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

Good morning, and welcome to Camping World Holdings 2020 Investor Presentation Conference Call. [Operator Instructions] Please be advised that this call is being recorded and the reproduction of the call, in whole or in 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; Tamara Ward, Chief Operating Officer; Karin Bell, Chief Financial Officer; and Matt Wagner, Executive Vice President, Dealership and Retail Operations. I will turn the call over to Mr. Moody to get us started.

Thank you, and good morning, everyone. Yesterday afternoon, we issued a press release containing our long-term goals for the business, and we released a video and slide presentation that outlines our business, our history, our growth initiatives and our long-term growth goals. This video and slide presentation 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. Any forward-looking statements represent our views only as of today, and we undertake no obligation to update them. Actual results may differ materially from those indicated by these statements as the result of various important factors, including those discussed in our Risk Factors section in our Form 10-K, our Form 10-Qs and other reports on file with the SEC. I'll now turn the call over to Marcus.

Thanks, Brent. Good morning, everybody. Based on a number of requests from current shareholders, we felt it was important to put on this investor conference. We believe this is something we will repeat in the years to come to allow people to get more information about the company, more importantly about where we are, but where we're going. And this will be in addition to our quarterly numbers that we provide in our quarterly calls. As we normally do on most of our conference calls, I want to make sure that we keep our prepared remarks really brief and then we get a chance to jump right into Q&A. And we're pleased with what we have to talk to you about today. And we -- last night, as Brent mentioned, we posted both -- some guidance for the balance of 2020 as well as our outlook, early stage outlook for 2021, and we did that through both a press release and a video presentation that you could find in the Investors section of campingworld.com. If you have not seen that video, we would strongly encourage you to watch it because we believe it tells a very tight narrative around the company. As part of our discussion today, I do want to review the goals and initiatives. But before we get started with that, I think it's important to highlight what we consider the 5 truths about our business that either often go unrecognized or they're misnomers. Number one, we are more than a company that sells RVs. And arguably, the largest misconception about our business is that we're simply an RV dealer. And that's far from the truth. We're much more than that. Selling RVs for us is just a fire starter for our business. In this presentation, we're going to show you the different revenue streams that make up the entire Camping World universe. Number two, a large portion of our business, or revenue -- excuse me, a large portion of our business is not cyclical. Every business has some level of cyclicality to it, but our secret sauce is the fact that most of our business is not. It's high-margin recurring revenue that really caters to the installed community of RV owners that really have driven this industry for many years in the past and many years to come, 10 million RV-ers in the range. Number three, we don't believe that our business model is easily duplicated. Through our 50-plus year history, we've refined our ecosystem, and we're going to talk to you today about why we don't believe it's easily duplicated. You often hear me talk about the moat around the castle. We think that moat is only going to get deeper and wider. We don't think that it's easy to get into our business. Number four, we have a relatively unlimited amount, a bountiful amount of white space in front of us. Years ago when we started this company, customers had a different travel pattern. And as we've looked at the whole addressable market, the 144 million approximate people that love the outdoors, whether that's RV-ing, hunting, fishing, camping, whatever it may be, that addressable market is huge. And we've noticed that people are traveling, but that as the RV and outdoor enthusiasts has gotten younger, people have started to travel in shorter distances because they're leaving work on Thursday night or leaving after school on Friday and they're traveling for the weekend, and they're coming back on Sunday night in preparation for work or school on Monday. It doesn't allow people to travel hundreds, if not thousands of miles. They're taking these 60-, 70-mile trips. That allows us to have much more opportunity to add to our footprint. We have 164 stores today. We think we can have much more than that. In fact, I would argue that over the next decade, that could be doubled. We don't think that white space is being doubled up. Number five, we believe we are a very stable business. If you look at the history of the company over 20 years, or even since we went public, we've had really good returns. And while we know we had a blip in 2019 as we enter the market and pivot it into something out of that market, for the most part, we've been very, very stable. In the prior Q&As, we've answered a lot of different questions about initiatives, and we want to really focus on the list we're going to talk about today, and then to dig in really deeply so that people understand how it is that we feel confident that $500 million is our outlook for 2021 and how we believe we're going to be able to compound that number every year going forward, consistent with how we compound at our earnings from the day we went public. Number one, we believe we can continue to grow our adjusted EBITDA in the mid-single digits, on average, over the next 5 years, generating more than $500 million in adjusted EBITDA next year alone. Annually, we're targeting a base case of 7.5% of adjusted EBITDA margin and SG&A as a guide around 58%. Now the reason I picked 7.5% as opposed to the 13% we reported in Q2 and hopefully, a larger number than that in Q3, is because we want to give people a base case of where they should expect our business to be. That's almost a floor for us as the company as we look at return on capital. But that number can move around pretty dramatically. Here's an example. If we go out and acquire $1 billion of RV dealership revenue with $55 million or $60 million of earnings, which is great, it's a 5% to 6% EBITDA trailing 12 number, we haven't had a chance to integrate that into our business, put in our processes in F&I, change the way we do used at our retail stores, and most importantly, pull those folks through our Good Sam house where the high-margin recurring revenue exists. So if we go out and make that big acquisition, oddly enough, it actually suppresses our EBITDA margin. We don't pay our bills with EBITDA margins. We pay our bills with cash flow. As the single largest beneficial owner of this company, I'm focused on driving this company to $600 million, then $700 million, then $800 million of earnings. I'd much rather have $800 million of earnings at 7.9% than $650 million at 9% EBITDA margin. We want to generate cash so that we can not only grow our business, delever our company, but we want to continue to increase our dividend if the Board of Directors feels it's appropriate. Number two, our goal is to have a net leverage ratio less than 2x by the end of this year. Now historically, when we went public and when we talked to investors, we've always been comfortable with leverage less than 3x. We're not changing our tune around that. We're comfortable less than 3x. When we get down below 2x, we're sitting with a lot of cash, and we want to make sure that we're using our cash in a way that's going to give the company the best return on investment. And whether that's paying down debt, making acquisitions, investing in technology, making a big dividend, a special dividend, increasing the monthly dividend, buying shares back, we want to preserve as much optionality as possible. Our goal is to obviously deploy that in the best use. Number three, historically, we've talked about the fact that we expect to open or acquire 8 to 10 locations a year. Look, that's an average number. There have been years we've done 15 deals, and there have been years we've done 0. And so this 8 to 10 number is an average. And what is the regulator of whether we do it or not isn't the amount of capital that we have. It's the amount of human capital that can actually absorb, integrate and train those new acquisitions or new store openings in a way that we feel is going to be accretive. As we sit here today, between raw land, finished facilities and acquisitions, we're in one step or another in the entire process to add up to 20 locations over the next 15 to 18 months. Those locations include, again, raw land where we're going to build, facilities that we've acquired that are empty today that we can renovate slightly and open or acquisitions that are already in the LOI or purchase agreement stage. Make -- I'll give you a much cleaner analysis. We are back in the new store opening, an acquisition game because we feel comfortable with our leverage. We're happy with where our cash is, and we believe our human capital and our systems are prepared to take that next leap. We expect to invest no less than $20 million to $30 million annually in technology that we going to -- that we believe is going to further separate us from our competition. Look, we see ourselves as a steward of the industry. It's important that the overall industry is healthy. Every dealer, every campground, every manufacturer, we want everybody to be healthy because it creates a better customer experience for somebody that's new to the lifestyle or somebody that's already in it to stay forever. For our company, the way we separate ourselves from our competition is by enhancing the customer experience, by making it easier to transact with us. And whether that's creating a new way to buy or a new way to get a value on your unit or a new way to get a return on your capital or book an appointment or communicate with us, we realize that customers today in 2020 and beyond want to be able to communicate with us in a way that works for them, not for us. And so we have to spend money to move with the times. We slipped up over the last 4, 5 years in our capital allocation towards technology. I think we've made progress in the last 12 to 15 months, but there's more work to be done. And this amount does not include any potential acquisition that we may make of proprietary technology that could be out there that could be additive to our business or our experience. This $20 million to $30 million is purely capital that we're going to deploy on a monthly, quarterly or annual basis as we reinvest, rejigger or improve what