Camping World Holdings, Inc. Reports Updated Fourth Quarter and Full Year 2017 Results

LINCOLNSHIRE, IL--(BUSINESS WIRE)--Camping World Holdings, Inc. (NYSE: CWH) (“Camping World,” “Company,” “we,” “us” or “our”) today updated its financial results for the fourth quarter and full year ended December 31, 2017.

On February 27, 2018, the Company initially reported earnings for the fourth quarter and fiscal year 2017. In early March 2018, after the Company had released earnings for the quarter and year ended December 31, 2017, the Company determined that a portion of the outside basis deferred tax asset related to its acquisition of the direct interests in CWGS Enterprises, LLC through newly issued LLC units is not expected to be realized in the foreseeable future, and, as a result, the Company should have established a valuation allowance on a portion of the outside basis deferred tax asset.

Accordingly, the Company restated its consolidated financial statements as of and for the year ended December 31, 2016 to reflect a valuation allowance against the portion of the deferred tax asset related to the outside basis difference of $102.7 million. Following the establishment of the valuation allowance as of December 31, 2016, the Company recognizes subsequent changes to the valuation allowance through the provision for income taxes or equity, as applicable. The effect of the correction of the foregoing error decreased Deferred Tax Assets, Net and Additional Paid-in Capital on the Company’s balance sheet.

The result of the restatement improved fourth quarter net income (loss) by $47.0 million through a corresponding $47.0 million reduction in income tax expense. Accordingly, the fourth quarter 2017 net loss of $52.5 million was reduced to a net loss of $5.5 million; improving diluted earnings per share to ($0.52) from ($1.87).

This non-cash adjustment had no impact on revenue, income from operations, EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share. The updated earnings release and restatement details are below.

Fourth Quarter 2017 Summary

• Total revenue increased 32.9% to $889.0 million;
• Gross profit increased 37.1% to $266.6 million and gross margin increased 92 basis points to 30.0%;
• Income from operations increased 37.9% to $44.3 million and operating margin increased 18 basis points to 5.0%;
• Net loss was $5.5 million and included a $99.8 million tax receivable liability adjustment to other income and $118.4 million of income taxes related to changes stemming from the U.S. tax reform enacted in December 2017. Net loss margin was 0.6% and diluted earnings per share⁽²⁾ was ($0.52);
• Adjusted Pro Forma Net Income⁽¹⁾ increased 112.8% to $22.0 million and Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share⁽¹⁾ increased 100.0% to $0.25; and
• Adjusted EBITDA⁽¹⁾ increased 76.0% to $65.3 million and Adjusted EBITDA Margin⁽¹⁾ increased 180 basis points to 7.3%.

Fiscal 2017 Summary

• Total revenue increased 21.8% to $4.3 billion;
• Gross profit increased 25.1% to $1.2 billion and gross margin increased 77 basis points to 29.1%;
• Income from operations increased 29.4% to $361.4 million, and operating margin increased 50 basis points to 8.4%,
• Net income was $233.0 million and included a $99.7 million tax receivable liability adjustment to other income, and $118.4 million of income taxes related to changes stemming from the U.S. tax reform enacted in December 2017. Net income margin was 5.4% and diluted earnings per share⁽²⁾ was $1.07;
• Adjusted Pro Forma Net Income⁽¹⁾ increased 51.0% to $198.7 million and Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share⁽¹⁾ increased 45.9% to $2.29; and
• Adjusted EBITDA⁽¹⁾ increased 38.2% to $399.6 million and Adjusted EBITDA Margin⁽¹⁾ increased 111 basis points to 9.3%.

⁽¹⁾ Adjusted Pro Forma Net Income, Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share, Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures. For reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, see the “Non-GAAP Financial Measures” section later in this press release.
⁽²⁾ Diluted earnings per share of Class A common stock is applicable only for periods after the Company’s initial public offering. For a discussion of earnings per share see the “Earnings Per Share” section later in this press release.

Presentation

This press release presents historical results, for the periods presented, of the Company and its subsidiaries, that are presented in accordance with accounting principles generally accepted in the United States (“GAAP”), unless noted as a non-GAAP financial measure. The Company’s initial public offering (“IPO”) and related reorganization transactions (“Reorganization Transactions”) that occurred on October 6, 2016 resulted in the Company as the sole managing member of CWGS Enterprises, LLC (“CWGS, LLC”), with sole voting power in and control of the management of CWGS, LLC. Despite its position as sole managing member of CWGS, LLC, the Company has a minority economic interest in CWGS, LLC. As of December 31, 2017, the Company owned 41.5% of CWGS, LLC. Accordingly, the Company consolidates the financial results of CWGS, LLC and reports a non-controlling interest in its consolidated financial statements. As the Reorganization Transactions are considered transactions among entities under common control, the financial statements for the periods prior to the IPO and related Reorganization Transactions have been adjusted to combine the previously separate entities for presentation purposes. Unless otherwise indicated, all financial comparisons in this press release compare our financial results from the 2017 fourth quarter and full year to our financial results from the 2016 fourth quarter and full year, respectively.

