Q1 2021 Winnebago Industries Inc Earnings Call

[music].

Ladies and gentlemen.

Thank you for standing by and welcome to the first quarter 2021, Winnebago Industries earnings Conference call.

At this time all participant lines are in listen only mode. So if you require operator assistance. Please press Star then zero.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press Star then one.

Please be advised on today's conference maybe recorded.

I'd now like to hand, the conference over to your host today Mr., Steve Stuber, Vice President Finance. Please go ahead Sir.

Thank you will.

Good morning, everyone and thank you for joining us today to discuss fiscal 20 2021 first quarter earnings results I am joined on the call today by Michael Happy President and Chief Executive Officer, and Bryan Hughes, Vice President and Chief Financial Officer.

This call is being broadcast live on our website at Investor Day, W.G.O. Dot net and a replay of the call will be available on our website later today. The news release with our first quarter results was issued on posted to our website earlier this morning.

Before we start I'd like to remind you that certain statements made during todays conference call regarding Winnebago industries and its operations may be considered forward looking statements under securities laws. The company cautions you that forward looking statements involve a number of risks and are inherently uncertain and a number of factors many of which are beyond the company.

These control could cause actual results to differ materially from these statements.

These factors are identified in our SEC filings, which I encourage you to read.

With that I would now like to turn the call over to our President and CEO, Michael Happy Mike.

Thank you, Steve and good morning, everyone.

I hope those joining us today are having a safe and healthy start to this holiday season.

We know this is a busy time of year and we greatly appreciate your interest in Winnebago industries and for taking the time to join us.

I will start off the call. This morning, with an overview of the key drivers of our first quarter performance.

Before turning it over to Brian Hughes, who will discuss our financial results in more detail.

Then I will offer some closing thoughts and we will conclude with a Q on a session.

In short window.

Winnebago industries had a fantastic first quarter Mark.

Mark in a very strong start to what we expect will be a remarkable fiscal 2021.

We gained RV market share.

Through our consolidated top line by approximately 35%.

Expanded gross margins 390 basis points and grew operating income 256%.

None of this would have been possible without day exceptional work of our World class Winnebago industries team.

And I am Bryan I want to thank them for their continued commitment and dedication.

There were three key drivers of our performance in the first quarter that I will expand upon today.

These include number one the continued strong end consumer demand, we're seeing for our outdoor lifestyle products number.

Number two winnebago industries unmatched portfolio of leading brands and new product innovation.

And third our commitment to driving operational excellence.

On our fiscal 2024th quarter call, we spoke about how the pandemic spurred consumers to combine the imperative of the safety of their families with their strong desire to be immersed in the experiences they could control and consequently, they continue to flock to the outer.

So a recreation lifestyle our products offer.

The expanding appeal of the outdoor lifestyle has contributed greatly to the momentum we have established in recent quarters and.

And will be essential to our success in fiscal 2021.

We continue to be very pleased with the strong retail growth, we see across our portfolio.

On a trailing three month basis as of October 2020, our consolidated RV market share is 12%.

Plus 120 basis points over the same period a year ago.

Of which 70 basis points represents organic growth.

Drivers of this continued growth includes our towable segment, driven by our Grand design, RV fifth wheel and travel trailer products.

Our extensive class B Winnebago branded motor home lineup.

And the new Mark class a motor home products.

I recently reviewed our RV retail comparisons for the first half of December 2020 versus a year ago and can assure you that our retail momentum is still strong and consumers continue to shop and buy arby's.

A survey we commissioned in November the Padilla Spotlight survey illustrated just how widespread the draw on the outdoors has been this year.

In calendar 2020, 68% of American consumers under the age of 55 participated in an outdoor activity such as camping boating hiking at a location away from their home or visiting a state or National Park over.

Overall, 60% of the US population pursued an outdoor activity and 20 in 2020.

And for 31% of those consumers. It was their first time participating in an outdoor activity.

We are excited about the thousands of new consumers, who have joined the RV on marine lifestyle over the last several months. In addition to helping drive the growth we have seen.

These new entrants join a community of RV consumers, who upgrade every three to five years, providing an important source of future growth.

The second major driver of our performance in the first quarter was the strength of our unmatched portfolio of premium outdoor lifestyle brands.

Over the past several years Winnebago industries has strategically expanded our offering beyond the iconic Winnebago brand.

Bringing on Grand design, Chris craft, and most recently, new bar, which celebrated its first anniversary as part of the Winnebago industries family on November eight.

Each of these unique brands are tied together with the Golden threads of quality innovation and service.

We have maintained our commitment to investing in each of our premium brands to ensure continued innovation that resonates with end consumers.

We are pleased that our brands aspiration on positioning and appeal have enabled us to capture motor home and towable market share gains once again.

The many design changes and feature upgrades made in calendar 2020. In addition to key product launches continue to fuel our growth.

When a mega brand and motor homes introduced the class B solus the.

The class a diesel journey and the compact classy echo.

The many redesigns within the Grand design RV lineup and the introduction of the transcend explore travel trailer will drive further market share gains.

Winnebago branded Towables introduced the height and all terrain travel trailer that features a patented exoskeleton.

Nu Mark continues to gain share in the class a motor home segment with new innovative products and features included and coaches such as the popular Canyon Star introduced in spring of 2020.

And lastly, Chris craft momentum continues as well driven by the 35 foot Calypso introduced in summer of 2020, and the 24 foot Calypso recently introduced this fall.

Looking forward I am energized by the fact that we have a very active new product development pipeline.

Extensive new product development is not only in the business as mentioned above but also in our specialty vehicles business unit, where we continue to sell our all electric class a product in the market today for many specialty applications.

Our RV industry, leading knowledge of these alternative power systems and the critical integration required with various subsystems is informing and benefiting and active product electrification roadmap that has been and continues to be in progress across our RV platform.

Finally, the third key driver of our first quarter performance was operational excellence, reflecting the incredible work of the Winnebago industries team.

Deeply believe that our people differentiate winnebago industries more than any other factor there result through historically difficult times their flexibility and their determination to advance our business through strong operations isn't during source of price.

Numerous cost saving and productivity initiatives, taking place across Winnebago industries enterprise are starting to positively impact our results, enabling higher levels of sales and profitability.

In the Winnebago branded motor home business, we continue to drive manufacturing efficiencies through continuous improvement activities relocated diesel operations from Oregon, The Iowa.

We also moved to a fully make to order business model and rationalize the portfolio to exit less profitable brands and revenue streams.

Related to the new our acquisition, we are well on track to deliver the committed annual synergies that will be fully realized in fiscal 2002 and beyond.

And finally, our enterprise operations organization, and specifically the corporate strategic sourcing team continues to deliver value by leveraging our ever growing scale and successfully navigating us through significant challenges such as tariffs and increased demand for.

Our partners are feeding our manufacturing campuses as effectively as this dynamic environment allows.

Before I turn the call over to Brian I wanted to mention that earlier. This month Winnebago industries unveiled a refreshed corporate enterprise brand and a new tagline be great outdoors.

This reinforces that while our company has made up of many great brands, our core values on foundational strength to create a company stronger than the sum of its parts.

Much more than a new look I believe our corporate enterprise brand identity will further inspire and unite our team around a common spirit of delivering extraordinary experiences to everyone. We serve.

With that I will turn the call over now to Winnebago Industries, Chief Financial Officer, Bryan Hughes Bryan. Thanks.

Thanks, Mike and good morning, everyone.

First quarter consolidated revenues were 793.1 million, an increase of 34.8% compared to $588.5 million for the fiscal 2020 period.

Revenues, excluding neumar were 674.4 million, reflecting an increase of 22% compared to the fiscal 2020 period, driven by continued strong and consumer demand.

Recall that our prior year Q1 included roughly three weeks of Neumar result, post the closing of that transaction and so therefore, the 22% organic revenue we are disclosing excludes newmark sales in their entirety from both this year and last year.

In future quarters, we will no longer be seeking to reported versus organic sales in so far as it relates to new Maher.

As a reminder, 100% of Neumar is reported in the results of our motor on segment.

We achieved very strong profitability in the first quarter fiscal 2021 gross.

Gross profit margin increased 390 basis points to 17.3%, while adjusted EBITDA margin increased 420 basis points to 11.3% compared to 7.1% for the fiscal 2020 period.

This significant margin expansion was driven by operating leverage improved pricing, including lower discounts and allowances.

And motor home segment productivity initiatives.

Reported earnings per diluted share were $1.70 per share compared to reported earnings per diluted share of 44 cents in the same period last year.

Adjusted earnings per diluted share were $1.69 net Bruce quarter, or an increase of 131.5% compared to the same quarter in fiscal 2020.

Consolidated adjusted EBITDA was $89.3 million for the quarter compared to $42 million last year, resulting in an increase of 112.4%.

The increases in both adjusted earnings per diluted share and adjusted EBITDA were driven by strong unit growth across the RV portfolio, lower discounts and allowances pricing actions and productivity initiatives and the motor on segment and the addition of new more in the case of EBITDA.

No debt adjusted EBITDA and adjusted EPS excludes the impact of a $3.6 million net gain from the sale of a portion of our junction city, Oregon Acis and that this gain is adjusted for in the motor home segment as well as our consolidated result.

Now I'll turn our to our segment performance starting with towable.

Revenues for the Towable segment were $454.9 million for the first quarter up 33.3% over the prior year driven by strong end consumer demand for our Grand design on RV and Winnebago product line.

When available industries unit share of the North American total market in the trailing three month basis through October 2020 was 10.9% or an increase of 80 basis points over the same period last year.

Segment, adjusted EBITDA margin of 13.9% increased 340 basis points.

Primarily due to lower discounts and allowances and operating leverage during the quarter.

Next let's turn to our more on segment.

In the first quarter revenues for the motor home segment were $322.4 million up 42.7% from the prior year driven by the addition of new Maher and strong Winnebago class D products as evidenced by our classy rolling three retail unit market share of 49.6%.

Through October 2020.

Excluding nu Mark on this year and last year's results segment revenues were 203.6 million, representing an organic increase of 7% over the prior year.

Adjusted EBITDA margin increased 530 basis points to 9.4% driven by pricing actions.

Productivity initiative operating leverage and favorable mix.

