LINCOLNSHIRE, Ill.--(BUSINESS WIRE)--
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 March 31, 2017.
Unless stated otherwise, comparisons are to the same period of 2016.
First Quarter 2017 Summary
-
Total revenue increased 10.8% to $883.8 million;
-
Gross profit increased 13.3% to $251.8 million and gross margin
increased 62 basis points to 28.5%;
-
Income from operations increased 24.5% to $69.8 million and operating
margin increased 87 basis points to 7.9%;
-
Net income increased 30.9% to $49.4 million, net income margin
increased 86 basis points to 5.6%; and adjusted pro forma net income(1)
increased 46.2% to $31.6 million;
-
Basic and diluted earnings per share(2) for the first
quarter of 2017 were $0.39 and $0.37, respectively, and adjusted pro
forma earnings per fully exchanged and diluted share(1) for
the quarter increased 47.2% to $0.38; and
-
Adjusted EBITDA(3) increased 24.9% to $71.7 million and
adjusted EBITDA(3) margin increased 92 basis points to 8.1%.
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(1)
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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.
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(2)
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Basic and 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.
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(3)
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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.
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Marcus Lemonis, Chairman and Chief Executive Officer, stated, “Trends
across our business continue to be very strong and we are very pleased
with our first quarter financial results. In the quarter, net income
increased 30.9% to $49.4 million and adjusted EBITDA increased 24.9% to
$71.7 million on a 10.8% increase in revenue to $883.8 million. We
believe these results demonstrate the strength and operating leverage in
our model. Being the only provider of a comprehensive portfolio of
services, protection plans, products and resources for RV enthusiasts
and the largest national network of RV-centric retail locations in the
United States, we are benefiting from the continued growth in the
installed base of recreational vehicles and strength in the lower priced
towable market.”
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 March 31, 2017, CWH owned 22.6% 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 first quarter to our financial results from the
2016 first quarter.
First Quarter 2017 Results Compared to First
Quarter 2016 Results
Units and Average Selling Prices
New vehicle units sold increased 30.9% to 13,763 and the average selling
price of a new vehicle decreased 5.9% to $36,663 in the first 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 18.8% to 6,516 and the average selling
price of a used vehicle increased 0.9% to $22,479 in the first quarter
of fiscal 2017. The decrease in used vehicle units sold was primarily
driven by reduced inventory availability 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 10.8% to $883.8 million from $797.7 million in
the first quarter of fiscal 2016.
Consumer Services and Plans revenue increased 11.7% to $50.2 million
from $45.0 million in the first quarter of fiscal 2016. The increase was
primarily driven by increases in consumer show exhibit and admissions
revenue, club memberships, roadside assistance contracts, and vehicle
insurance written premiums.
Retail revenue increased 10.7% to $833.6 million from $752.8 million in
the first quarter of fiscal 2016. Within the Retail segment, new vehicle
revenue increased 23.2% to $504.6 million, used vehicle revenue
decreased 18.1% to $146.5 million, parts, services and other revenue
increased 2.4% to $116.2 million and finance and insurance revenue
increased 29.9% to $66.3 million. 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 10.2% from
8.7% in the first quarter of fiscal 2016, and benefited from a sales mix
shift toward new lower-priced towable units and higher penetration rates.
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 first
quarter of 2017 increased 9.6% to $771.7 million. The increase in same
store sales at retail locations was primarily driven by a 26.1% increase
in finance and insurance same store sales and an 18.1% increase in new
vehicle same store sales, partially offset by a 1.1% decrease in parts,
services and other same store sales, and a 10.5% decrease in used
vehicle same store sales.
The Company operated a total of 126 retail locations as of March 31,
2017, compared to 120 retail locations at March 31, 2016.
Gross Profit
Gross profit increased 13.3% to $251.8 million and gross margin
increased 62 basis points to 28.5% from the first quarter of fiscal
2016. Consumer Services and Plans gross profit increased 15.9% to $29.1
million and gross margin increased 210 basis points to 57.9% of segment
revenue from the first quarter of fiscal 2016. The increase in Consumer
Services and Plans gross margin was primarily driven by an increase in
roadside assistance contracts in force with a reduction in claim costs,
an increase in vehicle insurance and TravelAssist programs due to
increased policies in force, an increase in consumer shows from five
acquired shows and one new show, and an increase in ancillary product
sales. Retail gross profit increased 12.9% to $222.7 million and gross
margin increased 52 basis points to 26.7% of segment revenue from the
first quarter of fiscal 2016. The increase in Retail gross margin was
driven primarily by an increase in the finance and insurance penetration
rate to 10.2% of vehicle sales from 8.7% of vehicle sales in the first
quarter of fiscal 2016, and a 528 basis point increase in gross margin
from used vehicle unit sales.
