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Item 7. Management’s Discussion and Analysis

2023-02-23 compared with 2022-02-24 · 480 added, 520 removed, 425 unchanged (70% of the section changed)

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This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various important factors, including those set forth under “Risk Factors” included in Part I, Item 1A of this Form 10-K, the “Cautionary Note Regarding Forward-Looking Statements” and in other parts of this Form 10-K.

Our actual results may differ materially from those anticipated in these

forward-looking statements as a result of various important factors, including those set forth under “Risk Factors” included in Part I, Item 1A of this Form 10-K, the “Cautionary Note Regarding Forward-Looking Statements” and in other parts of this Form 10-K.

Except to the extent that differences among reportable segments are material to an understanding of our business taken as a whole, we present the discussion in Management’s Discussion and Analysis of Financial Condition and Results of Operations on a consolidated basis.

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See Note 1 ─ Summary of Significant Accounting Policies ─ Description of the Business to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

With the COVID-19 crisis (see “COVID-19” below) causing many state and local governments to issue “stay-at-home” and “shelter-in-place” restrictions in mid-to-late March 2020, sales and traffic levels across the RV industry declined significantly in March 2020.

In response to the COVID-19 pandemic, many RV manufacturers, including Thor Industries, Forest River, Inc., and Winnebago Industries, temporarily suspended production from late March to mid-May 2020.

This led to a 44.6% decrease in wholesale shipments of new RVs for the three month period of March, April, and May 2020, according to the RV Industry Association’s survey of manufacturers.

The Company had taken steps to add new private label lines, expand its relationships with smaller RV manufacturers, and acquire used inventory to help manage risks in its supply chain.

In conjunction with the stay-at-home and shelter-in-place restrictions enacted in many areas, the Company saw significant sequential declines in its overall customer traffic levels and its overall revenues from the mid-March to mid-to-late April 2020 timeframe.

In the latter part of April 2020, the Company began to see significant improvements in its online web traffic levels and number of electronic leads, and in early May 2020, the Company began to see improvements in its overall revenue levels.

As the stay-at-home restrictions began to ease across certain areas of the country, the Company experienced significant acceleration in its in-store and online traffic, lead generation, and revenue trends in May 2020 continuing into the quarter ended June 30, 2021 and demand in new and used vehicles remained elevated through the remainder of 2021 and into the beginning of 2022.

Wholesale shipments of new RVs in the year ended December 31, 2021 were up 39.5% compared to the prior year.

We have announced a number of initiatives heading into 2022 through press releases, earnings calls, and our investor day, including an online RV sales process, service bay expansion, the addition of design centers to our existing store footprint, and continued expansion through dealership acquisitions.

We have also announced a number of land acquisitions in anticipation of constructing new stores.

In addition, in 2022, we plan to expand our dealerships to include a number of preowned superstores (“Preowned Mega-Centers”) focusing on used RVs, service and restoration, and our finance and insurance offerings.

See “Liquidity and Capital Resources” of this Form 10-K for a discussion of the expected cash requirements in 2022 for new dealership locations.

We expect the cash requirements of the other announced initiatives to be in excess of $25.0 million.

Good Sam Rentals, which is a peer-to-peer RV rental marketplace that can be accessed at RVRentals.com, was launched during the third quarter of 2021 and the financial results and cash needs to date were immaterial.

Our previously announced mobile RV technician marketplace is expected to launch in early 2022, with nominal further investment.

A summary of the changes in quantities and types of retail stores and changes in same stores from December 31, 2021 to December 31, 2022, are in the table below:

Retail Centers

Retail Stores

Number of store locations as of December 31, 2021

Converted (1)

Temporarily closed

Achieved designation of same store (2)

Number of store locations as of December 31, 2022

(1) One RV dealership was converted to a retail clearance center, which was subsequently closed.

(2) 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.

We executed a limited rollout of our online RV sales process on our RVs.com domain in one state during the quarter ended June 30, 2022.

We plan to expand RVs.com to additional markets after implementing enhancements, with limited additional investment, based on data gathered during the test rollout.

We operate two reportable segments:

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(1) Gross profit is presented exclusive of depreciation and amortization, which is presented separately in operating expenses.

As discussed in Note 1 ─ Summary of Significant Accounting Policies ─ COVID-19 to our consolidated financial statements included in Part II, Item 8 of this Form 10-K, the COVID-19 pandemic adversely impacted our business from mid-March through much of April 2020, but shifted to a primarily favorable impact beginning in May 2020.

In response to the pandemic, we implemented preparedness plans to keep our employees and customers safe, which include social distancing, providing employees with face coverings and/or other protective clothing as required, implemented additional cleaning and sanitization routines, and work-from-home orders for a significant portion of our workforce.

The majority of our retail locations continued to operate as essential businesses and consequently remained open to serve our customers through the pandemic, and we continued to operate our e-commerce business.

In addition to reducing marketing expenses, we temporarily reduced salaries and hours throughout the Company, including for our executive officers, and implemented headcount and other cost reductions primarily from the middle of March 2020 through the middle of May 2020.

Most of these temporary salary and hourly reductions ended in May 2020 as the adverse economic impacts of the pandemic began to decline.

In July 2021, we began transitioning many of our employees from work-from-home schedules to a return to our offices.

However, with the increase in COVID-19 cases in the U.S.

as a result of the Omicron variant in late 2021, many employees have reverted back to work from home schedules.

In conjunction with the stay-at-home and shelter-in-place restrictions enacted in many areas, we saw significant sequential declines in overall customer traffic levels and overall revenues from the mid-March to mid-to-late April 2020 timeframe.

In the latter part of April 2020, we began to see a significant improvement in online web traffic levels, and in early May 2020, we began to see improvements in overall revenue levels.

As the stay-at-home restrictions began to ease across certain areas of the country, we experienced significant acceleration in our in-store traffic and revenue trends in May 2020 continuing into the quarter ended June 30, 2021 and demand in new and used vehicles remained elevated through the remainder of 2021 and into the beginning of 2022.

Demand and interest in new and used vehicles continued to outpace vehicle supply during much of the year ended December 31, 2021.

In the last four months of 2021, we were able to procure more new vehicles than were sold during that period, which improved inventory levels at December 31, 2021.

We have been implementing marketing and operational plans to optimize our leadership position through the pandemic, regardless of the ultimate timing and slope of the recovery curve.

We have adapted our sales practices to accommodate customers’ safety concerns in this COVID-19 environment, such as offering virtual tours of RVs and providing home delivery options.

As discussed in Note 1 ─ Summary of Significant Accounting Policies ─ COVID-19 to our consolidated financial statements included in Part II, Item 8 of this Form 10-K, the COVID-19 pandemic has had a primarily favorable impact on our business beginning in May 2020.

Within a few months of the initial significant outbreaks of COVID-19 in the U.S., we experienced elevated demand for RVs and many of our related products and services.

We believe that consumers view RVs as a safer alternative to many other travel and recreational activities, in addition to an opportunity to enjoy the outdoors after many consumers spent much of their time at home during portions of the pandemic.

We believe this has led to an introduction of many new customers to the RV lifestyle and a greater appreciation of outdoor activities.

For much of the COVID-19 pandemic, demand and interest in new and used vehicles outpaced vehicle supply.

Beginning in September 2021, we were able to procure more new vehicles from our suppliers than were sold and new towables inventory levels, in particular, normalized in early 2022.

As other modes of transportation and vacation options have mostly recovered from the impact of COVID-19, the increased demand for our products has dropped from the peak levels experienced in recent years.

Historically, most of our consumer shows and events took place during the first quarter.

As a consequence of COVID-19, we held one in-person consumer show in 2021, held fewer in-person consumer shows and events during 2020 than in 2019 and we have held several of our virtual RV show events in 2020 and 2021.

As other modes of transportation and vacation options continue to recover from the impact of COVID-19, the increased demand for our products may not be sustained.

We are unable to accurately quantify the future impact that COVID-19 may have on our business, results of operations and liquidity due to numerous uncertainties, including the duration of the pandemic;

additional waves of infection or the spread of new variants;

the effectiveness of vaccines and therapies against COVID-19 variants and the willingness of a sufficient proportion of the public to receive the vaccine;

the economic impact of the pandemic;

actions that may be taken by governmental authorities;

and other as yet unanticipated consequences.

In addition, there could be weakening demand for items that are not basic goods, and our supply chain could be disrupted in the future as a result of the outbreak, such as if Thor Industries, Inc.

were to again close its North American production facilities as it did from late March to early May 2020.

Any of these events could have a material adverse impact on our operating results.

As a consequence of COVID-19, we held fewer consumer shows in 2021 and 2022.

Moving forward, we have shifted our consumer show strategy to focus on shows that support our own Camping World dealerships as opposed to hosting other competing dealerships.

We expect to annually host fewer than five ticketed in-person consumer shows under the Good Sam brand in future years.

We do not expect consumer shows to be material to our consolidated financial statements.

We have also held several of our virtual RV Show events, branded “the Ultimate RV Show”, beginning in 2020 and the Ultimate RV Show has evolved to be a multi-channel experience that is both online and in store locations.

Cybersecurity Incident

We rely on the integrity, security and successful functioning of our information technology systems and network infrastructure (collectively, “IT Systems”) across our operations.

In February 2022, we announced that we were experiencing a cybersecurity incident that resulted in the encryption of certain IT Systems and theft of certain data and information (the “Cybersecurity Incident”).

In February 2022, we announced the occurrence of a cybersecurity incident that resulted in the encryption of certain IT Systems and theft of certain data and information (the “Cybersecurity Incident”).

The Cybersecurity Incident resulted in our temporary inability to access certain of our IT Systems, caused by the disabling of some of our IT Systems by the threat actor and our temporarily taking certain other IT Systems offline as a precautionary measure.

We engaged leading outside forensics and cybersecurity experts, launched containment and remediation efforts and a forensic investigation, and are working on restoring and ensuring the security of our IT Systems.

We are also coordinating with law enforcement.

We are in the early stages of this incident and have not determined the full scope or content of our lost or stolen data.

We have and expect to continue to incur incremental costs for the investigation, containment and remediation of the Cybersecurity Incident, including legal and other professional fees, and investments to enhance the security of our IT Systems.

The containment, investigation, remediation, legal and other costs may exceed our insurance policy limits or may not be covered by insurance at all.

Other actual and potential consequences include, but are not limited to, negative publicity, reputational damage, lost trust with customers, regulatory enforcement action, and litigation that could result in financial judgments or the payment of settlement amounts and disputes with insurance carriers concerning coverage.

We have not yet determined if the Cybersecurity Incident will cause future disruptions to our business or how long such disruption could last.

We have also not yet been able to estimate the incremental costs resulting from the Cybersecurity Incident, which are expected to adversely impact our future financial results.

Based on the information currently known, we do not believe that the Cybersecurity Incident will have a material impact on our business, results of operations or financial condition, but no assurances can be given as we continue to assess the full impact from the Cybersecurity Incident, including costs, expenses and insurance coverage.

We engaged leading outside forensics and cybersecurity experts, launched containment and remediation efforts and a forensic investigation, which was completed as of September 30, 2022.

We are continuing to take measures to enhance our IT Systems.

Through our investigation, we identified that personal information of approximately 30,000 individuals was acquired without authorization, including, depending on the individual, dates of birth, Social Security numbers, and driver’s license numbers.

We complied with notification obligations in accordance with relevant law and are continuing to cooperate with law enforcement.

We have incurred costs related to investigation, containment, and remediation and expect to continue to incur incremental costs for the remediation of the Cybersecurity Incident, including legal and other professional fees, and investments to enhance the security of our IT Systems.

Other actual and potential consequences include, but are not limited to, negative publicity, reputational damage, lost trust with customers, and regulatory enforcement action.

In December 2022, three putative class action complaints were filed against us and certain of our subsidiaries arising out of the Cybersecurity Incident.

This litigation could result in financial judgments or the payment of settlement amounts and disputes with insurance carriers concerning coverage.

We do not expect that the Cybersecurity Incident will cause future disruptions to our business or that the Cybersecurity Incident, including anticipated costs associated with pending litigation, will have a future material impact on our business, results of operations or financial condition.

Key Performance Indicators

We evaluate the results of our overall business based on a variety of factors, including the number of Active Customers and Good Sam members, revenue and same store revenue, vehicle units, and same store vehicle units, gross profit and gross profit per vehicle sold, gross margin, finance and insurance per vehicle (“PV”), vehicle inventory turnover, and Adjusted EBITDA and Adjusted EBITDA margin.

Sales of new vehicles generally result in a lower gross profit margin than other areas of our business, including used vehicles, repair service and installation work, RV equipment and accessories, outdoor equipment and accessories and finance and insurance products.

Same store revenue.

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Over the past several years, we have seen a shift in our overall mix of new RV sales towards travel trailer vehicles, which tend to carry lower average selling prices than other classes of new RV vehicles.

From 2015 to 2021, total new vehicle travel trailer units have increased from 62% to 72% of total new vehicle unit sales and from 2015 to 2020 our average selling price of a new vehicle unit had decreased from $39,853 to $36,277.

However, over the past twelve months due to lower industry supply of travel trailers and motorhomes, both average cost and average sales price have increased.

Should the supply chain correct itself over the next twelve months, average sales price may again decline and impact our same store revenue.

From 2015 to 2022, total new vehicle travel trailer units have increased from 62% to 76% of total new vehicle unit sales but from 2015 to 2022 our average selling price of a new vehicle unit had increased from $39,853 to $45,834.

Due to lower industry supply of travel trailers and motorhomes during much of 2020 and 2021, both average cost and average sales price have increased.

If supply chain costs decline over the next twelve months, average sales price may again decline and impact our same store revenue.

Gross Profit and Gross Margins .

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Our gross profit is variable in nature and generally follows changes in our revenue.

Sales of new vehicles generally result in a lower gross margin than other areas of our business, including used vehicles, repair service and installation work, RV equipment and accessories, outdoor equipment and accessories and finance and insurance products.

While gross margins for our RV and Outdoor Retail segment are lower than gross margins for our Good Sam Services and Plans, this segment generates significant gross profit and is our primary means of acquiring new customers, to whom we then cross sell our higher margin products and services with recurring revenue.

We believe the overall growth of our RV and Outdoor Retail segments will allow us to continue to drive growth in gross profit due to our ability to cross sell our Good Sam Services and Plans to our increasing Active Customer base.

Gross margin in 2019 was negatively impacted by the 2019 Strategic Shift.

Gross margin in our RV and Outdoor Retail segment was positively impacted in 2020 and 2021 by increased demand for vehicles and reduced supply leading to higher averages prices per unit.

Gross margin in our RV and Outdoor Retail segment was positively impacted in 2020, 2021 and, to a lesser extent, 2022 by increased demand for vehicles and reduced supply leading to higher average prices per unit.

However, gross margins in 2022 were negatively impacted by the higher cost of new vehicles that was driven largely from the reduced supply of new vehicles during much of 2021.

Adjusted EBITDA and Adjusted EBITDA Margin.

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Industry Trends

After several years of strong growth, the overall RV industry experienced decelerating demand for new vehicles in 2018 and 2019.

Along with the decelerating demand trends, wholesale shipments of new RV vehicles declined 16.0% in 2019 according to the RV Industry Association’s survey of manufacturers.

In late 2019, the demand for new RVs across the overall RV industry began improving.

Wholesale shipments of new RVs increased 13.2% in the first two months of 2020 according to the RV Industry Association’s survey of manufacturers.

With the COVID-19 crisis causing many state and local governments to issue “stay-at-home” and “shelter-in-place” restrictions in mid-to-late March, sales and traffic levels across the RV industry declined significantly in April 2020.

In response to the COVID-19 pandemic, many RV manufacturers, including Thor Industries, Forest River, Inc., and Winnebago Industries, temporarily suspended production from late March to mid-May.

This led to a 44.6% decrease in wholesale shipments of new RVs for the three month period of March, April, and May 2020, according to the RV Industry Association’s survey of manufacturers.

The RV industry posted record shipments in both the third and fourth quarters of 2020, according to the RV Industry Association.

Wholesale shipments of RVs for the second half of 2020 increased 34.2% over the comparable period in 2019.

For the year ended December 31, 2020, total RV shipments increased 6.0% versus the comparable period in 2019, with the travel trailer group showing the largest increase.

Wholesale shipments for 2021 were 600,240 units, a new record for RV shipments for any year.

According to the RV Industry Association’s survey of manufacturers, wholesale shipments of recreational vehicles for 2021 were 600,240 units, a new record for RV shipments for any year.

Shipments for the year ended December 31, 2021 increased 39.5% over the year ended December 31, 2020 and surpassed 2017, the previous record year, by 19.0%.

