Camping World Holdings Inc (CWH) 2017 Q4 法說會逐字稿

Good morning, and welcome to the Camping World Holdings conference call to discuss financial results for the fourth quarter and full year 2017. (Operator Instructions) Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from the company. As a reminder, this call is being recorded.

On the call today from management are Marcus Lemonis, Chairman and Chief Executive Officer; Tom Wolfe, Chief Financial Officer; Brent Moody, Chief Operating and Legal Officer; and Roger Nuttall, President, Retail.

I will now turn the call over to Mr. Moody to get started. Please go ahead, sir.

Thank you, and good afternoon, everyone. A press release covering the company's fourth quarter and full fiscal year 2017 financial results was issued this afternoon and a copy of that press release can be found in the Investor Relations section on the company's website. It's important to note that management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These may include statements regarding our business goals, plans, abilities and opportunities, industry and customer trends, growth and diversification of our customer base, retail location openings, acquisitions and related expenses, increases in our borrowings and anticipated financial performance.

Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the risk factors section in our Form 10-K to be filed with the SEC and other reports on file with the SEC. Any forward-looking statements represent our views only as of today, and we undertake no obligations to update them. Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as adjusted pro forma net income, adjusted EBITDA and adjusted EBITDA margin, which we believe may be important to investors to assess our operating performance.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release and on our website.

With that, I'll turn the call over to Marcus.

Thanks, Brent, and good afternoon, everyone. I feel like spring is in the air. It's coming. We had a very strong fourth quarter, and we're pleased with the performance of our business and the underlying trends in both the RV and the outdoor market.

For the quarter, total revenue increased 33% to $889 million. Adjusted pro forma net income increased 113% to $22 million and adjusted EBITDA increased 76% to $65 million.

For the full year, revenue was up 22% to $4.3 billion and adjusted EBITDA increased 48% to $400 million. All of these were record results for the respective periods and we feel really good about the momentum of the business heading into 2018.

Demand for RVs remains very strong. And given the strong demand, we made a strategic decision to carry a little more inventory into the fourth quarter and the early part of this year, which we believe will put us in a position to drive higher sales volumes and pick up market share in a few regions.

The trends that we've been talking about for the past year remain strong and continue to drive our business. Our focus on towables and the lower-priced segment of the RV market allows us to sell to a much wider audience and a more diverse group of consumers than ever before. Millennials remain one of the fastest-growing segments of the market, but it's not just millennials driving the business. We're seeing strong demand across all age ranges and customer demographics for smaller and lower priced units.

Consumers today lead a very active and mobile lifestyle, and they're utilizing their RVs for a wide range of activities: Family vacations, weekend fishing, hunting trips, out of town tournaments with the kids, and tailgating parties with friends. Today, smaller RVs are the ultimate mobile experience that give consumers the ability to go and do just about anything outdoors.

We see a lot of similarities between the outdoor consumer and the RV consumer, and we believe there is significant opportunity to continue diversifying our business as these lifestyles converge.

Over the past year, we've acquired a few outdoor and active sports omnichannel businesses that to give us access to a more diverse base of outdoor lifestyle consumers. Overton's, Gander Outdoors, TheHouse.com, Uncle Dan's, W82 and Erehwon, all come with unbelievable talent, great products and a loyal customer following that we believe will leverage over time by cross-selling products and services.

We opened our first Gander Outdoors store in December and currently have 11 stores up and running. Early trends in these stores have been very promising and we're seeing healthy early conversion rates of Gander customers to our Good Sam Club and our Good Sam credit card. Our plan is to open nearly 72 Gander Outdoor stores by mid-June.

As I've said many times, we're being very calculated and disciplined in how we open stores and how we manage this business. We are only interested in operating stores that we believe have a clear path to profitability. We've aggressively negotiated rents, diversified the mix of merchandise, added a service department and layered out -- on a number of new benefits and savings to our Good Sam Club for the Gander Outdoors and Overton's customers. Our goal is not just to sell the products that we carry in stores and online, but to grow our customer file, expand our base of Good Sam Club members and then cross-sell the broad array of products and services into a growing and increasing base of customers and Good Sam Club members. That has always been our business model and it will continue to be as we continue to diversify.

In closing, I want to congratulate our existing team members for their hard work and their dedication in the last year. A lot of growth and a lot of change. And we welcome our new team members to what is sure to be a very exciting 2018.

Those are my prepared remarks. And I'll turn the call over to Tom to talk through our financial results.

Thank you, Marcus, and good afternoon, everyone. As Marcus stated, we had a strong fourth quarter and fiscal year and are very pleased with our financial results. Let me touch on some of the key highlights.

Total revenue increased 32.9% to $889 million. Both segments contributed to the strong growth with retail revenue up 35.1% to $837.9 million and Consumer Services and Plans revenue up 4.5% to $51.1 million.