we already have or develop new code or new technology. Again, it does not include what we could acquire on the outside to bolt on to our business. Currently, we have 2.1 Good Sam million members. I want to remind people that a year ago, we had a little bit more. But when we exited those locations that were not permitted to sell RVs, we retired that file off to one side because we wanted to look at what the total file was for a business that was going to go forward. We've seen growth in that file in the last 4 or 5 months, we're happy to say, even though we ended up [ off ] markets. We've seen growth in that file. The 2 numbers that we want everybody to be focused on, both internally and externally, is improving the customer experience, improving the benefits that are awarded to these well-deserving members so that we can retain them at a higher rate. In order to improve the file and its contribution to the company, we have to not only retain them, but we have to find new Good Sam members. And we do that electronically. We do that through our call center. We do that through our retail business. But most importantly, we're able to accelerate that when we pop up in new markets, either through acquisitions or new store openings. More recently, we've started to get intimately focused on each Good Sam member's contribution to our revenue pool on an annual basis. At the end of Q2 2020, we reported that each member generated approximately $1,850. We see a lot of room for improvement. But that member is only going to give us a larger share of wallet if we deliver the kinds of things they expect from us. They expect exclusive benefits, early access, a feeless-driven environment for them. When they write their $29 check or they sign up for a 2-, 3-year membership, they expect to receive a significant return on their capital. They expect to spend $29 and get multiple turns on that money. It is our job to continue to improve that experience. We're very focused on it. We believe that over the next 3 years, we can improve both the file size and the average spend per member by 10%. We think that's a pretty conservative goal, but it's a goal that we want our internal team to be focused on. It's not just about piling people into the file and then having them leave. It needs to be profitable and thoughtful. Number six, we're looking to expand lots of different high-margin products. And one of those areas where we see a ton of opportunity is on the collision repair side. We all know that we -- when we get out on the road or we're using it in campgrounds or we're active, we bump into stuff. Sometimes there's hail damage or accidents. Unfortunately, there's things like fires. We want to be the leader. We are today, but we think it's time to double down. This request is not only coming from consumers, those 10 million RV-ers who are finding at hard-to-find places, but our insurance partners who are looking for a more streamlined and regulated process around ensuring and improving their insurers' experience. One of those things that improves that experience is the amount of time it takes to repair a coach, where to drop it off, what the fees are going to be and how the whole process works. You know how we know that? Because one of the big contributors to our EBITDA is our own insurance agency, and we got that feedback from the customers who buy policies from us today. They want more locations where they can have their unit repaired. So over the next several years, whether it's expanding our existing locations or even adding regional service and collision centers, we love this high margin, 65% to 75% margin business. What does that serve? It serves the installed base. And it isn't reliant on the sale of new RVs. Now used RVs are a big benefactor of that. But largely, it's the 10 million-plus people that already own RVs today. One of the exciting things that Matt Wagner will talk to you about a little later during the Q&A is this unbelievable proprietary technology that we have worked for years to develop, called the Good Sam RV Valuator. Now the reason that we attach the Good Sam name to it is because Good Sam has historically been known as an independent authority and an advocate to members and RV-ers nationwide to provide them fair and accurate information. We believe this Good Sam Valuator superiorly trumps everything else that's out in the marketplace because we've taken years and years of transaction data, both on the new side and the used side, to be able to accumulate a value that we believe puts the appropriate amount on the asset that the RV-er is trading in. We think it creates a better experience for the entire RV industry, but most importantly, for our own customer. We know that our willingness to stretch on a trade or stretch on a purchase is a misnomer term because that stretch really is the appropriate value. Historically, RV dealers have used different books, black book, blue book, all kinds of books. From our perspective, unlike the auto business that has a rich amount of data to support it with all the auctions, both online and in person, our industry doesn't have that data. So when you look at these books, the data is so thin that the accuracy of those numbers are questionable. We believe that our data that ranges from coast to coast, north to south, east to west, left to right, all of everything in between, with close to 850,000 transactions over the last 15 years, provides us really good information. We also are going to add into that data trades that we see that we may not make a transaction on. Keep in mind through the rest of our database, we also know what warranties we'll provide, what growth side we provide. We have a lot of other data that goes into that formula as well. That RV Valuator is live. And it is our goal over the next 12 to 24 months to make it the authority on RV values, hoping that even other dealers use it. And if they don't like the values, they can send those customers to us, and we'll be glad to buy it right there on the cove with cash, same day. The next exciting thing that we want to talk about this notion that the RV rental market is something new. Look, there have been dominant RV rental companies for years in the United States: Cruise America, El Monte, Road Bear, just to name a few. And they have done an excellent job at catering to those people who come from Europe, who are weekenders who want to go tailgating but historically, domestic folks have not been the driver of the RV rental market. Now over the last 5 years, we've seen how technology can change the way people can monetize their assets. Good example is Airbnb, right? You took these vacation homes and different investment properties. And you were able to pull them together on a piece of technology that allowed people to think about investing in property differently than they ever did before because there's a platform to give them a return on that investment. Now our drive to getting into this space isn't purely economic. It really isn't. And we know that there are 2 primary competitors out there that we have a lot of respect for. We think they do a really wonderful job, and that's Outdoorsy and RVshare. They've done a great job of building a model that allows for consumers to rent and do all these things with each other, and we think that's fantastic. Our drive in getting into this space is primarily and purposefully to give our Good Sam members, our 2.1 million Good Sam members, and the balance of our active database, another 3 million people, an enhanced RV ownership experience. Because years ago, people would go out in RV, and they RV for weeks or months. So they'd be full timers. But that's not the case anymore. The RV owner has gotten younger and more of a weekend adventurist, they don't want to use them every weekend. Family activity, take them away from it, soccer games, all the things that go on in everybody's life. And so they're looking for ways to get into an RV for around $30,000, getting to a monthly payment of about $150 and figure out how they can enjoy it for their own family and then make money on it. So our motivation isn't purely this, but it's primarily this. What will drive this whole portfolio, this proprietary technology that we will be launching in the early part of 2021 is not only the 2.1 million Good Sam members, not only the 5.2 million active customers that we have, but our own used inventory that we have sit on our lots because we have figured out that's one more way for us to enhance the margin on the assets that we invest in. We already have great margins on selling them. If we can get a little less return on capital, we're going to look for it. And lastly and most importantly, we expect to announce a major strategic venture with a large rental company that already has a footprint coast to coast that does not get to enjoy this platform here. So we have all these drivers going into this. What makes us different? Number one, our cost of acquisition is going to be different than our competitors. Number two, our fee structure, both what we charge the person renting the unit and what we charge the person who's going to enjoy the unit while they rent it, that fee structure is going to be different. If you're a Good Sam member, we're giving you one more reason to stay in the club, and we're going to give you one more reason to join the club. If you're a non-Good Sam member, we expect to be the market disruptor as it relates to what those fees look like. How can we do that? And how can we make it financially work? Number one, in order to rent the unit, you are going to be required with every provider, not just us, to have insurance. Let me remind everybody, we're in that business. You're going to be required to have road side assistance so that your family is protected while on the road. Let me remind everybody that if it's self-insured product, well we dominate in this space. We also have all the soft and hard goods that go along with it. And through our distribution centers and our store experience, we will make renting that unit a 360-degree experience. It's important that the person that owns the asset knows, that the person they're renting it to has somebody to call other than them to get an information. So our 2 call centers, one in Greenville, North Carolina, and one in Denver, Colorado, along with our mobile tech hotline in Bowling Green, Kentucky, will all be available 24/7 to answer questions. We think that's the differentiator, and we don't think people should be charged for that. This particular platform, we think, is a game changer. We don't think it is appropriate for our company to be heavily invested in the rental business itself. It's not a good use of our capital. We did it before, we didn't like the returns. But through partnerships, our own inventory and our members, we believe that we will have an offering that will be second to none. This entire platform will be branded under Highways. That is a legacy Good Sam brand. And highways.com, a