Camping World Holdings Inc (CWH) 2017 Q1 法說會逐字稿

Good afternoon and welcome to Camping World Holdings' conference call to discuss financial results for the first quarter of fiscal 2017. (Operator Instructions). Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from the Company. As a reminder this call is being recorded.

On the call today from management are Marcus Lemonis, Chairman and Chief Executive Officer; Tom Wolfe, Chief Financial Officer; and Brent Moody, Chief Operating and Legal Officer. I will turn the call over to Mr. Moody to get started. Please go ahead.

Thank you and good afternoon, everyone. A press release covering the Company's first-quarter 2017 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.

Please note our remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These may include statements regarding our business goals, plans and abilities; industry and customer trends; growth of customer base, store openings and acquisitions 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 annual report on Form 10-K filed on March 13, 2017 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 adjusted EBITDA, 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 which is available on our website. Now I will turn the call over to Marcus.

Hello, everyone, and thank you for joining us for our first-quarter call. We had a very, very strong quarter and believe our results demonstrate the unique nature of our business and, most importantly, our operating leverage in our model, really looking for that EBITDA margin.

We are the only provider of a comprehensive portfolio of services, protection plans, products and resources for RV enthusiasts. We are also the largest operator of RV-centric retail locations in the United States with 126 at the end of the quarter.

Look, our business is really quite simple, it's driven by two things: the number of RVs on the road today known as the installed base; and our ability to sell products and services to that installed base of RV owners. The more RVs that are on the road and the more consumers utilize their RVs, the better that is for our business.

Our results for the quarter were strong across the globe. Total revenue increased 11% to $884 million. Net income increased 31% to $49 million and adjusted EBITDA increased 25% to $72 million.

The trends we saw in the first quarter were very consistent with our expectations and what we've seen in the past several quarters. Underlying consumer demand for RVs remains very strong and continues to be driven by a shift towards lower-priced towable models, consistent with our business model.

Given our focus in the towable segment, this shift continues to be a very healthy trend for Camping World. It's driving our new unit sales and leading to better penetration rates in finance, insurance and other products and services, which is how we ultimately drive margin and profitability.

Despite the strong industry trends our pipeline of acquisitions remains very healthy and we see no shortage of acquisition opportunities. We added four dealerships from acquisitions in the first quarter, four dealerships in the second quarter to date and are working on closing and integrating another five dealerships through acquisitions and one greenfield in the coming months.

As most people saw from our press release on Monday, Camping World CWH was chosen as the winning bidder at a bankruptcy auction for certain assets of Gander Mountain and its Overton's boating business. Simultaneous with our bid a group of liquidators was chosen as the winning bidder and retained as the agent for the bankruptcy estate to conduct liquidation sales of all of the existing Gander Mountain inventory in the Gander Mountain branded stores and the supporting distribution facilities.

The United States Bankruptcy Court for the District of Minnesota approved these transactions on May 4, 2017 and we expect the transaction to close in May of 2017. Pursuant to our winning bid, Camping World has agreed to purchase Overton's existing inventory for an amount equal to cost, which as of the date of the auction was approximately $15.6 million, plus $22.2 million for certain other assets of the Gander Mountain and Overton's business.

These assets include, but are not limited to, the right to designate any real estate leases for assignment to Camping World or other third parties and other contractual agreements that Camping World elects to assume. It also includes intellectual property rights, operating systems, platforms, distribution center equipment, Gander Mountain's and Overton's e-commerce business and fixtures and equipment for the Overton's retail and corporate operations.

With their affinity to the outdoor lifestyle, we think Gander Mountain and Overton's consumers are a perfect complement to our Camping World business but, more importantly, a complement to our Good Sam strategy of selling clubs, warranties, insurance and other related products.

The structure of our deal provides us with a lot of flexibility with businesses and with stores. Our plan is to maintain the current operations of Overton's catalog and online business along with two stores. In addition, on the Gander Mountain side our plan is to very tightly refine the merchandise assortment, renegotiate leases and operate only those stores with a very clear path to profitability.

