Camping World Holdings, Inc. Reports First Quarter 2019

LINCOLNSHIRE, IL–(BUSINESS WIRE)–Camping World Holdings, Inc. (NYSE: CWH) (“Camping World,” “CWH,”
“Company,” “we,” “us” or “our”) today reported results for the first
quarter ended March 31, 2019.

First quarter highlights and year-over-year financial comparisons:

  • Revenue increased 0.6% to $1.065 billion;
  • Gross profit decreased 1.2% to $298.3 million;
  • Income from operations, net loss and diluted loss per share of Class A
    common stock were $16.9 million, $26.8 million, and $0.52,
    respectively;
  • Adjusted EBITDA(1) was $21.4 million; and
  • The number of Active Customers(2) increased 31.4% to 5.1
    million and the number of Good Sam Club memberships increased 17.1% to
    approximately 2.15 million.

________________

(1)

  Adjusted EBITDA is a non-GAAP measure. For a reconciliation of this
non-GAAP measure to the most directly comparable GAAP measure, see
the “Non-GAAP Financial Measures” section later in this press
release.

(2)

An Active Customer is a customer who has transacted with us in any
of the eight most recently completed fiscal quarters prior to the
date of measurement.
 

Marcus A. Lemonis, Chairman and Chief Executive Officer, stated, “We are
excited about the progress we have made in our business. Our financial
results for the quarter and the directional trends in our business were
essentially in line with our full year guidance expectations. Consistent
with our forecast, we have seen an improvement in sales trends since
mid-March that has continued into April and early May, and our outlook
for the full year remains unchanged.”

Change in Segment Reporting

Following the resignation of Roger Nuttall from his position as
President of Camping World on December 21, 2018, the Company took steps
during the quarter ended March 31, 2019 to realign the reporting
structure of the Company including management and internal reporting. As
a result of these changes, the Company has determined that its
reportable segments have changed. The Company’s new reportable segments
have been identified based on various commonalities amongst the
Company’s individual product lines, which is consistent with the
Company’s operating structure and associated management structure and
management evaluates the performance of and allocates resources to these
segments based on segment revenues and segment profit. The segment
reporting for prior comparative periods have been recast to conform to
the current period presentation.

The Company previously had three reportable segments: (i) Consumer
Services and Plans; (ii) Dealership, and (iii) Retail. Following the
realignment, the Company now has the following two reportable segments:
(i) Good Sam Services and Plans and (ii) RV and Outdoor Retail. In
conjunction with the first quarter 2019 realignment of our reporting
structure, the Company combined our prior Dealership and Retail segments
into the RV and Outdoor Retail segment. The Company has also
reclassified a portion of the former Consumer Services and Plans
segment, the Good Sam Club and co-branded credit card operations, to the
RV and Outdoor Retail segment, which reflects the synergies of those two
programs with the RV and Outdoor Retail locations. Within the Good Sam
Services and Plans segment, the Company primarily derives revenue from
the sale of the following offerings: emergency roadside assistance;
property and casualty insurance programs; travel assist programs;
extended vehicle service contracts; vehicle financing and refinancing;
shows and events; and publications and directories. Within the RV and
Outdoor Retail segment, the Company primarily derives revenue from the
sale of new and used recreational vehicles (“RVs”); sales of RV products
and services, including the sale of parts, accessories, supplies and
services for RVs, and equipment, gear and supplies for camping, hunting,
fishing, skiing, snowboarding, bicycling, skateboarding, marine and
watersport and other outdoor activities; commissions on the finance and
insurance contracts related to the sale of RVs; and Good Sam Club
memberships and co-branded credit cards.

The reportable segments identified above are the business activities of
the Company for which discrete financial information is available and
for which operating results are regularly reviewed by the Company’s
chief operating decision maker to allocate resources and assess
performance. The Company’s chief operating decision maker is a group
comprised of the Chief Executive Officer and the President.

First Quarter 2019 Results

Good Sam Services and Plans Segment

  • Segment revenue(3) increased 4.8% to $47.0 million;
  • Segment gross profit(3) increased 7.7% to $26.2 million and
    segment gross margin(3) increased 150 basis points to
    55.9%; and
  • Segment income(4) increased 3.1% to $22.4 million.

