Camping World Holdings(CWH) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Basis of Presentation and Forward-Looking Statements The report's basis of presentation is defined, along with cautionary notes on forward-looking statements and associated risks - The report defines key entities including 'Company' as Camping World Holdings, Inc, and its subsidiaries like CWGS Enterprises, LLC ('CWGS, LLC')[342][343][345] - Forward-looking statements are subject to risks including financing availability, consumer preferences, IT disruptions, and ongoing litigation[327][347][349] Item 1. Financial Statements (Unaudited) Unaudited condensed consolidated financial statements detail the company's financial position, performance, and cash flows Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2023 | Dec 31, 2022 | June 30, 2022 | |:---|:---|:---|:---| | Assets |||| | Cash and cash equivalents | $54,458 | $130,131 | $133,957 | | Inventories | $2,077,024 | $2,123,858 | $1,995,796 | | Total current assets | $2,443,893 | $2,483,662 | $2,467,947 | | Total assets | $4,803,093 | $4,800,147 | $4,610,301 | | Liabilities |||| | Accounts payable | $200,516 | $127,691 | $249,218 | | Notes payable – floor plan, net | $1,155,356 | $1,319,941 | $1,000,808 | | Total current liabilities | $1,841,948 | $1,872,327 | $1,770,563 | | Total liabilities | $4,544,850 | $4,552,461 | $4,310,370 | | Stockholders' Equity |||| | Total stockholders' equity | $258,243 | $247,686 | $299,931 | Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---| | Total revenue | $1,900,721 | $2,168,632 | $3,387,601 | $3,831,028 | | Total gross profit | $571,102 | $716,793 | $1,012,122 | $1,276,995 | | Income from operations | $132,677 | $254,100 | $191,276 | $403,225 | | Net income | $64,723 | $197,985 | $69,626 | $305,284 | | Net income attributable to Camping World Holdings, Inc | $28,703 | $84,311 | $31,872 | $129,041 | | Basic EPS | $0.65 | $2.02 | $0.72 | $3.03 | | Diluted EPS | $0.64 | $2.01 | $0.71 | $3.01 | Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---| | Net cash provided by operating activities | $227,964 | $183,994 | | Net cash used in investing activities | $(131,907) | $(131,505) | | Net cash used in financing activities | $(171,730) | $(185,864) | | Net decrease in cash and cash equivalents | $(75,673) | $(133,375) | | Cash and cash equivalents at end of period | $54,458 | $133,957 | Notes to Unaudited Condensed Consolidated Financial Statements Detailed notes provide context on accounting policies, revenue, debt, leases, and other key financial statement components 1. Summary of Significant Accounting Policies - The Company consolidates the financial results of CWGS, LLC, where CWH holds sole voting power and control; as of June 30, 2023, CWH owned 52.6% of CWGS, LLC[390] - A February 2022 cybersecurity incident affecting ~30,000 individuals is not expected to have a future material impact following a settlement agreement in June 2023[365][368][394] - The business is seasonal, with higher revenue and profits in Q2 and Q3; SG&A as a percentage of gross profit is typically higher in Q1 and Q4[225][369] - The Company early adopted ASU 2021-08 as of January 1, 2023, which did not materially impact its financial statements[2][370][425] 2. Revenue - For the six months ended June 30, 2023, $64.1 million of recognized revenues were from the beginning-of-period deferred revenue balance[373] Total Unsatisfied Performance Obligations (in thousands) | Year | Amount | |:---|:---| | 2023 | $60,761 | | 2024 | $54,981 | | 2025 | $25,580 | | 2026 | $13,284 | | 2027 | $7,231 | | Thereafter | $4,822 | | Total | $166,659 | 3. Inventories and Floor Plan Payables Inventories (in thousands) | Category | June 30, 2023 | Dec 31, 2022 | June 30, 2022 | |:---|:---|:---|:---| | Good Sam services and plans | $565 | $625 | $343 | | New RVs | $1,206,493 | $1,411,016 | $1,329,604 | | Used RVs | $651,396 | $464,310 | $358,060 | | Products, parts, accessories and other | $218,570 | $247,907 | $307,789 | | Total | $2,077,024 | $2,123,858 | $1,995,796 | - The Floor Plan Facility allows borrowing up to $1.70 billion, maturing September 30, 2026; in July 2023, the committed notes payable increased by $150.0 million to $1.85 billion[401][429] Floor Plan Facility Interest Rates | Category | June 30, 2023 | Dec 31, 2022 | June 30, 2022 | |:---|:---|:---|:---| | Floor plan notes payable | 7.00% | 6.01% | 2.93% | | Revolving line of credit | 7.35% | 6.21% | 3.13% | Floor Plan Facility Outstanding Amounts and Available Borrowings (in thousands) | Metric | June 30, 2023 | Dec 31, 2022 | June 30, 2022 | |:---|:---|:---|:---| | Total commitment | $1,700,000 | $1,700,000 | $1,700,000 | | Less: borrowings, net of FLAIR offset account | $(1,155,356) | $(1,319,941) | $(1,000,808) | | Less: FLAIR offset account | $(133,483) | $(217,669) | $(277,867) | | Additional borrowing capacity | $411,161 | $162,390 | $421,325 | | Unencumbered borrowing capacity | $322,498 | $85,082 | $310,889 | | Revolving line of credit: Additional borrowing capacity | $49,115 | $49,115 | $49,115 | | Letters of credit: Additional capacity | $18,629 | $18,629 | $18,500 | 4. Restructuring and Long-Lived Asset Impairment - The 2019 Strategic Shift involved divesting from Outdoor Lifestyle Locations, with total estimated restructuring costs of $121.0 million to $129.7 million[9][11][407][435] 2019 Strategic Shift Restructuring Accrual (in thousands) | Metric | Balance at June 30, 2019 | Charged to expense | Paid or otherwise settled | Balance at June 30, 2023 | |:---|:---|:---|:---|:---| | One-time Termination Benefits | $— | $1,239 | $(1,239) | $— | | Lease Termination Costs | $— | $19,579 | $(19,579) | $— | | Other Associated Costs | $— | $41,007 | $(39,998) | $1,009 | | Total | $— | $61,825 | $(60,816) | $1,009 | - The Active Sports Restructuring, initiated March 1, 2023, has estimated total costs of $3.8 million to $4.1 million[14][409][440] Active Sports Restructuring Costs Incurred (in thousands) | Metric | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | |:---|:---|:---| | One-time termination benefits | $193 | $193 | | Incremental inventory reserve charges | $2,646 | $2,646 | | Other associated costs | $420 | $420 | | Total | $3,259 | $3,259 | Long-Lived Asset Impairment Charges (in thousands) | Type of Asset | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | |:---|:---|:---| | Leasehold improvements | $0 | $740 | | Operating lease right of use assets | $476 | $476 | | Furniture and equipment | $0 | $329 | | Software | $0 | $1,362 | | Construction in progress and software in development | $0 | $113 | | Intangible assets | $0 | $4,501 | | Total | $476 | $7,521 | 5. Assets Held for Sale - As of June 30, 2023, two properties were classified as held for sale, with associated secured borrowings of $4.1 million[413][445] Assets Held for Sale and Related Liabilities (in thousands) | Category | June 30, 2023 | Dec 31, 2022 | June 30, 2022 | |:---|:---|:---|:---| | Assets held for sale: Property and equipment, net | $4,635 | $0 | $0 | | Liabilities related to assets held for sale: Current portion of long-term debt | $206 | $0 | $0 | | Liabilities related to assets held for sale: Long-term debt, net of current portion | $3,919 | $0 | $0 | 6. Goodwill and Intangible Assets Goodwill by Segment (in thousands) | Segment | Dec 31, 2021 | June 30, 2022 | Dec 31, 2022 | June 30, 2023 | |:---|:---|:---|:---|:---| | Good Sam Services and Plans | $23,829 | $24,234 | $24,234 | $24,234 | | RV and Outdoor Retail | $459,805 | $483,050 | $598,189 | $631,510 | | Consolidated Total | $483,634 | $507,284 | $622,423 | $655,744 | Intangible Assets, Net (in thousands) | Category | June 30, 2023 | Dec 31, 2022 | June 30, 2022 | |:---|:---|:---|:---| | Good Sam Services and Plans | $4,646 | $5,074 | $5,600 | | RV and Outdoor Retail | $10,382 | $15,868 | $17,409 | | Total | $15,028 | $20,945 | $22,943 | - During Q1 2022, the Company recorded $8.8 million of incremental accelerated amortization for certain trademark and trade name intangible assets being phased out[164][481] 7. Long-Term Debt Outstanding Long-Term Debt (in thousands) | Category | June 30, 2023 | Dec 31, 2022 | June 30, 2022 | |:---|:---|:---|:---| | Term Loan Facility | $1,351,543 | $1,360,454 | $1,361,853 | | Real Estate Facilities | $188,449 | $145,911 | $22,076 | | Other Long-Term Debt | $8,403 | $3,280 | $3,341 | | Subtotal | $1,548,395 | $1,509,645 | $1,387,270 | | Less: current portion | $(26,766) | $(25,229) | $(15,826) | | Total | $1,521,629 | $1,484,416 | $1,371,444 | - The Term Loan Facility has a principal amount of $1.4 billion, with an average interest rate of 7.66% at June 30, 2023, up from 3.82% a year prior[421][451][484] - The Revolving Credit Facility has a total commitment of $65.0 million, with $22.75 million of additional borrowing capacity as of June 30, 2023[421][422][452] - The M&T Real Estate Facility has a maximum capacity of $250.0 million; an additional $59.2 million was borrowed in the first six months of 2023[486][488] - Other long-term debt totaled $8.4 million outstanding at June 30, 2023, with a weighted average interest rate of 4.27%[27] 8. Lease Obligations Net Lease Costs (in thousands) | Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---| | Operating lease cost | $29,376 | $28,081 | $58,581 | $56,577 | | Amortization of finance lease assets | $2,068 | $2,974 | $(745) | $5,665 | | Interest on finance lease liabilities | $1,540 | $1,152 | $2,939 | $2,139 | | Short-term lease cost | $550 | $555 | $1,064 | $1,018 | | Variable lease cost | $6,128 | $5,602 | $12,417 | $11,796 | | Sublease income | $(675) | $(306) | $(1,332) | $(699) | | Net lease costs | $38,987 | $38,058 | $72,924 | $76,496 | Supplemental Cash Flow Information Related to Leases (in thousands) | Category | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---| | Operating cash flows for operating leases | $58,227 | $57,181 | | Operating cash flows for finance leases | $2,934 | $2,072 | | Financing cash flows for finance leases | $2,847 | $3,042 | | New, remeasured and terminated operating leases | $18,872 | $(8,967) | | New, remeasured and terminated finance leases | $7,700 | $24,224 | - In February 2022, FRHP sold three properties for $28.0 million and leased them back for twenty years, which was accounted for as a financing transaction[263][288][492] 9. Fair Value Measurements - Fair value measurements are categorized into a three-tier hierarchy: Level 1 (quoted prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[30] Fair Value Measurement of Financial Liabilities (in thousands) | Instrument | Fair Value Hierarchy | June 30, 2023 Carrying Value | June 30, 2023 Fair Value | Dec 31, 2022 Carrying Value | Dec 31, 2022 Fair Value | June 30, 2022 Carrying Value | June 30, 2022 Fair Value | |:---|:---|:---|:---|:---|:---|:---|:---| | Term Loan Facility | Level 2 | $1,351,543 | $1,383,674 | $1,360,454 | $1,394,290 | $1,361,853 | $1,397,829 | | Floor Plan Facility Revolving Line of Credit | Level 2 | $20,885 | $21,327 | $20,885 | $19,823 | $20,885 | $17,535 | | Real Estate Facilities | Level 2 | $192,574 | $200,797 | $145,911 | $145,664 | $22,076 | $19,812 | | Other Long-Term Debt | Level 2 | $8,403 | $6,947 | $3,280 | $2,944 | $3,341 | $3,055 | 10. Commitments and Contingencies - The Company is involved in litigation primarily related to 'The Profit' TV show, but management does not expect a material adverse effect on financial statements[463][465][496][497] - As