Motor home productivity initiatives are driven by the savings associated with the closure of the junction city, Oregon facility the transition to a make to order business model on the Winnebago branded motor home business as well as several other operating improvements and lean activities that our business has pursued in the past year, but also has been working to transform the operational.

None of this business for the past three plus years.

While we are anticipating inflationary pressures and are always conscious of competitive pressures that may weigh on our net pricing equation as well as some lingering supply chain inefficiencies. These benefits as mentioned should provide a level of sustained profitability that is notably above the 4% to 5% yield and EBITDA debt.

Segment has generated over the past three years.

We are pleased to see this meaningful improvement.

Now turning to the balance sheet.

As expected our leverage ratio net debt to adjusted EBITDA continued to decline and is now 1.5 times at the top end of our targeted range of 0.9 times to 1.5 time drew.

Driven by strong EBITDA generation, and a cash balance of $272.9 million.

Total liquidity, including our untapped HDL is now approximately $465 million.

Cash flow from operation was an outflow of $2.7 million in the first quarter of fiscal 2021.

While profitability was strong in the quarter. This was offset by increases in working capital most notably in inventory at levels have increased as a result of on supply chain and consistent fees and also in response to the high growth in sales, we are seeing related to various on dealer orders and our heightened backlog position.

We continued our disciplined approach to capital allocation during Q1 investing in our businesses to deliver new and innovative products that drive organic growth.

Accumulating and maintaining cash balances in a manner that allows us to return to our targeted net debt to EBITDA ratio.

Maintaining a healthy liquidity position.

And returning cash to shareholders.

During the first quarter, we returned $10 million to shareholders in the form of share repurchases, we paid a dividend in Denver.

And earlier this week on December 16th our board of Directors approved a quarterly cash dividend of 12 cents per share payable on January 27 2021.

That concludes my review of our quarterly financial and with that I will now turn the call back to Mike to provide some closing comments Mike back to you.

Thanks, very much Bryan.

I would like to provide a bit of color on current industry trends and our confidence looking to the remainder of the 2021 fiscal year.

We ended the first fiscal quarter with exceptionally strong retail momentum and record backlogs in our motor home Towables and marine businesses.

With the second fiscal quarter underway, we are seeing that the typical seasonality of our business is more muted than normal as strong demand is continuing into the holiday season and dealer inventories remain extremely low.

In our fiscal 2021, we believe industry retail will grow in the mid single digits and while industry wholesale shipments will grow approximately 30%.

Note that our fiscal industry wholesale shipment projection considers and aligns with the RV I a calendar year 2021 industry forecast of approximately 20 plus percent.

We support the RV industry Association forecasts and have a growing view that it could be increasingly conservative as retail trends continue at elevated levels and the supply chain raises its output.

Our performance in the first fiscal quarter demonstrates the Winnebago industries is well positioned to continue to execute on our enterprise strategy on building a premier outdoor lifestyle company.

And maximizing value for our end customers dealers employees and shareholders.

As I mentioned earlier, we are confident that the favorable dynamics in the market as more Americans discover the wonder of the outdoor lifestyle will persist and continue to drive share gains and strong performance throughout the fiscal year.

In addition to the strategic and financial value creation, we constantly work towards Winnebago industries is also deeply committed to creating value in our communities.

Earlier this month, we released our second annual 2020 corporate responsibility report.

Outlining our environmental social and government performance progress and the key elements of our coal that 19 response.

The unprecedented events of 2020 signed an indelible light on significant challenges, we face as a society and the requirements of corporations like Winnebago industries to show up for our people and communities.

This includes prioritizing above all else their health and safety and ensuring we cultivate a diverse and equitable environment in which all members of Winnebago industries feel a sense of belonging.

I encourage everyone on this call to spend some time with our detailed corporate responsibility report. In addition to the continued progress we made in minimizing waste exploring alternative alternative energy sources, and reducing our safety incident rate what I'm. Most proud of is the way Winnebago industries on our employees stepped into.

We care for our communities customers and each other during this very challenging year.

Our deepest hope is that the 2021 calendar year brings greater certainty unity equity health and safety.

Our commitment to advancing these ideals will continue.

In addition to a steadfast focused on ESG throughout the remainder of fiscal 2021 day Winnebago industries will be focused on loans, maintaining our strong market and financial momentum we.

We are confident that the favorable market dynamics and the unique appeal of our products and brands will continue to drive market share gains and strong financial results.

Along with all of you Winnebago industries is cheering for the science and the healthcare communities, leading the charge to ended this tragic pandemic and distribute vaccines as quickly and safely as possible.

We are also deeply grateful to the frontline workers in our communities who continue to fight this virus each day.

That concludes our prepared remarks this morning. Thanks.

Thank you for your time I will now turn the line back over to the operator to take questions.

Ladies and gentlemen, if youd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.

To withdraw your question press the pound key.

Our first question comes from Craig Kennison with Baird. Your line is now open.

Good morning, Thanks for taking my question I wanted to ask about the motor home performance on that.

EBIT margin is really astounding here on its going to be tough for us to model going forward I think but maybe you could just walk us through the puts and takes of that significant increase and then shed any light you can on how sustainable it may be.

Yes, good morning, Craig.

Thanks for your question.

As you and probably others on the call no we have been working extremely hard for several years.

To improve the market and financial performance in the motor home business.

And while we think there is significant runway ahead of us in both the Winnebago err on the new more brands. We are pleased with the performance of that business in recent periods and especially the Bottomline performance, which we're able to share with all of you today there.

Theres been a lot of work being done in terms of operational productivity driving efficiency out of the business.

Rationalizing and improving the product line strengthening dealer relationships and innovating in emerging markets such as the class B Van segment.

And I think this cash.

Quarter's results in addition to obviously on.

The inclusion of numerous results.

It will reflect a more.

The momentum that we feel is starting to build in that segment Craig.

Craig I will turn it over to Brian to give you some more color, though on some of the specific.

Elements of the margin accretion that you saw.

Thanks, Mike.

Craig we've talked a lot about the variety of decisions that we've made over the years, we referenced on the call. The day in fact, the closure of the West coast on.

The flow production and moving that back to northern Iowa.

And some of the product line rationalization, an emphasis on innovation on the rebel of the class B line up more broadly speaking, it's not just the level of several products now and I think the echo on comp.

On pack classy cash.

Continues to reflect that innovative spirit and capability of the Winnebago motor home team.

And it's also a on some of the you know the lean philosophies that the team has dropped to the.

Lay out the space utilization.

In northern Iowa looks very different today than it did on.

Three years ago, even they've gone from three production line on down to two production line and increase the throughput change the flow of material pretty significantly.

Just had a couple of examples just in fiscal year 20, they had over 100 I call it meaningful cost savings initiative.

That drove some savings. This is a couple of examples in our class B facility.

Which is in Lake Mills, Iowa.

We used to outsource on recovering of feet.

From the chassis that came in we figured out a weighted reconfigured our line make it more.

Effective and efficient from a space utilization perspective, and we in source that recovering on that project alone. They we think 300 $350000.

We invested in a CNC machine.

Instead scrap and Insource. Some additional work there that project to probably $400000 on savings, but over 100 of these projects that.

The team executed just in fiscal year 20.

And these activities are what we are starting to see now materializing the result.

Could we saw an improvement as you probably noted in Q4.

In the margins of EBITDA margins and then we saw another nice increase in Q1 here now it's not to say that we won't face. Some headwinds of course had we know that theres some moving inflationary pressures.

And just as an example.

We think that the supply chain has done a nice job on our of.

On serving the industry, it's been challenging ramp up they are dealing with all the cobot impacts like every other company, but overall, they're doing a very nice job on our supply chain team internally you that Mike referenced is likewise on doing a great job. So hopefully that helps provide some color Craig to you know why.

We're seeing the improvements here in Q4, and now Q1 and why we.

Or raising our expectations I guess going forward.

Yes, Thats terrific helps helps a lot and then just one follow up just in terms of retail on to what extent are you shipping units today than our pre sold by dealers you know, making it that much harder to restock the channel. Thank you.

Craig I think the number one issue in.

Preventing us from restocking in the channel at the levels that we prefer to is the retail activity in the market and the dealers continue to see strong traffic even as the fall has turned into early winter here.

And as I mentioned in our prepared remarks, our retail results in early December here are quite positive.

So.

We really can't tell specifically, how many of the orders our dealers have placed with us on our pre sold in all of our businesses on Neumar and Chris craft have better visibility to some of that because of the customized.

Nature of some of their products, which are configured specifically for certain end consumers, but we do believe that a number of dealers have retail orders in hand.

And they are simply waiting for delivery of those products when they hit their lots for those consumers, but above and beyond that we believe that consumers in the outdoor spaces continue to shop for our views on boats and.

On that you will see elevated retail.

You know for probably some time here.

And so I think thats on probably biggest headwind to building back the dealer inventory is ultimately trying to get that wholesale shipment number to keep.

Exceeding retail at a consistent clip Bryan mentioned and I mentioned in our comments that we feel.

You know much better about the supply chain.

And the ability of the supply chain to keep up with our future manufacturing forecast and production schedules.

So yes, our field inventory is so low.

We we work on that every day with our dealers to try to prioritize and make sure the product is going to the right place.

But we are we.

We continue to increase output.

To try to address that for the rest of fiscal 2021.

Great. Thank you.

Our next question comes from Scott Stember with CL King Your line is that will be.

Good morning, guys and congrats on a great start to the year.

Thank you Scott anymore.

I'm going back on the supply issues. It sounds like obviously sequentially things are improving is on one side of the business that's feeling it a little bit more whether it's towables.

Chris craft or more on.

Yeah, Good morning, Scott.

I would tell you there is only one business in my opinion, which saw a.

A material impact due to the supply chain in our fiscal 21 first quarter and that was newmark newmark.

Neumar did have.

A particular challenge with a vendor on.

On some critical components and that did not allow us to reach our shipment potential in that quarter.

Have been working extremely diligently with this specific supplier on.

On their challenges on their constraints and we will most likely continue to work through this issue for our fiscal 21 second quarter, but we see things normalizing there in the back half of our fiscal year low.

On an all other businesses.

Day to day, we're always managing and navigating.

The timeliness of the delivery of the components.

What I have been telling people here recently is that our supply chain challenges have been impacting process.