Fourth Quarter 2017 Results Compared to Fourth Quarter 2016 Results

Units and Average Selling Prices

The total number of recreational vehicle units sold increased 36.1% to 18,117 units from 13,316 units and the average selling price of a unit sold decreased 4.6% to $33,031 from the fourth quarter of 2016. New vehicle units sold increased 50.4% to 12,013 units and the average selling price of a new vehicle decreased 8.4% to $38,163. Used vehicle units sold increased 14.5% to 6,104 units and the average selling price of a used vehicle decreased 4.9% to $22,930.

Revenue

Total revenue increased 32.9% to $889.0 million from $668.9 million in the fourth quarter of 2016. Consumer Services and Plans revenue increased 4.5% to $51.1 million and Retail revenue increased 35.1% to $837.9 million. In the Retail segment, new vehicle revenue increased 37.8% to $458.5 million, used vehicle revenue increased 9.0% to $140.0 million, parts, services and other revenue increased 48.4% to $174.7 million and finance and insurance revenue increased 57.3% to $64.8 million. Included in the parts, services and other revenue was $38.2 million in sales from the Outdoor and Active Sports Retail businesses acquired in 2017, including Gander Outdoors, Overton’s, TheHouse.com, Uncle Dan’s and W82. Finance and insurance, net revenue as a percentage of total new and used vehicle revenue increased to 10.8% from 8.9% in the fourth quarter of 2016.

Same store sales for the base of 115 retail locations that were open both at the end of the corresponding period and at the beginning of the preceding fiscal year increased 11.9% to $655.3 million for the three months ended December 31, 2017. The increase in same store sales was primarily driven by a 18.5% increase in new vehicle same store sales, a 34.0% increase in finance and insurance same store sales, and a 3.0% increase in parts, services and other same store sales, partially offset by a 5.0% decrease in used vehicle same store sales.

The Company operated a total of 140 Camping World retail locations, two Overton’s locations, two TheHouse.com locations, two Gander Outdoors locations, two W82 locations, and five Uncle Dan’s locations as of December 31, 2017, compared to 122 Camping World retail locations at December 31, 2016.

Gross Profit

Total gross profit increased 37.1% to $266.6 million, or 30.0% of total revenue, from $194.5 million, or 29.1% of total revenue, in the fourth quarter of 2016. On a segment basis, Consumer Services and Plans gross profit increased 8.2% to $31.1 million, or 60.8% of segment revenue, from $28.7 million, or 58.7% of segment revenue, and Retail gross profit increased 42.1% to $235.5 million, or 28.1% of segment revenue, from $165.8 million, or 26.7% of segment revenue, in the fourth quarter of 2016. A 211 basis point improvement in Consumer Services and Plans gross margin was primarily driven by increased file size of our membership clubs combined with reduced club marketing expense, and increased contracts in force in our roadside assistance programs combined with reduced program costs. A 137 basis point increase in Retail gross margin was primarily driven by an increase in the finance and insurance, net revenue as a percentage of total new and used vehicle revenue to 10.8% of vehicle sales from 8.9% of vehicle sales in the fourth quarter of 2016, and the 50.4% increase in new units sold.

Operating Expenses

Operating expenses increased 36.9% to $222.3 million from $162.4 million in the fourth quarter of 2016. Selling, general and administrative (“SG&A”) expenses increased 37.5% to $213.1 million from $154.9 million in the fourth quarter of 2016. The increase in SG&A expenses was primarily driven by the additional expenses associated with the incremental 26 greenfield and acquired retail locations opened during 2016 and 2017, two Overton’s locations, two TheHouse.com locations, two Gander Outdoors locations and two W82 locations operated during the fourth quarter of 2017 versus the prior year period, $17.7 million of pre-opening and payroll costs associated with the Gander Mountain acquisition, and $0.1 million of transaction expenses associated with the acquisition into new or complimentary markets. As a percentage of total gross profit, SG&A expenses increased 25 basis points to 79.9% compared to the fourth quarter of 2016. Depreciation and amortization expense increased 33.2% to $8.7 million primarily due to the addition of acquired and greenfield locations, and acquired businesses.

Floor Plan Interest & Other Interest Expenses

Floor plan interest expense increased to $8.4 million from $4.0 million in the fourth quarter of 2016. The increase was primarily attributable to higher inventory from new dealership locations and locations expecting higher unit sales, as well as a 84 basis point increase in the average floor plan borrowing rate. Other interest expense increased to $12.0 million from $10.3 million in the fourth quarter of 2016. The increase was primarily attributable to an increase in average debt outstanding partially offset by an 86 basis point decrease in the average interest rate.

Net Loss, Net loss margin, Adjusted Pro Forma Net Income⁽¹⁾, Diluted Earnings Per Share, and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share⁽¹⁾

Net loss was $5.5 million, reflecting a $99.8 million tax receivable liability adjustment to other income and $118.4 million of income tax expense related to changes stemming from the U.S. tax reform enacted in December 2017, among other items. Net loss margin was (0.6%), and diluted earnings per share was ($0.52).

