LINCOLNSHIRE, Ill. — Camping World Holdings reported results for the fourth quarter and full year ended Dec. 31.
Fourth Quarter 2017 Summary
- Total revenue increased 32.9% to $889.0 million;
- Gross profit increased 37.1% to $266.6 million and gross margin increased 92 basis points to 30.0%;
- Income from operations increased 37.9% to $44.3 million and operating margin increased 28 basis points to 7.4%;
- Net loss was $52.5 million and included a $99.8 million tax receivable liability adjustment to other income and $165.4 million of income taxes related to changes stemming from the U.S. tax reform enacted in December 2017. Net loss margin was 5.9% and diluted earnings per share was ($1.87);
- Adjusted pro forma net income(1) increased 112.8% to $22.0 million and Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share(1) increased 100.0% to $0.25; and
- Adjusted EBITDA(1) increased 76.0% to $65.3 million and Adjusted EBITDA Margin(1) increased 180 basis points to 7.3%
Fiscal 2017 Summary
- Total revenue increased 21.8% to $4.3 billion;
- Gross profit increased 25.1% to $1.2 billion and gross margin increased 77 basis points to 29.1%;
- Income from operations increased 29.4% to $361.4 million, and operating margin increased 50 basis points to 8.4%,
- Net income was $186.0 million and included a $99.7 million tax receivable liability adjustment to other income, and $165.4 million of income taxes related to changes stemming from the U.S. tax reform enacted in December 2017. Net income margin was 4.3% and diluted earnings per share was ($0.70);
- Diluted earnings per share(2) was ($1.87), adjusted pro forma net income(1) increased 51.0% to $198.7 million and adjusted pro forma earnings per fully exchanged and diluted share(1) increased 45.9% to $2.29; and
- Adjusted EBITDA(1) increased 38.2% to $399.6 million and adjusted EBITDA margin(1) increased 111 basis points to 9.3%.
(1) Adjusted Pro Forma Net Income, Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures. For reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, 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.
Marcus Lemonis, chairman and chief executive officer, stated, “We had a very strong fourth quarter and fiscal year and are pleased with the continued performance of our business and underlying trends in the RV market. Demand for towable and smaller recreational vehicles remained strong throughout 2017, and we made the strategic decision to carry a little more inventory in order to drive volumes and gain market share in the final months of the year. This decision paid off and we generated record fourth quarter revenue and Adjusted EBITDA. In the fourth quarter, revenue increased 33% to $889 million, Adjusted Pro Forma Net Income increased 113% to $22 million, and Adjusted EBITDA increased 76% to $65 million.”
Mr. Lemonis continued, “The trends that we have been talking about for the past year remain strong and continue to drive our business. Our focus on towables and the lower priced segment of the RV market allows us to sell to a much wider and more diverse group of consumers than ever before. We see a lot of similarities between the outdoor consumer and the RV consumer, and we believe there is a significant opportunity to continue diversifying our business as these lifestyles converge. Over the past year, we have acquired a number of outdoor and active sports businesses that give us access to a more diverse base of outdoor lifestyle customers. Overton’s, Gander Outdoors, TheHouse.com, Uncle Dan’s, W82 and Erehwon all come with great talent, great products and a loyal customer following that we believe we can leverage over time through cross-selling and cross-promotions. We began opening our first Gander Outdoors stores in December 2017 and are pleased with the early trends, including Good Sam Club conversion rates at these stores.”
This press release presents historical results, for the periods presented, of the Company and its subsidiaries, that are presented in accordance with accounting principles generally accepted in the United States (“GAAP”), unless noted as a non-GAAP financial measure. The Company’s initial public offering (“IPO”) and related reorganization transactions (“Reorganization Transactions”) that occurred on October 6, 2016 resulted in the Company as the sole managing member of CWGS Enterprises, LLC (“CWGS, LLC”), with sole voting power in and control of the management of CWGS, LLC. Despite its position as sole managing member of CWGS, LLC, the Company has a minority economic interest in CWGS, LLC. As of December 31, 2017, the Company owned 41.5% 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 fourth quarter and full year to our financial results from the 2016 fourth quarter and full year, respectively.
Fourth Quarter 2017 Results Compared to Fourth Quarter 2016 Results
Units and Average Selling Prices
The total number of recreational vehicle units sold increased 36.1% to 18,117 units from 13,316 units and the average selling price of a unit sold decreased 4.6% to $33,031 from the fourth quarter of 2016. New vehicle units sold increased 50.4% to 12,013 units and the average selling price of a new vehicle decreased 8.4% to $38,163. Used vehicle units sold increased 14.5% to 6,104 units and the average selling price of a used vehicle decreased 4.9% to $22,930.
Total revenue increased 32.9% to $889.0 million from $668.9 million in the fourth quarter of 2016. Consumer Services and Plans revenue increased 4.5% to $51.1 million and Retail revenue increased 35.1% to $837.9 million. In the Retail segment, new vehicle revenue increased 37.8% to $458.5 million, used vehicle revenue increased 9.0% to $140.0 million, parts, services and other revenue increased 48.4% to $174.7 million and finance and insurance revenue increased 57.3% to $64.8 million. Included in the parts, services and other revenue was $38.2 million in sales from the Outdoor and Active Sports Retail businesses acquired in 2017, including Gander Outdoors, Overton’s, TheHouse.com, Uncle Dan’s and W82. Finance and insurance, net revenue as a percentage of total new and used vehicle revenue increased to 10.8% from 8.9% in the fourth quarter of 2016.
Same store sales for the base of 115 retail locations that were open both at the end of the corresponding period and at the beginning of the preceding fiscal year increased 11.9% to $655.3 million for the three months ended Dec. 31, 2017. The increase in same store sales was primarily driven by a 18.6% increase in new vehicle same store sales, a 34.0% increase in finance and insurance same store sales, and a 3.0% increase in parts, services and other same store sales, partially offset by a 4.9% decrease in used vehicle same store sales.
The Company operated a total of 140 Camping World retail locations, two Overton’s locations, two TheHouse.com locations, two Gander Outdoors locations, two W82 locations, and five Uncle Dan’s locations as of December 31, 2017, compared to 122 Camping World retail locations at Dec. 31, 2016.
Total gross profit increased 37.1% to $266.6 million, or 30.0% of total revenue, from $194.5 million, or 29.1% of total revenue, in the fourth quarter of 2016. On a segment basis, Consumer Services and Plans gross profit increased 8.2% to $31.1 million, or 60.8% of segment revenue, from $28.7 million, or 58.7% of segment revenue, and Retail gross profit increased 42.1% to $235.5 million, or 28.1% of segment revenue, from $165.8 million, or 26.7% of segment revenue, in the fourth quarter of 2016. A 211 basis point improvement in Consumer Services and Plans gross margin was primarily driven by increased file size of our membership clubs combined with reduced club marketing expense, and increased contracts in force in our roadside assistance programs combined with reduced program costs. A 137 basis point increase in Retail gross margin was primarily driven by an increase in the finance and insurance, net revenue as a percentage of total new and used vehicle revenue to 10.8% of vehicle sales from 8.9% of vehicle sales in the fourth quarter of 2016, and the 50.4% increase in new units sold.
Operating expenses increased 36.9% to $222.3 million from $162.4 million in the fourth quarter of 2016. Selling, general and administrative (“SG&A”) expenses increased 37.5% to $213.1 million from $154.9 million in the fourth quarter of 2016. The increase in SG&A expenses was primarily driven by the additional expenses associated with the incremental 26 greenfield and acquired retail locations opened during 2016 and 2017, two Overton’s locations, two TheHouse.com locations, two Gander Outdoors locations and two W82 locations operated during the fourth quarter of 2017 versus the prior year period, $17.7 million of pre-opening and payroll costs associated with the Gander Mountain acquisition, and $0.1 million of transaction expenses associated with the acquisition into new or complimentary markets. As a percentage of total gross profit, SG&A expenses increased 25 basis points to 79.9% compared to the fourth quarter of 2016. Depreciation and amortization expense increased 33.2% to $8.7 million primarily due to the addition of acquired and greenfield locations, and acquired businesses.
Floor Plan Interest & Other Interest Expenses
Floor plan interest expense increased to $8.4 million from $4.0 million in the fourth quarter of 2016. The increase was primarily attributable to higher inventory from new dealership locations and locations expecting higher unit sales, as well as a 84 basis point increase in the average floor plan borrowing rate. Other interest expense increased to $12.0 million from $10.3 million in the fourth quarter of 2016. The increase was primarily attributable to an increase in average debt outstanding partially offset by an 86 basis point decrease in the average interest rate.
Net Loss, Net loss margin, Adjusted Pro Forma Net Income(1), Diluted Earnings Per Share, and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share(1)
Net loss was $52.5 million, reflecting a $99.8 million tax receivable liability adjustment to other income and $165.4 million of income tax expense related to changes stemming from the U.S. tax reform enacted in December 2017, among other things. Net loss margin was (5.9%), and diluted earnings per share was ($1.87).
Adjusted pro forma net income(1) increased 112.8% to $22.0 million from $10.3 million and adjusted pro forma earnings per fully exchanged and diluted share(1) increased 100.0% to $0.25 from $0.12 in the fourth quarter of 2016.
Adjusted EBITDA and Adjusted EBITDA Margin(1)
Adjusted EBITDA(1) increased 76.0% to $65.3 million and adjusted EBITDA margin(1) increased 180 basis points to 7.3% from 5.5% in the fourth quarter of fiscal 2016.
Select Balance Sheet and Cash Flow Items
The company’s working capital and cash and cash equivalents balance at December 31, 2017 were $478.7 million and $224.2 million, respectively, compared to $257.7 million and $114.2 million, respectively, at Dec. 31, 2016. At the end of the fourth quarter 2017, the company had $3.2 million of letters of credit outstanding under its $35 million revolving credit facility, $916.9 million of term loan principal outstanding under its senior secured credit facilities and $974.0 million of floor plan notes payable outstanding under its floor plan financing facility. Inventory at the end of the fourth quarter of fiscal 2017 increased 56.9% to $1,415.9 million compared to $902.7 million at Dec. 31, 2016.
Conference Call Information
A conference call to discuss the fiscal 2017 fourth quarter financial results is scheduled for Feb. 27 at 4:30 p.m. Eastern Time. Investors and analysts can participate on the conference call by dialing 800-239-9838 or 323-794-2551 and using conference ID # 6863288. Interested parties can also listen to a live webcast or replay of the conference call by logging on to the Investor Relations section on the Company’s website at http://investor.campingworld.com. The replay of the conference call webcast will be available at the investor relations website until March 6.
SOURCE: Camping World press release