Good Sam property, will be the platform in which this will operate both online and through an app. We also plan to launch in 2021 the much-needed mobile tech solution. I can get picked up by a car. I can get my food delivered by a car. Heck, I can probably get anything delivered today. But what I can't get today in a way that's easy for the customer is a way to access service help. I can call the Camping World hotline, get an answer on how to unplug or reset a fuse. But if I really need work and I'm far away from a Camping World store, I want to be able to tap in to Good Sam's knowledge and network and their responsibility to protect me while I'm on the road. And so Good Sam will have a mobile tech solution that not only takes advantage of our national footprint, but it allows those small business owners, those small repair shops and those 1-truck and 2-truck mobile repair companies to actually have a network feeding them for work. As I think about my role with small businesses across America and talk to a lot of those small providers, they needed to be able to latch on to something to drive their business. So this platform we're creating will operate much like our Good Sam campground network does, where it's a network of people that participate in it or our roadside assistance process that allows the various top providers in America to access all of that business as well. We push business through them, they go out and take care of our customers. A good experience results in retention. Those independent service providers and independent mobile providers will pay a small fee like the campgrounds do to be part of that network. It will be materially cheaper for them to participate in that than go spend money to find the customer on their own. We love being the traffic builder for businesses across the country. We also plan to launch a system that you always hear about, buy online, ship -- pickup in store; buy online, pickup in the curb. That's fine and dandy. But in today's day and age, we had to figure out a way to utilize the assets that we have in the marketplace already and to get a better return on them. Sometimes people get uncomfortable when we open up new locations. In today's day and age, with the web, and with what Amazon has been able to do with shorter-term deliveries, we had to figure out a way to get the product to the customer quicker and for less. And when you look at distributing products from 2 or 3 distribution centers, you're crossing over into UPS and FedEx zones. Every time you cross the zone, the fee goes up, both for the company and the customer. Every time you cross the zone, the amount of time goes up. And so when we think about it, as consumers, we realize that we needed to change that. So we invested several million dollars in getting ready to launch a platform that allows everyone of our 164 locations and the ones we're going to add to act as many distribution centers to get the product to the customer quicker and cheaper, including, but not limited to, a real delivery driver that can leave that location on that day and drop it off at a local campground. That's something that stems all the way back to how auto dealers used to deliver parts. We believe that our customers don't want to leave their campground, don't want to leave their activities, just want to know that the chair or their grill or whatever they need will be delivered to them. That is our goal over the next 3 to 4 years as we roll this out. We think that's a very big deal. Diversity has always been an important part of our company. However, we know that we can do better. When you look at our senior management team, we are very confident that we have the right assortment of [ gender ]. However, we believe that if it is our goal to serve every outdoor enthusiasts in America, all 144 million, we have to do a better job of making sure that at our store level, at our Board of Director level, at our general manager level, at our call center level, everything that we do better represents the entire marketplace. We have a lot of work to do, and we'll be dedicating both financial and human resources to expanding that both internally and externally. It's a moral thing for us, not a quota thing for us. We believe that if we want to communicate and own the entire space, we have to communicate with sincerity, and we have to really make sure we execute on this. As you look at the supply chain, which is a hot topic these days inside of any manufacturing or retail business, we believe that we have left ourselves slightly vulnerable, historically. If we're going to be a 360-degree company, we have to participate in every part of the industry. This particular initiative for us is to invest and acquire into suppliers that we believe are essential to the supply chain of the entire industry. We believe that we need to dedicate more time, more money and more resources to product development, innovation, not just with the RV itself, but with the products that go in them and the products that are used with them. Let me be clear, we are not getting into the RV manufacturing business through acquisitions. Yes, we may convert some vans for some van lifers. We may get into the van conversion business. We may get heavily into the renovation business or the DIY part of the business because it's popular in the van life today. So don't be surprised if you see some news around that. But in terms of competing with Thor or Winnebago or Forest River, that is not our business, just like we don't want them in our business. Their business is to innovate and make top brands, lighter, smarter, new technology to serve this industry. And more importantly, we expect our manufacturers to create a parts and service system that allows the experience to not rest solely on the dealers' shoulders, which it does today. And I'm speaking for every dealer in America, not just Camping World. We need to work together as dealers and manufacturers to create a smoother, cleaner process. We're going to take a little bit of risk on our books in the coming 12 to 15 months using our distribution centers to carry more fast-moving, breakable parts that will shorten the time frame between a unit being down for service and then getting repaired. And we understand that it's going to have some built-in obsolescence in it, and we'll adjust for it on the accounting side. But we have to improve the experience for the industry, not just our own company. And so we're heavily committed to investing in that, and we'll have more news in the coming weeks. We feel it's important that we not only do a better job of informing and educating the investors and people who put their money with our company, whether it's our landlords or manufacturers, but we have to do a better job educating our own team on what our own story is. Because if you work in the distribution center today or you work in the dealership today, you work in the call center, you're not exposed to the 360-degree view of that company. So we're launching a new learning platform that in order to work on the first day, you'll have to go through this educational platform. We will be investing $1 million to $2 million annually in educating our staff in a way we haven't been. So that as our company grows, and it will, we can cross-train people so they can be promoted into other areas, work in other locations and grow with the company. I don't think we did as good of a job as we could historically. We launched a proprietary process in the summer of 2020 that was a game changer for us. And we think that's part of the reason why our market share continues to grow. It allows customers to call, text, e-mail, request a real-time virtual visit and a virtual walk-through process. We have a new partnership with Cox Media that allows us to think about how to look at the customer differently through a CRM that is complementary to our larger CRM with Salesforce. Understanding the 360-degree view of the customer's essential, but every one of our businesses do business differently. And so when we launched this process, we wanted to make it easy for people to get information, to make an appointment, to do the transaction online. And quite frankly, we have cornered the market on home delivery. See, a lot of dealers would like to tell you that they do home delivery. But there is a significant regulatory process, interstate commerce, crossing state lines, all the paperwork that's required. We feel like we've checked all of those boxes. We are launching a fully comprehensive new platform that we believe will be the center point for everything in the RV outdoor lifestyle. For years, we have owned the domains rv.com, rvs.com, motorhome.com and a variety of other domains that necessarily haven't been used to their full potential. At the end of this year, we will launch rv.com, and it will be supported by communities and social media as well as a print publication that will be distributed monthly that is meant to inform, inspire and educate people, not sell them ads. Our goal is to provide content and to be the authority in everything RV and outdoor. RV.com and RV Magazine will launch, and we will retire from publishing MotorHome magazine and Trailer Life Magazine. MotorHome.com will become a new marketplace, specifically tied to everything that's motorized. And TrailerLife.com will become a private label brand skewed towards the types of products and sources that are needed if you're in the towable lifestyle. But we hope this clearly outlines where we're going. I don't know if we've ever been more excited. But over the last several years, we've been through a lot. We launched a lot of new ideas, and we're entrepreneurs at the core of what we do. And once in a while, we make mistakes, but we are not scared to admit it. We also think it's important to recognize those good things that come out of trial. Our Gander-branded locations in 2020 will deliver more than $50 million of EBITDA in the 2020 calendar year. That makes it the second-largest RV dealer network in America. That was our original goal. And while we had a misstep, we think we corrected quickly, but we also learned something. We learned that in our traditional Camping World stores, there was an appetite for more outdoor products. And our venture into outdoor products taught us what we want to be in and what we don't want to be in. And we don't want to operate locations that don't sell RVs. But that doesn't mean that we didn't learn about fishing and hunting and camping and biking and hiking. And when we look at our 20-plus percent improvement in our retail business in 2020, we think a portion of that is credited to that number. As we head into new things in 2021, whether it's furniture or electronics or appliances or all the new innovation we're going to bring to market, we know that the outdoor enthusiast is expecting us to deliver new ideas. And so we're excited to move into that. We're now going to move into the Q&A portion of our presentation. Operator?