We don't know which stores we may be looking to keep, what the merchandise assortment will look like today from store to store and when individual stores will come online. But we do know that we are focused on keeping those stores that have a clear path to profitability.

The sale of the existing Gander inventory by the liquidators could take several months before these stores are in a position to even be taken over. Under the terms of the agreement, we have committed to taking a minimum of 17 store locations and we have until October 6 to make all of those decisions.

The liquidation of the existing Gander Mountain inventory will allow us to start with a clean slate of what we consider is the appropriate mix at the appropriate levels at the appropriate stores in the appropriate markets at the right time. We also want to make sure that we are complementing that with existing Camping World and Overton inventory to maximize margin and maximize share of wallet. Our lease designation rights will allow us to select only those stores at appropriate locations, again, with the appropriate cost structures.

While we have some work ahead of us we are very excited about the opportunity to leverage the Good Sam database and leverage all of the Good Sam assets over Camping World, Overton's and Gander Mountain growing the database, growing the active customer base and increasing our penetration of all those products. We look forward to sharing more information with the investment community as our plans unfold.

Heading into peak RV summer selling season, we believe the RV market should remain very strong and we are focused on executing our strategy to drive operating profit and cash flow, like we have in the quarter we are talking about today.

I want to thank our more than 7,500 dedicated team members and employees who carry out the business plan every day not only with our existing stores but our newly acquired dealerships as well as our new assets for Overton's and Gander Mountain. Those are my prepared remarks; I'm going to turn it over to Tom and then we will answer questions after that.

Great, thanks, Marcus, and good afternoon, everyone. We had a strong first quarter and are pleased with our financial and operational results. Since the press release contains the detailed financial tables and explanations, let me touch on some of the biggest highlights of the quarter. Unless I state otherwise, comparisons are to the same period of 2016.

Revenue growth was fairly balanced between our two segments with consumer services and plans up 11.7% to $50.2 million and retail up 10.7% to $833.6 million. As we said in the past, the continued trend towards towable units and younger buyers continues to be a net positive for our overall business.

We believe this continues to expand the base of RV customers and allows us to cross sell a greater number of other higher-margin recurring revenue products and services, most notably our roadside assistance and retail finance and insurance program, which all experienced healthy increases in the quarter from an increase in file size, the number of dealerships and better penetration. The biggest standout was finance and insurance revenue which increased 29.9% to $66.3 million and to 10.2% of total vehicle sales.

Gross margin was strong across the board in the quarter, increasing 210 basis points to 57.9% in the consumer services and plans segment and increasing 52 basis points to 26.7% in the retail segment. Again, strong sales of higher-margin products and services such as roadside assistance and vehicle insurance programs, retail finance and insurance programs in addition to the 528 basis points increase in used vehicle gross margin were the primary reasons for the gross margin increase.

Operating expenses were well-controlled in the quarter with SG&A increasing 9.4%, relatively in-line with sales and decreasing as a percentage of total gross profit by 245 basis points.

Floor plan interest expense modestly increased to $5.3 million from $5.1 million primarily from higher average inventory attributable to new dealerships compared to the prior period -- partially offset by a 7 basis point decrease in the average borrowing rate.

Net income increased 30.9% to $49.4 million and net income margin increased 86 basis points to 5.6%. Adjusted EBITDA, which includes floor plan interest expense increased 24.9% to $71.7 million and adjusted EBITDA margin increased 92 basis points to 8.1%. Please refer to the tables in the earnings release for a reconciliation of net income to adjusted EBITDA and net income margin to adjusted EBITDA margin.

Turning to the March 31 balance sheet, working capital and cash balances were $332.2 million and $174.7 million respectively. Inventory increased 9.8% from December 31, 2016 to $998.6 million, primarily from our new store -- four new stores acquired and -- or opened during the first quarter of 2017 and the ramp up for our peak selling season.