In the Retail segment, same-store sales increased 11.9% and was driven by increases in finance and insurance, new vehicles and parts, service and other. We continue to view the trend towards towable units and younger buyers as a net positive for the overall business as we believe this creates continued expansion of the RV customer base and allows us to cross-sell a greater number of other higher-margin and recurring revenue products and services.

Most notable are our roadside assistance and retail finance and insurance programs, which experienced healthy increases in the fourth quarter, driven primarily by an increase in the number of dealerships and higher penetration.

The biggest standout again was finance and insurance revenue, which increased 57.3% to $64.8 million and to -- or 10.8% of total vehicle revenue. The other notable was parts, service and other revenue, which increased 48.4% to $174.7 million and benefited from $38.2 million of sales from the outdoor and active sports businesses. Gross margins were strong across the board in the quarter, increasing 211 basis points to 60.8% in the Consumer Services and Plans segment and increasing 137 basis points to 28.1% in the Retail segment.

Increased penetration of the finance and insurance products was the primary reason for the increase in the retail gross margin and the increased file size of our clubs and road size assistance programs combined with reduced program costs were the primary reasons for the increase in Consumer Services and Plans gross margin.

Operating expenses increased 36.9% to $222.3 million with the majority of the increase coming from a 37.5% increase in SG&A expenses to $213.1 million. The increase in SG&A expenses was primarily driven by increased variable wage-related and selling expenses associated with the strong increase in same-store sales revenue and the incremental new dealerships and outdoor and active sports businesses operated during the quarter, and $17.7 million of preopening and payroll comps associated with the Gander Outdoors business.

As a percentage of gross profit, SG&A expenses increased 25 basis points to 79.9%, which included 109,000 of transaction expenses and the $17.7 million of preopening expenses. Floor plan interest expense increased $8.4 million from $4 million, primarily from higher inventory from the new dealerships added in 2017 and an 84 basis point increase in the average borrowing rate.

Other interest expense increased 16.6% to $12 million, primarily from an increase in the average debt outstanding, partially offset by an 86 basis point decrease in the average borrowing rate. Adjusted EBITDA, which includes floor plan interest expense, increased 76% to $65.3 million and adjusted EBITDA margin increased 180 basis points to 7.3%. Please refer to the tables in the earnings release for a reconciliation of net income to adjusted EBITDA and net income margin to adjusted EBITDA margin. Turning to the December 31 balance sheet.

Working capital and cash balances were $478.7 million and $224.2 million, respectively. Inventory increased 56.9% to $1.4 billion, primarily from the 19 locations opened during 2017 and the outdoor and active sports businesses recently added. As Marcus indicated, given the strong demand, we did make a strategic decision to carry more inventory in the fourth quarter for the upcoming sales season in an effort to gain market share in certain markets and maintain better in-stock levels.

Looking at inventory on an estimated number of days of inventory basis, we have increased our days of inventory on hand by 16%, which is in line with our plan. We have $3.2 million of letters of credit issued under our $35 million revolving credit facility, $916.9 million of term loans outstanding under the senior secured credit facilities and $974 million of floor plan notes payable under the floor plan facility. We intend to increase our borrowings in the coming weeks to fund incremental store openings and provide working capital for dealership acquisition opportunity.

And with that said, I would like to turn the call back over to Marcus for our 2018 outlook.

Thanks, Tom. Look, we are very excited about both the RV and the outdoor and active sports businesses and believe that 2018 can be a really big transition year for Camping World Holdings.

As I mentioned, we feel very good about the momentum of the business into 2018 and demand for recreational vehicles remains very strong. But we also do not expect it to continue growing at the same record rate indefinitely, and it makes no sense to plan our business that way.

Our initial outlook for 2018 calls for revenue in the $4.8 billion to $5 billion range and an adjusted EBITDA in the range of $431 million to $441 million. These estimates include approximately $400 million in revenue for the outdoor and active sports business and $30 million in preopening expenses for the Gander Outdoors stores.

We do not anticipate that Gander Outdoors stores will have much impact on the company's adjusted EBITDA in 2018. With the Gander Outdoors stores opening in the first half of the year and their peak selling season being the third and fourth quarters, we would expect the Gander Outdoors stores to be a drag on the adjusted EBITDA in the first half of the year and accretive in the second half of the year.

We are not looking to provide quarterly guidance on a go-forward basis. But with the seasonality of this business changing from the outdoor space -- from the outdoor and RV space over the course of the year, I want to give you a little flavor of what it will look like quarter-by-quarter from an EBITDA perspective.

$70 million to $72 million is our expectation for the first quarter. $154 million to $161 million for the second quarter; $129 million to $133 million for the third quarter; and $72 million to $75 million in the fourth quarter.

With that said, we would like to turn the call back over to the operator to start the Q&A session.

(Operator Instructions) And we'll take our first question from Rick Nelson from Stephens.

Marcus, if you could update us on where you think we are with the RV cycle with inventory levels. I know you indicated inventories, you think, are in line with your plan. But if you could comment on inventories in the sector, if you think we're heavy there or just anything that might be concerning you at this point.