But not results here in the last 90 to 100 days.

It is definitely causing us to do some rework or some workarounds in our manufacturing process, but our teams are heroically doing wonderful work ultimately still to get the products completed in a high quality fashion and out the door.

So by and large we are we're navigating it pretty well.

Got it that's great and going back on motorized.

Your backlog is up tremendously and obviously some of those new Mark can you, maybe just talk about the organic backlog or non.

Non new more backlog, just trying to get a sense of how.

How somebody these newer products in my class C. Echoing some of these other items.

I'm just trying to get a sense of what we can expect from a shipment.

Perspective, as we go forward.

Yeah. Thank you Scott appreciate I appreciate the question.

We obviously, we won't share specific numbers with you on on any particular product, but we are seeing a strong backlog on the winnebago branded motor home business.

And to be fair, we are seeing strong backlog on the neumar business as well, but the Winnebago brand as Bryan mentioned that I mentioned as well in our prepared comments has.

Has introduced some really nice new products as of late a.

Further models and floor plans on the solus.

And next generation versions of the rebel.

A new class a diesel product called the journey.

In this compact classy called the Echo, which we are extremely excited about and so.

We have seen dealer receptivity to those products and candidly just the momentum that we have.

On the marketplace continue to increase.

So yes, we are we are pleased with the backlog on our motor home segment.

On both brands.

But especially the Winnebago branded motor home business, which as we've talked about we've been working on.

So diligently for the last number of years to restore some vitality to that business and listen we'll stay humble and paranoid, but we are optimistic about some of the momentum that is beginning to.

Present itself in that business.

Got it and just one quick.

Last question.

On the.

The stickiness of new customers coming into the outdoor market.

As the cobot vaccine works its way into the population just just talk about your expectations there.

Scott, We certainly understand why people would ask that question and we want to be clear that we're rooting for a vaccine as hard as any other company in the world and we want to see.

The vaccinations happen effectively and quickly so that.

Many things can return to normal, including some of our own physical operations as well that being said.

I personally believe that 2020 was only the first wave of new customer interest on the outdoors that you'll see and you will see another wave in 2020 watt.

Family, certainly flocked to the outdoors in 2020 because of the safety the day desired because of a lack of other activities that they could invest in but we are seeing increases in interest before the pandemic Andy on multiple customer segments younger buyers more diverse buyers.

People using our products for debt work or use cases that we've talked about work from anywhere.

We simply believe that there is a non-GAAP net positive interest in rvs and candidly voting on that even as vaccinations unfold across the country.

That there will continue to be retail momentum in the market for some time the comp and.

Often times I ask people that asked that question not to you. This morning, Scott, but to others will have you RV lately and have you been on the campgrounds talking to people about why they RV and they're not RV because there's not a vaccine there are volume because they love it.

The other thing that we're obviously optimistic about is that the wholesale environment for our business for we believe fiscal 21 in fiscal 22 for sure should be positive as well we believe it will take.

Literally until the end of fiscal 2022 in order for inventory levels at the dealers to return to turn rates that they desire and so we will be working obviously hard to fulfill that demand as much as we can.

Got it sounds very helpful. Thanks, guys.

Thank you Scott Thanks, Scott.

Our next question comes from Garrett Johnson with BMO capital markets. Your line is now moving.

Great. Thank you good morning, Hi, I have two question.

And the related to expenses insist on sustainability first of all on gross margin can you quantify or try to quantify the EBITDA squeeze impact from lower discounts because I think investors out there assume at some point simple normalized we'll get back to normal through situation on news.

Allowances and discounts will come back so first of all what he wouldn't the impact on on gross margin year over year from lower discounts allowances.

Yeah, Garik I don't think were going to give a quantified answer to that.

I would say that it was certainly a material.

Material contributor to the improvement.

You can't just point at the market in my opinion as it relates to that and that it will do.

Dissipate or go away.

As you said markets normalize I think some of that certainly also driven by innovation by product mix.

You know the quality of the product and kind of the.

Underlying improvements that we're seeing there so I hesitate to provide a quantification of that for several reasons, but it's really more for that latter part of my answer which is yeah. I don't want people to assume that it's just going to dissipate or go away when the market normalizes.

Go beyond that.

Recent push.

Okay. Those are all fair points appreciate that Bryan then on SDMA, there's got to be.

Some extra day, that's that's disappeared in this quarter shows open house travel things like that.

How much have you benefited from from that and then how much of that should come back at some point in the future because I think we will probably have an open house next year hopefully.

Yeah, I'll start with just a couple of reminders first last year's Q1, you might remember had transaction costs in it.

And so <unk> of $10 million, that's certainly influence last year's number.

Be mindful of that also this year includes industry M&A that gain on sale.

And so be mindful of that as well as you analyze DNA I agree with your comment though that.

Our company as low as I'm sure most companies are seeing some on.

Different spending patterns in the area of.

On more discretionary spending whether that be travel Nielsen entertainment other events that we.

We are all doing virtually instead of in person and that contributes to a savings as well and so on.

How much of that.

Returns when we get back to call. It a normal I think will depend company by company and what that new normal does look like I think will.

Expect to hang on to some of the the synergies, though the the savings that we've realized but hopefully that color helps you.

Think about the numbers.

Okay, great. Thank you Bryan you might.

Okay.

Our next question comes from Mike Swartz with Truest. Your line is now open.

Hey, good morning, guys.

Just a question on on gross margin in the quarter, 17% I think that might have been a record for the company I'm going to continue at night on my numbers back a decade plus so.

So I guess, how do we think about that number going forward and I think Mike you've been made made reference to you know seasonality is change there's not as much. This year. So just in terms of overhead and in some of the things you've laid out.

17%, a good number to use on.

Going forward.

Well good morning, Mike.

We are extremely pleased with the number you that you referenced and we recognize though that each quarter is a little bit different certainly because of seasonality and because of the rhythm of the business.

But.

[laughter] in on probably answer this on a different way than Bryan was I have high expectations that our teams will continue to.

Search and drive for.

Improved profitability in each of their businesses, while continuing to compete effectively for market share.

We have still not probably ever shipped the perfect unit, nor have we probably ever created the perfect.

Business environment in order to optimize our efficiencies and so we.

We are extremely pleased especially with the motor on market segment margin segment on its margin but.

But that being said I can look into that business and see countless opportunities to.

To continue to improve that in the future. So there are things we can control and then there are factors, obviously that we can't control, whether it's inflation or.

Competitive activities or the like so we believe we are raising the ceiling on on profitability within our business because of the investments we've made in the past with a high profit would be high profitability businesses like Grand design, certainly new bar at the time that we acquired it was accretive to the.

And we will continue to work across the portfolio to increase margins. So so obviously, we're not going to probably foreshadow, what second or third quarter will portend to be for overall margin, but I can tell you most of what we saw in the motor home segments, specifically this quarter we.

We believe can and should be a sustainable in the future, but our teams will have to go execute that the and work hard to make sure that that happens.

Okay. That's helpful. And then just the second question in speaking of motorized business I think when you announced the closure of junction City, you would anticipate about 4 million in savings I think my fiscal year 21, we're now bear, but maybe give us a sense of is that $4 million number still good in an in.

Just in context of the general productivity initiatives that you put through on that business. You know what are we talking about there and in total savings or efficiencies, including the junction city.

Piece of that.

Well, Mike, we certainly on medicine, and maybe even exceeded a little bit the ER the productivity benefits of bringing.

The junction city operations back to North Iowa.

And we're still not completely out of the junction city campus. The sale that Bryan referenced in his comments is really only a portion of the campus out there. So we have some work to do to.

Get rid of the the next half of that then and completely be out of that region.

But that combined with the continuous improvement opportunities on the motor home business that we're seeing candidly is probably producing now on an annualized basis, you know well into eight figures of productivity benefits for the motor home business versus the way. It ran you know two three years ago. So low.

So theres a lot going into this.

This motor on profitability pricing mix.

Again lack of discounts and allowances of ill certainly leveraged EPS DNA by that team, but operational excellence and productivity has been a big part of the journey as well and we also intend to see us sustain working capital.

On a fit to on this business now as we pivoted our business to a make to dealer order model you know earlier.

Earlier in fiscal 2000, and we've already seen a significant decrease before the first quarter fiscal 2021, and working capital on Winnebago motor homes, and once we kind of cleared through this some of the supply chain and Consistencies I. I think you'll see the company be effect.

I live in managing its working capital via its operations as well in the future.

Thanks, a lot Mike that's all from me.

Thank you Michael.

Our next question comes from Fred Right, then with Wolfe Research. Your line is now open.

Hey, guys. Good morning, He Mike you and Bryan of both alluded to inflationary cost superior different times on the call could you just touch specifically on the raw material outlook for steel and aluminum just given what those have done and then sort of what that could do to margins going forward.

Yeah, I won't comment on steel and aluminum specifically on.

You know as we look forward at our across our raw materials in our component we.

We expect some inflationary pressures as I think you would all expect as well.

You know I don't expect that it will be.

Significant beyond inflationary pressures, we continue to work with our supply base.

On cost savings initiatives on certainly with them directly and then internally and so I think.

No inflationary pressures across the board of a one and a half maybe as high as 2%.

Our what we're currently addressing you know on our goal is to I'd say cap. It at that and then and then work it back down to our cost savings.

Protocols and initiative. So hopefully that helps you at least think about the the magnitude of on what we view the risk to be.

Okay, That's fair and if we just look at the working capital impact from inventories in the quarter I know that there is some seasonality going on there, but I'm a bit surprised that it's still like an $80 million drag just given backlogs and dealer inventories. So there's some of that due to the new more disruption that you guys touched on are you stocking more components given some of the supply.

Hi chain issues you know.

How should we think about that and will there be an unwind on the inventory like going forward.

Yes to answer that last question I do think that there will be some improvement.

Throughout the rest of fiscal 21.

There's certainly some higher inventory as a result of I'll call. It the less consistent flow of goods coming out of our vendors. You know that are there tends to be more spike and then drought.

Of of certain component parts that raises the level.

The level of a work in process or units that aren't fully completed on.

And it also has caused us to a one on take stock up on certain items that we know that that might be at risk and then of course as you might anticipate because of the and we mentioned this in our our commentary because it got much higher orders because of the anticipated growth. That's certainly it's going to take up our inventory levels as well.

