Camping World Holdings, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021, compared with the three months ended March 31, 2020. Amounts are in U.S. dollars; financial figures below are in millions unless stated otherwise. The filing is unaudited.
Business context and reporting period
Camping World operates RV dealerships and service centers, an e-commerce business, and Good Sam membership and service programs. Its two reportable segments are RV and Outdoor Retail and Good Sam Services and Plans. At quarter-end, it operated 176 retail locations, including 165 RV dealerships. The company’s results reflect strong RV demand during the COVID-19 period, while consumer shows were not held in Q1 2021.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $1,557.8 | $1,027.3 |
| Gross profit / gross margin | $520.5 / 33.4% | $302.7 / 29.5% |
| Operating income / operating margin | $168.6 / 10.8% | $13.3 / 1.3% |
| Net income (loss), consolidated | $147.4 | $(14.1) |
| Net income (loss) attributable to Camping World Holdings, Inc. | $62.3 | $(8.2) |
| Class A EPS, basic / diluted | $1.43 / $1.40 | $(0.22) / $(0.22) |
| Operating cash flow | $87.8 | $(15.2) |
- Revenue increased 51.6%; RV and Outdoor Retail revenue rose 54.8%, while Good Sam Services and Plans revenue declined 13.4%.
- RV unit sales increased 38.7% overall. New-vehicle gross margin improved to 21.7% from 14.3%; used-vehicle gross margin rose to 24.2% from 20.7%.
- Adjusted EBITDA, a non-GAAP measure, was $189.3 versus $36.0. The company’s reported adjusted measure includes specified exclusions; it is not a substitute for GAAP results.
- Cash and cash equivalents were $256.9 at March 31, 2021, versus $166.1 at year-end 2020. Working capital was $541.0.
- Carrying amounts included $1,128.3 of term-loan debt, $539.7 of floor-plan borrowings net, $20.9 drawn on the floor-plan revolving line, and $4.4 under the real-estate facility. The filing separately reports operating lease liabilities.
- Available capacity included $546.3 of unencumbered floor-plan borrowing capacity and $24.1 under the floor-plan revolving line; the senior secured revolver had $29.1 of availability. The company reported compliance with applicable debt covenants.
Material changes versus prior period
- Revenue growth and margin expansion drove the return to profitability from a prior-year quarterly loss. Gross profit rose 72.0%, faster than revenue.
- Higher vehicle volumes and selling prices, stronger per-unit vehicle gross profit, and higher products and finance-and-insurance revenue supported results. SG&A increased $69.4, mainly from wage-related costs tied in part to higher gross profit, and increased selling and marketing spend.
- Floor-plan interest expense fell to $3.4 from $8.6, primarily due to lower borrowing rates and average borrowings; other interest expense fell to $12.2 from $14.7.
- Good Sam Services and Plans revenue fell in part because no consumer shows were held; roadside assistance and warranty program margins improved. Q1 2020 included $6.6 of long-lived asset impairment, compared with $0.5 in Q1 2021.
- Cash increased by $90.8 during the quarter. Operating cash generation was partly offset by working-capital investment, including higher contracts in transit and receivables and inventory purchases.
Outlook, risks, contingencies, and unusual items
- Management said available liquidity was expected to support operations, growth plans, dividends, and obligations for at least the next 12 months, while cautioning that future cash flows and financing availability are not assured. No quantified full-year earnings or revenue guidance is provided in the filing.
- The company identified more than 20 markets for potential acquisitions or greenfield sites in 2021 and said the combined investment could exceed $150 million. It acquired three dealerships in Q1 for $10.4 million and purchased $21.4 million of real property.
- Management cited record RV industry shipments and strong demand, but also tight new-RV inventory and supplier/component constraints. It warned that demand may not persist if pandemic restrictions return or alternative travel options recover, and that supply disruptions could adversely affect results.
- The peer-to-peer RV rental marketplace was expected to launch nationwide in fall 2021. The filing said development spending for this and the mobile RV technician marketplace was not expected to be material.
- After quarter-end, the board raised the regular quarterly dividend to $0.25 per share from $0.23. Dividend payments remain subject to board discretion and liquidity needs.
- The 2019 strategic shift continued to generate costs: estimated total restructuring costs were $92.6–$113.6, with potential future cash expenditures for lease termination and other associated costs. The company also recorded a $3.5 Tax Receivable Agreement liability adjustment and recognized tax benefits, including a $14.9 valuation-allowance release.
- A preliminary agreement to settle California and Washington wage-related class and PAGA claims was subject to final documentation and court approval; a $4.0 reserve was recorded. Other shareholder litigation remained pending, including a motion to dismiss an amended derivative complaint.
- COVID-19, seasonality, RV inventory availability, consumer demand, competition, financing access, debt covenants, litigation, and the company’s Tax Receivable Agreement and controlled-company structure are among the disclosed risks.
Important facts for investors to verify
- Whether strong RV demand, unit volumes, selling prices, and per-unit margins continued beyond Q1, and how supply constraints affected inventory and sales.
- Cash conversion and working-capital trends, including contracts in transit, receivables, inventory, and floor-plan financing usage.
- Debt maturities and refinancing plans, especially the senior secured revolving facility maturing November 8, 2021, as well as covenant headroom and available borrowing capacity.
- Actual spending and returns from the planned dealership expansion and acquisitions, and whether the expected investment exceeding $150 million is pursued.
- Final settlement terms and court approval for the wage-related claims, developments in other litigation, and any changes to recorded reserves.
- The sustainability of dividends and the effects of Tax Receivable Agreement payments, which the filing says may be significant.