Market Overview

Camping World Holdings, Inc. Reports Fourth Quarter Results

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Camping World Holdings, Inc. (NYSE:CWH) ("Camping World," "Company,"
"we," "us" or "our") today reported results for the fourth quarter and
full year ended December 31, 2017.

Fourth Quarter 2017 Summary

  • Total revenue increased 32.9% to $889.0 million;
  • Gross profit increased 37.1% to $266.6 million and gross margin
    increased 92 basis points to 30.0%;
  • Income from operations increased 37.9% to $44.3 million and operating
    margin increased 28 basis points to 7.4%;
  • Net loss was $52.5 million and included a $99.8 million tax receivable
    liability adjustment to other income and $165.4 million of income
    taxes related to changes stemming from the U.S. tax reform enacted in
    December 2017. Net loss margin was 5.9% and diluted earnings per share
    was ($1.87);
  • Adjusted pro forma net income(1) increased 112.8% to $22.0
    million and Adjusted Pro Forma Earnings per Fully Exchanged and
    Diluted Share(1) increased 100.0% to $0.25; and
  • Adjusted EBITDA(1) increased 76.0% to $65.3 million and
    Adjusted EBITDA Margin(1) increased 180 basis points to
    7.3%.

Fiscal 2017 Summary

  • Total revenue increased 21.8% to $4.3 billion;
  • Gross profit increased 25.1% to $1.2 billion and gross margin
    increased 77 basis points to 29.1%;
  • Income from operations increased 29.4% to $361.4 million, and
    operating margin increased 50 basis points to 8.4%,
  • Net income was $186.0 million and included a $99.7 million tax
    receivable liability adjustment to other income, and $165.4 million of
    income taxes related to changes stemming from the U.S. tax reform
    enacted in December 2017. Net income margin was 4.3% and diluted
    earnings per share was ($0.70);
  • Diluted earnings per share(2) was ($1.87), adjusted pro
    forma net income(1) increased 51.0% to $198.7 million and
    adjusted pro forma earnings per fully exchanged and diluted share(1)
    increased 45.9% to $2.29; and
  • Adjusted EBITDA(1) increased 38.2% to $399.6 million and
    adjusted EBITDA margin(1) increased 111 basis points to
    9.3%.
 
(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 had a
very strong fourth quarter and fiscal year and are pleased with the
continued performance of our business and underlying trends in the RV
market. Demand for towable and smaller recreational vehicles remained
strong throughout 2017, and we made the strategic decision to carry a
little more inventory in order to drive volumes and gain market share in
the final months of the year. This decision paid off and we generated
record fourth quarter revenue and Adjusted EBITDA. In the fourth
quarter, revenue increased 33% to $889 million, Adjusted Pro Forma Net
Income increased 113% to $22 million, and Adjusted EBITDA increased 76%
to $65 million."

Mr. Lemonis continued, "The trends that we have been talking about for
the past year remain strong and continue to drive our business. Our
focus on towables and the lower priced segment of the RV market allows
us to sell to a much wider and more diverse group of consumers than ever
before. We see a lot of similarities between the outdoor consumer and
the RV consumer, and we believe there is a significant opportunity to
continue diversifying our business as these lifestyles converge. Over
the past year, we have acquired a number of outdoor and active sports
businesses that give us access to a more diverse base of outdoor
lifestyle customers. Overton's, Gander Outdoors, TheHouse.com, Uncle
Dan's, W82 and Erehwon all come with great talent, great products and a
loyal customer following that we believe we can leverage over time
through cross-selling and cross-promotions. We began opening our first
Gander Outdoors stores in December 2017 and are pleased with the early
trends, including Good Sam Club conversion rates at these stores."

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 the Company 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, the Company has a minority economic interest in
CWGS, LLC. As of December 31, 2017, the Company owned 41.5% 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 fourth quarter and full year to our financial
results from the 2016 fourth quarter and full year, respectively.

Fourth Quarter 2017 Results Compared to Fourth
Quarter 2016 Results

Units and Average Selling Prices

The total number of recreational vehicle units sold increased 36.1% to
18,117 units from 13,316 units and the average selling price of a unit
sold decreased 4.6% to $33,031 from the fourth quarter of 2016. New
vehicle units sold increased 50.4% to 12,013 units and the average
selling price of a new vehicle decreased 8.4% to $38,163. Used vehicle
units sold increased 14.5% to 6,104 units and the average selling price
of a used vehicle decreased 4.9% to $22,930.