Adjusted Pro Forma Net Income⁽¹⁾ increased 112.8% to $22.0 million from $10.3 million and Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share⁽¹⁾ increased 100.0% to $0.25 from $0.12 in the fourth quarter of 2016.

Adjusted EBITDA and Adjusted EBITDA Margin⁽¹⁾

Adjusted EBITDA⁽¹⁾ increased 76.0% to $65.3 million and Adjusted EBITDA Margin⁽¹⁾ increased 180 basis points to 7.3% from 5.5% in the fourth quarter of fiscal 2016.

Select Balance Sheet and Cash Flow Items

The Company's working capital and cash and cash equivalents balance at December 31, 2017 were $478.7 million and $224.2 million, respectively, compared to $257.7 million and $114.2 million, respectively, at December 31, 2016. At the end of the fourth quarter 2017, the Company had $3.2 million of letters of credit outstanding under its $35 million revolving credit facility, $916.9 million of term loan principal outstanding under its senior secured credit facilities and $974.0 million of floor plan notes payable outstanding under its floor plan financing facility. Inventory at the end of the fourth quarter of fiscal 2017 increased 56.9% to $1,415.9 million compared to $902.7 million at December 31, 2016. Inventory related to the Outdoor and Active Sports Retail businesses, including Gander Outdoors, Overton’s, TheHouse.com, Uncle Dan’s and W82, was approximately $80.4 million at December 31, 2017. On an estimated number of days of inventory basis, days of inventory on hand increased by 16.1% which was driven by our strategic decision to raise inventory levels to increase market share in certain markets.

Restatement of Previously Reported Financial Statements

Following the purchase of newly-issued common units from CWGS, LLC in connection with the IPO and the May 2017 public offering, the Company’s deferred tax balances have reflected the differences in the book and tax basis of its investment in CWGS, LLC (i.e., outside basis) (the “Outside Basis Deferred Tax Asset”). In early March 2018, after the Company had released earnings for the year ended December 31, 2017, the Company determined that a portion of the Outside Basis Deferred Tax Asset related to its acquisition of the direct interest in CWGS, LLC through newly issued LLC units is not expected to be realized unless the Company were to dispose of its investment in CWGS, LLC, which the Company has no current plan to do. Accordingly, the Company has determined that it should have established a valuation allowance of $102.7 million against this portion of its Outside Basis Deferred Tax Asset that was recorded through equity as of December 31, 2016. Following the establishment of the valuation allowance as of December 31, 2016, the Company recognizes subsequent changes to the valuation allowance through the provision for income taxes or equity, as applicable.

As a result of the above, the following table reflects changes to the Company’s Statements of Income for the three months and year ended December 31, 2017 from the previously reported unaudited financial results:

	Three Months Ended December 31, 2017								Year Ended December 31, 2017
($ in thousands except per share amounts)	As Reported			Adjustment		As Corrected			As Reported			Adjustment		As Corrected
Income tax expense	$	(175,705	)	$	46,989	$	(128,716	)	$	(203,952	)	$	46,970	$	(156,982	)
Net income		(52,483	)		46,989		(5,494	)		186,004			46,970		232,974
Net income attributable to non-controlling interests		(12,599	)		—		(12,599	)		(204,612	)		—		(204,612	)
Net income attributable to Camping World Holdings, Inc.		(65,082	)		46,989		(18,093	)		(18,608	)		46,970		28,362
Earnings per share of Class A common stock:
Basic	$	(1.87	)	$	1.35	$	(0.52	)	$	(0.70	)	$	1.77	$	1.07
Diluted	$	(1.87	)	$	1.35	$	(0.52	)	$	(0.70	)	$	1.77	$	1.07

As a result of the above, the following table reflects changes to the Company’s balance sheets as of December 31, 2017 and 2016 from the previously reported unaudited and audited financial results, respectively:

	At December 31, 2017								At December 31, 2016
($ in thousands)	As Reported			Adjustment			As Corrected		As Reported			Adjustment			As Corrected
Deferred tax asset, net	$	245,075		$	(89,524	)	$	155,551	$	127,139		$	(102,706	)	$	24,433
Total assets		2,651,001			(89,524	)		2,561,477		1,558,483			(102,706	)		1,455,777
Additional paid-in capital		186,435			(136,494	)		49,941		72,700			(102,706	)		(30,006	)
Retained earnings		(40,778	)		46,970			6,192		71			—			71
Total stockholders' equity (deficit) attributable to Camping World Holdings, Inc.		146,029			(89,524	)		56,505		72,966			(102,706	)		(29,740	)
Non-controlling interest		34,332			—			34,332		(114,397	)		—			(114,397	)
Stockholders equity (deficit)		180,361			(89,524	)		90,837		(41,431	)		(102,706	)		(144,137	)
Total liabilities and stockholders' equity (deficit)		2,651,001			(89,524	)		2,561,477		1,558,483			(102,706	)		1,455,777

About Camping World Holdings, Inc.

