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Camping World Holdings, Inc. Announces Second Quarter Fiscal 2017 Financial Results

LINCOLNSHIRE, Ill., Aug 10, 2017 (BUSINESS WIRE) -- Camping World Holdings Inc. CWH, -2.90% ("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%.
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[(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...


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