Camping World Holdings, Inc. (NYSE: CWH) (“Camping World,”
“CWH,” “Company,” “we,” “us” or “our”) today reported results for
the third quarter ended September 30, 2019.
Third quarter highlights and year-over-year
comparisons:
- Revenue increased 6.0% to $1.39 billion;
- Gross profit decreased 9.3% to $338.5 million;
- Loss from operations, net loss and diluted loss per share of
Class A common stock were $32.3 million, $65.3 million, and $0.82,
respectively, and included long-lived asset impairment and
restructuring costs of $76.0 million related to the Company’s
previously disclosed 2019 strategic shift away from locations that
do not sell and/or service recreational vehicles (“RVs”);
- Adjusted EBITDA(1) decreased 37.5% to $60.6 million, and was
negatively impacted by discounting at retail locations earmarked
for closure;
- The number of Active Customers(2) increased 17.3 % to 5.24
million and the number of Good Sam Club memberships increased 7.7%
to approximately 2.17 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.
Third Quarter 2019
Results
Good Sam Services and Plans Segment
- Segment revenue(3) increased 2.2% to $42.2 million;
- Segment gross profit(3) increased 0.2% to $22.8 million and
segment gross margin(3) decreased 108 basis points to 54.1%;
and
- Segment income(4) decreased 2.4% to $18.2 million.
RV and Outdoor Retail Segment
- Segment revenue(3) increased 6.1% to $1.35 billion;
- Same store revenue decreased 5.0% to $1.04 billion
- Segment gross profit(3) decreased 9.9% to $315.6 million and
segment gross margin(3) decreased 416 basis points to 23.5%;
- Segment loss was $42.8 million compared to segment income of
$68.9 million in the third quarter last year and included $77.7
million of impairment and restructuring costs;
- Vehicle units sold increased 1.3% to 28,653 units;
- New vehicle units sold decreased 4.7% to 18,592 units
- Used vehicle units sold increased 14.6% to 10,061 units
- Average selling price per vehicle unit sold increased 2.3% to
$32,383;
- New vehicles increased 2.4% to $36,613 per unit
- Used vehicles increased 9.0% to $24,565 per unit
- Same store vehicle units sold decreased 8.0% to 24,285 units;
- New vehicle same store units sold decreased 14.7% to 15,553
units
- Used vehicle same store units sold increased 6.9% to 8,732
units
- Gross profit per vehicle sold including finance and insurance
increased 2.5% to $8,679;
- Finance and insurance revenue as a percentage of total vehicle
revenue increased 47 basis points to 12.3%;
- New vehicle inventory per dealership location decreased 20.9%
to $5.7 million from December 31, 2018;
- Products, service and other revenue increased 13.5% to $290.8
million and gross profit decreased 44.1% to $57.6 million;
- Same store products, service and other revenue decreased 7.3%
to $140.9 million
- Good Sam Club revenue increased 17.7% to $12.6 million and
gross profit increased 20.8% to $9.4 million; and
- Good Sam Club memberships increased 7.7% to approximately 2.17
million
- At September 30, 2019, the Company operated a total of 209 RV
and Outdoor Retail locations, with 153 of these selling and/or
servicing RVs.
______________
(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 September 30, 2019 were $470.8 million and $130.2 million,
respectively. Total inventories decreased 11.5% to $1.38 billion as
compared to December 31, 2018, driven by a 14.1% decrease in new RV
inventory and 17.6% decrease in products, parts, accessories and
miscellaneous inventory, partially offset by a 31.2% increase in
used RV inventory. At September 30, 2019, the Company had $1.15
billion of term loans outstanding under the Senior Secured Credit
Facility, $20.0 million outstanding under the Real Estate Facility,
$693.9 million of floor plan notes payable under the Floor Plan
Facility and $46.3 million of revolving lines of credit
borrowings.
As of September 30, 2019 and December 31, 2018, our subsidiary,
FreedomRoads, LLC maintained floor plan financing through the
Seventh Amended and Restated Credit Agreement (“Floor Plan
Facility”). On October 8, 2019, FR entered into a Second Amendment
to the Seventh Amended and Restated Credit Agreement (the
“Amendment”). The Amendment reduces the total commitment under the
Floor Plan Facility to $1.380 billion and extends the maturity date
of the Floor Plan Facility from December 12, 2020 to March 15,
2023, among other immaterial changes.
Restructuring and Long-lived Asset
Impairment
Restructuring
On September 3, 2019, the Board of Directors of CWH approved a
plan to strategically shift its business away from locations where
the Company does not have the ability or where it is not feasible
to sell and/or service RVs (the “2019 Strategic Shift”). As of
September 3, 2019, the Company operated 37 locations that do not
sell and/or service RVs but sell an assortment of outdoor lifestyle
products (the “Outdoor Lifestyle Locations”), and an additional
five Outdoor Lifestyle Locations that were previously closed or had
not opened as of that date. In addition, the Company operated seven
specialty retail locations operated by TheHouse.com, an indirect
wholly-owned subsidiary of the Company.