Revenue

Total revenue increased 32.9% to $889.0 million from $668.9 million in
the fourth quarter of 2016. Consumer Services and Plans revenue
increased 4.5% to $51.1 million and Retail revenue increased 35.1% to
$837.9 million. In the Retail segment, new vehicle revenue increased
37.8% to $458.5 million, used vehicle revenue increased 9.0% to $140.0
million, parts, services and other revenue increased 48.4% to $174.7
million and finance and insurance revenue increased 57.3% to $64.8
million. Included in the parts, services and other revenue was $38.2
million in sales from the Outdoor and Active Sports Retail businesses
acquired in 2017, including Gander Outdoors, Overton's, TheHouse.com,
Uncle Dan's and W82. Finance and insurance, net revenue as a percentage
of total new and used vehicle revenue increased to 10.8% from 8.9% in
the fourth quarter of 2016.

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 11.9% to $655.3 million for the three
months ended December 31, 2017. The increase in same store sales was
primarily driven by a 18.6% increase in new vehicle same store sales, a
34.0% increase in finance and insurance same store sales, and a 3.0%
increase in parts, services and other same store sales, partially offset
by a 4.9% decrease in used vehicle same store sales.

The Company operated a total of 140 Camping World retail locations, two
Overton's locations, two TheHouse.com locations, two Gander Outdoors
locations, two W82 locations, and five Uncle Dan's locations as of
December 31, 2017, compared to 122 Camping World retail locations at
December 31, 2016.

Gross Profit

Total gross profit increased 37.1% to $266.6 million, or 30.0% of total
revenue, from $194.5 million, or 29.1% of total revenue, in the fourth
quarter of 2016. On a segment basis, Consumer Services and Plans gross
profit increased 8.2% to $31.1 million, or 60.8% of segment revenue,
from $28.7 million, or 58.7% of segment revenue, and Retail gross profit
increased 42.1% to $235.5 million, or 28.1% of segment revenue, from
$165.8 million, or 26.7% of segment revenue, in the fourth quarter of
2016. A 211 basis point improvement in Consumer Services and Plans gross
margin was primarily driven by increased file size of our membership
clubs combined with reduced club marketing expense, and increased
contracts in force in our roadside assistance programs combined with
reduced program costs. A 137 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 10.8%
of vehicle sales from 8.9% of vehicle sales in the fourth quarter of
2016, and the 50.4% increase in new units sold.

Operating Expenses

Operating expenses increased 36.9% to $222.3 million from $162.4 million
in the fourth quarter of 2016. Selling, general and administrative
("SG&A") expenses increased 37.5% to $213.1 million from $154.9 million
in the fourth quarter of 2016. The increase in SG&A expenses was
primarily driven by the additional expenses associated with the
incremental 26 greenfield and acquired retail locations opened during
2016 and 2017, two Overton's locations, two TheHouse.com locations, two
Gander Outdoors locations and two W82 locations operated during the
fourth quarter of 2017 versus the prior year period, $17.7 million of
pre-opening and payroll costs associated with the Gander Mountain
acquisition, and $0.1 million of transaction expenses associated with
the acquisition into new or complimentary markets. As a percentage of
total gross profit, SG&A expenses increased 25 basis points to 79.9%
compared to the fourth quarter of 2016. Depreciation and amortization
expense increased 33.2% to $8.7 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 $8.4 million from $4.0 million
in the fourth quarter of 2016. The increase was primarily attributable
to higher inventory from new dealership locations and locations
expecting higher unit sales, as well as a 84 basis point increase in the
average floor plan borrowing rate. Other interest expense increased to
$12.0 million from $10.3 million in the fourth quarter of 2016. The
increase was primarily attributable to an increase in average debt
outstanding partially offset by an 86 basis point decrease in the
average interest rate.

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

Net loss was $52.5 million, reflecting a $99.8 million tax receivable
liability adjustment to other income and $165.4 million of income tax
expense related to changes stemming from the U.S. tax reform enacted in
December 2017, among other things. Net loss margin was (5.9%), and
diluted earnings per share was ($1.87).

