Camping World Holdings, Inc. Reports Fourth Quarter and Full Year 2018 Results

LINCOLNSHIRE, IL–(BUSINESS WIRE)–Camping World Holdings, Inc. (NYSE: CWH) (“Camping World,” “CWH,”
“Company,” “we,” “us” or “our”) today reported results for the fourth
quarter and full year ended December 31, 2018.

Full year highlights and year-over-year financial comparisons include:

  • Revenue increased 12.0% to $4.8 billion;
  • Gross profit increased 9.8% to $1.4 billion;
  • Income from operations, net income and diluted earnings per share of
    Class A common stock were $201.0 million, $65.6 million, and $0.28,
    respectively, and included a $40.0 million goodwill impairment charge
    and $43.2 million of Gander Outdoors pre-opening costs;
  • Adjusted EBITDA(1) was $312.5 million; and
  • Good Sam Club members increased by 16.7%, or more than 299,400 members.

Fourth Quarter 2018 Results

Consolidated Results

  • Revenue increased 10.6% to $982.4 million;
  • Gross profit increased 3.8% to $275.6 million and gross margin
    declined 186 basis points to 28.1%;
  • Loss from operations, net loss and diluted loss per share of Class A
    common stock were $43.0 million, $71.5 million, and $0.83,
    respectively, and included a $40.0 million goodwill impairment charge
    and $2.4 million of Gander Outdoors pre-opening costs;
  • Adjusted EBITDA(1) was $10.3 million;
  • The number of Active Customers(2) and Good Sam Club members
    reached all-time high levels of 5.1 million and 2.1 million,
    respectively; and
  • At December 31, 2018, the Company operated a total of 227 unique
    locations, which included 126 co-habited Dealership and Retail
    locations, 15 stand-alone Dealership locations, and 86 stand-alone
    Retail locations.

Consumer Services and Plans

  • Revenue(3) increased 8.5% to $55.5 million;
  • Gross profit(3) increased 8.9% to $33.8 million and gross
    margin(3) increased 19 basis points to 61.0%;
  • The number of participants across our clubs, roadside assistance,
    property and casualty insurance, and extended vehicle service programs
    within Consumer Services and Plans increased 11.1% to 3.1 million; and
  • The Company added 78,189 Good Sam Club members in the fourth quarter
    2018 and membership increased 16.7% year over year to an all-time-high
    of 2.1 million members.

Dealership

  • Revenue(3) decreased 0.8% to $717.6 million;

    • Same store revenue decreased 7.5% to $593.8 million across the
      same store base of 105 Dealership locations
  • Gross profit(3) decreased 1.6% to $185.0 million and gross
    margin(3) decreased 21 basis points to 25.8%;
  • Vehicle units sold decreased 1.6% to 17,824 units;

    • New vehicle units sold decreased 6.0% to 11,295 units
    • Used vehicles units sold increased 7.0% to 6,529 units
  • Average selling price per unit sold decreased 1.5% to $32,542;

    • New vehicles decreased 0.6% to $37,938 per unit
    • Used vehicles increased 1.2% to $23,208 per unit
  • Same store unit volume of new vehicles decreased 13.3%;
  • Gross profit per vehicle sold including finance and insurance
    decreased 3.5% to $8,487;
  • Finance and insurance revenue as a percentage of total vehicle revenue
    increased 109 basis points to 11.8%;
  • New vehicle inventory per dealership decreased 19.6% to $7.2 million
    from December 31, 2017;
  • At December 31, 2018, there were 141 Dealership locations; and
  • The company closed three Dealership locations in the fourth quarter
    2018.

Retail

  • Revenue(3) increased 84.7% to $209.3 million;

    • Same store revenue decreased 3.9% to $50.7 million across the same
      store base of 119 Camping World RV product, parts and accessory
      locations
  • Gross profit(3) increased 22.0% to $56.8 million and gross
    margin(3) decreased 1,395 basis points to 27.1%;

    • Included in gross profit was a $4.7 million increase in inventory
      reserves related to Camping World parts and accessories
  • At December 31, 2018, there were 212 Retail locations, including 128
    Camping World RV product, parts and accessory stores, 60 Gander
    Outdoors stores, and 24 other specialty stores; and
  • The Company closed six Gander Outdoors locations and one Camping World
    RV location in the fourth quarter of 2018.
______________
    (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.
(3) Revenue, gross profit and gross margin are after elimination of
inter-segment revenues.
 

