Camping World Holdings Inc. (NYSE:CWH) ("Camping World,"
“Company,” “we,” “us” or “our”), the nation's largest network of
RV-centric retail locations, today reported results for the quarter
ended June 30, 2017. Unless stated otherwise, comparisons are to
the same period of 2016.
Second Quarter 2017
Summary
- Total revenue increased 20.1% to $1.3
billion;
- Gross profit increased 24.5% to $372.8
million and gross margin increased 102 basis points to 29.1%;
- Income from operations increased 32.3%
to $136.8 million and operating margin increased 98 basis points to
10.7%;
- Net income increased 26.3% to $105.3
million, net income margin increased 40 basis points to 8.2%, and
adjusted pro forma net income(1) increased 41.6% to $77.7
million;
- Diluted earnings per share(2) was $0.84
and adjusted pro forma earnings per fully exchanged and diluted
share(1) increased 38.5% to $0.91; and
- Adjusted EBITDA(3) increased 36.0% to
$142.1 million and adjusted EBITDA margin(3) increased 130 basis
points to 11.1%.
_________________________ (1) Adjusted pro forma net income
and adjusted pro forma earnings per fully exchanged and diluted
share are non-GAAP measures. For reconciliations of the adjusted
pro forma net income and adjusted pro forma earnings per fully
exchanged and diluted share to GAAP net income attributable to
Camping World Holdings, Inc. and diluted weighted-average shares of
Class A common stock outstanding, see the “Non-GAAP Financial
Measures” section later in this press release. (2) Diluted earnings
per Class A common stock is applicable only for periods after the
Company’s initial public offering. For a discussion of earnings per
share see the “Earnings Per Share” section later in this press
release. (3) Adjusted EBITDA and adjusted EBITDA margin are
non-GAAP measures. For reconciliations of adjusted EBITDA to GAAP
net income and adjusted EBITDA margin to GAAP net income margin,
see the “Non-GAAP Financial Measures” section later in this press
release.
Marcus Lemonis, Chairman and Chief Executive Officer, stated,
“We delivered exceptional record-breaking results in the second
quarter. Revenue increased 20.1% to $1.3 billion, net income
increased 26.3% to $105.3 million, adjusted pro forma EBITDA
increased 36.0% to $142.1 million and adjusted net income increased
41.6% to $77.7 million. We believe these results clearly
demonstrate the power and leverage of our unique operating model,
which sells a comprehensive portfolio of products and services
across a growing database of consumers being driven by our national
network of retail locations that cater to RV, boating and outdoor
enthusiasts. While our business model has traditionally been
focused on the RV owner, we see a much broader opportunity to
leverage our products and services across the larger base of
outdoor lifestyle consumers.”
Presentation
This press release presents historical results, for the periods
presented, of Camping World Holdings, Inc. (“CWH”) and its
subsidiaries that are presented in accordance with accounting
principles generally accepted in the United States (“GAAP”), unless
noted as a non-GAAP financial measure. The Company’s initial public
offering (“IPO”) and related reorganization transactions
(“Reorganization Transactions”) that occurred on October 6, 2016
resulted in CWH as the sole managing member of CWGS Enterprises,
LLC (“CWGS, LLC”), with sole voting power in and control of the
management of CWGS, LLC. Despite its position as sole managing
member of CWGS, LLC, CWH has a minority economic interest in CWGS,
LLC. As of June 30, 2017, CWH owned 32.9% of CWGS, LLC.
Accordingly, the Company consolidates the financial results of
CWGS, LLC and reports a non-controlling interest in its
consolidated financial statements. As the Reorganization
Transactions are considered transactions among entities under
common control, the financial statements for the periods prior to
the IPO and related Reorganization Transactions have been adjusted
to combine the previously separate entities for presentation
purposes. Unless otherwise indicated, all financial comparisons in
this press release compare our financial results from the 2017
second quarter to our financial results from the 2016 second
quarter.
Second Quarter 2017 Results Compared to
Second Quarter 2016 Results
Units and Average Selling Prices
New vehicle units sold increased 38.2% to 21,930 and the average
selling price of a new vehicle decreased 4.5% to $34,787 in the
second quarter of fiscal 2017. The increase in new vehicle units
sold was primarily driven by strong consumer demand for new
vehicles and a shortage of supply of used vehicles. The decrease in
the average selling price of a new vehicle was driven by a higher
mix of lower-priced towable units.
Used vehicle units sold decreased 8.4% to 9,073 and the average
selling price of a used vehicle decreased 0.9% to $21,660 in the
second quarter of fiscal 2017. The decrease in used vehicle units
sold was primarily driven by reduced inventory availability
resulting from fewer trades on new vehicle unit sales and the
disposition of the automobile unit business as a result of the
distribution of the AutoMatch business in the second quarter of
2016.
