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Camping World Holdings, Inc. Announces Second Quarter Fiscal 2017 Financial Results

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Camping World Holdings Inc. (NYSE:CWH) ("Camping World," "Company,"
"we," "us" or "our"), the nation's largest network of RV-centric retail
locations, today reported results for the quarter ended June 30, 2017.
Unless stated otherwise, comparisons are to the same period of 2016.

Second Quarter 2017 Summary

  • Total revenue increased 20.1% to $1.3 billion;
  • Gross profit increased 24.5% to $372.8 million and gross margin
    increased 102 basis points to 29.1%;
  • Income from operations increased 32.3% to $136.8 million and operating
    margin increased 98 basis points to 10.7%;
  • Net income increased 26.3% to $105.3 million, net income margin
    increased 40 basis points to 8.2%, and adjusted pro forma net income(1)
    increased 41.6% to $77.7 million;
  • Diluted earnings per share(2) was $0.84 and adjusted pro
    forma earnings per fully exchanged and diluted share(1)
    increased 38.5% to $0.91; and
  • Adjusted EBITDA(3) increased 36.0% to $142.1 million and
    adjusted EBITDA margin(3) increased 130 basis points to
    11.1%.
_________________________
(1)   Adjusted pro forma net income and adjusted pro forma earnings per
fully exchanged and diluted share are non-GAAP measures. For
reconciliations of the adjusted pro forma net income and adjusted
pro forma earnings per fully exchanged and diluted share to GAAP net
income attributable to Camping World Holdings, Inc. and diluted
weighted-average shares of Class A common stock outstanding, see the
"Non-GAAP Financial Measures" section later in this press release.
(2) Diluted earnings per Class A common stock is applicable only for
periods after the Company's initial public offering. For a
discussion of earnings per share see the "Earnings Per Share"
section later in this press release.
(3) Adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures.
For reconciliations of adjusted EBITDA to GAAP net income and
adjusted EBITDA margin to GAAP net income margin, see the "Non-GAAP
Financial Measures" section later in this press release.
 

Marcus Lemonis, Chairman and Chief Executive Officer, stated, "We
delivered exceptional record-breaking results in the second quarter.
Revenue increased 20.1% to $1.3 billion, net income increased 26.3% to
$105.3 million, adjusted pro forma EBITDA increased 36.0% to $142.1
million and adjusted net income increased 41.6% to $77.7 million. We
believe these results clearly demonstrate the power and leverage of our
unique operating model, which sells a comprehensive portfolio of
products and services across a growing database of consumers being
driven by our national network of retail locations that cater to RV,
boating and outdoor enthusiasts. While our business model has
traditionally been focused on the RV owner, we see a much broader
opportunity to leverage our products and services across the larger base
of outdoor lifestyle consumers."

Presentation

This press release presents historical results, for the periods
presented, of Camping World Holdings, Inc. ("CWH") and its subsidiaries
that are presented in accordance with accounting principles generally
accepted in the United States ("GAAP"), unless noted as a non-GAAP
financial measure. The Company's initial public offering ("IPO") and
related reorganization transactions ("Reorganization Transactions") that
occurred on October 6, 2016 resulted in CWH as the sole managing member
of CWGS Enterprises, LLC ("CWGS, LLC"), with sole voting power in and
control of the management of CWGS, LLC. Despite its position as sole
managing member of CWGS, LLC, CWH has a minority economic interest in
CWGS, LLC. As of June 30, 2017, CWH owned 32.9% of CWGS, LLC.
Accordingly, the Company consolidates the financial results of CWGS, LLC
and reports a non-controlling interest in its consolidated financial
statements. As the Reorganization Transactions are considered
transactions among entities under common control, the financial
statements for the periods prior to the IPO and related Reorganization
Transactions have been adjusted to combine the previously separate
entities for presentation purposes. Unless otherwise indicated, all
financial comparisons in this press release compare our financial
results from the 2017 second quarter to our financial results from the
2016 second quarter.

Second Quarter 2017 Results Compared to Second
Quarter 2016 Results

Units and Average Selling Prices

New vehicle units sold increased 38.2% to 21,930 and the average selling
price of a new vehicle decreased 4.5% to $34,787 in the second quarter
of fiscal 2017. The increase in new vehicle units sold was primarily
driven by strong consumer demand for new vehicles and a shortage of
supply of used vehicles. The decrease in the average selling price of a
new vehicle was driven by a higher mix of lower-priced towable units.

Used vehicle units sold decreased 8.4% to 9,073 and the average selling
price of a used vehicle decreased 0.9% to $21,660 in the second quarter
of fiscal 2017. The decrease in used vehicle units sold was primarily
driven by reduced inventory availability resulting from fewer trades on
new vehicle unit sales and the disposition of the automobile unit
business as a result of the distribution of the AutoMatch business in
the second quarter of 2016.