[Operator Instructions] Our first question comes from Ryan Brinkman with JPMorgan.

Are there any guideposts you can give us in terms of what sort of margins or returns for the RV sharing business that might look like? What is your early work there suggested about the relative capital intensity of that business? And you touched on this, but just sort of beyond the direct impact of the business, how should investors be thinking about how it fits into the overall business? Do you think it will attract more Good Sam customers or introduce more people to the lifestyle that will then go on to purchase their own RV?

We never really thought about it as a mechanism to get people to purchase new RVs. In fact, that was a misnomer we made when we got into the rental business years ago. This is primarily for us a retention tool, and it is a bit of a recruitment tool of new members. But our goal is to really have this particular business touch on all the high-margin recurring revenue products that live not in this specific P&L but live in our ecosystem. And whether that's insurance or roadside or the hard and soft goods, that's our primary driver in here. And we're uncomfortable having our Good Sam members pay 25% of their -- to have to pay a fee equal to 20% or 25% of whatever they gain in the rental income and then have the renter themselves also have to pay. We don't expect this business to be wildly profitable in its own right, but we expect it to contribute significant profits to the other parts of our business, including the retention of the club, the acquisition of the credit card, the taking of the insurance and the roadside assistance, and the adoption of taking on the soft and hard goods as part of their journey. It wouldn't surprise me if it led to inspection fees and maintenance fees as well when owners and renters exchange units. Having that go through the shop again, having it all be cleaned and having it be prepped for the next delivery, much like we did when we owned the rental business. So the ancillary fees and revenue are really going to touch every part of our business, may or may not ignite somebody to buy a unit. But it could give us an opportunity to acquire a used unit if somebody doesn't really want to be in the space. So we're identifying people who are in the space. And that data is so valuable to us because we mine and market our other products and services to them. From a capital-intensive standpoint, we think it will cost us about $3 million or $4 million in 2021 to launch it. But we expect that we'll be able to attract enough fees and revenue to more than overcome it.

Okay. That's very helpful. And then just lastly for me, what kind of cash flow would you expect to be in a position to generate an environment where you are earning $500 million or more of annual adjusted EBITDA? And what do you see is your priority for deploying that cash? Just given the strong EBITDA outlook you just introduced, do you now intend to delever more by growing EBITDA as opposed to paying down debt, therefore, freeing capital for growth initiatives? How should we think about debt paydown versus investing in some of these new digital initiatives versus you alluded to some of the organic or maybe even inorganic store count expansion?

Yes. So we have been hyper-focused on driving down our leverage. I think we've paid off about $40 million year-to-date. But we want to find a combination of paying down debt, if we think that's the best use of capital, and driving our earnings. As we look at our goals for '20, one of them was to build as much cash as we possibly could and between our cash accounts and our flare accounts at the end of Q2, we had...

$445 million.