Adjusted pro forma net income(1) increased 112.8% to $22.0
million from $10.3 million and adjusted pro forma earnings per fully
exchanged and diluted share(1) increased 100.0% to $0.25 from
$0.12 in the fourth quarter of 2016.

Adjusted EBITDA and Adjusted EBITDA Margin(1)

Adjusted EBITDA(1) increased 76.0% to $65.3 million and
adjusted EBITDA margin(1) increased 180 basis points to 7.3%
from 5.5% in the fourth quarter of fiscal 2016.

Select Balance Sheet and Cash Flow Items

The Company's working capital and cash and cash equivalents balance at
December 31, 2017 were $478.7 million and $224.2 million, respectively,
compared to $257.7 million and $114.2 million, respectively, at December
31, 2016. At the end of the fourth quarter 2017, the Company had $3.2
million of letters of credit outstanding under its $35 million revolving
credit facility, $916.9 million of term loan principal outstanding under
its senior secured credit facilities and $974.0 million of floor plan
notes payable outstanding under its floor plan financing facility.
Inventory at the end of the fourth quarter of fiscal 2017 increased
56.9% to $1,415.9 million compared to $902.7 million at December 31,
2016.

Reclassifications and Revisions to Prior Periods

Certain revisions have been recorded in prior periods to correct for
errors that were immaterial to our previously-reported consolidated
financial statements. In connection with the preparation of the
financial statements for the year ended December 31, 2017, errors were
identified relating to i) the lack of deferral of a portion of Good Sam
roadside assistance policies sold through the finance and insurance
process with the sale of new and used vehicles, ii) the application of a
portion of certain vendor rebates against the related inventory
balances, iii) the elimination of the intercompany allocation of certain
revenue from new and used vehicles to consumer services and plans, and
iv) the allocation of the intercompany markup between costs applicable
to new and used vehicles. To quantify these errors, management performed
an analysis of deferred roadside assistance policies and vendor rebates
applicable to ending inventory for each period presented. The Company
evaluated the materiality of these errors both qualitatively and
quantitatively in accordance with the Securities and Exchange
Commission's Staff Accounting Bulletin ("SAB") No. 99 - Materiality, and
SAB No. 108 and concluded that the impact of these errors on the
Company's previously-issued consolidated financial statements was not
material. To enhance comparability and transparency, the Company has
revised its previously-reported consolidated financial statements for
the years ended and as of December 31, 2016 and 2015, to correct for
these errors. As a result of these revisions, new vehicles revenue, used
vehicles revenue, finance and insurance, net revenue, costs applicable
to revenue – new vehicles, costs applicable to revenue – used vehicles,
all within the retail segment, and net income attributable to
non-controlling interests and earnings per share, basic and diluted were
corrected as presented in the table below.

 
($ in thousands except per share amounts)   Three Months Ended December 31, 2016   Year Ended December 31, 2016
  As Reported   Adjustment   As Corrected As Reported   Adjustment   As Corrected
Revenue:
New vehicles $ 333,263 $ (637 ) $ 332,626 $ 1,866,182 $ (3,987 ) $ 1,862,195
Used vehicles 128,929 (469 ) 128,460 705,893 (2,567 ) 703,326
Finance and insurance, net 41,232 (23 ) 41,209 229,839 (1,155 ) 228,684
Retail segment revenues 621,127 (1,129 ) 619,998 3,341,933 (7,709 ) 3,334,224
Total revenue 670,032 (1,129 ) 668,903 3,526,706 (7,709 ) 3,518,997
Costs applicable to revenue- new vehicles 287,387 723 288,110 1,604,534 (7,671 ) 1,596,863
Costs applicable to revenue- used vehicles 100,454 255 100,709 555,113 2,140 557,253
Retail segment costs applicable to revenue 453,246 978 454,224 2,448,833 (5,531 ) 2,443,302
Total costs applicable to revenue 473,447 978 474,425 2,528,105 (5,531 ) 2,522,574
Income from operations 34,235 (2,107 ) 32,128 281,368 (2,178 ) 279,190
Net income 13,635 (2,107 ) 11,528 203,237 (2,178 ) 201,059
Net income attributable to non-controlling interests (11,576 ) 1,634 (9,942 ) (11,576 ) 1,634 (9,942 )
Net income attributable to Camping World Holdings, Inc. 2,059 (473 ) 1,586 191,661 (544 ) 191,117
Earnings per share of Class A common stock:
Basic $ 0.11 $ (0.03 ) $ 0.08 $ 0.11 $ (0.03 ) $ 0.08
Diluted $ 0.09 $ (0.02 ) $ 0.07 $ 0.09 $ (0.02 ) $ 0.07
 