Select Balance Sheet and Cash Flow Items

The Company’s working capital and cash and cash equivalents as of
December 31, 2018 were $583.0 million and $138.6 million, respectively.
On a year-over-year basis from December 31, 2017, total inventories
increased 10.1% to $1,559.0 million, primarily due to the new Retail
locations opened in 2018. New vehicle inventory decreased 8.6% to
$1,017.9 million and new vehicle inventory per dealership decreased
19.0% to $7.3 million. Retail segment inventory increased to $409.5
million from $188.3 million primarily from the 58 net Gander Outdoors
stores opened in 2018. At December 31, 2018, the Company had $38.7
million of borrowings under its revolving line of credit as part of its
Floor Plan Facility, $1,165.9 million of term loans outstanding under
the Senior Secured Credit Facilities, $9.5 million outstanding under the
Real Estate Facility, and $886.0 million of floor plan notes payable
under the Floor Plan Facility.

Revision for Correction of 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 included i) the
cancellation reserve for certain of its finance and insurance offerings
within the Dealership segment and ii) the calculation of the Tax
Receivable Agreement liability that arose from transactions in 2017. The
Company evaluated the materiality of these errors both qualitatively and
quantitatively in accordance with Staff Accounting Bulletin (“SAB”) No.
99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior
Year Misstatements When Quantifying Misstatements in Current Year
Financial Statements,” and determined the effect of these corrections
was not material to the previously issued financial statements as of and
for the years ended December 31, 2017 and 2016. However, correcting the
cumulative error during the year ended December 31, 2018 would have been
material to the current period. Therefore, the amounts in the previous
periods have been revised to reflect the correction of these errors. In
part as a result of these revisions, the Company expects to disclose in
its Annual Report on Form 10-K that, as part of its evaluation of its
internal control over financial reporting, the Company identified a new
material weakness in its internal controls that existed as of December
31, 2018, specifically related to the sufficiency of available technical
resources at the Company.

The following table presents the effect of the error correction on the
Company’s consolidated balance sheet for the period indicated:

  At December 31, 2017
($ in thousands) As Reported   Adjustment   As Corrected
Prepaid expenses and other assets $ 32,721 $ 8,417 $ 41,138
Total current assets 1,798,907 8,417 1,807,324
Deferred tax assets, net 155,551 (2,868 ) 152,683
Total assets 2,561,477 5,549 2,567,026
Current portion of Tax Receivable Agreement liability 8,093 813 8,906
Other current liabilities 22,510 10,152 32,662
Total current liabilities 1,320,169 10,965 1,331,134
Tax Receivable Agreement liability, net of current portion 129,596 1,230 130,826
Other long-term liabilities 39,161 12,428 51,589
Total liabilities 2,470,640 24,623 2,495,263
Additional paid-in capital 49,941 (7,421 ) 42,520
Retained earnings 6,192 1,427 7,619
Total stockholders’ equity attributable to Camping World Holdings,
Inc.
56,505 (5,994 ) 50,511
Non-controlling interests 34,332 (13,080 ) 21,252
Stockholders’ equity 90,837 (19,074 ) 71,763
Total liabilities and stockholders’ equity 2,561,477 5,549 2,567,026
 

The following table presents the effect of the error corrections on the
consolidated statements of income for the periods indicated:

 

  Three Months Ended December 31, 2017

($ in thousands except per share amounts)

As Reported   Adjustment   As Corrected
Revenue:
Finance and insurance, net $ 64,827 $ (1,006 ) $ 63,821
Total revenue 888,992 (1,006 ) 887,986
Income from operations 44,291 (1,006 ) 43,285
Tax Receivable Agreement liability adjustment

99,766

1,150

100,837

Income before income taxes 123,222 65 123,287
Income tax expense (128,716 ) 1,518 (127,198 )
Net income (5,494 ) 1,583 (3,911 )
Net income attributable to non-controlling interests (12,599 ) 680 (11,919 )
Net income attributable to Camping World Holdings, Inc. (18,093 ) 2,263 (15,830 )
Earnings per share of Class A common stock:
Basic $ (0.52 ) $ 0.07 $ (0.45 )
Diluted $ (0.52 ) $ 0.07 $ (0.45 )
 