of June 30, 2023, outstanding standby letters of credit were $11.4 million (Floor Plan) and $4.9 million (Senior Secured), with $23.4 million in surety bonds[467] 11. Statement of Cash Flows Supplemental Cash Flow Information (in thousands) | Category | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---| | Cash paid for interest | $82,200 | $41,271 | | Cash paid for income taxes | $2,323 | $28,572 | | Purchase of real property through assumption of other long-term debt | $5,185 | $0 | | Cost of treasury stock issued for vested restricted stock units | $3,457 | $8,547 | 12. Acquisitions - During H1 2023, the RV and Outdoor Retail segment acquired eight RV dealerships for approximately $74.4 million and purchased $42.2 million in real property[36][500] Acquired Assets and Liabilities (in thousands) | Category | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---| | Inventories, net | $40,391 | $11,775 | | Total tangible net assets acquired | $41,093 | $11,906 | | Total intangible assets acquired | $0 | $2,632 | | Goodwill | $33,321 | $23,650 | | Cash paid for acquisitions, net of cash acquired | $74,414 | $38,188 | | Inventory purchases financed via floor plan | $(31,188) | $(5,876) | | Cash payment net of floor plan financing | $43,226 | $32,312 | - Acquired goodwill of $33.3 million (2023) and $23.7 million (2022) primarily represents expected synergies and the acquired assembled workforce[471][500] 13. Income Taxes - The LLC Conversion, effective January 2, 2023, allows C-Corp losses to offset Pass-Through income within CWGS, LLC, reducing CWH's income tax expense[108][474] Income Tax Expense (in thousands) | Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---| | Income tax expense recorded by CWH | $(11,656) | $(28,661) | $(10,712) | $(48,771) | | Income tax expense recorded by CWGS, LLC | $(1,925) | $(3,714) | $(3,142) | $(4,640) | | Total Income tax expense | $(13,581) | $(32,375) | $(13,854) | $(53,411) | - The effective income tax rate was 16.6% for H1 2023, compared to 14.9% for H1 2022, differing from the 21.0% federal rate due to state taxes and non-controlling interests[475][507] - The Tax Receivable Agreement obligates the Company to pay 85% of realized tax benefits to Continuing Equity Owners and Crestview Partners II GP, L.P[89][90][508] 14. Related Party Transactions - Related party lease expense for RV dealership locations leased from managers and officers was $3.0 million for H1 2023, up from $1.3 million in the prior year period[91] - Rental payments for the Lincolnshire Lease, personally guaranteed by the Chairman and CEO, were $0.5 million for H1 2023[45] 15. Stockholders' Equity - No Class A common stock was repurchased in H1 2023; approximately $120.2 million remained available under the program as of June 30, 2023[47][50][103] - During H1 2022, the Company repurchased 2,592,524 shares of Class A common stock for approximately $79.8 million[47] 16. Non-Controlling Interests - CWH consolidates CWGS, LLC's financial results and reports a non-controlling interest for common units held by Continuing Equity Owners[51] CWGS, LLC Common Unit Ownership | Entity | June 30, 2023 Common Units | June 30, 2023 Ownership % | Dec 31, 2022 Common Units | Dec 31, 2022 Ownership % | June 30, 2022 Common Units | June 30, 2022 Ownership % | |:---|:---|:---|:---|:---|:---|:---| | CWH | 44,525,108 | 52.6% | 42,440,940 | 50.2% | 41,789,323 | 49.8% | | Continuing Equity Owners | 40,044,536 | 47.4% | 42,044,536 | 49.8% | 42,044,536 | 50.2% | | Total | 84,569,644 | 100.0% | 84,485,476 | 100.0% | 83,833,859 | 100.0% | - On January 1, 2023, 2.0 million common units of CWGS, LLC were redeemed for 2.0 million shares of Class A common stock[57] 17. Equity-Based Compensation Plans Equity-Based Compensation Expense (in