Yes, Roger and I really made a concerted effort to ramp up our inventory in anticipation of continuing to grab market share. And when we look at driving the average cost down and widening the mouth of the market, we felt that there were several moments in time where we were short stocked, particularly in the first half of the year on the entry-level travel -- trailer and entry-level fifth wheel side. And so we made a bet that we believe is not a gamble, but a very calculated decision to stock things that we believe we're going to grab share with. We also have more stores in our company today. And while we can't speak to the balance of the industry, we believe that as we make acquisitions, and we're in the process of making some right now, that we're not seeing any of the acquisitions that we're making for our own stores really out of whack on inventory. I can't speak to backlogs or manufacturers, but we feel very confident that we are well positioned to hit the expectations that we're setting for 2018. And we know that grabbing share in those lower price units is going to be the key to our success. So I can't speak to the industry, but what we're seeing from a trend standpoint is no slowdown in sight.

Great. Interest rates, the recent hikes, do you see that having impact on the demand side at all?

We don't. I mean, look, there were moments in time over the course of the most recent history of this industry where rates have been as high as 17%. Because folks finance between 180 and 240 months, the interest rate moving doesn't really make that much of a difference. We've always told people that gas prices and interest rates are not as important to our business as the ability -- the availability of credit. So we don't see anything in the near term with any rise in interest rates that we've -- that we anticipate affecting our business at all from a demand standpoint.

Okay, good to know. Also, tax reform. I'm curious how you see that impacting Camping World's corporate tax rate as well as the consumer, how you see that affecting.

Tom, would you mind addressing that issue, please?

Sure. At the partnership level, the distribution rate that goes to the -- all of the partners, including Camping World Holdings, in 2017 was 52.62%. Because of tax reform, that number is dropping down to 46.7%, roughly 11%. So while we will have that additional cash for reinvestment into the business, this CWH, the C corp blended tax rate for '17 was 38.5%, and that's dropping down to 25.3% because of the tax reform.

From a consumer standpoint, we hope that, that translates into more savings for folks. We hope that, that translates into more discretionary income. But what we find with our consumers is our average consumer has a pretty conservative financial approach, to begin with. Good credit and good debt to income ratios. And do we think it could bring new buyers to the table? We do. And that's part of the reason why we're getting slightly more aggressive on the entry-level side is that we believe it potentially could free up enough money for somebody to be able to afford an entry-level payment. And so that's part of our strategy as well. So we're excited about the opportunity.

We'll move on to our next question from Rafe Jadrosich with Bank of America.

I was wondering if -- 2018 -- 2017 was a pretty aggressive year in terms of M&A. I was wondering if you can talk about the environment in 2018 and then what you're assuming in your guidance in terms of greenfield builds versus acquisitions?

Great question. So we -- I've always been very consistent with how I look at this prior to us being public and when we run on our road show. We are an opportunistic acquisition company. In some cases, we look for financial opportunistic acquisitions. In other cases, we're looking for geographic or strategic ones. Dealership acquisitions is the most important growth sort of lever that we have in our business. And historically, we've either opened or acquired, in a given year, anywhere between 7 and 10 transactions. Last year, we were very blessed that we found more than that number. And as we head into '18, we continue to want to look to do things that make sense. We will not, and we will be -- I'm going to be super clear about this, we will never overpay just to gain top line. But we do want to be opportunistic and look for growth. And would we like to repeat 2017? You bet. Do we have things in the hopper at this moment today that will put us on pace to do that? We don't. But we are in the process of signing up a few deals right now and we are in discussions with several others. But that's consistent with how we run our business for 15 years. And so we don't see any change in pace. Some years, we exceed that expectation but we do not expect to ever fall below that 7 to 10 minimum.

And then just on the greenfield outlook for 2018?

Yes, we only want to look for opportunistic commercial real estate. And we can't speak to the overall commercial real estate market. But we've been lucky to find some opportunities to do those. We've been approached by a number of developers who are looking to build an outdoor lifestyle center. So we may have an opportunity to put an Overton's store or an Erehwon store along with a dealership. And we're finding that some of the land prices are getting slightly more attractive. Based on the improvement in the company, we've also been able to secure better REIT financing on our real estate. And that keeps us feeling pretty bullish about our growth, and we should expect a few stores to open on a greenfield basis as well this year.

Okay. And then last question. You spoke a little bit about Good Sam membership and then providing more incentives for consumers to sign up at the Gander stores. Can you just talk about the expanded incentives and what you're doing to drive that cost across?