Of the Outdoor Lifestyle Locations operating at September 3,
2019, the Company closed three locations during September 2019 and
currently expects to either sell, divest, repurpose, relocate or
close 28 of the remaining Outdoor Lifestyle Locations, at which
sales and/or service of RVs cannot be performed, and two of the
seven specialty retail locations operated by TheHouse.com. The
Company was able to, or is in the process of, acquiring and/or
obtaining the developmental consents, approvals and permits
necessary for the sale and/or service of RVs at six of the Outdoor
Lifestyle Locations. As part of the 2019 Strategic Shift, the
Company has evaluated the impact on the Company’s supporting
infrastructure and operations, which included rationalizing
inventory levels and composition, closing one of its distribution
centers, and realigning other resources. The Company expects the
majority of the store closures and/or divestitures related to the
2019 Strategic Shift to be completed by January 31, 2020. The
Company will have a reduction of headcount and labor costs for
those locations that are sold, divested or closed and the Company
expects to incur material charges associated with the activities
contemplated under the 2019 Strategic Shift. In connection with the
2019 Strategic Shift, the Company expects to incur costs relating
to one-time employee termination benefits of $1.0 million, contract
termination costs of between $10.0 million and $15.0 million,
incremental inventory reserve charges of $27.3 million, and other
associated costs of between $4.0 million and $6.0 million. The
following table details the costs incurred associated with the 2019
Strategic Shift (in thousands):
Three Months Ended
Nine Months Ended
September 30, 2019
September 30, 2019
Restructuring costs:
One-time termination benefits(1)
$
182
$
182
Incremental inventory reserve
charges(2)
27,306
27,306
Other associated costs(3)
236
236
Total restructuring costs
$
27,724
$
27,724
(1)
These costs were included in selling,
general, and administrative expenses in the condensed consolidated
statements of operations.
(2)
These costs were included in costs
applicable to revenue - products, services and other in the
condensed consolidated statements of operations.
(3)
For the three and nine months ended
September 30, 2019, costs of approximately $170,000 were included
in costs applicable to revenue - products, services and other, and
$66,000 were included in selling, general, and administrative
expenses in the condensed consolidated statements of
operations.
Long-lived Asset Impairment
During the three months ended September 30, 2019, the Company
had indicators of impairment of the long-lived assets for certain
of its locations, primarily those locations discussed above related
to the 2019 Strategic Shift. After performing the long-lived asset
impairment test for these locations, the Company determined that 38
locations had long-lived assets that were impaired. Of these 38
locations with long-lived assets that were impaired, two locations
were unrelated to the 2019 Strategic Shift, 26 locations were
Outdoor Lifestyle Locations that were operating at September 30,
2019, seven locations were Outdoor Lifestyle Locations that were
not open as of September 30, 2019, and three locations were
specialty retail locations operated by TheHouse.com. The calculated
long-lived asset impairment charge was allocated to each of the
categories of long-lived assets at each location pro rata based on
the long-lived assets’ carrying values, except that individual
assets cannot be impaired below their individual fair values when
that fair value can be determined without undue cost and effort.
For most of these locations, the operating lease right-of-use
assets and furniture and fixtures were written down to their
individual fair values and the remaining impairment charge was
allocated to the remaining long-lived assets up to the fair value
estimated on these assets based on liquidation value estimates.
During the three months ended September 30, 2019, the Company
recorded long-lived asset impairment charges relating to leasehold
improvements, furniture and equipment, and operating lease
right-of-use assets of $16.9 million, $23.7 million, and $9.4
million, respectively. Of the $50.0 million long-lived asset
impairment charge during the three months ended September 30, 2019,
$48.3 million related to the 2019 Strategic Shift discussed
above.
Revisions for Correction of Immaterial
Errors
In connection with the preparation of the financial statements
for the year ended December 31, 2018, the Company identified errors
in its Condensed Consolidated Financial Statements for the three
and nine months ended September 30, 2018 that related primarily to
i) the cancellation reserve for certain of its finance and
insurance offerings within the former Dealership segment in other
current liabilities and other long-term liabilities, ii) the
calculation of the Tax Receivable Agreement liability that arose
from transactions in 2017, iii) the classification in the condensed
consolidated statement of cash flows of non-cash capital
expenditures included in accounts payable and non-cash leasehold
improvements paid by lessor in other, net, and iv) the adoption of
Accounting Standards Codification (“ASC”) No. 606, Revenue from
Contracts with Customers (“ASC 606”) on January 1, 2018. The
Company corrected the errors in the accompanying Condensed
Consolidated Financial Statements for the three and nine months
ended September 30, 2018. The Company believes the correction of
the errors is immaterial to the previously issued Condensed
Consolidated Financial Statements.