  Year Ended December 31, 2017
($ in thousands except per share amounts) As Reported   Adjustment   As Corrected
Revenue:
Finance and insurance, net $ 332,034 $ (5,425 ) $ 326,609
Total revenue 4,285,255 (5,425 ) 4,279,830
Income from operations 361,380 (5,425 ) 355,955
Tax Receivable Agreement liability adjustment 99,687 1,071 100,758
Income before income taxes 389,956 (4,354 ) 385,602
Income tax expense (156,982 ) 2,072 (154,910 )
Net income 232,974 (2,282 ) 230,692
Net income attributable to non-controlling interests (204,612 ) 3,773 (200,839 )
Net income attributable to Camping World Holdings, Inc. 28,362 1,491 29,853
Earnings per share of Class A common stock:
Basic $ 1.07 $ 0.05 $ 1.12
Diluted $ 1.07 $ 0.05 $ 1.12
 

As a result of the above, the following table reflects changes to the
Company’s Statements of Cash Flows for the year ended December 31, 2017
from the previously reported financial results:

  Year Ended December 31, 2017
($ in thousands except per share amounts) As Reported   Adjustment   As Corrected
Net income $ 232,974 $ (2,282 ) $ 230,692
Adjustments to reconcile net income to net cash used in operating
activities:
Deferred income taxes 124,622 (2,073 ) 122,549
Tax Receivable Agreement liability adjustment (99,687 ) (1,071 ) (100,758 )
Accounts payable and other accrued expenses 53,646 (1,491 ) 52,155
Other, net 9,619 (304 ) 9,315
Net cash provided by (used in) operating activities (9,094 ) (7,221 ) (16,315 )
Cash flows from investing activities:
Purchases of property and equipment (66,780 ) 7,221 (59,559 )
Net cash used in investing activities (475,676 ) 7,221 (468,455 )
 

Earnings Conference Call and Webcast Information

A conference call to discuss the Company’s fourth quarter and full year
2018 financial results is scheduled for today, March 7, 2019, at 3:30
p.m. Central Time. Investors and analysts can participate on the
conference call by dialing 800-263-0877 or (646) 828-8143 and using
conference ID # 5885991. 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 December 31, 2018, 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
fourth quarter and full year ended December 31, 2018 to our financial
results from the fourth quarter and full year ended December 31, 2017,
respectively.

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 more than 225 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, our expectations regarding
material weaknesses in our financial reporting and related remediation
efforts, 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: 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; 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, 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 2018

 
Camping World Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
(In Thousands Except Per Share Amounts)
         
Three Months Ended December 31, Years Ended December 31,
  2018     2017     2018     2017  

 

 

Revenue:
Consumer services and plans $ 55,452 $ 51,096 $ 214,052 $ 195,614
New vehicles 428,508 458,456 2,512,854 2,435,928
Used vehicles 151,523 139,963 732,017 668,860
Dealership parts, services and other 69,414 61,312 279,438 246,898
Finance and insurance, net 68,188 63,821 383,711 326,609
Retail   209,308     113,338     669,945     405,921  
Total revenue 982,393 887,986 4,792,017 4,279,830
 
Costs applicable to revenue (exclusive of depreciation and
amortization shown separately below):
Consumer services and plans 21,631 20,030 86,687 81,822
New vehicles 377,913 393,797 2,188,735 2,086,229
Used vehicles 119,039 109,154 568,400 506,093
Dealership parts, services and other 35,705 32,614 140,076 128,851
Retail   152,523     66,782     445,187     235,921  
Total costs applicable to revenue 706,811 622,377 3,429,085 3,038,916
 
Gross profit:
Consumer services and plans 33,821 31,066 127,365 113,792
New vehicles 50,595 64,659 324,119 349,699
Used vehicles 32,484 30,809 163,617 162,767
Dealership parts, services and other 33,709 28,698 139,362 118,047
Finance and insurance, net 68,188 63,821 383,711 326,609
Retail   56,785     46,556     224,758     170,000  
Total gross profit 275,582 265,609 1,362,932 1,240,914
 
Operating expenses:
Selling, general, and administrative 261,621 213,052 1,069,359 853,160
Debt restructure expense 387 380 387
Depreciation and amortization 15,115 8,726 49,322 31,545
Goodwill impairment 40,046 40,046
Loss (gain) on sale of assets   1,823     159     2,810     (133 )
Total operating expenses   318,605     222,324     1,161,917     884,959  
 