Revenue

Total revenue increased 20.1% to $1.3 billion from $1.1 billion in the
second quarter of fiscal 2016.

Consumer Services and Plans revenue increased 5.9% to $48.1 million from
$45.4 million in the second quarter of fiscal 2016. The increase was
primarily driven by increases in vehicle insurance and Good Sam
TravelAssist programs primarily due to increased policies in force,
roadside assistance contracts and other increases.

Retail revenue increased 20.7% to $1.2 billion from $1.0 billion in the
second quarter of fiscal 2016. Within the Retail segment, new vehicle
revenue increased 31.9% to $762.9 million, used vehicle revenue
decreased 9.2% to $196.5 million, parts, services and other revenue
increased 10.4% to $174.2 million and finance and insurance revenue
increased 44.5% to $101.0 million. Continued strong consumer demand for
recreational vehicles combined with a shortage of supply of used
vehicles benefited new vehicle and finance and insurance sales and
decreased used vehicle sales. Finance and insurance net revenue as a
percentage of total new and used vehicle revenue increased to 10.5% from
8.8% in the second quarter of fiscal 2016, and benefited from a sales
mix shift toward lower-priced new towable units and better integration
of the finance and insurance selling process.

Same store sales of the 115 retail locations that were open both at the
beginning of the preceding fiscal year and at the end of the second
quarter of fiscal 2017 increased 10.6% to $1.1 billion. The increase in
same store sales at retail locations was primarily driven by the
increased volume of new towable units sold, and, to a lesser extent,
revenue increases from finance and insurance, partially offset by a
decrease in same store sales from used vehicle units sold.

The Company operated a total of 137 retail locations and two Overton's
retail locations as of June 30, 2017, compared to 120 retail locations
at June 30, 2016. In the second quarter of fiscal 2017, the Company
added ten RV-centric locations from completed acquisitions, one
RV-centric location from a greenfield opening, and two Overton's retail
locations.

Gross Profit

Gross profit increased 24.5% to $372.8 million and gross margin
increased 102 basis points to 29.1% from the second quarter of fiscal
2016. Consumer Services and Plans gross profit increased 5.2% to $27.5
million and gross margin decreased 40 basis points to 57.3% of segment
revenue from the second quarter of fiscal 2016. The decrease in Consumer
Services and Plans gross margin was primarily due to reduced gross
margin from consumer magazines, partially offset by an increase from the
vehicle insurance and TravelAssist programs. Retail gross profit
increased 26.3% to $345.3 million and gross margin increased 124 basis
points to 28.0% of segment revenue from the second quarter of fiscal
2016. The increase in Retail gross margin was driven primarily by a 173
basis point increase in the finance and insurance penetration rate to
10.5% of vehicle sales from 8.8% of vehicle sales in the second quarter
of fiscal 2016, and a 593 basis point increase in gross margin from used
vehicle unit sales to 27.0% from the second quarter of fiscal 2016.

Operating Expenses

Total operating expenses increased 20.4% to $236.1 million from the
second quarter of fiscal 2016. Selling, general and administrative
("SG&A") expenses increased 20.0% to $228.4 million from $190.3 million
in the second quarter of fiscal 2016. The increase in SG&A expenses was
primarily driven by the additional expenses associated with the
incremental seventeen dealerships and two Overton's locations operated
during the second quarter of 2017 versus the prior year period, $2.1
million of transaction expenses associated with the acquisition into new
or complimentary markets, including the Gander Mountain Acquisition and
$1.4 million of pre-opening and payroll costs associated with the Gander
Mountain Acquisition. SG&A expenses as a percentage of total gross
profit decreased 227 basis points to 61.3%, which includes the impact of
the $2.1 million of transaction expenses and the $1.4 million of
pre-opening and payroll costs associated with the Gander Mountain
Acquisition. Depreciation and amortization expense increased 25.7% to
$7.6 million.

Interest & Other Expenses

Floor plan interest expense increased 22.3% to $6.6 million from $5.4
million in the second quarter of fiscal 2016. The increase was primarily
related to a 7.8% increase in average inventory for the second quarter
2017 compared to the prior year period, primarily due to the seventeen
additional dealership locations opened over the last twelve months,
partially offset by a 6 basis point decrease in the average floor plan
borrowing rate. Other interest expense decreased 16.1% to $10.6 million
from $12.6 million in the second quarter last year primarily related to
a decrease in average debt outstanding, and a 91 basis point decrease in
the average interest rate.

