Market Overview

Camping World Holdings, Inc. Reports Third Quarter Results

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Camping World Holdings, Inc. (NYSE:CWH) ("Camping World," "Company,"
"we," "us" or "our") today reported results for the third quarter ended
September 30, 2017.

Third Quarter 2017 Summary

  • Total revenue increased 25.0% to $1.24 billion;
  • Gross profit increased 27.3% to $356.7 million and gross margin
    increased 51 basis points to 28.8%;
  • Income from operations increased 27.8% to $112.1 million and operating
    margin increased 20 basis points to 9.0%;
  • Net income increased 24.6% to $85.3 million, net income margin
    decreased 2 basis points to 6.9% and adjusted pro forma net income(1)
    increased 53.4% to $68.6 million
  • Diluted earnings per share(2) was $0.68 and adjusted pro
    forma earnings per fully exchanged and diluted share (1)
    increased 44.7% to $0.77; and
  • Adjusted EBITDA(1) increased 35.2% to $122.1 million and
    adjusted EBITDA margin(1) increased 74 basis points to 9.9%.

_______________________________________

(1)   Adjusted pro forma net income, adjusted pro forma earnings per fully
exchanged and diluted share, adjusted EBITDA and adjusted EBITDA
margin are non-GAAP measures. For reconciliations of these non-GAAP
measures to the most directly comparable GAAP measures, 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.

Marcus Lemonis, Chairman and Chief Executive Officer, stated, "We are
very pleased with our third quarter results and the continued strength
in the underlying trends across our business. For the quarter, total
revenue grew 25.0%, adjusted pro forma net income increased 53.4% and
adjusted EBITDA grew 35.2%, once again demonstrating the power and
leverage of our unique business and operating model. Looking ahead, we
believe we are well positioned to continue gaining share in the RV
market and broadening our reach across the outdoor lifestyle consumer
market."

Presentation

This press release presents historical results, for the periods
presented, of the Company 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
September 30, 2017, CWH owned 34.1% 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 third quarter
to our financial results from the 2016 third quarter.

Third Quarter 2017 Results Compared to Third
Quarter 2016 Results

Units and Average Selling Prices

New vehicle units sold increased 33.3% to 19,107 units and the average
selling price of a new vehicle decreased 1.6% to $37,430. The increase
in new vehicle units sold was primarily driven by strong consumer demand
for new 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 increased 7.2% to 8,557 units and the average
selling price of a used vehicle decreased 3.3% to $22,009. The increase
in used vehicle units sold was primarily driven by sales at new stores.

Revenue

Total revenue increased 25.0% to $1.24 billion from $991.1 million in
last year's third quarter. Consumer Services and Plans revenue increased
1.6% to $46.2 million and Retail revenue increased 26.1% to $1.19
billion. In the Retail segment, new vehicle revenue increased 31.2% to
$715.2 million primarily driven by the 33.3% increase in new vehicle
unit sales, used vehicle revenue increased 3.7% to $188.3 million,
parts, services and other revenue increased 24.3% to $187.8 million and
finance and insurance revenue increased 50.0% to $101.6 million. Finance
and insurance, net revenue as a percentage of total new and used vehicle
revenue increased to 11.2% from 9.3% in last year's third quarter.

Same store sales for the base of 115 retail locations that were open
both at the end of the corresponding period and at the beginning of the
preceding fiscal year increased 9.4% to $982.2 million for the three
months ended September 30, 2017. The increase in same store sales was
primarily driven by a 14.5% increase in new vehicle same store sales, a
30.5% increase in finance and insurance same store sales, and a 1.4%
increase in parts, services and other same store sales, partially offset
by a 7.9% decrease in used vehicle same store sales.

The Company operated a total of 137 Camping World retail locations, two
Overton's locations, two TheHouse.com locations, and one W82 location as
of September 30, 2017 compared to 120 Camping World retail locations and
zero Overton's, TheHouse.com, and W82 locations at September 30, 2016.

Gross Profit

Total gross profit increased 27.3% to $356.7 million, or 28.8% of total
revenue, from $280.2 million, or 28.3% of total revenue, in last year's
third quarter. On a segment basis, Consumer Services and Plans gross
profit increased 2.3% to $26.1 million, or 56.5% of segment revenue,
from $25.5 million, or 56.1% of segment revenue, and Retail gross profit
increased 29.8% to $330.6 million, or 27.7% of segment revenue, from
$254.8 million, or 26.9% of segment revenue, in last year's third
quarter. A 41 basis point improvement in Consumer Services and Plans
gross margin was primarily driven by an increase in roadside assistance
file size and reduced program costs. A 77 basis point increase in Retail
gross margin was primarily driven by an increase in the finance and
insurance, net revenue as a percentage of total new and used vehicle
revenue to 11.2% of vehicle sales from 9.3% of vehicle sales in last
year's third quarter, and the 33.3% increase in new units sold.