Operating Expenses
Total operating expenses increased 9.5% to $182.0 million from the first
quarter of fiscal 2016. Selling, general and administrative (“SG&A”)
expenses increased 9.4% to $175.5 million from $160.4 million in the
first quarter of fiscal 2016. The increase in SG&A expenses was driven
by a $9.1 million increase in wage-related expenses, primarily related
to increased vehicle unit sales and the additional acquired and
greenfield locations, $2.6 million of additional variable selling
expense, $1.5 million of additional lease expense, and $1.9 million of
store and corporate overhead expenses. As a percentage of total gross
profit, SG&A expenses declined 245 basis points to 69.7%. Depreciation
and amortization expense increased 16.3% to $6.9 million.
Interest & Other Expenses
Floor plan interest expense increased to $5.3 million from $5.1 million
in the first quarter of 2016. The increase was primarily attributable to
higher average inventory from the new dealerships added compared to the
prior year period partially offset by a 7 basis point decrease in the
average floor plan borrowing rate. Other interest expense decreased to
$9.4 million from $12.7 million in the first quarter last year. The
decrease was primarily attributable to a lower interest rate and amount
of borrowings under our existing term loan facility than under our
previous term loan facility as a result of the November 8, 2016
refinancing.
Net Income, Adjusted Pro Forma Net Income(1)
and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share(1)
Net income increased 30.9% to $49.4 million and adjusted pro forma net
income(1) increased 46.2% to $31.6 million from $21.6 million
in the first quarter of fiscal 2016. Adjusted pro forma earnings per
fully exchanged and diluted share(1) increased 47.2% to $0.38
from $0.26 in the first quarter of fiscal 2016.
Adjusted EBITDA(3)
Adjusted EBITDA(3) increased 24.9% to $71.7 million from
$57.4 million and adjusted EBITDA(3) margin increased 92
basis points to 8.1% from 7.2% in the first quarter of fiscal 2016.
Select Balance Sheet and Cash Flow Items
The Company's working capital and cash and cash equivalents balance at
March 31, 2017 were $332.2 million and $174.7 million, respectively,
compared to $266.8 million and $114.2 million, respectively, at December
31, 2016. On March 17, 2017, CWGS Group, LLC entered into an amendment
to the existing senior secured credit facilities to increase the
existing term loan facility by $95.0 million to $740.0 million. At the
end of the first quarter of 2017, the Company had no borrowings under
its $35 million revolving credit facility, $738.2 million of term loan
principal outstanding under its senior secured credit facilities and
$695.5 million of floor plan notes payable outstanding under its floor
plan financing facility. Inventory at the end of the first quarter of
fiscal 2017 increased 9.8% to $998.6 million compared to $909.3 million
at December 31, 2016.
Conference Call Information
A conference call to discuss the fiscal 2017 first quarter financial
results is scheduled for today, May 4, 2017, at 4:30 p.m. Eastern Time.
Investors and analysts interested in participating in the call are
invited to dial 888-203-7667 (international callers please dial
1-719-325-2493) 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 9349994 until
May 11, 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 126 retail locations in 36
states 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.
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 trends across our
business; our comparative advantages and our plans and ability to expand
consumer base and capture growth. 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 31, 2017, and our other reports
filed with the SEC could cause actual results to differ materially from
those indicated by the forward-looking statements made in this press
release. Any such forward-looking statements represent management’s
estimates as of the date of this press release. While we may elect to
update such forward-looking statements at some point in the future, we
disclaim any obligation to do so, even if subsequent events cause our
views to change, except as required under applicable law. These
forward-looking statements should not be relied upon as representing our
views as of any date subsequent to the date of this press release.
