CWH - NYSE

Good morning, and welcome to the Camping World Holdings conference call to discuss financial results for the fourth quarter and year ended December 31, 2025. [Operator Instructions] Please be advised that this call is being recorded, and the reproduction of this call in whole or in part is not permitted without the written authorization from the company. Joining on the call today are Matthew Wagner, Chief Executive Officer and President; Tom Kirn, Chief Financial Officer; Lindsey Christen, Chief Administrative and Legal Officer; and Brett Andress, Senior Vice President, Investor Relations. I will now turn the call over to Ms. Christen to get us started.

Thank you, and good morning, everyone. A press release covering the company's fourth quarter and year ended December 31, 2025, financial results was issued yesterday afternoon, and a copy of that press release can be found in the Investor Relations section on the company's website. Management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These remarks may include statements regarding macroeconomic industry and customer trends, business plans and goals, future reductions in SG&A, future growth of operations, future deleveraging activities, inventory management objectives, investments in customer experience, future capital allocation and future financial performance. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the Risk Factors section in our Form 10-K, our Form 10-Qs and other reports on file with the SEC. Any forward-looking statements represent our views only as of today, and we undertake no obligation to update them. Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as EBITDA, adjusted EBITDA and adjusted earnings per share diluted, which we believe may be important to investors to assess our operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial statements are included in our earnings release and on our website. All comparisons of our 2025 fourth quarter and full year results are made against the 2024 fourth quarter and full year results, unless otherwise noted. I'll now turn the call over to Matt.

Thank you, Lindsey. Good morning, and thank you for joining our full year 2025 earnings call. I am proud to report that our team made significant progress in 2025. We achieved full year adjusted EBITDA growth of over 35%. Our same-store unit sales improved over 14%. Good Sam generated record revenue and the parts, service and other category experienced a strong improvement in gross margins. This performance demonstrates the strength of our model and the hard work of our team. In the fourth quarter, we saw encouraging signs of momentum with same-store sales volume for new and used vehicles increasing by 4% and our combined market share holding firm at 13%. Our 2025 results provide a solid foundation, and we have only just begun to realize our full potential. Since assuming this position, I've spent considerable time with our teams, our customers and many of you in the investor community. My message has been simple. We are focused on disciplined execution to drive greater profitability. To that point, the first half of January started strong with short-term trends indicating positive new and used same-store sales. Towards the end of January, weather across the country forced the temporary closure of over 60 of our locations for at least 1 day. This widespread weather disruption, which persisted through the first week of February, resulted in a year-to-date estimated miss of about 1,500 new and used unit sales or about $13.5 million of gross profit. This weather interruption in combination with broader industry performance, forced us to reassess our sales expectations and broader industry retail and wholesale shipment expectations. Our execution amid these short-term challenges gives us confidence in our 3 strategic priorities: grow new and used RV sales, create greater SG&A cost efficiency and accelerate Good Sam's growth. Let's start with RV sales. Our strategy to grow new and used RV sales this year is multifaceted, including the expansion of exclusive RV brands, improved efficiency of used RV procurement, partnerships with organizations like Costco and the acceleration of inventory turnover rates. Looking beyond the immediate term, we see some significant positive industry catalysts on the horizon. We believe the 4.1 million customers who purchased new and used RVs during the 2020 to 2022 peak are approaching a manageable equity position in their vehicle. We anticipate this will create a substantial wave of trade-in demand over the next several years. We are taking decisive action in 2026 to cleanse and optimize our inventory portfolio to prepare us for this trade-in opportunity. By improving our inventory turnover rate, we will increase working capital efficiency with fresher inventory. To put it even more simply, we will do more with less and position ourselves to generate higher revenue and greater earnings power with less inventory. This will require a strict and at times, aggressive approach to move through certain aged and noncore RV assets. While this strategy is essential to reset our foundation and enhance future cash flows, we expect it will create a near-term negative impact on our gross profit per unit for both new and used vehicles. This proactive strategy is a key driver behind our outlook for the year. During our Q3 call, we set a minimum expectation of $310 million in adjusted earnings for 2026. Given our decision to accelerate the cleansing of our inventory, we believe this strategy could negatively impact EBITDA by about $35 million in 2026, particularly in the front half of the year. This leads me to our second priority, optimizing SG&A. In the last couple of months, we have completed about $25 million of annualized expense reductions. A large portion of these savings are expected to offset some of the gross margin impact from the acceleration of our inventory turnover. We will continue to pursue systems and processes to further centralize our business and remove costs to ensure we hit our targets. Now let me turn to our final priority, accelerating the growth of Good Sam. For nearly 60 years, Good Sam has been the bedrock of the RV community dedicated to protecting, enabling and empowering the adventures of every RV enthusiast. For our company, Good Sam is the cornerstone of our future growth, driving high margins and best-in-class customer service. We are confident in our ability to execute upon all of these management objectives in 2026. Last evening, we established an adjusted EBITDA range of $275 million to $325 million for the full year 2026. This range encompasses the high and low end of expected industry retail sales, plus it includes the expected impact of inventory corrections and cost savings to prepare this business for the next trading cycle. Lastly, as a Board, we changed our capital allocation strategy to prioritize the long-term health of the balance sheet. As such, we've elected to pause the dividend and retain operating free cash flow to reduce the net debt leverage and keep growth capital within the business. With that, I'll turn the call over to Tom to discuss the financial results in more detail.