Well hopefully that's helpful color for you.

Great. Thank you.

Okay.

Our next question comes from Steve O'hara with Sidoti. Your line is now on me.

Hi, Thanks for taking the question.

[noise] wanted to Steve [noise].

Good morning, I'm just maybe.

Maybe on on you touched on dealer relationships can you just talk about.

Maybe where you think that processes I guess, maybe specifically related to the Winnebago motorized brand or even the towable side is there more upside maybe down the road from kind of getting those back to historical levels.

Yeah, Good morning, Steve.

You know the fall of 2020 has been somewhat unique in terms of continuing to develop dealer relationships because as I think an earlier participant mentioned the lack of a trade shows retail shows and traditional dealer engagement events of have went away, but we have.

I've been very active in all of our brands as engaging dealers, especially about the new products that our teams have been introducing and specifically the brand that you referenced the Winnebago brand of our views has been very active as well in fact, just yesterday on North Iowa, We hosted one of our larger dealers and.

So we continue to be very.

Very engaged very focused on finding mutually beneficial opportunities to expand our presence on their lots.

You know, we simply just don't want more of their business.

We'd like to earn more of their business in a way that makes the dealer more profitable and successful as well and so our teams have been working quite hard on the Winnebago towable side to both upgrade the dealer network, but also expand into some of the open markets that that business had not yet filled with high quality dealers.

On the Winnebago motor home side, it's been less about market coverage, we mostly had a presence in every major market in that business, it's really been about strengthening the relationship with the dealers in those markets and at times and these are sometimes difficult decisions, but at times upgrading the relationships as well.

But.

As you all know this is not a franchise channel environment.

Our teams have to come to work every day with a mindset to earn our dealers business.

And again have it be mutually beneficial for both parties and I think our teams have been very focused on that I will note that neumar has been gaining market share as well since the acquisition by Winnebago industries. We are extremely pleased with the market share progress on class a motor homes by that brand and part of the journey there a head is.

That we have worked with the neumar team with their lead.

To partner with some of our dealers to fill some major markets around the country with that luxury premium brands and we believe that will have a material benefit going forward.

On the future. So so by and large we believe our dealer relationships are healthy across our businesses. We can always improve take they will always give us a list of things. We can work on and our teams are very very focused on making sure that those relationships are mutually beneficial.

Okay. Thank you and then maybe just on a class C and I know you noted that down supplier issues retains the acute in that line up with Neumar, but.

But class C shipments I think were down year over year and Im just wondering you made I mean, I I know that you know that the shipments that certainly for classy haven't been as strong as other segments of the market general, but I'm just kind of curious.

Maybe what's happening there is it supplier issues is it you know are you guys still kind of losing ground that business or how is that shaping up. Thank you Yep yep. Thanks, Steve Let me clarify if I could one thing on this.

The supply chain impact of Neumar as I referenced earlier was across the whole of the Neumar line. It was not specific to just you know they're.

They're super see lie on which continues to be introduced to the market you.

Our class C performance from forward the Winnebago brand in the first quarter of fiscal.

20.

21 was certainly not as good as we would have liked it to be that being said the team has been rationalizing the lineup there and as I mentioned on the call. We have introduced a new class C unit called the Echo and.

And there will be other products.

Enhancements to come on the class C line underneath the Winnebago brand in the months to come. So we are far away from what we believe a rightful fair position in the market should be we'll get on with our teams work. So.

So we view that as an upside opportunity over the next several years to rebound there and that is our ambition on our focus on to do so on and we think the introduction of the Echo is a good step in the right direction there.

Yeah, Steve I'll, just add more thing at which is on the retail side, we're starting to see some stabilization of class b on the retail side, which we welcome and so I think some of this might just be timing in the quarter to in terms of shipments this year versus last year, you know on the retail side I think we're seeing.

Confined to stabilization and with the Echo coming out now.

Hope that compact classy would would help.

Take some market share.

Okay. All right. Thank you very much for the time.

Yes.

Our next question comes from Bret Jordan with Jefferies. Your line is now open and.

Hey, good morning, guys.

Good morning, I guess the second the mentioned this week of electrification.

You know I guess as you think about the potential to have a battery electric RV I mean, how realistic is that and maybe a timeframe. If you think about race.

Range and cost and charging infrastructure is that something that you are sort of seeing on the intermediate or longer term.

Yeah. Good morning, Brett Thanks for the question.

The only comment I'll make there is that.

You know we have been active on electric.

Electrification for several years now.

Our teams have been leaders and innovators in the industry around lithium ion battery systems around the use of solar panels.

And we are the company with an all electric class a specialty vehicle in the market today.

We have an active electrification roadmap I met with a part of our team yesterday to review that.

And we are quickly.

And intentionally working on that to make sure that we're competitive in the market.

In the future.

So we are certainly aware of.

Some of the other news or the intentions of some other players in the industry.

But we are confident that.

You know our teams will be competitive in that space. You know one thing to note is an all electric product is not simply about.

On the drive train and the and the power system. It is about the integration of the whole experience for the consumer and the integration of the sub systems inside the driver experience in those alternative power systems as well and so we are we're not just focused on that.

Technology that drives the product we're focused on the integration and the experience with all of the different functionality within the product. So so stay tuned we're active we'll keep you all updated as news requires.

But we are keeping a close tabs on that in consumer and.

And have.

Significant relationships with many technology partners in this space today that we think will be a benefit in the future.

Okay. Thank you and I guess, one question sort of a big picture around class B, obviously as Super Hot category and sounds like a number of new entrance on the supplier side, how do you see I guess, maybe do you have a.

A number as far as how many incremental skews are coming into the market for 21 from both your catalog as well as other manufacturers or is that something that's moderating after a real big increase in 20.

We have long foreshadowed that there would be a level of increased competition on class B vans.

As this market segment emerges and certainly we have been one of the more successful first movers in that segment and have seen our market share approach levels in the 45% to 50% range here within the last year.

We welcome competition, obviously on the spirit of innovation and serving the customer well.

And so.

You are seen continuously new models introduced to the market by by other players.

And it will be a challenge for us overtime to keep share at the level that we have of a of a growing now more mainstream market segment, but we will work like heck to to try to keep every point of share that we possibly can and we will do that.

Because we make high quality innovative differentiated products.

We think people will ultimately a spiral but I am actually quite pleased that the class B category is growing at all because it is helping to bring our lean into the mainstream it is expanding the number of consumers that view, our business as something of potential value in their lives.

It is it is it is allowing different use cases and so for US. This is a net positive.

But we intend to compete very vigorously in that space for years to come we believe our volume will continue to grow because the market segment will grow up but.

Lots of future evolution, certainly will happen happen there, it's an exciting time in the RV industry for that particular category Yep.

Yeah.

Thank you.

Thanks for the question.

Our next question comes from David Whiston with Morningstar Your.

Your line is now open.

Thanks, Good morning first on share buybacks, you bought back on 1.6 million in the quarter.

Can you talk about what are your buyback spending plans for full year fiscal 21.

Yeah, we quantified on it at 10 million net the additional million six is really related to employee reported or employee equity income.

Comp plans and so.

Just two line on the numbers, that's why we might be talking about $10 million versus your higher number I'm as it relates to the forward you know what it goes back to our capital allocation priorities really David that that we laid out in the call. We will certainly continue to invest first and foremost in growth will accumulate cash.

Cash on.

To the extent that.

You know, we're managing towards that targeted capital or that targeted leverage ratio rather.

And then we'll make sure that we have the right liquidity and then return cash to shareholders and the dividends on the share repurchases.

So we will continue to proceed in that priority and you know there's no indication we're going to provide today as to what our intentions are in the future on share repurchase, but it will certainly be considered.

Considered in you know the sequence of the priorities I just laid out.

Okay and on the on asset sale, the 11 cents gain well what did you guys sell to get that.

We have a campus on the West Coast in junction City, Oregon.

It was one campus in total divided by thoroughfare or a street really on on one side, we had the bulk of our production Assembly operations on the other we had the bulk of that other property was.

Customer service facility on large way and so we sold on.

The portion of that property that was associated with our assembly operations.

And so that's.

The what the remaining property then being on the other side of the street and primarily historically a customer service operation none of those operations.

Our now staff with people or operating on their their dormant.

Okay and on.

The off road niche I watch your your whole product presentation. It was it was great and the upfront part is just can you talk a bit about what kind of customer wants on experiences it.

On older customers at a younger customer and is it a customer that wants to spend a lot of money.

David can you be more specific to the specific product you were talking about.

Echo.

Yes, I think that's going on.

On final on it was a new offering.

Okay, Yeah, I know that we continue to see a consumers on the RV industry that our interest in a couple of different experiences.

Experiences and the terms are are intended to be different but sometimes are used interchangeably. We have we have consumers who are interested in an overlay ending experience, which is essentially they want to camp on a more year round basis and get off the grid in a physical way they want to be off road.

Could you know off the traditional campgrounds and you are seeing a traditional Oems like Winnebago industries introduce products like the rebel now the echo and.

And other products, which on the height, which on a while.

The RV user to get off the you know the beaten path and and take their products carefully a into a more natural environment. There is also this phenomenon called boondocks on which is using your product off the grid from a power standpoint, and you will run days away.

From a a an electric hook up to your your RV and you will use a combination of the generator or the the literary lithium ion battery pack or the solar power panels.

And and.

Again, it's an opportunity for RV users too.

Be more isolated and candidly closer to nature and so these are trends you are seeing from not just us, but some of our peers and candidly some freshly on new companies in the market and its something that again, we believe is expanding the appeal of arby's gives us confidence that even post pandemic a year.

Going to continue to see different types of consumers seeking out. These are these experiences. So so the some of the new products, you're seeing from US day that are a reflection of trying to meet consumer demand for arby's year round off the grid and then on traditional ways from a a travel.

Standpoint.

Great very helpful. Thank you.

Thank you.

Our next question comes from Shawn Collins with Citigroup. Your line is now open.

Great I appreciate it good morning on Michael Bryan and Steve Hope you guys are well.

Thank you good morning show on me.

Hey, so so obviously on great results.