On March 17 we entered into an amendment to the existing senior secured credit facilities to increase the existing term loan facility by $95 million to $740 million to partially fund the dealership acquisitions we have announced. The remaining funds are for announced acquisitions -- will be provided with cash from operations and borrowings under our floor plan facility.

As of March 31, 2017, we had no borrowings under our $35 million revolving credit facility, $738.2 million of term loans outstanding under our secure credit facility and $695 million of floor plan notes payable under our floor plan facility.

Finally, for our outlook, we are expecting adjusted EBITDA of $325 million and revenue target of $3.9 billion for the full year fiscal 2017. Given the better-than-expected financial results we saw in the first quarter, this guidance does not include any estimates for the Gander Mountain and Overton businesses.

And with that said I would like to turn it back over to the operator to start our Q&A session. Operator?

(Operator Instructions). Rick Nelson, Stephens.

Thanks, good afternoon. Want to follow-up on the strategic rationale for the Overton's and Gander Mountain deal. Is your initial thought (inaudible) Gander Overton stores or convert them to Camping World?

No, our plan is to continue to operate Overton's as its own business and Gander Mountain as its own business and not have really any connection with Camping World, its management or its operations other than driving names through the database, club membership sales at the register, credit card services at the register, warranty, insurance and the affiliate products at the register and through direct mail.

And when there's an opportunity to add a dealership to any of those locations, we will do that. When there's an opportunity to add a small Gander or an Overton's to an existing dealership we will do that, but we will operate them as separate entities without a doubt.

And is your thought, Marcus, to push their merchandise into the Camping World stores?

No sir. There may be certain -- when you look at the inventory in Gander and you look at the inventory at Camping World it's very different. Oddly enough Camping World doesn't sell sleeping bags, fishing poles, any of those things.

I think everybody should expect the apparel assortment at Gander Mountain to reduce significantly and for us to take some of our best practices like generators, towing and hitching, grilling, chairs and really ramp those up. There are very few products that will lap over into both, but when we do find products that live in both stores we will obviously consolidate to a similar vendor and look for margin improvement.

And do you anticipate selling RVs out of the new locations?

In the Gander Mountain location that permits space like a Bowling Green, Kentucky or an Augusta, Georgia or an Amarillo, Texas, we will look to offer some level of RVs whether that's a full dealership or not. We already control the license of the Coleman towable brand; in fact we sell 9,000 Coleman towables a year. We may expand into pop-ups. So I could see a small assortment of RVs being sold in some stores and a few of them having full-blown dealerships.

And does this alter your other expansion plans, the acquisitions, the greenfield store openings? Is the capital going to be aimed at these new locations as opposed to other acquisitions? Or how do you see this unfolding I guess from an acquisition standpoint greenfield rest of 2017 and 2018?

Are we talking about the RV business?

Yes.

So let me be really crystal-clear at the beginning of this call. The RV business is the most important business in my world. And the Gander Mountain business and the Overton business are nice ancillary businesses that provide good EBITDA opportunity, good database growth opportunity.

But selfishly, part of the reason why I wanted to control those brands, the cash flow and the database is not only to market Good Sam products to that outdoor enthusiast, but -- let me be super clear -- we are going to market RVs to the multimillion person database that's in there as well.

Our primary business is the RV business and nothing will ever get in the way of new store openings or acquisitions for the Camping World brand. And we would not compromise that effort with any acquisition or store opening in any other silo.

That's fair. Thanks a lot and good luck.

David Tamberrino, Goldman Sachs.

Thank you. Good afternoon. Maybe just sticking with the Gander Overton's for a second here. My understanding is about 17 store leases that you are at a minimum going to take over by October 6. But there is about 120 stores. Is there -- and obviously you're only going to go after things that you think are profitable or you can turn around into profitability.

But is there a good way or number in your mind that you are thinking about, or is it yet to be known as you are digging up -- rolling up your sleeves and digging into some of these rent leases and these geographic areas that may or may not be contiguous to some of your other assets?