Thanks, Matt. For the fourth quarter, we recorded revenue of $1.2 billion, driven by a 14% increase in used unit volumes, partially offset by a 7% decline in new unit volumes. New ASPs improved from the trends we experienced earlier in the year and were only down slightly compared to the fourth quarter of 2024 as we expected. Vehicle gross margins and GPUs were primarily impacted by the strategic clearing of aged inventory beginning in December. We expect this margin pressure to persist during the first half of 2026. Within Good Sam, the business continued to post positive top line momentum with services and plans revenue increasing by about 3% in the quarter. The organization remains positioned for margin improvement in 2026 as we expect to begin to yield returns on several of the significant investments we've made over the last 12 to 18 months. Our Q4 adjusted EBITDA loss of $26.2 million compares to a loss of $2.5 million in Q4 of 2024. As we think about the drivers of the delta in our fourth quarter results versus our own expectations, the largest was the December hit to vehicle margins as we accelerated the cleansing of our inventory, along with dealer insurance product cancellation reserves. Our 2026 guidance calls for adjusted EBITDA in the range of $275 million to $325 million, with just over 50% of the annual adjusted EBITDA expected to occur in the first half of the year. Lastly, our liquidity position is solid, ending the quarter with $215 million of cash on the balance sheet. In an effort to further fortify the balance sheet, the Board of Directors made the decision to pause the company's quarterly dividend. Our Up-C structure was designed to require distributions out of the operating company to cover the taxes of our members including CWH. This historically generated excess cash trapped at the public company, which was the primary source of cash for the dividend. We've reached a point where this pool of trapped cash has been returned to shareholders. And while we could choose to fund the dividend out of incremental distributions from operations, we've elected instead to focus in the near term on net debt deleverage and dry powder for growth. As a step toward improving our net debt leverage, we have already repaid an additional $50 million of long-term debt to date so far in 2026. I'll turn the call back over to Matt.

Thanks, Tom. Before we flip to Q&A, I want to leave you with one final thought. This business is ultimately about bonding people with each other and the outdoors [indiscernible] as a next steward of this company, my goal is to become the most trusted RV company in the world by providing exceptional customer service and experiences. It is through this lens that I intend to lead this company through our next phase of growth with the goal of returning meaningful value to our shareholders. We'll now turn the call over to Q&A.

[Operator Instructions] Our first question comes from Craig Kennison of Baird.

Matt, you mentioned perhaps 1,500 units that were lost as a result of weather. In your experience, would you expect to get these units back as the season unfolds? Or do you think they're truly lost?

Craig, that's a debate that we constantly have internally. And the brutal reality is that a large portion of those are oftentimes just lost, and then it just gets caught into the jet stream of whatever the annualized outcomes are. But whenever you have an instance like this, it just forces you to change the calculus of what the short-term versus long-term projections are of the business. And that was a painful what you could argue is almost about a 17-day stretch of just weather impacts that were sprawling across the Atlantic region all the way over to the Midwest down to Texas and back over to Florida, which when you think of the whole quadrant of the country, that's where we have a pretty tremendous density of dealerships. And if customers, for whatever reason, just didn't choose to buy within that period, we do hope that some of them will come back in March. But we certainly aren't banking on that, and we're doing everything within our power to continue to solicit more customers to come back in to at least make up for whatever the shortfall was.