Return on retail trends continued to be strong in both rvs hand, and boating I just wanted to ask if you could compare and contrast kind of Harvey's vs. Boating on both are running at about robust levels, but it's one running stronger than the other and if you can provide any kind of color context and kind of.

With a focus on the boating market on general Thank you.

Yes. Thank you, Sean we will always be careful in our comments around the whole of the boating industry because while we're extremely proud of the Chris craft brand that is on our portfolio our seat at the table in that industry is not quite as large as some of the other.

Oh, yes, and in that space, but we believe both markets are healthy.

My sense is the RV market is probably a little hotter than the marine market, but both performed extremely well in calendar year 2020, and there are definitely segments of the RIN marine market.

It had been performing quite well even hear it in recent recent months dealer inventories are low on the marine side as well, maybe not quite as low as on the RV.

Space, but not too far apart and and again retail activity. It continues to appear to be positive.

Relatively consistent basis for both segments. So so very very similar in many ways I say there is there are less differences than there are similarities.

Our Chris craft brand.

I had a good calendar year 2020.

And it's its fiscal year 2021 prospects look very promising because of the backlog is that it has we have a full production calendar for.

The fiscal year, and and backlogs and orders are committed until late spring of 2021, even into potentially now the early summer months.

And so we are intent we acknowledge this in the past on working with our Chris craft team on possible capacity expansion in order to serve the market with those beautiful luxury boats in a more timely manner. So stay tuned for that.

That's great. Thanks. Thank you Michael that was that was helpful. On Thats. Good for me thanks for the time and the interest.

Thank you thanks Sarah.

Our next question comes from James Hardiman with Wedbush Securities. Your line is now moving.

Hi, good morning, Thanks for thanks for fitting me in here a couple of questions from me.

Thank you.

On a roundabout way may have already answered. This one but you know obviously the last couple of weeks, there's been a lot of vaccine news that's been encouraging.

We've heard from some travel companies, what they mean and uptick in bookings I guess I'm curious if you're seeing the flip side of that have you seen any any weakness and the the vaccine has begun to roll out I think I've commented on continued strength, but obviously, there's a difference between strength and.

Sort of 40% gross which is which is where you've been trending. So I guess the question is is there any indication that excitement about the vaccine is impacting demand in any way.

Yeah. Thank you James and welcome to the calls by the way.

We are not seeing any deterioration of demand or interest at this point, obviously the rollout of the vaccine is in its very early stages here late this month and so we will be monitoring the market both at retail and with our dealers, but also in other ways, whether it's through some of the.

The rental or sharing platforms.

We have good relationships with the you know many of the campgrounds around the country.

And their industry Association.

And so we will be monitoring those forward.

Indicators that foreshadow demand in the future, but from a retail standpoint from a consumer interest standpoint in terms of what they plan to do in 2021 day.

We are not seeing any deterioration and I guess I would remind everybody that the RV industry was was growing in popularity before the pandemic.

And we think this surge of interest will be net positive going you know going forward. We certainly recognize 2020 was a unique year in the choices that are American consumers had but.

But we anticipate that there will be net positive demand benefits.

From a you know the.

The the challenging experiences we all went through in 2020, so so no deterioration or signs of a at this point James.

Got it that's really helpful. And then maybe a modeling question now that we've lapped the new more acquisition, how should we be thinking about overall, yes. He obviously got that line is going to benefit from a limited promotions that we fear in the near term.

But I would think.

Just given the outperformance of our towables off for the foreseeable future, but there would at least be some some negative mix.

Mix impacting ASP or in the near term. So I guess that ultimately the question is can I guess, Steve can still continue to stay above water now that you're not getting that new market.

Yeah, I guess I'll take a first stab and let Mike pile on I think of it not just from an EPS. These standpoint, but also from a margin standpoint, just to supplement your question a little bit with that perspective on margin, we as the the Towables business continues to grow faster organic.

Moving the motor home business that.

That will be a tailwind to margins on because the EBITDA margins of Towables has always been higher than the motor home.

On the S.P.I. I think I would encourage you to look at that not with a consolidated results, but by segment you know the motor on segment versus the Towable segment, which is in line with our disclosure to you.

As well gene and so what you saw in Q1 here on the motor home segment, we talked about how new Mars shipments were suppressed because of the acute supply chain issues.

So I think I think as some of the supply chain issues are remedied and newmark and get back to you know shipping in line with retail you will see the accretive for the tailwind on a motor home Asap as a result of debt because the average selling price of Newpark is above.

The legacy Winnebago branded motor home business.

Okay. That's perfect makes most sense thanks guys.

Thanks strength.

That concludes today's question and answer session I'd like to turn the call back to Mr. Stuber for closing remarks.

Thank you Liz and thank you everyone for joining our call today on behalf of everyone here at Winnebago industries, We wish you and your families happy holidays and all the best in the new year.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

[music].

[music].

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to the first quarter 2021, Winnebago Industries earnings Conference call.

At this time all participant lines are in listen only mode. So if you require operator assistance. Please press Star then zero.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press Star then one.

Please be advised on today's conference maybe recorded.

I'd now like to hand, the conference over to your host a day Mr., Steve Stuber, Vice President Finance. Please go ahead Sir.

Thank you will.

Good morning, everyone and thank you for joining us today to discuss fiscal 20 2021 first quarter earnings results.

Joining me on the call today by Michael Happy President and Chief Executive Officer, and Bryan Hughes, Vice President and Chief Financial Officer.

This call is being broadcast live on our website at Investor Day, W.G.O. Dot net interest.

On a replay of the call will be available on our website later today.

The news release with our first quarter results was issued on posted to our website earlier this morning.

Before we start I'd like to remind you that certain statements made during todays conference call regarding Winnebago industries and its operations may be considered forward looking statements under securities laws.

The company cautions you that forward looking statements involve a number of risks and are inherently uncertain and a number of factors many of which are beyond the company's control could cause actual results to differ materially from these statements.

These factors are identified in our FCC filings, which I encourage you to read.

With that I would now like to turn the call over to our President and CEO, Michael Happy Mike.

Thank you, Steve and good morning, everyone.

I hope those joining us today are having a safe and healthy start to this holiday season.

We know this is a busy time of year and we greatly appreciate your interest in Winnebago industries and for taking the time to join us.

I will start off the call. This morning, with an overview of the key drivers of our first quarter performance before.

Before turning it over to Brian Hughes, who will discuss our financial results in more detail.

Then I will offer some closing thoughts and we will conclude with a Q and a session.

In short went.

Winnebago industries had a fantastic first quarter Mark.

Mark in a very strong start to what we expect will be a remarkable fiscal 2021.

We gained RV market share.

Through our consolidated top line by approximately 35%.

Expanded gross margins 390 basis points.

Gross operating income 256%.

None of this would have been possible without day exceptional work of our World class Winnebago industries team.

And I am Bryan wants it thanks.

For their continued commitment and dedication.

There were three key drivers of our performance in the first quarter that I will expand upon today.

These include number.

Number one on the continued strong it on consumer demand, we're seeing for our outdoor lifestyle products.

Number two winnebago industries on mass portfolio of leading brands and new product innovation.

And third our commitment to driving operational excellence.

On our fiscal 2024th quarter call, we spoke about how the pandemic spurred consumers. So combined the imperative of the safety of their families with their strong desire to be immersed in the experiences they could control.

And consequently, they continue to flock to the outdoor recreation lifestyle our products offer.

The expanding the appeal of the outdoor lifestyle has contributed greatly to the momentum we have established in recent quarters.

And well be essential to our success in fiscal 2021.

We continue to be very pleased with the strong retail growth, we see across our portfolio.

On a trailing three month basis as of October 20, Twond, our consolidated RV market share is 12%.

Plus 120 basis points over the same period a year ago.

Oh, which 70 basis points represents organic gross.

Drivers of this continued growth includes our towable segment, driven by our Grand design, RV fifth wheel and travel trailer products.

Our extensive class B Winnebago branded motor on light up.

And the new Mark last a motor home products.

I recently reviewed our RV retail comparisons for the first half of December Twentytwenty versus a year ago I can assure you that our retail momentum is still strong and consumers continue to shop and buy arby's.

A survey we commissioned in November the Padilla Spotlight survey.

Australia, just how widespread the draw on the outdoors has been this year.

In calendar 2020, 68% of American consumers under the age of 55 participated in an outdoor activity such as camping voting hiking at a location away from their home or visiting a state or National Park.

Overall, 60% of the U.S. population pursued an outdoor activity at 22020.

And for 31% of those consumers. It was their first time participating in an outdoor activity.

We are excited about the thousands of new consumers, who have joined the RFP on marine lifestyle over the last several months. In addition to helping drive the growth we have seen.

These new entrants join a community of RV consumers, who upgrade every three to five years, providing an important source of future growth.

The second major driver of our performance in the first quarter, what's the strength of our unmatched portfolio of premium outdoor lifestyle brands.

Over the past several years Winnebago industries has strategically expanded our offering beyond the iconic Winnebago brand.

Bringing on Grand design cost scrap and most recently no bar.

Which celebrated its first anniversary as part of the Winnebago industries family on November eight.

Each of these unique brands are tied together with the Golden threads of quality innovation and service.

We have maintained our commitment to investing in each of our premium brands to on shore continued innovation that resonates with consumers.

We are pleased that our brands aspiration on positioning and appeal have enabled us to capture motor home and towable market share gains once again.

The many design changes and feature upgrades made in calendar 2020. In addition, the key product launches continue to fuel our growth.

When a federal branded motor homes introduced the class B sole us the.

The class a diesel journey.

On the compact classy echo.

The many redesigns within the Grand design RV lineup and the introduction of the transcend explore travel trailer will drive further market share gains.

Winnebago branded Towables introduced the height and all terrain travel trailer that features a patented exoskeleton.

Neumar continues to gain share in the class a motor home segment with new innovative products and features included and coaches such as the popular Canyon Star introduced in spring of 2020.

And lastly, Chris craft momentum continues as well driven by the 35 foot Calypso introduced in summer of 2020, and the 24 foot Calypso recently introduced this fall.

Looking forward I am energized by the fact that we have a very active new product development pipeline.

Extensive new product development is not only in the business as mentioned above but also in our specialty vehicles business unit, where we continued to sell our all electric class a product in the market today for many specialty applications.