Brent and Tom and I have spent the last week in I will call it a whirlwind with notes on the wall and all over the boards. Where our Camping World locations are and where these companies are are mildly irrelevant. What does matter is that I want to really identify stores that have a clear path to profitability with EBITDA margins consistent with how we run the rest of our business.

So in addition to renegotiating leases you can expect a cataclysmic shift in the way inventory is managed, the size and the location of the distribution center over time, the way corporate overhead is structured.

And for those of you that have been in our deal for a while, for the quarter we were 8.1% EBITDA margin. I will not be doing anything or taking on any liabilities that put that EBITDA margin in jeopardy. In fact I believe that there are enough stores, potentially as many as 50, that could actually enhance that number. Not only because of our ability to renegotiate those leases but drive other SG&A down and supplement it with other products and services that we could sell through those stores.

So, as I think about each box individually, is it profitable in its own right and can it really be maximized through our other assets? Do I believe that this thing could be huge? I do, but we are not going to chase revenue. You guys have heard me say I hate revenue, I like earnings. And so, every location or every decision that we make will be based on not compromising our 8.1% EBITDA margin.

Marcus, that's pretty loud and clear. Maybe taking that a step further from the cost perspective, you are already a tenant of a number of net lease REITs. Do your existing relationships create visibility on what you can restructure those leases to?

I would say that, separate from the fact that we are a tenant in a lot of them, I have had several conversations with multiple, multiple landlords. And while we don't have anything truly formalized yet, we are noticing that the REITs are recognizing the current market conditions and addressing that in their proposals. So that's code for the rents are going down a lot.

Very helpful. Thank you. And then just the last one for me. The quarter was very strong from your traditional RV business. That's your obviously number one priority. What was it about the quarter that drew such a high unit growth? That is step one for me.

And then two, earlier in the earnings season there's a lot of banks and lenders that have made negative comments regarding the auto business; I know you are obviously different from autos. Some of it is specific to used residual values on cars, but also some of it is from declining net interest margins as interest rates rise. Have you seen any pullback from your partners?

We have not seen any pullback, but the growth and performance we had for the quarter continue to be attributable to the way we manage our SG&A, which allows us to perform at a high level. And we continue to drive the average selling price down.

And I think even from the first road show that we ever did eight months ago or six months ago, we've told everybody time and time again, the more you drive down that average selling price, the mouth of the market and the number of buyers gets wider.

And we continue to show that by shying away from high ticket price items, driving that number down and betting on that by putting inventory on the ground that's in the $15,000 to $25,000 sweet spot, having a tight SG&A and being able to be very competitive.

We also saw dramatic increases in our online leads because of the way we are pricing online our low-priced product. But what you didn't see through all the things I said is compressed gross margin.

Very clear. Last one just back on Gander and Overton's. You are looking at their stores right now. How are they comping? Are they comping down 10%, 15% year over year? Is it worse? Is it down 25%? What is the magnitude?

It's hard to tell what they are doing today because they are in full GOB, going out of business type things. We definitely, as we study the financials, noticed that 2014 and 2015 were very solid. The beginning of 2016 was very solid.

When the administration changed there was a dramatic drop in guns to a real trough, ammo and guns a real trough. We don't know if that is the new normal or that's just a bottoming out with the possibility of going back up.

We are basing all of our rent decisions, all of our SG&A decisions, all of our staffing, all of our inventory decisions on the trough, not the peak. And so anything above that would be really wonderful. But we are not able to give visibility into their numbers today.

Okay, that's fair. And just -- again, sorry to say last one, but my understanding is the gun business is highly volatile depending upon what the populace thinks is going to be coming up from legislation or potential regulatory changes, type of business that you really want to be in and getting into.

Well, we are going to have a selection of handguns and shotguns that we believe serve the meat of the market and have margins that are commensurate with our expectations. But I would expect that in those stores we are going to see an expansion of fishing potentially getting back into the live bait business and really digging into what the consumer wanted.