Yes. And sort of as a follow-up, there has been this expectation that tax refund season might provide a lift to the RV demand curve this year. I'm wondering if -- I know it's early, but in the last couple of weeks, if you've seen any improvement in demand that you could tie to that dynamic?

Craig, I think it's still a little too early. I mean we're looking at the same things, obviously, looking at some of the reports you've been putting out weekly just as well, keeping a watchful eye on what these tax refunds are. We anticipate -- if we did see any sort of improvement, it'd be probably over the next couple of weeks, where we anticipate a number of refunds starting to hit the end of February and then starting to accelerate throughout March. So I believe more to come there. We think in certain cohorts of consumers that could yield a significant benefit for us. I can tell you right now, we've been performing very well in certain categories like new fifth wheels and new entry-level motorized, but there is some softness admittedly on new travel trailer sales and used travel trailer sales remarkably. So when we think of the potential benefits of that refund, I think that would enable more of these potential travel trailer consumers to come back into the market, which would then make up for some of that gap that exists today.

Our next question comes from Joe Altobello of Raymond James.

Matt, just -- you started to do a little bit of this, but maybe if you could bridge the gap between the low end of your EBITDA guidance of $275 million with the prior floor of $310 million. I mean, obviously, inventory cleansing is the biggest part of that, and then you've had weather, but you also have cost savings and the Costco relationship, I think, is incremental as well. So maybe kind of walk us through those steps, if you could.

Yes. Very fair question, Joe. So I'll keep it as simple as possible. When we went through that $310 million base case on our Q3 call, there was a number of elements that were contemplated there. Since that time, what has transpired is we removed about $25 million of annualized SG&A savings for our business. So take that $310 million number and now go up to $335 million of potential upside. But we also realized over the last 45 days is we need to start to improve our inventory turnover rate to prepare for what will be this trade-in cycle, but also just to operate in a healthier environment. When we ended the year with about a 1.7 turn on new inventory, that wasn't satisfactory for us for a number of different reasons. Historically, we like to operate at about a 2.2 to 2.4 turn. And on the used side, it wasn't satisfactory for us then with about a 3.1 turn. We like to operate typically at about a 3.4 to 3.5 turn. There's a variety of different reasons why you want to accelerate turnover. But as a dealership business, generally, your inventory is your greatest risk, but also your greatest opportunity for growth. So when explaining this turnover number, I've oftentimes spoken about how inventory is like an ice cube sitting on your lot. With every day that it sits, you have different profitability as well as cost of mass and your profitability starts to melt with each day that passes and it starts to evaporate. So we know we need to accelerate that inventory turnover. And as such, that's where you start to take what is that $335 million EBITDA number and you start to reduce that back down to $300 million because we believe that there could be about a $35 million EBITDA hit by means of accelerating that inventory turnover. This is the right thing for the business over the long term, especially in preparation for what will be this trade-in cycle. You're correct, though, Joe, that we haven't contemplated what truly the upside will be of Costco. If we end up selling upwards of 3,000, 4,000 or 5,000 more units as a result of the Costco relationship, that would push more towards the outer end. But using that $300 million as a base case, I would say really the biggest input for the downside case of $275 million versus the upside of $325 million is simply going to be how the new and used industry trends in terms of retail sales. And we're factoring in right now that our retail expectations for the new side of the business in the industry will be about 325,000 annualized sales to maybe upwards of 350,000. And on the used side of the business, we believe that the used retail environment could yield maybe anywhere from 715,000 used sales to upwards of 750,000 which there's a wide range of outcomes in there, which is why like we're in such a business where the average sale price on new assets is going to be about $40,000. If there's a 3,000 or 4,000 unit difference from the high side to low side, that represents pretty material differences in the earnings expectations.

Very helpful. I appreciate that. Maybe to follow up on the balance sheet. I think you're at 5.7x leverage. Could you kind of walk us through where you see that number going by the end of this year and maybe by the end of '27?