Additionally, as a result of these errors, the cumulative effect of the
change on stockholders' /members' deficit as of January 1, 2015, the
earliest date presented in these consolidated financial statements, was
$8.1 million, resulting in an as-corrected amount of $250.7 million, as
compared to $242.6 million reported previously. Prior year inventories,
deferred tax asset, deferred revenues and gains, current and long-term
portion, additional paid-in capital, retained earnings, and
non-controlling interest on the consolidated balance sheets were each
corrected as follows:

 
  At December 31, 2016
($ in thousands) As Reported   Adjustment   As Corrected
Inventories $ 909,254 $ (6,543 ) $ 902,711
Total current assets 1,132,705 (6,543 ) 1,126,162
Deferred tax asset 125,878 1,261 127,139
Total assets 1,563,765 (5,282 ) 1,558,483
Deferred revenues and gains, current portion 68,643 2,485 71,128
Total current liabilities 865,937 2,485 868,422
Deferred revenues and gains, long-term portion 52,210 5,449 57,659
Total liabilities 1,591,980 7,934 1,599,914
Additional paid-in capital 74,239 (1,539 ) 72,700
Retained earnings 544 (473 ) 71

Total stockholders' equity attributable to Camping World Holdings,
Inc. deficit

74,978 (2,012 ) 72,966
Non-controlling interest (103,193 ) (11,204 ) (114,397 )

Stockholders (deficit)

(28,215 ) (13,216 ) (41,431 )

Total liabilities and stockholders' equity (deficit)

1,563,765 (5,282 ) 1,558,483
 

Conference Call Information

A conference call to discuss the fiscal 2017 fourth quarter financial
results is scheduled for today, February 27, 2018, at 4:30 p.m. Eastern
Time. Investors and analysts can participate on the conference call by
dialing 800-239-9838 or 323-794-2551 and using conference ID # 6863288.
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 March 6, 2018.

About Camping World Holdings, Inc.

Camping World Holdings, 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 140 retail locations in 36 states
and comprehensive e-commerce platform. Coupled with an unsurpassed
portfolio of industry-leading brands including Camping World, Gander
Outdoors, Good Sam, Overton's, TheHouse.com, Uncle Dan's, W82, and
Erehwon, The Company has become synonymous with outdoor experiences.
Camping World's stock is traded on the New York Stock Exchange under the
symbol "CWH".

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 market trends and
consumer behavior patterns. 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: our intent to increase borrowings in the near term to
fund certain store openings and dealership acquisitions; potential
impact of the recently identified material weaknesses in our internal
control over financial reporting; 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, businesses,
or product lines or categories, 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 imposed by our existing
senior secured credit facilities and our floorplan financial facility;
our reliance on seven 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;
risks associated with leasing substantial amounts of space, including
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; feasibility, delays, and difficulties in opening
of Gander Outdoors retail locations; realization of anticipated benefits
and cost savings related to recent acquisitions; potential litigation
relating to products we sell as a result of recent acquisitions,
including firearms and ammunition; 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 for the year ended
December 31, 2017, to be filed with the Securities and Exchange
Commission, or SEC, after the release of this press release 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 Fourth Quarter and Full Year Fiscal 2017

 
Camping World Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In Thousands Except Per Share Amounts)
 
 

Three Months Ended December 31,

 

Years Ended December 31,

2017   2016 2017   2016
(unaudited) (unaudited)
Revenue:
Consumer services and plans $ 51,096 $ 48,905 $ 195,614 $ 184,773
Retail
New vehicles 458,456 332,626 2,435,928 1,862,195
Used Vehicles 139,963 128,460 668,860 703,326
Parts, services and other 174,650 117,703 652,819 540,019
Finance and insurance, net   64,827     41,209     332,034     228,684  
Subtotal 837,896 619,998 4,089,641 3,334,224
 