Thor Industries, our largest supplier of RVs, disclosed in their Form 10-Q for the three months ended October 31, 2021 filed with the Securities and Exchange Commission on December 8, 2021 that their North American RV order backlog had increased substantially, and also disclosed that they had experienced supply constraints and shortages of various RV component parts as a result of the current market conditions and the COVID-19 pandemic, which they attempt to minimize, when possible, by identifying alternate suppliers.

These potential supply constraints are not unique to Thor Industries as suppliers in the RV industry attempt to meet the high demand for RV products combined with shipping delays, as described above, in the midst of the COVID-19 pandemic, which has created a shortage of RV new unit inventory.

In light of this shortage, as discussed above, we have taken steps to add new private label lines, expand our relationships with smaller RV manufacturers, and increased our focus on acquiring used inventory to help manage risks in our supply chain.

Wholesale shipments for 2022 were 493,268 units, 17.8% less than the comparable period in 2021, the all-time record year for shipments, but were still the third best year on record.

Thor Industries, our largest supplier of RVs, disclosed in its Form 10-Q for the three months ended October 31, 2022 as filed with the Securities and Exchange Commission on December 7, 2022 that its North American RV order backlog as of October 31, 2022 had declined 70% compared to October 31, 2021.

Thor Industries also disclosed that it believes that as of October 31, 2022, the North American RV independent dealer inventory levels were at historical, normalized levels for most of its towable products and generally below historical levels for its motorized products.

The per unit cost of new vehicles has been significantly higher than we experienced prior to the COVID-19 pandemic, which was largely driven by the RV manufacturers’ supply constraints described above and the strong demand for new vehicles, as well as the impact of higher inflation and interest rates.

These higher costs have been partially mitigated by the higher average selling prices on new vehicles, but we experienced a decrease in new vehicle gross margins during the year ended December 31, 2022 as a result of these higher costs.

We expect average selling prices may decrease over time as industry-wide supply continues to normalize, which would continue to reduce new vehicle gross margins.

We will continue to evaluate supplier pricing, among other criteria, as part of our vehicle procurement process.

In 2022, we experienced the impact of inflation on our operations, particularly with the increased cost of new vehicles.

The price risk relating to new vehicles includes the cost from the manufacturer, as well as freight and logistics costs.

Each of these costs have been impacted, to differing degrees, by factors such as high demand for product, supply chain disruptions, labor shortages, and increased fuel costs, some of which were caused, in part, by the COVID-19 pandemic.

We expect these cost pressures to continue into 2023.

Inflationary factors, such as increases to our product and overhead costs, may adversely affect our operating results if the selling prices of our products and services do not increase proportionately with those increased costs or if demand for our products and services declines as a result of price increases to address inflationary costs.

We finance substantially all of our new vehicle inventory and certain of our used vehicle inventory through revolving floor plan arrangements.

Inflationary increases in the costs of new and/or used vehicles financed through the revolving floor plan arrangement result in an increase in the outstanding principal balance of the revolving floor plan arrangement.

Additionally, our leases require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary increases.

Further, the cost of remodeling acquired retail locations and constructing new retail locations is subject to inflationary increases in the costs of labor and material, which results in higher rent expense on new retail locations.

Finally, our credit agreements include interest rates that vary based on various benchmarks.

Such rates have historically increased during periods of increasing inflation.

2019 Strategic Shift

In 2019, we made a strategic decision to refocus our business around our core RV competencies.

In connection with the 2019 Strategic Shift, we recorded restructuring charges of $47.2 million in 2019, $17.6 million in 2020 and $25.7 million in 2021, excluding related lease termination costs.

In total, we expect to incur costs relating to one-time employee termination benefits of $1.2 million, all of which had been incurred by December 31, 2020, lease termination costs of between $18.0 million and $34.0 million, incremental inventory reserve charges of $57.4 million, all of which has been incurred through December 31, 2021, and other associated costs of between $35.0 million and $42.0 million.

Through December 31, 2019, we incurred $21.2 million of such other associated costs primarily representing labor, lease, and other operating expenses incurred during the post-close wind-down period for the locations related to the 2019 Strategic Shift.

During the year ended December 31, 2021, we completed our analysis of our retail product offerings that are not RV related as part of the 2019 Strategic Shift.

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During the year ended December 31, 2021, we recorded $15.0 million of incremental reserve charges relating to product categories that are not RV related.

The Company does not expect to close additional locations or incur further one-time termination benefits or incremental reserve charges in connection with the 2019 Strategic Shift.

The remaining potential ongoing charges under the 2019 Strategic Shift relate to lease termination costs and other associated costs relating to the leases of previously closed locations under the 2019 Strategic Shift.

The process of identifying subtenants and negotiating lease terminations has been delayed in part due to the ongoing COVID-19 pandemic and is expected to continue.

The timing of these negotiations will vary as both subleases and terminations are contingent on landlord approvals.

See Note 5 — Restructuring and Long-Lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

As of December 31, 2022, the activities under the 2019 Strategic Shift have been completed with the exception of certain lease termination costs and other associated costs relating to the leases of previously closed locations under the 2019 Strategic Shift.

The process of identifying subtenants and negotiating lease terminations had been delayed in part due to the COVID-19 pandemic and is expected to continue.

The timing of these negotiations will vary as both subleases and terminations are contingent on landlord approvals and the costs may be greater than expected.

We expect to incur lease termination costs and other associated costs of $4.4 million to $15.9 million during 2023 relating to these leases on previously closed locations under the 2019 Strategic Shift.

Any restructuring costs, other than lease termination costs, relating to the 2019 Strategic Shift recognized after December 31, 2022 will not be included as an adjustment to our Non-GAAP Financial Measures (as defined in “Non-GAAP Financial Measures” in Part II, Item 7 of this Form 10-K).

Restructuring and Long-Lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

The following table details the costs incurred associated with the 2019 Strategic Shift (in thousands):

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These costs incurred in 2020 were primarily included in costs applicable to revenues – products, service and other in the consolidated statements of operations.

These costs incurred in 2019 were primarily included in selling, general and administrative expenses in the consolidated statements of operations.

These costs were included in lease termination charges in the consolidated statements of operations.

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Other associated costs primarily represent labor, lease, and other operating expenses incurred during the post-close wind-down period for the locations related to the 2019 Strategic Shift.

For the year ended December 31, 2021, 2020 and 2019, costs of approximately $0 million, $0.4 million and $0.6 million, respectively, were included in costs applicable to revenue – products, service and other, and $10.7 million, $16.4 million and $3.7 million, respectively, were included in selling, general, and administrative expenses in the consolidated statements of operations.

For the years ended December 31, 2022, 2021 and 2020, costs of approximately $0 million, $0 million and $0.4 million, respectively, were included in costs applicable to revenue – products, service and other, and $7.0 million, $10.7 million and $16.4 million, respectively, were included in selling, general, and administrative expenses in the consolidated statements of operations.

Comparison of Certain Trends to Pre-COVID-19 Pandemic Periods

Beginning in the fourth quarter of 2021 and continuing through the fourth quarter of 2022, the Company has experienced sequential decreases in new vehicle gross margin, primarily from the higher cost of new vehicles from the lower industry supply of travel trailers and motorhomes for much of 2021.

However, fourth quarter 2022 gross margins were higher than the Company experienced in any of the pre-COVID-19 pandemic periods of 2016 to 2019, which we believe are more typical demand environments than during the COVID-19 pandemic.

Additionally, the percentage of total unit sales relating to used vehicles was significantly higher in the fourth quarter of 2022 compared to the pre-COVID-19 pandemic periods of 2016 to 2019.

The Company is continuing to execute on its used vehicle strategy, which differentiates it from the competition with proprietary tools, such as the RV Valuator, focus on the development and retention of its service technician team, and investment in its service bay infrastructure.

The following table presents vehicle gross margin and unit sale mix for the three months ended December 31, 2022 and pre-COVID-19 pandemic periods of the three months ended December 31, 2019, 2018, 2017, and 2016:

Three Months Ended December 31,

Used vehicles

Unit sales mix

Used vehicles

(1) These periods were prior to the COVID-19 Pandemic.

Cost Reduction Initiatives in Fourth Quarter of 2022

During the fourth quarter of 2022, we began implementing a series of cost reduction initiatives, which included reduced headcount in the fourth quarter and the elimination or reduction of underperforming assets, locations, and business lines.

During the year ending December 31, 2023, the headcount reductions are expected to result in cost savings which will largely be offset by other increases in wages and benefits.

During the year ending December 31, 2023, the other cost reduction initiatives are expected to result in cost savings of between $30.0 million and $35.0 million, primarily as components of selling, general and administrative costs.

These other cost reduction amounts do not include offsets for additional expenditures for other initiatives in 2023, which we currently do not believe will be material.

Costs incurred to implement these cost reduction measures have not been, and are not expected to be, material.

While many of these cost reduction measures were completed during the fourth quarter of 2022, most of the remaining cost reduction measures will be completed by the end of the first half of 2023.

Our Corporate Structure Impact on Income Taxes

Our corporate structure is commonly referred to as an “Up-C” structure and typically results in a different relationship between income (loss) before income taxes and income tax expense than would be experienced by most public companies with a more traditional corporate structure.

More traditional structures are typically comprised predominately of Subchapter C corporations and/or lacking significant non-controlling interests with holdings through limited liability companies or partnerships.

Our corporate structure is commonly referred to as an “Up-C” structure and typically results in a different relationship between income before income taxes and income tax expense than would be experienced by most public companies with a more traditional corporate structure.

More traditional structures are typically comprised predominately of Subchapter C corporations (“C-Corps”) and/or lacking significant non-controlling interests with holdings through limited liability companies or partnerships.

Typically, most of our income tax expense is recorded at the CWH level, our public holding company, based on its allocation of taxable income from CWGS, LLC.

More specifically, as discussed in Note 11 — Income Taxes to our consolidated financial statements included in Part II, Item 8 of this Form 10-K, CWH is organized as a Subchapter C corporation and, as of December 31, 2021, is a 51.2% owner of CWGS, LLC (see Note 18 — Stockholders’ Equity and Note 19 — Non-Controlling Interests to our consolidated financial statements included in Part II, Item 8 of this Form 10-K).

More specifically, as discussed in Note 11 — Income Taxes to our consolidated financial statements included in Part II, Item 8 of this Form 10-K, CWH is organized as a C-Corp and, as of December 31, 2022, is a 50.2% owner of CWGS, LLC (see Note 18 — Stockholders’ Equity and Note 19 — Non-Controlling Interests to our consolidated financial statements included in Part II, Item 8 of this Form 10-K).

CWGS, LLC is organized as a limited liability company and treated as a partnership for U.S.

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federal entity-level income taxes (“Pass-Through”), with the exception of Americas Road and Travel Club, Inc., Camping World, Inc.

(“CW”), and FreedomRoads RV, Inc.

and their wholly-owned subsidiaries, which are Subchapter C corporations (“C-Corp”) embedded within the CWGS, LLC structure.

CWH receives an allocation of its share of the net income (loss) of CWGS, LLC based on CWH’s weighted-average ownership of CWGS, LLC for the period.

(“CW”) (prior to the conversion of CW and certain other subsidiaries to limited liability companies (the “LLC Conversion”) (see Note 11 — Income Taxes to our consolidated financial statements included in Part II, Item 8 of this Form 10-K)), and FreedomRoads RV, Inc.

and their wholly-owned subsidiaries, which are C-Corps embedded within the CWGS, LLC structure.

CWH receives an allocation of its share of the net income of CWGS, LLC based on CWH’s weighted-average ownership of CWGS, LLC for the period.

CWH recognizes income tax expense on its pre-tax income including its portion of this income allocation from CWGS, LLC primarily relating to Pass-Through entities.

The income tax relating to the net income (loss) of CWGS, LLC allocated to CWH that relates to separately taxed C-Corp entities is recorded at CWGS, LLC.

No income tax expense is recognized by the Company for the portion of net income (loss) of CWGS, LLC allocated to non-controlling interest other than income tax expense recorded by CWGS, LLC.

The income tax relating to the net income of CWGS, LLC allocated to CWH that relates to separately taxed C-Corp entities is recorded within the consolidated results of CWGS, LLC.

No income tax expense is recognized by the Company for the portion of net income of CWGS, LLC allocated to non-controlling interest other than income tax expense recorded by CWGS, LLC.

Rather, tax distributions are paid to the non-controlling interest holders, which are recorded as distributions to holders of LLC common units in the consolidated statements of cash flows.

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federal, state and local income taxes with respect to its allocable share of any taxable income of CWGS, LLC and is taxed at the prevailing corporate tax rates.

For the years ended December 31, 2021, 2020 and 2019, the Company used effective income tax rate assumptions between 25.0% and 25.5%, for income adjustments applicable to CWH when calculating the adjusted net income (loss) attributable to Camping World Holdings, Inc.

For the years ended December 31, 2022, 2021 and 2020, the Company used effective income tax rate assumptions between 25.0% and 25.5%, for income adjustments applicable to CWH when calculating the adjusted net income attributable to Camping World Holdings, Inc.

— basic and diluted (see “Non-GAAP Financial Measures” in Part II, Item 7 of this Form 10-K).

CWGS, LLC may be liable for various other state and local taxes.

The following table presents the allocation of CWGS, LLC’s net income (loss) to CWH between C-Corp and Pass-Through, the allocation of CWGS, LLC’s net income (loss) to non-controlling interests, income tax expense recognized by CWH, and other items:

By January 2, 2023, the “LLC Conversion” (see Note 11 — Income Taxes to our consolidated financial statements included in Part II, Item 8 of this Form 10-K) was completed.

The Company expects that, beginning with the year ending December 31, 2023, the LLC Conversion allows certain losses that previously would have been confined within the C-Corp portion of CWGS, LLC to instead offset a portion of income generated by the

Pass-Through portion of CWGS, LLC, which would reduce the amount of income tax expense recorded by CWH.

The LLC Conversion is also expected to reduce the amount of tax distributions required to be paid by CWGS, LLC to CWH and the non-controlling interest holders under the CWGS LLC Agreement beginning with the year ending December 31, 2023.

The following table presents the allocation of CWGS, LLC’s C-Corp and Pass-Through net income to CWH, the allocation of CWGS, LLC’s net income to non-controlling interests, income tax expense recognized by CWH, and other items:

Year Ended December 31,

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Pass-Through portion of CWGS, LLC net income allocated to CWH

CWGS, LLC net income (loss) allocated to CWH

CWGS, LLC net income (loss) allocated to noncontrolling interests

CWGS, LLC net income (loss)

CWGS, LLC net income allocated to CWH

CWGS, LLC net income allocated to noncontrolling interests

CWGS, LLC net income

Tax Receivable Agreement liability adjustment

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Other incremental CWH net income

Net income (loss)

The following table presents further information on income tax expense:

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Income tax expense recorded by CWH (1)

Income tax benefit (expense) recorded by CWGS, LLC

Income tax (expense) benefit recorded by CWGS, LLC (2)

Income tax expense

During the year ended December 31, 2022, this amount included $13.3 million of income tax expense relating to the LLC Conversion.

This income tax expense was primarily from the write-off of deferred tax assets, which was partially offset by the release of valuation allowance.

See Note 11 – Income Taxes to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

During the year ended December 31, 2022, this amount included $15.2 million of income tax expense relating to the LLC Conversion.

This income tax expense was primarily from the write-off of deferred tax assets, which was partially offset by the release of valuation allowance.

Additionally, during the year ended December 31, 2021, this amount included benefits to income tax of $15.2 million for the release of valuation allowance at CW, which, in 2021 and 2022 prior to the LLC Conversion, became available to offset state combined income in certain unitary states due to the Company’s increased ownership in CWGS, LLC.

See Note 11 – Income Taxes to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

Results of Operations

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Lease termination

(Gain) loss on sale or disposal of assets

Loss (gain) on sale or disposal of assets

Total operating expenses

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(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 unit revenue.

(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 vehicle unit sales.

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

Total revenue increased 26.9% or $1.5 billion, to $6.9 billion for 2021 from $5.4 billion for 2020.

The increase in total revenue was driven by a $1.5 billion, or 27.9%, increase in RV and Outdoor Retail revenue, partially offset by a $0.3 million, or 0.1%, decrease in Good Sam Services and Plans revenue.

Total gross profit increased 44.3%, or $753.8 million, to $2.5 billion for 2021 from $1.7 billion for 2020.

The increase in total gross profit was driven by a $754.0 million, or 47.3%, increase in RV and Outdoor Retail gross profit, and a $0.2 million, or 0.2%, decrease in Good Sam Services and Plans gross profit.

Income from operations increased 67.9%, or $323.3 million, to $799.5 million for 2021, from $476.2 million income from operations for 2020.