Revenue
Total revenue increased 20.1% to $1.3 billion from $1.1 billion
in the second quarter of fiscal 2016.
Consumer Services and Plans revenue increased 5.9% to $48.1
million from $45.4 million in the second quarter of fiscal 2016.
The increase was primarily driven by increases in vehicle insurance
and Good Sam TravelAssist programs primarily due to increased
policies in force, roadside assistance contracts and other
increases.
Retail revenue increased 20.7% to $1.2 billion from $1.0 billion
in the second quarter of fiscal 2016. Within the Retail segment,
new vehicle revenue increased 31.9% to $762.9 million, used vehicle
revenue decreased 9.2% to $196.5 million, parts, services and other
revenue increased 10.4% to $174.2 million and finance and insurance
revenue increased 44.5% to $101.0 million. Continued strong
consumer demand for recreational vehicles combined with a shortage
of supply of used vehicles benefited new vehicle and finance and
insurance sales and decreased used vehicle sales. Finance and
insurance net revenue as a percentage of total new and used vehicle
revenue increased to 10.5% from 8.8% in the second quarter of
fiscal 2016, and benefited from a sales mix shift toward
lower-priced new towable units and better integration of the
finance and insurance selling process.
Same store sales of the 115 retail locations that were open both
at the beginning of the preceding fiscal year and at the end of the
second quarter of fiscal 2017 increased 10.6% to $1.1 billion. The
increase in same store sales at retail locations was primarily
driven by the increased volume of new towable units sold, and, to a
lesser extent, revenue increases from finance and insurance,
partially offset by a decrease in same store sales from used
vehicle units sold.
The Company operated a total of 137 retail locations and two
Overton’s retail locations as of June 30, 2017, compared to 120
retail locations at June 30, 2016. In the second quarter of fiscal
2017, the Company added ten RV-centric locations from completed
acquisitions, one RV-centric location from a greenfield opening,
and two Overton’s retail locations.
Gross Profit
Gross profit increased 24.5% to $372.8 million and gross margin
increased 102 basis points to 29.1% from the second quarter of
fiscal 2016. Consumer Services and Plans gross profit increased
5.2% to $27.5 million and gross margin decreased 40 basis points to
57.3% of segment revenue from the second quarter of fiscal 2016.
The decrease in Consumer Services and Plans gross margin was
primarily due to reduced gross margin from consumer magazines,
partially offset by an increase from the vehicle insurance and
TravelAssist programs. Retail gross profit increased 26.3% to
$345.3 million and gross margin increased 124 basis points to 28.0%
of segment revenue from the second quarter of fiscal 2016. The
increase in Retail gross margin was driven primarily by a 173 basis
point increase in the finance and insurance penetration rate to
10.5% of vehicle sales from 8.8% of vehicle sales in the second
quarter of fiscal 2016, and a 593 basis point increase in gross
margin from used vehicle unit sales to 27.0% from the second
quarter of fiscal 2016.
Operating Expenses
Total operating expenses increased 20.4% to $236.1 million from
the second quarter of fiscal 2016. Selling, general and
administrative (“SG&A”) expenses increased 20.0% to $228.4
million from $190.3 million in the second quarter of fiscal 2016.
The increase in SG&A expenses was primarily driven by the
additional expenses associated with the incremental seventeen
dealerships and two Overton’s locations operated during the second
quarter of 2017 versus the prior year period, $2.1 million of
transaction expenses associated with the acquisition into new or
complimentary markets, including the Gander Mountain Acquisition
and $1.4 million of pre-opening and payroll costs associated with
the Gander Mountain Acquisition. SG&A expenses as a percentage
of total gross profit decreased 227 basis points to 61.3%, which
includes the impact of the $2.1 million of transaction expenses and
the $1.4 million of pre-opening and payroll costs associated with
the Gander Mountain Acquisition. Depreciation and amortization
expense increased 25.7% to $7.6 million.
Interest & Other Expenses
Floor plan interest expense increased 22.3% to $6.6 million from
$5.4 million in the second quarter of fiscal 2016. The increase was
primarily related to a 7.8% increase in average inventory for the
second quarter 2017 compared to the prior year period, primarily
due to the seventeen additional dealership locations opened over
the last twelve months, partially offset by a 6 basis point
decrease in the average floor plan borrowing rate. Other interest
expense decreased 16.1% to $10.6 million from $12.6 million in the
second quarter last year primarily related to a decrease in average
debt outstanding, and a 91 basis point decrease in the average
interest rate.
Net Income, Adjusted Pro Forma Net Income(1)
and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted
Share(1)
Net income increased 26.3% to $105.3 million and adjusted pro
forma net income(1) increased 41.6% to $77.7 million from $54.9
million in the second quarter of fiscal 2016. Adjusted pro forma
earnings per fully exchanged and diluted share(1) increased 38.5%
to $0.91 from $0.65 in the second quarter of fiscal 2016.
