Camping World Holdings, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied text does not provide a complete standalone fourth-quarter income statement. The company operates RV dealerships and service centers, alongside Good Sam membership, insurance, roadside assistance and other services. It reported 197 retail locations, including 196 selling and/or servicing RVs.
Financial performance and liquidity
| Metric | FY 2022 | FY 2021 | Change |
|---|---|---|---|
| Revenue | $6.967 billion | $6.914 billion | +0.8% |
| Gross profit / gross margin | $2.262 billion / 32.5% | $2.456 billion / 35.5% | Gross profit -7.9%; margin -306 bps |
| Operating income / margin | $568.5 million / 8.2% | $799.5 million / 11.6% | Operating income -28.9% |
| Net income | $351.0 million | $642.1 million | -45.3% |
| Net income attributable to Camping World Holdings, Inc. | $136.9 million | $278.5 million | -50.8% |
| Adjusted EBITDA (non-GAAP) | $653.4 million; 9.4% margin | $942.1 million; 13.6% margin | -30.6%; margin -420 bps |
| Operating cash flow | $189.8 million | $154.0 million | +$35.8 million |
| Cash and cash equivalents at year-end | $130.1 million | $267.3 million | -$137.2 million |
| Working capital | $611.3 million | $685.6 million | -$74.3 million |
- Revenue mix and margins: New vehicle revenue was $3.228 billion, down 2.2%; new-unit sales fell 9.4%, partly offset by an 8.0% increase in average selling price. New vehicle gross margin fell to 20.2% from 26.5%. Used vehicle revenue rose 11.3% to $1.878 billion, supported by 4.9% more units and a 6.2% higher average selling price; used margin declined to 24.5% from 26.0%. Finance and insurance revenue increased 4.2% to $623.5 million.
- Same-store results: Revenue was $5.926 billion, down 3.1%. Same-store new-vehicle units fell 13.6%; used-vehicle units were approximately flat. Active Customers declined 3.4% to 5.27 million and Good Sam Club membership declined 4.6% to 2.03 million.
- Cash flow and investment: Investing activities used $422.5 million, including $217.0 million for business acquisitions, $154.9 million in capital expenditures and $55.7 million for real estate. Financing activities provided $95.6 million. The company paid $105.4 million in Class A dividends, repurchased $79.8 million of shares and made $163.0 million in distributions to LLC common-unit holders.
- Debt: At year-end, the filing reported $1.320 billion of floor-plan borrowings, $1.360 billion outstanding under the term loan, $145.9 million of real-estate facilities, $20.9 million on the floor-plan revolving line and $104.5 million of finance-lease obligations. Debt and finance-lease balances totaled approximately $2.955 billion in the filing’s summary table. Variable rates increased materially; the term loan’s stated rate was 6.82% at December 31, 2022. The company was in compliance with applicable debt covenants.
- Borrowing availability: Reported remaining availability was $85.1 million under the floor-plan facility, $49.1 million on its revolving line, $60.1 million under the senior secured revolver and $122.1 million under real-estate facilities, subject to facility terms, collateral and covenant conditions.
Material changes and notable items
- Revenue was nearly flat, but profitability weakened substantially as elevated vehicle costs compressed margins, unit sales fell and interest expense rose. Total floor-plan and other interest expense increased to $117.8 million from $61.0 million.
- RV industry wholesale shipments fell 17.8% in 2022 from a record 2021, though 2022 remained the industry’s third-best year on record. Management said demand had moderated from pandemic-era peaks and expected average selling prices could decline as supply normalized.
- Inventory increased 18.4% to $2.123 billion, including new-vehicle inventory up 27.3%; new-vehicle inventory turnover fell to 1.9 from 3.0. The company used clearance and discounted pricing in the fourth quarter to reduce inventory, weighing on margins.
- The company acquired 11 dealership/service locations for approximately $213.6 million and an outdoor publication for $3.4 million. Acquisition-related goodwill increased by $138.8 million.
- The LLC conversion, effective January 2, 2023, generated $28.4 million of additional 2022 income tax expense. Management expects the conversion to allow certain operating losses to offset other LLC income, reducing future income-tax expense and required tax distributions.
- FY 2022 included $4.2 million of long-lived asset impairment, $1.6 million of lease-termination expense and $7.0 million of other restructuring costs. The company reported $653.4 million of Adjusted EBITDA; this non-GAAP measure excludes specified items and should be considered with GAAP results.
Outlook, risks and contingencies
- Management expects inflation-related cost pressures to continue into 2023 and stated that interest expense is expected to increase. It forecast $30–$35 million in 2023 savings from non-headcount cost-reduction initiatives; savings from headcount reductions are expected to be largely offset by wage and benefit increases.
- The company expects 2023 acquisition spending of up to $25 million, while noting it may increase if opportunities arise. It planned to slow dealership expansion and said it might delay opening seven nearly completed greenfield locations until market conditions improve.
- Management expected to maintain the $0.625 quarterly Class A dividend during 2023, subject to Board discretion, despite expecting no Excess Tax Distribution in 2023 following the LLC conversion.
- Eleven leases from the 2019 Strategic Shift remained unterminated or unsublet at year-end. Management estimated $4.4–$15.9 million of lease-termination and other associated costs during 2023; timing and cost depend on landlord approvals and negotiations.
- A February 2022 cybersecurity incident temporarily disrupted access to certain systems and exposed personal information of approximately 30,000 people. The company completed its forensic investigation in September 2022, but expected further remediation costs. Three putative class-action complaints were filed in December 2022; management did not expect a future material financial impact, but the outcome and potential loss were not estimable in the filing.
- Principal risks include discretionary consumer demand, inflation and interest rates, customer and company financing availability, inventory management, seasonality, supplier concentration (Thor Industries and Forest River represented approximately 95.7% of new RV inventory), and competition. The company also disclosed litigation, regulatory, lease, cybersecurity and tax-related exposures. It recorded a $170.6 million Tax Receivable Agreement liability, generally requiring payments equal to 85% of specified realized tax benefits.
Investor verification priorities
- Track inventory levels, turnover, discounting and new-vehicle gross margin as industry supply and demand normalize.
- Reconcile reported GAAP earnings with Adjusted EBITDA and assess whether excluded costs recur; review the decline in operating cash flow relative to earnings and cash used for acquisitions, capital spending, dividends and repurchases.
- Review debt maturities, variable-rate exposure, borrowing availability and covenant headroom; a 100-basis-point rate change was estimated to affect annual interest expense by approximately $29 million across specified facilities.
- Test the assumptions behind 2023 cost savings, delayed store openings, acquisition spending and the expected dividend against actual results and cash generation.
- Monitor the cybersecurity litigation and remediation costs, remaining restructuring leases, related-party arrangements and future Tax Receivable Agreement payments.
The independent auditor gave an unqualified opinion on the financial statements and internal control over financial reporting as of December 31, 2022. The audit report identified finance-and-insurance chargeback estimates and long-lived asset impairment estimates as critical audit matters.