The increase was primarily driven by a $753.8 million increase in gross profit, a $9.3 million decrease in long-lived asset impairment, a $2.3 million decrease in lease termination expense, and a $1.9 million decrease in loss on assets sales, partially offset by a $417.5 million increase in selling, general and administrative expenses, a $14.4 million increase in depreciation and amortization, and a $12.1 million increase in debt restructure expense.

Total other expense decreased 12.0%, or $8.9 million, to $65.3 million for 2021, from $74.2 million for 2020.

The decrease in other expense was primarily driven by a $7.7 million decrease in other interest expense and a $5.6 million decrease in floor plan interest expense, partially offset by a $3.0 million increase in Tax Receivable Agreement liability, a $1.4 million increase in loss on debt restructure, and $0.1 million of other expense.

As a result of the above factors, income before income taxes was $734.2 million for 2021 compared to a $402.0 million income before income taxes for 2020.

Income tax expense was $92.1 million for 2021, an increase of $34.4 million from $57.7 million for 2020.

As a result, net income was $642.1 million for 2021 compared to net income of $344.2 million for 2020.

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

Revenue and Gross Profit

Good Sam Services and Plans

Good Sam Services and Plans revenue decreased 0.1%, or $0.3 million, to $180.7 million in 2021, from $181.0 million for 2020.

The decrease was primarily attributable to a $5.7 million decrease due to only one in-person consumer show held in 2021 due to COVID-19 versus 24 shows held in the first quarter of 2020, a $4.8 million decrease primarily from the elimination of low margin extended warranty insurance programs, a $1.4 million decrease from reduced magazine ad sales as a result of combining two magazines into one, and a $0.4 million decrease from reduced ad sales in the annual directory, partially offset by a $6.9 million increase from roadside assistance programs primarily resulting from increased contracts in force, a $3.1 million increase in Good Sam TravelAssist revenue primarily resulting from increased contracts in force, and a $2.0 million increase from Good Sam insurance programs primarily resulting from increased contracts in force.

Good Sam Services and Plans gross profit decreased 0.2%, or $0.2 million, to $107.8 million in 2021, from $108.0 million for 2020, and gross margin remained unchanged at 59.7% for both periods.

The decrease in gross profit was primarily attributable to a $2.9 million decrease in contribution from fewer in-person consumer shows being held during the 2021 period due to COVID-19, a $1.2 million increase in overhead and marketing expenses, a $1.1 million reduction in contribution from the annual directory, a $1.0 million reduction from the magazine group, and a $0.2 million reduction from other services and plans, partially offset by a $3.2 million increase in contribution from the Good Sam TravelAssist programs, a $2.2 million increase from the Good Sam insurance programs, and an $0.8 million increase from the roadside assistance programs.

remained unchanged at 59.7% for both 2021 and 2020 reflecting increased revenue and higher gross margin from the Good Sam TravelAssist and Good Sam insurance products, partially offset by reduced gross margin for the roadside assistance programs and consumer shows.

Good Sam Services and Plans revenue increased primarily due to a $7.6 million increase from the roadside assistance programs primarily resulting from increased contracts in force and favorable updates to assumptions for cancellations;

a $2.4 million increase from the extended vehicle warranty programs primarily resulting from increased contracts in force;

a $2.0 million increase in Good Sam TravelAssist revenue primarily resulting from increased contracts in force;

a $1.6 million increase from the Good Sam Insurance Agency primarily resulting from increased contracts in force;

and an $0.9 million increase from the consumer shows due to no shows produced in 2021 and one show produced in 2022;

partially offset by $1.2 million reduction from the annual directory;

a $1.1 million reduction from RV financing programs;

and an $0.8 million reduction from other programs.

Good Sam Services and Plans gross profit increased primarily due to a $9.5 million increase from roadside assistance programs resulting from increased contracts in force, favorable updates to assumptions for cancellations, and reduced marketing costs;

a $2.4 million increase from the extended warranty insurance programs;

a $2.1 million increase from the Good Sam TravelAssist programs;

a $1.7 million increase from the Good Sam Insurance Agency;

and a $1.1 million increase from consumer shows;

partially offset by a $1.4 million increase in overhead support expenses;

a $2.0 million reduction from other services and plans, and a $1.1 million reduction from RV financing programs;.

The gross margin increase in Good Sam Services and Plans was primarily due to the increases from the roadside assistance programs described above.

RV and Outdoor Retail:

New vehicle revenue increased 16.9%, or $476.1 million, to $3.3 billion in 2021 from $2.8 billion for 2020.

The increase was primarily due to a 16.9% increase in average selling price per vehicle sold, driven by increases in demand for nearly all product types due to record demand outpacing manufacturer production.

On a same store basis, new vehicle revenue increased 7.7% to $3.0 billion and new vehicle units decreased 8.3% in 2021 compared to 2020.

New vehicle gross profit increased 74.2%, or $373.2 million, to $876.0 million in 2021 from $502.8 million for 2020.

The increase was due to a 16.9% increase in average price per vehicle sold.

New vehicle gross margin increased 874 basis points to 26.5% in 2021 from 17.8% in 2020.

The increase was due to a sales mix shift towards available higher-margin towable units and higher average motorized units gross margins resulting from lower motorized inventory levels.

New vehicle revenue decreased primarily due to a 9.4% decline in vehicles sold, partially offset by an 8.0% increase in average sales price.

On a same store basis, new vehicle revenue decreased 6.2% to $3.0 billion, and new vehicle units sold decreased 13.6%.

New vehicle gross profit decreased primarily due to a 17.4% increase in the average cost of new vehicles sold, partially offset by an 8.0% increase in the average selling price per new vehicle sold.

Also, a 9.4% decrease in vehicles sold contributed to the decrease in new vehicle gross profit.

Used Vehicles

Used vehicle revenue increased 71.2%, or $701.4 million, to $1.7 billion in 2021 from $984.9 million for 2020.

The increase was primarily due to a 29.6% increase in vehicle units sold and a 32.1% increase in average selling price per vehicle, driven by increases in demand for nearly all product types as lower new inventory levels have driven an increase in demand for used vehicles.

On a same store basis, used vehicle revenue increased 59.3% to $1.5 billion and used vehicle units sold increased 19.7% in 2021 compared to 2020.

Used vehicle gross profit increased 87.5%, or $204.6 million, to $438.4 million in 2021 from $233.8 million in 2020.

The increase was due to 29.6% increase in vehicles sold.

Used vehicle gross margin increased 226 basis points to 26.0% in 2021 from 23.7% in 2020 driven primarily by a 32.1% increase in average selling price per vehicle due to strong demand in the used vehicle market across nearly all product types.

Used vehicle revenue increased primarily due to a 4.9% increase in vehicles sold and a 6.2% increase in average selling price per vehicle, driven by an increase in demand for used vehicles, as they are a lower-cost alternative to new vehicles.

On a same store basis, used vehicle revenue increased 6.8% to $1.7 billion and used vehicles sold increased 0.1%.

Used vehicle gross profit increased due to the above mentioned increases in units sold and average sales price per vehicle.

The decrease in used vehicle gross margin was primarily the result of compression from an 8.4% higher average cost per unit sold, partially offset by a 6.2% increase in average selling price per vehicle sold.

Products, Service and Other

Products, service and other revenue increased 16.0%, or $152.1 million, to $1.1 billion in 2021 from $948.9 million in 2020.

The increase was primarily attributable to increased new and used vehicle revenue, which resulted in an increase in RV parts and accessory sales and promotions associated with our exit from non-RV retail categories in our 2019 Strategic Shift.

On a same store basis, products, service and other revenue increased 6.4% to $716.6 million for 2021 from $673.3 million in 2020.

Products, service and other gross profit increased 10.2%, or $36.7 million, to $394.9 million in 2021 from $358.2 million in 2020.

The increase was driven by increased volume of products sold and improved service margins.

Product, service and other gross margin decreased 188 basis points to 35.9% in 2021 primarily due to increased sales at lower margins to liquidate inventory in exited categories of fishing, firearms and apparel.

Products, service and other revenue decreased primarily due to our exit from certain non-RV product categories, as part of the 2019 Strategic Shift, that were sold in 2021, but not in 2022.

On a same store basis, products, service and other revenue decreased 13.5% to $667.4 million in 2022 from $771.6 million in 2021.

Products, service and other gross profit decreased primarily due to the absence of revenue resulting from our exit of certain non-RV product categories during the second half of 2021.

The increase in products, service and other gross margin was primarily due to the shift in mix to higher margin products and services, such as our RV service revenues, after our exit of certain lower margin, non-RV product categories during the second half of 2021.

Finance and Insurance, net

Finance and insurance revenue and gross profit is recorded net, since the Company is acting as an agent in the transaction, and commission is recognized when a finance and insurance product contract payment has been received or financing has been arranged.

Finance and insurance, net increased 28.9%, or $134.2 million, to $598.5 million in 2021 from $464.3 million in 2020, primarily due to increased volume of vehicles sold.

Finance and insurance, net as a percentage of new and used vehicle revenue decreased to 12.0% for 2021 from 12.2% for 2020, driven by average sales price increases on new and used vehicle sales outpacing the average price increase of Finance and Insurance, net.

On a same store basis, finance and insurance, net revenue increased 19.1%, or $87.1 million, to $544.0 million in 2020 versus $456.9 million in 2020.

Finance and insurance, net revenue as a percentage of new and used vehicle revenue was 12.2% in 2022 compared to 12.0% in 2021.

On a same store basis, finance and insurance, net decreased 0.1%, to $572.9 million.

Finance and insurance, net revenue increased in total and as a percentage of new and used vehicle revenue primarily due to an increase in the products sold per used vehicle, and increased gross profit per contract for both new and used vehicles sold, partially offset by a lower volume of vehicles sold.

Good Sam Club

Good Sam Club revenue increased 8.2%, or $3.6 million, to $47.9 million in 2021 from $44.3 million in 2020.

The increase resulted from a $1.9 million revenue increase primarily due to increased Good Sam Club memberships, and a $1.7 million increase in marketing fee revenue from Good Sam Club co-branded credit cards resulting from increased open accounts.

Good Sam Club gross profit increased 15.1%, or $5.3 million, to $40.7 million in 2021 from $35.4 million in 2020.

The increase was primarily due to increased Good Sam Club memberships, increased marketing fee revenue from Good Sam Club co-branded credit cards, and reduced marketing costs.

Good Sam Club gross margin increased to 85.0% in 2021 from 79.9% in 2020 primarily due to increased revenue and reduced marketing costs.

Good Sam Club revenue decreased primarily due to a reduction in marketing fee revenue from Good Sam Club co-branded credit cards driven by lower transaction counts at retail locations resulting mainly from the exit from certain non-RV product categories and reduced revenue related to decreased Good Sam Club file size.

Good Sam Club gross profit and gross margin decreased primarily due to the revenue reduction items noted above and investment in new programs.

Operating Expenses and Other

Selling, general and administrative

Selling, general and administrative expenses increased 36.1%, or $417.5 million, to $1.6 billion in 2021 from $1.2 billion in 2020.

The $417.5 million increase was primarily due to a $338.1 million increase in wage-related expenses attributable in large part to variable pay on increased gross profit in 2021 and the reduction in salaries relating to our initial response to COVID-19 that occurred in 2020 (see “COVID-19” in Part II, Item 7 of this 10-K), a $43.8 million increase in selling expenses mainly driven by branding and other marketing spend reductions made at the beginning of the COVID-19 pandemic, a $18.6 million increase in other store and corporate overhead expenses, and a $17.0 million increase in occupancy expenses primarily relating to the 25 locations opened over the last twenty-four months.

Selling, general and administrative expenses as a percentage of total gross profit decreased to 64.1% in 2021 from 67.9% in 2020.

Selling, general and administrative expenses increased primarily due to a $26.2 million increase in selling expenses, a $12.7 million increase in insurance costs due to increased inventory levels, a $13.0 million increase in occupancy expenses due to the net increase of ten store locations over the prior year, a $7.0 million increase in professional fees, a $6.1 million increase in personal property expenses, and a $0.6 million increase in other store and corporate overhead expenses, partially offset by an $18.2 million reduction in wage-related expenses and a $14.0 million reduction in equity-based compensation expenses.

The $14.0 million decrease in equity-based compensation expenses (See Note 20 — Equity-Based Compensation to our consolidated financial statements included in Part II, Item 8 of this Form 10-K) resulted from $20.0 million of expense for a stock grant to our Chairman and Chief Executive Officer in December 2021 with no grant to that individual in 2022, which was partially offset by an increase of $2.1 million for expense related to the modification of restricted stock units to accelerate and/or continue vesting under employee separation agreements and/or post-termination consulting arrangements, more weighted-average restricted stock units outstanding, and a higher weighted-average grant date fair value of those restricted stock units.

Depreciation and amortization

Depreciation and amortization increased 27.8%, or $14.4 million, to $66.4 million in 2021 from $52.0 million in 2020 due primarily to $7.4 million of accelerated depreciation on store fixtures related to categories exited as part of the 2019 Strategic Shift, and increased purchases of property and equipment.

Depreciation and amortization increased primarily due to increased capital expenditures, mainly driven by our expansion of RV dealership locations and improvements to existing RV dealerships.

Additionally, the increase was due to $8.8 million of incremental accelerated amortization during the first quarter of 2022 from

the adjustment of the useful lives of certain trademark and trade name intangible assets, associated with brands not traditionally associated with RVs, that we have effectively phased out.

The trademark and trade name intangible assets relating to the effectively phased out brands were fully amortized as of March 31, 2022.

These increases were partially offset by $7.4 million of accelerated depreciation on store fixtures in the third quarter of 2021 related to categories exited as part of the 2019 Strategic Shift.

Long-lived asset impairment

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Lease termination

Lease termination expense of $2.2 million in 2021, included $1.4 million related to the 2019 Strategic Shift discussed above.

Lease termination expense of $4.5 million in 2020, related primarily to lease terminations in connection with the 2019 Strategic Shift discussed above.

Lease termination expense related primarily to the 2019 Strategic Shift discussed above.

Floor plan interest expense

Floor plan interest expense decreased 28.3%, or $5.6 million, to $14.1 million for 2021 from $19.7 million in 2020.

The decrease was primarily due to 77 basis point decrease in the average floor plan borrowing rate and a 2.3% decrease in the average floor plan borrowings driven by lower average new unit inventory levels.

Floor plan interest expense increased primarily due to a 76.5% increase in average floor plan borrowings driven primarily by higher new vehicle inventory quantities from the normalization of the new travel trailer supply chain and increases in average new vehicle unit costs, a 146 basis point increase in the average floor plan borrowing rate, and, to a lesser extent, an increase in average used vehicles subject to floor plan financing.

Other interest expense, net

Other interest expense decreased 14.2%, or $7.8 million, to $46.9 million in 2021 from $54.7 million for 2020.

The decrease was primarily due to a 53 basis point decrease in average interest rate and reduced average borrowings applicable to our term loan facilities.

Other interest expense increased primarily due to a 96 basis point increase in the Term Loan Facility average interest rate and the additional $300.0 million of term loan borrowings in December 2021, which increased the average debt outstanding in 2022.

The increase in interest rates in 2022 did not have a proportionate impact on the increase in other interest expense, since the refinance of the Term Loan Facility in June 2021 resulted in a reduction in interest rates from the 25 basis point decrease in the applicable rate (as defined in the Credit Agreement (as defined in Note 9 – Long-Term Debt to our consolidated financial statements included in Part II, Item 8 of this Form 10-K)) and the Term Loan Facility was subject to the interest rate floor, including the 2.50% applicable rate, of 3.25% for the first four months of 2022 which negated interest rate increases during that period subject to the interest rate floor.

The applicable interest rate on the Term Loan Facility has subsequently risen above the interest rate floor and at December 31, 2022 is 6.82%.

For the Term Loan Facility, if the 6.82% interest rate was applicable for the entirety of the year 2022, other interest expense would have increased an additional $31.8 million.

We expect that interest rates and other interest expense, net will continue to increase in 2023.

Loss and expense on debt restructure

Loss and expense on debt restructure of $13.5 million in 2021 was comprised of $0.4 million in extinguishment of the original issue discount related to the Previous Term Loan Facility (as defined below), $1.0 million in extinguishment in capitalized finance costs related to the Previous Term Loan Facility, and $12.1 million in legal and other expenses related to the New Term Loan Facility (as defined below).

Loss and expense on debt restructure of $13.5 million in 2021 was comprised of $0.4 million in extinguishment of the original issue discount related to the Company’s prior term loan facility, $1.0 million in extinguishment of capitalized finance costs related to the Company’s prior term loan facility, and $12.1 million in legal and other expenses related to the Company’s current term loan facility.

Tax Receivable Agreement Liability adjustment

The Tax Receivable Agreement Liability adjustment of $2.8 million for 2021 related to a remeasurement in 2021 to reflect an increase in state tax rates.