Our RV industry, leading knowledge of these alternative power systems and the critical integration required with various subsystems is informing and benefiting and active product electrification roadmap that has been and continues to be on progress across our R&D platform.

Finally, the third key driver of our first quarter performance was operational excellence, reflecting the incredible work of the Winnebago industries team.

Deeply believe that our people differentiate winnebago industries more than any other factor their results are historically difficult times their flexibility and their determination to advance our business through strong operations is an enduring source a price.

Numerous cost saving and productivity initiatives, taking place across Winnebago industries enterprise are starting to positively impact our results, enabling higher levels of sales and profitability.

In the Winnebago branded motor home business, we continue to drive manufacturing efficiencies through continuous improvement activities relocated diesel operations from Oregon, The Iowa.

We also moved to a fully make to order business model.

And rationalize the portfolio to exit less profitable brands on revenue streams right.

Related to the new our acquisition, we are well on track to deliver the committed annual synergies that will be fully realized in fiscal 22 would be up.

And finally, our enterprise operations organization, and specifically the corporate strategic sourcing team continues to deliver value by leveraging our ever growing scale and successfully navigating us through significant challenges such as tariffs and increased demand.

Our partners are feeding our manufacturing campuses as effectively as this dynamic environment allows.

Before I turn the call over to Brian.

I wanted to mention that earlier this month Winnebago industries unveiled a refreshed corporate enterprise, Brad and a new tagline be great outdoors.

This reinforces that while our company has made up of many great brands, our core values on foundational strength create a company stronger than the sum of its parts.

Much more than a new look I believe our corporate enterprise brand identity will further inspire and unite our team around a common spirit of delivering extraordinary experiences to everyone. We serve.

With that I will turn the call over now to Winnebago Industries, Chief Financial Officer, Bryan Hughes Bryan. Thanks.

Thanks, Michael Good morning, everyone.

First quarter consolidated revenues were $793.1 million, an increase of 34.8% compared to 588.5 million for the fiscal 2020 period.

Revenues, excluding neumar were $674.4 million, reflecting an increase of 22% compared to the fiscal 2020 period driven by continued strong end consumer demand.

Recall that our prior year Q1 included roughly three weeks of Neumar result, post the closing of that transaction.

And so therefore, the 22% organic revenue we are disclosing excludes newmark sales in their entirety from both this year and last year.

In future quarters, we will no longer be seeking to reported versus organic sale in so far as it relates to new Maher.

As a reminder, 100% Neumar is reported in the results of our motor on segment.

We achieved very strong profitability in the first quarter fiscal 2021.

Gross profit margin increased 390 basis points to 17.3%, while adjusted EBITDA margin increased 420 basis points to 11.3% compared to 7.1% for the fiscal 2020 period.

This significant margin expansion was driven by operating leverage improved pricing, including lower discounts and allowances.

And motor on segment productivity initiatives.

Reported earnings per diluted share were $1.70 per share compared to reported earnings per diluted share of 44 cents on the same period last year.

Adjusted earnings per diluted share were $1.69 in the first quarter or an increase of 131.5% compared to the same quarter in fiscal 2020.

Consolidated adjusted EBITDA was $89.3 million for the quarter compared to $42 million last year, resulting in an increase of 112.4%.

The increases in both adjusted earnings per diluted share and adjusted EBITDA were driven by strong unit growth across the RV portfolio, lower discounts and allowances pricing actions and productivity initiatives and the motor on segment and the addition of new Mark on the case of EBITDA.

Note that adjusted EBITDA and adjusted EPS excludes the impact of a $3.6 million net gain from the sale of a portion of our junction city, Oregon assets.

And this gain is adjusted for in the Motor home segment as well as our consolidated result.

Now I'll turn to our segment performance starting with towable.

Revenues for the total segment were $454.9 million for the first quarter of 33.3% over the prior year driven by strong end consumer demand for our Grand design, RV and Winnebago product line.

Winnebago industries unit share of the North American coal market in the trailing three month basis through October 2020 was 10.9% or an increase of 80 basis points over the same period last year.

Segment, adjusted EBITDA margin of 13.9% increased 340 basis points price.

Primarily due to lower discounts and allowances and operating leverage during the quarter.

Now, let's turn to on more on segment.

In the first quarter revenues for the motor home segment were $322.4 million.

42.7% from the prior year driven by the addition of new Maher and strong Winnebago claffey products as evidenced by our plan. The rolling three retail unit market share of 49.6% through October 2020.

Excluding nu Mark on this year and last year's result segment revenues were $203.6 million, representing an organic increase of 7% over the prior year.

Adjusted EBITDA margin increased by 130 basis points to 9.4% driven by pricing actions.

Activity initiative operating leverage and favorable mix.

Moving on productivity initiatives are driven by the savings associated with the closure of the junction city, Oregon facility the transition to a make to order business model on the Winnebago branded motor home business as well as several other operating improvements and lean activities that our business has pursued in the past year, but also has been working to transform the operational environment.

On this business for the past three plus years.

While we are anticipating inflationary pressures and are always conscious of competitive pressures that may weigh on our net pricing equation as well as some lingering supply chain inefficiencies. These benefits as mentioned should provide a level of sustained profitability that is notably above the 4% to 5% yield and EBITDA.

This segment has generated over the past three years.

We are pleased to see the meaningful improvement.

Now turning to the balance sheet.

Effected our leverage ratio net debt to adjusted EBITDA continued to decline and is now 1.5 times at the top end of our targeted range of 0.9 times to 1.5 time, driven by strong EBITDA generation and a cash balance of $272.9 million.

Total liquidity, including our untapped.

It is now approximately $465 million.

Cash flow from operation was an outflow of $2.7 million in the first quarter of fiscal 2021.

While profitability was strong in the quarter. This was offset by increases in working capital most notably in inventory levels have increased as a result of supply chain and consistency and also in response to the high growth in sales we are seeing related to various you on dealer orders and our heightened backlog position.

We continued our disciplined approach to capital allocation during Q1 investing in our businesses to deliver new and innovative products that drive organic growth acute.

Accumulating and maintaining cash balances in a manner that allows us to return to our targeted net debt to EBITDA ratio.

Maintaining a healthy liquidity position.

And returning cash to shareholders.

During the first quarter, we returned $10 million to shareholders in the form of share repurchases.

We paid a dividend Denver.

And earlier this week on December 16th our board of Directors approved a quarterly cash dividend of 12 cents per share payable on January 27 2021.

That concludes my review of our quarterly financial and with that I will now turn the call back to Mike to provide some closing comments Mike back to you.

Thanks, very much Bryan.

I would like to provide a bit of color on current industry trends and our confidence looking to the remainder of the 2021 fiscal year.

We ended the first fiscal quarter with exceptionally strong retail momentum and record backlogs in our motor home Towables and marine businesses.

With the second fiscal quarter underway, we are seeing that the typical seasonality of our business is more muted than normal.

Strong demand is continuing into the holiday season and dealer inventories remain extremely low.

In our fiscal 2021, we believe industry retail will grow in the mid single digits and while industry wholesale shipments will grow approximately 30%.

Note that our fiscal industry wholesale shipment projection considers and aligns with the RV.

Calendar year 2021 industry forecast of approximately 20 plus percent.

We support the RV industry Association forecasts and have a growing view that it could be increasingly conservative as retail trends continue at elevated levels and the supply chain raises its output.

Our performance in the first fiscal quarter demonstrates the Winnebago industries is well positioned to continue to execute on our enterprise strategy of building a premier outdoor lifestyle company.

And maximizing value for our end customers dealers employees and shareholders.

As I mentioned earlier, we are confident that the favorable dynamics in the market as more Americans discovered the wonder of the outdoor lifestyle well persistent continued to drive share gains and strong performance throughout the fiscal year.

In addition to the strategic and financial value creation, we constantly work towards Winnebago industries is also deeply committed to creating value in our communities.

Earlier this month, we released our second annual 2020 corporate responsibility report.

Outlining our environmental social and government performance progress and the key elements of our coal that 19 response.

The unprecedented events of 2020 shined in Dellovo light on significant challenges, we face as a society and the requirements of corporations like Winnebago industries to show up for our people and communities.

This includes prioritizing above all else their health and safety and ensuring we cultivate a diverse and equitable environment in which all members of Winnebago industries feel a sense of belong.

I encourage everyone on this call to spend some time with our detailed corporate responsibility report. In addition to the continued progress we made in minimizing waste exploring alter alternative energy sources and reducing our safety incident rate what I'm. Most proud of is the way Winnebago industries on our employees step into.

Care for our communities customers and each other during this very challenging year.

Our deepest hope is that the 2021 calendar year brings greater certainty unity equity health and safety.

Our commitment to advancing these ideals will continue.

In addition to a steadfast focused on ESG throughout the remainder of fiscal 2021, Winnebago industries will be focused on on maintaining our strong market and financial momentum.

We are confident that the favorable market dynamics and the unique appeal of our products and brands will continue to drive market share gains and strong financial results.

Along with all of you Winnebago industries is cheering for the science and the healthcare communities, leading the charge to ended this tragic pandemic and distribute vaccines as quickly and safely as possible.

We are also deeply grateful to the frontline workers in our communities who continue to fight this virus each day.

That concludes our prepared remarks this morning.

Thank you for your time I will now turn the line back over to the operator to take questions.

Ladies and gentlemen, if youd like to ask a question at this time. Please press the star and the number one key on your Touchtone telephone.

To withdraw your question press the pound.

Our first question comes from Craig Kennison with Baird. Your line is now open.

Good morning, Thanks for taking my question I wanted to ask about the motor home performance.

EBIT margin is really astounding here on its going to be tough for us to model going forward I think maybe you could just walk us through the puts and takes of that significant increase and then shed any light you can on how sustainable it may be.

Yes, good morning, Craig Thanks.

Thanks for your question.

As you and probably others on the call no we have been working extremely hard for several years.

To improve the market and financial performance in the motor on business.

And while we think there is significant runway ahead of us in both on Winnebago Air on the Neumar brands. We are pleased with the performance of that business in recent periods and especially the bottom line performance, which we're able to share with all of you today there.

Theres been a lot of work being done in terms of operational productivity driving efficiency out of the business.

Rationalizing and improving the product line Steve.

