Lazydays - Q2 2023
July 28, 2023
Transcript
Operator (participant)
Greetings, and welcome to the Lazydays Holdings second quarter 2023 conference call. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Kelly Porter, Chief Financial Officer. Thank you. You may begin.
Kelly Porter (CFO)
Good morning, everyone, and thank you for joining us. Before we begin, I would like to remind everyone that we will be discussing forward-looking information, including potential future financial performance, which is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from such forward-looking statements and information. Such risks, uncertainties, assumptions, and other factors are identified in our earnings release and other periodic filings with the SEC, as well as the investor relations section of our website. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results, and any or all of our forward-looking statements may prove to be inaccurate. We can make no guarantees about our future performance, and we undertake no obligation to update or revise our forward-looking statements. On this call, we will discuss certain non-GAAP financial measures.
Please refer to our earnings release, which is available on our website, for how we define these measures and reconciliations to the closest comparable GAAP measures. With that, I'd like to turn the call over to John North, our chief executive officer.
John North (CEO)
Thank you, Kelly. Good morning, everyone, and thanks for joining today. As usual, I'll make a few opening comments. Kelly will give you our financial results, and then we'll answer some questions. As I reflect upon the second quarter, I would characterize the current environment as one where, notwithstanding the operational complexities every retailer is facing, Lazydays continues to make significant progress around the strategic initiatives that will set us up for both growth and success in the future. Obviously, the market dynamics continue to be difficult. The pandemic pulled forward significant demand. Supply chain pressures resulted in cost inflation across our product lines and led to increases in both invoice and retail price of vehicles. Central bankers' efforts to counteract inflationary pressure through interest rates are now at more than a 20-year high and have affected financing costs and availability.
However, underlying retail demand has been stable and has not experienced further deterioration. Both consumer and wholesale credit remains available, and the more challenging operational environment has catalyzed the marketplace, generating significant acquisition opportunities. There are also significant improvements available in both our used and service, body and parts business lines. In the words of Churchill, our recent mantra has been to, "Never let a good crisis go to waste." We have spent the last number of months focusing on optimizing our corporate overhead and reducing costs, improving the effectiveness of both our technology and marketing spend, and preparing the organization for significant growth in scale and operational efficiency.
While many of these endeavors are just beginning to develop the green shoots that can be demonstrated externally, I am pleased with our progress and confident that we have laid significant groundwork that will become observable to our analysts and investors in the coming quarters. Kelly will take you through the details in a few minutes, but we have improved our SG&A expense through rigorous cost control. We have a much healthier inventory, both in quantity and age, and have begun to unlock some of the capital tied up in our real estate through mortgage financing. We've also been diligently working on growth and scale, including the acquisition of Las Vegas, Nevada, and the opening of Council Bluffs, Iowa, earlier this year.
We also completed the relaunching of our Monticello, Minnesota, store as Airstream Minneapolis, which should be a top five dealer in the United States by sales volume, and just this week, completed our second acquisition of 2023 with the purchase of Buddy Gregg RVs in Knoxville, Tennessee. We remain on track to open our Wilmington, Ohio, and Fort Pierce, Florida, greenfields this quarter and our Surprise, Arizona, greenfield in the fourth quarter. Given the robust activity in the industry around store acquisitions, we anticipate an active cadence in the back half of the year. In short, the team continues to strengthen and gel around our strategic initiatives. First, we will be relentless in our execution and efficiencies. Secondly, we will aspire to be the dealer of choice with our OEM partners. Third, we will act like an owner and allocate capital responsibly and with a long-term mindset.
Finally, we will grow and leverage our infrastructure to deliver above-average performance metrics and superior return on invested capital. In closing, I always want to acknowledge the hard work of our team. It has not been an easy environment to operate in. The degree of difficulty is high, and the landscape is competitive. Time and again, I am impressed by the dedication and wherewithal of this team. I sincerely thank each and every one of our fantastic employees. With that, I'll let Kelly take it away.
Kelly Porter (CFO)
Thank you, John. Please note that unless stated otherwise, the 2023 second quarter comparisons are versus the same period in 2022.