thousands) | Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---| | Costs applicable to revenue | $222 | $222 | $354 | $363 | | Selling, general, and administrative | $6,270 | $8,746 | $12,497 | $20,279 | | Total equity-based compensation expense | $6,492 | $8,968 | $12,850 | $20,642 | Restricted Stock Units (RSUs) Activity (in thousands) | Metric | June 30, 2023 | |:---|:---| | Outstanding at December 31, 2022 | 2,549 | | Granted | 303 | | Vested | (99) | | Forfeited | (188) | | Outstanding at June 30, 2023 | 2,565 | - During H1 2023, the Company granted 271,922 RSUs to employees with an aggregate fair value of $4.9 million[20] 18. Earnings Per Share Basic and Diluted Earnings Per Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---| | Net income attributable to Camping World Holdings, Inc — basic | $28,703 | $84,311 | $31,872 | $129,041 | | Net income attributable to Camping World Holdings, Inc — diluted | $28,804 | $84,716 | $60,441 | $129,779 | | Weighted-average shares of Class A common stock outstanding — basic | 44,490 | 41,737 | 44,473 | 42,640 | | Weighted-average shares of Class A common stock outstanding — diluted | 44,804 | 42,139 | 84,783 | 43,171 | | Earnings per share of Class A common stock — basic | $0.65 | $2.02 | $0.72 | $3.03 | | Earnings per share of Class A common stock — diluted | $0.64 | $2.01 | $0.71 | $3.01 | - Class B and Class C common stock do not share in earnings or losses and are not participating securities[23] 19. Segments Information Segment Revenue (in thousands) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---| | Good Sam Services and Plans | $51,038 | $49,593 | $97,405 | $94,152 | | RV and Outdoor Retail | $1,849,683 | $2,119,039 | $3,290,196 | $3,736,876 | | Total consolidated revenue | $1,900,721 | $2,168,632 | $3,387,601 | $3,831,028 | Segment Income (in thousands) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---| | Good Sam Services and Plans | $26,840 | $22,124 | $50,459 | $43,296 | | RV and Outdoor Retail | $106,156 | $243,485 | $138,740 | $394,984 | | Total segment income | $132,996 | $265,609 | $189,199 | $438,280 | Total Assets by Segment (in thousands) | Segment | June 30, 2023 | Dec 31, 2022 | June 30, 2022 | |:---|:---|:---|:---| | Good Sam Services and Plans | $92,453 | $130,841 | $82,734 | | RV and Outdoor Retail | $4,538,440 | $4,448,354 | $4,261,031 | | Total assets | $4,803,093 | $4,800,147 | $4,610,301 | Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operational results, industry trends, and critical accounting policies Overview - Camping World Holdings, Inc is America's largest retailer of RVs, operating 203 locations as of June 30, 2023[235] Retail Store Locations and Changes (June 30, 2022 to June 30, 2023) | Category | Dealerships | Retail Centers | Retail Stores | Total | |:---|:---|:---|:---|:---| | Number of store locations as of June 30, 2022 | 181 | 8 | 1 | 190 | | Opened | 16 | 2 | — | 18 | | Converted | 1 | (1) | — | — | | Closed | (1) | (2) | (2) | (5) | | Number of store locations as of June 30, 2023 | 196 | 7 | — | 203 | - An 'Active Customer' is a customer who has transacted with the company in any of the eight most recently completed fiscal quarters[234] Industry Trends - Wholesale shipments of new RVs decreased 49.2% in the first six months of 2023 compared to the same period in 2022[39] - New vehicle gross margins decreased in 2022 and H1 2023 due to higher per-unit costs and a 7.9% decrease in average selling price in Q2 2023[41] - The company experienced inflation impacts on new vehicle costs and labor rates, which are expected to continue in 2023[43][73] Restructuring - The 2019 Strategic Shift to refocus on core RV competencies is nearing completion, with most activities expected to conclude by December 31, 2023[75] - The Active Sports Restructuring, initiated March 1, 2023, is expected to be