Results of operations for the Three Months Ended March 31, 2017
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Camping World Holdings, Inc. and Subsidiaries
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Condensed Consolidated Statements of Operations
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(In Thousands Except Per Share Amounts)
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Three Months Ended March 31,
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2017
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2016
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Revenue:
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Consumer services and plans
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$
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50,246
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$
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44,998
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Retail
|
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New vehicles
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504,586
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409,476
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Used Vehicles
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146,471
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|
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178,763
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Parts, services and other
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116,223
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|
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113,484
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Finance and insurance, net
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66,289
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51,027
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Subtotal
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833,569
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|
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752,750
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|
|
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Total revenue
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|
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883,815
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|
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797,748
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|
|
|
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Costs applicable to revenue (exclusive of depreciation and
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amortization shown separately below):
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Consumer services and plans
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21,147
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|
|
|
19,881
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|
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Retail
|
|
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New vehicles
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438,148
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|
|
|
350,848
|
|
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Used Vehicles
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|
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111,143
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|
|
|
145,088
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Parts, services and other
|
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61,595
|
|
|
|
59,635
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Subtotal
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610,886
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555,571
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|
|
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Total costs applicable to revenue
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632,033
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575,452
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Gross profit:
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Consumer services and plans
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29,099
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25,117
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Retail
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|
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New vehicles
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66,438
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58,628
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Used Vehicles
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35,328
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|
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33,675
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Parts, services and other
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54,628
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53,849
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Finance and insurance, net
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66,289
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51,027
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Subtotal
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222,683
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197,179
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Total gross profit
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251,782
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222,296
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Operating expenses:
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Selling, general, and administrative
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175,490
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160,388
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Depreciation and amortization
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6,853
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|
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5,891
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Gain on sale of assets
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(318
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)
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|
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(24
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)
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Total operating expenses
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182,025
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166,255
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Income from operations
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69,757
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|
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56,041
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Other income (expense):
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Floor plan interest expense
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(5,302
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)
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(5,142
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)
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Other interest expense, net
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(9,404
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)
|
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(12,748
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)
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Other income, net
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17
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–
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(14,689
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)
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(17,890
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)
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Income before income taxes
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55,068
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|
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38,151
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Income tax expense
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(5,627
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)
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(371