Net Income, Adjusted Pro Forma Net Income(1)
and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share
(1)

Net income increased 26.3% to $105.3 million and adjusted pro forma net
income(1) increased 41.6% to $77.7 million from $54.9 million
in the second quarter of fiscal 2016. Adjusted pro forma earnings per
fully exchanged and diluted share(1) increased 38.5% to $0.91
from $0.65 in the second quarter of fiscal 2016.

Adjusted EBITDA(3)

Adjusted EBITDA(3) increased 36.0% to $142.1 million from
$104.5 million and adjusted EBITDA(3) margin increased 130
basis points to 11.1% from 9.8% in the second quarter of fiscal 2016.

Select Balance Sheet and Cash Flow Items

The Company's working capital and cash and cash equivalents balance at
June 30, 2017 were $393.6 million and $252.2 million, respectively,
compared to $266.8 million and $114.2 million, respectively, at December
31, 2016. During the quarter ended June 30, 2017, the Company received
proceeds, net of underwriter discounts and commissions, of $122.5
million from the sale of 4.6 million Class A shares in a public
offering. At the end of the second quarter of 2017, the Company had $3.2
million of borrowings under its $35 million revolving credit facility,
$736.3 million of term loan principal outstanding under its senior
secured credit facilities and $780.9 million of floor plan notes payable
outstanding under its floor plan financing facility. Inventory at the
end of the second quarter of fiscal 2017 increased 10.6% to $1,106.1
million compared to $909.3 million at December 31, 2016.

Conference Call Information

A conference call to discuss the fiscal 2017 second quarter financial
results is scheduled for today, August 10, 2017, at 4:30 p.m. Eastern
Time. Investors and analysts interested in participating in the call are
invited to dial 877-723-9518 (international callers please dial
1-719-325-2429) approximately 10 minutes prior to the start of the call.
A live audio webcast of the conference call will be available online at http://investor.campingworld.com.
A taped replay of the conference call will be available within two hours
of the conclusion of the call by dialing 844-512-2921 (international
callers please dial 412-317-6671) and using access code 8899561 until
August 17, 2017, or on the Company's website.

About Camping World Holdings, Inc.

Camping World Holdings, Inc., is the only provider of a comprehensive
portfolio of services, protection plans, products and resources for
recreational vehicle ("RV") enthusiasts. Through its two iconic brands,
Camping World and Good Sam, the company offers new and used RVs for
sale, vehicle service and maintenance along with more than 10,000
products and services through our retail locations and membership clubs.
Good Sam branded offerings provide the industry's broadest and deepest
range of services, protection plans, products and resources while the
Camping World brand operates the largest national network of RV-centric
retail locations in the United States through 137 retail locations in 36
states, two Overton's locations offering marine and watersports
products, and an e-commerce platform. With both brands founded in 1966,
product and service offerings are based on 50 years of experience and
customer feedback from RV enthusiasts. In May 2017, the Company also
acquired certain assets of Gander Mountain and its Overton's boating
business through a recent bankruptcy auction.

For more information, visit www.CampingWorld.com.

Forward Looking Statements

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. All
statements contained in this press release that do not relate to matters
of historical fact should be considered forward-looking statements,
including, without limitation, statements about our comparative
advantages and our plans and ability to expand consumer base and capture
growth opportunities. These forward-looking statements are based on
management's current expectations.

These statements are neither promises nor guarantees, but involve known
and unknown risks, uncertainties and other important factors that may
cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed
or implied by the forward-looking statements, including, but not limited
to, the following: the availability of financing to us and our
customers; fuel shortages, or high prices for fuel; the well-being, as
well as the continued popularity and reputation for quality, of our
manufacturers; general economic conditions in our markets and ongoing
economic and financial uncertainties; our ability to attract and retain
customers; competition in the market for services, protection plans,
products and resources targeting the RV lifestyle or RV enthusiast; our
expansion into new, unfamiliar markets as well as delays in opening or
acquiring new retail locations; unforeseen expenses, difficulties, and
delays frequently encountered in connection with expansion through
acquisitions; our failure to maintain the strength and value of our
brands; our ability to successfully order and manage our inventory to
reflect consumer demand in a volatile market and anticipate changing
consumer preferences and buying trends; fluctuations in our same store
sales and whether they will be a meaningful indicator of future
performance; the cyclical and seasonal nature of our business; our
ability to operate and expand our business and to respond to changing
business and economic conditions, which depends on the availability of
adequate capital; the restrictive covenants in our existing senior
secured credit facilities and our floorplan financial facility; our
reliance on three fulfillment and distribution centers for our retail,
e-commerce and catalog businesses; natural disasters, whether or not
caused by climate change, unusual weather condition, epidemic outbreaks,
terrorist acts and political events; our dependence on our relationships
with third party providers of services, protection plans, products and
resources and a disruption of these relationships or of these providers'
operations; whether third party lending institutions and insurance
companies will continue to provide financing for RV purchases; our
inability to retain senior executives and attract and retain other
qualified employees; our ability to meet our labor needs; our inability
to maintain the leases for our retail locations or locate alternative
sites for our stores in our target markets and on terms that are
acceptable to us; our business being subject to numerous federal, state
and local regulations; regulations applicable to the sale of extended
service contracts; our dealerships' susceptibility to termination,
non-renewal or renegotiation of dealer agreements if state dealer laws
are repealed or weakened; our failure to comply with certain
environmental regulations; climate change legislation or regulations
restricting emission of "greenhouse gases;" a failure in our e-commerce
operations, security breaches and cybersecurity risks; our inability to
enforce our intellectual property rights and accusations of our
infringement on the intellectual property rights of third parties; our
inability to maintain or upgrade our information technology systems or
our inability to convert to alternate systems in an efficient and timely
manner; disruptions to our information technology systems or breaches of
our network security; Marcus Lemonis, through his beneficial ownership
of our shares directly or indirectly held by ML Acquisition Company, LLC
and ML RV Group, LLC, has substantial control over us and may approve or
disapprove substantially all transactions and other matters requiring
approval by our stockholders, including, but not limited to, the
election of directors; the exemptions from certain corporate governance
requirements that we will qualify for, and intend to rely on, due to the
fact that we are a "controlled company" within the meaning of the New
York Stock Exchange, or NYSE, listing requirements; and whether we are
able to realize any tax benefits that may arise from our organizational
structure and any redemptions or exchanges of CWGS, LLC common units for
cash or stock.

