Camping World Holdings Inc. reported adjusted earnings rose 16.5 percent in the first quarter on a 20.4 percent revenue gain.

First Quarter Highlights:

  • Total revenue increased 20.4 percent to a first quarter record of $1.1 billion;
  • Total number of recreational vehicles sold increased 21.0 percent to a first quarter record of 24,547 units;
  • Total same store sales increased 3.9 percent to a first quarter record of $838.6 million;
  • Finance & insurance revenue as a percentage of total vehicle revenue increased 205 basis points to an all-time high of 12.2 percent;
  • Gross profit increased 21.0 percent to a first quarter record of $304.8 million and gross margin increased 13 basis points to a first quarter record of 28.7 percent;
  • Income from operations, net income and diluted earnings per share decreased to $49.8 million, $17.3 million and $0.08, respectively and reflected $19.7 million of pre-opening expenses related to the Gander Outdoors store openings;
  • Adjusted pro forma net income increased 16.5 percent to $36.9 million, and adjusted pro forma earnings per fully exchanged and diluted share increased 9.7 percent to $0.41 and adjusted EBITDA decreased 0.1 percent to $71.8 million.

Marcus A. Lemonis, chairman and chief executive officer, stated, “We had a very strong first quarter and are pleased with the continued performance of our business. For the quarter, total revenue increased 20.4 percent to a first quarter record $1.1 billion, total gross profit increased 21.0 percent to a first quarter record $304.8 million, Adjusted Pro Forma Net Income increased 16.5 percent to $36.9 million and Adjusted EBITDA of $71.8 million was right in line with our expectation. While the unseasonably cold weather throughout a good portion of the country has likely impacted the early part of the peak selling season, we believe the backdrop across the RV industry remains strong and we continue to plan our business around a mid-single digit increase in same store sales in 2018.”

Lemonis continued, “We remain committed to profitable growth and have not seen any changes in the overall acquisition environment. In the first quarter, we announced five new acquisitions with six locations across five different states and plans to open eight new Supercenters late this year and early next year that we anticipate will begin to combine all of our brands in one location and serve a broad range of RV, outdoor and active lifestyle customers.”

First Quarter Review

Units and Average Selling Prices

The total number of recreational vehicle units sold increased 21.0 percent to 24,547 units from 20,279 units and the average selling price of a unit sold decreased 4.3 percent to $30,619 from $32,010 in the first quarter of 2017. New vehicle units sold increased 18.4 percent to 16,296 units and the average selling price of a new vehicle decreased 2.8 percent to $35,561. Used vehicle units sold increased 26.6 percent to 8,251 units and the average selling price of a used vehicle decreased 6.8 percent to $20,857 per unit.

Revenue

Total revenue increased 20.4 percent to $1.1 billion in the first quarter of 2018 from $881.6 million in the first quarter of 2017. Consumer Services and Plans revenue increased 7.1 percent to $53.8 million and Retail revenue increased 21.2 percent to $1.0 billion. In the Retail segment, new vehicle revenue increased 15.1 percent to $579.5 million; used vehicle revenue increased 18.0 percent to $172.1 million; parts, services and other revenue increased 41.4 percent to $164.3 million and finance and insurance revenue increased 39.1 percent to $91.8 million. Included in the parts, services and other revenue was $39.3 million in sales from the outdoor and active sports retail businesses, including Gander Outdoors, Overton’s, TheHouse.com, Uncle Dan’s, W82 and Erehwon Mountain Outfitters. Finance and insurance net revenue as a percentage of total new and used vehicle revenue increased 205 basis points to 12.2 percent for the first quarter of 2018 from 10.2 percent in the first quarter of 2017.

Same store sales for the base of 120 retail locations that were open on March 31, 2018 and January 1, 2017 increased 3.9 percent to $838.6 million for the quarter ended March 31, 2018. The increase in same store sales was primarily driven by a 22.0 percent increase in finance and insurance same store sales, a 1.6 percent increase in new vehicle same store sales, a 5.4 percent increase in used vehicle same store sales and a 1.0 percent increase in parts, services and other same store sales.

The company operated a total of 141 Camping World retail locations, one Overton’s location, two TheHouse.com locations, 28 Gander Outdoors locations, two W82 locations, five Uncle Dan’s locations and four Erehwon Mountain Outfitter locations as of March 31, 2018, compared to 126 Camping World retail locations at March 31, 2017.