Yes. Sure, Joe. I think our -- this is Tom. Our goal for this year is to get as far below 4.7 as possible. So that's ultimately our goal for this year and then to set us up to try to get below 4 in 2027 as we continue to improve earnings.

Our next question comes from James Hardiman of Citi.

So I was hoping we could dig a little bit deeper into sort of the inventory cleansing that seems to be the focal point of a lot of what we're talking about here. I guess, a, when did we get to a place where sort of the trajectory was just a turnover level that now feels like it's unacceptable. I think a lot of the commentary in previous quarters was that we were in a pretty good inventory place. And then how does it play out over the course of the year? I think there were some -- I think the expectation is first half headwind, maybe a tailwind or at least less of a headwind in the second half. But maybe walk us through some of the puts and takes. I'm assuming that ordering activity is going to come down pretty meaningfully and that gross margins are going to be negatively impacted as we maybe get a little bit more promotional to clear out some of those units. I didn't know if there's an SG&A impact to all of that, but maybe walk us through some of the moving pieces there.

James, fair questions all around. Really, the simplest way to even answer your first question is this is my inventory philosophy of simply hitting those elevated inventory turnover rates because inventory turnover really is important for 3 specific reasons. Number one, there's carrying costs associated with inventory. Every single day that it sits on our lot, you ultimately are hit with floor plan carrying costs. Number two, all these inventory assets are depreciable assets. With every day that it sits on our lot, you're going to lose more and more value. And number three, if you're locking up these assets on your lot, you're ultimately losing some opportunities elsewhere. So for example, we'd rather have a travel trailer that we're going to sell 6 times a year for a $2,000 profit versus having a travel trailer that we're only going to sell twice a year for a $5,000 profit. We know that we can redeploy that capital over and over again. And that truly starts to quantify bottom line improvement. So for example, our turnover rate to end 2025 on the new side was about 1.7. If we're to improve that to about 1.8, that's an additional $7 million of straight gross profit. We believe that we should be operating on the new side with a turnover rate somewhere in that range of 2.2 to 2.4. And by the way, that's just historically being healthier there. So when you think about just philosophically how we'd like to operate moving forward and then also in connection with the reality that there is a massive opportunity that we believe will start to brew in the back half of this year in terms of trade-ins. And we do believe that this will be a longer tail that will continue to materialize with greater and greater magnitude over the ensuing years. We wanted to make sure that we set ourselves up. And most of this impact to selling through the inventory on both the new and used side would be in the front half of the year. And there's some possibility that it could bleed a little bit more into Q3 because we have to be relatively judicious in terms of our approach into how fast we want to sell through those assets. But we wanted to reset the stage to say, okay, if we want to cleanse our inventory, which you could argue, it's still relatively healthy. We'll still make good margins. We're just not going to make margins to the same extent that we wanted. So I would expect that our margins for the collective 2026 could maybe be down year-over-year like 120 basis points to maybe upwards of 130 basis points on the new and used side combined over the course of the year because of the pressure on the front half of the year.

Got it. That's helpful. And then to this point about the better equity position for consumers. I just want to be clear here. It seems like in the context of the guidance, we're factoring in the costs associated to being in a better place to take advantage of that, but it doesn't seem like we're necessarily factoring in that positive inflection that it seems like you anticipate starting in the second half of the year. Just want to make sure that's the right way to think about this.

No, I would argue that we are factoring in what will be that improvement in the second half of the year in terms of the volume opportunity, which is why you can make a case that the front half of the year just based upon perhaps just like limited replenishment in certain categories of certain orders, which you alluded to, that is a distinct possibility. You're going to see more dealerships inclusive of ourselves re-up in anticipation of a model year '27 changeover, in which case, I think we set ourselves up very nicely to take advantage of an uptick in general demand and trade-ins in the back half of the year.

Okay. But maybe the disconnect, I mean, as we think about sort of your assumption for industry retail, does that factor in that positive inflection? Or is that more you think maybe specific to you guys rather than the broader industry?