These and other important factors discussed under the caption "Risk
Factors" in our Annual Report on Form 10-K filed with the Securities and
Exchange Commission, or SEC, on March 13, 2017, and our other reports
filed with the SEC could cause actual results to differ materially from
those indicated by the forward-looking statements made in this press
release. Any such forward-looking statements represent management's
estimates as of the date of this press release. While we may elect to
update such forward-looking statements at some point in the future, we
disclaim any obligation to do so, even if subsequent events cause our
views to change, except as required under applicable law. These
forward-looking statements should not be relied upon as representing our
views as of any date subsequent to the date of this press release.

Results of Operations for the Three Months Ended June 30, 2017

 

Camping World Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In Thousands Except Per Share Amounts)
 
  Three Months Ended June 30,   Six Months Ended June 30,
2017   2016 2017   2016

(unaudited)

(unaudited) (unaudited) (unaudited)
Revenue:
Consumer services and plans $ 48,103 $ 45,428 $ 98,349 $ 90,426
Retail
New vehicles 762,876 578,289 1,267,462 987,765
Used Vehicles 196,522 216,526 342,993 395,289
Parts, services and other 174,196 157,742 290,419 271,226
Finance and insurance, net   100,970     69,870     167,259     120,897  
Subtotal 1,234,564 1,022,427 2,068,133 1,775,177
 
Total revenue 1,282,667 1,067,855 2,166,482 1,865,603
 

Costs applicable to revenue (exclusive of depreciation and
amortization shown separately below):

Consumer services and plans 20,560 19,237 41,707 39,118
Retail
New vehicles 650,850 495,159 1,088,998 846,007
Used Vehicles 143,497 170,934 254,640 316,022
Parts, services and other   94,951     83,041     156,546     142,676  
Subtotal 889,298 749,134 1,500,184 1,304,705
 
Total costs applicable to revenue 909,858 768,371 1,541,891 1,343,823
 
Gross profit:
Consumer services and plans 27,543 26,191 56,642 51,308
Retail
New vehicles 112,026 83,130 178,464 141,758
Used Vehicles 53,025 45,592 88,353 79,267
Parts, services and other 79,245 74,701 133,873 128,550
Finance and insurance, net   100,970     69,870     167,259     120,897  
Subtotal 345,266 273,293 567,949 470,472
 
Total gross profit 372,809 299,484 624,591 521,780
 
Operating expenses:
Selling, general, and administrative 228,444 190,323 403,934 350,711
Depreciation and amortization 7,584 6,034 14,437 11,925
Loss (gain) on sale of assets   31     (224 )   (287 )   (248 )
Total operating expenses   236,059     196,133     418,084     362,388  
 
Income from operations 136,750 103,351 206,507 159,392
 
Other income (expense):
Floor plan interest expense (6,587 ) (5,387 ) (11,889 ) (10,529 )
Other interest expense, net (10,557 ) (12,577 ) (19,961 ) (25,325 )
Other income, net       (2 )   17     (2 )
  (17,144 )   (17,966 )   (31,833 )   (35,856 )
 
Income before income taxes 119,606 85,385 174,674 123,536
Income tax expense   (14,284 )   (1,979 )   (19,911 )   (2,350 )
Net income 105,322 83,406 154,763 121,186
Less: net income attributable to non-controlling interests   (85,917 )       (127,905 )    
Net income attributable to Camping World Holdings, Inc. $ 19,405   $ 83,406   $ 26,858   $ 121,186  
 
Earnings per share of Class A common stock (1):
Basic $ 0.84 $ 1.28
Diluted $ 0.84 $ 1.24
Weighted average shares of Class A common stock outstanding (1):
Basic 22,977 20,973
Diluted 22,977 84,673
 
(1) Basic and diluted earnings per Class A common stock is
applicable only for periods after the Company's IPO.
 

