📈 Lazydays RV Holdings $GORV - Failing Market Duopoly
Mini deep-dive on the RV retailer's current predicament
My dear fellow Hermits 👋
Welcome back to 🧙♂️ The Hermit 🧙♂️
ICYMI:
📈 Investment Thesis: The Children’s Place
🧗 Our Investing Journey: Unnatural Monopolies
💼 Hermit Portfolio: August Update
As we touched on in The Hermit Chat, the value you're getting here is miles ahead of the current price - $250. We even whipped up a nifty infographic to show the gap!
But great deals can't last forever. At the end of this month (Q3), we'll adjust the pricing to better reflect the value delivered - $300/year - and to welcome more curious minds into 🧙♂️ The Hermit Fellowship.
Recent Filings and Q2 2024 Results
Lazydays announced its results for Q2 2024 on August 15th, 2024, and has since released several major 8-K filings. The information in this report is derived from these official announcements and is supported by data gathered from over 18 months of meticulous observation and analysis of the company.
Summary
The article mixes hard facts with a bit of gut instinct, so here’s a quick recap of what we will cover today:
Business Breakdown: we’ll dive into the Lazydays business model to get a solid grasp of how the company makes money and the key factors driving its economics
Performance & Challenges: we’ll take a look at recent financial results and filings, getting into the nitty-gritty of the operational hurdles the company is currently dealing with
Our Take & Valuation: we’ll share our perspective on all of this, providing a ballpark valuation estimate that can swing based on different market conditions and execution scenarios
This sets the stage for a clearer understanding of where Lazydays is headed and what might shape its future performance.
This content is intended for informational purposes only and should not be taken as investment advice. The author does not represent any third-party interest, and he may be a shareholder in the companies described in this series. Please do your own research or consult with a professional advisor before making any financial decision. You will find a full disclaimer at the end of the post.
Full Business Breakdown
Lazydays Holdings, Inc. GORV 0.00%↑ is one of the leading RV retailers in the U.S., with a long history in the recreational vehicle industry. The company was founded in 1976 and is headquartered in Tampa, Florida. It operates RV dealerships across the country and provides a range of related services, including repairs, insurance, financing, and aftermarket parts. Lazydays also runs the Lazydays RV Resort in Tampa, further enhancing its reputation in the RV lifestyle sector.
Origins
The company emerged from a merger led by Andina Acquisitions Corp. II ("Andina"), which paid $87 million in cash plus 2.9 million shares of common stock. The business combination was valued at $208 million on a pro forma fully diluted basis.
The transaction was financed through a mix of cash from Andina’s $40 million IPO in 2015, a $95 million Private Investment in Public Equity ("PIPE") deal, and an expansion of Lazyday’s (fairly large) credit facility. We’ll provide a detailed overview of how this translated to a very “complex” capital structure later.
Upon Closing, Andina’s securities ceased trading, and Holdco shares began trading on the Nasdaq under the symbol “LAZY”, later changed to “GORV” in early 2024.
Ownership
As part of the strategic move outlined above, Coliseum Capital Management capitalized on the opportunity and quickly acquired a substantial stake in the company. Currently, they hold 46% of the common stock. However, when factoring in their convertible preferred shares, which can be converted into common stock, and warrants their total ownership increases to approximately 81% of Lazydays' outstanding common shares aka full control.
Market
The company operates in a highly fragmented sector, yet it functions effectively as a duopoly. It shares market space with the much larger Camping World, which posted $847 million in RV product and service sales in Q2 2024, compared to Lazydays' $239 million during the same period. Camping World dominates the market with roughly 200 locations and a 6.9% market share, whereas Lazydays - with a 2.1% market share - operates 25 stores plus its headquarters. General RV, the closest competitor, has 14 locations and is estimated to achieve about half of Lazyday’s volume, though exact figures are not available due to it being a private company.
The company relies significantly on strategic partnerships with major RV manufacturers, which are crucial for securing inventory and fueling growth in a competitive and fragmented industry. The largest partner, Thor Industries, is a dominant leader in the RV market. Winnebago Industries, while about one-fifth the size of Thor, is another key player with a notable presence.
As of June 30, 2024, Thor accounted for 41% of Lazydays' outstanding stock, followed by Winnebago at 31% and Forest River at 21%. These relationships are vital to the company's success in navigating a dynamic market landscape.