Operating Expenses

Operating expenses increased 27.0% to $244.6 million from $192.5 million
in last year's third quarter. Selling, general and administrative
("SG&A") expenses increased 26.8% to $236.2 million from $186.3 million
in last year's third quarter. The increase in SG&A expenses was
primarily driven by the additional expenses associated with the
incremental eighteen dealerships and two Overton's locations operated
during the third quarter of 2017 versus the prior year period, $7.3
million of pre-opening and payroll costs associated with the Gander
Mountain Acquisition, and $0.5 million of transaction expenses
associated with the acquisition into new or complimentary markets. As a
percentage of total gross profit, SG&A expenses declined 25 basis points
to 66.2% compared to last year's third quarter. Depreciation and
amortization expense increased 34.8% to $8.4 million primarily due to
the addition of acquired and greenfield locations, and acquired
businesses.

Floor Plan Interest & Other Interest Expenses

Floor plan interest expense increased to $7.4 million from $4.3 million
in last year's third quarter. The increase was primarily attributable to
higher inventory from new dealership locations and locations expecting
higher unit sales, as well as a 68 basis point increase in the average
floor plan borrowing rate. Other interest expense decreased $1.7 million
to $11.0 million from $12.7 million in last year's third quarter. The
decrease was primarily attributable to a decrease in average debt
outstanding, and an 86 basis point decrease in the average interest rate.

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

Net income increased 24.6% to $85.3 million. Adjusted pro forma net
income(1) increased 53.4% to $68.6 million from $44.8
million. Diluted earnings per share(2) was $0.68, and
adjusted pro forma earnings per diluted fully exchanged and diluted share(1)
increased 44.7% to $0.77 from $0.53 in last year's third quarter.

Adjusted EBITDA and Adjusted EBITDA Margin(1)

Adjusted EBITDA(1) increased 35.2% to $122.1 million from
$90.3 million and adjusted EBITDA margin(2) increased 74
basis points to 9.9% from 9.1% in the third quarter of fiscal 2016.

Select Balance Sheet and Cash Flow Items

The Company's working capital and cash and cash equivalents balance at
September 30, 2017 were $343.7 million and $163.2 million, respectively,
compared to $266.8 million and $114.2 million, respectively, at December
31, 2016. At the end of the third quarter 2017, the Company had $3.2
million of letters of credit outstanding under its $35 million revolving
credit facility, $734.5 million of term loan principal outstanding under
its senior secured credit facilities and $799.7 million of floor plan
notes payable outstanding under its floor plan financing facility.
Inventory at the end of the third quarter of fiscal 2017 increased 32.4%
to $1,204.1 million compared to $909.3 million at December 31, 2016.

Conference Call Information

A conference call to discuss the fiscal 2017 third quarter financial
results is scheduled for today, November 9, 2017, at 4:30 p.m. Eastern
Time. Investors and analysts can participate on the conference call by
dialing 800-441-0022 or 719-457-2605 and using conference ID # 6378900.
Interested parties can also listen to a live webcast or replay of the
conference call by logging on to the Investor Relations section on the
Company's website at http://investor.campingworld.com.
The replay of the conference call webcast will be available at the
investor relations website until November 16, 2017.

About Camping World

Camping World, headquartered in Lincolnshire, Illinois, is the leading
outdoor and camping retailer, offering an extensive assortment of
recreational vehicles for sale, RV and camping gear, RV maintenance and
repair and the industry's broadest and deepest range of services,
protection plans, products and resources. Since the Company's founding
in 1966, Camping World has grown to become one of the most well-known
destinations for everything RV, with 137 retail locations in 36 states
and a comprehensive e-commerce platform.