Camping World Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
($ in Thousands Except Per Share Amounts)
 
  June 30,   December 31,

2017

2016
Assets

(unaudited)

Current assets:
Cash and cash equivalents $ 252,161 $ 114,196
Contracts in transit 86,114 29,012
Accounts receivable, net 73,164 58,488
Inventories, net 1,106,098 909,254
Prepaid expenses and other assets   24,189     21,755  
Total current assets 1,541,726 1,132,705
 
Property and equipment, net 151,965 130,760
Deferred tax asset, net 243,185 125,878
Intangibles assets, net 21,785 3,386
Goodwill 289,884 153,105
Other assets   17,871     17,931  
Total assets $ 2,266,416   $ 1,563,765  
 
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $ 142,236 $ 68,655
Accrued liabilities 115,374 78,044
Deferred revenues and gains 69,920 68,643
Current portion of capital lease obligation 985 1,224
Current portion of tax receivable agreement liability 6,469 991
Current portion of long-term debt 7,400 6,450
Notes payable – floor plan, net 780,905 625,185
Other current liabilities   24,812     16,745  
Total current liabilities 1,148,101 865,937
 
Capital lease obligations, net of current portion 389 841
Right to use liability 10,270 10,343
Tax receivable agreement liability, net of current portion 86,857 18,190
Long-term debt, net of current portion 710,649 620,303
Deferred revenues and gains 56,301 52,210
Other long-term liabilities   31,688     24,156  
Total liabilities 2,044,255 1,591,980
 
Commitments and contingencies
 
Stockholders' equity (deficit):
Stockholders equity
Preferred stock, par value $0.01 per share – 20,000,000 shares
authorized; none issued and outstanding as of June 30, 2017 and
December 31, 2016
Class A common stock, par value $0.01 per share – 250,000,000 shares
authorized; 29,061,464 issued and 29,061,420 outstanding as of June
30, 2017 and 18,935,916 issued and outstanding as of December 31,
2016
291 189
Class B common stock, par value $0.0001 per share – 75,000,000
shares authorized; 69,066,445 issued; and 57,031,184 outstanding as
of June 30, 2017 and 62,002,729 outstanding as of December 31, 2016
6 6
Class C common stock, par value $0.0001 per share – one share
authorized, issued and outstanding as of June 30, 2017 and December
31, 2016
Additional paid-in capital 153,071 74,239
Retained earnings   20,068     544  
Total stockholders' equity attributable to Camping World Holdings,
Inc.
173,436 74,978
Non-controlling interests   48,725     (103,193 )
Total stockholders' equity (deficit) 222,161 (28,215 )
   
Total liabilities and stockholders' equity (deficit) $ 2,266,416   $ 1,563,765  
 

Earnings Per Share

On October 6, 2016, the limited liability company agreement of CWGS, LLC
was amended and restated to, among other things, (i) provide for a new
single class of common membership interests, the common units of CWGS,
LLC, and (ii) exchange all of the then-existing membership interests in
CWGS, LLC for common units of CWGS, LLC (collectively, the
"Recapitalization"). This Recapitalization changed the relative
membership rights of the owners of membership interests in CWGS, LLC
such that retroactive application of the Recapitalization to periods
prior to the IPO for the purposes of calculating earnings per share
would not be appropriate.

Prior to the IPO, the CWGS, LLC membership structure included membership
units, preferred units, and profits units. The Company analyzed the
calculation of earnings per unit for periods prior to the IPO using the
two-class method and determined that it resulted in a value that would
not be meaningful to the users of the consolidated financial statements.
Therefore, earnings per share information has not been presented for
periods prior to the IPO on October 6, 2016.