I spent a day talking to a number of store managers and customers who have said that the current most recent management at Gander got really away from its core customer and really bet $100 million on guns and was wrong. At the end of the day we think there's got to be a nice assortment.

The model is very simple -- low cost of SG&A, very competitive, understanding what the online community is doing and having an assortment there that is curated for the local market. I'd rather have 50 stores heavily curated for that local market than 150 stores that look like everything is the same, which is essentially what it was. Just a really, really (expletive) inventory system is what they had. Sorry for that, but I've never seen something so stupid.

Understood. Thank you very much.

Ryan Brinkman, JPMorgan.

Thanks for taking my questions. First one, just what do you think led to the Gander's bankruptcy filing? Was it simply the case that they had overextended themselves with the store expansion and the Overton acquisition and now you are the beneficiary of that? Or was there anything more structural there you think like, I don't know, stiff competition from Cabela's, Bass Pro Shops or even Amazon?

Poor real estate transactions -- very poor real estate transactions, undisciplined inventory buying from people that had no experience. The largest shareholder was creating direction on inventory not curated market by market, not really understanding that what sells in Michigan doesn't necessarily sell in Jacksonville, Florida and really understanding that. And a very sloppy SG&A model. Corporate overhead that looked like Vice President after Vice President and just layers of staff that no business could survive on.

Is Bass Pro and Cabela's a real competitor? Absolutely. But when we look at running a warehouse type -- simple cost model with simple real estate, instead of having a $1 million rent factor being at $500,000, compared to our competitors that could be at $5 million, $6 million and $7 million in the same neighborhood.

We believe that with that tight SG&A with the low real estate cost we will be able to be the low cost provider like we are at Camping World and still achieve the EBITDA margins because the SG&A makes up for it.

But terrible real estate, terrible inventory, terrible overhead. And candidly, they didn't need 160 stores. They could have done the same thing -- I think there was some cannibalization in markets like Wisconsin and Florida and Michigan and Texas that there was just no rhyme or reason to it. So yes, we are the beneficiary of somebody else's sloppiness.

That's very helpful background. Thanks. And then just how would you characterize -- even if they messed up from the execution perspective, how would you characterize the consumer awareness or brand equity on the part of their customers both on the Gander Mountain or the Overton side?

And then in the RV space you are by far the kind of biggest fish in the pond with a lot of structural advantages. Is it going to be any different trying to compete against the more scale competitors that you just mentioned?

Well, I think there's definitely going to be more competition. We are a different form of operator than Bass Pro and Cabela's. They are world-class retailers with a world-class experience with a world-class cost structure and we don't see ourselves really competing in that regard. What everybody forgets is that we have a database and our database on the RV side will be very helpful to growing Gander, and the database on the Gander Overton side will be very helpful.

The secret jewel in this whole thing in my mind has been Overton's. Gander Mountain paid $77 million for it seven or eight years ago. They did $60 million of revenue seven or eight years ago. It had $8 million or $9 million of EBITDA seven or eight years ago. And by the way, it's about the same right now. So despite all of the nonsense that happened in Minnesota, the staff at Overton's is very good at insulating that business.

We believe we have a business that can do right out of the rip $6 million, $7 million in EBITDA once we get our hands on it, once we get it integrated into the system and really preserve that brand. RVers love lakes and Overton's serves the lake community and the shore community. They don't serve the deep-sea fishing community.

And that's really the difference between Overton's and West Marine. One-stop just like our trailer stock, just like our trailers don't go -- we don't like the motor home business, we don't like the yacht customer. That's not really our customer. We think (multiple speakers).

Very interesting.

And I would expect us to open Overton stores either as standalone when the rent is right or side-by-side store-in-stores with Camping World and/or Gander. I would expect Overton's presence to dramatically increase without increasing the overall Company's fixed cost structure.