Yes. So the #1 goal of our company regardless of what department you work in is to grow our file and to grow our Good Sam file. And so there is a new person heading up the Good Sam. Her name is Tamara Ward. She's been with a company for 20 -- over 25 years. She was the Chief Marketing Officer. And we've transitioned to her into this elevated role of overseeing our club, which is our most important asset. It really is about coming up with an omnichannel approach to offering our Good Sam members discounts both in-store and online in our 360-degree outdoor business. So historically, Camping World and Good Sam were exclusively RV-centric. And we're now finding ways to offer people discounts on fishing trips and outdoor apparel and hunting apparel and everything that's really inside of that space. And we were adamant about not raising the price. The early success that we have seen inside of the few Gander stores has told us that we could expect in 2018 to have growth inside the Good Sam Club in the 10% to 12% range, which is significantly higher than we've experienced in the history of the company. We think that may -- that number may be conservative. But we think there's an opportunity to see massive growth, real true sticky growth without being promotional in the file. Obviously, our goal is to have people join that, have customers see the benefit and actually see a higher perceived value by getting a discount on products that they didn't get before when they paid $27. We also have gotten more aggressive in offering multiyear discounts, both 2 and 3-year joins, to give the consumer a better value and to lessen our selling expense and be more responsible in terms of the amount of mail that we put into the environment into the marketplace. So more digital growth, less mail in the marketplace, better deals for multiyear and better value for consumers is really our ethos going forward. And we expect 10% to 12% growth, which we've never seen before.

And we'll move on to Craig Kennison from Baird.

A couple of housekeeping questions and then a follow-up. First, with respect to guidance, do prospective acquisitions -- or are prospective acquisitions included in guidance or would that be incremental?

Tom?

Yes, it's included, the guidance -- with the guidance of the acquisitions.

So guidance includes the potential for perhaps, 7 to 10 additional acquisitions?

No. As we discussed early on, we start with our budget with roughly about 5 acquisitions. So anything in addition to that would be incremental.

And keep in mind, Craig, it was 7 to 10 acquisitions and new store openings. And as you know, you've been around our company for a while, those new store openings, they're -- they have a bit of a 12 to 18-month burn to them. And so we have some of those factored in. We definitely have some new store openings factored in. And those aren't as -- those aren't as pretty in the first 18 months.

Yes, good point. And then second follow-up would be on the tax policy. Presuming you have a windfall from a cash flow standpoint from lower tax rate, how would you allocate that windfall?

At this point -- I'm sorry, Tom. I wouldn't call it a windfall. I think, Tom, you point out that the percentage is not as big as we had expected. But regardless of what the percentage is, it is our expectation that we continue to reinvest that into 2 key things particularly in 2018. We are launching an entire new -- entirely new web platform with DemandWare. We want to have more mobility and flexibility to move brands in and out as we make acquisitions. And so we will be deploying a lot into our digital business. We're going to be deploying a lot more into our digital marketing and the way we reach consumers. And so there's some platforms to build. And then we want to use, obviously, some of that money for acquisitions. We do not, at this point, anticipate modifying anything else other than growing the business and looking for more technology-based businesses, more dealership acquisitions. And then we need to bolster our current e-commerce platform.

And then finally, with respect to the outdoor strategy, which has been entirely a bonus relative to what you talked about on the IPO. Just trying to wrap my hands around where that opportunity is headed. You've done deals, in camping, fishing, boards sports, a variety of other categories. Are there more categories to come or is it more about geographic expansion now that you've locked in some of those key categories?

That's great that you say that. So I try to always draw a visual for people for how I think about this business and how excited I am. But it really has become a 4-legged stool. Our primary and our strongest leg is our RV business. That's what brought us to the dance and that is our #1 focus. We're adding the -- a Gander business, which is sort of everything outdoors. We have our Overton's business, which is everything marine and fishing, and we are going to be very aggressive in grabbing market share both digitally and in the shop-in-shops that are inside of Gander's. There's 15,000 to 18,000 stores shop-in-shops. Overton's is a very key component because we see a lot of similarities between the marine consumer and the RV consumer in how they -- and what their appetite is for Good Sam products: the club, warranty, insurance, roadside and all of -- and warranties on all of those products. And then the last product is our active sports. That's the W82, the Erehwon, the Uncle Dan's. We believe that there's an opportunity to move people through the funnel. And those 4 legs on the stools have one sole purpose, and that's taking care of that seat that the person sits on, on that stool. And that lid, that seat is a Good Sam Club. Every one of those individual legs on the stool has a singular purpose, be profitable, have growth and drive membership in a valuable way to the consumer and grow the file. And I really believe that if we can take the current Good Sam member and future Good Sam members and give them this 360-degree seat that allows them to dip into any of those legs and receive value, discounts benefits, exclusive benefits, free shipping, whatever it may be, that we were going to start to attract a larger pool to our entire company base. And then we'll try to find things like credit card, like roadside, like insurance that are also common inside of that platform. I just couldn't figure out how to have that stool be 3 legs. Let me answer the second question. Let me answer that second question, which is we will continue to look for digital or strategic businesses that make those legs of the stools stronger. Anything that is accretive to the shareholders that add value to the Good Sam customer and that lay nicely into what we're doing will be our strategy. Digital is an important part of our business. And acquiring TheHouse and acquiring Overton's taught us so much about the opportunity at Camping World. And we've seen a nice growth at campingworld.com just scratching the surface. And so we're going to continue to look for digital opportunities in that regard as well. And you can tell how excited I am about this. Of all the years you've known me, I don't think I've ever been more excited about our business and the strength of adding value to the customer. I've never been more excited.

