Camping World Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Camping World operates RV dealerships and related retail, service, protection-plan and membership businesses. At quarter-end it operated 215 locations. Unless otherwise stated, amounts below are in U.S. dollars.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $1,364.0 million | $1,486.9 million |
| Gross profit / gross margin | $402.4 million / 29.5% | $441.0 million / 29.7% |
| Operating income | $4.2 million | $58.6 million |
| Net income (loss) | $(50.8) million | $4.9 million |
| Net income (loss) attributable to Camping World Holdings, Inc. | $(22.3) million | $3.2 million |
| Basic / diluted EPS | $(0.50) / $(0.51) | $0.07 / $0.05 |
| Adjusted EBITDA / margin (non-GAAP) | $8.2 million / 0.6% | $60.8 million / 4.1% |
| Operating cash flow | $(68.0) million | $199.2 million |
- Revenue declined 8.3%. Used-vehicle revenue fell 24.1%; new-vehicle revenue rose 1.4%, while finance and insurance revenue increased 4.4%.
- New-vehicle units sold increased 21.3%, but average selling price fell 16.4%. Used-vehicle units declined 14.0%, and average selling price fell 11.7%. Used-vehicle gross margin decreased to 17.5% from 23.1%; new-vehicle gross margin was 13.9% versus 13.8%.
- Operating expenses increased to $398.2 million from $382.4 million. Interest expense rose: floor-plan interest to $27.9 million from $20.8 million, and other interest to $36.1 million from $31.1 million. The filing attributes higher costs to increased borrowing rates and, for other interest, higher average real-estate debt.
- Cash and cash equivalents were $29.7 million at March 31, 2024, versus $39.6 million at December 31, 2023. Working capital was $381.6 million, compared with $401.3 million at year-end and $654.1 million a year earlier. Cash decreased $9.9 million during the quarter.
- Investing cash outflow was $59.5 million, including $58.8 million for dealership acquisitions, partly offset by real-property sale proceeds. Financing cash inflow was $117.6 million, including net floor-plan borrowings and debt proceeds.
- Total reported debt and finance-lease obligations were $3.17 billion, including $1.41 billion of floor-plan borrowings, $1.34 billion of term-loan debt, $219.1 million of real-estate debt, $31.9 million drawn on the floor-plan revolver and $155.3 million of finance leases. The filing reported $233.1 million of remaining availability across listed facilities, subject to borrowing-base, covenant and collateral conditions. The company reported compliance with applicable financial covenants.
Material changes and management commentary
- The decline in used-vehicle sales and prices, pressure on used-vehicle margins, higher interest costs and increased SG&A drove a sharp reduction in operating income and Adjusted EBITDA. Same-store revenue fell 11.8%, although same-store vehicle units were approximately flat overall.
- Management said it discounted older, higher-cost new RV inventory to shift toward lower-cost 2024 models. Lower new-model prices also pressured used-RV residual values; management said used-vehicle margins may improve as higher-cost inventory sells through.
- The company acquired nine dealership locations for approximately $67.7 million in aggregate purchase price; one had not opened by March 31. It had 211 RV dealerships, versus 188 a year earlier.
- Cash dividends were reduced to $0.125 per Class A share from $0.625, beginning in September 2023; $5.6 million was paid in Q1 2024. No shares were repurchased under the program during the quarter.
- Management expects dealership expansion through acquisitions and construction to cost $70–$90 million over the next 12 months, excluding acquired inventory. It also had $26.7 million of contracted future construction commitments at quarter-end.
Outlook, risks and unusual items
- No company revenue, earnings or Adjusted EBITDA guidance is provided in the supplied filing text. Management believes available liquidity and financing sources should support operations and plans for at least 12 months, but cautions that additional financing may be needed if operating cash generation or facility availability is insufficient.
- The RV Industry Association forecast cited by management projected approximately 350,000 North American RV shipments in 2024, up 13.8% from 2023, with a slower first half and faster second half. This is an industry forecast, not company guidance.
- Camping World is reviewing strategic alternatives for Good Sam, potentially including a sale, spin-off or other disposition; no decision or timetable was set. On May 3, 2024, it completed the sale of its RV furniture business assets for expected cash consideration of $19–$21 million and expects an immaterial loss, recorded in Q2.
- Q1 included $5.8 million of long-lived asset impairment charges, related to certain RV and Outdoor Retail locations, and $1.6 million of net losses on asset sales or disposals. Restructuring of Active Sports was substantially complete; remaining lease-related costs are expected to be below $1.1 million annually, net of sublease income.
- Two confidential arbitrations involving claims connected with the television show The Profit concluded post-hearing briefing in April 2024, with decisions expected within 30 days of April 23. A separate Precise Graphix matter was subject to an April 2024 settlement agreement providing for a $3.7 million allowed claim in Camping World’s favor, pending bankruptcy-court approval. Management said it could not estimate possible losses for the discussed matters and did not believe their disposition was likely to materially adversely affect the financial statements.
- Key risks include RV demand and pricing volatility, consumer financing availability, inventory valuation and mix, seasonality and weather, elevated interest rates and leverage, access to capital, facility covenants, litigation, and the outcome of the Good Sam strategic review. Management reported disclosure controls effective at March 31, 2024 and no material changes in internal control over financial reporting during the quarter.
Investor verification priorities
- Track whether sales and margins stabilize, especially used-RV prices, gross profit per unit and inventory turnover, and whether lower-cost 2024 inventory improves results.
- Reconcile operating cash flow, working-capital movements and floor-plan borrowing needs as the peak selling season progresses.
- Review debt maturities, interest-rate sensitivity, borrowing-base availability and covenant headroom; distinguish stated availability from immediately usable liquidity.
- Monitor execution and returns on dealership acquisitions and the $70–$90 million expansion plan, as well as construction commitments and sale-leaseback obligations.
- Confirm the outcome of the Good Sam strategic review, the RV furniture business sale proceeds and Q2 accounting, and court approval and recovery timing for the Precise settlement.
- Assess the sustainability of the reduced dividend alongside cash requirements, debt service and the company’s continuing obligations under its Tax Receivable Agreement.