Camping World Holdings, headquartered in Lincolnshire, Illinois, is the leading outdoor and camping retailer, offering an extensive assortment of recreational vehicles for sale, RV and camping gear, RV maintenance and repair, and the industry’s broadest and deepest range of services, protection plans, products and resources. Since the Company's founding in 1966, Camping World has grown to become one of the most well-known destinations for everything RV, with 140 retail locations in 36 states and comprehensive e-commerce platform. Coupled with an unsurpassed portfolio of industry-leading brands including Camping World, Gander Outdoors, Good Sam, Overton’s, TheHouse.com, Uncle Dan’s, W82, and Erehwon, The Company has become synonymous with outdoor experiences. Camping World’s stock is traded on the New York Stock Exchange under the symbol "CWH".

Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including, without limitation, statements about the Company’s expectations with regards to the realization of a portion of certain outside basis deferred tax assets. These forward-looking statements are based on management’s current expectations.

These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the following: potential impact of the recently identified material weaknesses in our internal control over financial reporting; the availability of financing to us and our customers; fuel shortages, or high prices for fuel; the well-being, as well as the continued popularity and reputation for quality, of our manufacturers; general economic conditions in our markets and ongoing economic and financial uncertainties; our ability to attract and retain customers; competition in the market for services, protection plans, products and resources targeting the RV lifestyle or RV enthusiast; our expansion into new, unfamiliar markets, businesses, or product lines or categories, as well as delays in opening or acquiring new retail locations; unforeseen expenses, difficulties, and delays frequently encountered in connection with expansion through acquisitions; our failure to maintain the strength and value of our brands; our ability to successfully order and manage our inventory to reflect consumer demand in a volatile market and anticipate changing consumer preferences and buying trends; fluctuations in our same store sales and whether they will be a meaningful indicator of future performance; the cyclical and seasonal nature of our business; our ability to operate and expand our business and to respond to changing business and economic conditions, which depends on the availability of adequate capital; the restrictive covenants imposed by our existing senior secured credit facilities and our floorplan financial facility; our reliance on seven fulfillment and distribution centers for our retail, e-commerce and catalog businesses; natural disasters, whether or not caused by climate change, unusual weather condition, epidemic outbreaks, terrorist acts and political events; our dependence on our relationships with third party providers of services, protection plans, products and resources and a disruption of these relationships or of these providers’ operations; whether third party lending institutions and insurance companies will continue to provide financing for RV purchases; our inability to retain senior executives and attract and retain other qualified employees; our ability to meet our labor needs; risks associated with leasing substantial amounts of space, including our inability to maintain the leases for our retail locations or locate alternative sites for our stores in our target markets and on terms that are acceptable to us; our business being subject to numerous federal, state and local regulations; regulations applicable to the sale of extended service contracts; our dealerships’ susceptibility to termination, non-renewal or renegotiation of dealer agreements if state dealer laws are repealed or weakened; our failure to comply with certain environmental regulations; climate change legislation or regulations restricting emission of “greenhouse gases;” a failure in our e-commerce operations, security breaches and cybersecurity risks; our inability to enforce our intellectual property rights and accusations of our infringement on the intellectual property rights of third parties; our inability to maintain or upgrade our information technology systems or our inability to convert to alternate systems in an efficient and timely manner; disruptions to our information technology systems or breaches of our network security; feasibility, delays, and difficulties in opening of Gander Outdoors retail locations; realization of anticipated benefits and cost savings related to recent acquisitions; potential litigation relating to products we sell as a result of recent acquisitions, including firearms and ammunition; Marcus Lemonis, through his beneficial ownership of our shares directly or indirectly held by ML Acquisition Company, LLC and ML RV Group, LLC, has substantial control over us and may approve or disapprove substantially all transactions and other matters requiring approval by our stockholders, including, but not limited to, the election of directors; the exemptions from certain corporate governance requirements that we will qualify for, and intend to rely on, due to the fact that we are a “controlled company” within the meaning of the New York Stock Exchange, or NYSE, listing requirements; and whether we are able to realize any tax benefits that may arise from our organizational structure and any redemptions or exchanges of CWGS, LLC common units for cash or stock.

These and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K filed for the year ended December 31, 2017, to be filed with the Securities and Exchange Commission, or SEC, after the release of this press release on March 13, 2017, and our other reports filed with the SEC could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change, except as required under applicable law. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release.

