicated locations that were not performing. That was a big contributor. We tightened down on our inventory levels, which we will continue to do to save on floor plan expense. And we had a significant sort of a reimagination of pay points. We got away from big bases, and we refigured people's pay points to be performance-driven. And you're seeing the results of how people's mindsets were shifted. We needed to return to a high level of variability with our cost structure. And when you look at 56% for the quarter, that's clearly our highest-performing quarter of the year, but our year-to-date number, quite frankly, is what we're looking at. We want to be 66%, 67% in that range or better on an annualized basis, and we know the levers that have to get pulled on. One of those levers is ensuring that our gross margins are in line with our expectations. SG&A, as you know, Craig, is a function of not only expense control, if you can't save your way to a profit, with expense control combined with margins. And when you look at our service margin and the unbelievable solid 80-plus percent margins that come out of our Good Sam business, those kinds of things give us the gross margin opportunity and the EBITDA margin opportunity of this business needs to separate itself from everybody, including the most profitable public auto out there that I don't think is even half of this number from an EBITDA margin standpoint.

And then as a follow-up, just to the demand that you're seeing, is there any change to the demographic profile of your traffic or sales? Just curious if you're seeing like a different type of consumer come in based on either the pandemic or just other work that's been done to attract a larger audience?

Look, I think you've definitely seen a significant drop in the average age of inquiries. We look at our web traffic. And one of the things that we're spending a lot of time and energy on is creating a digital narrative that attracts somebody that used to think that the RV lifestyle was like their father's Oldsmobile. It used to be like something that a retiree would do. And we think we're doing a really good job by making this young, cool, hip and easy. Part of that is having lighter, cheaper, affordable units so that it's a hobby and not a lifestyle 7 days a week. We think we've been very successful at that. And we're going to continue to do that. I think additionally you're also seeing people that have never thought about entering the lifestyle, never ever, ever thought about it, that are starting to at least poke around it. Has that necessarily translated into massive numbers? No, but it could be 1% or 2% of the revenue that we saw for the quarter, could have come from people that a year ago would have said, "Oh, no, that's not for me." I think we're trying to make RV cooler than it's ever been, and our marketing really speaks to that.

Next we have Seth Sigman with Crédit Suisse.

So I wanted to follow up on demand as well. It looks like same-store unit sales are tracking up 3.6% year-to-date. Obviously, there was that slowdown in March and early April. It sounds like you've come out a bit stronger now. My question is, do you think that demand has caught up now? Or do you feel like you're still missing sales in the context of that up 3.6%?

I don't know where you're getting 3.6%. I'd have to study my numbers. But I don't have anything with 3.6% in it.

I think the 6-month trend based on the release says that same-store unit sales were up 3.6% year-to-date, unless I'm looking at the wrong thing. But I mean, obviously that would be...

It's higher than 5%, and we can dig into it for our one-on-one call, but we are much higher than 3.6%. But to address the question of whether 3.6% or 6.6%, as you know, this industry has a bit of a bell curve to it, right? I mean the 4th of July was always Christmas Day for us. What we're seeing happen is that the year we're seeing it potentially get a little longer. And with school potentially not coming back at the same level and people home schooling, we're really anticipating that the fall could be slightly more robust. Now the balance to that is because of COVID, the fall usually has a lot of outdoor shows, big shows. We don't have those shows this particular year. We opted out of those shows because we felt that it was unsafe for our employees, but we think we'll continue to see solid performance for the back half of the year. But again, we will not compromise our margins or our EBITDA margin for volume. And so there may be other dealers who are willing to start giving product away as they get into winter to generate cash, we have enough cash, we want to stick to our business plan. But we still believe we will continue to take market share like we have demonstrated in the first 6 months of the year.

So it sounds like some of the sales could have been deferred, right? And some of the strength that you're seeing in July may just be those delayed sales. And I guess your view is that this Q3 could be a little bit better seasonally than it typically would because of some of those factors.