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 expectation to
continue gaining market share in the RV business and broadening our
reach across the outdoor lifestyle consumer market. 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 Third Quarter of Fiscal 2017

       
Camping World Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In Thousands Except Per Share Amounts)
 
Three Months Ended September 30,   Nine Months Ended September 30,
2017 2016 2017 2016
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue:
Consumer services and plans $ 46,169 $ 45,442 $ 144,518 $ 135,868
Retail
New vehicles 715,182 545,154 1,982,644 1,532,919
Used Vehicles 188,331 181,675 531,324 576,964
Parts, services and other 187,750 151,090 478,169 422,316
Finance and insurance, net   101,570     67,710     268,829     188,607  
Subtotal 1,192,833 945,629 3,260,966 2,720,806
 
Total revenue 1,239,002 991,071 3,405,484 2,856,674
 
Costs applicable to revenue (exclusive of depreciation and
amortization shown separately below):
Consumer services and plans 20,085 19,953 61,792 59,071
Retail
New vehicles 614,624 471,140 1,703,622 1,317,147
Used Vehicles 138,796 138,637 393,436 454,659
Parts, services and other   108,830     81,105     265,376     223,781  
Subtotal 862,250 690,882 2,362,434 1,995,587
 
Total costs applicable to revenue 882,335 710,835 2,424,226 2,054,658
 
Gross profit:
Consumer services and plans 26,084 25,489 82,726 76,797
Retail
New vehicles 100,558 74,014 279,022 215,772
Used Vehicles 49,535 43,038 137,888 122,305
Parts, services and other 78,920 69,985 212,793 198,535
Finance and insurance, net   101,570     67,710     268,829     188,607  
Subtotal 330,583 254,747 898,532 725,219
 
Total gross profit 356,667 280,236 981,258 802,016
 
Operating expenses:
Selling, general, and administrative 236,174 186,255 640,108 536,966
Depreciation and amortization 8,382 6,219 22,819 18,144
Loss (gain) on sale of assets   (5 )   21     (292 )   (227 )
Total operating expenses   244,551     192,495     662,635     554,883  
 
Income from operations 112,116 87,741 318,623 247,133
 
Other income (expense):
Floor plan interest expense (7,414 ) (4,322 ) (19,303 ) (14,851 )
Other interest expense, net (11,012 ) (12,715 ) (30,973 ) (38,040 )
Other expense, net   (96 )       (79 )   (2 )
  (18,522 )   (17,037 )   (50,355 )   (52,893 )
 
Income before income taxes 93,594 70,704 268,268 194,240
Income tax expense   (8,336 )   (2,288 )   (28,247 )   (4,638 )
Net income 85,258 68,416 240,021 189,602
Less: net income attributable to non-controlling interests   (65,131 )       (193,036 )    
Net income attributable to Camping World Holdings, Inc. $ 20,127   $ 68,416   $ 46,985   $ 189,602  
 
Earnings per share of Class A common stock (1):
Basic $ 0.68 $ 1.97
Diluted $ 0.68 $ 1.92
Weighted average shares of Class A common stock outstanding (1):
Basic 29,522 23,854
Diluted 88,452 85,947
(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)
   
September 30, December 31,
2017 2016
Assets
Current assets:
Cash and cash equivalents $ 163,225 $ 114,196
Contracts in transit 79,499 29,012
Accounts receivable, net 73,700 58,488
Inventories, net 1,204,138 909,254
Prepaid expenses and other assets   27,685   21,755  
Total current assets 1,548,247 1,132,705
 
Property and equipment, net 183,485 130,760
Deferred tax asset, net 262,433 125,878
Intangibles assets, net 37,972 3,386
Goodwill 328,402 153,105
Other assets   17,940   17,931  
Total assets $ 2,378,479 $ 1,563,765  
 
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $ 158,026 $ 68,655
Accrued liabilities 125,349 78,044
Deferred revenues and gains 78,934 68,643
Current portion of capital lease obligation 908 1,224
Current portion of tax receivable agreement liability 7,378 991
Current portion of long-term debt 7,400 6,450
Notes payable – floor plan, net 799,682 625,185
Other current liabilities   26,822   16,745  
Total current liabilities 1,204,499 865,937
 
Capital lease obligations, net of current portion 207 841
Right to use liability 10,231 10,343
Tax receivable agreement liability, net of current portion 102,485 18,190
Long-term debt, net of current portion 709,507 620,303
Deferred revenues and gains 56,782 52,210
Deferred tax liabilities 49
Other long-term liabilities   35,775   24,156  
Total liabilities 2,119,535 1,591,980
 
Commitments and contingencies
 
Stockholders' equity (deficit):

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;
30,227,113 issued and 30,227,031
outstanding as of September 30, 2017 and 18,935,916
issued
and outstanding as of December 31, 2016

302 189

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 September 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 September 30, 2017
and December 31, 2016

Additional paid-in capital 157,031 74,239
Retained earnings   35,655   544  
Total stockholders' equity attributable to Camping World Holdings,
Inc.
192,994 74,978
Non-controlling interests   65,950   (103,193 )
Total stockholders' equity (deficit) 258,944 (28,215 )
   