The following table presents the effect of the error corrections
on the condensed consolidated statement of operations for the
period indicated:
Three Months Ended September 30, 2018 ($ in thousands
except per share amounts)
As Reported Adjustment
As Corrected (unaudited) (unaudited) (unaudited) Revenue -
Finance and insurance, net
$
109,459
$
(3,241
)
$
106,218
Total revenue
1,312,727
(3,241
)
1,309,486
Costs applicable to revenue - Good Sam services and plans(1)
18,586
(57
)
18,529
Costs applicable to revenue - Good Sam Club
2,913
57
2,970
Income from operations
83,903
(3,241
)
80,662
Other income (expense)
—
2
2
Income before income taxes
59,294
(3,239
)
56,055
Income tax expense
(11,385
)
1,485
(9,900
)
Net income
47,909
(1,754
)
46,155
Net income attributable to non-controlling interests
(33,893
)
1,861
(32,032
)
Net income attributable to Camping World Holdings, Inc.
14,016
107
14,123
Earnings per share of Class A common stock: Basic
$
0.38
$
—
$
0.38
Diluted
$
0.38
$
—
$
0.38
Nine Months Ended September 30, 2018 ($ in
thousands except per share amounts)
As Reported
Adjustment As Corrected (unaudited) (unaudited)
(unaudited) Revenue - Finance and insurance, net
$
325,368
$
(9,845
)
$
315,523
Total revenue
3,819,469
(9,845
)
3,809,624
Income from operations
253,882
(9,844
)
244,038
Income before income taxes
177,706
(9,844
)
167,862
Income tax expense
(30,706
)
(321
)
(31,027
)
Net income
147,000
(10,165
)
136,835
Net income attributable to non-controlling interests
(101,772
)
5,663
(96,109
)
Net income attributable to Camping World Holdings, Inc.
45,228
(4,502
)
40,726
Earnings per share of Class A common stock: Basic
$
1.22
$
(0.12
)
$
1.10
Diluted
$
1.20
$
(0.10
)
$
1.10
(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 as disclosed in Note 18 – Segments Information to the
financial statements contained in our Quarterly Report on Form 10-Q
for the period ended September 30, 2019.
The following table presents the effect of the error corrections
on the condensed consolidated statement of cash flows for the
period indicated:
Nine Months Ended June 30, 2018 ($ in thousands
except per share amounts)
As Reported Adjustment
As Corrected (unaudited) (unaudited) (unaudited) Net income
$
147,000
$
(10,165
)
$
136,835
Deferred income taxes
7,300
321
7,621
Receivables and contracts in transit
(56,321
)
203
(56,118
)
Inventories
(37,364
)
(5,266
)
(42,630
)
Prepaid expenses and other assets
230
5,266
5,496
Accounts payable and other accrued expenses
122,483
1,959
124,442
Deferred revenue and gains
17,288
2,040
19,328
Other
4,383
8,657
13,040
Net cash provided by operating activities
251,058
3,015
254,073
Purchases of property and equipment
(105,408
)
(3,014
)
(108,422
)
Net cash used in investing activities
(286,784
)
(3,014
)
(289,798
)
Earnings Conference Call and Webcast
Information
A conference call to discuss the Company’s third quarter 2019
financial results is scheduled for today, November 7, 2019, at 3:30
p.m. Central Time. Investors and analysts can participate on the
conference call by dialing 866-548-4713 or (323) 794-2093 and using
conference ID # 6117163. 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 September 30,
2019, the Company owned 42.0% 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 third
quarter ended September 30, 2019 to our financial results from the
third quarter ended September 30, 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 RVs, 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 200 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: the potential impact of and our ability to remediate the
material weaknesses in our internal control over financial
reporting; current softness in the RV industry, which has increased
our costs and reduced our margins; uncertainty regarding how long
the ongoing softness in the RV industry will last; our ability to
execute and achieve the expected benefits of our 2019 Strategic
Shift; and the possibility of future asset impairment charges for
goodwill, intangible assets or other long-lived assets relating to
our 2019 Strategic Shift; 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 ability 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; the impact of ongoing
lawsuits against us and certain of our officers and directors, as
well as any potential future class action litigation; 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
Nine Months Ended
September 30,
September 30,
2019
2018
2019
2018
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Revenue: Good Sam Services and Plans
$
42,235
$
41,311
$
133,895
$
128,474
RV and Outdoor Retail New vehicles
680,716
697,317
1,989,163
2,084,346
Used vehicles
247,151
197,757
672,908
580,494
Products, service and other
290,771
256,150
760,073