Results of Operations for the Fourth Quarter and Full Year Fiscal 2017

Camping World Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In Thousands Except Per Share Amounts)
	Three Months Ended December 31,						Years Ended December 31,
	2017			2016			2017			2016
				Restated						Restated
	(unaudited)			(unaudited)
Revenue:
Consumer services and plans	$	51,096		$	48,905		$	195,614		$	184,773
Retail
New vehicles		458,456			332,626			2,435,928			1,862,195
Used Vehicles		139,963			128,460			668,860			703,326
Parts, services and other		174,650			117,703			652,819			540,019
Finance and insurance, net		64,827			41,209			332,034			228,684
Subtotal		837,896			619,998			4,089,641			3,334,224
Total revenue		888,992			668,903			4,285,255			3,518,997
Costs applicable to revenue (exclusive of depreciation and amortization shown separately below):
Consumer services and plans		20,030			20,201			81,822			79,272
Retail
New vehicles		393,797			288,110			2,086,229			1,596,863
Used Vehicles		109,154			100,709			506,093			557,253
Parts, services and other		99,396			65,405			364,772			289,186
Subtotal		602,347			454,224			2,957,094			2,443,302
Total costs applicable to revenue		622,377			474,425			3,038,916			2,522,574
Gross profit:
Consumer services and plans		31,066			28,704			113,792			105,501
Retail
New vehicles		64,659			44,516			349,699			265,332
Used Vehicles		30,809			27,751			162,767			146,073
Parts, services and other		75,254			52,298			288,047			250,833
Finance and insurance, net		64,827			41,209			332,034			228,684
Subtotal		235,549			165,774			1,132,547			890,922
Total gross profit		266,615			194,478			1,246,339			996,423
Operating expenses:
Selling, general, and administrative		213,052			154,918			853,160			691,884
Debt restructure expense		387			1,218			387			1,218
Depreciation and amortization		8,726			6,551			31,545			24,695
Loss (gain) on sale of assets		159			(337	)		(133	)		(564	)
Total operating expenses		222,324			162,350			884,959			717,233
Income from operations		44,291			32,128			361,380			279,190
Other income (expense):
Floor plan interest expense		(8,387	)		(4,003	)		(27,690	)		(18,854	)
Other interest expense, net		(11,986	)		(10,278	)		(42,959	)		(48,318	)
Loss on debt restructure		(462	)		(5,052	)		(462	)		(5,052	)
Tax Receivable Agreement liability adjustment		99,766			–			99,687			–
Other expense, net		–			2			–			–
		78,931			(19,331	)		28,576			(72,224	)
Income before income taxes		123,222			12,797			389,956			206,966
Income tax expense		(128,716	)		(1,269	)		(156,982	)		(5,907	)
Net income (loss)		(5,494	)		11,528			232,974			201,059
Less: net income attributable to non-controlling interests		(12,599	)		(9,942	)		(204,612	)		(9,942	)
Net income (loss) attributable to Camping World Holdings, Inc.	$	(18,093	)	$	1,586		$	28,362		$	191,117
Earnings (loss) per share of Class A common stock:
Basic	$	(0.52	)	$	0.08		$	1.07		$	0.08
Diluted	$	(0.52	)	$	0.07		$	1.07		$	0.07
Weighted average shares of Class A common stock outstanding:
Basic		34,837		$	18,766			26,622		$	18,766
Diluted		34,837		$	83,602			26,622		$	83,602

Camping World Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
($ in Thousands Except Per Share Amounts)
	As of December 31,
	2017		2016
			Restated
Assets
Current assets:
Cash and cash equivalents	$	224,163	$	114,196
Contracts in transit		46,227		29,012
Accounts receivable, net		79,881		58,488
Inventories, net		1,415,915		902,711
Prepaid expenses and other assets		32,721		21,755
Total current assets		1,798,907		1,126,162
Property and equipment, net		198,022		130,760
Deferred tax asset, net		155,551		24,433
Intangibles assets, net		38,707		3,386
Goodwill		348,387		153,105
Other assets		21,903		17,931
Total assets	$	2,561,477	$	1,455,777
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable	$	125,616	$	68,655
Accrued liabilities		101,929		78,044
Deferred revenues and gains		77,669		71,128
Current portion of capital lease obligation		844		1,224
Current portion of Tax Receivable Agreement liability		8,093		991
Current portion of long-term debt		9,465		6,450
Notes payable – floor plan, net		974,043		625,185
Other current liabilities		22,510		16,745
Total current liabilities		1,320,169		868,422
Capital lease obligations, net of current portion		23		841
Right to use liability		10,193		10,343
Tax Receivable Agreement liability, net of current portion		129,596		18,190
Long-term debt, net of current portion		907,437		620,303
Deferred revenues and gains		64,061		57,659
Other long-term liabilities		39,161		24,156
Total liabilities		2,470,640		1,599,914
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, par value $0.01 per share – 20,000,000 shares authorized; none issued and outstanding as of December 31, 2017 and December 31, 2016		–		–
Class A common stock, par value $0.01 per share – 250,000,000 shares authorized; 36,758,233 issued and 36,749,072 outstanding as of December 31, 2017 and 18,935,916 issued and outstanding as of December 31, 2016		367		189
Class B common stock, par value $0.0001 per share – 75,000,000 shares authorized; 69,066,445 issued; and 50,836,629 outstanding as of December 31, 2017 and 62,002,729 outstanding as of December 31, 2016		5		6
Class C common stock, par value $0.0001 per share – one share authorized, issued and outstanding as of December 31, 2017 and December 31, 2016		–		–
Additional paid-in capital		49,941		(30,006	)
Retained earnings (deficit)		6,192		71
Total stockholders' equity attributable to Camping World Holdings, Inc.		56,505		(29,740	)
Non-controlling interests		34,332		(114,397	)
Total stockholders' equity (deficit)		90,837		(144,137	)
Total liabilities and stockholders' equity (deficit)	$	2,561,477	$	1,455,777

Earnings Per Share

On October 6, 2016, the limited liability company agreement of CWGS, LLC was amended and restated to, among other things, (i) provide for a new single class of common membership interests, the common units of CWGS, LLC, and (ii) exchange all of the then-existing membership interests in CWGS, LLC for common units of CWGS, LLC (collectively, the “Recapitalization”). This Recapitalization changed the relative membership rights of the owners of membership interests in CWGS, LLC such that retroactive application of the Recapitalization to periods prior to the IPO for the purposes of calculating earnings per share would not be appropriate.