Adjusted EBITDA(3)
Adjusted EBITDA(3) increased 36.0% to $142.1 million from $104.5
million and adjusted EBITDA(3) margin increased 130 basis points to
11.1% from 9.8% in the second quarter of fiscal 2016.
Select Balance Sheet and Cash Flow Items
The Company's working capital and cash and cash equivalents
balance at June 30, 2017 were $393.6 million and $252.2 million,
respectively, compared to $266.8 million and $114.2 million,
respectively, at December 31, 2016. During the quarter ended June
30, 2017, the Company received proceeds, net of underwriter
discounts and commissions, of $122.5 million from the sale of 4.6
million Class A shares in a public offering. At the end of the
second quarter of 2017, the Company had $3.2 million of borrowings
under its $35 million revolving credit facility, $736.3 million of
term loan principal outstanding under its senior secured credit
facilities and $780.9 million of floor plan notes payable
outstanding under its floor plan financing facility. Inventory at
the end of the second quarter of fiscal 2017 increased 10.6% to
$1,106.1 million compared to $909.3 million at December 31,
2016.
Conference Call Information
A conference call to discuss the fiscal 2017 second quarter
financial results is scheduled for today, August 10, 2017, at 4:30
p.m. Eastern Time. Investors and analysts interested in
participating in the call are invited to dial 877-723-9518
(international callers please dial 1-719-325-2429) approximately 10
minutes prior to the start of the call. A live audio webcast of the
conference call will be available online at
http://investor.campingworld.com. A taped replay of the conference
call will be available within two hours of the conclusion of the
call by dialing 844-512-2921 (international callers please dial
412-317-6671) and using access code 8899561 until August 17, 2017,
or on the Company’s website.
About Camping World Holdings,
Inc.
Camping World Holdings, Inc., is the only provider of a
comprehensive portfolio of services, protection plans, products and
resources for recreational vehicle (“RV”) enthusiasts. Through its
two iconic brands, Camping World and Good Sam, the company offers
new and used RVs for sale, vehicle service and maintenance along
with more than 10,000 products and services through our retail
locations and membership clubs. Good Sam branded offerings provide
the industry’s broadest and deepest range of services, protection
plans, products and resources while the Camping World brand
operates the largest national network of RV-centric retail
locations in the United States through 137 retail locations in 36
states, two Overton’s locations offering marine and watersports
products, and an e-commerce platform. With both brands founded in
1966, product and service offerings are based on 50 years of
experience and customer feedback from RV enthusiasts. In May 2017,
the Company also acquired certain assets of Gander Mountain and its
Overton’s boating business through a recent bankruptcy auction.
For more information, 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 comparative advantages and our plans and
ability to expand consumer base and capture growth opportunities.
These forward-looking statements are based on management’s current
expectations.
These statements are neither promises nor guarantees, but
involve known and unknown risks, uncertainties and other important
factors that may cause our actual results, performance or
achievements to be materially different from any future results,
performance or achievements expressed or implied by the
forward-looking statements, including, but not limited to, the
following: the availability of financing to us and our customers;
fuel shortages, or high prices for fuel; the well-being, as well as
the continued popularity and reputation for quality, of our
manufacturers; general economic conditions in our markets and
ongoing economic and financial uncertainties; our ability to
attract and retain customers; competition in the market for
services, protection plans, products and resources targeting the RV
lifestyle or RV enthusiast; our expansion into new, unfamiliar
markets as well as delays in opening or acquiring new retail
locations; unforeseen expenses, difficulties, and delays frequently
encountered in connection with expansion through acquisitions; our
failure to maintain the strength and value of our brands; our
ability to successfully order and manage our inventory to reflect
consumer demand in a volatile market and anticipate changing
consumer preferences and buying trends; fluctuations in our same
store sales and whether they will be a meaningful indicator of
future performance; the cyclical and seasonal nature of our
business; our ability to operate and expand our business and to
respond to changing business and economic conditions, which depends
on the availability of adequate capital; the restrictive covenants
in our existing senior secured credit facilities and our floorplan
financial facility; our reliance on three fulfillment and
distribution centers for our retail, e-commerce and catalog
businesses; natural disasters, whether or not caused by climate
change, unusual weather condition, epidemic outbreaks, terrorist
acts and political events; our dependence on our relationships with
third party providers of services, protection plans, products and
resources and a disruption of these relationships or of these
providers’ operations; whether third party lending institutions and
insurance companies will continue to provide financing for RV
purchases; our inability to retain senior executives and attract
and retain other qualified employees; our ability to meet our labor
needs; our inability to maintain the leases for our retail
locations or locate alternative sites for our stores in our target
markets and on terms that are acceptable to us; our business being
subject to numerous federal, state and local regulations;
regulations applicable to the sale of extended service contracts;
our dealerships’ susceptibility to termination, non-renewal or
renegotiation of dealer agreements if state dealer laws are
repealed or weakened; our failure to comply with certain
environmental regulations; climate change legislation or
regulations restricting emission of “greenhouse gases;” a failure
in our e-commerce operations, security breaches and cybersecurity
risks; our inability to enforce our intellectual property rights
and accusations of our infringement on the intellectual property
rights of third parties; our inability to maintain or upgrade our
information technology systems or our inability to convert to
alternate systems in an efficient and timely manner; disruptions to
our information technology systems or breaches of our network
security; Marcus Lemonis, through his beneficial ownership of our
shares directly or indirectly held by ML Acquisition Company, LLC
and ML RV Group, LLC, has substantial control over us and may
approve or disapprove substantially all transactions and other
matters requiring approval by our stockholders, including, but not
limited to, the election of directors; the exemptions from certain
corporate governance requirements that we will qualify for, and
intend to rely on, due to the fact that we are a “controlled
company” within the meaning of the New York Stock Exchange, or
NYSE, listing requirements; and whether we are able to realize any
tax benefits that may arise from our organizational structure and
any redemptions or exchanges of CWGS, LLC common units for cash or
stock.
