Camping World Holdings, Inc. Reports Record Results for both Fourth Quarter and Full Year 2021

Camping World Holdings, Inc. (NYSE: CWH) (the “Company”), America’s Recreation Dealer, today reported results for the fourth quarter and full year ended December 31, 2021.

Marcus Lemonis, Chairman and CEO of Camping World Holdings, Inc. stated, “Since we took the Company public at the end of 2016, we have almost doubled our annual revenue to $6.9 billion and more than tripled our annual net income and Adjusted EBITDA (1) to $642 million and $942 million, respectively. It is our management team’s plan to continue positioning the Company for growth over the next five years. The long term trends along with our strong cash flow have us focused on three things: growing our business, repurchasing our shares, and returning capital to our shareholders.”

Full Year-over-Year Operating Highlights

  • Revenue was $6.9 billion, an increase of $1.5 billion, or 26.9%.
  • Gross profit was $2.5 billion, an increase of $753.8 million, or 44.3%, and gross margin was 35.5%, an increase of 427 basis points.
  • Net income was $642.1 million, an increase of $297.9 million, or 86.5%. Net income margin was 9.3% for 2021 versus 6.3% for 2020.
  • Diluted earnings per share of Class A common stock was $6.07 in 2021 versus $3.09 in 2020 and adjusted earnings per share - diluted(1) of Class A common stock was $6.88 in 2021 versus $3.66 in 2020.
  • Adjusted EBITDA(1) was $942.1 million, an increase of $377.1 million, or 66.8%, and adjusted EBITDA margin(1) was 13.6% for 2021 versus 10.4% for 2020.
  • Vehicle inventories were $1.5 billion, an increase of $645.8 million: new vehicle inventories were $1.1 billion, an increase of $417.8 million, and used vehicle inventories were $406.4 million, an increase of $228.1 million.
  • On June 3, 2021, we refinanced our senior secured credit facilities, reducing our outstanding principal by $38.6 million, extending the term to 2028, and lowering the applicable margin rate by 25 bps. On December 20, 2021, we entered into an amendment to the new senior secured credit facilities to increase the principal amount of the new term loan facility by $300.0 million.
  • On September 30, 2021, we entered into an Eighth Amended and Restated Credit Agreement governing our floor plan facility which allows us to borrow $1.70 billion of floor plan notes payable with up to $70.0 million under the revolving line of credit, and extended the term to 2026.
  • During 2021, we opened 16 locations, which included twelve RV dealerships acquired in 2021, three RV dealerships acquired in 2020, and one greenfield location. We currently have operating dealerships, agreements to acquire land or existing RV dealerships, or have dealerships under construction in 46 of the 48 contiguous states.
  • During the year, we increased our regular quarterly dividend to holders of our Class A common stock from $0.23 per share to $0.50 per share, or from $0.92 per share to $2.00 per share on an annualized basis. On February 18, 2022, the Company’s Board of Directors authorized a twenty-five percent increase to our regular quarterly dividend from $0.50 per share to $0.625 per share, or from $2.00 per share to $2.50 per share on an annualized basis.

Fourth Quarter-over-Quarter Operating Highlights

  • Revenue was a fourth quarter record of $1.4 billion, an increase of $243.8 million, or 21.5%.
  • Gross profit was $484.6 million, an increase of $106.6 million, or 28.2%, and gross margin was 35.2%, an increase of 184 basis points.
  • Net income was $59.3 million, an increase of $18.9 million, or 46.9%. Net income margin was 4.3% for the fourth quarter of 2021 versus 3.6% for the fourth quarter of 2020.
  • Diluted earnings per share of Class A common stock was $0.54 for the fourth quarter of 2021 versus $0.34 for the fourth quarter of 2020 and adjusted earnings per share - diluted(1) of Class A common stock was $0.90 for the fourth quarter of 2021 and $0.48 for the fourth quarter of 2020.
  • Adjusted EBITDA(1) was $131.5 million, an increase of $40.3 million, or 44.2%, and adjusted EBITDA margin(1) was 9.5% for the fourth quarter of 2021 versus 8.0% for the fourth quarter of 2020.

________________________

(1) Adjusted earnings per share – diluted, adjusted EBITDA, and adjusted EBITDA Margin are non-GAAP measures. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP measures, see the “Non-GAAP Financial Measures” section later in this press release.

Stock Repurchase Program

During the three months and the year ended December 31, 2021, the Company repurchased 1,779,416 and 3,988,881 shares of Class A common stock under this program, respectively, for approximately $69.4 million and $156.3 million, including commissions paid, at a weighted average price per share of $39.02 and $39.17, respectively, which is recorded as treasury stock on the consolidated balance sheets. As of December 31, 2021, the remaining approved amount for repurchases of Class A common stock under the share repurchase program was approximately $47.2 million.

On January 20, 2022, the Company’s Board of Directors authorized an increase to the Company’s stock repurchase program to allow for the repurchase of an additional $152.7 million of the Company’s Class A common stock and extended the expiration date of the program to December 31, 2025. Following this increase in authorization, approximately $200 million remained available for future repurchases.

Earnings Conference Call and Webcast Information

A conference call to discuss the Company’s fourth quarter and fiscal year 2021 financial results is scheduled for February 23, 2022, at 7:30 am Central Time. Investors and analysts can participate on the conference call by dialing (866) 239-9838 or (323) 794-2551 and using conference ID# 2143907. Interested parties can also listen to a live webcast or replay of the conference call by logging on to the Investor Relations section on the Company’s website at http://investor.campingworld.com. The replay of the conference call webcast will be available on the investor relations website for approximately 90 days.