Prior to the IPO, the CWGS, LLC membership structure included membership units, preferred units, and profits units. The Company analyzed the calculation of earnings per unit for periods prior to the IPO using the two-class method and determined that it resulted in a value that would not be meaningful to the users of the consolidated financial statements. Therefore, earnings per share information has not been presented for periods prior to the IPO on October 6, 2016.

	Three Months Ended						Year ended
	December 31,			December 31,			December 31,			December 31,
(In thousands except per share amounts)	2017			2016			2017			2016
Numerator:
Net income (loss) attributable to Camping World Holdings, Inc. — basic	$	(5,494	)	$	11,528		$	232,974		$	11,528
Less: net income attributable to non-controlling interests		(12,599	)		(9,942	)		(204,612	)		(9,942	)
Net income (loss) attributable to Camping World Holdings, Inc. — basic		(18,093	)		1,586			28,362			1,586
Add: reallocation of net income attributable to non- controlling interests from the assumed exchange of common units of CWGS, LLC for Class A common stock		—			4,164			—			4,164
Net income attributable to Camping World Holdings, Inc. — diluted	$	(18,093	)	$	5,750		$	28,362		$	5,750
Denominator:
Weighted-average shares of Class A common stock outstanding — basic		34,837			18,766			26,622			18,766
Dilutive common units of CWGS, LLC that are convertible into Class A common stock		—			64,836			—			64,836
Weighted-average shares of Class A common stock outstanding — diluted		34,837			83,602			26,622			83,602
Earnings (loss) per share of Class A common stock — basic	$	(0.52	)	$	0.08		$	1.07		$	0.08
Earnings (loss) per share of Class A common stock — diluted	$	(0.52	)	$	0.07		$	1.07		$	0.07

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the U.S. (“GAAP”), we use the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings per Fully Exchanged and Diluted Share (collectively the "Non-GAAP Financial Measures"). We believe that these Non-GAAP Financial Measures, when used in conjunction with GAAP financial measures, provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to the key metrics we use in our financial and operational decision-making. These non-GAAP measures are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and they should not be construed as an inference that the Company’s future results will be unaffected by any items adjusted for in these non-GAAP measures. In evaluating these non-GAAP measures, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of those adjusted in this presentation. The Non-GAAP Financial Measures that we use are not necessarily comparable to similarly titled measures used by other companies due to different methods of calculation.

EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin

We define “EBITDA” as net income before other interest expense (excluding floor plan interest expense), provision for income taxes and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA further adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, loss and expense on debt restructure, loss (gain) on sale of assets, monitoring fees, equity-based compensation, Tax Receivable Agreement liability adjustment, acquisition related transaction expenses and pre-opening costs, and other unusual or one-time items. We define “Adjusted EBITDA Margin” as Adjusted EBITDA as a percentage of total revenue. We caution investors that amounts presented in accordance with our definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin in the same manner. We present EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin because we consider them to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these Non-GAAP Financial Measures as a reasonable basis for comparing our ongoing results of operations.

The following tables reconcile EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin to the most directly comparable GAAP financial performance measure, which are net income, net income and net income margin, respectively:

	Three Months Ended						Year Ended
	December 31,						December 31,
($ in thousands)	2017			2016			2017			2016
Net income (loss)	$	(5,494	)	$	11,528		$	232,974		$	201,059
Other interest expense, net		11,986			10,278			42,959			48,318
Depreciation and amortization		8,726			6,551			31,545			24,695
Income tax expense		128,716			1,269			156,982			5,907
EBITDA		143,934			29,626			464,460			279,979
Adjustments:
Loss and expense on debt restructure (a)		849			6,270			849			6,270
Loss (gain) on sale of assets (b)		159			(339	)		(133	)		(564	)
Monitoring fee (c)		–			–			–			1,875
Equity-based compensation (d)		2,317			1,537			5,109			1,597
Tax Receivable Agreement liability adjustment (e)		(99,766	)		–			(99,687	)		–
Acquisitions - transaction expense (f)		109			–			2,662			–
Acquisitions - pre-opening costs (g)		17,683			–			26,352			–
Adjusted EBITDA	$	65,285		$	37,094		$	399,612		$	289,157
	Three Months Ended						Year Ended
	December 31,						December 31,
(as percentage of total revenue)	2017			2016			2017			2016
Net income (loss) margin		-0.6	%		1.7	%		5.4	%		5.7	%
Other interest expense, net		1.3	%		1.5	%		1.0	%		1.4	%
Depreciation and amortization		1.0	%		1.0	%		0.7	%		0.7	%
Income tax expense		14.5	%		0.2	%		3.7	%		0.2	%
Subtotal EBITDA margin		16.2	%		4.4	%		10.8	%		8.0	%
Adjustments:
Loss and expense on debt restructure (a)		0.1	%		0.9	%		0.0	%		0.2	%
Loss (gain) on sale of assets (b)		0.0	%		-0.1	%		0.0	%		0.0	%
Monitoring fee (c)		0.0	%		0.0	%		0.0	%		0.1	%
Equity-based compensation (d)		0.3	%		0.2	%		0.1	%		0.0	%
Tax Receivable Agreement liability adjustment (e)		-11.2	%		0.0	%		-2.3	%		0.0	%
Acquisitions - transaction expense (f)		0.0	%		0.0	%		0.1	%		0.0	%
Acquisitions - pre-opening costs (g)		2.0	%		0.0	%		0.6	%		0.0	%
Adjusted EBITDA margin		7.3	%		5.5	%		9.3	%		8.2	%

^_________________________________________________
(a)	Represents the loss and expense incurred on debt restructure and financing expense incurred from the First and Second Amendment to the Existing Senior Credit Facilities in 2017, the write-off of a portion of the original issue discount, capitalized finance costs from our previous term loan facilities, and rating agency fees and legal expenses related to the previous term loan facilities in 2016.
(b)	Represents an adjustment to eliminate the gains and losses on sales of various assets.
(c)	Represents monitoring fees paid pursuant to a monitoring agreement to Crestview and Stephen Adams. The monitoring agreement was terminated on October 6, 2016 in connection with the IPO.
(d)	Represents non-cash equity-based compensation expense relating to employees and directors of the Company.
(e)	Represents an adjustment to eliminate the gains on remeasurement of the Tax Receivable Agreement primarily due to changes in our effective income tax rate.
(f)	Represents transaction expenses, primarily legal costs, associated with acquisitions into new or complimentary markets, including the Gander Mountain acquisition. This amount excludes transaction expenses related to the acquisition of RV dealerships, consumer shows, Active Sports, Inc, and W82.
(g)	Represents pre-opening store costs, including payroll costs, associated with the Gander Mountain acquisition.

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

We define “Adjusted Pro Forma Net Income” as net income attributable to CWH adjusted for the reallocation of income attributable to non-controlling interests from the assumed exchange of all outstanding common units in CWGS, LLC (or the common unit equivalent of membership interests in CWGS, LLC for periods prior to the IPO) for newly-issued shares of Class A common stock of CWH and further adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include, among other things, reallocation of net income attributable to non-controlling interests, loss and expense on debt restructure, loss (gain) on sale of assets, monitoring fees, equity-based compensation, Tax Receivable Agreement liability adjustment, acquisition related transaction expenses and pre-opening costs, other unusual or one-time items, and the income tax expense effect of (i) these adjustments and (ii) the pass-through entity taxable income as if the parent company was a subchapter C corporation in periods prior to the IPO. We define “Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share” as Adjusted Pro Forma Net Income divided by the weighted-average shares of Class A common stock outstanding, assuming (i) the full exchange of all outstanding common units in CWGS, LLC (or the common unit equivalent of membership interests in CWGS, LLC for periods prior to the IPO) for newly-issued shares of Class A common stock of CWH, (ii) the Class A common stock issued in connection with the IPO was outstanding as of January 1 of each year presented, and (iii) the dilutive effect of stock options and restricted stock units, if any. We present Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share because we consider them to be important supplemental measures of our performance and we believe that investors’ understanding of our performance is enhanced by including these Non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.

The following table reconciles Adjusted Pro Forma Net Income and Adjusted Pro Forma Earnings Per Fully Exchanged and Diluted Share to the most directly comparable GAAP financial performance measure, which is net income attributable to Camping World Holdings, Inc. and weighted-average shares of Class A common stock outstanding — diluted:

	Three Months Ended						Year ended
	December 31,			December 31,			December 31,			December 31,
(In thousands except per share amounts)	2017			2016			2017			2016
Numerator:
Net income (loss) attributable to Camping World Holdings, Inc.	$	(18,093	)	$	1,586		$	28,362		$	191,117
Adjustments:
Reallocation of net income attributable to non-controlling interests from the assumed exchange of common units in CWGS, LLC (a)		12,599			9,942			204,612			9,942
Loss and expense on debt restructure (b)		849			6,270			849			6,270
Loss (gain) on sale of assets (c)		159			(339	)		(133	)		(564	)
Monitoring fee (d)		—			—			—			1,875
Equity-based compensation (e)		2,317			1,537			5,109			1,597
Tax Receivable Agreement liability adjustment (f)		(99,766	)		—			(99,687	)		—
Acquisitions - transaction expense (g)		109			—			2,662			—
Acquisitions - pre-opening costs (h)		17,683			—			26,352			—
Revaluation of deferred tax assets from tax reform (i)		118,386			—			118,386			—
Income tax expense (j)		(12,228	)		(8,653	)		(87,855	)		(78,703	)
Adjusted pro forma net income	$	22,015		$	10,343		$	198,657		$	131,534
Denominator:
Weighted-average Class A common shares outstanding - diluted		34,837			83,602			26,622			83,602
Adjustments:
Assumed exchange of post-IPO common units in CWGS, LLC for shares of Class A common stock (k)		53,772			—			59,995			—
Assumed exchange of pre-IPO common unit equivalent of membership interests in CWGS, LLC (l)		—			—			—			193
Assumed issuance of Class A common stock in connection with IPO (m)		—			170			—			170
Dilutive options to purchase Class A common stock		376			—			200			—
Dilutive restricted stock units		200			24			112			6
Adjusted pro forma fully exchanged weighted average Class A common shares outstanding - diluted		89,185			83,796			86,929			83,971
Adjusted pro forma earnings per fully exchanged and diluted share	$	0.25		$	0.12		$	2.29		$	1.57

____________________
(a)	Represents the reallocation of net income attributable to non-controlling interests from the assumed exchange of common units of CWGS, LLC in periods in which income was attributable to non-controlling interests.
(b)	Represents the loss and expense incurred on debt restructure and financing expense incurred from the First and Second Amendment to the Existing Senior Credit Facilities in 2017, the write-off of a portion of the original issue discount, capitalized finance costs from our previous term loan facilities, and rating agency fees and legal expenses related to the previous term loan facilities in 2016.
(c)	Represents an adjustment to eliminate the losses and gains on sales of various assets.
(d)	Represents monitoring fees paid pursuant to a monitoring agreement to Crestview and Stephen Adams. The monitoring agreement was terminated on October 6, 2016 in connection with our IPO.
(e)	Represents non-cash equity-based compensation expense relating to employees and directors of the Company.
(f)	Represents an adjustment to eliminate the gains on remeasurement of the Tax Receivable Agreement primarily due to changes in our effective income tax rate.
(g)	Represents transaction expenses, primarily legal costs, associated with acquisitions into new or complimentary markets, including the Gander Mountain acquisition. This amount excludes transaction expenses related to the acquisition of RV dealerships, consumer shows, Active Sports, Inc., and W82.
(h)	Represents pre-opening store costs, including payroll costs, associated with the Gander Mountain acquisition.
(i)	This amount relates to the remeasurement of federal net deferred tax assets resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21% from 35% under the 2017 Tax Act.
(j)	Represents the income tax expense effect of (i) the above adjustments and (ii) the pass-through entity taxable income as if the parent company was a subchapter C corporation in periods prior to the IPO. This assumption uses an effective tax rate of 38.5% for the adjustments and the pass-through entity taxable income.
(k)	Represents the assumed exchange of post-IPO Common units in CWGS, LLC at their Class A common stock equivalent amount.
(l)	Represents the assumed exchange of pre-IPO membership interests in CWGS, LLC at their common unit equivalent amount.
(m)	Represents the assumption that the shares of Class A common stock issued in connection with the IPO were outstanding as of January 1 of each period.

Uses and Limitations of Non-GAAP Financial Measures

Management and our board of directors use the Non-GAAP financial measures:

• as a measurement of operating performance because they assist us in comparing the operating performance of our business on a consistent basis, as they remove the impact of items not directly resulting from our core operations;
• for planning purposes, including the preparation of our internal annual operating budget and financial projections;
• to evaluate the performance and effectiveness of our operational strategies; and
• to evaluate our capacity to fund capital expenditures and expand our business.

By providing these Non-GAAP financial measures, together with reconciliations, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. In addition, our existing senior secured credit facilities use EBITDA to measure our compliance with covenants such as consolidated leverage ratio. The Non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net income or other financial statement data presented in our unaudited condensed consolidated financial statements included in this press release as indicators of financial performance. Some of the limitations are:

• such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
• such measures do not reflect changes in, or cash requirements for, our working capital needs;
• some of such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
• some of such measures do not reflect our tax expense or the cash requirements to pay our taxes;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
• other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.

Due to these limitations, the Non-GAAP financial measures should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these Non-GAAP financial measures only supplementally. As noted in the tables above, certain of the Non-GAAP financial measures include adjustments for reallocation of net income attributable to non-controlling interests, loss and expense on debt restructure, loss (gain) on sale of assets, monitoring fees, equity-based compensation, Tax Receivable Agreement liability adjustment, acquisition related transaction expenses and pre-opening costs, other unusual or one-time items, and the income tax expense effect described above, as applicable. It is reasonable to expect that certain of these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and complicate comparisons of our internal operating results and operating results of other companies over time. In addition, these certain Non-GAAP financial measures adjust for other items that we do not expect to regularly record in periods after the IPO, including monitoring fees. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the reconciliation tables above help management with a measure of our core operating performance over time by removing items that are not related to day to day operations.