Total revenue 888,992 668,903 4,285,255 3,518,997
 
Costs applicable to revenue (exclusive of depreciation and
amortization shown separately below):
Consumer services and plans 20,030 20,201 81,822 79,272
Retail
New vehicles 393,797 288,110 2,086,229 1,596,863
Used Vehicles 109,154 100,709 506,093 557,253
Parts, services and other   99,396     65,405     364,772     289,186  
Subtotal 602,347 454,224 2,957,094 2,443,302
 
Total costs applicable to revenue 622,377 474,425 3,038,916 2,522,574
 
Gross profit:
Consumer services and plans 31,066 28,704 113,792 105,501
Retail
New vehicles 64,659 44,516 349,699 265,332
Used Vehicles 30,809 27,751 162,767 146,073
Parts, services and other 75,254 52,298 288,047 250,833
Finance and insurance, net   64,827     41,209     332,034     228,684  
Subtotal 235,549 165,774 1,132,547 890,922
 
Total gross profit 266,615 194,478 1,246,339 996,423
 
Operating expenses:
Selling, general, and administrative 213,052 154,918 853,160 691,884
Debt restructure expense 387 1,218 387 1,218
Depreciation and amortization 8,726 6,551 31,545 24,695
Loss (gain) on sale of assets   159     (337 )   (133 )   (564 )
Total operating expenses   222,324     162,350     884,959     717,233  
 
Income from operations 44,291 32,128 361,380 279,190
 
Other income (expense):
Floor plan interest expense (8,387 ) (4,003 ) (27,690 ) (18,854 )
Other interest expense, net (11,986 ) (10,278 ) (42,959 ) (48,318 )
Loss on debt restructure (462 ) (5,052 ) (462 ) (5,052 )
Tax Receivable Agreement liability adjustment 99,766 99,687
Other expense, net       2          
  78,931     (19,331 )   28,576     (72,224 )
 
Income before income taxes 123,222 12,797 389,956 206,966
Income tax expense   (175,705 )   (1,269 )   (203,952 )   (5,907 )
Net income (loss) (52,483 ) 11,528 186,004 201,059
Less: net income attributable to non-controlling interests   (12,599 )   (9,942 )   (204,612 )   (9,942 )
Net income (loss) attributable to Camping World Holdings, Inc. $ (65,082 ) $ 1,586   $ (18,608 ) $ 191,117  
 
Earnings (loss) per share of Class A common stock:
Basic $ (1.87 ) $ 0.08 $ (0.70 ) $ 0.08
Diluted $ (1.87 ) $ 0.07 $ (0.70 ) $ 0.07
Weighted average shares of Class A common stock outstanding:
Basic 34,837 $ 18,766 26,622 $ 18,766
Diluted 34,837 $ 83,602 26,622 $ 83,602
 

 
Camping World Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
($ in Thousands Except Per Share Amounts)
 
  As of December 31,
2017   2016
Assets
Current assets:
Cash and cash equivalents $ 224,163 $ 114,196
Contracts in transit 46,227 29,012
Accounts receivable, net 79,881 58,488
Inventories, net 1,415,915 902,711
Prepaid expenses and other assets   32,721     21,755  
Total current assets 1,798,907 1,126,162
 
Property and equipment, net 198,022 130,760
Deferred tax asset, net 245,075 127,139
Intangibles assets, net 38,707 3,386
Goodwill 348,387 153,105
Other assets   21,903     17,931  
Total assets $ 2,651,001   $ 1,558,483  
 
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $ 125,616 $ 68,655
Accrued liabilities 101,929 78,044
Deferred revenues and gains 77,669 71,128
Current portion of capital lease obligation 844 1,224
Current portion of Tax Receivable Agreement liability 8,093 991
Current portion of long-term debt 9,465 6,450
Notes payable – floor plan, net 974,043 625,185
Other current liabilities   22,510     16,745  
Total current liabilities 1,320,169 868,422
 
Capital lease obligations, net of current portion 23 841
Right to use liability 10,193 10,343
Tax receivable agreement liability, net of current portion 129,596 18,190
Long-term debt, net of current portion 907,437 620,303
Deferred revenues and gains 64,061 57,659
Other long-term liabilities   39,161     24,156  
Total liabilities 2,470,640 1,599,914
 