Yes. I think our Q3 will be better than last year. It's not going to be second quarter good, but it will be better than last year for a number of reasons: One, our game is stronger. In the third quarter of last year, we were definitely distracted with our strategic shift. We think from an EBITDA performance, it's going to be materially different. Right now, we're just focused on making sure that we're taking care of our supply chain, and we're taking care of our margins and our customers.

Got it. Okay. And then just a follow-up on store growth. Getting back to the 8 to 10, I may have missed it, but did you give us a time line for that? And then if you could just update us on whether you've made any sort of changes to the real estate selection strategy as you think about reaccelerating the growth?

So we expect to add 8 to 10 stores in 2021 and don't see any reason why we wouldn't do that for several years after that consistent with what we did when we started the company in 2003 all the way up to the day we went public. We took a pause for 2020 because we felt like we needed to rightsize our balance sheet, rightsize our process and get refocused. We're now ready to go back out. In terms of looking at our real estate strategy, because we want to keep our competitors at bay, I can tell you that we have either signed LOIs on real estate or are in final discussions of LOIs with acquisitions. And so we'll be announcing those in normal course. But everybody could plan on us having 8 to 10 in 2021 and every year after that, unless something in the market outside of our controls changes our opinion of that.

And next questions comes from Tim Conder with Wells Fargo.

And congrats, Marcus, to the whole team there, great execution in obviously a little volatile environment. Can you talk a little bit about on the used side? You talked earlier about the funnel of consignment, the marketing database and so forth, how are those acquisitions cost of used inventory? How is that trending? And I guess, back into the earlier question about gross margins and going forward there, how does that play into that equation? And then I did want to come back to the first-time buyers. Any way you can parse, again, the first-time buyers versus maybe a lapsed buyer in any way versus that ongoing trade up type buyer.

The used industry is actually a pretty complicated matrix. And a lot of people don't have the resources that we have with our call center, with our national trade desk with a couple of hundred million dollars in the bank and with 5 million active customers in our database. And so we're able to lower our cost of acquisition of a traditional used unit compared to our competitors because of that -- because of those points that I just mentioned. For example, a traditional dealer will still buy on the curve, will still try to consign, but they're mostly relegated to going to auctions and buying and paying fees to buy them, fees to transport them. And we try to, at all costs, avoid that angle, which is why our margins are materially better. We also try to have a solid mix of our consignment business. And our consignment business allows us to have the customer maximize their value, right, because that's the goal of a consignment and us still be able to retain world-class use margins. And so the use business has gotten tougher as demand has gotten bigger. But we believe that we have the right strategies in place. In fact, if you visited one of our websites today or you visited one of our stores today, you don't see it as a consumer, but our process of appraising the trade or making the decision to purchase the unit is not a local decision anymore, and it used to be. And the reason we elected not to do that anymore is because we felt like our local stores were potentially missing out on opportunity. If somebody came in with a particular type code that they maybe weren't comfortable with, they may either put a low number on it or pass on the transaction completely. We elect to take all of those trades in. And then we analyze them at the end of the night, and we allocate them to the stores that we believe are going to best be able to maximize margin and maximize churn. That's a big shift for us, and that shift happened during the COVID process where we accelerated our digital strategy. We used 15 years of proprietary data to build a valuator that we'll be launching in the coming weeks to allow our stores and our consumers to get a price that is different than the book, different than Kelley Blue Book. We don't believe that Kelley Blue Book has enough empirical data to justify a value, and we believe that the customer wasn't getting enough for their trade. So we are going to be, going forward, the market maker on unit value to protect our Good Sam member, to ensure they're getting the most value and to ensure that we're stepping up. What our competitors largely deal with when they take in use is most of them don't have several hundred million dollars, $400 million to be exact, of cash on their balance sheet. They may have to floor plan that unit. And the floor plan providers only allow for that unit to be financed, in some cases, with a maximum of 75% or 80%. In most cases, those dealers won't want to put more money into the trade than they'll be able to floor the unit for. And we believe that if we can reset the market, raise the values for the consumers, we'll be able to: A, attract more trades and buyers; and B, raise the value for consumers across the entire enterprise; and three, separate ourselves from our competitors who may not have the working capital to compete with our trade values. It isn't that their trade values are wrong, it's that they're managing their trade values based on the liquidity on their balance sheet, especially going into winter.