RV and Outdoor Retail Segment

  • Segment revenue(3) increased 0.4% to $1,017.8 million;

    • Same store revenue decreased 11.0% to $847.9 million across the
      same store base of 139 locations, of which 121 sold new and/or
      used RV vehicles
  • Segment gross profit(3) decreased 2.0% to $272.1 million
    and segment gross margin(3) decreased 64 basis points to
    26.7%;
  • Segment income decreased 101.5% to a segment loss(4) of$0.4 million;
  • Vehicle units sold decreased 5.5% to 23,193 units;

    • New vehicle units sold decreased 7.9% to 15,016 units
    • Used vehicle units sold decreased 0.9% to 8,177 units
  • Average selling price per vehicle unit sold decreased 0.1% to $30,595;

    • New vehicles decreased 0.8% to $35,268 per unit
    • Used vehicles increased 5.5% to $22,014 per unit
  • Same store vehicle units sold decreased 12.1% to 21,112 units;

    • New vehicle same store units sold decreased 15.6% to 13,497 units
    • Used vehicle same store units sold decreased 5.2% to 7,615 units
  • Gross profit per vehicle sold including finance and insurance
    increased 2.2% to $8,433;
  • Finance and insurance revenue as a percentage of total vehicle revenue
    increased 110 basis points to 12.9%;
  • New vehicle inventory per dealership location increased 0.1% to $7.2
    million from December 31, 2018;
  • Products, service and other revenue increased 24.8% to $204.9 million
    and gross profit increased 0.6% to $68.8 million;

    • Same store products, service and other revenue decreased 9.6% to
      $113.0 million
  • Good Sam Club revenue increased 27.5% to $11.5 million and gross
    profit increased 16.2% to $7.7 million; and

    • Good Sam Club memberships increased 17.1% to approximately 2.15
      million
  • At March 31, 2019, the Company operated a total of 226 RV and Outdoor
    Retail locations, with 147 of these selling new and/or used RV
    vehicles.

______________

(3)

  Revenue, gross profit and gross margin are after elimination of
inter-segment revenues.

(4)

Segment income (loss) is defined as income (loss) from operations
before depreciation and amortization plus floor plan interest.
 

Select Balance Sheet and Cash Flow Items

The Company’s working capital and cash and cash equivalents as of March
31, 2019 were $505.1 million and $70.0 million, respectively. Total
inventories increased 4.1% to $1,623.0 million as compared to December
31, 2018, driven by a 5.7% increase in products, parts, accessories and
miscellaneous inventory, and a 4.4% increase in new vehicle inventory,
partially offset by a 3.3% decline in used inventory. At March 31, 2019,
the Company had $42.6 million of borrowings under its revolving line of
credit as part of its Floor Plan Facility, $1,172.1 million of term
loans outstanding under the Senior Secured Credit Facilities, $9.5
million outstanding under the Real Estate Facility, and $882.3 million
of floor plan notes payable under the Floor Plan Facility.

Revisions for Correction of Immaterial Errors

The Company corrected for errors that were immaterial to
previously-reported consolidated financial statements. These errors were
identified in connection with the preparation of the financial
statements for the year ended December 31, 2018, and related primarily
to i) the cancellation reserve for certain of its finance and insurance
offerings within the former Dealership segment in other current
liabilities and other long-term liabilities, ii) the calculation of the
Tax Receivable Agreement liability that arose from transactions in 2017,
iii) the classification in the condensed consolidated statements of cash
flows of non-cash capital expenditures included in accounts payable and
non-cash leasehold improvements paid by lessor in other, net, and iv)
the adoption of Accounting Standards Codification (“ASC”) No. 606,
Revenue from Contracts with Customers (“ASC 606”) on January 1, 2018.
The amounts in the previous period have been revised to reflect the
correction of these errors.

The following table presents the effect of the error corrections on the
condensed consolidated statement of operations for the three months
ended March 31, 2018:

     
Three Months Ended March 31, 2018
($ in thousands except per share amounts) As Reported Adjustment As Corrected
Revenue – Products, service and other $ 164,308 $ (156 ) $ 164,152
Revenue – Finance and insurance, net 91,849 (2,749 ) 89,100
Total revenue 1,061,566 (2,905 ) 1,058,661

Costs applicable to revenue – Good Sam services and plans(1)

20,423 37 20,460
Costs applicable to revenue – Products, service and other 95,888 (86 ) 95,802
Costs applicable to revenue – Good Sam Club 2,302 27 2,329
Total costs applicable to revenue 756,790 (22 ) 756,768
Selling, general and administrative expenses 245,114 1,199 246,313
Total operating expenses 255,023 1,199 256,222
Income from operations 49,753 (4,082 ) 45,671
Income before income taxes 24,495 (4,082 ) 20,413
Income tax expense (7,219 ) 354 (6,865 )
Net income 17,276 (3,728 ) 13,548
Net income attributable to non-controlling interests (14,095 ) 2,368 (11,727 )
Net income attributable to Camping World Holdings, Inc. 3,181 (1,360 ) 1,821
Earnings per share of Class A common stock:
Basic $ 0.09 $ (0.04 ) $ 0.05
Diluted $ 0.08 $ (0.03 ) $ 0.05
 
(1)   Amounts were combined and previously reported as costs applicable to
revenue consumer services and plans prior to reclassifications made
for changes in segment reporting.
 