Total liabilities and stockholders' equity (deficit) $ 2,378,479 $ 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   Nine Months
Ended Ended
September 30, September 30,
(In thousands except per share amounts) 2017 2017
Numerator:
Net income $ 85,258 $ 240,021
Less: net income attributable to non-controlling interests   (65,131 )   (193,036 )
Net income attributable to Camping World Holdings, Inc. — basic 20,127 46,985

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

  39,917     118,110  

Net income attributable to Camping World Holdings, Inc. —
diluted

$ 60,044 $ 165,095
Denominator:

Weighted-average shares of Class A common stock outstanding

basic

29,522 23,854

Dilutive common units of CWGS, LLC that are convertible into
Class
A common stock

  58,930     62,093  

Weighted-average shares of Class A common stock
outstanding —
diluted

88,452 85,947
 
Earnings per share of Class A common stock — basic $ 0.68 $ 1.97
Earnings per share of Class A common stock — diluted $ 0.68 $ 1.92

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   Nine Months Ended
September 30, September 30,
($ in thousands) 2017   2016 2017   2016
 
Net income $ 85,258 $ 68,416 $ 240,021 $ 189,602
Other interest expense, net 11,012 12,715 30,973 38,040
Depreciation and amortization 8,382 6,219 22,819 18,144
Income tax expense   8,336     2,288     28,247     4,638  
EBITDA 112,988 89,638 322,060 250,424
 
Adjustments:
Loss (gain) on sale of assets (a) (5 ) 21 (292 ) (225 )
Monitoring fee (b) 625 1,875
Equity-based compensation (c) 1,204 2,792 60

Loss on remeasurement of Tax
Receivable Agreement (d)

96 79
Acquisitions - transaction expense (e) 453 2,553
Acquisitions - pre-opening costs (f)   7,318         8,669      
Adjusted EBITDA $ 122,054   $ 90,284   $ 335,861   $ 252,134  
 
 
Three Months Ended Nine Months Ended
September 30, September 30,
(as percentage of total revenue) 2017 2016 2017 2016
 
Net income margin 6.9 % 6.9 % 7.0 % 6.6 %
Other interest expense, net 0.9 % 1.3 % 0.9 % 1.3 %
Depreciation and amortization 0.7 % 0.6 % 0.7 % 0.6 %
Income tax expense   0.7 %   0.2 %   0.8 %   0.2 %
Subtotal EBITDA margin 9.1 % 9.0 % 9.5 % 8.8 %
 
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 % 0.1 % 0.0 %

Loss on remeasurement of Tax
Receivable Agreement (d)

0.0 % 0.0 %
Acquisitions - transaction expense (e) 0.0 % 0.1 %
Acquisitions - pre-opening costs (f)   0.6 %       0.3 %    
Adjusted EBITDA margin   9.9 %   9.1 %   9.9 %   8.8 %

_________________________________________________

(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 loss 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, consumer
shows, TheHouse.com, and W82.

(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   Nine Months Ended
September 30,   September 30, September 30,   September 30,
(In thousands except per share amounts) 2017 2016 2017 2016
Numerator:

Net income attributable to Camping World
Holdings, Inc.

$ 20,127 $ 68,416 $ 46,985 $ 189,602
Adjustments:

Reallocation of net income attributable to
non-controlling
interests from the
assumed exchange of common units in
CWGS,
LLC (a)

65,131 193,036
Loss (gain) on sale of assets (b) (5 ) 21 (292 ) (225 )
Monitoring fee (c) 625 1,875
Equity-based compensation (d) 1,204 2,792 60

Loss on remeasurement of tax
receivable agreement (e)

96 79
Acquisitions - transaction expense (f) 453 2,553
Acquisitions - pre-opening costs (g) 7,318 8,669
Income tax expense (h)   (25,676 )   (24,300 )   (75,888 )   (70,078 )
Adjusted pro forma net income $ 68,648   $ 44,762   $ 177,934   $ 121,234  
Denominator:

Weighted-average Class A common
shares outstanding - diluted

88,452 85,947
Adjustments:

Assumed exchange of pre-IPO common
unit equivalent of
membership interests
in CWGS, LLC (i)

71,900 72,157

Assumed issuance of Class A common
stock in connection with
IPO (j)

11,872 11,872

Dilutive options to purchase Class A
common stock

219 140
Dilutive restricted stock units   128         82      

Adjusted pro forma fully exchanged
weighted average Class A
common
shares outstanding - diluted

  88,799     83,772     86,169     84,029  

Adjusted pro forma earnings per fully
exchanged and diluted
share

$ 0.77   $ 0.53   $ 2.06   $ 1.44  

____________________

(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 loss 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, consumer
shows, TheHouse.com, and W82.

(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, loss 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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