The Tax Receivable Agreement Liability adjustment for 2020 was a benefit of $0.1 million, which represented an adjustment for lower enacted state income tax rates.

The Tax Receivable Agreement Liability adjustment for 2022 and 2021 consisted of a benefit of $0.1 million and an expense of $2.8 million, respectively, related to a remeasurement from a decrease and increase, respectively, in state tax rates.

Income tax expense

Income tax expense increased $34.4 million, to $92.1 million in 2021 compared to $57.7 million for 2020.

The increase was primarily due to both higher income generated and an increase in ownership interest in CWGS, LLC for which the Company is subject to U.S.

federal and state taxes on its allocable share, plus higher state tax rates, net of operating losses recorded by CW for which limited tax benefit can be recognized, partially offset by the $15.2 million release of valuation allowance at CW, which is now available to offset state combined income in certain unitary states due to the Company’s increased ownership in CWGS, LLC.

The valuation allowance release during 2021 is attributable to the change in the entities within state combined filing groups due to unitary relationships, which provide additional taxable income sources to utilize CW’s deferred tax assets.

Income tax expense increased primarily due to a $28.4 million decrease in deferred tax assets, net of release of valuation allowance, as a result of the LLC Conversion in 2022.

Additionally, income tax expense for 2021 included benefits to income tax of $4.1 million for the revaluation of deferred tax assets as a result of increased state tax rates and $15.2 million for the release of valuation allowance at CW, which, in 2021 and 2022 prior to the LLC Conversion, became available to offset state combined income in certain unitary states due to the Company’s increased ownership in CWGS, LLC.

The valuation allowance release during 2021 was attributable to the change in the entities within state combined filing groups due to unitary relationships, which provided additional taxable income sources to utilize CW’s deferred tax assets.

CWH’s increased ownership in CWGS, LLC and other qualitative unity factors impacted the unitary relationships.

Net income increased $297.9 million to a net income of $642.1 million in 2021 from a net income of $344.2 million in 2020.

The change was primarily due to the items mentioned above.

The impact of these changes in deferred tax assets on income tax expense in 2022 and 2021 was partially offset by a decrease in income tax expense due to lower income generated during 2022.

Segment results

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Loss and expense on debt restructure

Other expense, net

Other income (expense), net

Income before income taxes

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Good Sam Services and Plans

Good Sam Services and Plans segment revenue decreased 1.0%, or $1.8 million, to $180.9 million for 2021, from $182.8 million for 2020.

The decrease was primarily attributable to a $7.2 million decrease due to fewer in-person consumer shows held in 2021 due to COVID-19, a $4.8 million decrease primarily from the elimination of low margin extended warranty insurance programs, a $1.4 million decrease from reduced magazine ad sales as a result of combining two magazines into one, and a $0.4 million decrease from reduced ad sales in the annual directory, partially offset by a $6.9 million increase from roadside assistance programs primarily resulting from increased contracts in force, a $3.1 million increase in Good Sam TravelAssist revenue primarily resulting from increased contracts in force, and a $2.0 million increase from Good Sam insurance programs primarily resulting from increased contracts in force.

Good Sam Services and Plans segment income decreased 15.3%, or $13.5 million, to $74.8 million for 2021, from $88.3 million for 2020.

The decrease in gross profit was primarily attributable to an increase in selling, general and administrative expenses of $12.7 million, a $2.9 million decrease in contribution from fewer in-person consumer shows being held during the 2021 period due to COVID-19, a $1.2 million increase in overhead and marketing expenses, a $1.1 million reduction from the annual directory, a $1.0 million reduction from the magazine group, a $0.6 million increase in loss on sale or disposal of assets, and a $0.2 million reduction from other services and plans, partially offset by a $3.2 million increase in contribution from the Good Sam TravelAssist programs, a $2.2 million increase from the Good Sam insurance programs, and an $0.8 million increase from the roadside assistance programs.

Segment income margin net of intersegment revenue elimination increased 741 basis points to 41.4%, primarily due to increased revenue and higher gross margin from the Good Sam TravelAssist and Good Sam insurance products, partially offset by reduced gross margin for the roadside assistance programs and consumer shows.

a $2.4 million increase from the extended vehicle warranty programs primarily resulting from increased contracts in force;

a $2.0 million increase in Good Sam TravelAssist revenue primarily resulting from increased contracts in force;

a $1.6 million increase from the Good Sam Insurance Agency primarily resulting from increased contracts in force;

and an $1.2 million increase from the consumer shows due to no shows produced in 2021 and one show produced in 2022;

partially offset by a $1.2 million reduction from the annual directory;

a $1.1 million reduction from RV financing programs;

and a $0.8 million reduction from other programs.

Good Sam Services and Plans segment income increased primarily due to a $9.5 million increase from the roadside assistance programs resulting from increased contracts in force, favorable updates to assumptions for cancellations, and reduced marketing expenses;

a $3.8 million decrease in selling, general and administrative expenses consisting mostly of a decrease in wages-related expenses;

a $2.4 million increase from the extended warranty insurance programs;

a $2.1 million increase from the Good Sam TravelAssist programs;

a $1.7 million increase from the Good Sam Insurance Agency;

and a $1.1 million increase from consumer shows;

partially offset by a $2.0 million reduction from other services and plans;

a $1.4 million increase in overhead support expenses;

and a $1.1 million reduction from the RV financing programs.

Segment income margin of 47.2% increased 585 basis points, or 14.1%, primarily due to increases from the roadside assistance programs and reduced selling, general and administrative expenses.

RV and Outdoor Retail segment

RV and Outdoor Retail segment revenue increased 27.9%, or $1.5 billion, to $6.8 billion for 2021, from $5.3 billion for 2020.

The increase was primarily driven by a $476.7 million, or 16.8%, increase in new vehicle revenue, a $702.5 million, or 71.1%, increase in used vehicle revenue, a $152.2 million, or 16.0%, increase in products, service and other revenue, a $138.9 million, or 29.3%, increase in finance and insurance, net revenue, and a $3.6 million, or 8.2% increase in Good Sam Club revenue.

RV and Outdoor Retail segment income increased $368.9 million, or 85.8%, to a segment income of $798.8 million for 2021 from $430.0 million for 2020.

The increase was primarily related to increased segment gross profit of $754.0 million primarily due to increased average sales price per vehicle sold, a $9.3 million reduction in long-lived asset impairment, a $5.6 million reduction in floor plan interest expense, a $2.3 million decrease in lease termination expense, and a $2.6 million reduction in loss on sale or disposal of assets, partially offset by a $404.9 million increase in selling, general and administrative expenses.

RV and Outdoor Retail segment margin increased to 11.9% in 2021 from 8.2% in 2020.

RV and Outdoor Retail segment revenue increased primarily due to a $191.6 million, or 11.3%, increase in used vehicle revenue, and a $28.0 million, or 4.6%, increase in finance and insurance, net revenue, partially offset by a $102.2 million, or 9.3%, decrease in products, service and other revenue, a $72.0 million, or 2.2%, decrease in new vehicle revenue, and a $1.4 million, or 2.9%, reduction in Good Sam Club revenue.

RV and Outdoor Retail segment income decreased primarily due to decreased segment gross profit of $206.4 million primarily due to increased average cost per vehicle sold and reduced vehicles sold;

a $34.2 million increase in selling, general and administrative expenses (see discussion of selling, general and administrative expenses above);

a $27.9 million increase in floor plan interest expense;

a $1.2 million increase in long-lived asset impairment;

and a $1.2 million increase in loss on sale or disposal of assets;

partially offset by a $0.6 million decrease in lease termination expense.

RV and Outdoor Retail segment margin decreased 405 basis points to 7.8% primarily due to higher vehicle costs and increased selling, general and administrative expenses.

Corporate and other expenses

Corporate and other expenses decreased $0.1 million, or 0.7%, to $9.7 million for 2021, from $9.8 million for 2020.

Corporate and other expenses increased primarily due to costs relating to the Cybersecurity Incident, which are net of insurance recoveries, and increased other professional fees.

Tax Receivable Agreement Liability adjustment

The Tax Receivable Agreement Liability adjustment for 2021 was an expense of $2.8 million and 2020 was a benefit of $0.1 million, which represented an adjustment for lower enacted state income tax rates in both periods.

Non-GAAP Financial Measures

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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.

These Non-GAAP Financial Measures are also frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry and are used by management to evaluate our operating performance, to evaluate the effectiveness of strategic initiatives and for planning purposes.

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 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.

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, 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 section and in the reconciliation tables below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.

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.

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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 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.

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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 (loss), and net income (loss) margin, respectively:

The following table reconciles EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin to the most directly comparable GAAP financial performance measures:

Fiscal Year Ended

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Subtotal EBITDA

Loss and expense on debt restructure (a)

Long-lived asset impairment (b)

Lease termination (c)

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

Equity-based compensation (e)

Tax Receivable Agreement liability adjustment (f)

Restructuring costs (g)

Long-lived asset impairment (a)

Lease termination (b)

Loss (gain) on sale or disposal of assets, net (c)

Equity-based compensation (d)

Tax Receivable Agreement liability adjustment (e)

Restructuring costs (f)

Loss and expense on debt restructure (g)

Adjusted EBITDA

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Subtotal EBITDA margin

Loss and expense on debt restructure (a)

Long-lived asset impairment (b)

Lease termination (c)

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

Equity-based compensation (e)

Tax Receivable Agreement liability adjustment (f)

Restructuring costs (g)

Long-lived asset impairment (a)

Lease termination (b)

Loss (gain) on sale or disposal of assets, net (c)

Equity-based compensation (d)

Tax Receivable Agreement liability adjustment (e)

Restructuring costs (f)

Loss and expense on debt restructure (g)

Adjusted EBITDA margin

(a) Represents the loss and expense incurred on debt restructure and financing expense, which is comprised of $0.4 million in extinguishment of the original issue discount and $1.0 million in extinguishment of capitalized finance costs related to the Previous Term Loan Facility, and $12.1 million in legal and other expenses related to the New Term Loan Facility in 2021.

(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 See Note 5 – Restructuring and Long-Lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

(c) Represents the loss (gain) 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.

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

See Note 5 – Restructuring and Long-Lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

(d) Represents an adjustment to eliminate (i) losses on the disposal or sale of real estate at closed retail locations in 2020 and 2019 and (ii) the gains and losses on disposal and sales 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 losses and gains on remeasurement of the Tax Receivable Agreement primarily due to changes in our blended statutory income tax rate and the transfer of certain assets from GSS Enterprises LLC (“GSS”) to CW.

(g) Represents restructuring costs relating to our 2019 Strategic Shift.

(b) 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.

See Note 5 – Restructuring and Long-Lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

(c) Represents an adjustment to eliminate (i) losses on the disposal or sale of real estate at closed retail locations in 2020, relating primarily to the 2019 Strategic Shift, and (ii) the gains and losses on disposal and sales of various assets.

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

(e) Represents an adjustment to eliminate the losses and gains on remeasurement of the Tax Receivable Agreement primarily due to changes in our blended statutory income tax rate.

See Note 11 – Income Taxes to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

(f) 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.

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See Note 5 – Restructuring and Long-Lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

(g) Represents the loss and expense incurred on debt restructure and financing expense, which is comprised of $0.4 million in extinguishment of the original issue discount and $1.0 million in extinguishment of capitalized finance costs related to the Previous Term Loan Facility, and $12.1 million in legal and other expenses related to the New Term Loan Facility in 2021.

Adjusted Net Income Attributable to Camping World Holdings, Inc.

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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 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.

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, income tax expense impact from the LLC Conversion, 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.

– 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 redemption, 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.

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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.

– Diluted divided by the weighted-average shares of Class A common stock outstanding, assuming (i) the redemption 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.

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– 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:

– Diluted, Adjusted Earnings Per Share – Basic, and Adjusted Earnings Per Share – Diluted to the most directly comparable GAAP financial performance measure:

Fiscal Year Ended

(In thousands except per share amounts)

Net income (loss) attributable to Camping World Holdings, Inc.

Net income attributable to Camping World Holdings, Inc.

Adjustments related to basic calculation:

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Income tax expense for above adjustment (b)

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

Loss (gain) on sale or disposal of assets (e):

Gross adjustment

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Income tax expense for above adjustment (b)

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

Adjusted net income (loss) attributable to Camping World Holdings, Inc.

Income tax expense impact from LLC Conversion (i)

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

Adjusted net income attributable to Camping World Holdings, Inc.

Adjustments related to diluted calculation:

Reallocation of net income (loss) attributable to non-controlling interests from the dilutive effect of stock options and restricted stock units (j)

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

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

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

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)

Adjusted net income (loss) attributable to Camping World Holdings, Inc.

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

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

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

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

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

Adjusted net income attributable to Camping World Holdings, Inc.

Fiscal Year Ended

(In thousands except per share amounts)

Weighted-average Class A common shares outstanding – basic

Adjustments related to diluted calculation:

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

Dilutive options to purchase Class A common stock (m)

Dilutive restricted stock units (m)

Dilutive redemption of common units in CWGS, LLC for shares of Class A common stock (n)

Dilutive options to purchase Class A common stock (n)

Dilutive restricted stock units (n)

Adjusted weighted average Class A common shares outstanding – diluted

Adjusted earnings (loss) per share - basic

Adjusted earnings (loss) per share - diluted

Fiscal Year Ended

(In thousands except per share amounts)

Anti-dilutive amounts (n):

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

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

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)

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

Adjusted earnings per share - basic

Adjusted earnings per share - diluted

Anti-dilutive amounts (o):

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

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

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

Anti-dilutive redemption of common units in CWGS, LLC for shares of Class A common stock (n)

Reconciliation of per share amounts:

Earnings (loss) per share of Class A common stock — basic

Non-GAAP Adjustments (o)

Adjusted earnings (loss) per share - basic

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

Non-GAAP Adjustments (o)

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

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

Adjusted earnings (loss) per share - diluted

Earnings per share of Class A common stock — basic

Non-GAAP Adjustments (p)

Adjusted earnings per share - basic

Earnings per share of Class A common stock — diluted

Non-GAAP Adjustments (p)

Dilutive redemption of common units in CWGS, LLC for shares of Class A common stock (q)

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

Adjusted earnings per share - diluted

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This assumption uses effective tax rates between 25.0% and 25.5% for the adjustments for 2022, 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.

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

See Note 5 – Restructuring and Long-Lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

(d) Represents the loss (gain) on the termination of operating leases relating primarily to the 2019 Strategic Shift, resulting from lease termination costs and the derecognition of the operating lease assets and liabilities.

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

See Note 5 – Restructuring and Long-Lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

(e) Represents an adjustment to eliminate (i) losses on the disposal or sale of real estate at closed retail locations in 2020 and 2019 and (ii) the gains and losses on disposal and sales of various assets.

(e) Represents an adjustment to eliminate (i) losses on the disposal or sale of real estate at closed retail locations in 2020, relating primarily to the 2019 Strategic Shift, and (ii) the gains and losses on disposal and sales 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.

(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.

See Note 11 – Income Taxes to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

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These costs exclude lease termination costs, which are presented separately (see (d) above).

See Note 5 – Restructuring and Long-lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

(i) Represents the adjustment to net (income) loss attributable to non-controlling interests resulting from the above adjustments that impact the net income of CWGS, LLC.

Restructuring and Long-Lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

(i) For the year ended December 31, 2022, the Company recognized $28.4 million of income tax expense relating to the LLC Conversion.

This income tax expense was primarily from the write-off of deferred tax assets, which was partially offset by the release of valuation allowance.

See Note 11 – Income Taxes to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

(j) Represents the adjustment to net (income) loss 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 49.8%, 49.1% and 55.9% for the years ended December 31, 2022, 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 effective tax rates between 25.0% and 25.5% for the adjustments for 2021, 2020 and 2019, 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

year ended December 31, 2021, this adjustment included the reversal of the $15.2 million benefit from changes in the valuation allowance for CW.

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% for the adjustments for 2021, 2020 and 2019 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 $15.2 million release of valuation allowance during the year ended December 31, 2021 was considered to be reversed and excluded from adjusted net income attributable to Camping World Holdings, Inc.

(k) 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.

(l) Represents the income tax expense effect of the above adjustment for reallocation of net income attributable to non-controlling interests.

This assumption uses effective tax rates between 25.0% and 25.5% for the adjustments for 2022, 2021 and 2020.

(m) Typically represents adjustments to reflect the income tax benefit of losses of consolidated C-Corps that under the Company’s equity structure, prior to the LLC Conversion, could not be used against the income of other consolidated subsidiaries of CWGS, LLC.

However, for the year ended December 31, 2021, this adjustment included the reversal of $15.2 million benefit from changes in the valuation allowance for CW.

