Good morning and welcome to Camping World Holdings Conference Call to discuss Financial Results for the Third Quarter of 2017. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from the company. As a remainder, this call is being recorded. On the call today from management are Marcus Lemonis, Chairman and Chief Executive Officer; Tom Wolfe, Chief Financial Officer, Brent Moody, Chief Operating and Legal Officer; and Roger Nuttall, President of Retail. I'll turn the call over to Mr. Moody to get started. Please go ahead, sir.

Thank you. Good morning everyone and thanks for joining. A press release covering the company's third quarter 2017 financial results was issued this morning and a copy of that press release can be found in the Investor Relations section on the company's website. Management's remarks on this may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These may include statements regarding our business goals, plans and abilities, industry and customer trends, growth and diversification of customer base, retail location openings and acquisitions and related expenses, and anticipated financial performance. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the risk factors session in our Annual Report on Form 10-K filed on March 13th, 2017 with the SEC and our quarterly report on Form 10-Q that is expected to be filed with the SEC this afternoon. Any forward-looking statements represent our views only as of today and we undertake no obligation to update those statements. Please also note that we will be referring to certain non-GAAP financial measures on today's calls, such as adjusted EBITDA and adjusted EBITDA margin, which we believe may be important to investors to assess our operating performance. Reconciliations to these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release, which is available on our website. With that, I'll turn the call over to Marcus. Hey Marcus, looks like you're on mute.

Mr. Lemonis, please check your mute button or pick up your handset.

Good morning and thank you everybody for joining. I apologize for being on mute. We obviously are now through our one-year anniversary of being public and our business remained very strong in the third quarter. We continue to leverage our strong revenue growth against our higher margins and we feel like we delivered exceptional bottom-line performance for the third quarter. The total revenue increased 25% to a third quarter record $1.24 billion, net income increased 25% to a third quarter record $85 million, and the adjusted EBITDA increased 35% to a third quarter record of $122 million. Demand for recreational vehicles continues to be strong and we've really seen no change in the underlying fundamentals driving this business. We continue to see a shift, however, to smaller towable units, and younger buyers entering the market. Our F&I penetration rates remain very good with the sale of our products and F&I margins increasing, and our consumer services and plans segment contributing to our strong profit margins. Interestingly enough, Millennials remain the fastest-growing demographic across the RV industry and we believe this is partially driven by their active outdoor lifestyle and the way they are integrating RVs across a wider variety of activities such as weekend soccer tournaments, hunting, fishing trips, tailgating events, and other camping and outdoor activities. With our focus on smaller less expensive units and driving down our RV selling price, we believe we are well-positioned to serve this younger outdoor enthusiasts. Not only does this widen our target market, but it allows us to cross out a comprehensive portfolio of higher margin recurring revenue products and services across a wider database of customers. And quite frankly have a longer customer lifecycle. This is this is the very essence of our business model and we remain focused on doing…

Thank you, Marcus and good morning everyone. As Marcus said, we had a strong third quarter and are pleased with our financial results. Let me touch on some of the key highlights. Total revenue increased 25% to $1.4 billion, both segments contributed to the growth with revenue retail revenue up 26.1% to $1.1 9 billion and consumer services and plans revenue up 1.6% to $46.2 million. In the retail segment, same-store sales increased 9.4% and was driven by increases in new vehicles, parts, service and other, and finance and insurance. We continue to view that trend towards towable units and younger buyers as a net positive for the overall business as we believe this creates continued expansion of the RV customer base and allows us to cross-sell a greater number of other higher margin and recurring revenue products and services. Most notable are our roadside assistance and retail finance and insurance programs which experienced healthy increases in the third quarter from an increase in the number of dealerships and higher penetration. The biggest standout was again finance and insurance revenue which increased 50% to $101.6 million and to 11.2% of total vehicle sales revenue from 9.3% in the prior year period. The other notable was the part, service and other revenue which increased 24.3% to $187.8 million and benefited from $13.9 million of revenue from the Overton's acquisition. Gross margin increase 51 basis points to 28.8% of total revenue, retail gross margin increased 77 basis points to 27.7% of segment revenue, while consumer services and plans gross margin increased 41 basis points to 56.5% of segment revenue. Increased penetration of the finance and insurance products was the primary reason for the retail gross margin increase. Operating expenses increased 27% to $244.6 million with a majority of this change coming from…

