Camping World Holdings, Inc. Third Quarter 2026 Results Conference Call - CAMPING WORLD HOLDINGS INC

Financial Performance:

• Reported adjusted EBITDA for Q3 2026 was $36 million; excluding a $12.7 million unfavorable F&I chargeback reserve adjustment, adjusted EBITDA would have been $49 million.
• New vehicle gross margin declined to 10.2% due to intensified industry promotions, while used vehicle gross margin improved 150 basis points sequentially to 18% on leaner, fresher inventory.
• Good Sam services and plans gross margin expanded 550 basis points to 62.3%, though segment revenue declined, holding adjusted EBITDA flat at $21.4 million.
• SG&A was reduced by $24 million year-over-year in Q3, contributing to a year-to-date reduction of $80 million; total annualized cost savings now exceed $150 million.
• Operating cash flow for the first nine months totaled $488 million, and floor plan borrowing was reduced by $349 million.
• The company ended the quarter with $263 million in cash, $444 million in working capital, and no mortgages on over $200 million of owned real estate.

Guidance and Future Outlook:

• Full-year 2026 adjusted EBITDA guidance is revised below the previous low end; no full-year 2026 outlook is provided due to fourth-quarter earnings variability.
• Management expects Q4 total unit volume (new and used) to decline year-over-year at a similar mid-single to low-double-digit pace as Q3, with new sales down mid-single to low-single digits.
• For 2027, the company targets an incremental $75 million in SG&A savings and expects gross margins to normalize slightly, potentially yielding $60–$70 million in additional earnings benefits combined with minor cost inflation.
• Long-term new vehicle gross margin is anticipated to recover to a 13–14% range once consumer sentiment stabilizes and interest rate impacts are absorbed, with used margins potentially rising from 18%.
• Industry-wide new retail sales are forecast to be roughly flat to down mid-single digits in 2027, while used retail sales are expected to be flat.
• Positive free cash flow generation is expected in 2027, even after accounting for potential refinancing of senior secured credit facilities.

Business Segments and Product Lines:

• New vehicle average selling price (ASP) increased nearly 12% driven by share gains in fifth-wheel and motorized segments; 61% of new inventory is now Model Year 2027.
• Used inventory levels are down 25% on a cost basis year-over-year, with aged used inventory (>180 days) reduced to its lowest level in six years.
• Good Sam has completed a system overhaul, enabling the sale of extended service, roadside, and insurance products to external dealers and partners at scale.
• A custom in-house RV sales CRM is now live across all locations, improving lead response times by over 150% and reducing lead-to-first-interaction time by 70%.
• The company closed four dealerships, two of which are reserved for potential reopening if market conditions improve; no plans exist to sell Good Sam or core dealership assets.

Market and Competitive Landscape:

• U.S. retail registrations (new and used) were down 4.5% year-to-date through August, with new registrations down 16% and used up 1%.
• Competitive promotion intensity was extreme in Q2 and early Q3, with rivals offering 37–40% discounts off MSRP (vs. typical 27–30%) to clear aged inventory; management declined to match these pricing levels to preserve margins.
• Camping World holds approximately 21% North American market share and 24.5% U.S. market share on a trailing 12-month basis.
• The "Campsite Reserve" fifth wheel has become the number eight best-selling brand in North America, contributing to market share gains in the high-ASP fifth-wheel segment.

Risks and Challenges:

• Macroeconomic headwinds, including persistent inflation, energy prices, and high interest rates, continue to weigh on consumer sentiment and willingness to trade in assets.
• The average age of trade-in assets is currently 7.5 years, significantly higher than the historical norm of 4.5 years, delaying the refresh cycle.
• Front-end margins remain under pressure due to the disconnect between new vehicle pricing and used vehicle market values.
• Potential future F&I chargeback reserve adjustments are a risk, as evidenced by the $12.7 million non-recurring charge in Q3.
• Rising refinancing costs for senior secured credit facilities are anticipated, though management views them as manageable.

Management Commentary and Tone:

• Management tone was confident in the company's operational transformation, emphasizing a "meaningfully different" cost structure and healthy inventory position compared to a year ago.
• CEO Matthew Wagner expressed pride in the team's execution regarding inventory de-risking, SG&A reduction, and margin protection despite volume losses.
• CFO Tom Kern highlighted the structural nature of the $150 million cost program and the expected transition to positive free cash flow in 2027.
• Management repeatedly emphasized discipline over chasing volume, stating they would trade market share for margin sustainability.

Analyst Questions and Answers:

• Q: Trends in September/October regarding interest rates and consumer confidence?
  • A: New sales trends improved sequentially (high 20s down in July to low teens down in October); used sales faced pressure but are expected to stabilize as competitors deplete inventory and do not replenish aggressively.
• Q: Long-term new gross margin targets?
  • A: Expected to return to 13–14% as consumer balance sheets heal and interest rate shocks are absorbed.
• Q: Nature of the $150 million cost savings and timing?
  • A: The $50 million incremental is from headcount and store closures; the $100 million base program is mostly complete via headcount, AI/efficiency, and software rationalization, with net savings reflecting seasonal rehiring.
• Q: Impact of potential Lippert/Patrick merger on pricing?
  • A: Management hopes the merger will reduce aftermarket costs, potentially aiding consumer affordability.
• Q: Service margin compression?
  • A: A strategic, one-quarter decision to discount services and launch a win-back campaign to re-engage customers who are holding onto assets longer, with margins expected to normalize later.
• Q: Good Sam recurring profit share details?
  • A: Renegotiated credit card contract now includes ~$2.3 million quarterly recurring profit share, up from previous royalty structures.

Other Key Points:

• The company amended its mortgage facility with M&T Bank, extending maturity to August 2031; the term loan matures in June 2028.
• Capital expenditures for 2027 are expected to remain below $80 million, down from roughly $92 million year-to-date.
• Revenue from Good Sam's recurring products now accounts for over 60% of the company's total gross profit.
• Management intends to remain agile and may reinstate seasonal headcount if volume trends improve significantly in the summer selling season.