Subsequent to the redemption of all common units in CWGS, LLC and prior to the LLC Conversion, the Company believes certain actions could be taken such that the C-Corps’ 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% for the adjustments for 2022, 2021 and 2020 for the losses experienced by the consolidated C-Corps for which valuation allowances have been recorded.

No assumed release of valuation allowance established for previous periods were included in these amounts.

The $15.2 million release of valuation allowance during the year ended December 31, 2021 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 years ended December 31, 2020 and 2019 produces an anti-dilutive result;

therefore, adjusted earnings per share – 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.

Beginning in 2023, these C-Corp losses will offset income of other consolidated subsidiaries as a result of LLC Conversion at or around December 31, 2022.

See Note 11 – Income Taxes to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for additional information.

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

(o) The below amounts have not been considered in our adjusted earnings per share – diluted amounts as the effect of these items are anti-dilutive.

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

(q) 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.

As discussed under “Our Corporate Structure Impact on Income Taxes” in Part II, Item 7 of this Form 10-K, 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;

● to evaluate our capacity to fund capital expenditures and expand our business.

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 consolidated financial statements included elsewhere in this Form 10-K 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;

● 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 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.

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.

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 redemption 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 (o) above).

Liquidity and Capital Resources

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These cash requirements have historically been met through cash provided by operating activities, cash and cash equivalents, proceeds from registered offerings of our Class A common stock, borrowings under our Senior Secured Credit Facilities (as defined below), borrowings under our Floor Plan Facility (as defined below), and borrowings under our Real Estate Facilities (as defined below).

As a public company, our additional liquidity needs include public company costs, payment of regular and special cash dividends, any exercise of the redemption right by the Continuing Equity Owners from time to time (should we elect to exchange common units for a cash payment), our stock repurchase program as described below, payments under the Tax Receivable Agreement, and state and federal taxes to the extent not reduced as a result of the Tax Receivable Agreement.

As a public company, our additional liquidity needs include public company costs, payment of regular and special cash dividends, any exercise of the redemption right by the Continuing Equity Owners from time to time (should we elect to redeem common units for a cash payment), our stock repurchase program as described below, payments under the Tax Receivable Agreement, and state and federal taxes to the extent not reduced

as a result of the Tax Receivable Agreement.

The Continuing Equity Owners may exercise such redemption right for as long as their common units remain outstanding.

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Stock Repurchase Program

In October 2020, our board of directors authorized a stock repurchase program for the repurchase of up to $100.0 million of our Class A common stock, expiring on October 31, 2022.

In August 2021, our board of directors authorized an increase to the stock repurchase program for the repurchase of up to an additional $125.0 million of our Class A common stock and an extension of the stock repurchase program to expire on August 31, 2023.

In January 2022, our board of directors authorized an increase to the stock repurchase program to allow for the repurchase of an additional $152.7 million of our Class A common stock and an extension of the stock repurchase program to expire on December 31, 2025.

In October 2020, our Board of Directors initially authorized a stock repurchase program for the repurchase of up to $100.0 million of our Class A common stock, expiring on October 31, 2022.

In August 2021 and January 2022, our Board of Directors authorized increases to the stock repurchase program for the repurchase of up to an additional $125.0 million and $152.7 million, respectively, of our Class A common stock.

Following these extensions, the stock repurchase program now expires on December 31, 2025.

Repurchases under the program are subject to any applicable limitations on the availability of funds to be distributed to the Company by CWGS, LLC to fund the repurchase and may be made in the open market, in privately negotiated transactions or otherwise, with the amount and timing of repurchases to be determined at our discretion, depending on market conditions and corporate needs.

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We expect to fund the repurchases using cash on hand.

During the year ended December 31, 2021 and 2020, we repurchased 3,988,881 and 811,223 shares of our Class A common stock, respectively, for $156.3 million and $21.5 million, respectively, including broker commissions.

During the years ended December 31, 2022 and 2021, we repurchased 2,592,524 and 3,988,881 shares of our Class A common stock, respectively, for $79.8 million and $156.3 million, respectively, including broker commissions.

As of December 31, 2022, $120.2 million was available under the stock repurchase program to repurchase additional shares of our Class A common stock.

Following the January 2022 increase in the stock repurchase program, approximately $200 million remained available for future repurchases.

For each of the three months ended September 30, 2021 and December 31, 2021, we paid a regular quarterly cash dividends on our Class A common stock of $0.50 per share, which was funded with a $0.15 per common unit cash distribution from CWGS, LLC and the remainder was funded with all or a portion of the Excess Tax Distribution (as defined under “Dividend Policy” included in Part II, Item 5 of this Form 10-K).

On August 23, 2021, our board of directors approved the increase of the portion of the quarterly dividend funded by these quarterly cash distributions from CWGS, LLC to $0.15 per share of Class A common stock from $0.10 per share and increased the quarterly cash dividend relating to all or a portion of the Excess Tax Distribution to $0.35 per share of Class A common stock from $0.15 per share.

Between July 20, 2020 and April 29, 2021, the portion of the quarterly cash dividend funded by these quarterly cash distributions from CWGS, LLC had previously been raised in several incremental steps to $0.10 per share from $0.08 per share and the quarterly cash dividend relating to all or a portion of the Excess Tax Distribution had previously been raised in several incremental steps to $0.15 per share from $0.0732 per share.

On February 18, 2022, our board of directors approved the increase of the portion of the quarterly dividend relating to all or a portion of the Excess Tax Distribution to $0.475 per share of Class A common stock from $0.35 per share for an increase of the total quarterly dividend to $0.625 per share from $0.50 per share beginning in March 2022.

On February 18, 2022, our Board of Directors approved the increase of the portion of the quarterly cash dividend relating to all or a portion of the Excess Tax Distribution (as defined under “Dividend Policy” included in Part II, Item 5 of this Form 10-K) to $0.475 per share of Class A common stock from $0.35 per share, which increased the total quarterly cash dividend to $0.625 per share of Class A common stock from $0.50 per share beginning in March 2022.

For each of the four quarters of 2022, we paid a regular quarterly cash dividend on our Class A common stock of $0.625 per share, which was funded with a $0.15 per common unit cash distribution from CWGS, LLC and the remainder funded with all or a portion of the Excess Tax Distribution.

Prior to February 18, 2022, our quarterly cash dividend on our Class A common stock was raised in several incremental steps from our first cash dividend of $0.08 per share on December 20, 2016.

CWGS, LLC is required to make cash distributions in accordance with the CWGS LLC Agreement in an amount sufficient for us to pay any expenses incurred by us in connection with the regular quarterly cash dividend, along with any of our other operating expenses and other obligations.

Our dividend policy has certain risks and limitations, particularly with respect to liquidity, and we may not pay dividends according to our policy, or at all.

As described above, CWGS, LLC intends to make a regular quarterly cash distribution to its common unit holders, including us, and we intend to use all of the proceeds from such distribution on our common units to pay a regular quarterly cash dividend on our Class A common stock, subject to our discretion as the sole managing member of CWGS, LLC and the discretion of our board of directors.

Additionally, as described above, we currently intend to pay a portion of our regular quarterly cash dividend with all or a portion of the Excess Tax Distribution (as defined under “Dividend Policy” included in Part

II, Item 5 of this Form 10-K) to the holders of our Class A common stock subject to the discretion of our board of directors as described under “Dividend Policy” included in Part II, Item 5 of this Form 10-K.

Accordingly, CWGS, LLC intends to make a regular quarterly cash distribution to its common unit holders, including us, and we intend to use all of the proceeds from such distribution on our common units to pay a regular quarterly cash dividend on our Class A common stock, subject to our discretion as the sole managing member of CWGS, LLC and the discretion of our Board of Directors.

Additionally, as described above, we currently intend to pay a portion of our regular quarterly cash dividend with all or a portion of the Excess Tax Distribution to the holders of our Class A common stock subject to the discretion of our Board of Directors.

The LLC Conversion is expected to

decrease future Excess Tax Distributions by allowing losses at those subsidiaries to offset taxable income allocated to the members of CWGS, LLC instead of the losses being confined within embedded C-Corps (see Note 11 – Income Taxes to our consolidated financial statements included in Part II, Item 8 of this Form 10-K).

As a result of the LLC Conversion which will generate significant capital losses in 2023 that will be allocated to each member of CWGS, LLC, it is expected that we will not receive any Excess Tax Distribution in 2023.

These significant capital losses relate to the LLC Conversion transaction itself and not the ongoing benefits that we expect from offsetting losses generated by these converted subsidiaries against income from other subsidiaries of CWGS, LLC.

However, even with no Excess Tax Distribution in 2023, we expect to have the ability to continue to pay the regular quarterly cash dividend on our Class A common stock of $0.625 per share during 2023, which is subject to the discretion of our Board of Directors.

Our dividend policy has certain risks and limitations particularly with respect to liquidity, and we may not pay future dividends according to our policy, or at all.

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Acquisitions and Capital Expenditures

During the year ended December 31, 2021, we acquired 12 dealerships having an aggregate value of $100.1 million (see Note 15 – Acquisitions to our consolidated financial statements included in Part II, Item 8 of this Form 10-K) and purchased $129.2 million of real property.

Additionally, through 2022, our expansion of dealerships and Preowned Mega-Centers through acquisition and construction is expected to cost between $250.0 million and $350.0 million for a combination of business acquisitions and capital expenditures relating to land, buildings, and improvements.

We announced a number of initiatives heading into 2022, including an online RV sales process, service bay expansion, the addition of design centers to our existing store footprint, and continued expansion through dealership acquisitions.

We had also announced a number of land acquisitions in anticipation of constructing new stores in 2022.

During the year ended December 31, 2022, the RV and Outdoor Retail segment acquired the assets of various RV dealerships and one RV service center comprised of 11 locations for an aggregate purchase price of approximately $153.7 million (see Note 15 – Acquisitions to our consolidated financial statements included in Part II, Item 8 of this Form 10-K) and purchased real property of $55.7 million, of which $19.7 million was from parties related to the sellers of the businesses.

Also, in 2022, the Good Sam Services and Plans segment acquired the assets of an outdoor publication for $3.4 million.

We have plans to slow dealership expansion in 2023.

We have seven greenfield locations at or near construction completion which we may delay opening until market conditions improve.

At this time, we expect our acquisition spend may be up to $25.0 million in 2023, but we may increase this range as other acquisition opportunities arise.

Factors that could impact the quantity of future locations or the cost to acquire or open those locations include, but are not limited to, our ability to locate potential acquisition targets or greenfield locations in a geographic area and at a cost that meets our success criteria;

continued strong cash flow generation from our operations to fund these acquisitions and new locations;

and availability of financing on our Floor Plan Facility.

and availability of financing under our Floor Plan Facility.

We expect the additional cash requirements of the other announced initiatives to be immaterial.

Tax Receivable Agreement Liability

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2019 Strategic Shift

During the year ended December 31, 2021, we incurred long-lived asset impairment charges of $1.4 million related to the 2019 Strategic Shift.

We expect that none of the foregoing charges will result in future cash expenditures.

Additionally, in connection with the 2019 Strategic Shift, we have incurred or expect to incur costs relating to one-time employee termination benefits of $1.2 million, lease termination costs of between $18.0 million and $34.0 million, incremental inventory reserve charges of $57.4 million, and other associated costs of $35.0 million to $42.0 million.

We expect that approximately $3.2 million to $10.2 million of other associated costs and $4.5 million to $20.5 million of lease termination costs will result in future cash expenditures.

In connection with the 2019 Strategic Shift during the year ended December 31, 2022, we have paid or otherwise settled $6.1 million of lease termination costs and $7.1 million of other associated costs, which excludes gains from the derecognition of the related operating lease assets and liabilities for these terminated leases.

We expect that approximately $2.8 million to $6.3 million of other associated costs and $1.6 million to $9.6 million of lease termination costs will result in future cash expenditures during 2023.

For a discussion of the 2019 Strategic Shift, see Note 5 ─ Restructuring and Long-Lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

There has been significant uncertainty surrounding the impact of the COVID-19 pandemic on our results of operations and cash flows.

As a result, we initially took proactive steps to increase cash available on-hand, including, but not limited to, reducing cash expenditures, including wage reductions through a combination of temporary salary reductions, layoffs, and furloughs;

negotiating payment deferrals with lessors;

reducing marketing and promotional expenses;

and delaying strategic capital expenditures.

As demand for our products accelerated and our cash position improved, most of the temporary salary reductions ended in May 2020.

We are continually monitoring the COVID-19 pandemic and its potential impacts on our business.

If stay-at-home and shelter-in-place restrictions are put back into place, we may choose to re-implement cost reduction measures.

Other Cash Requirements or Commitments

Substantially all of our new RV inventory and certain of our used RV inventory is financed under our Floor Plan Facility (defined below).

See “Description of Senior Secured Credit Facilities, Floor Plan Facility and Real Estate Facilities” for a discussion of the cash requirements related to our indebtedness.

Substantially all of our new RV inventory and, at times, certain of our used RV inventory is financed under our Floor Plan Facility (defined in Note 4 – Inventories and Floor Plan Payables to our consolidated financial statements included in Part II, Item 8 of this Form 10-K).

See “Description of Credit Facilities, Other Long-Term Debt, and Finance Lease Arrangements” for a summary of the cash requirements related to our indebtedness.

See Note 10 ─ Lease Obligations to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for a discussion of cash requirements relating to operating and finance lease obligations.

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Sources of Liquidity and Capital

We believe that our sources of liquidity and capital including cash provided by operating activities, additional borrowings under our Floor Plan Facility, and borrowings under our Revolving Credit Facility will be sufficient to finance our continued operations, growth strategy, including the opening of any additional retail locations, regular and special quarterly cash dividends (as described above), required payments for our obligations under the Tax Receivable Agreement, and additional expenses we expect to incur for at least the next twelve months.

However, we cannot assure you that our cash provided by operating activities, cash and cash equivalents or cash available under our New Revolving Credit Facility or our Floor Plan Facility, including the potential additional borrowings noted above, will be sufficient to meet our future needs.

If we are unable to generate sufficient cash flows from operations in the future, including as a result of the impact of the COVID-19 pandemic on our business and if availability under our New Revolving Credit Facility or our Floor Plan Facility is not sufficient, we may have to obtain additional financing.

We believe that our sources of liquidity and capital including cash provided by operating activities and borrowings under our various credit facilities, other long-term debt, and finance lease arrangements (see Liquidity and Capital Resources — Description of Credit Facilities, Other Long-Term Debt, and Finance Lease Arrangements in Part II, Item 7 of this Form 10-K), including additional borrowing capacity where applicable, will be sufficient to finance our continued operations, growth strategy, including the opening of any additional retail locations, regular and special quarterly cash dividends (as described above), required payments for our obligations under the Tax Receivable Agreement, and additional expenses we expect to incur for at least the next twelve months.

However, we cannot assure you that our cash provided by operating activities, cash and cash equivalents or cash available under our Revolving Credit Facility, our Floor Plan Facility, and our Real Estate Facilities, will be sufficient to meet our future needs.

If we are unable to generate sufficient cash flows from operations in the future and if availability under our Revolving Credit Facility, our Floor Plan Facility, and our Real Estate Facilities is not sufficient, we may have to obtain additional financing.

If we obtain additional capital by issuing equity, the interests of our existing stockholders will be diluted.

If we incur additional indebtedness, that indebtedness may impose significant financial and other covenants that may significantly restrict our operations.

We cannot assure you that we could obtain refinancing or additional financing on favorable terms or at all, including the expected additional borrowings noted above and particularly in light of the economic uncertainty due to the COVID-19 pandemic.

See “Risk Factors — Risks Related to our Business — Our ability to operate and expand our business and to respond to changing business and economic conditions will depend on the availability of adequate capital” included in Part I, Item 1A of this Form 10-K.

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Our Floor Plan Facility includes a flooring line aggregate interest reduction (“FLAIR”) offset account that allows us to transfer cash as an offset to the payables under the Floor Plan Facility.

The FLAIR offset account at December 31, 2021 was $92.1 million, all

of which could have been withdrawn while remaining in compliance with the financial covenants of the Floor Plan Facility.

At December 31, 2022, and 2021, the FLAIR offset account was $217.7 million and $92.1 million, respectively, of which $159.1 million and $92.1 million, respectively, could have been withdrawn while remaining in compliance with the financial covenants of the Floor Plan Facility.

We have experienced, and expect to continue to experience, variability in revenue, net income, and cash flows as a result of annual seasonality in our business.

Because RVs are used primarily by vacationers and campers, demand for services, protection plans, products, and resources generally declines during the winter season, while sales and profits are generally highest during the spring and summer months.

In addition, unusually severe weather conditions in some geographic areas may impact demand.

We generate a disproportionately higher amount of our annual revenue in our second and third fiscal quarters, which include the spring and summer months.