These and other important factors discussed under the caption
“Risk Factors” in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission, or SEC, on March 13, 2017, and
our other reports filed with the SEC could cause actual results to
differ materially from those indicated by the forward-looking
statements made in this press release. Any such forward-looking
statements represent management’s estimates as of the date of this
press release. While we may elect to update such forward-looking
statements at some point in the future, we disclaim any obligation
to do so, even if subsequent events cause our views to change,
except as required under applicable law. These forward-looking
statements should not be relied upon as representing our views as
of any date subsequent to the date of this press release.
Results of Operations for the Three
Months Ended June 30, 2017
Camping World Holdings, Inc. and Subsidiaries Condensed
Consolidated Statements of Operations (In Thousands Except Per
Share Amounts)
Three Months Ended June 30,
Six Months Ended June 30, 2017
2016 2017 2016
(unaudited)
(unaudited) (unaudited) (unaudited) Revenue: Consumer services and
plans $ 48,103 $ 45,428 $ 98,349 $ 90,426 Retail New vehicles
762,876 578,289 1,267,462 987,765 Used Vehicles 196,522 216,526
342,993 395,289 Parts, services and other 174,196 157,742 290,419
271,226 Finance and insurance, net 100,970
69,870 167,259 120,897 Subtotal
1,234,564 1,022,427 2,068,133 1,775,177 Total revenue
1,282,667 1,067,855 2,166,482 1,865,603
Costs applicable to revenue (exclusive of
depreciation and amortization shown separately below):
Consumer services and plans 20,560 19,237 41,707 39,118 Retail New
vehicles 650,850 495,159 1,088,998 846,007 Used Vehicles 143,497
170,934 254,640 316,022 Parts, services and other 94,951
83,041 156,546 142,676
Subtotal 889,298 749,134 1,500,184 1,304,705 Total
costs applicable to revenue 909,858 768,371 1,541,891 1,343,823
Gross profit: Consumer services and plans 27,543 26,191
56,642 51,308 Retail New vehicles 112,026 83,130 178,464 141,758
Used Vehicles 53,025 45,592 88,353 79,267 Parts, services and other
79,245 74,701 133,873 128,550 Finance and insurance, net
100,970 69,870 167,259
120,897 Subtotal 345,266 273,293 567,949 470,472
Total gross profit 372,809 299,484 624,591 521,780 Operating
expenses: Selling, general, and administrative 228,444 190,323
403,934 350,711 Depreciation and amortization 7,584 6,034 14,437
11,925 Loss (gain) on sale of assets 31 (224 )
(287 ) (248 ) Total operating expenses 236,059
196,133 418,084 362,388
Income from operations 136,750 103,351 206,507
159,392 Other income (expense): Floor plan interest expense
(6,587 ) (5,387 ) (11,889 ) (10,529 ) Other interest expense, net
(10,557 ) (12,577 ) (19,961 ) (25,325 ) Other income, net –
(2 ) 17 (2 ) (17,144 )
(17,966 ) (31,833 ) (35,856 ) Income
before income taxes 119,606 85,385 174,674 123,536 Income tax
expense (14,284 ) (1,979 ) (19,911 )
(2,350 ) Net income 105,322 83,406 154,763 121,186 Less: net income
attributable to non-controlling interests (85,917 )
– (127,905 )
– Net income
attributable to Camping World Holdings, Inc. $ 19,405 $
83,406 $ 26,858 $ 121,186 Earnings per
share of Class A common stock (1): Basic $ 0.84 $ 1.28 Diluted $
0.84 $ 1.24 Weighted average shares of Class A common stock
outstanding (1): Basic 22,977 20,973 Diluted 22,977 84,673
(1) Basic and diluted earnings per Class A common stock is
applicable only for periods after the Company's IPO. Camping
World Holdings, Inc. and Subsidiaries Condensed Consolidated
Balance Sheets ($ in Thousands Except Per Share Amounts)