Total revenue for the quarter was $308.4 million, a decrease of 17.4%. While we continue to face difficult year-over-year comparisons, we are closer to the inflection point of the third quarter of 2022, which marked the end of the benefits associated with COVID demand. From this point on, all metrics will be on a same-store basis, unless otherwise stated. New unit sales declined 25.2% in the quarter, and gross profit per unit, excluding LIFO, declined 29%. Compared to the first quarter of 2023, new unit sales were relatively consistent, and gross profit per unit increased 5% to $12,744 per unit.
Used unit sales, excluding wholesale units, declined 18.3%, and gross profit per unit declined 24.8%. Compared to the first quarter of 2023, used unit sales increased 4.5%, and gross profit per unit increased 1.5% to $13,566 per unit. Finance and insurance revenue declined 22.7% during the quarter, primarily due to lower unit volume and lower financing penetration, as higher interest rates incentivize more consumers to pay in cash. F&I per unit was $5,020 for the quarter, a decrease of 1%. As it relates to current pricing and consumer demand, we are experiencing more typical seasonal discounting on 2023 model year units because of the 2024 model year changeover.
The prior model year discounting should be far less acute than what we experienced in 2022, as the OEMs have taken a more balanced approach to production over the last few quarters. Dealers continue to destock as wholesale production remains far below current retail sales volumes. Model year 2024 pricing is flat to modestly lower than 2023 units, as our OEM partners work to normalize input costs and achieve more efficiencies in their manufacturing operations. Our stores continue to actively manage inventory levels, ending the quarter with less than 5% of our current inventory as model year 2022 units. We ended the quarter with 180 days supply of new vehicle inventory, a decrease of 27 days compared to the first quarter of the year, and 83 days supply on used inventory, a six-day increase over the first quarter.
As a reminder, we calculate days supply on a trailing 90-day average. Our service, body and parts revenue decreased 3.4%. Our gross profit increased by approximately 0.5%. Our gross margin on service, body and parts increased 180 basis points, primarily related to increased warranty rates. We maintained our laser focus on cost control and optimizing every dollar spent below the line. We continue to make meaningful progress to reduce costs as we experience sequential improvement each month of the quarter. Total SG&A, as a percentage of gross profit in the quarter, was 74.5%, excluding the impact of LIFO. Adjusted SG&A for the quarter was 73.7%, a 600 basis point improvement over the first quarter.
Adjusted net income was $3.9 million for the quarter, down from $23.5 million last year. Adjusted fully diluted earnings per share was $0.14 for the quarter, down from $0.87 last year. Shifting to liquidity and capital allocation, as of June 30th, we had cash and cash equivalents of $24.2 million, with $56.4 million of immediate availability on our new and used floor plan line, as well as $4.6 million available on our revolving credit line. We also had approximately $72 million of unfinanced real estate that we estimate could provide approximately $61 million of additional liquidity. At quarter end, we were comfortably in compliance with all debt covenants.
During the quarter, we generated adjusted operational cash flows of approximately $2.1 million, and we deployed $32 million in capital expenditures, primarily related to construction of our greenfield locations. Since quarter end, we completed the mortgage financing of both our recently acquired store in Knoxville and our Murfreesboro location, both in Tennessee, generating proceeds of $30.6 million. With that, we can open the call to questions. Operator?
Operator (participant)
Thank you. We'll now be conducting a question-and-answer session. If you'd like to be placed into question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. One moment, please, while we pull for questions. Our first question today is coming from Steve Dyer from Craig-Hallum Capital Group. Your line is now live.
Ryan Sigdahl (Senior Research Analyst)
Good morning, John, Kelly. It's Ryan on for Steve.
John North (CEO)
Hey, good morning.
Ryan Sigdahl (Senior Research Analyst)
Curious if there's any deviation in monthly trends intra-quarter, and then also as we've gotten into July, to comment on?
John North (CEO)
Trends in what regard?
Ryan Sigdahl (Senior Research Analyst)
Just overall business, whether it be demand side, new, used, certain categories, et cetera.
John North (CEO)
Yeah, I mean, there's always some volatility in unit volume month-to-month. I'm not sure that I would call it a trend one way or the other. It's hard to maybe totally isolate the signal from the noise. We've seen pretty consistent unit volume on the new side, you know, with some level of probably normal fluctuation. It's just timing and where weekends fall at month-end and that sort of thing. Obviously, our business is skewed more towards weekends, so the calendar can have an effect in the month, and so I don't want to read too much into that. In terms of used, you know, I think we've continued to try to source more used procurement, purchasing direct from consumers in the marketplace.