$445 million. We expect that number to grow and to build through Q3 and Q4. And as a management team and as a Board of Directors, we'll look at the appropriate allocation of capital. My goal in leading this team is to look for the most opportunistic, highest yield of capital for the company, period, end of story. One of those things that could be on the list but would not be high on the list is share buyback. People ask me all the time, "How come you're not buying shares back? How come you're not buying shares back?" And at the end of the day, from our perspective, our goal is to grow the amount of free cash flow in the company. Our goal is to delever to the extent that we're comfortable, which is under 3x. We're going to be under 2 at the end of the year. And our goal is to continue to invest in our business in a way that we believe makes sense. But whether it's acquisitions or new store openings, those are fine. But we are not looking away from the possibility of paying down $100 million here or there. In terms of the amount of free cash flow that we expect the business to make, I don't think we have all those numbers right in front of us, but we expect it to be significant, a couple hundred, several hundred million dollars on an ongoing basis. We have CapEx. We're a relatively CapEx-light company. We can flex up and down. We need to keep our facilities right. We need to make sure our fixed assets are right, and we need to make sure we're investing in our technology. We have our interest payment at a pretty low interest rate, okay? And so when we look at all those things, we believe that the free cash flow that this company has is significantly robust. We expect to grow the company with that cash flow.

Our next question comes from John Lovallo with Bank of America.

Marcus, the first one would be, I know you typically decouple what Camping World can do versus the industry. But can you just give us a little bit of guidance on what you're thinking of market assumptions underlying your 2021 EBITDA outlook?

I can. So we're expecting low to mid-single-digit growth on the top line side. I can't speak for what the industry is going to do. And when we look at the first 6 months of the year, while we saw a nice performance in both May and June, we also saw a terrible performance in March and April. And as you look at January and February of 2020, we were actually trending really nicely. We're actually trending, I think we're about 11% up. And so as we look at 2021, we have already factored in very loosely low to mid-single-digit growth. And here are the things that we actually think are more -- are contributing more to our $500 million plus than that. We expect our margins to stay in the range that they are today, right? As older stores mature, as the Good Sam products and services continue to grow, we expect those margins to continue to grow. And we can't speak to whether the new unit sales margins will be more or less than they are today because we don't know where that supply chain is going to be. But as we look at our overall business, while the new RV sales and used RV sales make up 67% of our revenue, they only make up about 39% of our growth. We're very hyper-focused on growing those high-margin pieces like I talked about with collision repair and service and things of that nature. But short answer, 3% to 5% on the top line, continued performance on the SG&A side and some relative consistency on the margin side.

Okay. Great. And just a follow-on to that. So is there an underlying market assumption that you guys are working off of?

Well we're outperforming the market. So we're just worried about ourselves at this point.

Okay. And then in terms of SG&A over the years as you were growing as a company, acquiring businesses and so forth, SG&A, you sort of ramped along with the top line. How confident are you in the ability to really rein in SG&A, given all these new initiatives that you're mentioning today?

I'm very confident because while we have set a ceiling target for our internal team at 68%, we believe we can outperform that, and we always have initiatives. And so what happens is when we look at our list of initiatives for the year, we have to pick and choose which ones we're going to spend money on. And so when we launch some of these new initiatives that we've discussed today, the ones that we have out there that aren't performing at the rate we want to or haven't achieved their task, those will go by the wayside and be replaced. We don't see these initiatives as being purely incremental.

Our next question is from Marc Cohodes with Alder Lane.

It appears by listening to you, you're really getting away from trying to make money in selling metal. And you're more about selling services, getting in the recurring revenue business and basically taking up margins. Where do you see further expansion in those areas? Could it be mobile service? Or instead of bringing your RV to the Camping World, you have a fleet or basically have a AAA crew floating around? Or could it be joint ventures with others in the space?

So we never want to get away from what our primary revenue driver is. I love selling RVs. It's actually in my blood. And it is the fire starter. And while it may be the lowest margin of all the high-margin things we do, it is quintessential for us to dominate in every market that we exist to grab market share and to generate as many transactions as we can profitably. We are not in the business of selling metal where we lose money. We want to grow the new, we want to grow the used. And as we think about our store expansion, whether it's Lincoln, Nebraska or Branson, Missouri or wherever we're going, we want to sell more RVs. But we don't want to build a business model purely reliant on the gross profit attributable to the sale of just the RV. We excel tremendously on the finance and insurance side. We excel on the service side. And so for us, it's continuing to hone in and tweak on all the things that the customer wants. And we spent 2020 really listening to the gaps that the market was not filling for the customer. Mobile service, as you identified, was one of those things where customers were saying, it's [ higher that ] our activities to be able to have our unit replaced. I don't want to have that happen. So we're very, very focused on making sure that we provide all those products and services. But I want to be clear, at no point while I'm around are we ever going to water down or minimize the excitement of selling RVs, period, end of story. And in fact, in 2021, we believe that we will be able to sell our 1 millionth RV. Not like McDonald's, right? But we believe that, that's our year. So please know that we are laser-focused on that. But our goal of getting to $600 million or $700 million can't be singularly reliant on that.

So if RVs are the razor, all your services are the blade. You sold an awful lot of razors this year. How many of these blades are really going to kick in for next year? Because your guidance actually seems low to me given your new installed base this year.

The guidance may seem low because what we also have factored in there is the number of new store openings, and our new store openings take about 12 to 18 months to reach a level of maturity. They have a burn associated with them, and we wanted to be realistic about that in our numbers. But it takes about 12 to 18 months ironically to pull a first-time buyer to either our company or to the industry through the system, to be able to get them in this Good Sam database, to be able to market them other products and services. And so as we look at that, we know that there's timing there. But one thing that everybody should take note on is that our razor, razor blade model is true. But I can also grow my razor blades with transactions that happened outside of our company. And I would expect our company to announce in the next 30 -- call it, 3 to 6 months, relationships with other companies that may offer Good Sam the opportunity to sell those products and services through their large platform. I want to say it again so that we're all clear. I would not be surprised if over the next 3 to 6 months, Good Sam announces relationships with companies other than its sister company, the RV dealer, that allow it to distribute its products through other big platforms, other big consolidators. There's no reason that Good Sam can't be bigger than Costco. And Costco has done a nice job selling cars and boats and a bunch of other things through a system. Costco doesn't actually sell the car or the boat. They latch on to a big network or a big company. I wouldn't be surprised if Good Sam got into that business and figured out how to also help that other company into selling annuity products as well. And whether that's roadside or assurance or warranties or all those other things, Good Sam has a mandate to grow its business outside of its own company.

And finally, in the new peer-to-peer rental business, how many different touch points or drop-off centers or campgrounds or retail partners do you anticipate having?

Today, the peer-to-peer market, as you know or as you may know, is usually very one-on-one, okay? And that's happening maybe in somebody's driveway or at a Walmart parking lot. And we wanted to create a larger network and a safer platform for people to do it because there's transactions that need to happen. Obviously, we'll use our 164 and growing locations, but we may expect to provide some level of partnership with maybe Flying J, which is our fuel partner, or any of our Good Sam parks. But at this point, we're thinking about it primarily starting with where we can execute and where we can control the experience. But I want to add something to the question as it relates to peer to peer. There are more RVs sold in America between private individuals, person to person than there are through dealers. And I wouldn't be surprised if in 2021, our company started to insert ourselves into that private party transaction. Today, Good Sam already provides refinancing for people. And so if you bought your unit 4 years ago, 5 years ago from us or from somebody else and from another party, we help you direct lend and provide the financing. We wouldn't be surprised if in 2021, we got more into that business with multiple lenders, and we started processing the title work and the entire F&I menu process that we actually do when we sell them ourselves. Private parties want to be insured. They want to be protected, and they want to get a good deal. We think there's a room -- we think there's room for opportunity. And we're going to definitely be researching that in the coming months as a good 2021 initiative to grow on.

Our next question comes from Rick Nelson with Stephens.

So I'd like to follow-up on the white space opportunity. You talked about a potential to double the store base over the decade. And the pipeline, I think you mentioned you had 20 locations lined up at this point, if you could speak to that? And what sort of [ points ] you're finding from the sellers, given how healthy the RV business is at this point?

Of the 20 locations that I mentioned, Rick, they are a combination of raw land, facilities that are vacant that are ready to have minor repairs done to them to launch and the new one. We acquired 1 last week, working on 2 more this week. There are -- and there are, we'll say, 2 handfuls' worth of dealership acquisitions that are in some stage of the process, either LOI stage or signed purchase agreement. Want to give everybody a little color on how the new store opening process works and how we're thinking about it from an economic standpoint and from a return on capital. And then I'm going to do the acquisition as well. And Brent and I always have this healthy debate about how we should be -- we should be opening them, should we be buying them? And I think we both are right in this case. When we look at opening up a new store, they're really -- it's a very simple process. We go into the market, and we acquire raw land anywhere from 6 to 15 acres depending on the size of the market. And in this particular economy, commercial property is suppressed in value, which is why you see us signing up some properties. We then know that it costs us anywhere from $250,000 an acre to develop the land and $80 to $120 a foot to build the building. A building usually ranges from 25,000 to 30,000 square feet. So $250,000 in site development and $80 to $100 a foot to build it with a facility that ranges from 25,000 to 35,000, okay? It's important to note that very rarely does the company have its capital deployed in that. Now we can, and we may going forward deploy some of our capital in real estate, particularly when we think we own it right, and we don't want to lose that value. But typically, we sell it to a REIT. And we enjoy cap rates anywhere from 6.25% to 7.5% based on a variety of factors. And so that capital is off our books, off our balance sheet. We become tenants. In order to open that location, we believe that location needs $5 million of RV rolling stock inventory. And for every $1 million of inventory, we like to have $180,000 of what we call working capital allocated to that $1 million. So $5 million of inventory. That's about $1 million of working capital. To open up the store, not including what the REIT's going to take between signage, furniture, fixtures, equipment, retail inventory, shop equipment, flag poles, all the things that it takes to open, it's about $750,000. So right now, at this point, you're $1.75 million to $2 million of capital depending on the size of the facility. We then believe that, that location in the first 12 months, on average, could lose anywhere from $500,000 to $750,000. So at the end of 12 months, we have anywhere from $2.5 million to $2,750,000 invested in that facility from a capital standpoint. It takes us about 12 to 15, 18 months to get to breakeven. Now there are cases where we make money, we're right out of the rip. It happens actually more than you would think. But there are some cases where it takes a little longer. But on average, use as a guide 12 to 18 months. At that point, once we start making money in year 1, that business, if it does $20 million in top line after it's matured, after that 12 to 18 months, it will make about $1 million. And every year after that, once it matures in years 3 and beyond, you'll have a $25 million to $30 million dealership with a 6% to 7% EBITDA contribution in those 4 walls. Okay? It's pretty good return on capital. One thing that I didn't mention, the ancillary Good Sam products and services value that gets created through the sale of memberships, credit card, roadside, warranty, travel assist, magazine subscriptions, et cetera, are not embedded in those numbers. They'll add another $0.5 million to that number for a fully mature store through the sale of warranties and roadside and things of that nature. So the cash-on-cash return, absent Good Sam, with a mature store that we built for scratch, is anywhere from $1.7 million to $2 million on a $1.7 million to $2.7 million investment. We like those numbers a lot. On the acquisition side, there have been ranges of multiples that people could pay, big ranges. Sometimes, like in some of the deals we're doing now, we're just acquiring the real estate and the inventory. Sometimes, we're just acquiring the real estate. In other cases, we're acquiring a fully operational business, and we're paying a multiple. The multiple that we provide to the market that could range from anywhere from 1 to 4x is on a backward-looking number. It is not imputed with our lower cost of capital on the floor plan, our rebates that we received from the manufacturers or the banks, our integration of retail products and services or any change that we make in F&I or our service process. We don't pro forma that number. So when we say to you, it's 2x or 3x multiple, that's not an LTM. We believe that, based on history, that we're able to, over the long run, improve that from 1 to 1.5x from a turn standpoint. We're able to improve that number. So when we look at our capital allocation, it is clear to us that new store openings and acquisitions are some of the best uses of capital because of the cash-on-cash return on their own and their contribution to the overall ecosystem.

That's very helpful. Makes a lot of sense.

And Rick, as a side note, the ability to do acquisitions in this moment in time are better than we've seen in a long time, and the multiples don't match what you would think for a lot of different reasons. It is still a highly fragmented, highly disjointed nonfranchise in most case business. And the ability to build the moat around your dealership isn't as great as one would think. Because we could buy a piece of land, build the building and use our private label business, our Good Sam file and our retail brand to drive traffic and compete with you right next door no matter how good the industry is doing. It's very different from the auto business. Will we pay 4x or 5x for a deal? Sure. If it makes strategic sense, it's filling a void, we believe we can dramatically improve on their numbers until if we buy a business that has $30 million in revenue and makes $500,000, we'll pay up on a multiple basis for that because we know that $500,000 for them is $2 million for us because we know what we're going to tweak. So we're more focused on what we think we can make out of it, not some formulaic model. And we do not stick to a formula.

Our next question comes from Joe Besecker with Emerald Asset Management.

Joe Besecker. Good call. I want to reiterate what Marc Cohodes said about your video. I thought it was extremely well done, and I think it's worth the time for people to watch it because it was very informative to me.

Thank you.

And on that video, I learned something. As much work as we've done on your company, I thought there were a couple of tidbits on there, which I had not known. You had put the fact that there is a ton of social media talk and back and forth, you referenced TikTok. Can you drill down on that a little and how you plan to expand on that and how you see that working into the business model? Because I had not known that, and I thought that was pretty impressive.