Thanks Tom. In the previous quarter, we revised our estimates I think to around $370 some odd million, but based on our strong performance for the first nine months of the year, we are raising our 2017 revenue and adjusted EBITDA outlook to approximately $4.2 billion and $384 million respectively. These estimates exclude any Gander Mountain acquisition and preopening expenses. So, you can better evaluate the results of our core business. With that said, we'd like to turn the call back over to the operator to start the Q&A session please. Operator?

Thank you sir. [Operator Instructions] We'll take our first question from Rick Nelson of Stephens.

Thanks. Good morning. Congrats on a great quarter. Marcus these results continue to be very strong, any update on your thinking about the cycle, where we're at middle innings, late innings. Any comments on the financing environment?

Based on what we're seeing on a daily basis through our stores and what we're seeing in terms of our lead generation, which is a good canary in the coal mine, I still believe that we're at the beginning of the game and we just don't see anything. What's that's slowing us down. What we believe is driving that compared to what we've seen historically is the fact that as we've driven down our average selling price and as millennials have become a bigger part of our universe because of their affinity to the outdoor lifestyle and our connection to it, we don't see anything in the near future that gives us any reason to believe that we're in the middle or the end of the game. We feel like we had plenty of room in front of us and I don't feel one bit of headwind.

Thank you. Maybe it [Indiscernible] sales opportunity, I know your inventory is tight [Indiscernible] inventory levels?

Well, we feel -- I know that Roger and I feel very good about our inventory levels and some could argue that we could be missing some revenue simply because we do not play in the very high end luxury motorhome business. But we believe that our return on capital and our EBITDA margins and our risk aversion theory is why we have the level of profitability that we do. Could we stock $200,000, $300,000, $400000 motorhomes and sell them? Sure. But we're in the business of selling things and making a profit on them. And so we don't believe that we're missing any of our core business. We believe that we're properly stocked both on our towable and fifth wheel business on our entry level gas. And we think that our relationship our strong relationship with Thor and Forest River is what gives us an advantage to ensure that we're always in stock with the right product at the right time.

Great. Finally, if I could you ask Gander Outdoors, an update on how the negotiations are going [Indiscernible] I know you provided some numbers around your fourth quarter expectation for Gander, but any luck into next year and the following--?

Yes, we feel -- Brent Moody and I have really been at the forefront of negotiating those leases and as we said from day one, we -- the company will not sign up for any leases that we believe don't give us more than the clear path to profitability. Profitability, quite frankly, on a four wall basis that's consistent with our EBITDA margin expectation, like we currently operate at. One of the things that we've done is we've elected to shrink the size of the boxes that the company currently -- historically had. When they were boxes that were 80,000, 90,000, 100,000, we elected to pass on those because we didn't -- after analysis, did not like the turning of the inventory and the margins associated with that and the return on capital. And so, a lot of the stores that we elected to take have low rent factors, but have slightly smaller footprints; 30,000, 40,000, 50,000, as opposed to 60,000, 70,000, 80,000. We believe that we're going to be able to generate solid sales, but more importantly, solid profitability out of those. But let me remind everybody that the reason that we did the Gander acquisition, the reason we did Overton's, in addition to wanting to have a profitable business segment, was to touch more customers, to put them into our database, to sell more club memberships and credit cards. And we believe that the size of the box, consistent with the size of the market, will give us that yield that we were looking for. And our goal is to really continue to grow that database. And we should see a nice uptick by maybe 2% for 3% in the growth of the file over the next 24 months, in addition to what our historical trend was. I…

Great. Thanks for the color and good luck.

Thank you.

We'll take our next question from David Tamberrino of Goldman Sachs.