June 30, December 31,
2017
2016 Assets
(unaudited)
Current assets: Cash and cash equivalents
$ 252,161 $
114,196 Contracts in transit
86,114 29,012 Accounts
receivable, net
73,164 58,488 Inventories, net
1,106,098 909,254 Prepaid expenses and other assets
24,189 21,755 Total current assets
1,541,726 1,132,705 Property and equipment, net
151,965 130,760 Deferred tax asset, net
243,185
125,878 Intangibles assets, net
21,785 3,386 Goodwill
289,884 153,105 Other assets
17,871
17,931 Total assets
$ 2,266,416
$ 1,563,765
Liabilities and stockholders' equity
(deficit) Current liabilities: Accounts payable
$
142,236 $ 68,655 Accrued liabilities
115,374 78,044
Deferred revenues and gains
69,920 68,643 Current portion of
capital lease obligation
985 1,224 Current portion of tax
receivable agreement liability
6,469 991 Current portion of
long-term debt
7,400 6,450 Notes payable – floor plan, net
780,905 625,185 Other current liabilities
24,812 16,745 Total current liabilities
1,148,101 865,937 Capital lease obligations, net of
current portion
389 841 Right to use liability
10,270
10,343 Tax receivable agreement liability, net of current portion
86,857 18,190 Long-term debt, net of current portion
710,649 620,303 Deferred revenues and gains
56,301
52,210 Other long-term liabilities
31,688
24,156 Total liabilities
2,044,255 1,591,980
Commitments and contingencies Stockholders' equity
(deficit): Stockholders equity
– – Preferred stock, par
value $0.01 per share – 20,000,000 shares authorized; none issued
and outstanding as of June 30, 2017 and December 31, 2016
–
– Class A common stock, par value $0.01 per share – 250,000,000
shares authorized; 29,061,464 issued and 29,061,420 outstanding as
of June 30, 2017 and 18,935,916 issued and outstanding as of
December 31, 2016
291 189 Class B common stock, par value
$0.0001 per share – 75,000,000 shares authorized; 69,066,445
issued; and 57,031,184 outstanding as of June 30, 2017 and
62,002,729 outstanding as of December 31, 2016
6 6 Class C
common stock, par value $0.0001 per share – one share authorized,
issued and outstanding as of June 30, 2017 and December 31, 2016
– – Additional paid-in capital
153,071 74,239
Retained earnings
20,068 544
Total stockholders' equity attributable to Camping World Holdings,
Inc.
173,436 74,978 Non-controlling interests
48,725 (103,193 ) Total stockholders' equity
(deficit)
222,161 (28,215 ) Total liabilities
and stockholders' equity (deficit)
$ 2,266,416
$ 1,563,765
Earnings Per Share
On October 6, 2016, the limited liability company agreement of
CWGS, LLC was amended and restated to, among other things, (i)
provide for a new single class of common membership interests, the
common units of CWGS, LLC, and (ii) exchange all of the
then-existing membership interests in CWGS, LLC for common units of
CWGS, LLC (collectively, the “Recapitalization”). This
Recapitalization changed the relative membership rights of the
owners of membership interests in CWGS, LLC such that retroactive
application of the Recapitalization to periods prior to the IPO for
the purposes of calculating earnings per share would not be
appropriate.
Prior to the IPO, the CWGS, LLC membership structure included
membership units, preferred units, and profits units. The Company
analyzed the calculation of earnings per unit for periods prior to
the IPO using the two-class method and determined that it resulted
in a value that would not be meaningful to the users of the
consolidated financial statements. Therefore, earnings per share
information has not been presented for periods prior to the IPO on
October 6, 2016.