That's been an area where I think we've seen maybe some, some secular improvement, you know, for the first six months of the year as we've leaned into that, and we've made a concerted effort to reduce wholesales, which you can see in our results, trying to convert more of that into new. You know, service business is the bedrock. It doesn't fluctuate all that much. The opportunity for us there is really around capacity, specifically technicians, to try to get, you know, more ability to turn wrenches and bill hours to consumers. There's significant demand that is on a unfulfilled basis, just given where we are there, so we have work to do. Overall, as I said in the prepared remarks, I would say trends have been fairly consistent.
I wouldn't say there's been a big inflection that I would call out one way or the other. It's not as robust as we'd like to see. I think everybody's well aware of that. I wouldn't say that it's necessarily, you know, really deviating from the, the kind of run rate that it's been on, you know, including normal seasonality in, in northern and southern markets, which sort of work inverse of each other.
Ryan Sigdahl (Senior Research Analyst)
Yeah, that's helpful. It was mainly if you'd seen any, any change. We know the ongoing challenges with the industry. It was just if you'd seen any bright spots get any better or worse, was the main question. Switching over to some of your dealer or network expansion. Your Maryville store, you shut down. I guess, how much did you get for that from, presumably the state? Then how much did you pay for Buddy Gregg? I guess, kind of what's the net-net there from a financial standpoint?
John North (CEO)
Yeah, that store has not yet closed, but the Tennessee Department of Transportation is expanding a highway. When I joined the organization, the original plan was to, you know, allow that store to close and then relocate the operations to our existing store, which is on the east side of Knoxville. As I talked to Ron and the operational team, we decided that trying to find an alternative site would make more sense, and so we were fortunate to identify Buddy Gregg. You know, given Ron's contacts, we were able to, to make that acquisition happen. It's probably additive. You know, the Maryville store was not insignificant in terms of revenue. I think some of that revenue will move over to Buddy Gregg.
In my experience, typically, when you take two stores and push them into one, it's not a 100% combination. You know, I would say net-net, of the $40 million run rate we gave for Knoxville, I wouldn't assume that 100% of that will be incremental. I think there'll be some erosion, but it's hard for me to quantify exactly how much that is. It's somewhat of a guess, and, you know, frankly, we're just not that smart. I think we've tried to hedge accordingly. I wouldn't anticipate the full $40 million will come in there. In terms of the benefit from the state, it's fairly immaterial.
They give us some assistance in terms of relocation, but we'll also incur costs to move everything around and shut things down, and so I don't anticipate a significant windfall there. More importantly, we're keeping our store count intact, and we're allowing the employees that are at the Maryville location to, you know, have alternatives in terms of where they go. That will be helpful just in terms of, of maintaining their employment, which is important to us culturally.
Ryan Sigdahl (Senior Research Analyst)
Good. One more for me, just on the exclusive Airstream store in Monticello. Curious, just customer perceptions, I know it's, it's very early since that opened, but just if there's different customers' perceptions, if you get different OEM allocations, OEM support, discounts, et cetera, given it's an exclusive store, and then if there's any opportunity to do that at other locations?
John North (CEO)
In short, I think, yes. You know, Airstream's a little bit of a different animal, in my view, relative to other potential, you know, RV brands. I would say that the, the demographics and the consumers are typically very Airstream-focused. You know, they're not necessarily down looking at a different brand and then convert over to Airstream or vice versa. So I think it's a little bit of a different customer base than you might encounter in a more traditional, you know, RV dealership. You know, as we analyze the market, we have a dealership about, I guess, 20, 30 minutes away in Ramsey as well. Both of those are northwest of downtown Minneapolis on the way up to the lakes, which you probably know better than me, Ryan, given your proximity.
We had two dealerships there, both of size and scale. We had the Airstream product being sold out of Ramsey. We made the strategic decision to go to Airstream and offer them an exclusive location. You know, Airstream has a handful of these superstores, I'll call them. You know, there's one in Tampa, there's a few in the Pacific Northwest. You know, and they do significant volume, you know, in the 300-400 range. We were able to partner with Airstream. I think we're able to increase our allocation a little bit there, and more importantly, create a really immersive experience for that customer. We're pretty excited about it.
There's actually a Airstream campground about 20 minutes from the store with 150 spots dedicated only to Airstream consumers. We think it's gonna be a really powerful partnership, and we're really excited to grow with Airstream. You know, frankly, I think they're excited to have another standalone dealership to represent, you know, Minneapolis and then the broader state of Minnesota. Our relationship with them is, is certainly strong, and we appreciate the support, and we're excited about that, especially given that it should be hopefully top five store in terms of sales volume in the country, which is, which is not insignificant. We feel really positive about that change.
Ryan Sigdahl (Senior Research Analyst)
Very good. Yes, it's in an excellent location off Interstate 94, catching all that north traffic, going to the lake. That's it for me. Thanks, John, thanks, Kelly. Best of luck, guys.
John North (CEO)
Thanks, Ryan.
Operator (participant)
Thank you. Next question is coming from Daniel Moore from CJS Securities. Your line is now live.
Daniel Moore (Director of Research)
Thank you. Good morning, John, morning, Kelly. Thanks for taking the questions. Maybe start with just a little bit more color on the inventory destocking process. You know, how much discounting should we be thinking about or expect on the remaining 2023s for the next few quarters? Just talk about your confidence that, you know, we won't necessarily be in the same place six to 12 months from now with the 2023s that we've kind of gone through with the 2022s. Appreciate it.
John North (CEO)
Good morning, Dan. Thanks for the question, and I wouldn't, I'd be remiss if I didn't acknowledge that we appreciate the recent initiation of coverage and the partnership with CJS and you and Bob and the whole team, so thanks for that. You know, as it pertains to inventory, I think it's important to delineate between what we experienced last year, you know, which was really the, the, the breaking of the logjam in terms of the backlog of, of orders and a significant oversupply of 2022s versus what I think is happening this year, which is, as we move through the summer and model year 2024s are introduced, you'll start to see more aggressive discounting of 2023s. That's normal. You know, that happens every year.
I think whether you're talking automotive or whether you're talking RV, at least in the, you know, 10 or 11 months that I've been here, and, you know, Kelly has been here a few months shy of that, so, you know, it's still early for us in terms of our experience. You know, that, that should be normal, right? You're gonna have that model year changeover, and you're gonna see discounting move up, and typically, the discounting gets more aggressive as the year progresses, but it becomes a smaller percentage of the mix. I certainly don't think it's gonna be as acute as last year.
You know, I think according to the pundits that I look at and the industry data that's, that's released in terms of where we're going, you know, most people are triangulating around a 300,000 or so wholesale delivery number for this calendar year, compared to a 350,000, you know, retail delivery number. So that would imply 50,000 units of destocking. So, you know, I think, in short, we've done a good job of being ahead of getting through the 2022s. Kelly mentioned it's less than 5% of our inventory at this point, and we're down to 100 and some units, I think. So that's pretty much behind us. You know, now we're starting to see the 2024s hit. You know, we have a few hundred on the ground.
It's not a significant number. We're starting to obviously prioritize some of the discounting and partnering with the OEMs around ways to keep that momentum moving. When I look at our bottom line, gross profit per deal, you know, I think our expectation is that you're not gonna see it move dramatically from, from here. You know, it's gonna fluctuate as it would normally, but I don't anticipate the pressure that we saw in the back half of last year at all. I do think the 2024s are gonna come on and help, I guess, adjust the mix or balance the mix more quickly than what happened last year, which should help to hold grosses more consistent. I think it's very different than last year and manageable.
Daniel Moore (Director of Research)
Really helpful. I think you stole my next question, which is, you know, gross margins, despite being, you know, a lot of flux, have, have actually held up, you know, quite well, and I know you think of it more gross profit per unit, but, you know, any additional color on the likely direction of, of gross margin, you know, either on a, on a percentage basis or per unit basis, as we think about the balances of this calendar year, beyond what you just described?
John North (CEO)
It's a nuanced question, and it's an interesting point to call out. You know, I think if I take a step back, we're a lot more interested in selling more units than making more gross because of the knock-on effects. You know, every unit that we sell has an F&I opportunity, obviously, but importantly, many of them come with trades, and all of them become then potential customers in our service department down the road. So this is a unique retail business, in that there aren't many retailers that sell stuff and then fix them, too, down, down the road.
That all creates a flywheel effect, where you can improve the velocity of the business and maintain the customer, you know, and the, and the life, life cycle value of the customer, is, is much more significant than just the transaction where you shake hands and have a deal. I think overall, you know, I think we would like to see more volume as opposed to more gross profit. I don't think that means that the gross per unit on the new and used side has to change a lot. I just think we're prioritizing, hopefully making more customer relationships as opposed to trying to make more off of each customer relationship.
I would be remiss if I didn't point out that I think we have opportunity in our F&I and in our service department to really drive improvement, you know, beyond kind of what the market's gonna give us. When I step back, I don't think, you know, that there's huge opportunity to sell more units that we're missing, but I do think there's a lot of opportunity to try to attach more value to consumers in the F&I department, and then importantly, to try to maintain and improve our ability to service vehicles downstream. That's gonna be much more meaningful to our overall gross margin than trying to hold a little bit more profit, you know, when we sell a, a new or used unit.
Daniel Moore (Director of Research)
That's great color. Obviously consistent, but certainly helpful. Lastly, just in terms of liquidity, I appreciate the color, Kelly, as well. You know, you bought back a decent amount of stock over the last few quarters. Just talk about your capacity and appetite, you know, either for further buybacks, given kind of current liquidity, versus your expansion plans, in the current demand environment. Thanks again.
Kelly Porter (CFO)
Hey, Dan, this is Kelly. Thanks for the question, and good to hear from you again today. From a liquidity standpoint, I would say we, we would want to reiterate our, our focus on really a couple of different areas. All things being equal, we'd like to deploy capital first to real estate buybacks, and then to continue to expansion through acquisitions. With all that said, you know, depending on where the market goes and where our stock goes, at any at some price, we will buy back stock. It just depends on, you know, kind of where things go and, and what the market looks like for acquisition appetite versus where our stock price goes. Would prefer to allocate towards real estate and acquisitions, but again, if something happened and our stock price dropped, we would look to allocate towards buybacks again.
Daniel Moore (Director of Research)
Very good. Appreciate the color. Best of luck in the coming quarter, and talk soon.
Kelly Porter (CFO)
Thank you.
Operator (participant)
Thank you. Next question is coming from Mike Swartz from Truist Securities. Your line is now live.
Mike Swartz (Director of Equity Research)
Hey, good morning, guys. More of a housekeeping question to start. When I look at the, the ASPs for, for the new vehicle business, they were actually up year-over-year, and I think that's a material change from the down year-over-year in the first calendar quarter. Is that some kind of accounting nuance? Is there mix playing into that? Which is, I guess, what, what's driving that?
John North (CEO)
Hey, Mike, nice to hear from you. I don't know if I've necessarily deconstructed everything, to give you a specific answer, so I will caveat appropriately. You know, we're a lot more concerned with gross and unit sales than revenue. I, I really spend very little time looking at our revenue, but understand, you know, the question and as you model things. My intuition is that it really is just a function of inflation. You know, pricing has gone up overall, both on the wholesale and the retail side. I mean, if I had to guess, I would say 2019 compared to 2023, you're probably looking at a 30%-40% increase in the cost of most everything.
My suspicion is just as we work through, and I think we were ahead of maybe others in the industry in terms of the 2022s, the 2023s have become a greater percentage of our mix in the second quarter in particular. I think you're seeing just, frankly, inflationary costs, which is probably, you know, what's driving that. Because when you look at, you know, the grosses and the margins, you're not seeing a commensurate growth there. I think it's really just kind of, you know, raising the overall transaction value as a function of 2023s comprising more of the mix.
Mike Swartz (Director of Equity Research)
Oh, okay. That, that's great. Thank you. Then just, I think you, I think you had mentioned that, that model year 2024 pricing is, is kind of flat to down versus model year 2023. I, I assume you're talking about invoice pricing from the OEMs. I guess broader, broader question is, how do you think about affordability in, in the RV space? I, I guess, is there kind of a sweet spot for where you think kind of net pricing needs to go before we start to really see a, a, a rebound or a pickup in, in, in the retail environment?
John North (CEO)
Yeah, I, I think you're correct in your first statement. What we were alluding to was the, the invoice cost of the units appear to be flat or down in most cases as it pertains to 2024. That, that is correct as a clarifier. You know, what's the right price for the consumer? I, I guess I look at that through a couple of lenses. You know, the first is that one of the reasons we've been focused on used is because in times where affordability is more difficult, you know, for a consumer, you know, you see a natural shift toward more used demand. You know, people effectively trade down to match to a payment.
You know, I don't know the absolute percentage, but my suspicion is 90%+, 85%+ of people are, are thinking of a payment when they're thinking of a purchase here. I think there's, there's that lever that gets pulled first. The other one that comes to mind is just our financing penetration. You know, pre kind of Fed interest rate moves, we were north of 70% in terms of the financing penetration on the units we sold, and that number is now in the 60s.
I think for the higher end, you know, purchaser or the more natural inclination to pay cash, money, you know, their retirement account or in their equity portfolio or in their home equity line of credit, you know, now that interest rates on an RV are gonna have a seven or an eight handle, even for the best credit quality customer, I think you're seeing more people elect to just pay cash where they have that optionality. I think for them, you know, the affordability is probably less important. I do think the 2024 model year's moderating will help. Then I just think there's probably a longer-term thing here, which is consumers getting used to money not being free.
I don't know how long that takes, but, you know, if you step back, and I'm old enough to remember, I mean, a, a 7% or 8% auto loan isn't bananas. You know, it's just that for the last decade, you know, if you didn't have 0.9% financing or 1.9% financing, you know, it seemed really expensive. So how long it takes for that to socialize across the buyer base, I don't know. My suspicion is eventually people will sort of forget that money used to be that cheap, and then, you know, I think that'll be easier for people to accept. You know, we finance a lot of RVs for 180 or even 240 months if they're over $50,000.
In terms of the absolute payment, I just don't think it's that material. I think you're talking, you know, in, in the $10s, not in the $100s. I, I don't think that most consumers can't avoid that. I think it's also just more of the sticker shock.
Mike Swartz (Director of Equity Research)
Gotcha. Okay, that's helpful. Then just one final one for me. With you guys freeing up some, some additional liquidity, and I think you made the comments that you're, you know, maybe more aggressively seeking out acquisition opportunities in the back half of the year. Maybe just give us a refresher on kind of some of your core acquisition criteria?
John North (CEO)
Yeah, I think, in general, we're focused on a few different things. Number one is probably size. I think you'll see us be focusing on larger revenue opportunities in terms of the individual dealership or box. You know, I think from our perspective, it's as much effort, you know, to run a $50 million revenue box as a $15 million revenue box. But obviously, the earnings potential is significantly higher in the former than the latter. You know, we probably defer to larger. There's lots of dealerships in the country that are probably below those thresholds, and those are the ones I would say that have been more recently coming to market, or there's been a more, a greater quantity of those. That's first.
Second is real estate ownership. We're very focused on locations where we can own the dirt, and the acquisition we did in Knoxville this week is a good example of that. We were able to buy the real estate there as well, so we have site control, which is critical. The third consideration is OEM relationships. You know, there are certainly good relationships with all of our OEM partners, but I think we're focused on trying to be a little bit selective and look for some of the OEM partners and relationships and expanding those, because we have very good relationships with certain OEMs, and so I think we're prioritizing some of that.
You know, probably the last is just thinking about geography. There's value in the network effect of having dealerships clustered, because you can share the benefits of marketing and personnel, and people can move around and support more easily. There's also benefit in diversification. As I think about Florida, you know, we have stores in Tampa, we have a store in The Villages and, you know, a store under construction in Fort Pierce. You know, I'd love to diversify away from Florida, not because we don't like the market, but just because it's prudent for us to, to have roofs elsewhere and, and to create more of a nationwide network, particularly as we work, work to build our brand and our reputation with consumers coast to coast. It's probably that order, and those are the considerations for us as we think about going forward.
Mike Swartz (Director of Equity Research)
Okay, great. Thanks.
Operator (participant)
Thank you. Next question is coming from Brandon Rollé from D.A. Davidson. Your line is now live.
Brandon Rollé (Managing Director and Senior Research Analyst)
Good morning. Thank you for taking my questions. Just quickly on inventory, could you talk about your appetite for taking on more new inventory in the back half of the year, maybe versus pre-owned inventory, given current retail fundamentals?
John North (CEO)
Good morning, Brandon. Nice to hear from you. I think we are really focused on a couple of different things. You know, inventory is a very broad bucket, and what I mean by that is, you know, we stock everything from a $40,000 stick-and-tin towable trailer up to a, you know, $800,000-$900,000 Class A diesel pusher with a tag axle. I would say, as it pertains to new, I think it, it's different. You know, we've certainly seen a little bit more slowdown on the motorized side of things. You know, I think that that had been undersupplied longer than the towable and fifth wheel segments, just given supply chain issues around getting chassis and that sort of thing.
As I think about the last couple of quarters, I would say, you know, we've, we've seen less of a slowdown externally, but I would say, you know, as it pertains to consumer demand, you know, the, the, the channel certainly has caught up, which I think was a slower catch-up than we saw on the towable side. You know, so I think we're being prudent there just in terms of moderating. We, we are certainly thinking about trying to run with a lower day supply. You saw that we sequentially improved in Q1 -Q2 in terms of day supply, and so we're thoughtful around that. In particular, trying to be cautious with a lot of the 2023s coming in now that 2024 is around the corner. I don't anticipate significant changes in either direction.
I think you'll see us maintain inventory. We do need to start ordering up. you know, a third of our business is in Tampa, the Super Show is a gigantic event for us in January. We need to be ordering now to take that stuff in and given the lead times required for some of that motorized product, in particular, to stock up for that. I don't anticipate big changes there. you know, on the used side, it's a good call out, and thank you, for allowing us to talk to it.
You know, we've grown our used inventory from, from memory, Kelly, I think $15 million, so far. You know, that's been a very concerted effort. You know, that obviously, we don't borrow against all of our used inventory. We tend to pay cash for it, and then floor it as required. Our operational cash flow has also been, you know, optically lower than it would've been if we hadn't been building used inventory, because we didn't put the associated flooring on for it. We've made a concerted effort to stock more used. We do think that there's more healthy underlying demand there because of the affordability topics we've talked about earlier.
Frankly, I think there's more of a market to be had there, so we've, we've leaned into that. You know, we'll see if that grows. Some of it's market dependent, you know, what's for sale? Can we find things, purchase them attractively relative to where the market is today? Which is really, I mean, literally a piece-by-piece decision. Our wholesale team and, and our operational leaders buy those actually unit by unit. So it's hard for me to predict if that's going to build or not. If there are opportunities, we'll take advantage of them, and, and if they're not, there won't.
In general, I'm pleased that we have more used inventory in inventory. It's interesting, I mean, 50% of our used inventory turns in less than 30 days. There's really healthy demand for that, for that in the marketplace, if you can find the right pieces, and so we're focused on that.
Brandon Rollé (Managing Director and Senior Research Analyst)
Great. Just, you know, quickly on the used market, what are you seeing in terms of used inventory availability and then maybe, you know, just overall competition, maybe from other retailers to procure those used units?
John North (CEO)
It's competitive, for sure. Certainly, within the marketplace, you know, we're not the only retailer that's aware of the opportunities in used and, and touting the benefits of trying to focus on it. That's not, that's not lost on Lazydays. You know, everybody's certainly working hard to find stuff. You know, I think it's, it's an interesting time. You have some subset of consumers that, that bought the product in the pandemic that weren't probably traditional RVers. You know, I'm sure some of them are, now that the world is, I guess, quote, unquote, more normal, maybe looking to, to sell.
You know, I think the, the counterweight to that is that I think many of the people who are in the lifestyle and, and have been in the lifestyle, you know, might have upgraded in 2019, 2020, 2021. In particular, if you were buying a model year 2020, 2021, 2022, you know, you were probably paying MSRP or more, and that's certainly not where the market is today, and you probably were potentially financing it in the 4s, and that's not where the market is today.
do think there's, you know, some amount of, of probably longer hold periods in the future as it pertains to used, just because, I mean, a similar dynamic to what we're seeing in the housing market, where, you know, given where interest rates have gone, people are, you know, looking at the relative ability to trade up, and, and given, you know, the increased payment, you know, they're deferring and just electing to stay where they are. I think some of that's in play in the used market as well, and it's gonna take a little bit of time to work through that.
Overall, I think there's opportunities. We've seen an uptick in the number of trade-ins coming in on our used side, which has been good to see. You know, and, and it's like a, a single-digit % change, but nonetheless, it's improving. I think that's health- healthy and very manageable.
Brandon Rollé (Managing Director and Senior Research Analyst)
Great. Thank you.
Operator (participant)
Thank you. We've reached the end of our question-and-answer session. I'll turn the floor back over for any further closing comments.
John North (CEO)
Thanks, everybody. Have a great day.
Operator (participant)
Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.