Okay. Okay. So basically, the proprietary data allows you to price better than Kelley Blue Book, which is what the competitors are utilizing to make their decision on the floor plan availability also.

It is our goal in the next 2 to 3 years to reset the values of how the industry looks at used. We sell over 100,000 units a year. In fact, we -- hopefully, we're crossing our 1 millionth unit next year. We have enough data that supports our value and our values, for the most case, are higher than any book that's out there.

Okay. Okay. And then, I guess, back to the question on the first-time buyers, is there anything else you can add there? And lastly, just to clarify, maybe a little bit of confusion on the comps, which is unit based and which is dollar based? I guess, maybe that's -- that may be a little bit of the root of the confusion, I guess?

You know what, I don't have that handy, and I don't want to misspeak. John, do you have that answer?

What is he looking for?

There's confusion around the comp numbers. And then are we talking about units or dollars? That's the question. That's what Tim is asking. What's the answer?

He's looking at the 6 months and you were talking about...

But Tim is asking, is it units or dollars? 3.6% was based on what?

New and used.

New and used, combined.

New is around 5%.

New is around 5% at 6 months.

Okay. So units is what you're referring to on those -- on the top numbers. Okay. And then, again...

That's correct. Tim, I think you know this -- Tim, I think you know this, and so does everybody else, that the whole world started to get locked down around March 12. And so when you looked at our first quarter of, I think, we were 30-some-odd million, $36 million, we missed out -- in our opinion, we missed out on about $20 million to $25 million of earnings because in the last 3 weeks of March, the bottom fell out, and it continued through April 21st. So we believe that what we want the market to look at is the full 6 months. We think that our EBITDA margin is better at a full 6-month. Our same-store sales numbers are a full 6-month. We think that, that's the way we want everybody to look at our business. Don't look at the quarter, don't look at the first quarter, don't look at April, look at the first 6 months, that will really give you a good picture of where our business is.

[Operator Instructions] Next from Bank of America. We have John Lovallo.

First one is maybe going back to SG&A for a second here. On a year-over-year basis, it looks like it's about $30 million lower on an absolute basis. Just curious if you believe that the level you're running at right now is sustainable? I mean, should we think about SG&A potentially being down on a year-over-year basis going forward? Or were there some COVID costs in there, less travel, et cetera, that may have artificially lowered that?

Look, I think there was definitely less travel, and there were a few less employees, but there were also some additional costs that it took to operate during COVID as well. We also, at the end of the quarter, did provide some sizable bonuses to those folks who took pay cuts in the beginning part of the quarter. So our number isn't completely avoid of personnel expense. Our margins drove a big portion of the SG&A as a percentage of for the second quarter. But as we move into the back half of this year and we move into '21, '22 and beyond, we want our SG&A as a percentage of growth to be below 70%, and we want to return to the EBITDA margin between 7% and 8% that we always believe we should have been at and we were. When you have an influx of new stores, like we did over the last 2 years, or you have to shut things down, it screws up all of the metrics. So in the third quarter and in the fourth quarter, the expenses as a percentage of everything compared to last year are going to look better. What we want to keep focusing on is take out the stores that we eliminated. If you see our total expenses below 70%, we internally believe we're finding the right balance of taking care of the customer, taking care of the employees and providing a good return on capital. 56% is not something that we believe is an annualized number. But if you said to me, could you be in the low 60s in 2021? I think we have a shot at it in the second quarter. Second quarter always has our best metrics in those categories. That's usually the quarter we're the most profitable. But I think our number for year-to-date was like 68 point something. We're going to try to hold on to that like a mother bear as best we can.

[Technical Difficulty]

Well I can't hear you. I apologize. You are muffled, sorry.

Can you hear me now?

Yes, sir.

