Camping World Holdings, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless noted. Amounts are in U.S. dollars. Camping World operates RV dealerships and related retail, service, membership, and protection-plan businesses.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $1,486.9 million | $1,662.4 million | Down 10.6% |
| Gross profit | $441.0 million | $560.2 million | Down 21.3% |
| Gross margin | 29.7% | 33.7% | Down 4.0 percentage points |
| Operating income | $58.6 million | $149.1 million | Down 60.7% |
| Net income | $4.9 million | $107.3 million | Down 95.4% |
| Net income attributable to Camping World Holdings | $3.2 million | $44.7 million | Down 92.9% |
| Class A EPS, basic / diluted | $0.07 / $0.05 | $1.03 / $1.02 | |
| Adjusted EBITDA (non-GAAP) | $60.8 million | $182.1 million | Margin 4.1% vs. 11.0% |
| Cash from operating activities | $199.2 million | $(210.1) million |
- Revenue and margins: New-vehicle revenue fell 22.5% as units sold declined 26.9%; new-vehicle gross margin fell to 13.8% from 22.8%. Used-vehicle revenue rose 10.4%, supported by 13.3% more units, but used-vehicle margin declined to 23.1% from 24.9%. Good Sam Services and Plans revenue increased 4.1%.
- Cash flow: Operating cash flow improved by $409.3 million year over year, driven chiefly by a $143.7 million inventory cash inflow versus a $348.4 million outflow in Q1 2022. Investing activities used $20.7 million; financing activities used $235.8 million. Cash decreased $57.3 million to $72.8 million.
- Liquidity: Working capital was $654.1 million at March 31, 2023. The company reported $523.3 million of remaining availability across specified credit facilities, subject to facility terms, collateral and covenants; this includes $349.5 million of floor-plan capacity, $60.1 million under the senior revolver and $64.6 million under real estate facilities. The $223.9 million FLAIR offset account included $220.6 million that management said could be withdrawn while remaining within floor-plan covenants.
- Debt and interest: The company’s summary of credit facilities, other long-term debt and finance leases showed $2.729 billion outstanding, including $1.042 billion in floor-plan borrowings, $1.354 billion on the term loan and $106.3 million in finance lease obligations. The term-loan average rate was 7.20% versus 3.25% a year earlier; the floor-plan rate was 6.63% versus 2.18%. Higher rates and, to a lesser extent, higher real-estate borrowings increased floor-plan and other interest expense by a combined $31.4 million year over year.
Material changes and management commentary
- Consolidated revenue fell 10.6%, while total vehicle units sold declined 12.2%. Same-store revenue decreased 15.7%.
- Segment income was $56.2 million, down 67.5%. Good Sam Services and Plans segment income increased 11.6% to $23.6 million; RV and Outdoor Retail segment income declined 78.5% to $32.6 million, with segment margin falling to 2.3% from 9.3%.
- Management cited fewer new-vehicle sales, higher new-vehicle costs, weaker finance-and-insurance revenue, and increased floor-plan interest expense as key pressures. Lower SG&A and higher used-vehicle sales partially offset the declines.
- Q1 2023 wholesale RV shipments were 54.3% below Q1 2022, according to the RV Industry Association data cited by the company. Management said elevated vehicle costs and inflationary pressures were expected to continue during 2023; it also noted that normalized industry supply could put further pressure on new-vehicle gross margins.
Outlook, risks, contingencies and unusual items
- Outlook: No full-year earnings guidance is provided in the filing text. Management expected $100 million to $160 million of 2023 dealership expansion spending through acquisitions and capital expenditures. It stated that available liquidity was expected to fund operations, growth, dividends and obligations for at least the next 12 months, while cautioning that additional financing could be needed if cash generation or facility availability proves insufficient.
- Interest-rate exposure: A 100-basis-point rate change was estimated to affect next-12-month interest expense by $13.9 million on the term loan, $10.6 million on floor-plan borrowings, $0.2 million on the floor-plan revolver and $2.1 million on real-estate facilities.
- Unusual items: The company recorded $7.0 million of long-lived asset impairment, including charges associated with the planned reduction and integration of Active Sports operations; a $5.0 million gain on asset sales/disposals; and a $1.3 million impairment of an equity-method investment. Operating cash flow benefited materially from inventory reduction.
- Dividends and capital allocation: The company paid a quarterly dividend of $0.625 per Class A share. It made no stock repurchases in Q1 and had approximately $120.2 million remaining under its repurchase authorization.
- Contingencies: Three putative class actions related to the February 2022 cybersecurity incident were subject to an agreement in principle to settle for an immaterial amount, pending a settlement agreement and court approval. Separate disputes involving businesses featured on The Profit remained in arbitration or litigation; management said it could not estimate possible losses, though it did not believe disposition of pending matters was likely to materially affect the financial statements.
- Other risks: The filing highlights RV-industry cyclicality and seasonality, consumer demand and financing availability, inventory management, inflation, variable-rate debt, cybersecurity, litigation and access to adequate capital. The company reported compliance with applicable debt covenants at March 31, 2023.
Important facts for investors to verify
- Whether vehicle demand, new-vehicle margins and finance-and-insurance revenue stabilize as industry shipments and dealer inventories normalize.
- Whether inventory reductions and operating cash flow are sustainable, and how cash and facility availability change through the peak selling season.
- How higher variable interest rates affect interest expense, earnings and covenant headroom.
- Actual 2023 dealership expansion spending, acquisitions and returns on the planned investment.
- Progress on the Active Sports restructuring, remaining 2019 Strategic Shift lease costs, and resolution of the cybersecurity settlement and other legal matters.
- The sustainability of the dividend and management’s liquidity outlook, including potential Tax Receivable Agreement payments and other financing needs.