So everybody should take very close note of that; that when we have markets like Asheville, North Carolina, like Myrtle Beach, like some of our locations in Texas or Florida, where we already have a facility that has an 8% EBITDA margins and we can find 5,000 or 6,000 square feet, we will add an Overton's to attract more people, to generate more revenue and to get that EBITDA margin from 8% to 9% or 10%.

Okay, very, very helpful. And then just finally for me on the core business. With the big increase in RV shipments over the past few years, I'm just curious, does that represent any sort of opportunity for you on the used side? As maybe the customers who bought from you or someone else a towable four years ago or something looks to trade up, are you seeing any sort of increased supply that you could capitalize upon?

We've seen the used market start to pick up in terms of its supply in the last 3 or 4 months. We know that the average trade cycle is between 3.5 and 4 years, so we are going to start to see some of that inventory come around. But it isn't come around in such a way that the used pricing has depressed much. And as I've said in calls past, I'm not going to chase that market. I don't want to be stuck with any inventory.

We run such a tight aging supply chain that if we buy it for $1,000 or $10,000 I don't want to put so much in it that I'm underwater within 60 days. So we still have our foot on the brake a little bit, but we are starting to see the supply grow and we think that will help us in the coming six months. We don't know by how much, but we should see that trend start to reverse.

Okay, thank you.

Rafe Jadrosich, Bank of America.

Hi, good afternoon. Thanks for taking my questions. Marcus, you spoke a lot about the success you've had in pushing ASPs lower on some of the new towable product. Can you talk a little bit about the product availability there and how the manufacturers are? Are they innovating fast enough to keep that going?

It isn't really even about innovation. With the RV business it is a pretty simple formula. It's really based on size of the unit and the floor plan of the unit. And we have 15 years of data that show us in specific markets what length and what floor plans sell. We are having no problem on the supply side. We can get inventory as we need it. So we are not struggling there.

As it relates to innovation, there is a balance between becoming too clever and too cute and pricing yourself out of the market. The typical buyer today that buys a towable from us is still a payment buyer. And while $1,000 of innovative ideas, technology may sound attractive to all of us, a it isn't necessarily attractive to the consumer who just wants to go camp, fish, hunt and get outdoors. Technology doesn't really play. In most cases their cell phones don't even work.

So yes, there are innovations with new fabrics, innovations with lighter weight materials that are making them more gas efficient. But it isn't like a television screen where it's starting to get thinner and with more buttons and tricks. It's the simple box on a very simple platform and we try to work hard not to get too cute.

Manufacturers do make things that we would call nichey. We try to stay away from that stuff and really stay in the center of where we think the market is. We've made a number of acquisitions. We are going to continue to make acquisitions. And so, from our perspective we need to grow our market share in our local markets by driving down average selling price.

We need to grow our business by making acquisitions and employing all of the things that we do well: service, parts, F&I, driving towables. And in every single instance we know that we are able to get a nice bump out of the acquisition. And we want to stick to our plan in that regard.

Are there any brands out there -- and there has been some consolidation in the space that in the past you might not have had access to that you can get a deeper penetration with?

No, I don't think so. We have a very solid relationship with Thor, a very solid relationship with Winnebago, and we have a nice relationship with Forest River as well. Those are the three real leaders. As Thor has continued to consolidate the market and acquired or started new brands and new ideas, we have been able to really add value to their business as they have been able to add value to ours.

But let me be clear about something. The customer is more brand agnostic than one would believe, especially in comparison to the automobile business, which is what has allowed us to launch a number of private labels, Coleman being one of them, Mallard being one of them, Pioneer being one of them.

And you should expect that a number of trademarks that we've secured from Gander Mountain could also find their way onto a few private labels. Remember, it's down to size and floor plan. So we can get Thor to make us Coleman's, to make 9,000 of them that doesn't exist for any other dealer that exist for us. And so, as we decide that we want to do any other private label we know there's manufacturers that will make the product for us.