Presentation

This press release presents historical results for the periods presented for the Company and its subsidiaries, which 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 had a minority economic interest in CWGS, LLC through March 11, 2021. As of December 31, 2021, the Company owned 51.2% of CWGS, LLC. Accordingly, the Company consolidates the financial results of CWGS, LLC and reports a non-controlling interest in its consolidated financial statements.

About Camping World Holdings, Inc.

Camping World Holdings, Inc., headquartered in Lincolnshire, IL, (together with its subsidiaries) is America’s largest retailer of RVs and related products and services. Our vision is to build a long-term legacy business that makes RVing fun and easy, and our Camping World and Good Sam brands have been serving RV consumers since 1966. We strive to build long-term value for our customers, employees, and shareholders by combining a unique and comprehensive assortment of RV products and services with a national network of RV dealerships, service centers and customer support centers along with the industry’s most extensive online presence and a highly-trained and knowledgeable team of associates serving our customers, the RV lifestyle, and the communities in which we operate. We also believe that our Good Sam organization and family of programs and services uniquely enables us to connect with our customers as stewards of the RV enthusiast community and the RV lifestyle. With over 185 locations in 40 states, Camping World has grown to become prime destinations for everything RV.

For more information, please visit www.CampingWorld.com.

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 our business plans and goals, including statements regarding the strength of our business, our long-term plan, potential stock repurchases, future dividend payments and our future financial results. 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: the COVID-19 pandemic, which has had, and could have in the future, certain negative impacts on our business; risks related to the cybersecurity incident announced in February 2022; our ability to execute and achieve the expected benefits of our 2019 Strategic Shift; the availability of financing to us and our customers; fuel shortages or high prices for fuel; the success of our manufacturers; general economic conditions in our markets; changes in consumer preferences; competition in our industry; risks related to acquisitions and expansion into new markets; our failure to maintain the strength and value of our brands; our ability to manage our inventory; fluctuations in our same store sales; the cyclical and seasonal nature of our business; our dependence on the availability of adequate capital and risks related to our debt; our reliance on six fulfillment and distribution centers; natural disasters, including epidemic outbreaks; risks associated with selling goods manufactured abroad; our dependence on our relationships with third party suppliers and lending institutions; our ability to retain senior executives and attract and retain other qualified employees; risks associated with leasing substantial amounts of space; regulatory risks; data privacy and cybersecurity risks; risks related to our intellectual property; the impact of ongoing or future lawsuits against us and certain of our officers and directors; and risks related to our organizational structure.

These and other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K to be filed for the year ended December 31, 2021 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.

In addition, this press release references projected annualized dividend payments. Future declarations of quarterly dividends are subject to the determination and discretion of the Company’s Board of Directors based on its consideration of various factors, including the Company’s results of operations, financial condition, level of indebtedness, anticipated capital requirements, contractual restrictions, restrictions in its debt agreements, restrictions under applicable law, receipt of excess tax distributions from CWGS Enterprises, LLC, its business prospects and other factors that Camping World’s Board of Directors may deem relevant.

We intend to use our official Facebook, Twitter, and Instagram accounts, each at the handle @CampingWorld, as a distribution channel of material information about the Company and for complying with our disclosure obligations under Regulation FD. The information we post through these social media channels may be deemed material. Accordingly, investors should subscribe to these accounts, in addition to following our press releases, SEC filings, public conference calls and webcasts. These social media channels may be updated from time to time.

Camping World Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations (unaudited)
(In Thousands Except Per Share Amounts)
 

Three Months Ended

Year Ended

December 31,

December 31,

2021

2020

2021

2020

Revenue:
Good Sam Services and Plans $

46,368

 

$

43,309

 

$

180,722

 

$

180,977

 

RV and Outdoor Retail
New vehicles

554,397

 

520,231

 

3,299,454

 

2,823,311

 

Used vehicles

412,273

 

204,627

 

1,686,217

 

984,853

 

Products, service and other

238,236

 

268,473

 

1,100,942

 

948,890

 

Finance and insurance, net

114,757

 

85,708

 

598,475

 

464,261

 

Good Sam Club

11,561

 

11,472

 

47,944

 

44,299

 

Subtotal

1,331,224

 

1,090,511

 

6,733,032

 

5,265,614

 

Total revenue

1,377,592

 

1,133,820

 

6,913,754

 

5,446,591

 

Costs applicable to revenue (exclusive of depreciation and amortization shown separately below):
Good Sam Services and Plans

19,636

 

17,245

 

72,877

 

72,938

 

RV and Outdoor Retail
New vehicles

409,272

 

411,350

 

2,423,478

 

2,320,537

 

Used vehicles

312,920

 

155,374

 

1,247,794

 

751,029

 

Products, service and other

149,532

 

169,440

 

706,074

 

590,716

 

Good Sam Club

1,617

 

2,382

 

7,203

 

8,892

 

Subtotal

873,341

 

738,546

 

4,384,549

 

3,671,174

 

Total costs applicable to revenue

892,977

 

755,791

 

4,457,426

 

3,744,112

 

 
Gross profit:
Good Sam Club services and plans

26,732

 

26,064

 

107,845

 

108,039

 

RV and Outdoor Retail
New vehicles

145,125

 

108,881

 

875,976

 

502,774

 

Used vehicles

99,353

 

49,253

 

438,423

 

233,824

 

Products, service and other

88,704

 

99,033

 

394,868

 

358,174

 

Finance and insurance, net

114,757

 

85,708

 

598,475

 

464,261

 

Good Sam Club

9,944

 

9,090

 

40,741

 

35,407

 

Subtotal

457,883

 

351,965

 

2,348,483

 

1,594,440

 

Total gross profit

484,615

 

378,029

 

2,456,328

 

1,702,479

 

 
Operating expenses:
Selling, general, and administrative

379,941

 

293,834

 

1,573,609

 

1,156,071

 