We incur additional expenses in the second and third fiscal quarters due to higher purchase volumes, increased staffing in our retail locations and program costs.

If, for any reason, we miscalculate the demand for our products or our product mix during the second and third fiscal quarters, our sales in these quarters could decline, resulting in higher labor costs as a percentage of gross profit, lower margins and excess inventory, which could cause our annual results of operations to suffer and our stock price to decline.

Additionally, SG&A expenses as a percentage of gross profit tend to be higher in the first and fourth quarters due to the timing of acquisitions and the seasonality of our business.

We prefer to acquire new retail locations in the first and fourth quarters of each year in order to provide time for the location to be re-modeled and to ramp up operations ahead of the spring and summer months.

The timing of our acquisitions in the first and fourth quarters, coupled with generally lower revenue in these quarters has historically resulted in SG&A expenses as a percentage of gross profit being higher in these quarters.

Due to our seasonality, the possible adverse impact from other risks associated with our business, including atypical weather, consumer spending levels and general business conditions, is potentially greater if any such risks occur during our peak sales seasons.

See “Risk Factors — Risks Related to our Business — Our business is seasonal and this leads to fluctuations in sales and revenues” included in Part I, Item 1A of this Form 10-K.

See Note 1 ─ Summary of Significant Accounting Policies — Seasonality to our consolidated financial statements included in Part II, Item 8 of this Form 10-K and “Risk Factors — Risks Related to our Business — Our business is seasonal and this leads to fluctuations in revenues” included in Part I, Item 1A of this Form 10-K.

The following table shows summary cash flow information for the years ended December 31, 2022 and 2021, respectively:

Year Ended December 31,

(In thousands)

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Net cash used in investing activities

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Operating activities.

Our cash flows from operating activities are primarily collections from contracts in transit and customers following the sale of new and used vehicles, as well as from the sale of retail products, RV service and Good Sam services and plans.

Contracts in transit represent amounts due from third-party lenders from whom pre-arranged agreements have been determined, and to whom the retail installment sales contracts have been assigned.

Our primary uses of cash from operating activities are repayments of vehicle floor plan payables, payments to retail product suppliers, personnel-related expenditures, payments related to leased property, advertising, and various consumer services program costs.

Net cash provided by operating activities was $154.0 million for the year ended December 31, 2021, a decrease of $593.7 million from $747.7 million of net cash provided by operating activities in the year ended December 31, 2020.

The decrease was primarily due to a $239.3 million decrease in inventory in 2020 coupled with a $629.8 million increase in inventory in 2021, a $43.8 million reduction in the CARES Act deferral of payroll taxes, a $26.0 decrease in accounts receivable, and a $12.5 million reduction in deferred income taxes, partially offset by a $297.9 million increase in net income, a $27.3 million increase in equity-based

compensation, $12.8 million of increased accounts payable and other accrued expenses, a $10.2 million increase in deferred revenue and $9.5 million of other cash uses.

Net cash provided by operating activities was $189.8 million for the year ended December 31, 2022, an increase of $35.8 million from $154.0 million of net cash provided by operating activities for the year ended December 31, 2021.

The increase was primarily due to a $375.5 million decrease in the working capital adjustment for inventory, a $49.2 million increase in deferred income taxes, a $24.7 million decrease in the working capital adjustment for accounts receivable and contracts in transit, and a $13.9 million increase in depreciation and amortization, partially offset by a $291.0 million reduction in net income, a $95.0 million decrease in the working capital adjustment for accounts payable and other accrued expenses, a $13.3 million decrease in the working capital adjustment for deferred revenue, a $14.1 million decrease in equity-based compensation, and a $14.1 million reduction in other operating activities.

Investing activities.

Our investment in business activities primarily consists of expanding our operations through organic growth and the acquisition of retail locations.

Substantially all of our new retail location acquisitions and capital expenditures have been financed using cash provided by operating activities and borrowings under our Senior Secured Credit Facilities, as applicable.

Our capital expenditures consist primarily of investing in acquired and greenfield retail and RV dealership locations, existing retail locations, information technology, hardware and software.

The expected capital expenditures relating to new dealerships and real estate purchases through December 31, 2022 are discussed above.

As of December 31, 2021, we had $4.9 million in capital expenditures commitments.

Substantially all of our new retail locations and capital expenditures have been financed using cash provided by operating activities and borrowings under our various credit facilities, other long-term debt, and finance lease arrangements, as applicable (see Liquidity and Capital Resources — Description of Credit Facilities, Other Long-Term Debt, and Finance Lease Arrangements in Item 7 of Part II of this Form 10-K).

The table below summarizes our capital expenditures for the years ended December 31, 2022 and 2021, respectively:

Year Ended December 31,

(In thousands)

IT hardware and software

Greenfield and acquired retail locations

Greenfield and acquired dealership locations

Existing retail locations

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Total capital expenditures

Our capital expenditures consist primarily of investing in acquired and greenfield retail and RV dealership locations, existing retail locations, information technology, hardware and software.

The expected capital expenditures relating to new dealerships and real estate purchases for the year ending December 31, 2023 are discussed above.

As of December 31, 2022, we had entered into contracts for construction of new dealership buildings for an aggregate future commitment of $8.8 million.

There were no other material commitments for capital expenditure.

Net cash used in investing activities was $422.5 million for the year ended December 31, 2022.

The $355.8 million of cash used in investing activities was comprised of $129.2 million for the purchase of real property, $118.7 million of capital expenditures primarily related to retail locations, $100.1 million for purchases of businesses, $8.0 million for purchases of other investments and $5.7 million for purchases of intangibles, partially offset by proceeds of $3.6 million from the sale of real property, and $2.2 million from the sale of property and equipment.

The $422.5 million of cash used in investing activities was comprised of $154.9 million of capital expenditures primarily related to retail locations, $217.0 million for the purchase of RV and outdoor retail businesses and a publication business, $55.7 million for the purchase of real property, $3.0 million for purchase of other investments, and $0.9 million for the purchase of intangible assets, partially offset by proceeds from the sale of real property of $7.4 million and proceeds of $1.6 million from the sale of property and equipment.

See Note 15 – Acquisitions to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Net cash used in investing activities was $355.8 million for the year ended December 31, 2021.

The $125.9 million of cash used in investing activities was comprised of $53.1 million for the purchase of real property, $47.6 million for the purchase of RV and Outdoor Retail businesses, $31.8 million of capital expenditures primarily related to retail locations, $2.5 million for investment in businesses, and $0.2 million for the purchase of intangible assets, partially offset by $7.5 million from the sale of real property, and proceeds of $1.8 million from the sale of property and equipment.

The $355.8 million of cash used in investing activities was comprised of $129.2 million for the purchase of real property, $118.7 million of capital expenditures primarily related to retail locations, $100.1 million for purchases of RV and outdoor retail businesses, $8.0 million for purchases of other investments and $5.7 million for purchases of intangible assets, partially offset by proceeds of $3.6 million from the sale of real property, and $2.2 million from the sale of property and equipment.

See Note 15 – Acquisitions to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Financing activities.

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Our net cash provided by financing activities was $ 95.6 million for the year ended December 3 1 , 2022.

The $ 303.0 million of cash provided by financing activities was primarily due to $ 487.9 million of net proceeds from borrowings under the Floor Plan Facility , $430.7 million of proceeds from long-term debt, and $4.1 million of proceeds from exercise of stock options, partially offset by $193.7 million of member distributions, $177.9 million of payments on long-term debt, $156.3 million for the repurchase of Class A common stock, $67.2 million of dividends paid on Class A common stock, $12.1 million of RSU shares withheld for tax, $7.7 million stock award shares withheld for tax, $2.9 million for finance lease payments, and $1.9 million of debt issuance costs.

Our net cash used in financing activities was $603.2 million for the year ended December 31, 2020.

The $603.2 million of cash used in financing activities was primarily due to $324.5 million of payments under the Floor Plan Facility, $137.0 million of distributions to CWGS, LLC common unit holders, $61.0 million of dividends paid on Class A common stock, $39.1 million of payments on long-term debt, $21.5 million for repurchases of Class A common stock to treasury stock, $20.0 million of payments on credit facilities, and $4.7 million of payments related to RSU shares withheld for taxes, partially offset by proceeds from exercise of stock options of $4.6 million.

Description of Senior Secured Credit Facilities, Floor Plan Facility, Real Estate Facilities, and Other Long-Term Debt

As of December 31, 2021 and 2020, we had outstanding debt in the form of our Senior Secured Credit Facilities (as defined below), our Floor Plan Facility (as defined below), our Real Estate Facilities (as defined below), and other long-term debt.

The $ 95.6 million of cash provided by financing activities was primarily due to $ 314.1 million of net proceeds from borrowings under the Floor Plan Facility (as defined below), $127.8 million of proceeds from long-term debt under our Real Estate Facilities (as defined below), $28.0 million of proceeds from a sale-leaseback arrangement, $6.0 million of proceeds from landlord funded construction on finance leases, and $0.5 million of proceeds from exercise of stock options, partially offset by $163.0 million of member distributions, $105.4 million of dividends paid on Class A common stock, $79.8 million for the repurchase of Class A common stock, $ 12.3 million of payments on long-term debt, $ 11.1 million of withholding taxes paid upon the vesting of restricted stock units (“RSUs”), $6.0 million for finance lease payments, and $3.2 million of debt issuance costs.

Our net cash provided by financing activities was $ 303.0 million for the year ended December 31, 2021 .

The $ 303.0 million of cash provided by financing activities was primarily due to $ 487.9 million of net proceeds from borrowings under the Floor Plan Facility , $430.7 million of proceeds from long-term debt, and $4.1 million of proceeds from exercise of stock options, partially offset by $193.7 million of member distributions, $177.9 million of payments on long-term debt, $156.3 million for the repurchase of Class A common stock, $67.2 million of dividends paid on Class A common stock, $12.1 million of withholding taxes paid upon vesting of RSUs, $7.7 million stock award shares withheld for tax, $2.9 million for finance lease payments, and $1.9 million of debt issuance costs.

Description of Credit Facilities, Other Long-Term Debt, and Finance Lease Arrangements

As of December 31, 202 2 and 202 1 , we had outstanding debt in the form of our Senior Secured Credit Facilit ies (as defined below), our Floor Plan Facility (as defined below), our Real Estate Facilities (as defined below), other long-term debt , and finance lease obligations .

We may from time to time seek to refinance, retire or exchange our outstanding debt.

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For additional information regarding our interest rate risk and interest rate hedging instruments, see “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of this Form 10-K.

The following table shows a summary of the outstanding balances, current portion, and remaining available borrowings under our credit facilities , other long-term debt and finance lease arrangements at December 31, 2022 :

(In thousands)

Floor Plan Facility:

Notes payable - floor plan

Revolving line of credit

Senior Secured Credit Facilities:

As of December 31, 2021 and 2020, CWGS Group, LLC (the “Borrower”), a wholly-owned subsidiary of CWGS, LLC, was party to separate credit agreements (the “New Credit Agreement” as of December 31, 2021 and, as amended from time to time, the “Previous Credit Agreement” as of December 31, 2020) for senior secured credit facilities (the “New Senior Secured Credit Facilities” as of December 31, 2021, the “Previous Senior Secured Credit Facilities” as of December 31, 2020, and collectively the “Senior Secured Credit Facilities”).

The New Senior Secured Credit Facilities consist of a $1.400 billion term loan facility (the “New Term Loan Facility”) and a $65.0 million revolving credit facility (the “New Revolving Credit Facility”).

The Previous Senior Secured Credit Facilities consisted of a $1.195 billion term loan facility (the “Previous Term Loan Facility”) and a $35.0 million revolving credit facility (the “Previous Revolving Credit Facility”).

In June 2021, concurrently with the closing of the New Credit Agreement, we replaced the Previous Senior Secured Credit Facilities with the full amount available under the New Term Loan Facility and paying an additional $61.4 million from cash on hand, resulting in an overall reduction of outstanding principal of $38.6 million.

For this New Credit Agreement, approximately 85% of the principal balance of the Previous Term Loan Facility was considered a debt modification when replaced with the New Term Loan Facility and, as such, this modified portion was not considered a financing cash outflow or inflow.

In December 2021, the Borrower entered into an amendment to the New Credit Agreement to borrow an additional $300.0 million on the New Term Loan Facility.

The New Term Loan Facility requires mandatory principal payments in equal quarterly installments of $2.8 million, which commenced in June 2021, and, as a result of the additional $300.0 million of borrowings in December 2021, was revised to equal mandatory quarterly installments of $3.5 million.

The New Revolving Credit Facility matures in June 2026, and the New Term Loan Facility matures in June 2028.

As of December 31, 2021, the average interest rate on the New Term Loan Facility was 3.39%.

The Credit Agreement for our New Senior Secured Credit Facilities requires the “Borrower” and its subsidiaries to comply on a quarterly basis with a maximum Total Net Leverage Ratio (as defined in the New Credit Agreement), which covenant is in effect only if, as of the end of each calendar quarter, the aggregate amount of borrowings under the revolving credit facility (including swingline loans), letters of credit and unreimbursed letter of credit disbursements outstanding at such time is greater than 35% of the total commitment on the New Revolving Credit Facility (excluding (i) up to $15.0 million attributable to any outstanding undrawn letters of credit and (ii) any cash collateralized or backstopped letters of credit), as defined in the New Credit Agreement.

As of December 31, 2021, we were not subject to this covenant as borrowings under the New Revolving Credit Facility did not exceed the 35% threshold.

To the extent that we are unable to comply with the maximum Total Net Leverage Ratio in the future, we would be unable to borrow under the Revolving Credit Facility and may need to seek alternative sources of financing in order to operate and finance our business as we deem appropriate.

Our borrowing capacity under the New Revolving Credit Facility at December 31, 2021 was limited to $60.1 million of borrowings, with no borrowings outstanding and $4.9 million subject to outstanding letters of credit.

At December 31, 2021, we would have met this covenant if we had exceeded the 35% threshold.

We were in compliance with all applicable debt covenants at December 31, 2021 and 2020.

Additionally, the Borrower is required to prepay the term loan borrowings in an aggregate amount up to 50% of excess cash flow, as defined in the New Credit Agreement, for such fiscal year depending on the Total Net Leverage Ratio beginning with the year ended December 31, 2022.

We are not subject to an additional excess cash flow payment relating to 2021 under the New Term Loan Facility and we were not required to make an additional excess cash flow payment relating to 2020 under the Previous Term Loan Facility.

See Note 9 — Long-Term Debt to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for a further discussion of the terms of the Senior Secured Credit Facilities.

Term Loan Facility

Revolving Credit Facility

Real Estate Facilities

Other long-term debt

Finance lease obligations

(1) The unencumbered borrowing capacity for the Floor Plan Facility represents the additional borrowing capacity less any accounts payable for sold inventory and less any purchase commitments.

Additional borrowings are subject to the vehicle collateral requirements under the Floor Plan Facility.

(2) The revolving line of credit borrowings are subject to a borrowing base calculation but were not limited as of December 31, 2022 .

(3) The Revolving Credit Facility remaining available balance was reduced by outstanding undrawn letters of credit.

The Credit Agreement requires compliance with a Total Net Leverage Ratio covenant when borrowings on the Revolving Credit Facility (excluding certain amounts relating to letters of credit) is over a 35%, or $22.8 million, threshold.

(4) Additional borrowings on the Real Estate Facilities are subject to a debt service coverage ratio covenant and to the property collateral requirements under the Real Estate Facilities.

Floor Plan Facility

In September 2021, FreedomRoads, LLC (“FR”) entered into the Eighth Amended and Restated Credit Agreement (“Post-Amendment Floor Plan Facility”) that amended the Seventh Amended and Restated Credit Agreement (“Pre-Amendment Floor Plan Facility” and collectively the “Floor Plan Facility”) that was previously entered into in December 2017.

The Post-Amendment Floor Plan Facility allows FR to borrow (a) up to $1.70 billion of floor plan notes payable, an increase from $1.38 billion under the Pre-Amendment Floor Plan Facility, (b) up to $30.0 million under a letter of credit facility, an increase from $15.0 million under the Pre-Amendment Floor Plan Facility, and (c) up to a maximum amount outstanding of $70.0 million under the revolving line of credit, an increase from $42.0 million under the Pre-Amendment Floor Plan Facility.

The Post-Amendment Floor Plan Facility removes the $3.0 million quarterly reduction in the maximum amount outstanding under the revolving line of credit under the Pre-Amendment Floor Plan Facility.

The Post-Amendment Floor Plan Facility also includes an accordion feature allowing FR, at its option, to increase the aggregate amount of the floor plan notes payable in $50 million increments up to a maximum amount of $200 million.

The lenders under the Post-Amendment Floor Plan Facility are not under any obligation to provide commitments in respect of any such increase.