The following table presents the effect of the error corrections on the
condensed consolidated statements of cash flows for the three months
ended March 31, 2018:

     
Three Months Ended March 31, 2018
($ in thousands except per share amounts) As Reported Adjustment As Corrected
Net income $ 17,276 $ (3,728 ) $ 13,548
Deferred income taxes 2,736 (310 ) 2,426
Receivables and contracts in transit (56,104 ) (7,463 ) (63,567 )
Inventories (150,918 ) (2,719 ) (153,637 )
Prepaid expenses and other assets 1,675 3,944 5,619
Accounts payable and other accrued expenses 123,987 (1,181 ) 122,806
Deferred revenue and gains (2,959 ) 973 (1,986 )
Other 524 1,732 2,256
Net cash used in operating activities (48,218 ) (8,752 ) (56,970 )
Purchases of property and equipment (52,021 ) 8,752 (43,269 )
Net cash used in investing activities (88,418 ) 8,752 (79,666 )
 

Earnings Conference Call and Webcast Information

A conference call to discuss the Company’s first quarter 2019 financial
results is scheduled for today, May 8, 2019, at 3:30 p.m. Central Time.
Investors and analysts can participate on the conference call by dialing
888-394-8218 or (323) 701-0255 and using conference ID # 8483527.
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 on the
investor relations website for approximately 90 days.

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 March 31, 2019, the Company owned 41.9% of CWGS, LLC.
Accordingly, the Company consolidates the financial results of CWGS, LLC
and reports a non-controlling interest in its consolidated financial
statements. Unless otherwise indicated, all financial comparisons in
this press release compare our financial results of the first quarter
ended March 31, 2019 to our financial results from the first quarter
ended March 31, 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, other outdoor and active sports products, 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 226 locations in 36 states and a comprehensive e-commerce platform.

For more information, please 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 business plans and
goals, including the ability of our model to deliver long-term growth
and sustainability through industry cycles, and our beliefs regarding
our competitive position. 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: any remediation of the 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; changes in consumer preferences; our reliance on eight
fulfillment and distribution centers for our retail, e-commerce and
catalog businesses; risks associated with selling goods manufactured
abroad; 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 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; 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;
disruptions to our information technology systems or breaches of our
network security; 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; 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, 2018 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

 
Camping World Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In Thousands Except Per Share Amounts)
   
Three Months Ended March 31,
2019 2018
(unaudited) (unaudited)
Revenue:
Good Sam Services and Plans $ 46,966 $ 44,825
RV and Outdoor Retail
New vehicles 529,577 579,510
Used vehicles 180,008 172,091
Products, service and other 204,876 164,152
Finance and insurance, net 91,891 89,100
Good Sam Club   11,451     8,983  
Subtotal   1,017,803     1,013,836  
Total revenue 1,064,769 1,058,661
 
Costs applicable to revenue (exclusive of depreciation and
amortization shown separately below):
Good Sam Services and Plans 20,731 20,460
RV and Outdoor Retail
New vehicles 463,044 503,884
Used vehicles 142,846 134,293
Products, service and other 136,104 95,802
Good Sam Club   3,717     2,329  
Subtotal   745,711     736,308  
Total costs applicable to revenue 766,442 756,768
 
Gross profit:
Good Sam Services and Plans 26,235 24,365
RV and Outdoor Retail
New vehicles 66,533 75,626
Used Vehicles 37,162 37,798
Products, service and other 68,772 68,350
Finance and insurance, net 91,891 89,100
Good Sam Club   7,734     6,654  
Subtotal   272,092     277,528  
Total gross profit 298,327 301,893
 
Operating expenses:
Selling, general, and administrative 268,065 246,313
Debt restructure expense 424
Depreciation and amortization 13,594 9,400
(Gain) loss on sale of assets   (214 )   85  
Total operating expenses   281,445     256,222  
 
Income from operations 16,882 45,671
 
Other income (expense):
Floor plan interest expense (11,610 ) (10,743 )
Other interest expense, net (17,643 ) (12,839 )
Loss on debt restructure (1,676 )
Tax Receivable Agreement liability adjustment   8,477      
Total other income (expense)   (20,776 )   (25,258 )
 