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 December 31, 2017 and
December 31, 2016
Class A common stock, par value $0.01 per share – 250,000,000 shares
authorized; 36,758,233 issued and 36,749,072 outstanding as of
December 31, 2017 and 18,935,916 issued and outstanding as of
December 31, 2016
367 189
Class B common stock, par value $0.0001 per share – 75,000,000
shares authorized; 69,066,445 issued; and 50,836,629 outstanding as
of December 31, 2017 and 62,002,729 outstanding as of December 31,
2016
5 6
Class C common stock, par value $0.0001 per share – one share
authorized, issued and outstanding as of December 31, 2017 and
December 31, 2016
Additional paid-in capital 186,435 72,700
Retained earnings (deficit)   (40,778 )   71  
Total stockholders' equity attributable to Camping World Holdings,
Inc.
146,029 72,966
Non-controlling interests   34,332     (114,397 )
Total stockholders' equity (deficit) 180,361 (41,431 )
   
Total liabilities and stockholders' equity (deficit) $ 2,651,001   $ 1,558,483  
 

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 Ended   Year ended
December 31,   December 31, December 31,   December 31,
(In thousands except per share amounts) 2017 2016 2017 2016
Numerator:
Net income (loss) attributable to Camping World Holdings, Inc. —
basic
$ (52,483 ) $ 11,528 $ 186,004 $ 11,528
Less: net income attributable to non-controlling interests   (12,599 )   (9,942 )   (204,612 )   (9,942 )
Net income (loss) attributable to Camping World Holdings, Inc. —
basic
(65,082 ) 1,586 (18,608 ) 1,586
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
      4,164         4,164  
Net income attributable to Camping World Holdings, Inc. — diluted $ (65,082 ) $ 5,750 $ (18,608 ) $ 5,750
Denominator:
Weighted-average shares of Class A common stock outstanding — basic 34,837 18,766 26,622 18,766
Dilutive common units of CWGS, LLC that are convertible into Class A
common stock
      64,836         64,836  
Weighted-average shares of Class A common stock outstanding — diluted 34,837 83,602 26,622 83,602
 
Earnings (loss) per share of Class A common stock — basic $ (1.87 ) $ 0.08 $ (0.70 ) $ 0.08
Earnings (loss) per share of Class A common stock — diluted $ (1.87 ) $ 0.07 $ (0.70 ) $ 0.07
 

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 and expense on debt
restructure, loss (gain) on sale of assets, monitoring fees,
equity-based compensation, Tax Receivable Agreement liability
adjustment, 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   Year Ended
December 31, December 31,
($ in thousands) 2017   2016 2017   2016
 
Net income (loss) $ (52,483 ) $ 11,528 $ 186,004 $ 201,059
Other interest expense, net 11,986 10,278 42,959 48,318
Depreciation and amortization 8,726 6,551 31,545 24,695
Income tax expense   175,705     1,269     203,952     5,907  
EBITDA 143,934 29,626 464,460 279,979
 
Adjustments:
Loss and expense on debt restructure (a) 849 6,270 849 6,270
Loss (gain) on sale of assets (b) 159 (339 ) (133 ) (564 )
Monitoring fee (c) 1,875
Equity-based compensation (d) 2,317 1,537 5,109 1,597
Tax Receivable Agreement liability adjustment (e) (99,766 ) (99,687 )
Acquisitions - transaction expense (f) 109 2,662
Acquisitions - pre-opening costs (g)   17,683         26,352      
Adjusted EBITDA $ 65,285   $ 37,094   $ 399,612   $ 289,157  
 
 
Three Months Ended Year Ended
December 31, December 31,
(as percentage of total revenue) 2017 2016 2017 2016
 
Net income (loss) margin -5.9 % 1.7 % 4.3 % 5.7 %
Other interest expense, net 1.3 % 1.5 % 1.0 % 1.4 %
Depreciation and amortization 1.0 % 1.0 % 0.7 % 0.7 %
Income tax expense   19.8 %   0.2 %   4.8 %   0.2 %
Subtotal EBITDA margin 16.2 % 4.4 % 10.8 % 8.0 %
 