Okay, and then final question, just the parts and services grew but I think a little bit slower than the rest of the business. You have talked about some labor tightness there in the past. Can you talk about maybe some of the initiatives you have to improve that? Is there any visibility on that potentially subsiding?

Well, there is a couple things, right. We are starting to launch some service technician vocational institutes where we are going to start growing our technicians from college or vo-tech school all the way up.

I think we are going to put 100 in the program like literally this week and start to grow those internally where you are taking a plumber, a journeyman, an auto mechanic and you put them through a one-, two-year program. It's a significant investment for us but we've got to grow our farm team that way.

We are still looking at a regional service center or two. We don't have our plans totally (inaudible) just yet but we should by the end of the second quarter. And we need to continue to spend CapEx dollars in some of our existing locations adding on bays.

And it's always going to grow at a slower rate than the RV sales just because of the peer dollar amount. You sell one unit it's $15,000, $20,000. You've got to do a lot of service work to keep pace with that just because of the pure price.

Great, thank you.

Tim Conder, Wells Fargo Securities.

Thank you. And Marcus, thanks for all the clarity so far, very, very helpful. A couple things more I guess from the housekeeping perspective. The revenue and EBITDA contribution, could you guys break that out from let's just say acquisitions that are less than 12 months old as far as how that's going to -- what you have built-in for your outlook in 2017?

So any acquisition I guess that's not -- I know you don't focus on comp store sales, but let's just term it not yet into the organic base. What your expectations are for the full year? One question.

Then Marcus, back to the -- you focused on it's about payment, it's about just a good center of the field products. How were the retail lending standards from what you are seeing with your partners, mix of prime, subprime and delinquencies, how are those trends looking on a year-over-year basis and then year to date?

I will address your second question first, then I am going to turn it over to Tom to address your first question. We don't see a lot of subprime in our business. And unlike the auto business, which is why we always tell people stop comparing us to the auto business.

A tough credit score in our business is a 640 credit score. A 640 credit score in the auto business is we are all high-fiving each other and the guy is driving at 2:00. And so, we don't really see that.

In terms of delinquencies, we are still seeing less than 1%. We obviously don't share in any of that risk that our retail lenders have, but we do get reports from them because we ask for them on a store and by a category basis.

We don't see any trends by category that are alarming to us and we don't see any increase in the delinquencies that look any different than they have for the last three years. So I think the retail lenders are pretty happy right now, performs better than their auto portfolio. Tom?

Hey, Tim, in regards to the same-store sales revenue, on an overall basis for the retail segment it's up 9.6% same-store sales. For the new vehicles it's up to 18.1% same-store sales. We are down about 10.5% on used, about flat for service, parts and other, and up 26.1% for the finance and insurance. And again, same-store sales are calculated with dealerships that were in place as of January 1 of the prior year.

Okay, that's helpful. And I guess, Tom, another way to ask the question too would be of the acquisitions that you all have made since basically prior to becoming public just less than 12 months -- what are you budgeting at this point for all of 2017 that we could benchmark off of that would flow into revenue and/or EBITDA at this point?

Because you have mentioned before -- and, Marcus, you have talked about this, that you look for things and generally in the first year when you acquire it, sales could even maybe drop a little as well as EBITDA [until] you kind of get things adjusted. So just trying to get a ballpark figure there.

There is a couple things and, I'll have Tom finish it, but not all of the acquisitions have closed and they stagger. And I think probably by the middle of the summer we will have closed on most of the ones that we've talked about in the previous four months. They take anywhere from 90 to 150 days based on licensing, zoning, whatever it may be -- or a difficult seller.

We -- Tom will talk a little bit about what our revised estimate is for the year based on our results in the first quarter. My expectation is that we are going to revise guidance closer to 325, but I don't think we are able to give you much more of a snapshot than that.