The social media, starting at the beginning of 2020, has been a real tool, valuable tool for our company. And whether I'm using my personal handles to drive traffic or the company is using its own handles, we have activated and gamified our entire social media platform. With...

I don't know -- Marcus, I don't remember the number. Maybe somebody there can help me. But it was a pretty large number. I mean, do you remember what that was?

Yes. I do. Yes, sir. I'm going to get to that number just a second. And so when we look at -- we look at 2 different buckets, how the overall marketplace is engaging. And like, for example, with TikTok, it was 1.2 billion using #gocamping. With Camping World alone, just Camping World alone, it is 40 million impressions or engagements. And we really believe that there's a lot to grow on. And so as you see us move forward, we are seeing that we're able to attract a younger buyer. When we look at the engagement of those buyers and we look at the average age of our buyers, we're seeing that our social engagements are working with a younger buyer. But the younger buyer wouldn't be transacting no matter how great our social media was if our relationship with the manufacturers and the manufacturers' innovation on their own wasn't driving down towards lighter, less expensive, more easily towable units than they ever had before. In fact, the #1 unit that we'll sell this year in demand is the one that I give away on social media almost every day, which is the Coleman 17B. It's a single axle. And we laughed about it internally. And the reason that I'm belaboring this point is because social media is only good if the action and the engagement can translate into something. We've seen growth in our hiking, in our biking, in our fishing. We've seen growth in categories that we had not seen before from our historical RV installed community. So we are launching a new relationship with MLB. That was announced today. We'll have the NLCS. We're going back to the Camping World truck series after we achieved our goal with Gander for the next 2 years. We're launching a Camping World Concert Series that is all driven on social media starting tonight with bands like Alabama, Lady Antebellum, Zac Brown. And we believe that in order to drive our marketing costs down, our traditional marketing costs down, we have to drive digital and we have to drive social. Our business this summer was largely driven by -- and our separation from our competition was largely driven by our digital game and our activation on social. And that's small little petri dish that we just experienced, well you can expect us to double and triple down on that.

Yes. I was -- that was something that -- first of all, it's kind of counterintuitive, but I guess not. And the -- those numbers were eye-popping to me. And are those sharing of the experiences that are incurred by Camping, are they organically generated? Or do you have programs to encourage them?

So a little bit of both. But most of the social engagement, oddly enough, is either driven by a small social media team or myself. And so when you see post coming from my account about Camping World or even Camping World's account, in most cases, because I apparently have a lot of free time, those are largely driven by me because I understand that the engagement, whether it's a customer complaint, a problem with my package, wanting to get a new unit, asking a question as the first-time buyer, we have turned on all these social listeners to make sure that it acts like a live call center. And what we're noticing is that people like that engagement, even when they're mad. When somebody's mad, they go to that. And so social media, whether it is TikTok or any of those, is also used to handle dispute resolution. And our industry, because of the product, has issues.

That was very impressive. And once again, whoever put the whole presentation, I think this is a wise move for you to do this. But pre-video, I thought, was exceptionally well done as well. And the social media aspect is something that I'm going to -- we're going to follow here at Emerald pretty closely because that tells us a lot.

Thanks you, sir. I can add one note before we go on to our next question. We've noticed that a lot of analysts are starting to report on traffic using cell phone data. And we think it's an important tool to continue to take a look at those analysts' reports. Quite frankly, in some cases, they're more accurate than stat survey data because stat survey data doesn't include all the states, there's reporting lags. And while we use it as a guide, it isn't as effective as transactions and traffic. And so we complement those analysts who have started to understand how to look at geo-fencing a traditional RV dealer in us and comparing and contrasting traffic volumes between the 2. Because you're able to see the throughput of all the products and services coming through our doors, not just somebody visiting an RV dealer. The last report I saw, I think an average RV dealer was down, I think, a little bit, 4% to 5%. And I think we were 10% or 11%. Please don't quote me on that. That separation is largely because what happens inside of the 4 walls or the 4 acres or whatever it is in the land is such a universally different offering than everybody else that we're attracting people for service, for collision, for Good Sam, for whatever it may be. I mean, that's what helps drive our opportunities and drive down our acquisition costs. Next question?

Our next question is from Brett Andress with KeyBanc Capital Markets.

And thank you for hosting this. Maybe actually kind of just piggybacking off of your last comment. Can you help us build out your 2020 EBITDA target just a little bit more? I guess, I mean, what are you seeing in your July, August, September retail that gives you the confidence today to put out the $460 million to $490 million of EBITDA?

I put out the $460 million to $490 million because I had information that nobody else had, and our business continues to be solid. We know there's been a lot of chatter around the break in the supply chain. And while we all would love to have more inventory, we continue to perform positively on a same-store basis while our inventory is down 30-plus percent. I think that's a really important factor. Our margins are performing in line with our expectations based on the supply/demand curve. Our retail business continues to perform. And our cost of acquisition and our performance of our Good Sam business, particularly in July and August, has been surprising. Our installed base is starting to return at a more normalized rate, and we're really enjoying that. July and August, because we're in the middle of the quarter, we can't give you too much information. But we will tell you that we had positive same-store sales. We're happy with our margins. And our SG&A is performing consistent with how it performed in Q2 on a relative basis.

Got it. Helpful. And then is there a rule of thumb or, I guess, a generic example? I guess, on average, how many Good Sam members does one store generate? I'm just trying to extrapolate what these 20 locations that you have for the future could mean to the database.

In year 1, those retail locations will generate approximately $2.5 million on average in business, on average. The average transaction is around $111. And we convert at about 11% to 12% on average for the year of joins and renews on those number of transactions in an early stage store. So $2.5 million. Average transaction, about $111, and converting at about 11% or 12% of that number. As the store matures and as it goes on, it gets better and better and better. But that is a good rule of thumb for modeling purposes.

Got it. And then just one last one. I think you mentioned earlier $1 billion of acquired revenues, and I don't know where that came from. But I guess, can you just remind us what the M&A landscape looks like? Are there any larger dealer groups out there that seem attractive to you? Or is this kind of simply the single mom-and-pop type dealerships on your radar?