And we'll move on to Tim Conder from Wells Fargo Securities.

A couple of things here. First of all, I'll start out with a little housekeeping. Tom or Marcus, whoever wants to take this. The quarterly guidance, does that include the anticipated preopening expenses related to Gander?

Yes, it does. That's backed out of that number. So that's an adjusted EBITDA number.

Okay, okay. Okay. Just wanted to reconfirm. Okay. And then Marcus...

Can I just address that real quick? I'm sorry, I just want to add a little color to that if it's okay with you?

Sure.

The most important thing for us in this Gander Outdoors opening process was to get it right the first time and so many retailers are in such a hurry to open stuff that they end up signing up for leases that they shouldn't, taking on products that they shouldn't, opening at the wrong time, hiring staff that they shouldn't. And what I told the team was that we only have one shot to do this. And by getting the supply chain right and picking the right vendors and picking the right locations and really rolling this out as a nontraditional retail model with a heavy service component and a heavy Good Sam component. If it took a little longer and we used a little bit more of our capital, that would be okay with me because I'm a big believer that if we invest now like we did in the fourth quarter we are now in doing it right the first time, that will have an infrastructure that's built for the long run as opposed to everybody running as fast as they can to get top line. I was very clear with everybody that 2018 was the year that, that was all going to get built. And that I expected '19 to deliver real results. But we expect that there's a possibility that we'll see north of 100,000 Good Sam members added, it could be way more than that. And it could be as many as 50,000 to 75,000 new credit card files even though they're not all open. So when you measure the value of Gander Outdoors or Overton's, or Erehwon's, or Uncle Dan's or any of these, please always know that our primary goal is to build and grow our annuity business for predictable cash flow. And so please be patient with our opening schedule. This is not a race.

Okay. No, that's been -- no, very helpful, Marcus. And we were last week in one of the just recently opened stores. And the Good Sam signage, the linkage there, the Erehwon product, the Overton store in a store, everything was what you had laid out before. How you're going, how you're selecting product for the region and not something that previously was maybe purchased and expected to sell everywhere in the country. So all very evident in that store.

Thank you.

A question as it relates to parts and accessories. That store remains a challenge, it appears, for the industry. Are you looking to bolster this in any way, internally partner there? And then not exactly parts and accessories. But the recent JV that Thor did, how do you see that as maybe being a competition or being a partner or benefiting Camping World.

Look, we sell more recreational vehicles than anybody in America and we service more recreational vehicles than anybody in America. So we have a dog in the fight when it comes to ensuring that our customers have the parts needed for the repairs that their coaches demand. We still believe that this industry has a long way to go as an industry, not as Camping World or a manufacturer in rectifying this parts problem that we think has room for improvement. So that's first. Second, our goal at Camping World is to enhance and embellish the unit and the experience that the customer has when they buy from us and that's what's inside and outside the RV, which was really led us to the whole outdoor space, right? We want to get on our bike or go fishing. I think that any time companies can come together and form partnerships to create a better product for the consumer, ultimately, the retailer and the consumer win. And whether that is Thor doing it or Forest River or Winnebago, we're agnostic to who's doing it. What we have to do a better job of in our company, and I know that Roger works day in and day out with his team, is we have to come up with ways to shorten the repair time between the time a customer brings their coach in and the time they leave. And one thing that Roger has done really well is started to carry some of the faster-moving items on the repair side in an inventory manner. And so when you people talk about, "Oh, these guys are carrying more inventory." Yes, we're carrying more inventory because we want to grab share. We're carrying more inventory because we believe that the customer needs to be taken care of. And our return on capital for that investment is good customer service, less lawsuits and a return customer. But I feel as an industry, we still have a long ways to go, and product development is something that I think you're going to spend our company spend more money on in the near future. If we learned anything from the Gander and Overton's acquisition, it's that product development is a singular focus of a department, not an individual. And we've seen some of the things that they've done in the recent months that have really propelled us to believe that we should be more of a trailblazer in the RV space. And so you should expect more innovation and more creation and more sourcing and more development out of our RV segment in the coming years because we -- I take the blame. I probably didn't -- I probably wasn't creative enough and we've really acquired some great talent, and we think there's opportunity there. We won't be doing that with other people. We love proprietary stuff and we love to control the marketplace as everybody likes to criticize us for.

Our next question comes from Seth Sigman from Credit Suisse.