Okay, okay. And then maybe a little different question here, but it seems to fit within your strategy, and if you have any color I would appreciate it. Are you seeing any shift of people who would have a or share a lake house or a cabin to say hey, why make that investment in one location. Let's buy a towable and then we can shift the lake once or twice during the year or every other year or whatever they want to do? But any stat on -- how far from -- a radius from home does your typical towable customer take that product within a year?

That's actually a great question. And we don't have solid, solid data, but what we do know is that towable customers travel between 150, 200 miles, that is really their radius. A motor home customer could travel 1,000 because obviously they are going coast to coast.

What we like about the towable customer is that it is not long trips but a frequent number of trips. So they may take 15 or 20 trips a year but only go 40 miles, 50 miles, 80 miles. And we like that because usage results in maintenance, and usage results in activity, and activity results in buying more accessories.

Which is one of the reasons that we like some of the other complementary things we are picking up in the Gander Overton's pieces, how do we bring some of those popular things, things you can go out on your lake, a little tent for the junior kid who wants to sleep outside with his buddy.

All the things that really complement that, we want to have a suite of products for the outdoor enthusiast, but we don't want to be -- the best way for you to think about it is I like to be for the everyman in the RV business, which is why we like towables. We are going to share that same mentality and every other business that we get into.

Okay great. Thank you, gentlemen, for the color.

(Operator Instructions). Craig Kennison, Baird.

Yes, hi, it's Craig. Thanks for taking the question. With Overton and Gander as well, do you foresee any opportunity to sell new boats and become a boat dealer over time?

At this time I'm not anticipating getting into the boat business, but if we ever decided to get into the boat business or the cargo trailer business, we would employ the same philosophy that we have on the RV side, which is be at the bottom of the market on the price point and make sure that we had the service facility to actually execute it.

If somebody buys a boat we look at that as an insurance opportunity, a roadside opportunity, the ability to sell towing and hitching, the ability to sell a cover, the ability to sell a warrantee. And so, for us the only reason we would drive into the small -- I'm going to call them John boats.

The only reason we would going to that market is to understand what the margin would be on the entire purchase, not just the boat itself, trailer, the hitch and ball, the warranty, the insurance, all of those other things and then we would make that decision. There are a number of Ganders where there is room to do that, but I don't think that's going to be our first step. I'm not ruling it out but it's definitely not a today thing.

Thanks, Marcus. And then on the RV business, there is a lot of anxiety among investors about new inventory and whether it's too high or not fresh enough. Can you comment on your dealer inventory turns and how fresh your new inventory might be?

Well, there should be a lot of anxiety because while we don't run our inventory -- or while we believe we run our inventory extra lean, some could argue we miss a little business, as we are making these acquisitions or looking at potential acquisitions, we are seeing that our competitors are over inventoried.

And we see that as an opportunity to not only de-inventory, which lowers floor plan costs, de-inventory and drive the average price down which opens up volume like I think there should be some concern that maybe there are people that are over inventoried.

I don't think it's something that's earth shattering. I think it could be fixed with a little tweaking over 30 or 45 days. But keep in mind we are also going into our selling season. And so, those inventories really come down dramatically and I would expect that by mid-June the entire community should have their inventory right sized.

Thank you. And then finally just getting back to something I think you said earlier about your margin expectations around this new transaction. Did you say that you essentially plan to at least hold your overall EBIT margin such that any Gander Mountain or Overton revenue would come in at least neutral to EBIT margin?

That would be the goal. The goal is to ensure that if you have a store that does $5 million you are at least making $500,000 on a four-wall contribution. And that the other products and services that you are flowing through there would enhance the overall Company margin. And then obviously you would have the corporate overhead that supported those four walls. That is my plan. How I'm going to get there I haven't really figured it out yet, but that is the plan.

Great, thank you.

And there are no further questions at this time. I'll turn the conference back to your presenters for any additional or closing remarks.

Okay, thank you very much for joining the call. We hope you were pleased with the quarter like we were. And we look forward to talking to you in a few months. Take care.

Thank you.

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation.