Camping World Holdings, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021; comparisons are with the corresponding 2020 periods. The company operates Good Sam Services and Plans and RV and Outdoor Retail businesses. Amounts below are in U.S. dollars; financial statement figures are unaudited.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $1,916.6M | $1,678.8M | $5,536.2M | $4,312.8M |
| Gross profit / margin | $691.4M / 36.1% | $533.1M / 31.8% | $1,971.7M / 35.6% | $1,324.5M / 30.7% |
| Operating income / margin | $242.7M / 12.7% | $193.1M / 11.5% | $716.2M / 12.9% | $409.7M / 9.5% |
| Net income | $189.3M | $154.8M | $582.8M | $303.9M |
| Net income attributable to Camping World Holdings | $79.7M | $58.1M | $251.2M | $108.0M |
| Diluted EPS | $1.72 | $1.44 | $5.49 | $2.77 |
| Adjusted EBITDA (non-GAAP) | $288.0M | $217.0M | $810.6M | $473.8M |
Cash flow, liquidity and debt
- For the first nine months, operating cash flow was $571.9M, down from $928.5M. The company attributed the decline principally to inventory investment: inventory used $198.3M of cash in 2021, compared with a $430.6M cash source in 2020.
- Investing cash outflow was $256.3M, including $99.7M for dealership acquisitions, $88.6M of capital expenditures and $61.1M for real estate. Financing cash outflow was $348.8M. Cash declined $33.3M to $132.8M.
- Working capital was $515.3M, compared with $458.7M at year-end 2020. The company reported $60.1M of available capacity on its senior secured revolver and $49.1M on the floor-plan revolving line. Floor-plan facility unencumbered borrowing capacity was $852.5M.
- Long-term debt was $1.1B, net of current portion; floor-plan notes payable were $520.7M and the floor-plan revolving line balance was $20.9M. The balance sheet also reports substantial operating lease liabilities and a $179.9M Tax Receivable Agreement liability.
- In June, the company refinanced its term and revolving facilities, reducing principal outstanding by $38.6M; the new term loan matures in 2028. The September floor-plan amendment increased facility capacity and extended maturity to 2026. The company reported compliance with applicable debt covenants.
Material changes versus the prior period
- Q3 revenue rose 14.2%; nine-month revenue rose 28.4%. Growth was concentrated in RV and Outdoor Retail, particularly used vehicles, finance and insurance, and higher vehicle selling prices.
- Q3 new-vehicle revenue fell 4.8% as units sold declined 19.1%, while average selling price rose 17.7%. Used-vehicle revenue increased 74.0%. Same-store Q3 revenue increased 2.6%, but same-store unit sales fell 14.4%.
- Gross margin expanded, reflecting higher vehicle prices and vehicle gross profit. SG&A increased 31.4% in Q3 and 38.4% year to date, largely from wage-related costs, variable compensation, marketing and store growth.
- Good Sam Services and Plans revenue declined 2.4% year to date, in part because no in-person consumer shows were held; Q3 segment income also fell as roadside-assistance marketing costs increased.
- Inventory reached $1.36B, up from $1.14B at December 2020. Used-RV inventory increased particularly sharply. Management said demand continued to exceed supply, although the company procured more new vehicles than it sold in September.
Outlook, commentary, risks and unusual items
- No specific earnings or revenue guidance is provided. Management said liquidity sources should be sufficient for operations, growth, dividends and obligations for at least the next 12 months, while cautioning that future cash generation and financing availability are not assured.
- Management expects $240M–$330M of dealership expansion through 2022, including acquisitions and spending on land, buildings and improvements. Announced online-sales, service-bay and design-center initiatives are expected to require another $25M–$35M. Good Sam Rentals launched during Q3; the mobile RV technician marketplace was expected to launch in early 2022.
- COVID-19 and supply constraints remain uncertainties. Management warned demand may not persist as other travel options recover; manufacturer constraints, component shortages, changing consumer preferences and inventory availability could adversely affect results.
- The company recorded $15.0M of incremental reserves for non-RV product categories as it finalized the 2019 Strategic Shift. Estimated total shift-related restructuring costs are $116.6M–$136.6M; lease and wind-down costs may continue, with negotiations dependent on landlord approvals.
- The June debt refinancing generated $10.4M of debt-restructure loss and expense. Nine-month results also included a $3.5M Tax Receivable Agreement liability adjustment and a $14.5M tax valuation-allowance release.
- Legal matters include shareholder derivative litigation and a counterclaim seeking damages of at least approximately $2.5M, with a potential treble-damages claim. A California employment class/PAGA matter had a $4.0M reserve and preliminary settlement approval; final approval remained pending. The filing cautions that litigation exposure could exceed insurance coverage.
- During the first nine months, the company repurchased $86.8M of Class A shares and paid $44.8M in dividends. The remaining authorized repurchase amount was approximately $116.7M. Dividend payments remain subject to board discretion and liquidity constraints.
Important facts for investors to verify
- Whether unusually high vehicle prices and gross margins can persist as supply improves and consumer demand normalizes.
- Inventory growth, used-vehicle turnover, floor-plan financing capacity and the effect of inventory investment on operating cash flow.
- Actual costs, timing and cash requirements for dealership expansion, announced initiatives and remaining Strategic Shift leases.
- Debt terms, covenant headroom, interest-rate exposure, Tax Receivable Agreement payments and capacity to fund dividends and repurchases.
- Final outcomes and potential financial exposure from the disclosed litigation and employment settlement.
- Adjusted EBITDA is a non-GAAP measure with company-defined adjustments; compare it with GAAP earnings and cash flow. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.