Debt restructure expense

3,023

 

 

12,078

 

 

Depreciation and amortization

17,121

 

13,032

 

66,418

 

51,981

 

Long-lived asset impairment

1,646

 

1,406

 

3,044

 

12,353

Lease termination

126

 

2,590

 

2,211

 

4,547

 

(Gain) loss on sales or disposal of assets

(583

)

670

 

(576

)

1,332

 

Total operating expenses

401,274

 

311,532

 

1,656,784

 

1,226,284

 

Income from operations

83,341

 

66,497

 

799,544

 

476,195

 

Other expense:
Floor plan interest expense

(4,222

)

(2,972

)

(14,108

)

(19,689

)

Other interest expense, net

(11,650

)

(12,588

)

(46,912

)

(54,689

)

Loss on debt restructure

 

 

(1,390

)

 

Tax Receivable Agreement liability adjustment

707

 

141

 

(2,813

)

141

 

Other expense, net

(45

)

 

(122

)

 

Total other expense

(15,210

)

(15,419

)

(65,345

)

(74,237

)

Income before income taxes

68,131

 

51,078

 

734,199

 

401,958

 

Income tax expense

(8,865

)

(10,740

)

(92,124

)

(57,743

)

Net income

59,266

 

40,338

 

642,075

 

344,215

 

Less: net income attributable to non-controlling interests

(32,018

)

(25,960

)

(363,614

)

(221,870

)

Net income attributable to Camping World Holdings, Inc. $

27,248

 

$

14,378

 

$

278,461

 

$

122,345

 

 
Earnings per share of Class A common stock:
Basic $

0.61

 

$

0.34

 

$

6.19

 

$

3.11

Diluted $

0.54

 

$

0.34

 

$

6.07

 

$

3.09

 

Weighted average shares of Class A common stock outstanding:
Basic

44,820

 

42,444

 

45,009

 

39,383

 

Diluted

88,566

 

43,233

 

89,762

 

40,009

 

 
Camping World Holdings, Inc.
Supplemental Data
 

Three Months Ended December 31,

Increase

Percent

2021

2020

(decrease)

Change

Unit sales
New vehicles

11,415

 

13,274

 

(1,859

)

(14.0

%)

Used vehicles

10,669

 

6,930

 

3,739

 

54.0

%

Total

22,084

 

20,204

 

1,880

 

9.3

%

 
Average selling price
New vehicles $

48,567

 

$

39,192

 

$

9,376

 

23.9

%

Used vehicles $

38,642

 

$

29,528

 

$

9,114

 

30.9

%

 
Same store unit sales(1)
New vehicles

10,181

 

12,845

 

(2,664

)

(20.7

%)

Used vehicles

9,511

 

6,796

 

2,715

 

39.9

%

Total

19,692

 

19,641

 

51

 

0.3

%

 
Same store revenue(1) ($ in 000's)
New vehicles $

496,222

 

$

504,592

 

$

(8,370

)

(1.7

%)

Used vehicles

370,672

 

200,874

 

169,798

 

84.5

%

Products, service and other

136,515

 

168,702

 

(32,187

)

(19.1

%)

Finance and insurance, net

102,557

 

83,537

 

19,020

 

22.8

%

Total $

1,105,966

 

$

957,705

 

$

148,261

 

15.5

%

 
Average gross profit per unit
New vehicles $

12,714

 

$

8,203

 

$

4,511

 

55.0

%

Used vehicles $

9,312

 

$

7,107

 

$

2,205

 

31.0

%

Finance and insurance, net per vehicle unit $

5,196

 

$

4,242

 

$

954

 

22.5

%

Total vehicle front-end yield(2) $

16,267

 

$

12,069

 

$

4,198

 

34.8

%

 
Gross margin
Good Sam Services and Plans

57.7

%

60.2

%

(253

)

bps
New vehicles

26.2

%

20.9

%

525

 

bps
Used vehicles

24.1

%

24.1

%

3

 

bps
Products, service and other

37.2

%

36.9

%

35

 

bps
Finance and insurance, net

100.0

%

100.0

%

unch. bps
Good Sam Club

86.0

%

79.2

%

678

 

bps
Subtotal RV and Outdoor Retail

34.4

%

32.3

%

212

 

bps
Total gross margin

35.2

%

33.3

%

184

 

bps
 
Inventories ($ in 000's)
New vehicles $

1,108,836

 

$

691,114

 

$

417,722

 

60.4

%

Used vehicles

406,398

 

178,336

 

228,062

 

127.9

%

Products, parts, accessories and misc.

278,148

 

266,786

 

11,362

 

4.3

%

Total RV and Outdoor Retail inventories $

1,793,382

 

$

1,136,236

 

$

657,146

 

57.8

%

 
Vehicle inventory per location ($ in 000's)
New vehicle inventory per dealer location $

6,336

 

$

4,319

 

$

2,017

 

46.7

%

Used vehicle inventory per dealer location $

2,322

 

1,115

 

$

1,208

 

108.4

%

 
Vehicle inventory turnover(3)
New vehicle inventory turnover

3.0

 

3.1

 

(0.0

)

(1.5

%)

Used vehicle inventory turnover

4.0

 

5.2

 

(1.2

)

(22.7

%)

 
Retail locations
RV dealerships

175

 

160

 

15

 

9.4

%

RV service & retail centers

10

 

10

 

 

0.0

%

Subtotal

185

 

170

 

15

 

8.8

%

Other retail stores

2

 

1

 

1

 

100.0

%

Total

187

 

171

 

16

 

9.4

%

 
Other data
Active Customers(4)

5,452,287

 

5,314,104

 

138,183

 

2.6

%

Good Sam Club members

2,124,284

 

2,088,064

 

36,220

 

1.7

%

Service bays (5)