Adjustments:
Loss and expense on debt restructure (a) 0.1 % 0.9 % 0.0 % 0.2 %
Loss (gain) on sale of assets (b) 0.0 % -0.1 % 0.0 % 0.0 %
Monitoring fee (c) 0.0 % 0.0 % 0.0 % 0.1 %
Equity-based compensation (d) 0.3 % 0.2 % 0.1 % 0.0 %
Tax Receivable Agreement liability adjustment (e) -11.2 % 0.0 % -2.3 % 0.0 %
Acquisitions - transaction expense (f) 0.0 % 0.0 % 0.1 % 0.0 %
Acquisitions - pre-opening costs (g)   2.0 %   0.0 %   0.6 %   0.0 %
Adjusted EBITDA margin   7.3 %   5.5 %   9.3 %   8.2 %
 

_______________________________________

(a)

 

Represents the loss and expense incurred on debt restructure and
financing expense incurred from the First and Second Amendment to
the Existing Senior Credit Facilities in 2017, the write-off of a
portion of the original issue discount, capitalized finance costs
from our previous term loan facilities, and rating agency fees and
legal expenses related to the previous term loan facilities in
2016.

 

(b)

Represents an adjustment to eliminate the gains and losses 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 the 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, consumer
shows, Active Sports, Inc, and W82.

 

(g)

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, reallocation of net income attributable to
non-controlling interests, loss and expense on debt restructure, loss
(gain) on sale of assets, monitoring fees, equity-based compensation,
Tax Receivable Agreement liability adjustment, 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   Year ended
December 31,   December 31, December 31,   December 31,
(In thousands except per share amounts) 2017 2016 2017 2016
Numerator:
Net income (loss) attributable to Camping World Holdings, Inc. $ (65,082 ) $ 1,586 $ (18,608 ) $ 191,117
Adjustments:
Reallocation of net income attributable to non-controlling interests
from the assumed exchange of common units in CWGS, LLC (a)
12,599 9,942 204,612 9,942
Loss and expense on debt restructure (b) 849 6,270 849 6,270
Loss (gain) on sale of assets (c) 159 (339 ) (133 ) (564 )
Monitoring fee (d) 1,875
Equity-based compensation (e) 2,317 1,537 5,109 1,597
Tax Receivable Agreement liability adjustment (f) (99,766 ) (99,687 )
Acquisitions - transaction expense (g) 109 2,662
Acquisitions - pre-opening costs (h) 17,683 26,352
Revaluation of deferred tax assets from tax reform (i) 165,375 165,375
Income tax expense (j)   (12,228 )   (8,653 )   (87,856 )   (78,703 )
Adjusted pro forma net income $ 22,015   $ 10,343   $ 198,675   $ 131,534  
Denominator:
Weighted-average Class A common shares outstanding - diluted 34,837 83,602 26,622 83,602
Adjustments:
Assumed exchange of post-IPO common units in CWGS, LLC for shares of
Class A common stock (k)
53,772 59,995
Assumed exchange of pre-IPO common unit equivalent of membership
interests in CWGS, LLC (l)
193
Assumed issuance of Class A common stock in connection with IPO (m) 170 170
Dilutive options to purchase Class A common stock 376 200
Dilutive restricted stock units   200     24     112     6  
Adjusted pro forma fully exchanged weighted average Class A common
shares outstanding - diluted
  89,185     83,796     86,929     83,971  
Adjusted pro forma earnings per fully exchanged and diluted share $ 0.25   $ 0.12   $ 2.29   $ 1.57  
 

____________________

(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 the loss and expense incurred on debt restructure and
financing expense incurred from the First and Second Amendment to
the Existing Senior Credit Facilities in 2017, the write-off of a
portion of the original issue discount, capitalized finance costs
from our previous term loan facilities, and rating agency fees and
legal expenses related to the previous term loan facilities in
2016.

 

(c)

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

 

(d)

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.

 

(e)

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

 

(f)

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

 

(g)

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, Active Sports, Inc., and W82.

 

(h)

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

 

(i)

This amount relates to the remeasurement of federal net deferred
tax assets resulting from the permanent reduction in the U.S.
statutory corporate tax rate to 21% from 35% under the 2017 Tax
Act.

 

(j)

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.

 

(k)

Represents the assumed exchange of post-IPO Common units in CWGS,
LLC at their Class A common stock equivalent amount.

 

(l)

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

 

(m)

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 reallocation of
net income attributable to non-controlling interests, loss and expense
on debt restructure, loss (gain) on sale of assets, monitoring fees,
equity-based compensation, Tax Receivable Agreement liability
adjustment, 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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