Strengthening dealer relationships and innovating on.

Emerging markets such as the class B they on segment.

And I think.

On this.

Quarter's results in addition to obviously.

The inclusion of numerous results.

Reflect.

Momentum that we feel is starting to build in that segment Craig.

Craig I will turn it over to Brian to give you some more color, though on some of the specific.

Elements of the margin accretion that you saw.

Thanks, Mike.

Craig we've talked a lot about the right decisions that we've made over the years, we referenced on the call today in fact, the closure of the West Coast.

Diesel production and moving that back to northern Iowa, but.

And some of the product line rationalization that emphasis on innovation.

All of the class B lineup more broadly speaking, it's not just the level of several products now on I think the echo.

On pack class C continues to reflect that innovative spirit and capability of Winnebago motor home team.

And it's also some of the the low.

Moving philosophies that the team has brought the lay out the space utilization.

In northern Iowa looks very different today than it did on.

Three years ago even.

Gone from three production line.

On to two production lines and increase the throughput change the flow of material pretty significantly.

Just as a couple of examples just in fiscal year 20, they had over 100 I call it meaningful cost savings initiative.

That drove some savings. This is a couple of examples in our class B facility.

Which is in Lake Mill, Iowa.

We use the outsource on recovering of seat.

From the chassis that came in we figured out a weighted reconfigured our line make it more.

Effective and efficient from a space utilization perspective, and we in source that recovering on that project loans safe, we think 300 $350000.

We invested in a CNC machine.

Instead scrap and Insource some additional work there that project too.

Probably $400000 on savings, but over 100 on these projects.

But the team executed just in fiscal year 2000.

And these activities are what we are starting to see now materializing the results okay.

We saw an improvement as you probably noted in Q4.

In the margins of EBITDA margins and then we saw another nice increase in Q1 here now it's not to say that we won't face. Some headwinds of course ahead, we know that there is some moving inflationary pressures.

And just as an example.

We think that the supply chain has done a nice job on our of.

Serving the industry, it's been challenging ramp up they are dealing with all the cobot impacts like every other company, but overall, they're doing a very nice job on our supply chain team internally here that Mike referenced is likewise on.

Doing a great job, so hopefully that helps provide some color Craig too.

Why were seeing the improvements here in Q4, now Q1 and why we.

Our raising our expectations I guess going forward.

Yes, Thats terrific helps helps a lot and then just one follow up just in terms of retail.

To what extent are you shipping units today that are pre sold by dealers.

Making it that much harder to restock the channel. Thank you.

Craig I think the number one issue in.

Preventing us from restocking in the channel at the levels that we prefer to is the retail activity.

On the market and the dealers continue to see strong traffic even as the fall has turned into early winter here.

And as I mentioned in our prepared remarks, our retail.

Results in early December here are quite positive.

So.

We really can't tell specifically, how many of the orders our dealers have placed with us.

Our pre sold in all of our businesses on Neumar and Chris craft have better visibility to some of that because of the customized nature of some of their products, which are configured specifically for certain end consumers.

But we do believe that a number of dealers have retail orders in hand.

And they are simply waiting for delivery of those products when they hit their lots for those consumers.

On the above and beyond that we believe that consumers in the outdoor spaces continue to shop for our views on boats and.

On that you will see elevated retail.

For for probably some time here.

And so I think thats, probably the biggest headwind to building back the dealer inventory is ultimately trying to get that wholesale shipment number to keep.

Exceeding retail at a consistent clip Bryan mentioned and I mentioned in our comments that we feel.

Yes, much better about the supply chain.

And the ability of the supply chain to keep up with our future manufacturing forecast and production schedules.

So yes, our field inventory is still low.

We will.

We work on that every day with our dealers to try to prioritize and make sure the product is going to the right place.

Yes, but we are we.

We continue to increase output.

To try to address that for the rest of fiscal 2021.

Great. Thank you.

Our next question comes from Scott Stember with CL King Your line is now open.

Good morning, guys and congrats on a great start to the year.

Thank you Scott anymore.

Going back on supply issues. It sounds like obviously sequentially things are improving is on one side of the business thats feeling it a little bit more whether it's towables.

Chris craft or more right.

Yes, good morning, Scott.

I would tell you there is only one business in my opinion, which saw a.

A material impact due to the supply chain in our fiscal 21 first quarter and that was new loans.

Newmark did have a.

A particular challenge with a vendor on some critical components and that did not allow us to reach our shipment potential in that quarter. We.

We have been working extremely diligently with this specific supplier.

On their challenges on their constraints and.

We will most likely continue to work through this issue for our fiscal 21 second quarter, but we see things normalizing there in the back half of our fiscal year, let's go on in all other businesses.

Day to day, we're always managing and navigating.

The timeliness of the delivery of the components up what I have been telling people here recently is that our supply chain challenges have been impacting process.

But not results here in the last 90 to 100 days it.

It is definitely causing us to do some rework or some workarounds in our manufacturing process, but our teams are heroically doing wonderful work ultimately still to get the products completed in a high quality fashion and out the door.

So by and large we are we're navigating it pretty well.

Got it that's great and going back to motorized.

Your backlog is up tremendously.

Obviously some of those new Mark maybe just talk about the organic backlog or.

Non new more backlog just trying to get a sense of.

How some of these newer products and by classy echoing some of these other items.

I'm just trying to get a sense of what we could expect from a shipment.

Perspective, as we go forward.

Yes. Thank you Scott appreciate I appreciate the question.

We obviously, we won't share specific numbers with you on.

On any particular product, but we are seeing a strong backlog on the Winnebago branded motor home business.

And to be fair, we are seeing strong backlog on the new car business as well, but the Winnebago brand as Bryan mentioned that I mentioned as well in our prepared comments.

Has introduced some really nice new products as of late further.

Further models and floor plans on the sole us.

And next generation versions of the rebel.

A new class a diesel product called the journey.

And this compact classy called the Echo, which we are extremely excited about and so.

We have seen dealer receptivity to those products and candidly just the momentum that we have the.

Marketplace cash.

Continue to increase.

So yes, we are we are pleased with the backlog on our motor home segment.

On both brands.

Especially the Winnebago branded motor home business, which as we've talked about we've been working on.

On the diligently for the last number of years to restore some vitality to that business and.

Listen, we'll stay humble and paranoid, but we are optimistic about some of the momentum that is beginning to.

Presented itself in that business.

Got it and just one quick.

Last question.

On cost.

The mix of new customers coming into the outdoor market.

As the Cobi vaccine works its way to the population just just talk about your expectations there.

Scott, We certainly understand why people would ask that question and we want to be clear that we're rooting for a vaccine as hard as any other company in the world and we want to see.

The vaccinations happen effectively and quickly.

So that.

Many things can return to normal, including some of our low physical operations as well that being said.

I personally believe that 2020 was only the first wave of new customer interest on the outdoors that you'll see on you will see another wave in 2020 watt.

Family, certainly flocked to the outdoors and 2020 because of the safety the day desired because of a lack of other activities that they could at best debt, but we are seeing increases in interest before the pandemic Andy on multiple customer segments younger buyers more diverse buyers.

People using our products for different work.

Use cases, we've talked about work from anywhere.

We simply believe that there is a non-GAAP net positive interest in rvs and candidly voting.

Net even as vaccinations unfold across the country.

That there will continue to be retail momentum in the market for some time to come up and up.

Often times I ask people that asked that question not to you. This morning, Scott, but to others will have you RV lately and have you been on the campgrounds talking to people about why they RV and they're not are being because there is not a vaccine there RV and because they love it.

The other thing that we're obviously optimistic about is that the wholesale environment for our business for we believe fiscal 21 in fiscal 22 for sure should be positive as well we believe it will take.

Literally until the end of fiscal 2022 in order for inventory levels at the dealers to return to turn rates that they desire and so we will be working obviously hard to fulfill that demand as much as we can.

Got it very helpful. Thanks, guys.

Thank you Scott Thanks, Scott.

Our next question comes from Gerrick Johnson with BMO capital markets. Your line is now open.

Great. Thank you good morning, Hi, I have two questions.

And the related to expenses and sustainability first of all on gross margin can you quantify or try to quantify the basis point impact from lower discounts because I think investors out there assume at some point things will normalize we'll get back to normal sort of situation on.

Yes.

Allowances and discounts will come back so first of all what he wouldn't the impact on on gross margin year over year from lower discounts allowances.

Yeah, Garik I don't think were going to give a quantified answer to that.

I would say that it was certainly a.

Material contributor to the improvement.

But you can't just point at the market in my opinion.

As it relates to that and that it will.

Dissipate or go away.

As you said markets normalize I think some of that certainly also driven by innovation by product mix.

The quality of the product and kind of.

Underlying improvements that we're seeing there so I hesitate to provide a quantification of that for several reasons, but it's really more for that latter part of my answer which is.

Yeah, I don't want people to assume that it's just going to dissipate or go away when the market normalizes.

Good day.

Yes.

Recent push.

Okay. Those are all fair points appreciate that Bryan then on M&A.

There's got to be.

As you know that that's just appeared in this quarter shows open house travel things like that.

How much have you benefited from from that and then how much of that should come back at some point in the future because I think we will probably have an open house next year hopefully.

Yes, I'll start out with just a couple of reminders first last year's Q1.

Right remember had transaction costs than net.

So <unk> of $10 million that certainly influence last year's number.

Be mindful of that also this year includes industry M&A that gain on sale.

So be mindful of that as well as you analyze SGN day.

I agree with your comment though that.

Our company as low as I'm sure most companies are seeing some on.

Different spending patterns in the area of.

More discretionary spending whether that be travel and entertainment.

Other event that.

We are all doing virtually instead of in person and that contributes to a savings as well and so on.

How much of that.

Returns when we get back to call. It a normal I think will depend company by company and what that new normal does look like I think will.

Expect to hang on to some of the dissynergies or the the savings that we've realized but hopefully that color helps you.

Think about the numbers.

Okay, great. Thank you Bryan you might.

You bet.

Our next question comes from Mike Swartz with Truest. Your line is now open.

Hey, good morning, guys.

Just a question on on gross margin in the quarter, 17% I think that might have been a record for the company going to looking at my on my numbers back a decade plus so.