  Three Months   Six Months
Ended Ended
June 30, June 30,
(In thousands except per share amounts) 2017 2017
Numerator:
Net income $ 105,322 $ 154,763
Less: net income attributable to non-controlling interests   (85,917 )   (127,905 )
Net income attributable to Camping World Holdings, Inc. — basic 19,405 26,858

Add: Reallocation of net income attributable to non-controlling
interests from the assumed exchange of common units of CWGS, LLC
for Class A common stock

 

   

78,193

 
Net income attributable to Camping World Holdings, Inc. — diluted $ 19,405 $ 105,051
Denominator:
Weighted-average shares of Class A common stock outstanding — basic 22,977 20,973
Dilutive common units of CWGS, LLC that are convertible into Class A
common stock
      63,700  
Weighted-average shares of Class A common stock outstanding — diluted 22,977 84,673
 
Earnings per share of Class A common stock — basic $ 0.84 $ 1.28
Earnings per share of Class A common stock — diluted $ 0.84 $ 1.24
 

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared
and presented in accordance with accounting principles generally
accepted in the U.S. ("GAAP"), we use the following non-GAAP financial
measures: EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted pro
forma net income and adjusted pro forma earnings per fully exchanged and
diluted share (collectively the "Non-GAAP Financial Measures"). We
believe that these Non-GAAP Financial Measures, when used in conjunction
with GAAP financial measures, provide useful information about operating
results, enhance the overall understanding of past financial performance
and future prospects, and allow for greater transparency with respect to
the key metrics we use in our financial and operational decision making.
These non-GAAP measures are also frequently used by analysts, investors
and other interested parties to evaluate companies in the Company's
industry. The presentation of this financial information is not intended
to be considered in isolation or as a substitute for, or superior to,
the financial information prepared and presented in accordance with
GAAP, and they should not be construed as an inference that the
Company's future results will be unaffected by any items adjusted for in
these non-GAAP measures. In evaluating these non-GAAP measures, you
should be aware that in the future the Company may incur expenses that
are the same as or similar to some of those adjusted in this
presentation. The Non-GAAP Financial Measures that we use are not
necessarily comparable to similarly titled measures used by other
companies due to different methods of calculation.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

We define "EBITDA" as net income before other interest expense
(excluding floor plan interest expense), provision for income taxes and
depreciation and amortization. We define "Adjusted EBITDA" as EBITDA
further adjusted for the impact of certain non-cash and other items that
we do not consider in our evaluation of ongoing operating performance.
These items include, among other things, loss (gain) on sale of assets,
monitoring fees, equity-based compensation, gain on remeasurement of our
Tax Receivable Agreements, acquisition related transaction expenses and
pre-opening costs, and other unusual or one-time items. We define
"Adjusted EBITDA Margin" as Adjusted EBITDA as a percentage of total
revenue. We caution investors that amounts presented in accordance with
our definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
may not be comparable to similar measures disclosed by our competitors,
because not all companies and analysts calculate EBITDA, Adjusted EBITDA
and Adjusted EBITDA Margin in the same manner. We present EBITDA,
Adjusted EBITDA and Adjusted EBITDA Margin because we consider them to
be important supplemental measures of our performance and believe they
are frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in our industry.
Management believes that investors' understanding of our performance is
enhanced by including these Non-GAAP Financial Measures as a reasonable
basis for comparing our ongoing results of operations.

The following tables reconcile EBITDA, Adjusted EBITDA, and Adjusted
EBITDA Margin to the most directly comparable GAAP financial performance
measure, which are net income, net income and net income margin,
respectively:

  Three Months Ended   Six Months Ended
June 30, June 30,
($ in thousands) 2017   2016 2017   2016
 
Net Income $ 105,322 $ 83,406 $ 154,763 $ 121,186
Other interest expense, net 10,557 12,577 19,961 25,325
Depreciation and amortization 7,584 6,034 14,437 11,925
Income tax expense   14,284     1,979     19,911     2,350  
EBITDA 137,747 103,996 209,072 160,786
 
Adjustments:
Loss (gain) on sale of assets (a) 31 (222 ) (287 ) (246 )
Monitoring fee (b) 625 1,250
Equity-based compensation (c) 869 60 1,588 60
Gain on remeasurement of Tax Receivable Agreement (d) (17 )
Acquisitions - transaction expense (e) 2,100 2,100
Acquisitions - pre-opening costs (f)   1,351         1,351      
Adjusted EBITDA $ 142,098   $ 104,459   $ 213,807   $ 161,850  
 
 
Three Months Ended Six Months Ended
June 30, June 30,
(as percentage of total revenue) 2017 2016 2017 2016
 
Net income margin 8.2 % 7.8 % 7.1 % 6.5 %
Other interest expense, net 0.8 % 1.2 % 0.9 % 1.4 %
Depreciation and amortization 0.6 % 0.6 % 0.7 % 0.6 %
Income tax expense   1.1 %   0.2 %   0.9 %   0.1 %
Subtotal EBITDA margin 10.7 % 9.7 % 9.7 % 8.6 %
 
Adjustments:
Loss (gain) on sale of assets (a) 0.0 % (0.0 %) (0.0 %) (0.0 %)
Monitoring fee (b) 0.1 % 0.1 %
Equity-based compensation (c) 0.1 % 0.0 % 0.1 % 0.0 %
Gain on remeasurement of Tax Receivable Agreement (d) (0.0 %)
Acquisitions - transaction expense (e) 0.2 % 0.1 %
Acquisitions - pre-opening costs (f)   0.1 %       0.1 %    
Adjusted EBITDA margin   11.1 %   9.8 %   9.9 %   8.7 %

(a)

 

Represents an adjustment to eliminate the losses and gains on
sales of various assets.