James, it's Brett. So when you think about how we're factoring in that trade-in cycle this year into those retail outlooks, it's fairly minimal. I mean the way we see this trade cycle playing out is pretty long duration. I mean we're talking very, very early innings at the end of 2026 potentially, building itself into '27 going all the way out to 2030 when you think about having to replace 3 years of RVs that normally are on a 3- to 5-year trade-in cycle that essentially got elongated by at least 3 years based on what we see from those cohorts. So minimal expectations as we think about '26 because it's much more of a longer tail event for the industry.

Our next question comes from Scott Stember of ROTH Capital.

This is Jack Weisenberger on for Scott. Just moving into the parts and services segment. I mean, we have seen a decline in '25 compared to used sales rising. I assume you attribute that to prioritizing the space for used reconditioning. But is there any way you could give some detail kind of on that underlying business there?

Jack, you broke up for a moment there, but I think I captured the general essence of your question. Yes, last year, we generally were impacted in terms of reallocation of our internal work, so that necessarily was a detriment to the overall external service work in PS&O category. Heading into this year, though, this is one of our focal points, which we internally have been working through diligently, and we don't speak about it too much extensively in a public setting. But we know we have a lot of work to do to expand our service capabilities and our service network. Yes, we have more days and more service technicians than any other entity within this industry. But we do believe we're not getting as much in the external space as we should. So for this upcoming year, we have focused pretty extensively on our tech training, which is really the people component of the business. Within the process side of the business, we're launching a service CRM here, which will be live over the next 60 days, which we've been focused on for the last 60 days. So this has been a sprint for us to try to stand up a proper CRM. And then finally, what we're also working on with manufacturing partners, especially Thor, is creating a more streamlined parts process for reordering and reducing the repair event cycle time for consumers. That last component is perhaps the most important. So I can tell you that is a pain point in our industry of just that repair event cycle time and how long it takes to get parts to actually satisfy consumer needs. So we'll continue to keep the group posted. I know, in particular, you, Jack and Scott have maintained a focus on this category. So we'll do a better job out speaking about this publicly. But we're quite excited about the opportunity there. And then while it's not going to be huge revenue, we do believe it's really good gross profit because the margins within our service business are oftentimes going to be pushing upwards of about 60% in service, whereas collectively in that parts, service and other, it's going to be a little bit less than that.

Great. And then kind of focusing on pausing the dividend and M&A. So just kind of what are you seeing in the M&A environment going into 2026? And does kind of pausing the dividend allow you to look any more aggressively for deals? Or does it kind of get put in the back seat kind of ahead of leverage?

Yes, Jack, it's Brett. So as we think about the M&A environment today and the pipeline we're seeing, it continues to lean more on the, I'd say, the stress side, if you look at the assets available and coming to market. We are continuing to be extremely prudent, extremely disciplined when we think about deploying any incremental capital towards M&A. We do have one that we have currently signed up that we plan to close in March that fits all of the criteria when we think about having a low rent factor, having a manageable small goodwill bite-size number and having incremental brands to add to the portfolio. But outside of that, I would say our criteria is very, very tight. And we're going to continue to allocate and deploy that capital much more towards that repayment. But we will always be in the market for it.

Our next question comes from Noah

I guess maybe just to kind of follow up on kind of improving inventory turnover. Is the decision there really driven by kind of aged mix or optimization of kind of unit type? Just trying to kind of understand like maybe the puts and takes to kind of repositioning the inventory here.

Yes. optimization, number one, Noah. Flexibility number two. And really the driving factor behind that all is the flexibility is being limited by the fact that we're locked up in some noncore assets that we'd ideally like to redeploy that capital into better turning assets. So as we sit here today, about 18% of our new assets are model year 2025, which inherently those are going to be 1 model year too old. And we're on the shot clock right now where model year '27s are going to be debuted somewhere in that June, July time frame. So we want to position ourselves to be completely out of those assets to take advantage of the opportunity of a newer model year. Never mind, on the used side, we were relatively aggressive in pursuing expansion of our used inventory investment in the second half of last year. We just want to make certain that we turn through that product as fast as possible. There's a general rule of thumb in operating a dealership. I mean your first loss is your best loss or simply put in another more positive light is your first opportunity to sell something is probably your best opportunity to sell it. So while in the case of used margins, we still think that they'll be healthy in the context of the general like dealership business. We think that there could be a little bit more pressure on used margins more holistically on the front half of the year compared to the back half. So I wouldn't be surprised if our used blended margin for the entire year ended up in that like 17.5% range, maybe even a little lighter. Whereas on the new side, we'll again be under some pressure on the front half of the year, paving the way very nicely for the back half of the year, where I could see our new blended margin for the entire year being somewhere in that like 12.5% range. So collectively, though, this is all about optimization and flexibility. And some of that flexibility is being hindered by means of just having some noncore assets today.