The $1 billion comment came from me addressing the EBITDA margin -- a floor, a target of 7.5%. And the point that I wanted to make is what drives that EBITDA margin is obviously solid performance in SG&A, but mix also adjusts that. And so if we added on $1 billion of acquisitions in a 12- or 24-month period and have good EBITDA margins, 5% or 6%, and the reality of it is, is that would actually pull our EBITDA margin as a company down until the company had a chance to pull all those customers through its other high-margin recurring businesses and put them through the house and get them to actually transact. So that's question number one. Number two, we are right now in the process, in some stage, of signing out either LOIs, purchase agreements or closing on a number of acquisitions. And sure, there are large dealer groups that are out there. But I don't know that large dealer groups or small dealer groups are how we think about acquisitions. We look at our math. We look at our opportunity. We look at where the Good Sam file is. We look at where the RV registrations are. We look at the brands that are available and how we can supplement it with our private label. We look at the retail opportunity and what we're doing online and how that all works. And if there's an opportunity to acquire one that has one location or one that has 6, we're still going to do that same process no matter what. And so as we think about whether we're making acquisitions in Minnesota or Pennsylvania or Texas or wherever it may be, it still has to go through that chief strainer to hit all of those mark no matter why. Could we acquire $1 billion of revenue in a 24-month period? Sure. But I'm not going to overpay for it. Don't have to. There's enough out there that we can buy right. And there's enough -- if they don't want to sell at the right multiple, we'll just build down the street. No problem. So one misnomer about this industry is that we buy RVs for the same price as everybody else, like the car business, not the case. And number two, when you look at our private label business, it makes up a huge percentage, like 30% of all of our new units. And we expect, through the licensing of new brands, that, that will continue to grow. Because we will continue to license brands like Coleman, which is a relationship between Coleman, Thor and ourselves, and we think next year, we'll be the #1 travel trailer in America. We're going to continue to do that to make sure that we don't have barriers of entry to cause us to overpay for something we don't want to pay for. Just as a little note. We'll be acquiring one right in your area that you and I can go visit together. It's not a far drive from [indiscernible]

All right. I look forward to that.

Our next question comes from Mike Swartz with SunTrust Truist.

Marcus, just maybe following up on the prior question as it relates to the $500 million EBITDA target for 2021. It wasn't entirely clear to me. But is there M&A? And are those 20 locations included in that number?

Well all 20 of those locations won't find their way into 2021 because the raw build takes permitting and all that good news. What we have factored in is 8 to 10 either new store openings or acquisitions with a general model around that 8 to 10 because we never know what's going to come. But the answer is the 500 plus million dollars, not $500 million, more than $500 million, is a function of and includes the average of 8 to 10 acquisitions/new store openings included in that number.

Okay. That's helpful. And then, maybe just -- I think you outlined about $20 million to $30 million in technology spend that you're targeting annually. Maybe you can provide a little context what you're spending today. And then I guess, what's the hurdle rate you're targeting? And then do you have a way of measuring that return?

It's difficult. So we're spending probably half of that today, and so we're making a conscious decision to double it. In most cases, it's meant to create retention or attraction to our products and services as opposed to providing a direct return on that investment singularly. So if we launch a mobile tech and service platform, which we're going to, while it creates a nominal amount of fees, it enhances the experience. It enhances our sale of parts. It enhances our repair business if it gets taken back to the shop, and it enhances the stickiness created or needed for warranty and roadside when somebody has a claim or an issue and they have a good experience. We have to work harder at spending money on doing things to enhance the customer and, quite frankly, the associate experience to improve retention. It's very difficult. But if we retain 1% more of our Good Sam file, just 1% more, it's about $800,000 to our bottom line. It sounds easy, but you have to really enhance that offering to break that historical trend. We are very, very focused on doing it because retaining them is a heck of a lot easier than finding new ones, but we believe we can do both.

Our next question comes from Brad Safalow with PAA Research.

And thanks for hosting this event. I guess the one question I wanted to ask is if you can build out some more of the detail on the monetization on the rental platform, RV sharing platform in terms of all the touch points in your business. So in theory, you get a commission. And granted, it's going to be less than your competitors from the RV owner, from the consumer. Clean fees. You have the trip insurance. You have other insurance. You have all these different touch points. But I was wondering if you could just walk us through what you envision a model transaction looks like so that people like myself and others can take these KPIs for that business and decide what we think it could actually be?

Brad, I think that's a great question. And what we would prefer to do is take the next 30 to 45 days, put the model together, and we'll be prepared to discuss it on or before our Q3 earnings call. We'll put a little presentation together. Maybe it'll be a video or at least some slides where we'll post it for everybody to see, and we'll build out a large model, and then we'll show you what a single transaction could look like and what we believe our penetration could be of that whole file. But we want to put a little more art and science behind us before we just spit numbers out there.

Our next question is from Bret Jordan with Jefferies. .

When you're thinking about the finance and insurance business, how much of that is recurring versus what percent is tied to a transaction? I guess, in the video you put out last night, it sort of looks like it's not as correlated to unit sales. But how much are actually transactional versus recurring revenues in F&I?

So there's 2 buckets that I'd like you to bifurcate. The first bucket is we do finance insurance and products under Good Sam. We don't call it that, but it's our products and plans and protections. And that, for us, is F&I is not tied to a transaction, and that is very strong on the recurring side. If you look at the retention of warranty insurance and roadside, you're in the high 70s, low 80s in a number of those products. So that's to the installed base. When we go over to the field operations side of our business, what I wanted to demonstrate in that presentation is how we internally, not how we report it, but how we think about revenue in our business, particularly around F&I. We have the recurring business, that is our Good Sam. So that warranty and all the things we just talked about. And then we have the finance and insurance related to the sale of RVs of the installed community. So those 10 million RV-ers that no matter what's happening in the marketplace, they still trade. They still transact. Those things are tied to F&I. Where the vulnerability is for the company and where the small amount of cyclicality that exists for the business lives is in the first-time entrant to the lifestyle. And so when somebody comes in with their first unit and they don't trade, they do take on those F&I products. And so when we look at the downside risk in this business, how to do a sort of a test model, you'd have to really understand that, that first-time buyers coming out, and the gross profit associated with the unit and the gross profit associated with the F&I, is there. Best way to think about it, best way for us to think about it is we look at the holistic nature of that gross profit. So that's first-time buyer. When you add up all the things that he or she transacts in is around a 20% to 22% gross margin on their transactions. If business is down, call it, 5%, 6%, 7%, on new sales, on new sales, you can ascribe approximately 20% to 22% of that revenue and that gross profit. So you take new and used sales down 5% or 6% on the first-time buyer. You assign a 20% to 22% gross profit margin to that revenue. And then you take out 40% of that gross profit because we pay commissions and salaries and all the selling expenses associated with that. So if you started with $100 of revenue, and you took 22% of that in gross profit, you have $22, and then you take out 40% of that $22, that's the amount that the business could be impacted in a cycle. And I just want to use $100 as an example. And then you can flex up or flex down where you believe that flex up or down is. $100 turns into $22 in gross. $22 turns into whatever 60% of $22 is. That's usually what would impact the bottom line.

Okay. And then I guess a question on the geo-fencing traffic data we've been looking at, I guess, I would have maybe given all of the noise around the -- or positive noise around the RV space this year, maybe they expected a higher traffic. Do you think traffic is being limited by a lack of inventory, that customers are not shopping because they know there's nothing to buy? And the conversion rates are significantly higher, those who are actually they are there to buy? Or is it -- is conversion similar to what you might have seen a year ago or in any prior market?