IPO Preview: Camping World Holdings - Largest RV Retailer
Camping World Holdings (NYSE:CWH) filed its S-1/A with the Securities and Exchange Commission on Sept. 26, 2016, setting the terms for the IPO that is scheduled for Oct. 7, 2016. CWH will offer 11.4 million shares with an additional over-allotment option of 1.7 million shares. CWH estimates net proceeds of $230.4 million (or $265.5 million if the underwriters exercise their option in full to purchase additional shares of Class A common stock). The price range is $21 to $23 per share.
After the IPO, CWH will be a controlled company, with CEO Marcus Lemonis holding more than 50% of the voting power. Underwriters for the IPO include: Goldman Sachs, J.P. Morgan Securities, Credit Suisse Securities, KayBanc Capital Markets, Robert W. Baird & Co., Stephens Inc., and Wells Fargo Securities.
Business Summary: Retailer of Recreational Vehicles and Accessories
Camping World Holdings offers a portfolio of products, protection plans, services and other resources for recreational vehicle owners and camping enthusiasts. The company sells new and used RVs, repair parts, RV accessories and supplies, as well as repair and maintenance services. In addition, Camping World offers property and casualty insurance, emergency roadside assistance, extended vehicle service contracts, travel assist programs, vehicle financing and refinancing, co-branded credit cards, club memberships, and publications and directories. Camping World also maintains an e-commerce site and sells through direct marketing.
As of March 31, 2016, the company operates a network of 120 RV retail locations and had approximately 7400 employees. The company was founded in 1966 and is headquartered in Lincolnshire, Illinois.
(Camping World Holdings Inc., S-1 /A Filing)
Executive Management Highlights
Chairman and CEO Marcus Lemonis has served in his position since the company's formation. He also stars in CNBC's reality show, The Profit. Previous experience includes positions at FreedomRoads Holding Co., Holiday RV Superstores, and AutoNation USA. He holds a B.A. from Marquette University.
CFO Thomas Wolfe has served in his position since the company's formation. He previously held positions at Affinity Group Holdings, Convenience Management Group, First City Properties, and Deloitte & Touche. He holds a B.S. from California State Polytechnic University, San Louis Obispo.
Financial Highlights and Market
In its S-1/A filing, the company notes that it is the only provider of comprehensive products and services for the RV market. Approximately 9 million households in the U.S. own an RV, and Camping World has approximately 3.1 million active customers from that base. The company has two brands: Good Sam and Camping World.
The Good Sam brand offers the widest range of related products and services in the industry, and for the three years ended December 31, 2015, Camping World Holdings had annual retention rates ranging from 65% to 75% for its extended vehicle service contracts, property and casualty insurance, emergency roadside assistance, and membership clubs.
Total revenue generated in 2015, was $3.3 billion, representing a 21.3% five-year CAGR. In 2015, net income was $178.5 million and adjusted EBITDA was $253.7 million, representing a 139.8% and 25.6% five-year CAGR, respectively. In the three months ended March 31, 2016, total revenue was $809.7 million. This was a 14.4% increase from $707.8 million for the same period the prior year. Same-store sales for the same three months were $658.6 million versus $597.3 million, an increase of 10.3%. Camping World derives approximately 93% of its revenue from the sale of RVs, parts, accessories, finance and insurance, while services plans make up the rest.
The company intends to use the net proceeds of the IPO to repay $200.4 million of outstanding debt and the rest for general corporate purposes.
IPO Valuation and Industry Peers
Assuming Camping World Holdings prices at the mid-point of its range, it would have a market capitalization value of $2.21 billion post the IPO. Using last twelve-month sales, CWH would trade at a price/sales multiple of 0.629x.
The majority of CWH's direct competitors in the RV space are public companies, such as General RV Center, Cruise America, and Coachmen. Polaris Industries Inc. (NYSE:PII) is a strong public company in comparison to CWH, which designs and manufactures off-road vehicles (ORV), vehicle accessories, and repair and maintenance services. Polaris has a market cap of $4.63 billion and a price/sales multiple of 1.01x.
Conclusion: CWH is a fast growing business, with strong leadership, and a long history of successful performance.
CWH is the largest RV retailer in a growing industry and is positioned to benefit from this growth. At a market cap of $2.21 billion and a price/sales multiple of 0.629x, CWH's valuation is below that of similar sized companies in the industry.
We recommend investors consider purchasing shares in this upcoming IPO.
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CWH over the next 72 hours.
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