Got it. That's really helpful. Maybe just one housekeeping question. I think you mentioned kind of thinking about retail in a range of 325,000 to 350,000 units. Is it too simplistic to kind of assign the ends of those ranges to the EBITDA guidance range, meaning like the $275 million would be associated with 325,000 industry units? And then just any other color on the top and the bottom of the range.

No, I think that's a pretty constructive way to look at it. And obviously, there's going to be some weird variables in there in terms of like general SG&A as a percent of growth and then ultimately, is there market share gains, and that's where you get caught in this trick bag. But I think if you were to bracket it just holistically, that's a helpful place to start. And then we're giving you a range where you can then figure out your puts and takes of what is that bull versus bear case. We think that $300 million is a really helpful place to start at the midpoint. And then there's going to be different opportunities that arise throughout the balance of the year. I mean we're sitting here only about 55 days into the year and 55 days into a different management change, where there's a different amount of possibilities and range of outcomes here as we go through the balance of the year.

Our next question comes from Tristan Thomas-Martin of BMO Capital Markets.

When you talk about noncore RV assets, what are you referring to specifically?

So when I think of noncore on the new side, I'm thinking of floor plans that are no longer being built or in the case of like Thor, Thor has consolidated some of their manufacturing businesses from like a Heartland into a Jayco. And some of those older Heartland units, while still a relevant brand, they're no longer in production. And while it's still a good product and while we still will make a margin on it, we can't expect to make that same elevated margin that we would on our fresher product. And when we look at the used side of the business, once a used asset generally hits about 120 to 150 days, there's a high likelihood that unless you sell in that ensuing 30-day time period that it's going to start to hit an age bucket of like 210 to 280 days. We want to avoid that at all costs. Used especially is one of those categories where you need to move quickly through those assets because every 60 to 90 days, there's going to be some sort of depreciation hit associated with NADA at a minimum. And NADA, unfortunately, is going to be relevant because that's a determining factor of advance rates for financing capabilities. So to put that in simpler terms, when a customer comes in and they want to buy an asset, it doesn't matter what the fair market value is of that asset, they're going to be limited by that financing advance rate on the front end and back end based upon an NADA valuation. We, as a dealership, have 2 options. We either ask that customer for an increase in their deposits, their down payment to reduce that overall advance or that financing amount. Or number two, you have to cut margins to actually satisfy that. And unfortunately, we're in a period on some of those older assets. We just might have to have a willingness to cut some margin to ensure that, that customer could buy that asset because there's a significant amount of credit available. It's just a matter of consumers having a willingness to actually put the down payment and actually afford that monthly payment.

Okay. And then another question kind of around like this new industry inventory strategy, I'm sorry. How does that impact your ordering with the OEMs? And then also have OEMs kind of handle this change plus the weather and their production schedules?

This is like a [ fishing ] question. We will continue to reorder with manufacturers at the same pace we always have on the best-selling products. What we have gotten into a nice cadence on is actually ordering more frequently, so with greater frequency and with shorter lead times. So in other words, like we'll place orders this week, and we'll be focusing largely on April orders. Whereas historically, there's been time periods where we've had to order out in excess of like 3, 4 months, and we have to project out then the following 3 or 4 months of sales, which is playing a dangerous game of like what are the various outcomes of retail sales activity and what sort of ending inventory balances do you want and need. So I would argue we're in a really nice pull-through environment as opposed to a push environment where demand is truly being pulled through, and we're having to just modify orders on an as-needed basis based upon short-term trends. So the best-selling brands products will continue to order in mass. And I can tell you, we work extensively with all of our partners at Thor, Forest River, Winnebago, and we make sure that they have as much visibility into our real-time demand so they can also modify whatever sort of parts materials they're ordering up in the verticals.

Our next question comes from Patrick Buckley of Jefferies.

Could you talk a bit about the trends you're seeing in the market?