So I guess, how do we think about that number going forward and I think Mike you. Even made made reference to seasonality is change there's not as much. This year. So just in terms of overhead and some of the things you've laid out.

17%, a good number to use going.

Going forward.

Well good morning, Mike.

We are extremely pleased with the number you that you referenced and.

We recognize though that each quarter is a little bit different certainly because of seasonality and because of the rhythm of the business.

But.

Ill probably answer this on a different way that Bryan was I have high expectations that our teams will continue to.

Search and drive for.

You know improved profitability on each of their businesses, while continuing to compete effectively for market share.

We have still not probably ever shipped the perfect unit, nor have we probably ever created the perfect.

Business environment in order to optimize our efficiencies and so.

We are extremely pleased especially with the motor on market segment margin segment on its margin.

But that being said I can look into that business and see countless opportunities to.

To continue to improve that in the future. So there are things we can control and then there are factors, obviously that we can't control, whether it's inflation or.

Tentative activities or the like so we believe we are raising the ceiling on.

On on profitability within our business because of the investments we've made in the past with.

Hi profit would be high profitability businesses like Grand design, certainly new bar at the time that we acquired it was accretive to the to the Winnebago branded motor on SEC.

Business.

And we will continue to work across the portfolio to increase margins. So so obviously, we're not going to probably foreshadow, what second or third quarter will or tend to be for overall margin, but I can tell you most of what we saw in the motor home segments, specifically this quarter.

We believe can and should be sustainable.

Sustainable in the future, but our teams will have to go execute that and work hard to make sure that that happens.

Okay. That's helpful. And then just the second question and speaking of motorized business I think when you announced the closure of junction city.

You would anticipate about 4 million in savings I think my fiscal year 21, we're now there maybe give us a sense of is that $4 million number still good in an interest in context of the general productivity initiatives that you put through on that business.

What are we talking about there and in total savings or efficiencies, including the junction city piece.

Piece of that.

Well, Mike we've certainly on method and maybe even exceeded a little bit the.

The productivity benefits of bringing the.

The junction city operations back to North Iowa.

And we're still not completely out of the junction city campus. The sale that Bryan referenced in his comments is really only a portion of the campus out there. So we have some work to do to.

Get rid of the next half of that then and completely be out of that region.

But that combined with the continuous improvement opportunities on the motor on business that we are seeing candidly is probably producing now on an annualized basis.

Well into eight figures of productivity benefits for the motor home business versus the way Randy you know two three years ago, So listen there's a lot going into.

This motor on profitability pricing mix again lack of discounts and allowances.

Ill, certainly leveraged SGN day by that team, but operational excellence and productivity has been a big part of the journey as well and we also intend to see us sustain working capital.

Benefit to on this business now as we pivoted our business to a make to dealer order model.

Earlier in fiscal 20.

And we've already seen a significant decrease before the first quarter fiscal 2021, and working capital on Winnebago models.

And once we kind of cleared through this some of the supply chain and Consistencies I. I think you will see the company.

The effective in managing its working capital via its operations as well on the future.

Thanks, a lot Mike that's all from me.

Thank you Michael.

Okay.

Our next question comes from Fred Bratman with Wolfe Research. Your line is now open.

Hey, guys. Good morning, Mike you and Bryan of both alluded to inflationary costs, a few different times on the call could you just touch specifically on the raw material outlook for steel and aluminum just given what those of Dom and sort of what that could do to margins going forward.

Yeah, I won't comment on steel and aluminum specifically on.

As we look forward at our.

Across our raw materials in our component.

We expect an inflationary pressures as I think you would all expect as well.

You know I don't expect that it will be.

Significant beyond inflationary pressures, we continue to work with our supply base on cost savings initiative on.

Certainly with them directly and then internally.

And so I think.

No inflationary pressures across the board of a one and a half maybe as high as 2%.

Our what we're currently addressing.

Our goal is to I'd say cap it at that and then and then work it back down to our cost savings.

Protocol and initiative. So hopefully that helps you at least think about the the magnitude of on.

Well, we view the risk to be.

Okay, That's fair and if we just look at the working capital impact from inventories in the quarter I know that there is some seasonality going on there, but im a bit surprised that it's still like an $80 million drag just given backlogs and dealer inventory. So some of that due to the new more disruption that you guys touched on are you stocking more components given some of the supply.

Chain issues.

How should we think about that and will there be an unwind on.

On the inventory wide going forward.

Yes to answer that last question I do think that there'll be some improvement.

Throughout throughout the fiscal 21.

There's certainly some higher inventory as a result of I'll call. It the the less consistent flow of goods coming out of our vendors.

Third there tends to be more spike and then drought.

Of of certain component parts that raises the.

Level of a work in process or units that aren't fully completed.

And it also has caused us to low.

On a take stock up on certain items that we know that that might be at risk and then of course as you might anticipate because of the and we mentioned this in our our commentary because without much higher orders because of the anticipated growth. That's certainly is going to take up our inventory levels as well hopefully that's helpful color for you.

Perfect. Thank you.

Okay.

Our next question comes from Steve O'hara with Sidoti. Your line is now open.

Hi, Thanks for taking the question.

Good morning, Steve.

Morning, just.

Maybe on you touched on dealer relationships can you just talk about.

Maybe where you think that process is I guess, maybe specifically related to the winnebago motorized sprint or even the towable side.

There is more upside maybe down the road from kind of getting those back to historical levels.

Yes, good morning, Steve.

On the fall of 2020 has been somewhat unique in terms of continuing to develop dealer relationships because as I think an earlier participant mentioned the lack of of trade shows a retail shows and traditional dealer engagement events of have went away, but we have.

Have been very active in all of our brands as engaging dealers, especially about the new products that our teams have been introducing and specifically the brand that you referenced the Winnebago brand of RBS has been very active as well in fact, just yesterday on North Iowa, We hosted one of our larger dealers and.

So we continue to be very.

Very engaged very.

Very focused on finding mutually beneficial opportunities to expand our presence on their lots.

We simply just don't want more of their business.

We'd like to earn more of their business in a way that makes the dealer more profitable and successful as well and so our teams have been working quite hard on the Winnebago towable side to both upgrade the dealer network, but also expand into some of the open markets that that business had not yet filled with high quality dealers.

On the Winnebago motor home side, it's been less about market coverage, we've mostly had a presence in every major market in that business, it's really been about strengthening the relationship with the dealers on those markets and at times and these are sometimes difficult decisions, but at times upgrading the relationships as well.

But as you all know this is not a franchise channel environment.

Our teams have to come to work every day with a mindset to earn our dealers business.

And again have us be mutually beneficial for both parties that I think our teams have been very focused on that I will note that new bar has been gaining market share as well since the acquisition by Winnebago industries. We are extremely pleased with the market share progress on class a motor homes by that brand and part of the journey. There ahead is.

That we have worked with the neumar team with their lead to.

To partner with some of our dealers to fill some major markets around the country with that luxury premium brands and we believe that will have a material benefit going forward.

The future so so by and large we believe our dealer relationships are healthy across our businesses. We can always improve take they will always give us a list of things. We can work on and our teams are very very focused on making sure that those relationships are mutually beneficial.

Okay. Thank you and then maybe just on class C and I know you noted that supplier.

Supplier issues retains the acute in that line up with Neumar, but.

But class C shipments I think were down year over year.

And Im just wondering you made I mean I I.

I know that you know that the shipments that certainly for classy haven't been as strong as other segments of the market in general, but I'm just kind of curious maybe.

Maybe what's happening there is it supplier issues is it.

Are you guys still kind of losing ground that business or how how's that shaping up. Thank you Yep Yep. Thanks, Steve Let me clarify if I could one day.

The supply chain impact of Neumar as I referenced earlier was across the whole of the Neumar line. It was not specific to just you know.

They're super see a wide on which continues to be introduced to the market.

Our class C performance from forward the Winnebago brand in the first quarter of fiscal.

20.

21 was certainly not as good as we would have liked it to be that.

That being said the team has been rationalizing the lineup there and as I mentioned on the call. We have introduced a new class C unit called the Echo.

And there will be other product.

Enhancements to come on the class C line underneath the Winnebago brand in the months to come. So we are far away from what we believe a rightful fair position on the market should be with on with our teams work. So.

So we view that as an upside opportunity over the next several years to rebound there.

And that is our ambition on our focus on to do so on and we think the introduction of the Echo is a good step in the right direction there.

Yeah, Steve on the okay.

Okay, one more thing on that which is on the retail side, we're starting to see some stabilization of class b on the retail side, which we welcome.

And so I think some of this might just be timing in the quarter to in terms of shipments this year versus last year.

On the retail side I think we're seeing.

Some signs of stabilization and with the echo coming out now.

Hope that that compact classy would would help.

Take some market share.

Okay. All right. Thank you very much on the time.

Our next question comes from Bret Jordan with Jefferies. Your line is now open.

Hi, good morning, guys.

Good morning, I guess, the second mentioned this week of electrification.

You know I guess as you think about the potential to have a battery electric RV I mean, how realistic is that and maybe a timeframe. If you think about race.

Range and cost and charging infrastructure is that something that you are.

Our sort of seeing on the intermediate or longer term.

Yes, good morning, Brett Thanks for the question.

The only comment I'll make there is that.

You know we have been active on electric.

Electrification for several years now.

Our teams have been leaders and innovators in the industry around lithium ion battery systems.

Around the use of solar panels.

And we are the company with an all electric class a specialty vehicle in the market today.

We have an active.

Electrification roadmap I met with part of our team yesterday to review that.

And we are quickly.

And intentionally working on that to make sure that we're competitive in the market.

In the future.

So we are certainly aware of some of the other news or the intentions of some other players on the industry.

But we are confident that.

Our teams will be competitive in that space one thing to note.

It all electric product is not simply about the.

On the drive train on the and the power system. It is about the integration of the whole experience for the consumer and the integration of the sub systems.

Inside the driver experience in those alternative power systems as well and so we are we're not just focused on the technology that drives the product we're focused on the integration and the experience.

With all of the different functionality within the product so so stay tuned.

We're active we'll keep you all updated as news requires.

But we are keeping a close tabs on that end consumer.

And have.

Significant relationships with many technology partners in this space today that we think will be a benefit in the future.

Okay. Thank you.