Great. Thank you. I got a couple follow-up questions from that line of questioning, as well. But I want to start off with your consumer products business, your Good Sam business in the quarter. It seemed like growth decelerated from where we were earlier in the year. It was kind of growing mid to high single-digits, double-digits in the first quarter, but it was only about 2% growth topline revenue for this quarter. And I think during the recent secondary offering, the active customer base was up maybe about 13%. So, could you maybe walk us through what were some of the headwinds to that business within the quarter?

Well, we believe that some of those headwinds, quite frankly, were self-imposed. We have recently, in the last seven months, raised the price of the Good Sam Club from $25 to $27, as we continue to add more value and more benefits for consumers. And we have also looked at a number of our files. And Tom does a really great job of digging into the individual segments and really understanding that inside of each one of the segments, we want to understand which customers are profitable and which ones are not. And we have done some analysis. We have identified a number of customers who have really -- their performance on their product that they bought was negative to us. And so you take something like roadside assistance; if we saw a customer that was not as profitable or not profitable at all, then we elected to decelerate our marketing to the customer. And I don't want to say send people out of the file, but our goal is to grow the profitability of those. And every couple of years we do a bit of a refresh, both on pricing and on looking at our -- of the way we market. And so I don't think there is anything -- I know there's nothing, in my opinion, to be concerned about, about the pacing of those products and services. We're also getting ready to ramp up our execution of marketing to Overton's, TheHouse, Gander, et cetera. And so I would expect us to see a nice bump in 2018. But no worries -- nothing to be concerned about, in terms of the current trend other than we want to be more profitable.

Understood. Makes a lot of sense. So, you expect that acceleration or reacceleration of growth next year. Now, on the quarter again, your P&S margins -- looks like they compressed a little bit during the quarter. Can you walk me through exactly what happened within that business segment in the retail?

The parts and service?

Yes, correct.

As we look throughout the year, we use Camping World as a mechanism to drive traffic, but that isn't the reason for the compression. We are very, very diligent about tight inventory control and tight aging. And we believe that a lot of retailers do not necessarily put up the margins in the most authentic way. Our choice is to take inventory that we don't believe is moving at the rate that we want it to, or any mistake that we've made, and liquidate those at deep discounts. And so any compression that you see there is just a strong conviction towards tight inventory management, and not what I like to call hiding the weenie by having the margins look high, and having the dead inventory sit in the warehouse. We believe we have to -- our first loss is our best loss and we just need to keep the inventory turning and redeploy that capital into faster-moving, higher-margin products.

Understood. So that sounds a little bit of one-time in nature experienced during the quarter.

No. Once a year, we will do that. The timing of which we do that changes. But we really elected to make sure that we went into the fourth quarter with a cleaner inventory, and we will always continue to do that. So, once a year, you could see that pulsing where you may see a little bit of a compression. It's not because we're being promotional; it's not because of the online marketplace; it truly is just us managing our inventory and keeping it in line.

Understood. And then on Gander Outdoors there stores obviously makes sense, $300 million in revenue. I'm a little surprised on the just kind of target 8% EBITDA margin. You're doing better than that on the overall business. From some of your comments earlier, it sounded like your lease rates were much more favorable than the prior stores were. So, what's the upside opportunity from that 8%, particularly with still being under negotiations for a lot of those rates? I think you mentioned that a lot were reset under $300,000 for the stores you took over, and your opening negotiation is around $150,000 per store. So, can you walk us through what the right lease rate is going to be, per box, and what the upside is for that 8% target margin?

I think that our average lease rate is going to still be under $300,000, $285,000 to $295,000. David, as you've known me for a year now in this context, we only put numbers out there that we know we can hit. And our goal in Gander is to also sell other products and services. Keep in mind that the products and services of Good Sam that are sold through Gander, the financial results or the earnings of that product being sold will not be recorded in Gander. And so we will be able to talk to, in the coming 12 months, about the overall profitability of what we think the acquisition did, and what it contributed to the file. So, when we talk about 8%, we're talking about just what's happening in those four walls, not the ancillary products and services and the profitability associated with them, because we report that profitability inside of our Good Sam segment. I am very pleased, to be candid with you, about the 8% number. Consistent with -- I think in comparison to what the other retailers in the space have reported, which is way south of that. And so we don't want to be naive to think that we could have a higher than market pricing. We have to realize that we still have to have an experience and we don't want to record our Good Sam revenue inside of that P&L.