substantially completed by December 31, 2023, with estimated costs of $3.8 million to $4.1 million[523] Comparison of Certain Trends to Pre-COVID-19 Pandemic Periods - Q2 2023 new vehicle gross margins were slightly higher than pre-COVID-19 pandemic periods (2016-2019)[76] - The percentage of total unit sales from used vehicles was significantly higher in Q2 2023 compared to pre-COVID-19 periods[525] Vehicle Gross Margin and Unit Sale Mix (Three Months Ended June 30) | Metric | 2023 | 2019 | 2018 | 2017 | 2016 | |:---|:---|:---|:---|:---|:---| | Gross margin: |||||| | New vehicles | 15.4% | 12.5% | 13.6% | 15.1% | 14.9% | | Used vehicles | 22.9% | 21.6% | 22.9% | 25.9% | 20.4% | | Unit sales mix: |||||| | New vehicles | 51.5% | 67.9% | 72.7% | 70.7% | 61.6% | | Used vehicles | 48.5% | 32.1% | 27.3% | 29.3% | 38.4% | Our Corporate Structure Impact on Income Taxes - The company uses an 'Up-C' structure, with CWH (a C-Corp) being the public holding company and a 52.6% owner of CWGS, LLC (a Pass-Through entity)[78][526] - The LLC Conversion, completed by January 2, 2023, allows C-Corp losses to offset Pass-Through income, reducing CWH's income tax expense[108] - Effective income tax rates used for CWH income adjustments were 25.3% for 2023 and 25.4% for 2022[79] Results of Operations Key Financial Highlights (Three Months Ended June 30, 2023 vs. 2022) (in thousands) | Metric | 2023 Amount | 2022 Amount | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Total revenue | $1,900,721 | $2,168,632 | $(267,911) | (12.4%) | | Total gross profit | $571,102 | $716,793 | $(145,691) | (20.3%) | | Income from operations | $132,677 | $254,100 | $(121,423) | (47.8%) | | Net income | $64,723 | $197,985 | $(133,262) | (67.3%) | | Net income attributable to Camping World Holdings, Inc | $28,703 | $84,311 | $(55,608) | (66.0%) | Key Financial Highlights (Six Months Ended June 30, 2023 vs. 2022) (in thousands) | Metric | 2023 Amount | 2022 Amount | Change ($) | Change (%) | |:---|:---|:---|:---|:---| | Total consolidated revenue | $3,387,601 | $3,831,028 | $(443,427) | (11.6%) | | Total gross profit | $1,012,122 | $1,276,995 | $(264,873) | (20.7%) | | Income from operations | $191,276 | $403,225 | $(211,949) | (52.6%) | | Net income | $69,626 | $305,284 | $(235,658) | (77.2%) | | Net income attributable to Camping World Holdings, Inc | $31,872 | $129,041 | $(97,169) | (75.3%) | - Good Sam Services and Plans revenue and gross profit increased due to more contracts in force for various programs[69][97][157][199] - RV and Outdoor Retail revenue decreased due to lower new vehicle sales (-19.3% in Q2) and average selling prices (-7.9% in Q2), while used vehicle revenue increased from higher unit sales (+14.3% in Q2)[67][158][533][534] - Floor plan interest expense increased significantly by 136.7% in Q2 and 176.6% in H1, driven by a 429-430 basis point rate increase[195][478] - Other interest expense, net, increased by 124.4% in Q2 and 121.1% in H1, due to higher interest rates and principal balances[64][196] - Selling, general and administrative expenses decreased due to reduced advertising and commissions, partially offset by higher wage expenses and professional fees[117][163] - Income tax expense decreased due to lower income generated from CWGS, LLC[122][197] Non-GAAP Financial Measures - The Company uses non-GAAP measures like EBITDA and Adjusted EBITDA to enhance understanding of performance and for internal decision-making[172][207] - Adjusted EBITDA excludes items not considered in ongoing operating performance, such as asset impairment, restructuring costs, and equity-based compensation[207] EBITDA and Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---| | Net income | $64,723 | $197,985 | $69,626 | $305,284 | | Subtotal EBITDA | $129,028 | $262,922 | $179,954 | $431,093 | | Adjusted