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)
|
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Net income
|
|
|
|
49,441
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|
|
|
37,780
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Less: net income attributable to non-controlling interests
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(41,988
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)
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–
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Net income attributable to Camping World Holdings, Inc.
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$
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7,453
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|
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$
|
37,780
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|
|
|
|
|
|
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Earnings per share of Class A common stock (1):
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Basic
|
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$
|
0.39
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|
|
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Diluted
|
|
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$
|
0.37
|
|
|
|
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Weighted average shares of Class A common stock outstanding (1):
|
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|
|
|
Basic
|
|
|
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18,946
|
|
|
|
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Diluted
|
|
|
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83,772
|
|
|
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(1)
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Basic and diluted earnings per Class A common stock is applicable
only for periods after the Company's IPO.
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|
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|
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Camping World Holdings, Inc. and Subsidiaries
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Condensed Consolidated Balance Sheets
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($ in Thousands Except Per Share Amounts)
|
|
|
|
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|
|
March 31,
|
December 31,
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|
|
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2017
|
|
|
|
2016
|
|
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Assets
|
|
|
|
|
Current assets:
|
|
|
|
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Cash and cash equivalents
|
$
|
174,734
|
|
|
$
|
114,196
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|
|
Contracts in transit
|
|
69,009
|
|
|
|
29,012
|
|
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Accounts receivable, net
|
|
62,774
|
|
|
|
58,488
|
|
|
Inventories, net
|
|
998,595
|
|
|
|
909,254
|
|
|
Prepaid expenses and other assets
|
|
19,640
|
|
|
|
21,755
|
|
|
Total current assets
|
|
1,324,752
|
|
|
|
1,132,705
|
|
|
|
|
|
|
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Property and equipment, net
|
|
141,936
|
|
|
|
130,760
|
|
|
Deferred tax asset, net
|
|
124,902
|
|
|
|
125,878
|
|
|
Intangibles assets, net
|
|
3,043
|
|
|
|
3,386
|
|
|
Goodwill
|
|
198,937
|
|
|
|
153,105
|
|
|
Other assets
|
|
18,349
|
|
|
|
17,931
|
|
|
Total assets
|
$
|
1,811,919
|
|
|
$
|
1,563,765
|
|
|
|
|
|
|
|
Liabilities and stockholders' deficit
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
$
|
108,700
|
|
|
$
|
68,655
|
|
|
Accrued liabilities
|
|
94,055
|
|
|
|
78,044
|
|
|
Deferred revenues and gains
|
|
64,902
|
|
|
|
68,643
|
|
|
Current portion of capital lease obligation
|
|
1,117
|
|
|
|
1,224
|
|
|
Current portion of tax receivable agreement liability
|
|
208
|
|
|
|
991
|
|
|
Current portion of long-term debt
|
|
7,400
|
|
|
|
6,450
|
|
|
Notes payable – floor plan
|
|
695,533
|
|
|
|
625,185
|
|
|
Other current liabilities
|
|
20,669
|
|
|
|
16,745
|
|
|
Total current liabilities
|
|
992,584
|
|
|
|
865,937
|
|
|
|
|
|
|
|
Capital lease obligations
|
|
591
|
|
|
|
841
|
|
|
Right to use liability
|
|
10,307
|
|
|
|
10,343
|
|
|
Tax receivable agreement liability, net of current portion
|
|
19,125
|
|
|
|
18,190
|
|
|
Long-term debt, net of current portion
|
|
711,797
|
|
|
|
620,303
|
|
|
Deferred revenues and gains
|
|
53,150
|
|
|
|
52,210
|
|
|
Other long-term liabilities
|
|
27,272
|
|
|
|
24,156
|
|
|
Total liabilities
|
|
1,814,826
|
|
|
|
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 March 31, 2017 and
December 31, 2016
|
|
–
|
|
|
|
–
|
|
|
Class A common stock, par value $0.01 per share – 250,000,000 shares
authorized; 18,946,040 issued and 18,946,000 outstanding as of March
31, 2017 and 18,935,916 issued and outstanding as of December 31,
2016
|
|
189
|
|
|
|
189
|
|
|
Class B common stock, par value $0.0001 per share – 75,000,000
shares authorized; 69,066,445 issued and 62,002,729 outstanding as
of March 31, 2017 and December 31, 2016
|
|
6
|
|
|
|
6
|
|
|
Class C common stock, par value $0.0001 per share – one share
authorized; one issued and outstanding as of March 31, 2017 and
December 31, 2016
|
|
–
|
|
|
|
–
|
|
|
Additional paid-in capital
|
|
74,362
|
|
|
|
74,239
|
|
|
Retained earnings
|
|
5,094
|
|
|
|
544
|
|
|
Total stockholders' equity attributable to Camping World Holdings,
Inc.
|
|
79,651
|
|
|
|
74,978
|
|
|
Non-controlling interests
|
|
(82,558
|
)
|
|
|
(103,193
|
)
|
|
Total stockholders' deficit
|
|
(2,907
|
)
|
|
|
(28,215
|
)
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
$
|
1,811,919
|
|
|
$
|
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
|
|
|
|
Ended
|
|
|
|
March 31,
|
|
(In thousands except per share amounts)
|
|
|
2017
|
|
|
Numerator:
|
|
|
|
Net income
|
|
$
|
49,441
|
|
|
Less: net income attributable to non-controlling interests
|
|
|
(41,988
|
)
|
|
Net income attributable to Camping World Holdings, Inc. — basic
|
|
|
7,453
|
|
|
Add: reallocation of net income attributable to non-controlling
interests from the assumed dilutive effect of stock options and RSUs
|
|
|
23,893
|
|
|
Net income attributable to Camping World Holdings, Inc. — diluted
|
|
$
|
31,346
|
|
|
Denominator:
|
|
|
|
Weighted-average shares of Class A common stock outstanding — basic
|
|
|
18,946
|
|
|
Dilutive common units of CWGS, LLC that are convertible into Class A
common stock
|
|
|
64,826
|
|
|
Weighted-average shares of Class A common stock outstanding — diluted
|
|
|
83,772
|
|
|
|
|
|
|
Earnings per share of Class A common stock — basic
|
|
$
|
0.39
|
|
|
Earnings per share of Class A common stock — diluted
|
|
$
|
0.37
|
|
|
|
|
|
|
|
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, gain on sale of assets,
monitoring fees, equity-based compensation, gain on remeasurement of our
Tax Receivable Agreements, 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
|
|
|
|
March 31,
|
|
($ in thousands)
|
|
|
2017
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
49,441
|
|
|
$
|
37,780
|
|
|
Other interest expense, net
|
|
|
9,404
|
|
|
|
12,748
|
|
|
Depreciation and amortization
|
|
|
6,853
|
|
|
|
5,891
|
|
|
Income tax expense
|
|
|
5,627
|
|
|
|
371
|
|
|
EBITDA
|
|
|
71,325
|
|
|
|
56,790
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Gain on sale of assets (a)
|
|
|
(318
|
)
|
|
|
(24
|
)
|
|
Monitoring fee (b)
|
|
|
–
|
|
|
|
625
|
|
|
Equity-based compensation (c)
|
|
|
719
|
|
|
|
–
|
|
|
Gain on remeasurement of tax receivable agreement (d)
|
|
|
(17
|
)
|
|
|
–
|
|
|
Adjusted EBITDA
|
|
$
|
71,709
|
|
|
$
|
57,391
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
(as percentage of total revenue)
|
|
|
2017
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
Net income margin
|
|
|
5.6
|
%
|
|
|
4.7
|
%
|
|
Other interest expense, net
|
|
|
1.1
|
%
|
|
|
1.6
|
%
|
|
Depreciation and amortization
|
|
|
0.8
|
%
|
|
|
0.7
|
%
|
|
Income tax expense
|
|
|
0.6
|
%
|
|
|
0.0
|
%
|
|
Subtotal EBITDA margin
|
|
|
8.1
|
%
|
|
|
7.1
|
%
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
Gain on sale of assets (a)
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
Monitoring fee (b)
|
|
|
0.0
|
%
|
|
|
0.1
|
%
|
|
Equity-based compensation (c)
|
|
|
0.1
|
%
|
|
|
0.0
|
%
|
|
Gain on remeasurement of tax receivable agreement (d)
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
Adjusted EBITDA margin
|
|
|
8.1
|
%
|
|
|
7.2
|
%
|
|
|
|
__________
|
|
|
|
(a)
|
|
Represents an adjustment to eliminate the gains and losses 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.