(b)

Represents monitoring fees paid pursuant to a monitoring agreement
to Crestview and Stephen Adams. The monitoring agreement was
terminated on October 6, 2016 in connection with the IPO.

(c)

Represents non-cash equity-based compensation expense relating to
employees and directors of the Company.

(d)

Represents an adjustment to eliminate the gains on remeasurement
of the Tax Receivable Agreement primarily due to changes in our
effective income tax rate.

(e)

Represents transaction expenses, primarily legal costs, associated
with acquisitions into new or complimentary markets, including the
Gander Mountain Acquisition. This amount excludes transaction
expenses related to the acquisition of RV dealerships and consumer
shows.

(f)

Represents pre-opening store costs, including payroll costs,
associated with the Gander Mountain Acquisition.

 

Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings Per
Fully Exchanged and Diluted Share

We define "Adjusted Pro Forma Net Income" as net income attributable to
CWH adjusted for the reallocation of income attributable to
non-controlling interests from the assumed exchange of all outstanding
common units in CWGS, LLC (or the common unit equivalent of membership
interests in CWGS, LLC for periods prior to the IPO) for newly-issued
shares of Class A common stock of CWH and further adjusted for the
impact of certain non-cash and other items that we do not consider in
our evaluation of ongoing operating performance. These items include,
among other things, loss (gain) on sale of assets, monitoring fees,
equity-based compensation, gain on remeasurement of the Tax Receivable
Agreement, acquisition related transaction expenses and pre-opening
costs, other unusual or one-time items, and the income tax expense
effect of (i) these adjustments and (ii) the pass-through entity taxable
income as if the parent company was a subchapter C corporation in
periods prior to the IPO. We define "Adjusted Pro Forma Earnings Per
Fully Exchanged and Diluted Share" as Adjusted Pro Forma Net Income
divided by the weighted-average shares of Class A common stock
outstanding, assuming (i) the full exchange of all outstanding common
units in CWGS, LLC (or the common unit equivalent of membership
interests in CWGS, LLC for periods prior to the IPO) for newly-issued
shares of Class A common stock of CWH, (ii) the Class A common stock
issued in connection with the IPO was outstanding as of January 1 of
each year presented, and (iii) the dilutive effect of stock options and
restricted stock units, if any. We present Adjusted Pro Forma Net Income
and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share
because we consider them to be important supplemental measures of our
performance and we believe that investors' understanding of our
performance is enhanced by including these Non-GAAP financial measures
as a reasonable basis for comparing our ongoing results of operations.

The following table reconciles Adjusted Pro Forma Net Income and
Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share to the
most directly comparable GAAP financial performance measure, which is
net income attributable to Camping World Holdings, Inc. and
weighted-average shares of Class A common stock outstanding — diluted:

  Three Months Ended   Six Months Ended
June 30,   June 30, June 30,   June 30,
(In thousands except per share amounts) 2017 2016 2017 2016
Numerator:
Net income attributable to Camping World Holdings, Inc. $ 19,405 $ 83,406 $ 26,858 $ 121,186
Adjustments:
Reallocation of net income attributable to non-controlling interests
from the assumed exchange of common units of CWGS, LLC (a)
85,917 127,905
Loss (gain) on sale of assets (b) 31 (222 ) (287 ) (246 )
Monitoring fee (c) 625 1,250
Equity-based compensation expense (d) 869 60 1,588 60
Gain on remeasurement of tax receivable agreement (e) (17 )
Acquisitions - transaction expense (f) 2,100 2,100
Acquisitions - pre-opening costs (g) 1,351 1,351
Income tax expense (h)   (31,963 )   (29,000 )   (50,212 )   (45,778 )
Adjusted pro forma net income $ 77,710   $ 54,869   $ 109,286   $ 76,472  
 
Denominator:
Weighted-average Class A common shares outstanding - diluted 22,977 84,673
Adjustments:
Assumed exchange of pre-IPO common unit equivalent of membership
interests in CWGS, LLC (i)
71,924 72,288
Assumed issuance of Class A common stock in connection with IPO (j) 62,586 11,872 11,872
Dilutive options to purchase Class A common stock 56 101
Dilutive restricted stock units   61         59      
Adjusted pro forma fully exchanged weighted average Class A common
shares outstanding - diluted
  85,680     83,796     84,833     84,160  
Adjusted pro forma earnings per fully exchanged and diluted share $ 0.91   $ 0.65   $ 1.29   $ 0.91  

____________________

(a)

 

Represents the reallocation of net income attributable to
non-controlling interests from the assumed exchange of common
units of CWGS, LLC in periods in which income was attributable to
non-controlling interests.