Okay, understood. And just last one for me. For those initial 15 to 20 stores, are those locations that you will be cross-selling RVs? And are you still targeting 15 to 20 Gander Outdoors stores to be inventorying up and putting those RVs outside?

So, of the 15 to 20 that will open up in the first quarter, none of them will have RVs at them, because the amount of work that has to be done to get the dealership ready just wouldn't happen in the next 60 days. We still do expect that there will be approximately 15 locations out of the 60 that will have dealerships co-located on the property, a Camping World business co-located on the property with Gander, giving us really an outdoor lifestyle center. But what we won't do is sign up for leases that we think put us in peril, so that's still our target. But we're going to add dealership locations, whether we add them there, whether we make acquisitions, or whether we do new store openings. Our primary business is our dealership business. And we don't want anybody thinking that anything we're doing with Overton's or TheHouse or Gander is even moderately distracting us from our core business.

Understood. Thank you very much, Marcus.

Thank you. We'll take our next question from Seth Sigman of Credit Suisse.

Thanks a lot and good morning. I wanted to just follow up on that last point, actually, around store growth. So, this year it looks like year-to-date, you have opened up 12% more stores. That's well above the mid to high single-digit growth rate we've seen in prior years. Obviously a lot of that is opportunistic. But is there a way to think about the baseline store growth for 2018? I know you have tried to take a conservative view on that in the past, but any sort of parameters around that would be really helpful.

Yes. I mean I hate to do this to you, but I'm going to give the same answer that I gave on the initial roadshow, which is we want to open or acquire seven to 10 stores a year, but it is always my goal to make as many acquisitions as our human capital can absorb and as our infrastructure can absorb. Let me be super clear about one thing. There is no barrier to entry to us making acquisitions in the RV industry space. There are plenty of sellers, but we obviously want to make sure that we're not overpaying for things because we obviously look at our return on capital. And we want to make sure that we can integrate them into our company in a way that makes them seamless. We will always look to outpace expectations. But I think for this discussion, I'm going to stick with the same thing I've said historically, which is seven to 10. But as you can see, based on the last 12 months, we like to do deals, and there is no barrier to entry.

Okay. Yes, understood. And just to follow-up on one of those last points you made. I mean there's no reason to believe that growth would be constrained for Camping World, given some of the efforts with Gander, right?

Zero, none, not at all. It's almost like saying that the -- yes. Absolutely not; no.

Got it, okay. And then a lot of talk about demographics and that being the key driver here. Is there a way to quantify how much of the growth is actually coming from this younger consumer base? And then I guess even more importantly, what are the implications for this on other parts of the business? I think you alluded to higher attach rates, potentially. Can you maybe just walk us through some of those benefits?

I'm not able, on this call, to give you specifics about how the younger buyer translated. We'll go back and do that research. But what we know for sure is that as we've driven down the average selling price, we've cast a wider net. And typically as the average selling price drops, you're dealing with a more payment-conscious consumer. And when you're dealing with a more payment-conscious consumer, your likelihood of financing the product and making some money there increases, and your likelihood of selling them valuable products and services, things that they need, and including them in their monthly payment is dramatically increased as well. And we think there's a direct correlation to the drop in selling price, casting a wider net to a younger audience. And we think there's a direct correlation to the lower selling price and the younger audience, turning out to be better F&I results based on them being payment-conscious and risk-adverse.

Okay, got it. Thank you.

Thank you. We'll take our next question from Tim Conder of Wells Fargo Securities.