(Loss) income before income taxes (3,894 ) 20,413
Income tax expense   (22,913 )   (6,865 )
Net (loss) income (26,807 ) 13,548
Less: net loss (income) attributable to non-controlling interests   7,412     (11,727 )
Net (loss) income attributable to Camping World Holdings, Inc. $ (19,395 ) $ 1,821  
 
Earnings per share of Class A common stock:
Basic $ (0.52 ) $ 0.05
Diluted $ (0.52 ) $ 0.05
Weighted average shares of Class A common stock outstanding:
Basic 37,195 36,816
Diluted 37,195 37,320
 
 
Camping World Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
($ in Thousands Except Share and Per Share Amounts)
   

March 31,

December 31,
2019 2018
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 69,985 $ 138,557
Contracts in transit 117,226 53,214
Accounts receivable, net 87,006 85,711
Inventories 1,622,964 1,558,970
Prepaid expenses and other assets   46,338     51,710  
Total current assets 1,943,519 1,888,162
 
Property and equipment, net 343,946 359,855
Operating lease assets 820,090
Deferred tax assets, net 128,695 145,943
Intangibles assets, net 34,144 35,284
Goodwill 371,098 359,117
Other assets   20,931     18,326  
Total assets $ 3,662,423   $ 2,806,687  
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 224,821 $ 144,808
Accrued liabilities 130,949 124,619
Deferred revenues and gains 81,463 88,054
Current portion of finance lease liabilities 9 23
Current portion of operating lease liabilities 54,878
Current portion of Tax Receivable Agreement liability 9,376 9,446
Current portion of long-term debt 12,976 12,977
Notes payable – floor plan, net 882,346 885,980
Other current liabilities   41,573     39,211  
Total current liabilities 1,438,391 1,305,118
 
Right to use liability 5,147
Operating lease liabilities, net of current portion 822,543
Tax Receivable Agreement liability, net of current portion 116,368 124,763
Revolving line of credit 42,610 38,739
Long-term debt, net of current portion 1,150,605 1,152,888
Deferred revenues and gains 57,393 67,157
Other long-term liabilities   26,879     79,958  
Total liabilities 3,654,789 2,773,770
 
Commitments and contingencies
 
Stockholders’ equity:
Preferred stock, par value $0.01 per share – 20,000,000 shares
authorized; none issued and outstanding as of March 31, 2019 and
December 31, 2018
Class A common stock, par value $0.01 per share – 250,000,000 shares
authorized; 37,285,248 issued and 37,198,920 outstanding as of March
31, 2019 and 37,278,690 issued and 37,192,364 outstanding as of
December 31, 2018
372 372
Class B common stock, par value $0.0001 per share – 75,000,000
shares authorized; 69,066,445 issued; and 50,706,629 outstanding as
of March 31, 2019 and December 31, 2018
5 5
Class C common stock, par value $0.0001 per share – one share
authorized, issued and outstanding as of March 31, 2019 and December
31, 2018
Additional paid-in capital 48,573 47,531
Retained earnings   (24,759 )   (3,370 )
Total stockholders’ equity attributable to Camping World Holdings,
Inc.
24,191 44,538
Non-controlling interests   (16,557 )   (11,621 )
Total stockholders’ equity 7,634 32,917
   
Total liabilities and stockholders’ equity $ 3,662,423   $ 2,806,687  
 
   

Earnings Per Share

 
Three Months Ended March 31,
(In thousands except per share amounts) 2019 2018
Numerator:
Net (loss) income $ (26,807 ) $ 13,548
Less: net (loss) income attributable to non-controlling interests   7,412     (11,727 )
Net (loss) income attributable to Camping World Holdings, Inc. —
basic
(19,395 ) 1,821
Add: reallocation of net (loss) income attributable to
non-controlling interests from the assumed dilutive effect of stock
options and RSUs
      15  
Net (loss) income attributable to Camping World Holdings, Inc. —
diluted
$ (19,395 ) $ 1,836
Denominator:
Weighted-average shares of Class A common stock outstanding — basic 37,195 36,816
Dilutive options to purchase Class A common stock 315
Dilutive restricted stock units       189  
Weighted-average shares of Class A common stock outstanding — diluted 37,195 37,320
 
(Loss) earnings per share of Class A common stock — basic $ (0.52 ) $ 0.05
(Loss) earnings per share of Class A common stock — diluted $ (0.52 ) $ 0.05
 
Weighted-average anti-dilutive securities excluded from the
computation of diluted earnings per share of Class A common stock:
Stock options to purchase Class A common stock 859
Restricted stock units 1,444
Common units of CWGS, LLC that are convertible into Class A common
stock
51,673 51,830
 

Contacts

Investors:
John Rouleau
[email protected]

Media Outlets:
Karen Porter
[email protected]

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