A couple follow-up questions from the quarter. So when you look at the used vehicle business, looks like it improved quite a bit. In fact, if you look at it on a unit basis per store, it looks like it was up for the first time in several quarters at least. Can you just give us a sense of what's going on there? And is this the start of a new trend towards maybe the used business picking up?

Yes, I don't want us to pat ourselves on the back. I know that Roger and the team are very critical of our performance in the used business. A couple of key things. I think the team has done a much better job of really creating trades. And what I mean by that is as we've gotten more aggressive in the new marketplace, we've been able to accumulate more trades. That's number 1. Number 2, we're probably starting to see the trade cycle that we love, the 3.5 to 4.5 years start to pick up a little bit. And then third, the bar was pretty low. And so it was always our expectation. And I think we called it out, Roger did a year ago, that we would start to see improvements in that regard. And so yes, but I would probably give us, and I think Roger would agree, I'll probably give us a B- with plenty of room for improvement, but we're heading in the right direction and there's a real focus on it right now.

When you think about some of the demographic trends that you've talked about and how that drives the new business, can you maybe speak a little bit about the demographic profile of the used customer and if that's different than what you've seen on the new side?

No, we typically -- that's a great question. We typically don't see much of a variance. But believe it or not, you really have to think about it by segment. So travel trailers typically skew a little younger. That's a first-time buyer. That's a hunter, a fisherman, somebody going with her kids for a soccer tournament like all of us have done. And so it's typically by category SKUs and it doesn't really delineate between new or used enough to really report anything. It's more by segment than it is by types -- it's more by types than it is by new or used.

And just one final follow-up. When you think about the guidance for the first half of the year, specifically the second quarter, seems to imply a pretty big acceleration in the growth rate for adjusted EBITDA from Q1 to Q2. Is that just Gander expected to ramp in that period? I know seasonally, it's a bigger time of the year for you, but just wondering what would be driving that.

No. Yes, I'm really glad that somebody pointed that out. We are not going to be giving quarterly guidance after this. And that's not our intention. Our business has historically always looked like this. First quarter, fourth quarter are usually pretty similar. And the second quarter and the third quarter are usually very robust. Yes, we're in the outdoor space. Yes, we're in all these other categories, but we are a RV and outdoor company. And at this moment in time, our revenue is driven by RVs and our cash flow is driven by Good Sam and RVs. And we hope that the other things over time help Good Sam become a bigger part of our business. The reason we got into the outdoor space is to grow the Good Sam EBITDA materially because nobody in our company believes that we would be able to grow it at the levels that we wanted to, at the pace that we wanted to, singularly with the RV space no matter how much the RV business grow. And we also didn't feel like we were tapping into the outdoor market enough. So the quarterly numbers that you've seen 70, in the low- to mid-70s, first and fourth quarter, those have been pretty consistent. And then it really takes off in the second and third quarter across all of our businesses. Particularly when I think about Overton's, Overton's fishing, marine, it's going to look pretty similar as well, right?

Ryan Brinkman with JPMorgan.

Can you give us a sense of the split of merchandise that you were offering in the Gander Mountain stores now just in terms of how much of that is the legacy Gander product versus maybe some of the more traditional Camping World wares?

Yes. So the new Gander box that used to be 100,000 square feet now averages right around 40,000 square feet. And the way we want people to think about that box is 3 distinct business units in one box. So historically, Gander was skewed hunting and apparel. And what we've done now, and the team has done remarkably market-by-market, is literally split the pie into 3 pieces. A massive fishing and marine store by using our historical Overton's database and data on sales. Big fishing departments, live bait. I mean, all the things that you could think of to directly compete with a company that used to -- that did this that used to be public. That is our -- that's our target audience in that regard. The second pie is really understanding that active lifestyle customer, that younger customer. Hiking, biking, kayaking, paddle boarding, skateboarding, skiing, snowboarding, all of those things that are more active sports. And it's merchandised appropriately for the market. As part of our house acquisition, TheHouse.com, we acquired a bike manufacturer that was inside of their company. And so we're obviously going to be driving our own bikes and vertical bikes called Framed, through our distribution model. And then the last third is the historical Gander business, which was archery, hunting, the firearms, all the things that are inside of there. But the historical Gander business is really significantly less than it used to be because we want to be a marine superstore and an active lifestyle superstore as well.

Very interesting. And then just lastly for me. As you do grow your outdoor business, which, in my mind, it sort of compares more to the Camping World sort of retail store concept. Has there been any consideration to potentially create parallels to the other parts of your business? For example, by retailing, I don't know, other types of outdoor vehicles such as those used by sportsmen or boaters, or maybe creating membership organizations or organizing trade shows for those other markets, et cetera, et cetera?

So that we have -- so we have a trade show organization today that is very profitable, has historically been in the RV space. We've now expanded it into other outdoor lifestyle products. And we're looking to make acquisitions of other ones as well. In terms of clubs and organizations, we're really to trying to take Good Sam and pivot it to be an outdoor club, not just an RV club, really making sure that our current outdoor -- our RV customer has everything they need. Plus, because of their loyalty and because of what they've done for us, give them access to all of these other things. From a trade show standpoint, from a membership standpoint, we've learned through the Overton's and Gander process that there is an opportunity to do some grassroots marketing at the local level where with some youth archery clubs, some local biking clubs, some local kayak clubs, those are all things that we never really even thought about before and we're learning. And I think that we're going to learn how to extrapolate that into our RV business. And so that's part of the acquisition is what we've learned. But all of that stuff is happening at a grassroots level. Both their social media, their community involvement and sponsorships and how they activate at the local clubs. We are not a national company. We are a local company that happens to have stores across the country.

(Operator Instructions) We'll take our next question from David Tamberrino from Goldman Sachs.

Got a couple of questions here. So first on the top line guide for next year. So just to aggregate on some of your comments from earlier from an inorganic add perspective, call it, 6 stores, average $30 million revenue, 11% gross for the Good Sam business, another $20 million in revenue and maybe another $360 million from the acquisitions from this year. That's $400 million minus $40 million or so you reported this quarter. But only leaving about 1% revenue growth in your base business, call it core RV. I know you said you're expecting it not to grow as much as it had in the past couple of years, Marcus, but just wanted to send how conservative that guidance really is.

I -- you guys have been with me in this environment for a year now. I'm a "put up what you can absolutely do and you better darn well deliver" kind of guy. I know that we have to report it in the segments and everybody does the math the way you just did it. But we wanted to pick a revenue number that we knew we can hit. But more importantly, that does not steer us away from our focus on profitability. We're not going to make acquisitions just to hit top line. We're not going to open stores just to hit top line. We're not going to do anything just to hit top line. And everybody laughed at me on the roadshow, I don't care about revenue. It was our goal over 1 year ago to get to $400 million. We fell like $300,000 to $400,000 short. It is our goal to continue to focus on profitability and to continue to return on -- get a return on capital that is, what we think, what maybe we define it as world class. So top line may come. But what I'm really focused on is how do I beat $435 million to $440 million? How do I do that in a way that doesn't compromise our inventory, doesn't compromise our customer or our staff? And I know that's probably not what the marketplace wants to hear, but if I make an acquisition that does $5 million in revenue and makes $1 million, that's more important to me than $10 billion that makes $1 billion. So Tom was very good at getting me harnessed to give him a revenue number with the team. But my number that I want you to focus on is how's Marcus and the team going to get to $440 million. That's our goal. And that may not be, Dave, that may not be the answer you want, but that's -- ultimately, that's how -- everybody that you represent, everybody that I work for, the shareholders, that's how they get paid.

I understand and I appreciate your comments and the thought process, Marcus. And my next comment or question actually goes in that line of thinking is, you're doing 9%, 9.3% EBITDA margin is essentially what that guide is. During the roadshow, during the diligence process, you're talking about targeting 8% targeting EBITDA margins. We're 100 basis points plus above that today. How much further can you go from there? Can we get to double digits all in after the Gander stores have launched and lapped the full year?

I want to be very careful because I think there's this fine line between growing the file, which costs money to do, and returning value to the customers, which is an absolute must with staying competitive in a digital marketplace, which means there's -- there are always the risk of margin compression, and launching new brands, which costs money. And there's this internal debate that is, unfortunately, me against the world sometimes, where people think we're spending too much time focusing on EBITDA margin and not enough time focusing on growth. I -- we're trying to find this happy medium. I'm going to stick to my 8% number because I know that you guys will hold me to it. And I know that the management team is also trying to drive me to that number. But I really, as the largest shareholder on this call, like the return on capital. And I'd like to be #1 at everything that I do and being 9% is pretty damn good. And do I think we can get to 10%? I do. Everybody else thinks I'm crazy. We'll have to really execute at the credit card and the club at Gander and Overton's to get to 10%. I mean, you don't have -- we'll have to be -- we'll have to really kick some butt because that return on capital is so strong. And then we're going to have to take that file and sell products to consumers that add value to their lifestyle with high margins as well. The question is can we execute that? I think we can. But if I'm being asked to give you a projection, you know that I will, Dave, it's 8%. That's my number.

Completely fair. Along the lines of the incremental Good Sam business, can you walk us through how many new unique customers you've acquired over the last year from Gander, TheHouse.com, W82s, the rest of acquisitions, kind of what was your year-end 2016 active customer size? What is it at year-end 2017? And what's the conversion rate that you're assuming to get that 11% growth from the low- to mid-single-digit growth that you're seeing in revenue for Good Sam this past year?

So I don't have the file size. Tom, do you have the ending file size for '17 handy?

Yes, the actual file size is 1,795,000...

At the end of the year? Tom, at the end of the year?

At the end of the year.