|
|
|
|
|
|
|
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, gain on sale of assets, monitoring fees,
equity-based compensation, gain on remeasurement of the Tax Receivable
Agreement, 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
|
|
|
|
March 31,
|
|
March 31,
|
|
(In thousands except per share amounts)
|
|
|
2017
|
|
|
|
2016
|
|
|
Numerator:
|
|
|
|
|
|
Net income attributable to Camping World Holdings, Inc.
|
|
$
|
7,453
|
|
|
$
|
37,780
|
|
|
Adjustments:
|
|
|
|
|
|
Reallocation of net income attributable to non-controlling interests
from the assumed exchange of common units of CWGS, LLC (a)
|
|
|
41,988
|
|
|
|
—
|
|
|
Gain on sale of assets (b)
|
|
|
(318
|
)
|
|
|
(24
|
)
|
|
Monitoring fee (c)
|
|
|
—
|
|
|
|
625
|
|
|
Equity-based compensation expense (d)
|
|
|
719
|
|
|
|
—
|
|
|
Gain on remeasurement of tax receivable agreement (e)
|
|
|
(17
|
)
|
|
|
—
|
|
|
Income tax expense (f)
|
|
|
(18,249
|
)
|
|
|
(16,778
|
)
|
|
Adjusted pro forma net income
|
|
$
|
31,576
|
|
|
$
|
21,603
|
|
|
Denominator:
|
|
|
|
|
|
Weighted-average Class A common shares outstanding - diluted
|
|
|
83,772
|
|
|
|
—
|
|
|
Adjustments:
|
|
|
|
|
|
Assumed exchange of pre-IPO common unit equivalent of membership
interests in CWGS, LLC (g)
|
|
|
—
|
|
|
|
72,651
|
|
|
Assumed issuance of Class A common stock in connection with IPO (h)
|
|
|
—
|
|
|
|
11,872
|
|
|
Dilutive options to purchase Class A common stock
|
|
|
146
|
|
|
|
—
|
|
|
Dilutive restricted stock units
|
|
|
58
|
|
|
|
—
|
|
|
Adjusted pro forma fully exchanged weighted average Class A common
shares outstanding - diluted
|
|
$
|
83,976
|
|
|
$
|
84,523
|
|
|
Adjusted pro forma earnings per fully exchanged and diluted share
|
|
$
|
0.38
|
|
|
$
|
0.26
|
|
|
____________
|
|
(a)
|
|
Represents the reallocation of net income attributable to
non-controlling interests from the assumed exchange of common
units of CWGS, LLC in periods were income was attributable to
non-controlling interests.
|
|
(b)
|
|
Represents an adjustment to eliminate the gains and losses on
sales of various assets.
|
|
(c)
|
|
Represents monitoring fees paid pursuant to a monitoring agreement
to Crestview and Stephen Adams. The monitoring agreement was
terminated on October 6, 2016 in connection with 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 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.
|
|
(g)
|
|
Represents the assumed exchange of pre-IPO membership interests in
CWGS, LLC at their common unit equivalent amount.
|
|
(h)
|
|
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 gain on sale of
assets, monitoring fees, equity-based compensation, gain on
remeasurement of the Tax Receivable Agreement, 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/20170504006394/en/
Source: Camping World Holdings Inc.