Thank you. Marcus, just a couple of questions; or maybe Tom, whoever would want to take this. First of all, Marcus, do you believe, on the outdoor side -- are there any remaining puzzle pieces to be put together on that? And then, Marcus or Tom, again, whoever wants to take this. Tom, you called out the costs that you've incurred for the store openings, and indicated that there will be some as we go through 2018. Any additional quantification that you can give related to those costs?

I'll take the first one and then I'll let Tom take the second. I mean the answer is yes. There are always going to be outdoor puzzle pieces left. And what we want to do is we want to continue to diversify our online presence. The growth of our outdoor categories will initially come from the opening of stores. The ones that we thought were the most profitable in the markets that could give us the best yield on our database. But as you look at the other acquisitions, whether it's Overton's, TheHouse, Uncle Dan's, and anything else that we're looking at now, we are clearly looking at brands and businesses that can give us the same result, but that have an online presence. And so that's number one. Number two, we'll continue to look to acquire things that we think round out those businesses. If there's somebody inside of the boating, fishing, marine space that would be a nice tuck-in for Overton's or a nice complement, whether it's a vertically integrated product or a business, and they have a predisposition to being online, we will continue to look at those as well. But obviously our goal is to continue to bring in new buyers. And we want to do that digitally, and -- but we don't want to ever want to walk away from where we know our highest penetration is which is in the stores. I'm going to start the second question. I'm going to let Tom finish it. We are very focused on the costs associated with the Gander rollout. But I want to have everybody understand where we believe the bulk of that is coming from. Today the bulk of that is coming from the staff that I've elected to bring on early who is working…

No. Thank you, Marcus, and hi, Tim. In regards to what Marcus mentioned, that the primary components of the expenses for the fourth quarter will be for payroll and staff and the merchandising area, the warehouse and so forth ramping up, the preopening costs as well as the lease expense. And we will be pushing to normalize those expenses by rightsizing the back office and management in 2018.

Okay. And just in general, Tom, just any kind of quantification how we should think about those? And then maybe how they would normalize and fall off throughout the year?

Yes, and we'll be providing the 2018 guidance within the first two months of next year. And we'll express and detail those expenses at that time.

Okay. And then, Marcus, just a clarification. So, it sounds like future puzzle pieces here would be heavily skewed towards online versus then additional physical locations and just further enhancing and e-commerce ability, is that fair?

Yes, I mean I think there could be some small acquisitions where we believe we are picking up a brand or some expertise that would be small. But I would not anticipate any Gander-like acquisition in near future. Now, that doesn't mean that if we're able to make a very strategic acquisition that is accretive to Gander; that we wouldn't look at that. But it would have to truly be financially accretive to the shareholders and to the capital base. But I'd never say never, but right now, we're focused on the online business.

Thank you, gentlemen.

Thank you. We'll go next to Ryan Brinkman with J.P. Morgan.

Hi, good morning. This is Samik on for Ryan Brinkman. The first question I had is just wanted to get an update if you've had a chance to look at the customer database that Gander has more closely, relative to the sort of peak database that you already have existing with Camping World. Just trying to get a sense of how much of the opportunity with Gander is about getting access to new customers vis-à-vis increasing share of wallet with the same customer that Camping World had already.

We were shocked at how little crossover there was between the two markets. We were shocked to be honest with you. And we think part of that is the way we marketed at Camping World before and candidly maybe missed some opportunity to find new customers. We think the ability to not only bring these historical customers back to Gander, but bring them to the Camping World business is plentiful. And I think one of the things that we have to stay focused on in 2018 is making sure that we find the balance between making good acquisitions and mining what we already have and really working on improving our existing business. So, we think there's a great opportunity for particularly Good Sam and some of the products. We don't think all of the products will grow as quickly as others. We think the Club will see nice growth. We think that credit card will see nice growth. We think our product warranty business; so if you buy a chair or a fishing pole, we think that business will grow. And then obviously, over time, we want to grow our roadside business. But we couldn't be more pleased with the delta and the lack of overlap between the Overton's database and the Gander database.

Got it. And just to follow-up, Marcus, you mentioned Thor and Forest River in your prepared remarks. Just can you remind us where your relationship stands with Winnebago? And do you see an opportunity on your new RV sales if you were to sort of ramp up that relationship further?

We have a great relationship with Winnebago. But our relationship with Winnebago is exclusively on the motorized side and we do not do business with Grand Design. It's just not something that makes sense for our company. But we obviously want to temper our investments into the motorhome business just because it's slightly riskier. And as Roger has done an amazing job driving that average selling price down, in some cases, he may choose to get out of a $150,000 motorhome and get into 10 travel trailers. The exact same amount of capital invested, but we see 15 customers instead of one. We see great margins on all those transactions. And most importantly, we sell products and services 15 times as opposed to one. And I think that the RV dealership team has really understood their role and their contribution to the overall business that driving average selling prices down, which means minimizing our motorhome presence and increasing our towable presence, is really what we need as a company to grow, and how to grow our EBITDA margin as well.

Got it, got it. Thanks for taking our questions. Thank you.

Thank you. We'll take our next question from Alice Wycklendt with Baird.

Yes, hi gentlemen. Congrats on a great quarter and thanks for taking my question. Just first, you've talked a lot about the success with the younger demographics and some new buyers in the market. What is Camping World doing to ensure those new entrants have a favorable experience with their first RV, hopefully to increase the likelihood that they'll stay in the lifestyle, and then return to the market a few years down the line?

You know what? It's an excellent question, because the RV industry historically has had its challenges. And we have made significant investment into our service and parts operation. And in the most recent quarter, we have launched a training for -- a vocational school for technicians. The biggest challenge this industry has is making sure that it keeps pace on the service side with what it generates on the sales side. But we look at all first-time buyers, whether they are 30 or 60, the same way. And that's giving them the kind of walk through and the kind of sales presentation that we believe they need to be successful. In our Bowling Green office, we also have a 1-800 number that's available to all the customers, but first-time buyers tend to use it more for technical support. It's 24-hour technical support on -- so it's the first time I ever used this; I don't know how to put out my oning [ph] or do something. It's similar to what you would find that an auto manufacturer would have. Unfortunately, the RV manufacturers don't provide that level of support, and the burden falls on us. And we made the decision, about 24 months ago, to invest in that. But I think we have to continue to get better. And I think your question definitely brings this issue to the forefront. And I think the next time we have a call, we'll hopefully have an even better answer than the one we gave today.

Great, that's helpful. And then you reported growth in used vehicle for the first time in a few quarters. I think part of that is lapping the exit of the auto business and then the benefit from new stores. But can you talk about the dynamics in the used market today? Any changes in terms of supply or pricing there?

We have not seen a big difference in terms of supply. The market is still red-hot, and the used market -- the reselling market is very hot. But what we have started to see is slightly a higher percentage of people trading. And so we think that's great that people that bought three, four, five years ago are starting their upgrade process now. I would like to say that our team did an exceptional job in used. But I'll be candid with you: you pointed it out. Part of it is lapping numbers. But our theory has changed a little bit. As we've driven down the average selling price and really worked hard to drive it down, we've closed the gap between the price of new and used. We've just done it. And I think what's happened is, is that we've looked at transactions and said customer walks in the door, they send us a lead, they call us, whatever -- however we get to them, our job is to sell them something and not worry about where we think it's best for them to buy. We want to sell them something, create their experience, get them to buy a warranty and roadside and all the products and services and become sticky to the company. And I think that's one thing that we've just gotten better at, which is probably why our new sales are up a little bit more than the industry average is because we're probably just swapping transactions.

Great. Thanks for taking my questions.

Thank you. At this time, I'd like to turn the conference back over to Marcus Lemonis for any closing remarks.

We continue to be very, very bullish about where our business is and we see no headwind. We continue to focus on SG&A and margins. We will continue to make acquisitions consistent with how we've historically done it. And we think that the Gander/Overton's business could turn out to be a real big surprise for all of us. And so we're excited to get those open. And we'll see you when we report our fourth-quarter results. Thank you so much.

Thank you for your participation. That does conclude today's conference. You may now disconnect.