I would tell you that those businesses that we acquired added nothing to that number because we didn't have the e-commerce infrastructure or any stores open to actually even be able to sell any of it. And so while those acquisitions came in, in the fall, I wish we were as good as Amazon where we have the lockbox at Whole Foods tomorrow. But we did not and we really just started that process in January. So the growth of the file in 2017, Tom, what was the growth percentage in '17 from '16?

About 4%, 4.5%.

Right. So that's on the pure historical base of business. I'm telling you that we're going to be plus 10%. Because I -- and you know again that I'm conservative in that regard. As these stores open, our management team at Overton's and Gander have been unbelievable. We're now starting to roll it out over the next 4 months in these other businesses. I'm confident that we're going to be plus 10%. And again, I'm hoping for more and maybe on the next call, we'll be able to give you more guidance on that as we roll stores out.

Okay, I appreciate that. Last question. Are there any headwinds to the new RV business from an increased supply of used? And what is the F&I attachment rate for used versus new? I ask this because if you think about the traditional auto business, which you're not, but the traditional auto business, you have increased supply of used, there is a little bit maybe 10% of customers that might be diverted away from a new car to a used. And then on the F&I side, there's a couple of $100 gap between what you can upsell a new customer versus used. So I just want to understand those sensitivities and how you're thinking about those 2 businesses as used cycle kicks in.

Hey, Roger, are you on the call, bud?

Yes, I'm here, Marcus. And thanks, David. I don't know at this point that we -- we don't perceive any real headwinds from the modification of used or the increased availability. It has come back around in the last 3 to 3.5 months. Perhaps that might happen. I wouldn't be surprised if once that supply is back in there, that there was a little bit of a -- maybe a little bit of cannibalization on the new by the used when we have that increased supply. But our focus really isn't about how much new and how much used, it's do we get to sell where the opportunity is and we make great margins on the used as well as we do on the new? And the F&I attachment rates that we have, if you're just looking at financing, just the financing piece, a little on that, we're sitting about 80% attachment rate on the new units and we're sitting just over 64% on the used.

Got it. Is there -- I can do math in trying to figure out a dollar amount. But is there a dollar amount that you'd kind of point us to as the variance between new versus used?

Roger, I don't think it's very much, is it?

Well, the way we look at that, we don't really look at that as a dollar amount per unit because of the mix that we have can skew that. That 10% factor that we look at there as a percentage of the retail sales, that we're a little higher on new. We normally see probably in the 10.5% to 11% at that percentage of net (inaudible) that on a new side and probably around 8% to 8.5% today on the used.

And thank you for pointing out that this is not the car business, I think the auto manufacturers that are public would love to have our margins and our attachment rates. So thank you for separating us from them.

And our final question comes from Jim Chartier with Monness, Crespi, Hardt.

I just wanted to clarify. Do you expect the Consumer Services and Plans revenue be considered to grow 10% to 12%? Are you talking about the customer file?

The Good Sam Club file. And so that is a club where people pay $27 a year to belong.

Okay. And how do -- so how does -- how do you cross-sell those people over time? Does the revenue for that Good Sam Club customer increase over time as you have more opportunity to sell them additional products?

It does. Yes, that's a great question. So as we bring people into the file and we nurture them and we know more about them, and we understand their lifestyle, we then proactively go out and sell them only products and services that we believe enhance what they have. So whether it's get them a better rate on boat insurance or get them a better deal on a hiking trip or whatever that may be, we only sell them those products and services, roadside assistance, warranty insurance. There's about a 6 to 12-month lag time between the time they come into file and when we really can start to see their revenue grow, their contribution as a member grow. And so if we see 11% this year, we hope to see a similar growth in the following year. And then it starts to compound. But one of the things that it's important to note, every Good Sam member does not necessarily buy all of the products and services. Some may take one, some may take 2 or 3. The best ones are the ones that take 1 to 2, but they have the best performance. But there are some Good Sam members that just buy the club for the discounts, the exclusivity or the access to something, and they don't necessarily buy other products. They may have a brother who has insurance. And if they don't -- they are wealthy enough to not want to buy a warranty. And so we -- there isn't necessarily a direct correlation. But the growth that we see in the consumer products will usually, slightly by 6 to 12 months, lag behind their entrance into the file.

Okay. And then on the new dealerships, how many of the 72 Gander stores do you expect will have a dealership attached to it upon opening or over time?

Yes, over time, Brent Moody's and my and Roger's goal was to get to close to 10. Some of those deals fell off, new ones got added in. I don't think we're prepared right now because we're still negotiating some of them to commit to anything and give up our leverage. But our goal is to have some.

And there are no further question. I'd now like to hand the call back over to Mr. Marcus Lemonis for closing remarks.

Great. Well, thank you so much for those of you that joined. You can tell from the tone of our voice how excited we are about where we're heading in this company. This is -- we're building a company for the future of the outdoor space, not a company for today. And so be patient with that growth. And remember that the Good Sam Club and the Good Sam file is why we do all of this. So thanks for joining, talk to you soon.

Thank you.