EBITDA | $139,295 | $277,687 | $200,136 | $459,782 | Adjusted EBITDA Margin | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---| | Net income margin | 3.4% | 9.1% | 2.1% | 8.0% | | Subtotal EBITDA margin | 6.8% | 12.1% | 5.3% | 11.3% | | Adjusted EBITDA margin | 7.3% | 12.8% | 5.9% | 12.0% | Adjusted Earnings Per Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |:---|:---|:---|:---|:---| | Adjusted net income attributable to Camping World Holdings, Inc – basic | $32,739 | $90,626 | $39,805 | $141,116 | | Adjusted net income attributable to Camping World Holdings, Inc – diluted | $32,853 | $181,451 | $75,517 | $141,927 | | Adjusted earnings per share - basic | $0.74 | $2.17 | $0.90 | $3.31 | | Adjusted earnings per share - diluted | $0.73 | $2.16 | $0.89 | $3.29 | Liquidity and Capital Resources - Primary liquidity needs include working capital, acquisitions, and debt service, met through operations, cash, and credit facilities[215] - The Board approved a decrease in the quarterly cash dividend to $0.125 per share from $0.625 per share to support aggressive dealership acquisitions[519] - The company plans to spend $150.0 million to $210.0 million over the next twelve months on dealership expansion[245] - Working capital was $601.9 million at June 30, 2023, down from $697.4 million at June 30, 2022[224][249] - Net cash provided by operating activities increased by $44.0 million to $228.0 million for H1 2023, mainly due to favorable working capital changes offsetting lower net income[521] Summary of Credit Facilities and Other Long-Term Debt (in thousands) | Facility | Outstanding | Current Portion | Remaining Available | |:---|:---|:---|:---| | Floor Plan Facility: Notes payable - floor plan | $1,155,356 | $1,155,356 | $322,498 | | Revolving line of credit | $20,885 | $0 | $49,115 | | Senior Secured Credit Facilities: Term Loan Facility | $1,351,543 | $14,015 | $0 | | Revolving Credit Facility | $0 | $0 | $22,750 | | Real Estate Facilities | $192,574 | $12,642 | $68,394 | | Other long-term debt | $8,403 | $315 | $0 | | Finance lease obligations | $104,678 | $5,337 | $0 | | Total | $2,833,439 | $1,187,665 | $462,757 | - A 100 basis point increase in effective interest rates would increase annual interest expense by $13.9 million for the Term Loan Facility and $11.7 million for the Floor Plan Facility[268] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Disclosure controls and procedures were evaluated by management and deemed effective at the reasonable assurance level as of June 30, 2023[294] - No material changes in internal control over financial reporting were identified during the fiscal quarter ended June 30, 2023[295] PART II. OTHER INFORMATION This part includes legal proceedings, risk factors, equity security transactions, and a list of exhibits Item 1. Legal Proceedings - The company refers to Note 10 – Commitments and Contingencies for information on legal proceedings[273] Item 1A. Risk Factors - No material changes to risk factors were disclosed from those previously reported in the Annual Report on Form 10-K for the year ended December 31, 2022[274] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities Issuer Purchases of Equity Securities (Class A Common Stock) | Period | Total Number of Purchased Shares | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs | |:---|:---|:---|:---|:---| | April 1, 2023 to April 30, 2023 | — | $— | — | $120,166,000 | | May 1, 2023 to May 31, 2023 | — | — | — | $120,166,000 | | June 1, 2023 to June 30, 2023 | — | — | — | $120,166,000 | | Total | — | $— | — | $120,166,000 | - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2023[278] Item 6. Exhibits - The exhibits include various corporate documents, employment agreements, CEO/CFO certifications, and Inline XBRL documents[282][283][299][302][305][309][310]