Income from operations (43,023 ) 43,285 201,015 355,955
 
Other income (expense):
Floor plan interest expense (9,555 ) (8,387 ) (38,315 ) (27,690 )
Other interest expense, net (17,589 ) (11,986 ) (63,329 ) (42,959 )
Loss on debt restructure (462 ) (1,676 ) (462 )
Tax Receivable Agreement liability adjustment   (1,324 )   100,837     (1,324 )   100,758  
  (28,468 )   80,002     (104,644 )   29,647  
 
Income (loss) before income taxes (71,491 ) 123,287 96,371 385,602
Income tax (expense) benefit   237     (127,198 )   (30,790 )   (154,910 )
Net income (loss) (71,254 ) (3,911 ) 65,581 230,692
Less: (income) loss attributable to non-controlling interests   40,926     (11,919 )   (55,183 )   (200,839 )
Income (loss) attributable to Camping World Holdings, Inc. $ (30,328 ) $ (15,830 ) $ 10,398   $ 29,853  
 
Earnings (loss) per share of Class A common stock:
Basic $ (0.82 ) $ (0.45 ) $ 0.28 $ 1.12
Diluted $ (0.83 ) $ (0.45 ) $ 0.28 $ 1.12
Weighted average shares of Class A common stock outstanding:
Basic 37,137 $ 34,837 36,985 $ 26,622
Diluted 88,812 $ 34,837 88,878 $ 26,622
 
 

Results of Operations

 
Camping World Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
($ in Thousands Except Per Share Amounts)
 
As of December 31,
  2018     2017
Assets
Current assets:
Cash and cash equivalents $ 138,557 $ 224,163
Contracts in transit 53,214 46,227
Accounts receivable, net 85,711 79,881
Inventories, net 1,558,970 1,415,915
Prepaid expenses and other assets   51,710     41,138
Total current assets 1,888,162 1,807,324
 
Property and equipment, net 359,855 198,022
Deferred tax asset, net 145,943 152,683
Intangibles assets, net 35,284 38,707
Goodwill 359,117 348,387
Other assets   18,326     21,903
Total assets $ 2,806,687   $ 2,567,026
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 144,808 $ 125,616
Accrued liabilities 124,619 101,929
Deferred revenues and gains 88,054 77,669
Current portion of capital lease obligation 23 844
Current portion of Tax Receivable Agreement liability 9,446 8,906
Current portion of long-term debt 12,977 9,465
Notes payable – floor plan, net 885,980 974,043
Other current liabilities   39,211     32,662
Total current liabilities 1,305,118 1,331,134
 
Capital lease obligations, net of current portion 23
Right to use liability 5,147 10,193
Tax Receivable Agreement liability, net of current portion 124,763 130,826
Revolving line of credit 38,739
Long-term debt, net of current portion 1,152,888 907,437
Deferred revenues and gains 67,157 64,061
Other long-term liabilities   79,958     51,589
Total liabilities 2,773,770 2,495,263
 
Commitments and contingencies
 
Stockholders’ equity:
Preferred stock, par value $0.01 per share – 20,000,000 shares
authorized; none issued and outstanding as of December 31, 2018 and
December 31, 2017
Class A common stock, par value $0.01 per share – 250,000,000 shares
authorized; 37,278,690 issued and 37,192,364 outstanding as of
December 31, 2018 and 36,758,233 issued and 36,749,072 outstanding
as of December 31, 2017
372 367

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 December 31, 2018 and 50,706,629 outstanding as of December
31, 2017

5 5
Class C common stock, par value $0.0001 per share – one share
authorized, issued and outstanding as of December 31, 2018 and
December 31, 2017
Additional paid-in capital 47,531 42,520
Retained earnings (deficit)   (3,370 )   7,619
Total stockholders’ equity attributable to Camping World Holdings,
Inc.
44,538 50,511
Non-controlling interests   (11,621 )   21,252
Total stockholders’ equity 32,917 71,763
   
Total liabilities and stockholders’ equity $ 2,806,687   $ 2,567,026
 

Contacts

Investors:
John Rouleau
John.Rouleau@CampingWorld.com

Media
Outlets:
Karen Porter
PR-CWGS@CampingWorld.com

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