(b)

Represents an adjustment to eliminate the losses and gains on
sales of various assets.

(c)

Represents monitoring fees paid pursuant to a monitoring agreement
to Crestview and Stephen Adams. The monitoring agreement was
terminated on October 6, 2016 in connection with our IPO.

(d)

Represents non-cash equity-based compensation expense relating to
employees and directors of the Company.

(e)

Represents an adjustment to eliminate the gains on remeasurement
of the Tax Receivable Agreement primarily due to changes in our
effective income tax rate.

(f)

Represents transaction expenses, primarily legal costs, associated
with acquisitions into new or complimentary markets, including the
Gander Mountain Acquisition. This amount excludes transaction
expenses related to the acquisition of RV dealerships and consumer
shows.

(g)

Represents pre-opening store costs, including payroll costs,
associated with the Gander Mountain Acquisition.

(h)

Represents the income tax expense effect of (i) the above
adjustments and (ii) the pass-through entity taxable income as if
the parent company was a subchapter C corporation in periods prior
to the IPO. This assumption uses an effective tax rate of 38.5%
for the adjustments and the pass-through entity taxable income in
periods prior to the IPO.

(i)

Represents the assumed exchange of pre-IPO membership interests in
CWGS, LLC at their common unit equivalent amount.

(j)

Represents the assumption that the shares of Class A common stock
issued in connection with the IPO were outstanding as of January 1
of each period.

 

Uses and Limitations of Non-GAAP Financial Measures

Management and our board of directors use the Non-GAAP financial
measures:

  • as a measurement of operating performance because they assist us in
    comparing the operating performance of our business on a consistent
    basis, as they remove the impact of items not directly resulting from
    our core operations;
  • for planning purposes, including the preparation of our internal
    annual operating budget and financial projections;
  • to evaluate the performance and effectiveness of our operational
    strategies; and
  • to evaluate our capacity to fund capital expenditures and expand our
    business.

By providing these Non-GAAP financial measures, together with
reconciliations, we believe we are enhancing investors' understanding of
our business and our results of operations, as well as assisting
investors in evaluating how well we are executing our strategic
initiatives. In addition, our existing senior secured credit facilities
use EBITDA to measure our compliance with covenants such as consolidated
leverage ratio. The Non-GAAP financial measures have limitations as
analytical tools, and should not be considered in isolation, or as an
alternative to, or a substitute for net income or other financial
statement data presented in our unaudited condensed consolidated
financial statements included in this press release as indicators of
financial performance. Some of the limitations are:

  • such measures do not reflect our cash expenditures, or future
    requirements for capital expenditures or contractual commitments;
  • such measures do not reflect changes in, or cash requirements for, our
    working capital needs;
  • some of such measures do not reflect the interest expense, or the cash
    requirements necessary to service interest or principal payments on
    our debt;
  • some of such measures do not reflect our tax expense or the cash
    requirements to pay our taxes;
  • although depreciation and amortization are non-cash charges, the
    assets being depreciated and amortized will often have to be replaced
    in the future and such measures do not reflect any cash requirements
    for such replacements; and
  • other companies in our industry may calculate such measures
    differently than we do, limiting their usefulness as comparative
    measures.

Due to these limitations, the Non-GAAP financial measures should not be
considered as measures of discretionary cash available to us to invest
in the growth of our business. We compensate for these limitations by
relying primarily on our GAAP results and using these Non-GAAP financial
measures only supplementally. As noted in the tables above, certain of
the Non-GAAP financial measures include adjustments for loss (gain) on
sale of assets, monitoring fees, equity-based compensation, gain on
remeasurement of the Tax Receivable Agreement, acquisition related
transaction expenses and pre-opening costs, other unusual or one-time
items, and the income tax expense effect described above, as applicable.
It is reasonable to expect that certain of these items will occur in
future periods. However, we believe these adjustments are appropriate
because the amounts recognized can vary significantly from period to
period, do not directly relate to the ongoing operations of our business
and complicate comparisons of our internal operating results and
operating results of other companies over time. In addition, these
certain Non-GAAP financial measures adjust for other items that we do
not expect to regularly record in periods after the IPO, including
monitoring fees. Each of the normal recurring adjustments and other
adjustments described in this paragraph and in the reconciliation tables
above help management with a measure of our core operating performance
over time by removing items that are not related to day to day
operations.

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