Gross Profit

Total gross profit increased 21.0 percent to $304.8 million, or 28.7 percent of total revenue in the first quarter of 2018, from $251.9 million, or 28.6 percent of total revenue, in the first quarter of 2017. On a segment basis, Consumer Services and Plans gross profit increased 6.8 percent to $31.1 million, or 57.8 percent of segment revenue in the first quarter of 2018, from $29.1 million, or 57.9 percent of segment revenue in the first quarter of 2017. Retail gross profit increased 22.8 percent to $273.7 million, or 27.2 percent of segment revenue in the first quarter of 2018, from $222.8 million, or 26.8 percent of segment revenue, in the first quarter of 2017. The increase in Retail gross margin was driven by an increase in the finance and insurance net revenue as a percentage of total new and used vehicle revenue to 12.2 percent in the first quarter of 2018 from 10.2 percent in the first quarter of 2017.

Operating Expenses

Operating expenses increased 40.1 percent to $255.0 million in the first quarter of 2018 from $182.0 million in the first quarter of 2017. Selling, general and administrative (SG&A) expenses increased 39.7 percent to $245.1 million in the first quarter of 2018 from $175.5 million in the first quarter of 2017. The increase in SG&A expenses was primarily driven by the additional expenses associated with the 21 additional RV retail locations, 28 Gander Outdoors locations which included $19.7 million of pre-opening costs associated with the store openings, one Overton’s location, two TheHouse.com locations, two W82 locations, five Uncle Dan’s locations and four Erehwon Mountain Outfitter locations operated during the first quarter of 2018. As a percentage of total gross profit, SG&A expenses increased 1,077 basis points to 80.4 percent in the first quarter of 2018 from 69.7 percent in the first quarter of 2017. Depreciation and amortization expense increased 37.2 percent to $9.4 million, primarily due to the addition of acquired and greenfield locations, and the acquired businesses.

Floor Plan Interest & Other Interest Expenses

Floor plan interest expense increased to $10.7 million in the first quarter of 2018 from $5.3 million in the first quarter of 2017. The increase was primarily attributable to higher inventory from new dealership locations and existing locations expecting higher unit sales, as well as a 100 basis point increase in the average floor plan borrowing rate. Other interest expense increased to $12.8 million in the first quarter of 2018 from $9.4 million in the first quarter of 2017. The increase was primarily attributable to an increase in average debt outstanding partially offset by an 8 basis point decrease in the average interest rate.

Net Income, Net Income Margin, Adjusted Pro Forma Net Income, Diluted Earnings Per Share and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share

Net income, net income margin and diluted earnings per share were $17.3 million, 1.6 percent and $0.08, respectively, for the quarter ended March 31, 2018. Net income, net income margin and diluted earnings per share were $49.6 million, 5.6 percent and $0.38, respectively, for the quarter ended March 31, 2017.

Adjusted pro forma net income increased 16.5 percent to $36.9 million in the first quarter of 2018 from $31.7 million in the first quarter of 2017. Adjusted pro forma earnings per fully exchanged and diluted share increased 9.7 percent to $0.41 in the first quarter of 2018 from $0.38 in the first quarter of 2017.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA decreased 0.1 percent to $71.8 million and adjusted EBITDA margin decreased 139 basis points to 6.8 percent from 8.2 percent for the first quarter of 2018 versus the first quarter of 2017.

Select Balance Sheet and Cash Flow Items

The company’s working capital and cash and cash equivalents on March 31, 2018 were $680.9 million and $331.3 million, respectively, compared to $478.7 million and $224.2 million, respectively, at December 31, 2017. At the end of the first quarter 2018, the company had $2.8 million of letters of credit outstanding under its $35.0 million revolving credit facility, and $1.2 billion of term loan principal outstanding under its Senior Secured Credit Facilities. In addition, the company had $9.4 million of letters of credit outstanding within the Floor Plan Facility, borrowings of $24.4 million under its revolving line of credit and $939.8 million of floor plan notes payable outstanding under its floor plan financing facility. Inventory at the end of the first quarter of 2018 increased 11.2 percent to $1.6 billion compared to $1.4 billion at December 31, 2017.