Hello can you hear me? Our next question comes from Patrick Buckley of Jefferies.

We're having some technical difficulties. We're chatting with the operator right now to try to get you, Patrick Buckley up next to ask another question.

Patrick, could you please speak into the line?

Can you guys hear me out?

Pardon me, it seems there's an issue with your line, if you could dial back in. Our next question comes from Brandon...

Patrick, we're going to dial back in. I know we have queue -- more individual sitting in the queue with Brandon and Jim. So give us one moment, I'll try to get back to you. Operator. I believe we have the speakers back on the line. [Technical Difficulty]

This is the operator. I do believe we have the speakers back on the line.

Sorry about that. And Ariel, thanks for reconnecting us. We are available for the next question.

We are seeing our most material improvement within all the exclusive brands that we've launched across the board. So that's where I would argue our fifth wheel improvement is truly idiosyncratic to us. And I would be shocked if the entire industry was seeing the amount of gains that we're seeing year-over-year. So I'd assume that within each of these categories of fifth wheels and entry-level motorized, we're picking up material market share because we just had a more creative strategy heading into this year.

[Operator Instructions] Our next question comes from Jim Chartier of Monness, Crespi, Hardt.

Can you hear me?

Yes.

Okay. So historical used gross margin was in the low 20% range, new kind of 13% to 14%. What are -- what is kind of the new gross margin target for new and used under the kind of the more strict inventory turn targets?

I'd say for this year, Jim, we anticipate over the balance of the entire 2026 year that new margins will probably settle into that like 12.5% range and used margins probably in that 17.5% range. But once we get into a more balanced environment of just redeployment of capital and maintaining just standard steady-state turnover rates, I'd expect that our margins will structurally be higher and we'll get closer to what have been those historical norms. So I would hope that by 2027, if we're seeing improvement in turnover, we feel really good with our deployment of capital and a replenishment of inventory that our new margins should be settling into that like 13% to 13.5% range. And then on the used side, I wouldn't be surprised if we start to settle into that like 18% to maybe pushing upwards of like 18.75% range. But I do believe on the used side that it will be really difficult for us to rationalize sitting in at that 20% margin range because I do believe we'll be giving up opportunities in terms of just raw gross profit generation. I think I'd argue over time and over a longer tail that used margins settling anywhere from like 18% to 19% is probably a better way to approach it, especially in connection with turnover rates being more elevated than the new side. That's still a much better gross margin return on investment for us on the used side. So we'd rather be aggressive there even if we start to just like tap down some of that new side a little bit more.

And so how does that translate then if used is going to be lower than it was historically by a couple of points, is a 7% EBITDA margin for the business still realistic? Just SG&A to gross target change? How do you kind of get back to a historical operating EBITDA margin?

Yes. I think that it definitely is possible, but this speaks more to just how do we optimize our footprint. You've seen us make a lot of tough decisions over the last year in terms of shutting down locations that were underperforming, making certain that we're eliminating some of the fixed cost structure that exists in this business. And we're less in this cost-cutting mode to get closer to that EBITDA margin and that SG&A as a percent of gross. It's more of this cost optimization mode where we do believe that we'll be able to accelerate our used business that much more and come up with a more predictable GPU model compared to the straight gross margin model, which becomes a lot easier for us to then rationalize what our fixed cost structures are to start to drive that EBITDA margin back up to historical norms and ideally in a mid-cycle hitting that 7%. And then also on the SG&A side, we know we still have some work to do to get closer to that 80% or better SG&A as a percent of gross. Never mind, get back to some of the levels that we experienced in 2016, 2017, which I think we have a lot more work to get down to that like 72% to 74% SG&A as a percent of gross.

And then just on the new side, where do you think the ASP is going to shake out for the full year?

I could see new ASPs for the full year shaking out at like that like $39,000 to $40,000 range. And on the used side, I could see it being in that like $31,500 range.

This concludes our question-and-answer session. I would like to turn the conference back over to Matthew Wagner for any closing remarks.

Thank you very much for everyone's time this morning. As you can tell, we're very excited for the opportunity that lays before us, but we know we have quite a bit of work to do in the short term to pave the way for a much brighter future. We look forward to speaking with all of you again in another couple of months.