Three Months Six Months Ended
Ended June 30, June 30, (In thousands except
per share amounts)
2017 2017 Numerator: Net income $
105,322 $ 154,763 Less: net income attributable to non-controlling
interests (85,917 ) (127,905 ) Net income
attributable to Camping World Holdings, Inc. — basic 19,405 26,858
Add: Reallocation of net income
attributable to non-controlling interests from the assumed exchange
of common units of CWGS, LLC for Class A common stock
—
78,193
Net income attributable to Camping World Holdings, Inc. —
diluted $ 19,405 $ 105,051 Denominator: Weighted-average shares of
Class A common stock outstanding — basic 22,977 20,973 Dilutive
common units of CWGS, LLC that are convertible into Class A common
stock — 63,700 Weighted-average shares
of Class A common stock outstanding — diluted 22,977 84,673
Earnings per share of Class A common stock — basic $ 0.84 $ 1.28
Earnings per share of Class A common stock — diluted $ 0.84 $ 1.24
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are
prepared and presented in accordance with accounting principles
generally accepted in the U.S. (“GAAP”), we use the following
non-GAAP financial measures: EBITDA, adjusted EBITDA, adjusted
EBITDA margin, adjusted pro forma net income and adjusted pro forma
earnings per fully exchanged and diluted share (collectively the
"Non-GAAP Financial Measures"). We believe that these Non-GAAP
Financial Measures, when used in conjunction with GAAP financial
measures, provide useful information about operating results,
enhance the overall understanding of past financial performance and
future prospects, and allow for greater transparency with respect
to the key metrics we use in our financial and operational decision
making. These non-GAAP measures are also frequently used by
analysts, investors and other interested parties to evaluate
companies in the Company’s industry. The presentation of this
financial information is not intended to be considered in isolation
or as a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP, and they should not
be construed as an inference that the Company’s future results will
be unaffected by any items adjusted for in these non-GAAP measures.
In evaluating these non-GAAP measures, you should be aware that in
the future the Company may incur expenses that are the same as or
similar to some of those adjusted in this presentation. The
Non-GAAP Financial Measures that we use are not necessarily
comparable to similarly titled measures used by other companies due
to different methods of calculation.
EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
We define “EBITDA” as net income before other interest expense
(excluding floor plan interest expense), provision for income taxes
and depreciation and amortization. We define “Adjusted EBITDA” as
EBITDA further adjusted for the impact of certain non-cash and
other items that we do not consider in our evaluation of ongoing
operating performance. These items include, among other things,
loss (gain) on sale of assets, monitoring fees, equity-based
compensation, gain on remeasurement of our Tax Receivable
Agreements, acquisition related transaction expenses and
pre-opening costs, and other unusual or one-time items. We define
“Adjusted EBITDA Margin” as Adjusted EBITDA as a percentage of
total revenue. We caution investors that amounts presented in
accordance with our definitions of EBITDA, Adjusted EBITDA and
Adjusted EBITDA Margin may not be comparable to similar measures
disclosed by our competitors, because not all companies and
analysts calculate EBITDA, Adjusted EBITDA and Adjusted EBITDA
Margin in the same manner. We present EBITDA, Adjusted EBITDA and
Adjusted EBITDA Margin because we consider them to be important
supplemental measures of our performance and believe they are
frequently used by securities analysts, investors and other
interested parties in the evaluation of companies in our industry.
Management believes that investors’ understanding of our
performance is enhanced by including these Non-GAAP Financial
Measures as a reasonable basis for comparing our ongoing results of
operations.
The following tables reconcile EBITDA, Adjusted EBITDA, and
Adjusted EBITDA Margin to the most directly comparable GAAP
financial performance measure, which are net income, net income and
net income margin, respectively:
Three Months Ended Six Months Ended
June 30, June 30, ($ in thousands)
2017
2016 2017 2016 Net Income
$ 105,322 $ 83,406 $ 154,763 $ 121,186 Other interest expense, net
10,557 12,577 19,961 25,325 Depreciation and amortization 7,584
6,034 14,437 11,925 Income tax expense 14,284
1,979 19,911 2,350
EBITDA
137,747 103,996 209,072 160,786 Adjustments: Loss (gain) on
sale of assets (a) 31 (222 ) (287 ) (246 ) Monitoring fee (b) – 625
– 1,250 Equity-based compensation (c) 869 60 1,588 60 Gain on
remeasurement of Tax Receivable Agreement (d) – – (17 ) –
Acquisitions - transaction expense (e) 2,100 – 2,100 – Acquisitions
- pre-opening costs (f) 1,351 –
1,351 –
Adjusted EBITDA $ 142,098
$ 104,459 $ 213,807 $ 161,850
Three Months Ended Six Months Ended June
30, June 30, (as percentage of total revenue)
2017 2016 2017 2016 Net
income margin 8.2 % 7.8 % 7.1 % 6.5 % Other interest expense,
net 0.8 % 1.2 % 0.9 % 1.4 % Depreciation and amortization 0.6 % 0.6
% 0.7 % 0.6 % Income tax expense 1.1 % 0.2 %
0.9 % 0.1 %
Subtotal EBITDA margin 10.7 % 9.7 % 9.7 %
8.6 % Adjustments: Loss (gain) on sale of assets (a) 0.0 %
(0.0 %) (0.0 %) (0.0 %) Monitoring fee (b) – 0.1 % – 0.1 %
Equity-based compensation (c) 0.1 % 0.0 % 0.1 % 0.0 % Gain on
remeasurement of Tax Receivable Agreement (d) – – (0.0 %) –
Acquisitions - transaction expense (e) 0.2 % – 0.1 % – Acquisitions
- pre-opening costs (f) 0.1 % – 0.1 %
–
Adjusted EBITDA margin 11.1 %
9.8 % 9.9 % 8.7 %
(a)
Represents an adjustment to eliminate the
losses and gains on sales of various assets.