2,575

 

2,291

 

284

 

12.4

%

Finance and insurance gross profit as a % of total vehicle revenue

11.9

%

11.8

%

5

 

bps

n/a

 

Same store locations

158

 

n/a

 

n/a

 

n/a

 

 

Year Ended December 31,

Increase Percent

2021

2020

(decrease) Change
Unit sales
New vehicles

77,777

 

77,827

 

(50

)

(0.1

%)

Used vehicles

48,938

 

37,760

 

11,178

 

29.6

%

Total

126,715

 

115,587

 

11,128

 

9.6

%

 
Average selling price
New vehicles $

42,422

 

$

36,277

 

$

6,145

 

16.9

%

Used vehicles $

34,456

 

$

26,082

 

$

8,374

 

32.1

%

 
Same store unit sales(1)
New vehicles

70,053

 

76,365

 

(6,312

)

(8.3

%)

Used vehicles

44,466

 

37,161

 

7,305

 

19.7

%

Total

114,519

 

113,526

 

993

 

0.9

%

 
Same store revenue(1) ($ in 000's)
New vehicles $

2,984,049

 

$

2,771,177

 

$

212,872

 

7.7

%

Used vehicles

1,543,936

 

969,033

 

574,903

 

59.3

%

Products, service and other

716,629

 

673,316

 

43,313

 

6.4

%

Finance and insurance, net

543,985

 

456,933

 

87,052

 

19.1

%

Total $

5,788,599

 

$

4,870,459

 

$

918,140

 

18.9

%

 
Average gross profit per unit
New vehicles $

11,263

 

$

6,460

 

$

4,803

 

74.3

%

Used vehicles

8,959

 

6,192

 

2,766

 

44.7

%

Finance and insurance, net per vehicle unit

4,723

 

4,017

 

706

 

17.6

%

Total vehicle front-end yield(2)

15,096

 

10,389

 

4,707

 

45.3

%

 
Gross margin
Good Sam Services and Plans

59.7

%

59.7

%

(2

)

bps
New vehicles

26.5

%

17.8

%

874

 

bps
Used vehicles

26.0

%

23.7

%

226

 

bps
Products, service and other

35.9

%

37.7

%

(188

)

bps
Finance and insurance, net

100.0

%

100.0

%

unch. bps
Good Sam Club

85.0

%

79.9

%

505

 

bps
Subtotal RV and Outdoor Retail

34.9

%

30.3

%

460

 

bps
Total gross margin

35.5

%

31.3

%

427

 

bps
 
Inventories ($ in 000's)
New vehicles $

1,108,836

 

$

691,114

 

$

417,722

 

60.4

%

Used vehicles

406,398

 

178,336

 

228,062

 

127.9

%

Products, parts, accessories and misc.

278,148

 

266,786

 

11,362

 

4.3

%

Total RV and Outdoor Retail inventories $

1,793,382

 

$

1,136,236

 

$

657,146

 

57.8

%

 
Vehicle inventory per location ($ in 000's)
New vehicle inventory per dealer location $

6,336

 

$

4,319

 

$

2,017

 

46.7

%

Used vehicle inventory per dealer location

2,322

 

1,115

 

1,208

 

108.4

%

 
Vehicle inventory turnover(3)
New vehicle inventory turnover

3.0

 

3.1

 

(0.0

)

(1.5

%)

Used vehicle inventory turnover

4.0

 

5.2

 

(1.2

)

(22.7

%)

 
Retail locations
RV dealerships

175

 

160

 

15

 

9.4

%

RV service & retail centers

10

 

10

 

 

0.0

%

Subtotal

185

 

170

 

15

 

8.8

%

Other retail stores

2

 

1

 

1

 

100.0

%

Total

187

 

171

 

16

 

9.4

%

 
Other data
Active Customers(4)

5,452,287

 

5,314,104

 

138,183

 

2.6

%

Good Sam Club members

2,124,284

 

2,088,064

 

36,220

 

1.7

%

Service bays (5)

2,575

 

2,291

 

284

 

12.4

%

Finance and insurance gross profit as a % of total vehicle revenue

12.0

%

12.2

%

(19

)

bps

n/a

 

Same store locations

158

 

n/a

 

n/a

 

n/a

 

(1) Our same store revenue and units calculations for a given period include only those stores that were open both at the end of the corresponding period and at the beginning of the preceding fiscal year.

(2) Front end yield is calculated as gross profit from new vehicles, used vehicles and finance and insurance (net), divided by combined new and used retail units sold.

(3) Inventory turnover calculated as vehicle costs applicable to revenue over the last twelve months divided by average quarterly ending vehicle inventory over the last twelve months.

(4) An Active Customer is a customer who has transacted with us in any of the eight most recently completed fiscal quarters prior to the date of measurement.

(5) A service bay is a fully constructed bay dedicated to service, installation, and collision offerings.

 
Camping World Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets (unaudited)
($ in Thousands Except Per Share Amounts)
 

December 31,

December 31,

2021

2020

Assets
Current assets:
Cash and cash equivalents $

267,332

 

$

166,072

 

Contracts in transit

57,741

 

48,175

 

Accounts receivable, net

101,644

 

83,422

 

Inventories

1,792,865

 

1,136,345

 

Prepaid expenses and other assets

64,295

 

60,211

 

Total current assets

2,283,877

 

1,494,225

 

Property and equipment, net

599,324

 

367,898

 

Operating lease assets

750,876

 

769,487

 

Deferred tax assets, net

199,321

 

165,708

 

Intangible assets, net

30,970

 

30,122

 

Goodwill

483,634

 

413,123

 

Other assets

24,927

 

15,868

 

Total assets $

4,372,929

 

$

3,256,431

 

Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $

136,757

 

$

148,462

 

Accrued liabilities

189,595

 

137,688

 

Deferred revenues

95,467

 

88,213

 

Current portion of operating lease liabilities

62,217

 

62,405

 

Current portion of finance lease liabilities

4,964

 

2,240

 

Current portion of Tax Receivable Agreement liability

11,322

 

8,089

 

Current portion of long-term debt

15,822

 

12,174

 

Notes payable – floor plan, net

1,011,345

 

522,455

 

Other current liabilities

70,834

 

53,795

 

Total current liabilities

1,598,323

 

1,035,521

 

Operating lease liabilities, net of current portion

774,889

 

804,555

 

Finance lease liabilities, net of current portion

74,752

 

27,742

 

Tax Receivable Agreement liability, net of current portion

171,073

 

137,845

 

Revolving line of credit

20,885

 

20,885

 

Long-term debt, net of current portion

1,377,751

 

1,122,675

 

Deferred revenues

69,024

 

61,519

 

Other long-term liabilities

52,338

 

54,920

 

Total liabilities

4,139,035

 

3,265,662

 

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, 2021 and 2020

 

 

Class A common stock, par value $0.01 per share – 250,000,000 shares authorized; 47,805,259 issued and 44,130,956 outstanding as of December 31, 2021 and 43,083,008 issued and 42,226,389 outstanding as of December 31, 2020

475

 

428

 

Class B common stock, par value $0.0001 per share – 75,000,000 shares authorized; 69,066,445 issued as of December 31, 2021 and 2020; and 41,466,964 and 45,999,132 outstanding as of December 31, 2021 and 2020

4

 

5

 

Class C common stock, par value $0.0001 per share – one share authorized, issued and outstanding as of December 31, 2021 and 2020

 

 

Additional paid-in capital

98,113

 

63,342

 

Treasury stock, at cost; 3,390,131 and 572,447 shares as of December 31, 2021 and 2020

(130,006

)

(15,187

)

Retained earnings (deficit)

189,471

 

(21,814

)

Total stockholders' equity attributable to Camping World Holdings, Inc.

158,057

 

26,774

 

Non-controlling interests

75,837

 

(36,005

)

Total stockholders' equity (deficit)

233,894

 

(9,231

)

Total liabilities and stockholders' equity (deficit) $

4,372,929

 

$

3,256,431

 

 

Earnings Per Share

Basic earnings per share of Class A common stock is computed by dividing net income attributable to Camping World Holdings, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income attributable to Camping World Holdings, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock (unaudited):

 

Three Months Ended

Year Ended

December 31,

December 31,

(In thousands except per share amounts)

2021

2020

2021

2020

Numerator:
Net income $

59,266

 

$

40,338

 

$

642,075

 

$

344,215

 

Less: net income attributable to non-controlling interests

(32,018

)

(25,960

)

(363,614

)

(221,870

)

Net income attributable to Camping World Holdings, Inc. — basic $

27,248

 

$

14,378

 

278,461

 

122,345

 

Add: reallocation of net income attributable to non-controlling interests from the assumed dilutive effect of stock options and RSUs

 

160

 

 

1,304

 

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

21,001

 

 

266,381

 

 

Net income attributable to Camping World Holdings, Inc. — diluted $

48,249

 

$

14,538

 

$

544,842

 

$

123,649

 

Denominator:
Weighted-average shares of Class A common stock outstanding — basic

44,820

 

42,444

 

45,009

 

39,383

 

Dilutive options to purchase Class A common stock

127

 

125

 

150

 

79

 

Dilutive restricted stock units

1,050

 

664

 

1,165

 

547

 

Dilutive common units of CWGS, LLC that are convertible into Class A common stock

42,569

 

 

43,438

 

 

Weighted-average shares of Class A common stock outstanding — diluted

88,566

 

43,233

 

89,762

 

40,009

 

 
Earnings per share of Class A common stock — basic $

0.61

 

$

0.34

 

$

6.19

 

$

3.11

 

Earnings per share of Class A common stock — diluted $

0.54

 

$

0.34

 

$

6.07

 

$

3.09

 

 
Weighted-average anti-dilutive securities excluded from the computation of diluted earnings per share of Class A common stock:
Stock options to purchase Class A common stock

 

 

 

361

 

Restricted stock units

 

2,305

 

6

 

1,349

 

Common units of CWGS, LLC that are convertible into Class A common stock

 

46,825

 

 

49,916

 

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States (“GAAP”), we use the following non-GAAP financial measures: EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income Attributable to Camping World Holdings, Inc. – Basic, Adjusted Net Income Attributable to Camping World Holdings, Inc. – Diluted, Adjusted Earnings Per Share – Basic, and Adjusted Earnings Per Share – Diluted (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 Financial 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 Financial Measures. In evaluating these Non-GAAP Financial 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, net (excluding floor plan interest expense), provision for income tax expense and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA further adjusted for the impact of certain noncash 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, long-lived asset impairment, lease termination costs, gains and losses on sale or disposal of assets, net, equity-based compensation, Tax Receivable Agreement liability adjustment, restructuring costs related to the 2019 Strategic Shift, 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 table reconciles EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP financial performance measures, which are net income and net income margin, respectively (unaudited):

 

Three Months Ended

Year Ended

December 31,

December 31,

($ in thousands)

2021

2020

2021

2020

EBITDA and Adjusted EBITDA:
Net income $

59,266

 

$

40,338

 

$

642,075

 

$

344,215

 

Other interest expense, net

11,650

 

12,588

 

46,912

 

54,689

 

Depreciation and amortization

17,121

 

13,032

 

66,418

 

51,981

 

Income tax expense

8,865

 

10,740

 

92,124

 

57,743

 

Subtotal EBITDA

96,902

 

76,698

 

847,529

 

508,628

 

Loss and expense on debt restructure (a)

3,023

 

 

13,468

 

 

Long-lived asset impairment (b)

1,646

 

1,406

 

3,044

 

12,353

 

Lease termination (c)

126

 

2,590

 

2,211

 

4,547

 

(Gain) loss on sale or disposal of assets, net (d)

(583

)

670

 

(576

)

1,332

 

Equity-based compensation (e)

28,867

 

6,966

 

47,936

 

20,661

 

Tax Receivable Agreement liability adjustment (f)

(707

)

(141

)

2,813

 

(141

)

Restructuring costs (g)

2,262

 

3,047

 

25,701

 

17,609

 

Adjusted EBITDA $

131,536

 

$

91,236

 

$

942,126

 

$

564,989

 

 
 
 

Three Months Ended

Year Ended

December 31,

December 31,

(as percentage of total revenue)

2021

2020

2021

2020

Adjusted EBITDA margin:
Net income margin

4.3

%

3.6

%

9.3

%

6.3

%

Other interest expense, net

0.8

%

1.1

%

0.7

%

1.0

%

Depreciation and amortization

1.2

%

1.1

%

1.0

%

1.0

%

Income tax expense

0.6

%

0.9

%

1.3

%

1.1

%

Subtotal EBITDA margin

7.0

%

6.8

%

12.3

%

9.3

%

Loss and expense on debt restructure (a)

0.2

%

 

0.2

%

 

Long-lived asset impairment (b)

0.1

%

0.1

%

0.0

%

0.2

%

Lease termination (c)

0.0

%

0.2

%

0.0

%

0.1

%

(Gain) loss on sale or disposal of assets, net (d)

(0.0)

%

0.1

%

(0.0)

%

 

Equity-based compensation (e)

2.1

%

0.6

%

0.7

%

0.4

%

Tax Receivable Agreement liability adjustment (f)

(0.1)

%

(0.0)

%

0.0

%

(0.0

)%

Restructuring costs (g)

0.2

%

0.3

%

0.4

%

0.3

%

Adjusted EBITDA margin

9.5

%

8.0

%

13.6

%

10.4

%

 
(a)

Represents the loss and expense incurred on debt restructure and financing expense for the three months and the year ended December 31, 2021 which is comprised of $0 and $0.4 million in extinguishment of the original issue discount, respectively, $0 and $1.0 million in extinguishment of capitalized finance costs related to the previous term loan facility, respectively, and $3.1 million and $12.1 million in legal and other expenses related to the new term loan facility, respectively.

(b)

Represents long-lived asset impairment charges related to the RV and Outdoor Retail segment, which primarily relate to locations affected by the 2019 Strategic Shift.

(c)

Represents the loss on the termination of operating leases, relating primarily to the 2019 Strategic Shift, resulting from lease termination fees and the derecognition of the operating lease assets and liabilities.

(d)

Represents an adjustment to eliminate the gains and losses on sale or disposal of various assets.

(e)

Represents non-cash equity-based compensation expense relating to employees, directors, and consultants of the Company.

(f)

Represents an adjustment to eliminate the loss and gains on remeasurement of the Tax Receivable Agreement primarily due to changes in our effective income tax rate and the transfer of certain assets from GSS Enterprises LLC (“GSS”) to Camping World, Inc. (“CW”).

(g)

Represents restructuring costs relating to our 2019 Strategic Shift. These restructuring costs include one-time employee termination benefits relating to retail store or distribution center closures/divestitures, incremental inventory reserve charges, and other associated costs, as applicable for each period. These costs exclude lease termination costs, which are presented separately above (see (c) above).

Adjusted Net Income Attributable to Camping World Holdings, Inc. and Adjusted Earnings Per Share

We define “Adjusted Net Income Attributable to Camping World Holdings, Inc. – Basic” as net income attributable to Camping World Holdings, Inc. 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, long-lived asset impairment, lease termination costs, gains and losses on sale or disposal of assets, net, equity-based compensation, Tax Receivable Agreement liability adjustment, restructuring costs related to the 2019 Strategic Shift, other unusual or one-time items, the income tax expense effect of these adjustments, and the effect of net income attributable to non-controlling interests from these adjustments.

We define “Adjusted Net Income Attributable to Camping World Holdings, Inc. – Diluted” as Adjusted Net Income Attributable to Camping World Holdings, Inc. – Basic adjusted for the reallocation of net income attributable to non-controlling interests from stock options and restricted stock units, if dilutive, or the assumed exchange, if dilutive, of all outstanding common units in CWGS, LLC for shares of newly-issued Class A common stock of Camping World Holdings, Inc.

We define “Adjusted Earnings Per Share – Basic” as Adjusted Net Income Attributable to Camping World Holdings, Inc. - Basic divided by the weighted-average shares of Class A common stock outstanding. We define “Adjusted Earnings Per Share – Diluted” as Adjusted Net Income Attributable to Camping World Holdings, Inc. – Diluted divided by the weighted-average shares of Class A common stock outstanding, assuming (i) the exchange of all outstanding common units in CWGS, LLC for newly-issued shares of Class A common stock of Camping World Holdings, Inc., if dilutive, and (ii) the dilutive effect of stock options and restricted stock units, if any. We present Adjusted Net Income Attributable to Camping World Holdings, Inc. – Basic, Adjusted Net Income Attributable to Camping World Holdings, Inc. – Diluted, Adjusted Earnings Per Share – Basic, and Adjusted Earnings Per Share – Diluted 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 Net Income Attributable to Camping World Holdings, Inc. – Basic, Adjusted Net Income Attributable to Camping World Holdings, Inc. – Diluted, Adjusted Earnings Per Share – Basic, and Adjusted Earnings Per Share – Diluted to the most directly comparable GAAP financial performance measure, which is net income attributable to Camping World Holdings, Inc., in the case of the Adjusted Net Income Non-GAAP financial measures; earnings (loss) per share of Class A common stock – basic, in the case of Adjusted Earnings Per Share – Basic; and earnings (loss) per share of Class A common stock – diluted, in the case of the Adjusted Earnings Per Share – Diluted:

 

Three Months Ended

Year Ended

December 31,

December 31,

(In thousands except per share amounts)

2021

2020

2021

2020

Numerator:
Net income attributable to Camping World Holdings, Inc. $

27,248

 

$

14,378

 

$

278,461

 

$

122,345

 

Adjustments related to basic calculation:
Loss and expense on debt restructure (a):
Gross adjustment

3,023

 

 

13,468

 

 

Income tax expense for above adjustment (b)

(394

)

 

(1,770

)

 

Long-lived asset impairment (c):
Gross adjustment

1,646

 

1,406

 

3,044

 

12,353

 

Income tax expense for above adjustment (b)

(24

)

 

(24

)

(13

)

Lease termination (d):
Gross adjustment

126

 

2,590

 

2,211

 

4,547

 

Income tax expense for above adjustment (b)

(16

)

(13

)

(54

)

(36

)

(Gain) loss on sale or disposal of assets (e):
Gross adjustment

(583

)

670

 

(576

)

1,332

 

Income tax expense for above adjustment (b)

(1

)

1

 

4

 

(1

)

Equity-based compensation (f):
Gross adjustment

28,867

 

6,966

 

47,936

 

20,661

 

Income tax expense for above adjustment (b)

(3,631

)

(727

)

(5,812

)

(2,023

)

Tax Receivable Agreement liability adjustment (g):
Gross adjustment

(707

)

(141

)

2,813

 

(141

)

Income tax expense for above adjustment (b)

180

 

35

 

(718

)

35

 

Restructuring costs (h)
Gross adjustment

2,262

 

3,047

 

25,701

 

17,609

 

Income tax expense for above adjustment (b)

(14

)

(14

)

(56

)

(84

)

Adjustment to net income attributable to non-controlling interests resulting from the above adjustments (i)

(17,207

)

(7,692

)

(44,787

)

(31,537

)

Adjusted net income attributable to Camping World Holdings, Inc. – basic

40,775

 

20,506

 

319,841

 

145,047

 

Adjustments related to diluted calculation:
Reallocation of net income attributable to non-controlling interests from the dilutive effect of stock options and restricted stock units (j)

654

 

295

 

 

1,994

 

Income tax on reallocation of net income attributable to non-controlling interests from the dilutive effect of stock options and restricted stock units (k)

(197

)

(75

)

 

(494

)

Reallocation of net income attributable to non-controlling interests from the dilutive exchange of common units in CWGS, LLC (j)

 

 

408,401

 

 

Income tax on reallocation of net income attributable to non-controlling interests from the dilutive exchange of common units in CWGS, LLC (k)

 

 

(104,543

)

 

Assumed income tax expense of combining C-corporations with full or partial valuation allowances with the income of other consolidated entities after the dilutive exchange of common units in CWGS, LLC (l)

 

 

(6,169

)

 

Adjusted net income attributable to Camping World Holdings, Inc. – diluted $

41,232

 

$

20,726

 

$

617,530

 

$

146,547

 

Denominator:
Weighted-average Class A common shares outstanding – basic

44,820

 

42,444

 

45,009

 

39,383

 

Adjustments related to diluted calculation:
Dilutive exchange of common units in CWGS, LLC for shares of Class A common stock (m)

 

 

43,438

 

 

Dilutive options to purchase Class A common stock (m)

127

 

125

 

150

 

79

 

Dilutive restricted stock units (m)

1,050

 

664

 

1,165

 

547

 

Adjusted weighted average Class A common shares outstanding – diluted

45,997

 

43,233

 

89,762

 

40,009

 

 
Adjusted earnings per share - basic $

0.91

 

$

0.48

 

$

7.11

 

$

3.68

 

Adjusted earnings per share - diluted $

0.90

 

$

0.48

 

$

6.88

 

$

3.66

 

 
Anti-dilutive amounts (n):
Numerator:
Reallocation of net income attributable to non-controlling interests from the anti-dilutive exchange of common units in CWGS, LLC (j) $

48,571

 

$

33,357

 

$

 

$

251,412

 

Income tax on reallocation of net income attributable to non-controlling interests from the anti-dilutive exchange of common units in CWGS, LLC (k) $

(14,678

)

$

(8,450

)

$

 

$

(64,964

)

Assumed income tax benefit of combining C-corporations with full or partial valuation allowances with the income of other consolidated entities after the anti-dilutive exchange of common units in CWGS, LLC (l) $

5,058

 

$

764

 

$

 

$

6,430

 

Denominator:
Anti-dilutive exchange of common units in CWGS, LLC for shares of Class A common stock (m)

42,569

 

46,825

 

 

49,916

 

 
Reconciliation of per share amounts:
Earnings (loss) per share of Class A common stock - basic $

0.61

 

$

0.34

 

$

6.19

 

$

3.11

 

Non-GAAP Adjustments (o)

0.30

 

0.14

 

0.92

 

0.57

 

Adjusted earnings (loss) per share - basic $

0.91

 

$

0.48

 

$

7.11

 

$

3.68

 

 
Earnings (loss) per share of Class A common stock - diluted $

0.54

 

$

0.34

 

$

6.07

 

$

3.09

 

Non-GAAP Adjustments (o)

0.30

 

0.14

 

0.92

 

0.57

 

Dilutive exchange of common units in CWGS, LLC for shares of Class A common stock (p)

0.06

 

 

(0.10

)

 

Dilutive options to purchase Class A common stock and/or restricted stock units (p)

 

 

(0.01

)

 

Adjusted earnings (loss) per share - diluted $

0.90

 

$

0.48

 

$

6.88

 

$

3.66

 

(a)

Represents the loss and expense incurred on debt restructure and financing expense for the three months and the year ended December 31, 2021 which is comprised of $0 and $0.4 million in extinguishment of the original issue discount, respectively, $0 and $1.0 million in extinguishment of capitalized finance costs related to the previous term loan facility, respectively, and $3.1 million and $12.1 million in legal and other expenses related to the new term loan facility, respectively.

(b)

Represents the current and deferred income tax expense or benefit effect of the above adjustments, many of which are related to entities with full valuation allowances for which no tax benefit can be currently recognized. This assumption uses effective tax rates between 25.0% and 25.5% for the adjustments for 2021 and 2020, which represents the estimated tax rate that would apply had the above adjustments been included in the determination of our non-GAAP metric.

(c)

Represents long-lived asset impairment charges related to the RV and Outdoor Retail segment, which primarily relate to locations affected by the 2019 Strategic Shift.

(d)

Represents the loss on termination of operating leases, relating primarily to the 2019 Strategic Shift, resulting from the lease termination fees and the derecognition of the operating lease assets and liabilities.

(e)

Represents an adjustment to eliminate the losses and gains on sale or disposal of various assets.

(f)

Represents non-cash equity-based compensation expense relating to employees, directors, and consultants of the Company.

(g)

Represents an adjustment to eliminate the losses and gains on remeasurement of the Tax Receivable Agreement primarily due to changes in our effective income tax rate and the transfer of certain assets from GSS to CW.

(h)

Represents restructuring costs relating to our 2019 Strategic Shift. These restructuring costs include one-time employee termination benefits relating to retail store or distribution center closures/divestitures, incremental inventory reserve charges, and other associated costs, as applicable for each period. These costs exclude lease termination costs, which are presented separately above (see (d) above).

(i)

Represents the adjustment to net income attributable to non-controlling interests resulting from the above adjustments that impact the net income of CWGS, LLC. This adjustment uses the non-controlling interest’s weighted average ownership of CWGS, LLC of 48.7% and 52.5% for the three months ended December 31, 2021 and 2020, respectively, and 49.1% and 55.9% for the year ended December 31, 2021 and 2020, respectively.

(j)

Represents the reallocation of net income attributable to non-controlling interests from the impact of the assumed change in ownership of CWGS, LLC from stock options, restricted stock units, and/or common units of CWGS, LLC.

(k)

Represents the income tax expense effect of the above adjustment for reallocation of net income attributable to non-controlling interests. This assumption uses an effective tax rates between 25.0% and 25.5% for the adjustments for 2021 and 2020, which represents the estimated tax rate that would apply had the above adjustments been included in the determination of our non-GAAP metric.

(l)

Typically represents adjustments to reflect the income tax benefit of losses of consolidated C-corporations that under the Company’s current equity structure cannot be used against the income of other consolidated subsidiaries of CWGS, LLC. However, for the three months and the year ended December 31, 2021, this adjustment included the reversal of the $0.7 million and the $15.2 million benefit, respectively, from changes in the valuation allowance for Camping World, Inc. Subsequent to the exchange of all common units in CWGS, LLC, the Company believes certain actions could be taken such that the C-corporations’ losses could offset income of other consolidated subsidiaries. The adjustment reflects the income tax benefit assuming effective tax rates between 25.0% and 25.5% during 2021 and 2020 for the losses experienced by the consolidated C-corporations for which valuation allowances have been recorded. No assumed release of valuation allowance established for previous periods were included in these amounts and the $0.7 million and the $15.2 million release of valuation allowance during the three months and the year ended December 31, 2021, respectively, was considered to be reversed and excluded from adjusted net income attributable to Camping World Holdings, Inc. – diluted for purposes of this calculation.

(m)

Represents the impact to the denominator for stock options, restricted stock units, and/or common units of CWGS, LLC.

(n)

The below amounts have not been considered in our adjusted earnings per share – diluted amounts as the effect of these items are anti-dilutive. Specifically, adjusted earnings per share - diluted on a fully-exchanged basis for the three months ended December 31, 2021 and 2020 and for the year ended December 31, 2020 produces an anti-dilutive result; therefore, adjusted earnings per shares – diluted has not been presented on a fully-exchanged basis.

(o)

Represents the per share impact of the Non-GAAP adjustments to net income detailed above (see (a) through (i) above).

(p)

Represents the per share impact of stock options, restricted stock units, and/or common units of CWGS, LLC from the difference in their dilutive impact between the GAAP and Non-GAAP earnings per share calculations.

Our “Up-C” corporate structure may make it difficult to compare our results with those of companies with a more traditional corporate structure. There can be a significant fluctuation in the numerator and denominator for the calculation of our adjusted earnings per share – diluted depending on if the common units in CWGS, LLC are considered dilutive or anti-dilutive for a given period. To improve comparability of our financial results, users of our financial statements may find it useful to review our earnings per share assuming the full exchange of common units in CWGS, LLC for all periods, even when those common units would be anti-dilutive. The relevant numerator and denominator adjustments have been provided under “Anti-dilutive amounts” in the table above (see (n) above).

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 Senior Secured Credit Facilities use Adjusted EBITDA, as calculated for our subsidiary CWGS Group, LLC, to measure our compliance with covenants such as the 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 consolidated financial statements included elsewhere 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 loss and expense on debt restructure, long-lived asset impairment, lease termination costs, gains and losses on sale or disposal of assets, net, equity-based compensation, Tax Receivable Agreement liability, restructuring costs relating to the 2019 Strategic Shift, 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. 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.

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