In addition, the maturity of the Post-Amendment Floor Plan Facility was extended to September 2026 from March 2023 under the Pre-Amendment Floor Plan Facility.

The Post-Amendment Floor Plan Facility may continue to be used to finance (i) up to 100% of our new RV inventory, and (ii) various percentages of our used RV inventory, as determined by reference to the most recently published National Automobile Dealers Association RV Industry Appraisal Guide.

Additionally, we may borrow, repay and reborrow under the revolving line of credit for general corporate purposes.

As of December 31, 2022 and 2021, FreedomRoads, LLC (“FR”) maintained floor plan financing through the Eighth Amended and Restated Credit Agreement (“Floor Plan Facility”) entered into in September 2021, which amended the Seventh Amended and Restated Credit Agreement that was previously entered into in December 2017.

The Floor Plan Facility at December 31, 2022 allowed FR to borrow (a) up to $1.70 billion under a floor plan facility, (b) up to $30.0 million under a letter of credit facility and (c) up to a maximum amount outstanding of $70.0 million under the revolving line of credit.

The Floor Plan Facility also includes an accordion feature allowing FR, at its option, to request to increase the aggregate amount of the floor plan notes payable in $50 million increments up to a maximum amount of $200 million.

The lenders under the Floor Plan Facility are not under any obligation to provide commitments in respect of any such increase.

The maturity date of the Floor Plan Facility is September 30, 2026.

As of December 31, 2022 and 2021, the applicable interest rate for the floor plan notes payable under the Floor Plan Facility was 6.01% and 1.96%, respectively.

Effective October 1, 2021 under the Post-Amendment Floor Plan Facility, at the Company’s option, the floor plan notes payable, and borrowings for letters of credit, in each case, under the Post-Amendment Floor Plan Facility bear interest at a rate per annum equal to the floating Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus the applicable rate of 1.90% to 2.50% determined based on FR’s consolidated current ratio, or, the base rate plus the applicable rate of 0.40% to 1.00% determined based on FR’s consolidated current ratio.

The one-month BSBY rate was 0.06% as of December 31, 2021.

Prior to October 1, 2021 under the Pre-Amendment Floor Plan Facility, the applicable borrowing rate margin on LIBOR and base rate loans ranges from 2.05% to 2.50% and 0.55% and 1.00%, respectively, based on the consolidated current ratio at FR and the borrowings under the floor plan credit agreement bore interest at one-month LIBOR plus 2.05% as of December 31, 2020.

LIBOR was 0.15% as of December 31, 2020.

As of December 31, 2021 and 2020, the applicable interest rate for revolving line of credit borrowings under the Floor Plan Facility was 2.31% and 2.55%.

Effective October 1, 2021 under the Post-Amendment Floor Plan Facility, revolving line of credit borrowings bear interest at a rate per annum equal to, at the Company’s option, either:

Under the Floor Plan Facility, at our option, the floor plan notes payable, and borrowings for letters of credit, in each case, bear interest at a rate per annum equal to (a) the floating Bloomberg Short-Term Bank Yield Index rate (“BSBY”) plus the applicable rate of 1.90% to 2.50% determined based on FR’s consolidated current ratio, or, (b) the base rate (as described below) plus the applicable rate of 0.40% to 1.00% determined based on FR’s consolidated current ratio.

As of December 31, 2022 and 2021, the applicable interest rate for revolving line of credit borrowings under the Floor Plan Facility was 6.21% and 2.31%, respectively.

Under the Floor Plan Facility, revolving line of credit borrowings bear interest at a rate per annum equal to, at our option, either:

(a) a floating BSBY rate, plus 2.25%, in the case of floating BSBY rate loans, or (b) a base rate determined by reference to the greatest of:

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and (iii) the floating BSBY rate plus 1.75%, plus 0.75%, in the case of base rate loans.

Additionally, under the Post-Amendment Floor Plan Facility, the revolving line of credit borrowings are limited by a borrowing base calculation.

The applicable interest rate for the revolving line of credit borrowings under the Pre-Amendment Floor Plan Facility was based on one month LIBOR plus 2.40%.

An additional $20.0 million of borrowings on the revolving line of credit was made in November 2021 and was paid off in December 2021.

In May 2020, FR entered into a Third Amendment to the Seventh Amended and Restated Credit Agreement (“Third Amendment”) that provided FR with a one-time option to request a temporary four-month reduction (“Current Ratio Reduction Period”) of the minimum Consolidated Current Ratio (as defined in the Floor Plan Facility) at any time during 2020 and the first seven days of 2021.

FR did not exercise that option.

During the Current Ratio Reduction Period, the applicable borrowing rate margin on LIBOR and base rate loans ranges from 2.05% to 3.00% and 0.55% and 1.50%, respectively, based on the Consolidated Current Ratio at FR.

From May 12, 2020 through July 31, 2020, FR was not allowed to draw further Revolving Credit Loans (as defined in the Pre-Amendment Floor Plan Facility).

In June 2020, FR made a voluntary $20.0 million principal payment on the revolving line of credit.

The credit agreement governing the Floor Plan Facility contains certain financial covenants, which we were in compliance with at December 31, 2021 and 2020.

See Note 4 – Inventories and Floor Plan Payables to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for a further discussion of the outstanding amounts, available borrowings, and terms of the Floor Plan Facility.

Additionally, under the Floor Plan Facility, the revolving line of credit borrowings are limited by a borrowing base calculation, which did not limit the borrowing capacity at December 31, 2022.

The Floor Plan Facility includes a flooring line aggregate interest reduction (“FLAIR”) offset account that allows us to transfer cash as an offset to the payables under the Floor Plan Facility.

These transfers reduce the amount of liability outstanding under the floor plan borrowings that would otherwise accrue interest, while retaining the ability to withdraw amounts from the FLAIR offset account subject to the financial covenants under the Floor Plan Facility.

As a result of using the FLAIR offset account, we experience a reduction in floor plan interest expense in our consolidated statements of operations.

As of December 31, 2022 and 2021, FR had $217.7 million and $92.1 million, respectively, in the FLAIR offset account.

The maximum FLAIR percentage of outstanding floor plan borrowings is 35% under the Floor Plan Facility.

The FLAIR offset account does not reduce the outstanding amount of loans under the Floor Plan Facility for purposes of determining the unencumbered borrowing capacity under the Floor Plan Facility.

We have determined that the credit agreements governing the Floor Plan Facility include subjective acceleration clauses, which could impact debt classification.

We believe that no events have occurred at December 31, 2022 that would trigger a subjective acceleration clause.

Additionally, the credit agreements governing the Floor Plan Facility contain certain financial covenants.

FR was in compliance with all debt covenants at December 31, 2022 and 2021.

See Note 4 – Inventories and Floor Plan Payables to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Senior Secured Credit Facilities

As of December 31, 2022 and 2021, CWGS Group, LLC (the “Borrower”), a wholly-owned subsidiary of CWGS, LLC, was party to a credit agreement (the “Credit Agreement”) for a senior secured credit facility (the “Senior Secured Credit Facilities”).

The Senior Secured Credit Facilities consist of a $1.4 billion term loan facility (the “Term Loan Facility”) and a $65.0 million revolving credit facility (the “Revolving Credit Facility”).

The funds available under the Revolving Credit Facility may be utilized for borrowings or letters of credit;

however, a maximum of $25.0 million may be allocated to such letters of credit.

The Revolving Credit Facility matures in June 2026, and the Term Loan Facility matures in June 2028.

The Term Loan Facility requires mandatory principal payments in equal quarterly installments of $3.5 million.

Additionally, we are required to prepay the term loan borrowings in an aggregate amount up to 50% of excess cash flow, as defined in the Credit Agreement, for such fiscal year depending on the Total Leverage Ratio (as defined by the Credit Agreement) beginning with the year ended December 31, 2022.

No additional excess cash flow payment was required relating to 2022 and we do not expect an additional excess cash flow payment to be required relating to 2023.

Under the Senior Secured Credit Facilities, we have the ability to request to increase the amount of term loans or revolving loans in an aggregate amount not to exceed the greater of (a) a “fixed” amount set at $725.0 million and (b) 100% of consolidated EBITDA for the most recent four consecutive fiscal quarters on a pro forma basis (as defined in the Credit Agreement).

We requested and received an increase in the Term Loan Facility of $300.0 million in December 2021.

The lenders under the Senior Secured Credit Facilities are not under any obligation to provide commitments in respect of any such increase.

The Senior Secured Credit Facilities are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by each of our existing and future domestic restricted subsidiaries with the exception of FreedomRoads Intermediate Holdco, LLC, the direct parent of FR, and FR, and its subsidiaries.

The Credit Agreement contains certain restrictive covenants pertaining to, but not limited to, mergers, changes in the nature of the business, acquisitions, additional indebtedness, sales of assets, investments, and the payment of dividends subject to certain limitations and minimum operating covenants.

Additionally, we have determined that the Senior Secured Credit Facilities include subjective acceleration clauses, which could impact debt classification.

We believe that no events have occurred at December 31, 2022 that would trigger a subjective acceleration clause.

The Credit Agreement requires the Borrower and its subsidiaries to comply on a quarterly basis with a maximum Total Net Leverage Ratio (as defined in the Credit Agreement), which covenant is in effect only if, as of the end of each calendar quarter, the aggregate amount of borrowings under the revolving credit facility (including swingline loans), letters of credit and unreimbursed letter of credit disbursements outstanding at such time is greater than 35% of the total commitment on the Revolving Credit Facility (excluding (i) up to $15.0 million attributable to any outstanding undrawn letters of credit and (ii) any cash collateralized or backstopped letters of credit), as defined in the Credit Agreement.

As of December 31, 2022, we were not subject to this covenant as borrowings under the Revolving Credit Facility did not exceed the 35% threshold and it did not limit our borrowing capacity.

We were in compliance with all applicable debt covenants at December 31, 2022 and 2021.

See Note 9 – Long-Term Debt to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Real Estate Facilities

On October 27, 2022, subsidiaries of FRHP Lincolnshire, LLC (“FRHP”), an indirect wholly-owned subsidiary of CWGS, LLC, entered into a credit agreement with a syndication of banks for a real estate credit facility (the “M&T Real Estate Facility”) with aggregate maximum principal capacity of $250.0 million with an option that allows FRHP to request an additional $100.0 million of principal capacity.

The lenders under the M&T Real Estate Facility are not under any obligation to provide commitments in respect of any such increase.

The M&T Real Estate Facility bears interest at FRHP’s option, based on applicable rates as of December 31, 2022, of either (as defined in the credit agreement for the M&T Real Estate Facility):

(a) the Secured Overnight Financing Rate (“SOFR”) plus 2.30% or (b) the highest of (i) the Federal Funds Rate plus 1.80%, (ii) the Prime Rate plus 1.30%, or (iii) SOFR plus 2.30%.

The M&T Real Estate Facility has an unused commitment fee of 0.20% of the aggregate unused principal amount and it matures in October 2027.

Additionally, the M&T Real Estate Facility is subject to a covenant to comply with a minimum debt service coverage ratio of greater than 1.10 to 1.00.

All obligations under the M&T Real Estate Facility and the guarantees of those obligations, are secured, subject to certain exceptions, by the mortgaged real property assets.

In November 2018, September 2021, and December 2021, Camping World Property, Inc.

(the ‘‘Real Estate Borrower’’), an indirect wholly-owned subsidiary of CWGS, LLC, and CIBC Bank USA (“Lender”), entered into loan and security agreements for real estate credit facilities (as amended from time to time, the “First Real Estate Facility”, the “Second Real Estate Facility”, and the “Third Real Estate Facility”, respectively, and collectively the “Real Estate Facilities”) with aggregate maximum principal capacities of $21.5 million, $9.0 million, and $10.1 million for the First Real Estate Facility, Second Real Estate Facility, and Third Real Estate Facility, respectively.

The First Real Estate Facility, the Second Real Estate Facility, and Third Real Estate Facility mature in October 2023, September 2026, and December 2026, respectively.

As of December 31, 2021, the First Real Estate Facility, Second Real Estate Facility, and Third Real Estate Facility had outstanding principal balances of $4.2 million, $8.7 million, and $10.0 million, respectively, net of unamortized finance costs, with an overall weighted interest rate of 2.89%.

As of December 31, 2021, the Company had no available capacity under the Real Estate Facilities.

As of December 31, 2021 and 2020, the interest rate on the Real Estate Facilities, as applicable, was 2.75% and 3.00%, respectively, with a commitment fee of 0.50% of the aggregate unused principal amount of the Real Estate Facilities.

As of December 31, 2021 and 2020, the Company had zero additional capacity under the Real Estate Facilities.

In August 2020, we entered into an agreement to lease an owned property for a former distribution center in Greenville, North Carolina to a third party.

By entering into this lease, we were required to pay down $10.3 million of the First Real Estate Facility, which we paid in August 2020.

Additionally, in September 2020, the Company sold an owned property relating to the other former distribution center in Greenville, North Carolina to a third party.

By selling this property, the Company was required to pay down $3.4 million of the First Real Estate Facility in September 2020.

The Real Estate Facilities are subject to certain cross default provisions, a debt service coverage ratio, and other customary covenants which we were in compliance with at December 31, 2021 and 2020.

See Note 9 — Long-Term Debt to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for a further discussion of the terms of the Real Estate Facilities.

(the ‘‘Real Estate Borrower’’), an indirect wholly-owned subsidiary of CWGS, LLC, and CIBC Bank USA (“Lender”), entered into loan and security agreements for real estate credit facilities (as amended from time to time, the “First CIBC Real Estate Facility”, the “Second CIBC Real Estate Facility”, and the “Third CIBC Real Estate Facility”, respectively, and collectively the “CIBC Real Estate Facilities”) with aggregate maximum principal capacities of $21.5 million, $9.0 million, and $10.1 million for the First CIBC Real Estate Facility, Second CIBC Real Estate Facility, and Third CIBC Real Estate Facility, respectively.

Borrowings under the CIBC Real Estate Facilities are guaranteed by CWGS Group, LLC, a wholly-owned subsidiary of CWGS, LLC.

The CIBC Real Estate Facilities may be used to finance the acquisition of real estate assets and are secured by first priority security interest on the real estate assets acquired with the proceeds of the CIBC Real Estate Facilities.

The First CIBC Real Estate Facility, the CIBC Second Real Estate Facility, and Third CIBC Real Estate Facility mature in October 2023, September 2026, and December 2026, respectively.

The following table shows a summary of the outstanding balances, remaining available borrowings, and weighted average interest rate under the M&T Real Estate Facility and the CIBC Real Estate Facilities (collectively the “Real Estate Facilities”) at December 31, 2022:

As of December 31, 2022

(In thousands)

Outstanding (1)

Available (2)

Interest Rate

Real Estate Facilities

M&T Real Estate Facility

First CIBC Real Estate Facility

Second CIBC Real Estate Facility

Third CIBC Real Estate Facility

(1) Outstanding principal amounts are net of unamortized finance costs.

(2) Amounts cannot be reborrowed.

(3) Additional borrowings on the M&T Real Estate Facility are subject to a debt service coverage ratio covenant and the property collateral requirements under the M&T Real Estate Facility

We determined that the credit agreements governing the Real Estate Facilities include subjective acceleration clauses, which could impact debt classification.

We believe that no events have occurred at December 31, 2022 that would trigger a subjective acceleration clause.

Additionally, the Real Estate Facilities are subject to certain cross default provisions, a debt service coverage ratio, and other customary covenants.

We were in compliance with all debt covenants at December 31, 2022 and 2021.

See Note 9 – Long-Term Debt to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Other Long-Term Debt

In December 2021, FRHP Lincolnshire, LLC, an indirect wholly-owned subsidiary of CWGS, LLC, assumed a mortgage as part of a real estate acquisition.

As of December 31, 2021, the outstanding principal balance of the mortgage was $3.4 million with an interest rate of 3.50%.

The mortgage matures in December 2026.

See Note 9 — Long-Term Debt to our consolidated financial statements included in Part II, Item 8 of this Form 10-K for a further discussion of the terms of the other long-term debt.

Other long-term debt is comprised of a mortgage on a property, which matures in December 2026.

See Note 9 – Long-Term Debt to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Finance Lease Obligation

From time to time, we enter into finance leases typically for real estate and/or information technology equipment.

See Note 10 – Leases to our consolidated financial statements included in Part II, Item 8 of this Form 10-K

Sale/Leaseback Arrangements

We have in the past and may in the future enter into sale-leaseback transactions to finance certain property acquisitions and capital expenditures, pursuant to which we sell property and/or leasehold improvements to third parties and agree to lease those assets back for a certain period of time.

We have in the past and may in the future enter into sale-leaseback transactions to finance certain property acquisitions and capital expenditures, pursuant to which we sell property and/or leasehold

improvements to third parties and agree to lease those assets back for a certain period of time.