(b)
Represents monitoring fees paid pursuant
to a monitoring agreement to Crestview and Stephen Adams. The
monitoring agreement was terminated on October 6, 2016 in
connection with the IPO.
(c)
Represents non-cash equity-based
compensation expense relating to employees and directors of the
Company.
(d)
Represents an adjustment to eliminate the
gains on remeasurement of the Tax Receivable Agreement primarily
due to changes in our effective income tax rate.
(e)
Represents transaction expenses, primarily
legal costs, associated with acquisitions into new or complimentary
markets, including the Gander Mountain Acquisition. This amount
excludes transaction expenses related to the acquisition of RV
dealerships and consumer shows.
(f)
Represents pre-opening store costs,
including payroll costs, associated with the Gander Mountain
Acquisition.
Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings
Per Fully Exchanged and Diluted Share
We define “Adjusted Pro Forma Net Income” as net income
attributable to CWH adjusted for the reallocation of income
attributable to non-controlling interests from the assumed exchange
of all outstanding common units in CWGS, LLC (or the common unit
equivalent of membership interests in CWGS, LLC for periods prior
to the IPO) for newly-issued shares of Class A common stock of CWH
and further adjusted for the impact of certain non-cash and other
items that we do not consider in our evaluation of ongoing
operating performance. These items include, among other things,
loss (gain) on sale of assets, monitoring fees, equity-based
compensation, gain on remeasurement of the Tax Receivable
Agreement, acquisition related transaction expenses and pre-opening
costs, other unusual or one-time items, and the income tax expense
effect of (i) these adjustments and (ii) the pass-through entity
taxable income as if the parent company was a subchapter C
corporation in periods prior to the IPO. We define “Adjusted Pro
Forma Earnings Per Fully Exchanged and Diluted Share” as Adjusted
Pro Forma Net Income divided by the weighted-average shares of
Class A common stock outstanding, assuming (i) the full exchange of
all outstanding common units in CWGS, LLC (or the common unit
equivalent of membership interests in CWGS, LLC for periods prior
to the IPO) for newly-issued shares of Class A common stock of CWH,
(ii) the Class A common stock issued in connection with the IPO was
outstanding as of January 1 of each year presented, and (iii) the
dilutive effect of stock options and restricted stock units, if
any. We present Adjusted Pro Forma Net Income and Adjusted Pro
Forma Earnings Per Fully Exchanged and Diluted Share because we
consider them to be important supplemental measures of our
performance and we believe that investors’ understanding of our
performance is enhanced by including these Non-GAAP financial
measures as a reasonable basis for comparing our ongoing results of
operations.
The following table reconciles Adjusted Pro Forma Net Income and
Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share
to the most directly comparable GAAP financial performance measure,
which is net income attributable to Camping World Holdings, Inc.
and weighted-average shares of Class A common stock outstanding —
diluted:
Three Months Ended Six Months Ended June 30,
June 30, June 30, June 30, (In thousands except per share
amounts) 2017 2016 2017 2016
Numerator: Net income
attributable to Camping World Holdings, Inc. $ 19,405 $ 83,406 $
26,858 $ 121,186 Adjustments: Reallocation of net income
attributable to non-controlling interests from the assumed exchange
of common units of CWGS, LLC (a) 85,917 — 127,905 — Loss (gain) on
sale of assets (b) 31 (222 ) (287 ) (246 ) Monitoring fee (c) — 625
— 1,250 Equity-based compensation expense (d) 869 60 1,588 60 Gain
on remeasurement of tax receivable agreement (e) — — (17 ) —
Acquisitions - transaction expense (f) 2,100 — 2,100 — Acquisitions
- pre-opening costs (g) 1,351 — 1,351 — Income tax expense (h)
(31,963 ) (29,000 ) (50,212 ) (45,778 )
Adjusted pro forma net income $ 77,710 $ 54,869 $
109,286 $ 76,472
Denominator:
Weighted-average Class A common shares outstanding - diluted 22,977
— 84,673 — Adjustments: Assumed exchange of pre-IPO common unit
equivalent of membership interests in CWGS, LLC (i) — 71,924 —
72,288 Assumed issuance of Class A common stock in connection with
IPO (j) 62,586 11,872 — 11,872 Dilutive options to purchase Class A
common stock 56 — 101 — Dilutive restricted stock units 61
— 59 — Adjusted
pro forma fully exchanged weighted average Class A common shares
outstanding - diluted 85,680 83,796
84,833 84,160 Adjusted pro forma
earnings per fully exchanged and diluted share $ 0.91 $ 0.65
$ 1.29 $ 0.91
____________________
(a)
Represents the reallocation of net income
attributable to non-controlling interests from the assumed exchange
of common units of CWGS, LLC in periods in which income was
attributable to non-controlling interests.