670,661
Finance and insurance, net
114,466
106,218
334,582
315,523
Good Sam Club
12,633
10,733
36,467
30,126
Subtotal
1,345,737
1,268,175
3,793,193
3,681,150
Total revenue
1,387,972
1,309,486
3,927,088
3,809,624
Costs applicable to revenue (exclusive of depreciation and
amortization shown separately below): Good Sam Services and Plans
19,401
18,529
58,878
56,650
RV and Outdoor Retail New vehicles
598,718
609,244
1,743,161
1,810,822
Used vehicles
194,947
152,562
530,474
449,361
Products, service and other
233,174
153,167
537,885
397,035
Good Sam Club
3,259
2,970
9,900
8,406
Subtotal
1,030,098
917,943
2,821,420
2,665,624
Total costs applicable to revenue
1,049,499
936,472
2,880,298
2,722,274
Gross profit: Good Sam Services and Plans
22,834
22,782
75,017
71,824
RV and Outdoor Retail New vehicles
81,998
88,073
246,002
273,524
Used vehicles
52,204
45,195
142,434
131,133
Products, service and other
57,597
102,983
222,188
273,626
Finance and insurance, net
114,466
106,218
334,582
315,523
Good Sam Club
9,374
7,763
26,567
21,720
Subtotal
315,639
350,232
971,773
1,015,526
Total gross profit
338,473
373,014
1,046,790
1,087,350
Operating expenses: Selling, general, and administrative
299,564
278,330
870,995
807,738
Debt restructure expense
–
–
–
380
Depreciation and amortization
14,104
13,179
41,644
34,207
Long-lived asset impairment
50,025
–
50,025
–
Loss on disposal of assets
7,087
843
9,247
987
Total operating expenses
370,780
292,352
971,911
843,312
Income from operations
(32,307
)
80,662
74,879
244,038
Other income (expense): Floor plan interest expense
(9,005
)
(7,815
)
(31,884
)
(28,760
)
Other interest expense, net
(17,568
)
(16,794
)
(53,422
)
(45,740
)
Loss on debt restructure
–
–
–
(1,676
)
Tax Receivable Agreement liability adjustment
–
–
8,477
–
Other expense, net
–
2
–
–
Total other income (expense)
(26,573
)
(24,607
)
(76,829
)
(76,176
)
(Loss) income before income taxes
(58,880
)
56,055
(1,950
)
167,862
Income tax expense
(6,383
)
(9,900
)
(37,497
)
(31,027
)
Net (loss) income
(65,263
)
46,155
(39,447
)
136,835
Less: net loss (income) attributable to non-controlling interests
34,571
(32,032
)
7,377
(96,109
)
Net (loss) income attributable to Camping World Holdings, Inc.
$
(30,692
)
$
14,123
$
(32,070
)
$
40,726
Earnings per share of Class A common stock: Basic
$
(0.82
)
$
0.38
$
(0.86
)
$
1.10
Diluted
$
(0.82
)
$
0.38
$
(0.86
)
$
1.10
Weighted average shares of Class A common stock outstanding: Basic
37,361
37,018
37,266
36,933
Diluted
37,361
37,055
37,266
37,140
Camping World Holdings, Inc. and Subsidiaries Condensed
Consolidated Balance Sheets ($ in Thousands Except Share and Per
Share Amounts)
September 30,
December 31,
2019
2018
(unaudited)
Assets Current assets: Cash and cash equivalents
$
130,234
$
138,557
Contracts in transit
88,762
53,214
Accounts receivable, net
86,788
85,711
Inventories
1,380,214
1,558,970
Prepaid expenses and other assets
37,759
51,710
Total current assets
1,723,757
1,888,162
Property and equipment, net
330,182
359,855
Operating lease assets
823,475
–
Deferred tax assets, net
126,487
145,943
Intangibles assets, net
31,386
35,284
Goodwill
386,915
359,117
Other assets
18,825
18,326
Total assets
$
3,441,027
$
2,806,687
Liabilities and stockholders' equity (deficit)
Current liabilities: Accounts payable
$
177,336
$
144,808
Accrued liabilities
156,393
124,619
Deferred revenues and gains
93,609
88,054
Current portion of finance lease liabilities
–
23
Current portion of operating lease liabilities
58,211
–
Current portion of Tax Receivable Agreement liability
6,815
9,446
Current portion of long-term debt
14,143
12,977
Notes payable – floor plan, net
693,889
885,980
Other current liabilities
52,609
39,211
Total current liabilities
1,253,005
1,305,118
Right to use liability
–
5,147
Operating lease liabilities, net of current portion
850,948
–
Tax Receivable Agreement liability, net of current portion
109,504
124,763
Revolving line of credit
46,340
38,739
Long-term debt, net of current portion
1,156,071
1,152,888
Deferred revenues and gains
60,112
67,157
Other long-term liabilities
30,652
79,958
Total liabilities
3,506,632
2,773,770
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 September 30,
2019 and December 31, 2018
–
–
Class A common stock, par value $0.01 per share – 250,000,000
shares authorized; 37,533,958 issued and 37,377,004 outstanding as
of September 30, 2019 and 37,278,690 issued and 37,192,364
outstanding as of December 31, 2018
374
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 September 30, 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 September 30, 2019 and
December 31, 2018
–
–
Additional paid-in capital
51,625
47,531
Retained earnings
(48,872
)
(3,370
)
Total stockholders' equity attributable to
Camping World Holdings, Inc.
3,132
44,538
Non-controlling interests
(68,737
)
(11,621
)
Total stockholders' equity (deficit)
(65,605
)
32,917
Total liabilities and stockholders' equity (deficit)
$
3,441,027
$
2,806,687
Earnings Per Share
Three Months Ended September
30,
Nine Months Ended September
30,
(In thousands except per share amounts)
2019
2018
2019
2018
Numerator: Net (loss) income
$
(65,263
)
$
46,155
$
(39,447
)
$
136,835
Less: net loss (income) attributable to non-controlling interests
34,571
(32,032
)
7,377
(96,109
)
Net (loss) income attributable to Camping World Holdings, Inc. —
basic
$
(30,692
)
$
14,123
$
(32,070
)
$
40,726
Add: reallocation of net income attributable to non-controlling
interests from the assumed dilutive effect of stock options and
RSUs
—
8
—
56
Net (loss) income attributable to Camping World Holdings, Inc. —
diluted
$
(30,692
)
$
14,131
$
(32,070
)
$
40,782
Denominator: Weighted-average shares of Class A common stock
outstanding — basic
37,361
37,018
37,266
36,933
Dilutive options to purchase Class A common stock
—
—
—
104
Dilutive restricted stock units
—
37
—
103
Weighted-average shares of Class A common stock outstanding —
diluted
37,361
37,055
37,266
37,140
Earnings (loss) per share of Class A common stock — basic
$
(0.82
)
$
0.38
$
(0.86
)
$
1.10
Earnings (loss) per share of Class A common stock — diluted
$
(0.82
)
$
0.38
$
(0.86
)
$
1.10
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
767
903
809
611
Restricted stock units
1,266
1,639
1,373
851
Common units of CWGS, LLC that are convertible into Class A common
stock
51,669
51,708
51,671
51,751
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are
prepared and presented in accordance with accounting principles
generally accepted in the United States (“GAAP”), we use the
following non-GAAP financial measures: EBITDA, Adjusted EBITDA,
Adjusted EBITDA Margin, Adjusted Net Income Attributable to Camping
World Holdings, Inc. – Basic, Adjusted Net Income Attributable to
Camping World Holdings, Inc. – Diluted, Adjusted Earnings Per Share
– Basic, and Adjusted Earnings Per Share – Diluted (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 Financial 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 Financial
Measures. In evaluating these Non-GAAP Financial 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,
net (excluding floor plan interest expense), provision for income
tax expense 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, long-lived asset
impairment, loss on disposal of assets, equity-based compensation,
Tax Receivable Agreement liability adjustment, Gander Outdoors
pre-opening costs, restructuring costs related to the 2019
Strategic Shift, 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 table reconciles EBITDA, Adjusted EBITDA, and
Adjusted EBITDA Margin to the most directly comparable GAAP
financial performance measure, which are net (loss) income and net
(loss) income margin, respectively:
Three Months Ended
Nine Months Ended
September 30,
September 30,
($ in thousands)
2019
2018
2019
2018
Net (loss) income
$
(65,263
)
$
46,155
$
(39,447
)
$
136,835
Other interest expense, net
17,568
16,794
53,422
45,740
Depreciation and amortization
14,104
13,179
41,644
34,207
Income tax expense
6,383
9,900
37,497
31,027
EBITDA
(27,208
)
86,028
93,116
247,809
Loss and expense on debt restructure (a)
—
—
—
2,056
Long-lived asset impairment (b)
50,025
—
50,025
—
Loss on disposal of assets and other expense, net (c)
7,087
841
9,247
987
Equity-based compensation (d)
2,934
4,188
9,513
10,535
Tax Receivable Agreement liability adjustment (e)
—
—
(8,477
)
—
Gander Outdoors pre-opening costs (f)
—
5,765
—
40,771
Restructuring costs (g)
27,724
—
27,724
—
Adjusted EBITDA
$
60,562
$
96,822
$
181,148
$
302,158
Three Months Ended
Nine Months Ended
September 30,
September 30,
(as percentage of total revenue)
2019
2018
2019
2018
EBITDA margin: Net (loss) income margin
(4.7
%)
3.5
%
(1.0
%)
3.6
%
Other interest expense, net
1.3
%
1.3
%
1.4
%
1.2
%
Depreciation and amortization
1.0
%
1.0
%
1.1
%
0.9
%
Income tax expense
0.5
%
0.8
%
1.0
%
0.8
%
Subtotal EBITDA margin
(2.0
%)
6.6
%
2.4
%
6.5
%
Loss and expense on debt restructure (a)
—
—
—
0.1
%
Long-lived asset impairment (b)
3.6
%
—
1.3
%
—
Loss on disposal of assets and other expense, net (c)
0.5
%
0.1
%
0.2
%
0.0
%
Equity-based compensation (d)
0.2
%
0.3
%
0.2
%
0.3
%
Tax Receivable Agreement liability adjustment (e)
—
—
(0.2
%)
—
Gander Outdoors pre-opening costs (f)
—
0.4
%
—
1.1
%
Restructuring costs (g)
2.0
%
—
0.7
%
—
Adjusted EBITDA margin
4.4
%
7.4
%
4.6
%
7.9
%
(a)
Represents the loss and expense incurred
on debt restructure and financing expense incurred from the Third
Amendment to the Credit Agreement in 2018.
(b)
Represents long-lived asset impairment
charges related to the RV and Outdoor Retail segment, which
primarily relate to locations affected by the 2019 Strategic
Shift.
(c)
Represents an adjustment to eliminate the
losses and gains on disposal and sales of various assets and other
expense, net.
(d)
Represents non-cash equity-based
compensation expense relating to employees and directors of the
Company.
(e)
Represents an adjustment to eliminate the
loss on remeasurement of the Tax Receivable Agreement primarily due
to changes in our effective income tax rate and the transfer of
certain assets from GSS to CWI.
(f)
Represents pre-opening store costs
associated with the Gander Outdoors store openings in 2018, which
is comprised of 1) Gander Outdoors-specific corporate and retail
overhead, 2) distribution center expenses, and 3) store-level
startup expenses. Based on the nature of the acquisition through a
bankruptcy auction and the large quantity of retail locations
opened in 2018 in a very compressed timeframe, the Company does not
deem the pre-opening store costs for the initial rollout of Gander
Outdoors locations to be normal, recurring charges. The Company
does not intend to adjust for pre-opening store costs other than
for the initial rollout of Gander Outdoors.
(g)
Represents restructuring costs relating to
our 2019 Strategic Shift. These restructuring costs include
one-time employee termination benefits, contract termination costs,
incremental inventory reserve charges, and other associated
costs.
Adjusted Net Income Attributable to Camping World Holdings, Inc.
and Adjusted Earnings Per Share
We define “Adjusted Net Income Attributable to Camping World
Holdings, Inc. – Basic” as net income attributable to Camping World
Holdings, Inc. 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, long-lived asset impairment,
loss on disposal of assets, equity-based compensation, Tax
Receivable Agreement liability adjustment, Gander Outdoors
pre-opening costs, restructuring costs related to the 2019
Strategic Shift, other unusual or one-time items, the income tax
expense effect of these adjustments, and the effect of net income
attributable to non-controlling interests from these
adjustments.
We define “Adjusted Net Income Attributable to Camping World
Holdings, Inc. – Diluted” as Adjusted Net Income Attributable to
Camping World Holdings, Inc. – Basic adjusted for the reallocation
of net income attributable to non-controlling interests from stock
options and restricted stock units, if dilutive, or the assumed
exchange, if dilutive, of all outstanding common units in CWGS, LLC
for shares of newly-issued Class A common stock of Camping World
Holdings, Inc.
We define “Adjusted Earnings Per Share – Basic” as Adjusted Net
Income Attributable to Camping World Holdings, Inc. - Basic divided
by the weighted-average shares of Class A common stock outstanding.
We define “Adjusted Earnings Per Share – Diluted” as Adjusted Net
Income Attributable to Camping World Holdings, Inc. – Diluted
divided by the weighted-average shares of Class A common stock
outstanding, assuming (i) the exchange of all outstanding common
units in CWGS, LLC for newly-issued shares of Class A common stock
of Camping World Holdings, Inc., if dilutive, and (ii) the dilutive
effect of stock options and restricted stock units, if any. We
present Adjusted Net Income Attributable to Camping World Holdings,
Inc. – Basic, Adjusted Net Income Attributable to Camping World
Holdings, Inc. – Diluted, Adjusted Earnings Per Share – Basic, and
Adjusted Earnings Per Share – Diluted 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 Net Income Attributable
to Camping World Holdings, Inc. – Basic, Adjusted Net Income
Attributable to Camping World Holdings, Inc. – Diluted, Adjusted
Earnings Per Share – Basic, and Adjusted Earnings Per Share –
Diluted to the most directly comparable GAAP financial performance
measure, which is net income attributable to Camping World
Holdings, Inc., in the case of the Adjusted Net Income non-GAAP
financial measures, and weighted-average shares of Class A common
stock outstanding – basic, in the case of the Adjusted Earnings Per
Share non-GAAP financial measures:
Three Months Ended
Nine Months Ended
September 30,
September 30,
September 30,
September 30,
(In thousands except per share amounts)
2019
2018
2019
2018
Numerator: Net (loss) income attributable to Camping World
Holdings, Inc.
$
(30,692
)
$
14,123
$
(32,070
)
$
40,726
Adjustments related to basic calculation: Loss and expense on debt
restructure (a): Gross adjustment
—
—
—
2,056
Income tax expense for above adjustment (b)
—
—
—
(217
)
Long-lived asset impairment (c): Gross adjustment
50,025
—
50,025
—
Income tax expense for above adjustment (b)
(82
)
—
(82
)
—
Loss on disposal of assets and other expense, net (d): Gross
adjustment
7,087
841
9,247
987
Income tax (expense) benefit for above adjustment (b)
(467
)
1
(461
)
—
Equity-based compensation (e): Gross adjustment
2,934
4,188
9,513
10,535
Income tax expense for above adjustment (b)
(246
)
(345
)
(815
)
(894
)
Tax Receivable Agreement liability adjustment (f): Gross adjustment
—
—
(8,477
)
Income tax benefit for above adjustment (b)
—
—
2,143
—
Gander Outdoors pre-opening costs (g): Gross adjustment
—
5,765
—
40,771
Income tax benefit for above adjustment (b)
—
—
—
—
Restructuring costs (h): Gross adjustment
27,724
—
27,724
—
Income tax benefit for above adjustment (b)
—
—
—
—
Adjustment to net (loss) income attributable to non-controlling
interests resulting from the above adjustments (i)
(50,937
)
(6,289
)
(56,014
)
(31,727
)
Adjusted net income (loss) attributable to Camping World Holdings,
Inc. – basic
5,346
18,284
733
62,237
Adjustments related to diluted calculation: Reallocation of net
income attributable to non-controlling interests from the dilutive
effect of stock options and restricted stock units (j)
4
16
—
225
Income tax on reallocation of net income attributable to
non-controlling interests from the dilutive effect of stock options
and restricted stock units (k)
(2
)
(5
)
—
(78
)
Adjusted net income attributable to Camping World Holdings, Inc. –
diluted
$
5,348
$
18,295
$
733
$
62,384
Denominator: Weighted-average Class A common shares
outstanding – basic
37,361
37,018
37,266
36,933
Adjustments related to diluted calculation: Dilutive options to
purchase Class A common stock (l)
—
—
—
104
Dilutive restricted stock units (l)
21
37
—
103
Adjusted weighted average Class A common shares outstanding –
diluted
37,382
37,055
37,266
37,140
Adjusted earnings per share - basic
0.14
0.49
0.02
1.69
Adjusted earnings per share - diluted
0.14
0.49
0.02
1.68
Anti-dilutive amounts (m): Numerator:
Reallocation of net income attributable to non-controlling
interests from the anti-dilutive exchange of common units in CWGS,
LLC (j)
$
16,362
$
38,305
$
48,637
$
127,610
Income tax on reallocation of net income attributable to
non-controlling interests from the anti-dilutive exchange of common
units in CWGS, LLC (k)
$
(8,958
)
$
(12,669
)
$
(26,049
)
$
(40,114
)
Assumed income tax benefit of combining C-corporations with full
valuation allowances with the income of other consolidated entities
after the anti-dilutive exchange of common units in CWGS, LLC (n)
$
28,228
$
5,623
$
44,252
$
14,753
Denominator: Anti-dilutive exchange of common units in CWGS,
LLC for shares of Class A common stock (l)
51,669
51,708
51,671
51,751
Anti-dilutive restricted stock units (l)
—
—
15
—
(a)
Represents the loss and expense incurred
on debt restructure and financing expense incurred from the Third
Amendment to the Credit Agreement in 2018.
(b)
Represents the current and deferred income
tax expense effect of the above adjustments, many of which are
related to entities with full valuation allowances for which no tax
benefit can be currently recognized. This assumption uses an
effective tax rate of 25.3% for the adjustments for 2019 and 2018,
which represents the estimated tax rate that would apply had the
above adjustments been included in the determination of our
non-GAAP metric.
(c)
Represents long-lived asset impairment
charges related to the RV and Outdoor Retail segment, which
primarily relate to locations affected by the 2019 Strategic
Shift.
(d)
Represents an adjustment to eliminate the
losses and gains on disposals and sales of various assets and other
expense, net.
(e)
Represents non-cash equity-based
compensation expense relating to employees and directors of the
Company.
(f)
Represents an adjustment to eliminate the
loss on remeasurement of the Tax Receivable Agreement primarily due
to changes in our effective income tax rate and the transfer of
certain assets from GSS to CWI.
(g)
Represents pre-opening store costs
associated with the Gander Outdoors store openings, which is
comprised of 1) Gander Outdoors-specific corporate and retail
overhead, 2) distribution center expenses, and 3) store-level
startup expenses. The Company incurred significant costs related to
the initial rollout of Gander Outdoors locations, which was
substantially complete by December 31, 2018. Based on the nature of
the acquisition through a bankruptcy auction and the large quantity
of retail locations opened and to be opened in a very compressed
timeframe, the Company does not deem the pre-opening store costs
for the initial rollout of Gander Outdoors locations to be normal,
recurring charges. The Company does not intend to adjust for
pre-opening store costs other than for the initial rollout of
Gander Outdoors.
(h)
Represents restructuring costs relating to
our 2019 Strategic Shift. These restructuring costs include
one-time employee termination benefits, contract termination costs,
incremental inventory reserve charges, and other associated
costs.
(i)
Represents the adjustment to net income
attributable to non-controlling interests resulting from the above
adjustments that impact the net income of CWGS, LLC. This
adjustment uses the non-controlling interest’s weighted average
ownership of CWGS, LLC of 58.0% and 58.3% for the three months
ended September 30, 2019 and 2018, respectively, and 58.1% and
58.4% for the nine months ended September 30, 2019 and 2018,
respectively.
(j)
Represents the reallocation of net income
attributable to non-controlling interests from the impact of the
assumed change in ownership of CWGS, LLC from stock options,
restricted stock units, and/or common units of CWGS, LLC.
(k)
Represents the income tax expense effect
of the above adjustment for reallocation of net income attributable
to non-controlling interests. This assumption uses an effective tax
rate of 25.3% for the adjustments for 2019 and 2018.
(l)
Represents the impact to the denominator
for stock options, restricted stock units, and/or common units of
CWGS, LLC.
(m)
The below amounts have not been considered
in our adjusted earnings per share – diluted amounts as the effect
of these items are anti-dilutive.
(n)
Represents adjustments to reflect the
income tax benefit of losses of consolidated C-corporations that
under the Company’s current equity structure cannot be used against
the income of other consolidated subsidiaries of CWGS, LLC.
Subsequent to the exchange of all common units in CWGS, LLC, the
Company believes certain actions could be taken such that the
C-corporations’ losses could offset income of other consolidated
subsidiaries. The adjustment reflects the income tax benefit
assuming effective tax rate of 25.3% during 2019 and 2018, for the
losses experienced by the consolidated C-corporations for which
valuation allowances have been recorded. No assumed release of
valuation allowance established for previous periods are included
in these amounts.
Prior to our Form 10-Q for the three months ended September 30,
2018, we had calculated adjusted earnings per share on a fully
exchanged basis regardless of whether the common units in CWGS, LLC
were dilutive. That calculation will no longer be presented,
however, we have provided anti-dilutive amounts in the table above,
when applicable.
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 Senior Secured Credit
Facilities use EBITDA to measure our compliance with covenants such
as consolidated leverage ratio. The Non-GAAP financial measures
have limitations as analytical tools, and should not be considered
in isolation, or as an alternative to, or a substitute for net
income or other financial statement data presented in our unaudited
condensed consolidated financial statements included in this press
release as indicators of financial performance. Some of the
limitations are:
- such measures do not reflect our cash expenditures, or future
requirements for capital expenditures or contractual
commitments;
- such measures do not reflect changes in, or cash requirements
for, our working capital needs;
- some of such measures do not reflect the interest expense, or
the cash requirements necessary to service interest or principal
payments on our debt;
- some of such measures do not reflect our tax expense or the
cash requirements to pay our taxes;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future and such measures do not reflect any cash
requirements for such replacements; and
- other companies in our industry may calculate such measures
differently than we do, limiting their usefulness as comparative
measures.
Due to these limitations, the Non-GAAP Financial Measures should
not be considered as measures of discretionary cash available to us
to invest in the growth of our business. We compensate for these
limitations by relying primarily on our GAAP results and using
these Non-GAAP Financial Measures only supplementally. As noted in
the tables above, certain of the Non-GAAP Financial Measures
include adjustments for loss and expense on debt restructure,
long-lived asset impairment, loss on disposal of assets,
equity-based compensation, Tax Receivable Agreement liability,
Gander Outdoors pre-opening costs, restructuring costs related to
the 2019 Strategic Shift, 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. 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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191107006053/en/
Investors: John Rouleau John.Rouleau@CampingWorld.com
Media Outlets: Karen Porter PR-CWGS@CampingWorld.com
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