Okay. Sorry about that. Maybe the margin differential between a towable and motorized RV, I would think that a bigger, more highly contented vehicle, like on the light vehicle side, for instance, would carry higher margins. But is that not the case with RVS because the towables have a higher percent margin?

So unlike the auto business, where a luxury product could yield a higher gross margin because of the way the manufacturer structures invoice and the way they manage the supply chain, we have the inverted. And so as you think about the price grid, typically, the margins are better as you drive down the average selling price. And remember that you are financing units anywhere between 100 in and 44 months and 200 in 40 months, and so that allows for a full suite of necessary products to be included in that transaction. What always throws everybody off about our business and our margins and our EBITDA margin performance is the $120 plus million that comes from our Good Sam, high-margin recurring revenue. It would be like saying -- taking AAA and mushing it into CarMax. That's one of the benefits that we have that we don't believe that the market gives us credit for. We have almost 2.1 million people spending approximately $1,850 a year and that -- a good chunk of that margin is 70%, 80% margin business. That gives us the ability to have world-class margins and be the leader in volume on the travel trailer side. Now we do need that blend. And this particular business model, why we believe that this company is still undervalued today is because the model that we have built is -- has a giant moat around it. And the moat starts with the database, it leads with the Good Sam member being loyal and buying the products and services that they need, and it ends with our finance and service business. The commodity that we sell, where we compete with everybody else, is the common travel trailer fifth wheel or C class. Where we separate ourselves from everybody is our ability to acquire the customer for less, the ability to capture a higher-margin with that customer and the ability to hold on to them for a longer period of time. That's our differentiator.

Okay. That's helpful. And finally, just on the acquisitions that you mentioned potentially picking up here a bit. Are you finding that with the current industry strength that potential sellers are less inclined or more inclined to want to exit?

I always make at least 1 bold statement a call. We can buy pretty much anything we want. And if we can't buy it, we will open in that market. And I used to tell people, the whitespace exist and our job is to fill the whitespace for the interested party in the RV lifestyle. And whether that's Lincoln, Nebraska or Cheyenne, Wyoming or Oshkosh, Wisconsin, or Cape Girardeau, Missouri, we're going to go where we see whitespace because the customer is asking us to come there. And we're going to bring our full suite of products, including our retail offering, our Good Sam offering, our RV service offering and our RV sales offering. We ultimately know that we can grow this business by 10%, 20%, 30%, 40%, 50% over the next 3 to 5 years. And that is our focus going forward. But we will not do it unless it's profitable.

And next, we'll move to Ryan Brinkman with JPMorgan.

I think the margin number stands out to me as maybe the most impressive part. Could you just kind of comment on the various different tailwinds to margin during the quarter and rate their sustainability? Are you able to quantify the degree to which you might have benefited from any austerity measures that won't repeat going forward? And then while we can see your average used RV ASP from the release, I'm just curious if maybe used RVs are sequentially surging like in the light vehicle market, the prices, such that you might have benefited from that? And what's your outlook for used pricing going forward?

I'll start with your last question. So a surge in used demand would actually contract our margins because while we'd like to believe that we could sell them for more, we also have to pay more for them when we buy them from the consumer. And it is our belief that if we provide the customer the right value for the used, not some behind the desk talk to the sales manager underneath their tie trying to steal their trade, we will gain loyalty for life with that particular customer. It's a very competitive environment, and we believe used will contribute -- continue to contribute. But our margins on an annualized basis -- let's just leave the quarter for just a minute, on an annualized basis, are pretty much bolstered by a few things that people don't like to talk about a lot. Our Good Sam margin business is a 75% to 80% margin business; our service and repair business is a 70% plus margin business, and we will build more service space; our retail operations are a 35% to 39% margin business; our F&I business is a significant margin business; and our lowest margin business in the entire company and the entire industry is the sale of a new RV. And so when you hear me talk a lot about us being agnostic to whether the customer buys new or used, we're agnostic because we don't mind if they buy used. The margin is better. The service performance is better, the finance penetration is better. And at the end of the day, we are a data mining company that wants to take care of the customer in a 360-degree wheel by selling them roadside and warranty and insurance and credit card and club and accessories and toilet paper and service and collision repair and all the things that go along with it. And the spark to that is the volume of transactions that we can do with the sale of new and used RVs. But it's important to note that when new and used RV sales are down, like they were in March, like they were in able, our Good Sam business, from a profitability standpoint, was actually up because we have a bit of a reverse hedge. The Good Sam business doesn't skyrocket, like we'd like it to, but it also doesn't go backwards. And that's an important thing that we want investors to understand that everything we do drives -- driving our 2 million-plus database because if you extrapolate out $1,850 times the number of members we have, you'll see that a lion's share of our revenue comes from our members. And as we add locations or make acquisitions or get -- add more benefits to our members or do things that help them to retain them, all that does is take that $1,850 to $1,860 and $1,870. So we have 2 goals going forward; grow our total file size profitably, by the way; and grow the average spend per member. That is our business model, and it always has been. We did a terrible job of explaining that clearly until now.

That's very helpful. And then just relative to all these new buyers entering the industry for the first time, which types of RVs do you find that they're gravitating towards new versus used, towables, I imagine, price range, et cetera? And then the number of new buyers coming into the industry, I would have expected maybe the number of Good Sam club members to grow year-over-year. It looks like it declined a little bit there. Do you have any color on what might have been driving that?

Our Good Sam membership file actually grew when you extract out the members that are associated with the stores that we exited in September of 2019. And Tamara Ward, who's our Chief Operating Officer, felt it necessary to remove them. In fact, when we made the strategic shift, we stopped selling those memberships in those stores, we stop renewing them because we felt that it would be a bad experience for the customer. We don't want to have file size to be -- a file size number just to be a number. We want the purity and the clarity and the cleanliness of that file to be really right because we spend money marketing to that customer. And so we feel very -- we are very proud that we are at 2,063,000, considering that we extracted about 200,000 members from the file when we exited those markets. So we are actually up, but we know that the narrative doesn't give us the opportunity to put all that color around it.

Okay. That's great. And then for the new buyers, what are they gravitating toward? Which types of vehicles are they more interested in?

It really depends on the average income and the lifestyle choices of that buyer. And you would think that they would all be buying travel trailers. But as the funnel opens up and people's curiosity opens up, if somebody made $150,000 a year plus, they may buy a C class; if they made $300,000 a year, they may buy a motorhome because they have the access to store the motorhome or the staff to help them with it. But the bulk of our first-time buyers are living in that $25,000 and under category. And as -- if you really study our inventory online and you look at our ASP, what's interesting is nobody notices that our top line revenue is only up 9%, but some of it is intentional because we have continually and will continually exit the heavy diesel market. When we look at the return on capital for the industry of selling a diesel at 1.34%, I am not interested in being in a business where I get a 1.3% return, I'll just pick my money in a local bank. I want to be in sectors and in segments and in categories where I could drive volume, because that drives memberships and all the ancillary products and, not or, and I can get a reasonable return on capital that's at a minimum on a transaction on a unit of 10 plus.

Ladies and gentlemen, that does conclude our question-and-answer session. I'd like to turn the floor back to Mr. Lemonis for any additional or closing remarks.

Look, we're very grateful to our almost 11,000 associates. But more importantly, we think that this industry has nowhere to go but up. And we think it's important to recognize the suppliers and manufacturers and camp ground owners who really made the last 6 months possible. The supply chain was very difficult. And we saw suppliers and manufacturers, whether it was Lippert or Patrick or Thor really step-up in the way, and there are many more really step-up in the way and pull all the tricks out of the bag to keep our industry healthy. A healthy industry is a healthy Camping World and a healthy Camping World results in these kinds of results. So we're grateful, and we thank you, and we look forward to another solid report as we head into the third quarter. Thank you very much.

And once again, ladies and gentlemen, that does conclude our call for today. Thanks again for joining us. You may now disconnect.