(b)
Represents an adjustment to eliminate the
losses and gains on sales of various assets.
(c)
Represents monitoring fees paid pursuant
to a monitoring agreement to Crestview and Stephen Adams. The
monitoring agreement was terminated on October 6, 2016 in
connection with our IPO.
(d)
Represents non-cash equity-based
compensation expense relating to employees and directors of the
Company.
(e)
Represents an adjustment to eliminate the
gains on remeasurement of the Tax Receivable Agreement primarily
due to changes in our effective income tax rate.
(f)
Represents transaction expenses, primarily
legal costs, associated with acquisitions into new or complimentary
markets, including the Gander Mountain Acquisition. This amount
excludes transaction expenses related to the acquisition of RV
dealerships and consumer shows.
(g)
Represents pre-opening store costs,
including payroll costs, associated with the Gander Mountain
Acquisition.
(h)
Represents the income tax expense effect
of (i) the above adjustments and (ii) the pass-through entity
taxable income as if the parent company was a subchapter C
corporation in periods prior to the IPO. This assumption uses an
effective tax rate of 38.5% for the adjustments and the
pass-through entity taxable income in periods prior to the IPO.
(i)
Represents the assumed exchange of pre-IPO
membership interests in CWGS, LLC at their common unit equivalent
amount.
(j)
Represents the assumption that the shares
of Class A common stock issued in connection with the IPO were
outstanding as of January 1 of each period.
Uses and Limitations of Non-GAAP Financial Measures
Management and our board of directors use the Non-GAAP financial
measures:
- as a measurement of operating
performance because they assist us in comparing the operating
performance of our business on a consistent basis, as they remove
the impact of items not directly resulting from our core
operations;
- for planning purposes, including the
preparation of our internal annual operating budget and financial
projections;
- to evaluate the performance and
effectiveness of our operational strategies; and
- to evaluate our capacity to fund
capital expenditures and expand our business.
By providing these Non-GAAP financial measures, together with
reconciliations, we believe we are enhancing investors’
understanding of our business and our results of operations, as
well as assisting investors in evaluating how well we are executing
our strategic initiatives. In addition, our existing senior secured
credit facilities use EBITDA to measure our compliance with
covenants such as consolidated leverage ratio. The Non-GAAP
financial measures have limitations as analytical tools, and should
not be considered in isolation, or as an alternative to, or a
substitute for net income or other financial statement data
presented in our unaudited condensed consolidated financial
statements included in this press release as indicators of
financial performance. Some of the limitations are:
- such measures do not reflect our cash
expenditures, or future requirements for capital expenditures or
contractual commitments;
- such measures do not reflect changes
in, or cash requirements for, our working capital needs;
- some of such measures do not reflect
the interest expense, or the cash requirements necessary to service
interest or principal payments on our debt;
- some of such measures do not reflect
our tax expense or the cash requirements to pay our taxes;
- although depreciation and amortization
are non-cash charges, the assets being depreciated and amortized
will often have to be replaced in the future and such measures do
not reflect any cash requirements for such replacements; and
- other companies in our industry may
calculate such measures differently than we do, limiting their
usefulness as comparative measures.
Due to these limitations, the Non-GAAP financial measures should
not be considered as measures of discretionary cash available to us
to invest in the growth of our business. We compensate for these
limitations by relying primarily on our GAAP results and using
these Non-GAAP financial measures only supplementally. As noted in
the tables above, certain of the Non-GAAP financial measures
include adjustments for loss (gain) on sale of assets, monitoring
fees, equity-based compensation, gain on remeasurement of the Tax
Receivable Agreement, acquisition related transaction expenses and
pre-opening costs, other unusual or one-time items, and the income
tax expense effect described above, as applicable. It is reasonable
to expect that certain of these items will occur in future periods.
However, we believe these adjustments are appropriate because the
amounts recognized can vary significantly from period to period, do
not directly relate to the ongoing operations of our business and
complicate comparisons of our internal operating results and
operating results of other companies over time. In addition, these
certain Non-GAAP financial measures adjust for other items that we
do not expect to regularly record in periods after the IPO,
including monitoring fees. Each of the normal recurring adjustments
and other adjustments described in this paragraph and in the
reconciliation tables above help management with a measure of our
core operating performance over time by removing items that are not
related to day to day operations.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170810006096/en/
Investor Relations:ICRJohn Rouleau,
203-682-8200John.Rouleau@ICRinc.comorRachel Schacter,
203-682-8200Rachel.Schacter@ICRinc.comorMedia:ICRJessica
Liddell, 203-682-8208Jessica.Liddell@ICRinc.com
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