Such sales generate proceeds which vary from period to period.

On February 8, 2022, FRHP Lincolnshire, LLC sold three properties for a total sale price of $28.0 million.

Concurrent with the sale of these properties, we entered into three separate twenty-year lease agreements, whereby we will lease back the properties from the acquiring company.

Under each lease agreement, FR has four consecutive options to extend the lease term for additional periods of five years for each option.

This transaction is accounted for as a financing transaction.

We recorded a liability for the amount received, will continue to depreciate the non-land portion of the assets, and have imputed an interest rate so that the net carrying amount of the financial liability and remaining assets will be zero at the end of the initial lease terms.

The financial liability is included in other long-term liabilities in the consolidated balance sheet as of December 31, 2022.

Deferred Revenue

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Deferred revenue is expected to be recognized as revenue as set forth in the following table (in thousands):

December 31, 2022

Recent Accounting Pronouncements

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Actual results could differ from those estimates.

Critical accounting policies are those that management believes are both most important to the portrayal of our financial condition and operating results, and require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

We base our estimates on historical experience, outside advice from parties believed to be experts in such matters, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

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Our significant accounting policies can be found in Note 1 — Summary of Significant Accounting Policies to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

We consider the following policies to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements.

Revenue Recognition

Revenues are recognized by the Company when control of the promised goods or services is transferred to its customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Sales and other taxes collected from the customer concurrent with revenue-producing activities are excluded from revenue.

Incidental items that are immaterial in the context of the contract are recognized as expense.

The Company’s contracts with customers may include multiple performance obligations.

For such arrangements, the Company allocates revenue to each performance obligation based on its relative stand-alone selling price.

The Company generally determines stand-alone

selling prices based on the prices charged to customers or using the adjusted market assessment approach.

The Company presents disaggregated revenue on its consolidated statements of operations.

Good Sam Services and Plans revenue consists of revenue from publications, and marketing fees from various consumer services and plans.

Roadside Assistance (“RA”) revenues are deferred and recognized over the contractual life of the membership.

RA claim expenses are recognized when incurred.

Marketing fees for finance, insurance, extended service and other similar products are recognized as variable consideration, net of estimated cancellations, if applicable, when a product is sold or financing has been arranged.

These marketing fees are recorded net as we are acting as an agent in the transaction.

The related estimate for cancellations on the marketing fees for multi-year finance and insurance products utilize actuarial analysis to estimate the exposure.

Promotional expenses consist primarily of direct mail advertising expenses and renewal expenses and are expensed at the time related materials are mailed.

Newsstand sales of publications and related expenses are recorded as variable consideration at the time of delivery, net of estimated returns.

Subscription sales of publications are reflected in income over the lives of the subscriptions.

The related selling expenses are expensed as incurred.

Advertising revenues and related expenses are recorded at the time of delivery.

Revenue and related expenses for consumer shows are recognized when the show occurs.

RV and Outdoor Retail revenue consists of sales of new and used RVs, sales of RV products, parts and service and other products, distribution of RV furniture, and commissions on the related finance and insurance contracts.

Revenue from the sale of recreational vehicles is recognized upon completion of the sale to the customer.

Conditions to completing a sale include having an agreement with the customer, including pricing, whereby the sales price must be reasonably expected to be collected and having control transferred to the customer.

RV and Outdoor Retail revenue from parts, service and other products sales is recognized over time as work is completed and when parts are delivered to our customers.

For these service and parts revenues recorded over time, the Company utilizes a method that considers total costs incurred to date and the applicable margin in relation to total expected efforts to complete our performance obligation in order to determine the appropriate amount of revenue to recognize over time.

Finance and insurance revenue is recorded net, since the Company is acting as an agent in the transaction, and is recognized when a finance and insurance product contract payment has been received or financing has been arranged.

Revenue Recognition — Finance and Insurance Chargebacks

The proceeds the Company receives for arranging financing contracts, and selling insurance and service contracts, are subject to chargebacks if the customer terminates the respective contract earlier than a stated period.

In the case of insurance and service contracts, the stated period typically extends from one to five years with the refundable commission balance declining over the contract term.

In the case of insurance and service contracts, the stated period typically extends from one to seven years with the refundable commission balance declining over the contract term.

These proceeds are recorded as variable consideration, net of estimated chargebacks.

Chargebacks are estimated based on ultimate future cancellation rates by product type and year sold using a combination of actuarial methods and leveraging our historical experience from the past eight years, adjusted for new consumer trends.

Chargebacks are estimated based on ultimate future cancellation rates by product type and year sold using a combination of actuarial methods and

leveraging our historical experience using data extending back to 2013, adjusted for new consumer trends.

The chargeback liabilities included in the estimate of variable consideration totaled $76.4 million and $68.8 million as of December 31, 2022 and December 31, 2021, respectively.

If cancellation rates on products sold during 2022 and 2021 were to increase by 100 basis points, our chargeback liabilities would have increased by $5.9 million as of December 31, 2022.

Good Sam Club revenue consists of revenue club membership fees and royalty fees from co-branded credit cards.

Membership revenue is generated from annual, multiyear and lifetime memberships.

The revenue and expenses associated with these memberships are deferred and amortized over the membership period.

Unearned revenue and profit are subject to revisions as the membership progresses to completion.

Revisions to membership period estimates would change the amount of income and expense amortized in future accounting periods.

For lifetime memberships, an 18-year period is used, which is the actuarially determined estimated fulfillment period.

Royalty revenue is earned under the terms of an arrangement with a third-party credit card provider based on a percentage of the Company’s co-branded credit card portfolio retail spending with such third-party credit card provider and for acquiring new cardholders.

Contracts in Transit

Contracts in transit consist of amounts due from non-affiliated financing institutions on retail finance contracts from vehicle sales for the portion of the vehicle sales price financed by our customers.

These retail installment sales contracts are typically funded within ten days of the initial approval of the retail installment sales contract by the third-party lender.

Contracts in transit are included in current assets in our consolidated financial statements and totaled $57.7 million and $48.2 million as of December 31, 2021 and 2020, respectively.

Inventories, net

Dealership inventories consist primarily of new and used vehicles held for sale valued using the specific-identification method and valued at the lower of cost or net realizable value.

Cost includes purchase costs, reconditioning costs, dealer-installed accessories, and freight.

For vehicles accepted in trades, the cost is the fair value of such used vehicles at the time of the trade-in.

Dealership parts and accessories are valued at the lower of cost or net realizable value.

Retail parts, accessories and other inventories primarily consist of retail travel and leisure specialty merchandise and are stated at lower of cost or net realizable value.

RV furniture for distribution are stated at lower of cost or net realizable value.

In assessing lower of cost or net realizable value for inventory, we typically consider (i) the aging of the inventory item, (ii) historical sales experience of the inventory item, and (iii) current market conditions and trends for the inventory item.

We also review and consider the following metrics related to sales of inventory items (both on a recent and longer-term historical basis):

(i) days of supply in our inventory, and (ii) average selling price if sold at less than original cost.

We then determine the appropriate level of reserve required to reduce our inventory to the lower of cost or market and record the resulting adjustment in the period in which we determine a loss has occurred.

If future demand or market conditions for our products are less favorable than forecasted or if unforeseen circumstances negatively impact the utility of inventory, we may be required to record additional write-downs, which would negatively affect the results of operations in the period when the write-downs are recorded.

Goodwill and Other Intangible Assets

Goodwill is reviewed at least annually for impairment, and more often when impairment indicators are present.

We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its net book value.

The qualitative analysis used contains inherent uncertainties, including significant estimates and assumptions related to growth rates, projected earnings and cost of capital.

We are subject to financial risk to the extent that our assets and goodwill become impaired due to deterioration of the underlying businesses.

The risk of an asset impairment loss may increase to the extent the underlying businesses’ earnings or projected earnings decline.

During the fourth quarter of 2021, we performed our annual impairment assessment of the carrying value of our goodwill.

The fair value of our reporting units significantly exceeded the carrying value of its net assets.

As a result, we were not required to record an impairment of goodwill relating to our reporting units.

See Note 7 — Goodwill and Intangible Assets to our consolidated financial statements included in Part II, Item 8 of this Form 10-K.

Finite-lived intangibles are recorded at cost, net of accumulated amortization and, if applicable, impairment charges.

Finite-lived intangible assets consist of membership and customer lists with weighted average useful lives of approximately 5.9 years, and websites are 7.0 years.

The approximate weighted average useful lives of our RV and Outdoor Retail finite-lived intangibles assets are as follows:

customer lists and domain names are 7.3 years, suppliers lists are 5.0 years, trademarks and trade names are 11.2 years, and websites are 7.8 years.

The weighted-average useful life of all our finite-lived intangible assists is approximately 9.8 years.

Long-Lived Assets

Long lived assets are included in property and equipment, which also includes capitalized software costs to be held and used.

For our major software systems, such as our accounting and membership systems, our capitalized costs may include some internal or external costs to configure, install and test the software during the application development stage.

We do not capitalize preliminary project costs, nor do we capitalize training, data conversion costs, maintenance or post development stage costs.

Our long-lived assets are

reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Long-Lived Assets — Impairment

Our long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Our long-lived asset groups exist predominantly at the individual location level and the associated impairment analysis involves the comparison of an asset group’s estimated future undiscounted cash flows over its remaining useful life to its respective carrying value, which primarily includes furniture, equipment, leasehold improvements, and operating lease assets.

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The measurement of any impairment loss includes estimation of the fair value of the asset group’s respective operating lease assets, which includes estimates of market rental rates based on comparable lease transactions.

We apply the provisions of ASC No.

740, “Income Taxes” (“ASC 740”).

Under ASC 740, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.

In evaluating our ability to recover our deferred tax assets, we consider all available positive and negative evidence, including our operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis.

In accordance with ASC 740, we recognize, in our consolidated financial statements, the impact of our tax positions that are more likely than not to be sustained upon examination based on the technical merits of the positions.

The Company recognizes interest and penalties for uncertain tax positions in income tax expense.

We are subject to federal and state income taxes.

Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes.

In addition, a number of jurisdictions in which we are subject to tax have pursued or are actively pursuing changes to their tax laws applicable to corporate taxpayers, such as the 2017 Tax Act.

The 2017 Tax Act was signed into law on December 22, 2017.

The 2017 Tax Act significantly revised the U.S.

corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21% and eliminating certain deductions.

For the year ended December 31, 2021, there were no significant impacts on estimated values of the Tax Receivable Agreement liability and the Company’s deferred tax assets as a result of any recent tax law changes, other than increased state tax rates as a result of being subject to combined filing groups due to new unitary relationships.

CWH’s increased ownership in CWGS, LLC and other qualitative unity factors impacted the unitary relationships.

We are subject to U.S.

federal, state and local income taxes with respect to our allocable share of any taxable income of CWGS, LLC and are taxed at the prevailing corporate tax rates.

CWGS, LLC is currently treated as a partnership for U.S.

federal and most applicable state and local income tax purposes and, as such is generally not subject to any U.S.

federal entity-level income taxes with the exception of certain subsidiaries, which are Subchapter C corporations.

Taxable income or loss of a partnership is passed through to and included in the taxable income of its owners for U.S.

federal income tax purposes.

However, CWGS, LLC may be liable for various other state and local taxes.

Pursuant to the CWGS LLC Agreement, CWGS, LLC will generally make pro rata tax distributions to holders of common units in an amount sufficient to fund all or part of their tax obligations with respect to the taxable income of CWGS, LLC that is allocated to them.

Tax Receivable Agreement Liability

As described in Note 11 — Income Taxes to the consolidated financial statements included in Part II, Item 8 of this Form 10-K, we are a party to the Tax Receivable Agreement under which we are contractually committed to pay the Continuing Equity Owners 85% of the amount of any tax benefits that we actually realize, or in some cases are deemed to realize, as a result of certain transactions (the “TRA Payments”).

Amounts payable under the Tax Receivable Agreement are contingent upon, among other things, (i) generation of future taxable income over the term of the Tax Receivable Agreement and (ii) future changes in tax laws.

generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then we would not be required to make the related TRA Payments.

Therefore, we would only recognize a liability for TRA Payments if we determine if it is probable that we will generate sufficient future taxable income over the term of the Tax Receivable Agreement to utilize the related tax benefits.

Estimating future taxable income is inherently uncertain and requires judgment.

In projecting future taxable income, we consider our historical results and incorporate certain assumptions, including projected retail location openings, revenue growth, and operating margins, among others.

As of December 31, 2021, our Tax Receivable Agreement liability was recorded at $182.4 million after increasing the liability by $2.8 million in the year ended December 31, 2021 to reflect our future tax benefit primarily as a result of an increase in enacted state income tax rates.

During the year ended December 31, 2021, the Tax Receivable Agreement liability was further adjusted to reflect new transactions, net of cash payments made.

We concluded it is probable that we would have sufficient future taxable income to utilize the related tax benefits of the liability recorded.

If we determine in the future that we will not be able to fully utilize all or part of the related tax benefits, we would derecognize the portion of the liability related the benefits not expected to be utilized.

Additionally, we estimate the amount of TRA Payments expected to be paid within the next 12 months and classify this amount as current on our Consolidated Balance Sheets.

This determination is based on our estimate of taxable income for the next fiscal year.

To the extent our estimate differs from actual results, we may be required to reclassify portions of our liabilities under the Tax Receivable Agreement between current and non-current.

For the years ended December 31, 2022, 2021, and 2020, we recorded long-lived asset impairment of $4.2 million, $3.0 million, and $12.4 million, respectively (see Note 5 – Restructuring and Long-lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K).

Inventories — Products, Parts, Accessories and Other

In assessing lower of cost or net realizable value for products, parts, accessories and other inventories, we typically consider (i) the aging of the inventory item, (ii) historical sales experience of the inventory item, and (iii) current market conditions and trends for the inventory item.

We also review and consider the following metrics related to sales of inventory items (both on a recent and longer-term historical basis):

(i) days of supply in our inventory, and (ii) average selling price if sold at less than original cost.

We then determine the appropriate level of reserve required to reduce our inventory to the lower of cost or net realizable value and record the resulting adjustment in the period in which we determine a loss has occurred.

For the years ended December 31, 2021 and 2020, we recorded incremental inventory reserve charges of $15.0 million and $0.5 million, respectively relating to our 2019 Strategic Shift (see Note 5 – Restructuring and Long-lived Asset Impairment to our consolidated financial statements included in Part II, Item 8 of this Form 10-K).

Deferred Tax Assets and Tax Receivable Agreement Liability — Valuation

When Continuing Equity Owners redeemed common units in CWGS, LLC for Class A common stock, CWH received an equal number of common units to the quantity of shares of Class A common stock issued to the Continuing Equity Owners.

When CWH acquired this additional ownership in CWGS, LLC in the form of common units, it received a significant step-up in outside tax basis on the underlying assets held by CWGS, LLC.

The step-up was principally equivalent to the difference between (1) the fair value of the underlying assets on the date of the redemption and (2) the tax basis in the underlying assets, multiplied by the percentage of common units acquired.

The majority of the step-up in basis was related to intangible assets, primarily goodwill, and is included within deferred tax assets on our consolidated balance sheets.

The computation of the step-up required valuations of the intangible assets of CWGS, LLC and has the same complexities and estimates as our purchase accounting on acquisitions (see Note 15 – Acquisitions to our consolidated financial statements included in Part II, Item 8 of this Form 10-K).

In addition, the step-up is governed by complex IRS rules that limit which class and amount of step-up is deductible.

Given the magnitude of the deferred tax assets and complexity of the calculations, small adjustments to our model used to calculate these deferred tax assets can result in material changes to the amounts recognized, especially in years that include redemptions by Continuing Equity Owners.

If more common units of CWGS, LLC are redeemed by Continuing Equity Owners, the percentage of

CWH’s ownership of CWGS, LLC will increase, and additional deferred tax assets will be created as additional tax basis step-ups occur and such amounts are likely to be material.

Pursuant to the Tax Receivable Agreement, CWH makes annual payments to the Original Equity Owners that had previously redeemed common units in CWGS, LLC equivalent to 85% of any tax benefits CWH realizes on each year’s tax return from the additional tax deductions arising from the step-up in tax basis.

A Tax Receivable Agreement liability of $170.6 million existed as of December 31, 2022 for the future cash obligations expected to be paid under the Tax Receivable Agreement and was not discounted.

The calculation of this liability is a function of the step-up described above and, therefore, has the same complexities and estimates.

Similar to the deferred tax assets, these liabilities would likely increase materially if Continuing Equity Owners redeem additional common units of CWGS, LLC.

As of December 31, 2022, if there was a 100 basis point increase or decrease in the estimated income tax rate, the Tax Receivable Agreement liability would increase or decrease by $6.7 million, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis