Q1 2022 Winnebago Industries Inc Earnings Call

Yeah.

Good day, and thank you for standing by and welcome to the Q1 fiscal 2020 to Winnebago Industries. A result conference call I would now like to hand, the conference over to your host today, Steve Stuber, Vice President of Investor Relations. Please go ahead.

Thank you Justin.

Everyone and thank you for joining us today to discuss Winnebago Industries' fiscal 2022 first quarter earnings results.

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

This call is being broadcast live on our website at Investor <unk> W. G O that's in.

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

News release, as well as our third quarter.

The news release with our third quarter results as well as the Q1 earnings supplement for issued and posted to our website earlier this morning.

Before we start I'd like to remind you that certain statements made during today's 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 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.

Thanks, Steve Good morning, everyone and thank you for joining us today.

As always we deeply appreciate your interest in Winnebago industries and taking the time this morning to discuss our fiscal 2022 first quarter results.

I'll begin this morning with a discussion of the drivers of our performance for the quarter before turning it over to Bryan Hughes, Our Chief Financial Officer, who will discuss our financial results in more detail.

Then I will offer some closing comments and thoughts before we turn to your questions.

Winnebago industries started our fiscal 2022 year. This past September by building on our sustained momentum and continuing to demonstrate the outsize growth and profitability.

Our expanded portfolio a premium outdoor lifestyle brands can deliver.

Our golden threads of quality service and innovation continue to differentiate our premium brands propelling continued retail market share gains across the portfolio.

The way in which consumers have increasingly embraced and excitement for the outdoor lifestyle remains a powerful tailwind driving demand for Winnebago industries premium products, whether on land or.

Or water.

Winnebago industries grew first quarter revenues, 46% year over year.

Including for the first time results from Barletta boats.

And revenues grew 38% on an organic basis, excluding birla.

The strength of consumer demand for our products drove our RV performance ahead of the overall market.

Resulting in further retail market share gains during the quarter.

On a trailing three month basis through October our RV market share is 13, 3% 1.3 share points ahead of the same period last year.

The catalyst continues to be our Grand design, RV brand, which consistently delivers record results and outstanding support for our dealers and end consumers.

Newmar branded diesel motor home share and Winnebago brand towles growth.

Also contributed nicely.

In the Marine segment, our letter continues to grow ahead of the pontoon market.

Capturing five 3% retail market share on a trailing three month basis through October.

One and a half share points ahead of the same period last year.

Our outstanding team and their commitment to operational excellence enabled us to deliver for consumers, while simultaneously expanding our gross margin to an all time high.

Winnebago industries delivered gross margin of 19, 8% in the first quarter.

A 250 basis point improvement versus last year.

Our commitment to a make to confirm dealer order business model across the enterprise and a highly effective enterprise wide strategic sourcing team were particularly helpful. As we continue to navigate supply chain challenges and inflationary cost input pressures.

That we fully expect will be an ongoing reality during our fiscal 2022.

Before I continue I want to recognize the superb Winnebago industries employee team.

Now more than 7200 strong across our five brands. Our employees have worked diligently to drive our continued momentum and provide the high quality products and exceptional service our customers and dealer partners have come to expect.

They are collectively phenomenal.

Now in the face of record backlogs and working hard to replenish dealer inventories.

Our team's focus and drive remains a key contributor to Winnebago industries and driving our market growth.

We continue to believe that the accelerated demand for our products catalyzed by COVID-19 by bringing even more people into the outdoor lifestyle and ultimately our premium brands is a lasting foundation to further build on.

Recent RV I E survey data showed that at an astounding 9.6 million additional households say they are considering buying an RV in the next five years combined with over 14 million households, who have camp for the first time during 'twenty 'twenty and 2021.

Now we fully recognize that not all of these potential customers will actually buy a recreational vehicle.

But we do agree that future demand will be reasonably sustained at higher historical levels in large part because of consumer interest and participation in the outdoors being at all time highs.

Winnebago industries is uniquely well positioned to continue to capture an outsized portion of the market's growth and deliver that value to our employees communities and shareholders as more families take to the great outdoors and enjoy the outdoor lifestyle.

Winnebago industries continues to invest in the long term appealing to the increasingly diverse number of consumers turning to the outdoors in both recreational vehicles.

And marine providing a strong foundation for additional growth.

As evidence of that today, we are reporting our marine segment for the first time, consisting of our premium branded Chris craft and Barletta businesses.

We are convicted in our intent to profitably grow this segment meaningfully in the years ahead.

As Brian's remarks will outline in more detail our marine segment is performing well and in line with the high expectations, we have for Bart letter.

The results highlight the strength of the pontoon market and bar letters unique offering and strong brand affinity.

Which has integrated smoothly into our portfolio and delivered on the high growth expectations, we anticipated.

Our letter extended our reach into one of the fastest growing voting segments. The pontoon category and we see tremendous opportunity to further leverage their unique product innovation quality dealer network and service offerings strengths to sustained retail market share growth.

Our letter is delivering both an exciting growth platform and a natural fit with our broader portfolio of premium brands.

Within our Marine segment Barletta is balanced by the iconic Chris craft brand.

Which was our initial entree into marine and a truly strategic entity in our premium brand portfolio.

Together, they are enabling winnebago industries to capture more of the industry wide demand for the outdoor lifestyle and drive incremental growth.

Overall, we see a meaningful runway for further growth across our portfolio.

Winnebago industries is well positioned to tap into the secular demand shift of consumers embracing the outdoor lifestyle.

We are also investing significant energy and resources around emerging technologies and anticipate being an active innovator in the future as consumer demand for new technology application rises.

I want to thank our world class team are dedicated dealer network.

And supply partners for their ongoing hard work.

And strong execution.

With that opening summary, I will now turn the call over to our Chief Financial Officer, Bryan Hughes to review, our fiscal 2022 first quarter financials in more detail.

Brian.

Thanks, Mike and good morning, everyone.

First quarter record level consolidated revenues, including results for Barletta, where 1.2 billion, reflecting an increase of 46% compared to $793 1 million for the fiscal 2021 period.

Excluding barletta performance, our organic growth for fiscal 2020 to Q1 with 38%.

Our growth was driven by continued strong end consumer demand for our premium branded products and pricing initiatives.

We delivered another period of very strong profitability in the first quarter of fiscal 2022.

Gross profit with $229 4 million, representing an increase of 67% compared to $137 million for the fiscal 2021 period.

Gross profit margin increased 250 basis points in the quarter to a record 19, 8% driven.

Driven by pricing productivity initiatives.

Operating leverage in RV segment mix, partially offset by higher material and component costs.

Operating income was $146 4 million for the quarter.

An increase of 72% compared to $85 million for the first quarter of last year.

Note that our first quarter operating income includes $3 4 million in acquisition related costs.

And $4 6 million of incremental amortization of intangible assets related to the Barletta acquisition.

Fiscal 2022 first quarter net income was $99 6 million, an increase of 74% compared to $57 4 million in the prior year quarter.

Note that fiscal 2022 net income includes $6 4 million of contingent consideration fair value adjustment.

Which is included in non operating income.

Related to the earn out included in the deal structure associated with the Barletta acquisition.

Reported earnings per diluted share was a record $2.90 compared to reported earnings per diluted share of $1 70 in the same period last year.

Adjusted earnings per diluted share was a record $3 and 51.

An increase of 97% compared to adjusted earnings per diluted share of $1 78 in the same period last year.

Consolidated adjusted EBITDA was $167 2 million for the quarter.

Compared to $89 3 million last year.

Which represents an increase of 87%.

Driven by higher revenues.

<unk> intended in part to cover current and anticipated higher material and component costs.

And productivity initiatives.

Now I'll turn to our segment performance.

Which includes a new marine segment comprised the bar letting Chris craft, we will start with the towable segment.

Total segment revenues for the first quarter were $651 million up 43% from $454 9 million in the prior year driven.

Driven by strong continued end consumer demand and pricing actions.

Segment, adjusted EBITDA was $112 1 million up 78% over the prior year period.

Adjusted EBITDA margin of 17, 2% increased 330 basis points.

Primarily due to pricing ahead of anticipated material and component cost inflation.

And operating leverage.

Next let's turn to our Motorhomes segment and.

In the first quarter revenues for the motor homes segment were $421 5 million.

Up 31% from the prior year driven.

Driven by strong end consumer demand, particularly in class B and class a products.

And pricing actions.

Segment, adjusted EBITDA was $50 2 million up 65% from the prior year.

Adjusted EBITDA margin was a robust 11, 9% and increased 250 basis points over last year, and 70 basis points sequentially, driven by operating leverage pricing and productivity initiatives.

Partially offset by material and component cost inflation.

Finally, let's turn to our marine segment.

In the first quarter revenues for the Marine segment were $79 3 million up $67 4 million or 567%.

Driven primarily by the addition of Barletta.

Excluding results from Barletta, both marine revenues increased 19% from the first quarter of fiscal 2021.

As communicated during the course of acquiring buyer letter or letters margin profile is accretive to the company.

Marine segment adjusted EBITDA of $10 6 million was $9 7 million higher than the same period last year and adjusted EBITDA margin was 13, 3% 610 basis points higher than the seven 2% recorded last year.

Turning to the balance sheet.

As of November 27th 2022, the company had outstanding debt of $532 7 million comprised of $600 million of debt net of convertible note discount of $56 7 million and the debt issuance cost of $10 5 million.

The company also had working capital of $502 5 million and cash flow from operations of $56 5 million, which compared favorably to last year's cash outflow of $2 7 million and was achieved despite continued supply chain constraints, causing disruptions to material flow.

And fluctuating inventory levels.

We continued to maintain a very healthy liquidity position at the close of our fiscal quarter, we had liquidity of approximately $404 million, including an untapped ABL of $192 5 million.

During the first quarter, we completed the Barletta acquisition.

Reinvested back in our businesses.

Our first capital allocation priority and we returned approximately $26 million to shareholders through dividends and share repurchases.

And finally as noted earlier, we recorded higher intangible amortization expense this quarter of $4 6 million due to amortization associated with the <unk> acquisition.

Assuming a steady state business or no additional acquisitions are consummated intangible amortization expense for both Q2 and Q3 is currently anticipated to be $8 million and.

And $5 2 million for Q4.

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

Thanks, very much Brian.

Looking beyond our strong financial performance during the quarter I want to take a few minutes to highlight progress in another area of our business that is central to our overall success corporate responsibility.

As I briefly mentioned during our last earnings call. We continued to build on our track record of initiatives that positively impact our communities during the first quarter.

At the end of August we mobilized resources through our Winnebago Industries Foundation.

To support natural disaster relief.

And employee hardship.

And more recently announced dependent scholarship programs for our employees families.

We have taken it upon ourselves to ensure we do everything in our power to help because we understand that we are stronger together.

In that spirit the year round go together fund we launched is intended to be available for any of our employees. If they are impacted by a natural or personal disaster in the future.

Additionally in October we announced that we are joining business ambition for one and a half degrees Celsius.

He campaign led by the Science based targets initiative in partnership with the UN Global compact and the we mean business coalition.

In joining the project, we set a goal for ourselves to achieve net zero greenhouse emissions by 2050.

And committed to setting a science based targets through the science based targets initiative.

We also announced important targets on water usage waste reduction.

And overall product lifestyle lifecycle and sustainability composition.

As an outdoor lifestyle company, we recognize the importance of protecting our outdoor destinations. So that they can be enjoyed for generations to come.

On December 10th we published our third annual 2021 corporate responsibility report.

Which outlines our progress over the last year in this area and so many more.

The report details all the ways, we are advancing environmental social and governance initiatives across our organization and alignment with widely accepted ESG reporting frameworks and UN sustainable development goals.

The initiatives are fully integrated with our enterprise strategy.

We take pride in our ability to consistently apply them in our normal course interactions with all our important stakeholders.

These tenants will remain central to our business.

And we will continue to support our commitment to be great outdoors.

Now turning to our outlook for the rest of fiscal 'twenty two.

Looking at the RV industry at a macro level, we anticipate consumer demand to remain elevated compared to pre pandemic levels.

We are aligned with RBI as prediction of over 600000 wholesale shipments for calendar 2022.

But we will be monitoring closely the retail demand rhythm as the industry works to replenish low levels of dealer inventory.

However, we as one OEM in the RV industry will be working very closely with all our brands to responsibly produce and ship product.

Our dealers deserve ample margins and high returns as well and our production strategies influence that outcome.

While we anticipate the supply chain constraints and inflation to continue we have found a good cadence and working closely with our suppliers to mitigate the impact as much as possible.

Most importantly, we will continue to match our production levels with confirmed dealer orders.

This enterprise wide mandate is an important part of our business model and is especially important as the industry works to replenish, but not overdrive dealer inventory levels.

We continue to believe RV industry retail in our fiscal 2022 period will be at its second highest level.

Only behind our fiscal 2021 cycle.

We fully expect Winnebago industries portfolio to continue gaining retail market share in the RV market behind our steadfast commitment to quality service and innovation.

Additionally, we will also continue integrating and realizing the full potential of our letters premier products and expect the brand to further gain retail market share as that market for pontoon boats remains at near record levels.

In short we are relentlessly focused on sound execution of our winning strategy to build on our strong momentum.

That concludes our prepared remarks this morning.

I'd like to wish each of you on the call.

Our dealer and supplier partners are in customers.

And especially our employees and their families.

Safe and happy holiday season.

I will now turn it back over to the operator for the Q&A session.

Thank you very much for your time this morning.

Okay.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby we compile the Q&A roster and once again that is star one if you'd like to ask a question.

And our first question comes from Craig Kennison from Baird. Your line is now open.

Hey, good morning, Thanks for taking my question lots to talk about but really impressive gross margin in the quarter and really over the last.

Four quarters, you have sustained over 18% gross margin you've added.

Lotto, which seems to be higher margin is there any way to frame what you think of as the structural new gross margin level for this business once like discounting normalizes in the environment.

Normalizes with more inventory in the channel.

Yeah. Good morning, Craig This is Mike.

We certainly are pleased with the financial performance of the company over a very tumultuous period here the last four to candidly six or seven quarters.

And yes, we have been able to consistently reach levels of profitability during the past year.

It had been historically higher than that we are pleased with.

It is difficult to fully predict.

The different curve balls, which could affect the business in the future concerning inflation or supply chain disruption.

And we certainly recognize many have questions about the sustainability.

Our profit profile.

I can just tell you organically that we come to work every day.

Working to do our best to earn a premium price in the market through our dealers with our end consumers and we work internally to continue to transform the business to be as efficient as possible. So that we can manage.

Costs within the business.

We also continue to change the profile of the company and from an overall portfolio standpoint.

And in the course of the last 25 months now as we sit here today, we have added two important businesses and Newmar and then as you mentioned barletta and we anticipate over the next several years that we will continue to manage the portfolio profile.

That we give ourselves the best chance to continue to improve.

And maintain the profitability of the company going forward, but I will turn it over to Bryan Hughes for any comments in the near term on some of the structural dynamics happening.

Yeah, I guess, Mike the comments that I would add are first and foremost we have talked for some time, Craig about the product portfolio being the primary driver of margins long term.

The innovation that we intend to bring the quality differentiation that we very much intend to bring and continue to bring and then the post sale service.

That our products are intended to be supported by so that's the most important thing.

For our long term margin profile.

Certainly we when we price we do so with cost inputs and inflationary pressures in mind.

But even more so we price to the marketplace and what we think the market.

We'll support for our innovation, our quality and our service.

We've also as we've talked about in the past pursued productivity initiatives. We believe those have been a meaningful contributor.

Two our businesses, we've talked historically about motor home, but I don't also want to undersell.

The things that the <unk> business has done.

Over time, as well to get more out of their existing facilities increase their output their throughput and they've done a phenomenal job at that and that is reflected certainly in the margins that.

That we saw in Q1 and the elevated margins frankly that we've seen in the <unk> segment historically.

Historically.

So I know, there's a lot of <unk>.

Open questions about gosh looking forward is it going to be headwinds.

From marketplace dynamics.

From cost inflation, while sure theres going to be headwinds my point is that we're going to continue to fight those headwinds.

With tailwind and the things that we have done historically and we'll continue to pursue.

Mike and I believe that there is more to be done in our business to capture the opportunity and we need to continue to do that obviously, our internal expectations are for elevated margins relative.

Relative to others, you may see in the industry.

Reflected by innovation quality and service great product out in the marketplace.

Yes. Thanks, a lot I appreciate that I think the market is trying to value your business kind of post pandemic way, assuming post pandemic volume and post pandemic margin. So any input you can <unk>.

Sure with respect to those those variables I think would be helpful. Clearly with your stock trading where it's at today people are using pretty low numbers for those inputs.

So anything you can provide is helpful.

Meanwhile, on the on the buyback it looks like you were active in the quarter maybe.

Maybe just comment on on your.

Capital allocation priorities, and whether you would still elevated buybacks versus other priorities in this environment.

Yeah, Thanks, Greg for that question.

Our priority continues to be growth.

Opportunity to invest in the business organically and we've talked about some of the things that we're doing.

Two to expand our capacity you see elevated capex in our Q1.

Versus last year and versus our run rate quarterly as a result of those investments.

That remains a priority for us, especially in the environment that we're in and the market share.

Accretion that we are realizing we also have every intention of continuing to grow our business Inorganically. We have stated that many times strategically so that growth remains our first priority.

We've.

Continue to ensure our liquidity is in a good spot.

Had a leverage ratio of 0.7 at the end of the quarter that reflects the barletta acquisition. It is continuing to be underneath are.

Long range target of $3 nine to $1 five.

But maintaining that balance sheet health.

He is also a priority.

And then lastly, but certainly.

Not the least of our priorities I would say is returning cash to shareholders.

We've increased our dividend notably.

Since the prior year, a 50% increase.

We also to your point of your question we have.

<unk> recently.

Received authorization from our board for a $200 million share repurchase program, which we took advantage of and frankly, we like to have that opportunity to return cash to shareholders through the share repurchase program. We did it at an elevated level in Q1, and we will continue to utilize that as a means of generating.

Turn of cash to our shareholders going forward it will certainly depend on.

The other priorities the growth initiatives in particular.

And what the current environment.

Enables for us in that regard, but we will continue to use the share repurchase program.

As another means.

Thank you.

And thank you.

And our next question comes from Garrick Johnson from BMO capital markets.

Your line is now open.

Yes.

Hey, good morning.

I was kind of interested in the accessibility enhanced portfolio.

In my mind, probably a growing category over time.

The adventure.

He is about $60 $65000.

More expensive on a wholesale level than the base adventure.

What kind of incremental margins do you get that accessibility enhanced business and maybe also if you could talk about margins in commercial.

Yes, good morning, Garik This is Mike.

We are working on increasing.

The both the size, but also the profitability of our accessibility enhanced line.

As you mentioned that continues to grow with the adventure class a but also here recently.

A really need class b product called the role that we have been showing it.

Some of the trade events around that particular market.

We're not going to share specific margins within the specialty vehicle business.

But I can only assure you that the expectations for that business from a profitability standpoint, especially in the long term as it grows.

It used to be accretive to the overall <unk>.

<unk> of the company.

And.

That is largely because as Brian indicated in his prior comments, we truly believe that we can create innovative solutions for.

For consumers with especially physical disabilities to be able to reach and participate and enjoy the outdoors.

We have stated in the past that we believe there are millions several millions of consumers.

That have a interest in the recreational vehicle lifestyle.

But have not been able to find the exact right product that allows them to safely and effectively.

Engage in the outdoors and our specialty vehicles team.

Amongst many other market strategies they are exploring <unk>.

<unk> two.

Continues to expand that accessibility enhance.

Product line.

So we do anticipate over time that especially with scale that it will.

Be accretive to the portfolio I will just remind you and other investors listening to the call that it is currently.

Financially immaterial part of the portfolio strategically important currently but one we intend to continue to invest in.

Great. Thank you Mike.

And thank you.

And our next question comes from Scott timber from C. L. King your.

Your line is now open.

Good morning, guys and thanks for taking my questions. Good morning, Scott.

Mike you talked about it.

At least from a supply chain that you've.

<unk>.

I guess, a reasonable spot to be in right now, which I guess implies that things have improved modestly.

Can you maybe talk about that on the supply chain side and just from a production standpoint.

Your views on when.

The dealer channel, we will get back to be where it needs to be.

Yes.

Good morning, Scott. Thank you for the questions I'll start with the.

The health of the supply chain and our point of view on that certainly from a macro output level.

Supply chain continues to improve otherwise you would not have seen.

In the example of the recreational vehicle industry.

Several months in a row now.

Kurt.

RV shipments.

The challenge with the supply chain continues to be its inconsistency on almost a daily <unk>.

<unk> a weekly basis.

And so we continue to battle within all of our businesses regular disruptions in many different materials.

And.

So we would we would certainly state that its healing in quantity.

It is not all that much different in the consistency of delivery and.

We also worry very much about the quality.

And have processes in place to work with our suppliers to try to maintain a high level of quality.

And our teams as we stated in our prepared comments, we think have done as good a job if not better than many of our competitive peers and continuing to navigate that but but.

But that.

Drama is not over by any means as we enter calendar 2022.

Your second question had to do with the.

The field inventory levels, and we would talk about it in this way.

Sure.

You have to look at field inventory normalization in the context of several elements.

One will just take category.

The category that is that is.

Most quickly progressing towards normalization in terms of inventory turns is the recreational vehicle tovel space.

We are seeing.

But meaningful increase in travel.

Travel trailers, and even fifth wheels being supplied to the dealer channel.

Bolstering one year comps, but also in a two year comp factor. So that's the category that will probably reach.

The levels that dealers aspire to have sooner than everything else.

The second category would be the motor home category that will happen later.

Then the towboat category the turns are higher currently.

Production output is lower.

Then on the towable side.

And so that will be it will take longer than the last category I would point out that we believe will take the longest is the boat category pontoons and.

The.

Luxury run our routes from our fiberglass standpoint that we're in.

So.

The supply chain retail in dealers appetite for where they are forward looking turns will be all factor into the pace and timing and so I just would ask us all to make sure that when people say are we nearing inventory normalization.

We think about it in a more nuanced setting.

And just sort of a peanut butter spread.

Context going forward, we believe there continues to be.

Especially against two year forward looking turn targets.

We think there continues to be ample runway in several of our categories to continue to provide dealers with the product that they are asking for.

Got it and then just a quick last question looking at your backlog and tables and in motorized.

Seems to be some pretty big implied ASP growth. There can you talk about is that.

Future price increases related to your anticipation of raw materials going up or maybe just talk about that dynamic a little.

Yes so.

We have seen a rise in backlogs and I know many people ask questions about that and wonder about the integrity of that.

Again, not all companies measure backlogs the same way our backlogs are intended to reflect orders from dealers that we can confirm our desire to be delivered within a six month period.

I routinely tell people that the front half of that backlog.

Probably has more validity and integrity as it relates to future production planning purposes, and the back half of the backlog is probably a little bit more fluid and it's dynamic.

Context.

In terms of future reliability, but as you also indicated you can also see some of the pricing.

Power that we've had.

Via the value of the backlog and.

And we've talked of routinely Scott.

Our price increases on a year over year basis within our portfolio, probably range anywhere from 8% to 30% depending on the brand or the product category and so I think you do see that reflected in the backlogs in terms of sort of the wholesale value.

<unk>.

The dollar backlog.

I'll tell you candidly that backlogs are not always the best reflection of the health of our business and in fact, it would be my desire over time to probably see our backlog get a little skinnier because that means that we're probably moving the operational model.

Two a more just in time.

Better better deliver our product to the dealer.

State.

But we recognize that people think bigger is greater.

But we continue to focus on sort of the integrity of the backlog.

Giving dealers exactly the products that they are asking for and not too much.

Got it that was very helpful. Thank you.

Yes.

Thank you.

And our next question comes from Mike Swartz from <unk> Securities. Your line is now open.

Hey, good morning, guys, maybe just starting off with Mike you've made comments around just your production philosophy and not wanting to.

Load the channel up with too much inventory, but can you talk about I mean, just looking at the quarter looking at the industry production. Your production. It looks like you under shipped relative to the industry are you seeing or do you believe thats, having any impact on near term share opportunity for share gain in the market I E could it be larger than what you are.

Sure.

You cited earlier in the call.

Yes, good morning, Mike Thanks for the question.

A couple of thoughts there one is and we've stated this before that there's probably a timing correlation between shipment share and retail share thats as close together as has been the case for many years.

<unk>.

We have been.

Really focused on retail market share both in terms of units, but also in terms of dollars the retail market share percentage that we share on a regular basis via these earnings calls is a unit number I would contend that our dollar market share at retail is higher than the 13, 3% that we shared today.

So we are very focused on retail market share.

And we understand.

But there is some relevance between shipment share and retail share.

But we are focused on making sure our dealers have the right mix.

And inventory of product that they need to sell.

To optimize retail we do believe that this spring, especially when retail starts to pop again seasonally.

Specially down in the South and then gradually towards the north that the increased amount of new unit inventory on dealers' lots is going to have a beneficial impact to retail velocity.

Compared to a period of year prior where they had a lot less inventory. So we certainly have to have to keep an eye on the relation between shipment share in retail market share.

But we believe that we can accomplish our retail market share goals.

By operating a disciplined production and shipment model and subsequently Thats why you don't see us talk a lot about shipment share.

In our earnings results because.

It's not the most important metric that that.

We operate the business with them.

Okay. That's helpful. And then maybe a question for Brian just going back to Craig's question on gross margin sustainability.

When we look at the quarter you did nearly 20% gross margin.

In the prior four quarters, or so youre doing something between call it 17% 18%.

Should we look at that increment in the first quarter as the impact from taking some of the pricing ahead of cost inflation or are there other dynamics, there that we need to better things.

About.

Yes. There is there is so much in place there Mike or so much in play rather that to call out one specific item I don't know that that would be the right way to convey what happened in the quarter.

Certainly we called out the segment mix.

We did call out the pricing we mentioned in one case or in the case of the towable segment that it was.

For the cost increases we were seeing in the quarter, but also anticipating to hit in the future.

Look what.

What I hesitate to convey is some sort of expectation that the margins are going to come down because thats just not the way we are running the business right. Now we are running the business is to optimize our margins.

And as I mentioned earlier with with Craig we're climbing after the opportunity or the tailwind.

Aggressively and we expect that those those.

Those tail wins will do a nice job of offsetting potential headwinds and that's the way we're going to continue to run the business.

So I think that's the only thing that I would I would call out.

Okay, great. Thanks.

Thank you.

And our next question comes from Brett Andrews from Keybanc.

Yes.

Thank you.

Hey, good morning, guys.

Just a question on restocking in tolls. So you built 5000 units.

This quarter I think.

Another $5 kind of gets you back to pre pandemic levels, and maybe you need a little bit more than that.

You get turns in line, but if we get you close so I guess, how do you think about price in that context, I mean, how much price can you hold with a normal level of channel inventory and I guess, presumably.

A normal level of discounting that comes with that.

Yes, good morning, Brett.

So we strive to balance.

Pricing power and market share.

Progression.

Yeah.

And so our all of our businesses.

Have have.

Pricing decision authority within their business with certainly some oversight as needed from Brian awry.

But the direction from the enterprises to balance as Brian says margin optimization, but to do it in terms of retail share progression.

I did mention that the towboat category is certainly a category that has been refilling arguably faster than the other categories.

Now candidly I would contend that.

Perhaps the two largest companies in the total space in the industry are leading the charge as Mike's question indicated on shipment share in refilling.

The dealer channel.

Our turns.

From a backward looking standpoint for our toll boat dealer inventory.

Are certainly meaningfully elevated.

Versus a couple of years ago, and the combination of market share growth.

Dealer expansion new products.

We really look at turns from a forward looking standpoint internally in order to work with the dealers to get them to the levels that they want to run their business when.

We believe dealers are going to want to.

To both sustain the margins they have been making and to sustain some higher turn rate.

Then what they were doing pre COVID-19 and I think if you've talked to some of the especially the larger <unk>.

Dealers here recently.

Would validate that.

When inventory normalizes in the market whatever that means.

In some level of pricing competitiveness returns in the market at a higher level.

Our dealer partners, we will have the first decision to make.

How to deal with that in terms of their retail pricing decisions and their strategies will ultimately then determine.

What we would do in the future in whether we would participate.

In any of that discounting or promotional pressure.

We are not seeing significant.

Promotional or discounting pressure from our dealers on any of our outdoor brands currently.

We will continue to monitor for that.

And be prepared.

To engage in that conversation.

But that day has not arrived yet within our business.

Got it Okay, and then I think earlier you mentioned.

You phrased it is monitoring.

Rhythm right. So maybe if you could elaborate that.

On that a little bit more I guess, you have different expectations for the rate of retail growth that we're seeing here. This off season I'm talking about gross compared to 19.

Maybe what you would expect to see in the selling season.

Any elaboration on that rhythm.

So yes so.

Our growth versus two years ago and pretty soon here 2019 will turn into 2020 and from a two year comp standpoint.

But our growth versus 2019 for our brands in the RV space, especially has been consistently positive.

It has slowed like the rest of the industry has but we have been consistently positive.

One of the biggest factors to the unpredictability of future retail.

Is the impact of dealers, having the inventory that consumers were looking for a year or two ago, especially a year ago.

Couldn't see to make a buying decision.

Or to or to buy something in a timeframe.

That was reasonable.

Many of the dealer principals that we speak with.

Have some level of confidence that as inventory continues to increase on their lots and in their showrooms.

That their retail prospects have a probability of being stronger going forward.

And so for US we will be especially monitoring what begins to happen in February March and April of 2022, and there are a lot of factors, obviously that can impact overall retail demand, but we will especially be monitoring sort of the seasonal retail bounce in spring of 2022.

To see what that means in terms of whether we can continue to build inventory in the market or we will begin to borrow again at some point, especially in late spring and early summer. So theres a lot of there's a lot of unknown spud.

Hi.

I, usually tease you all on this call by making the following comment.

When I look at the retail for our brands in the RV space for.

Four week ending December 11th.

We had extremely strong comps on a two year level.

They were stronger the week of December ending December 11th then they were probably a month. Prior so we've actually seen a little bit of a rebound here in two year comp retail.

On our reports.

So it is an extremely dynamic marketplace and that's subsequently one of the reasons why we can't always predict timing of any.

Field inventory normalization specifically.

Nor do we nor can we anticipate specifically when you might start to see some of that price competition at retail returned to the market.

Got it thank you.

Thank you.

And our next question.

Fred.

From Wolfe research.

Your line is now open.

Hey, guys. Good morning, a lot of questions on sort of retail and wholesale but I guess simplistically. When you look at the RV ecosystem do you think that dealers manufacturers and suppliers can all have higher post COVID-19 margins.

Good morning, Fred Thanks for the question.

I would hope that would be the case I mean, we will see if that happens I think some of that will be determined by.

The Kansas candidly the business decisions.

Individual firms and organizations make for themselves.

But.

Certainly this is an industry, especially on the recreational vehicle side.

That has been extremely competitive from a gross margin standpoint for many years in the industry by and large has done a good job of keeping the retail prices of our products.

Affordable for people to enter the lifestyle.

So there will be this natural tension between volume and affordability.

<unk> or <unk>.

Level of profitable health.

We have always maintained in our business model that the profitability of the dealer is extremely important to us and we want our brands on the dealers' lots to be some of the most profitable brands that they do business with.

So that they can continue to reinvest in the business So I.

I personally have.

Implored or had conversations with several dealer principals.

About them trying to do everything they can to maintain margins and maintain a higher turn rate.

As we get further and further away from sort of this pre COVID-19 or the start of the Covid era, and so we will see but I do believe many dealers are going to fight extremely hard to maintain to maintain margins.

That makes sense that's super helpful.

Just one follow up on sort of the supply chain comments it sounds like that's getting better but any improvement on the chassis side I know that it sounds like.

Travel trailers and tow boats are going to improve before motor homes, but I know last quarter. You had cited the chassis is sort of the big bottleneck. So any improvement there any line of sight to that getting better or should we expect that to be sort of the big constriction here near term.

Yes.

Yes. Thanks for the question on chassis two comments there one is semiconductor chips continue to be a meaningful constraint.

Within the motorized chassis.

Category.

We've seen a little bit of improvement of that here in late in our fiscal 'twenty one year.

We anticipate meaningful constraints to continue to run through most of 'twenty, two probably at least through quarter three of fiscal 'twenty two.

We are very pleased with what's happened here in the last two financial quarters, with our Newmar business and while we don't break out specific.

Brand our results financially I can tell you that our newmar business has really.

<unk> performed nicely in terms of output and working their way through some of the supply chain constraints that they were facing.

Year or so ago.

So.

So that business in particular has not seen a ton of impact from chassis constraints. They are seeing some challenges with different types of components or systems that go into their products.

But yes motorized will continue to battle.

Semiconductor chip challenge for probably.

As I said.

Much much of 2022.

Great. Thanks, guys.

Okay.

And thank you and our next question comes.

Bret Jordan from Jefferies. Your line is now open.

Hey, good morning, guys.

Good morning, another supply chain question, but could you talk about the marine segment and I guess power availability, you mentioned that marine would be restocked last of the three is that because you've seen more pre sales and you are just shipping four for retail or because there is a greater supply chain holdup there.

Sure.

Yes, Brent good morning, Thanks for the question.

Again are our peers at Brunswick, and Malibu and Master craft may be in a better position to answer this from a volume perspective in the marine category, but.

Our businesses have been working very closely with the.

The engine Slash motor manufacturers.

Within the industry to ensure.

Reliable supply.

One of the the motor engine manufacturers is has probably done a better job than another one for both of our brands.

But we are in daily contact through those brands with those engine suppliers with.

With the forecast of what we need but the only other comment I'll make there is that because of the engine supplier constraints that we've seen in the marine business.

We've had to we've had to adjust some of our go to market strategies and production strategies to better fit with what engines are available by brand.

So it is it has been tight.

As I've said, it's been exceptionally tight on one of the brands.

The other brand has engine brand has worked really hard.

To supply us with engines in a reliable fashion for that we're grateful.

But we've had to we've had to modify some of our go to market strategies because of that we hope that improves.

In 2022.

And we'll see we'll see if it does but in addition to engines there are definitely.

A plethora of other categories that we've struggled through some of the similar.

To the RV industry like furniture, but some of them at times are more unique in terms of marine specific components, but.

Again I think the.

The inventory levels in the marine industry again, depending on the category are.

Broadly a little bit lower than the RV industry.

The other thing I will just comment that in that sense is that barletta.

Is just a significant growth opportunity for us and.

While bar letters dealer inventories today are higher than they were a year ago.

They're not where we want them to be in order to reach our market share targets that we have for the future of that business and.

As we do in our other businesses, we have a book of confirm dealer orders that the <unk> team as is.

And a busy fashion trying to produce product for us.

Okay, and then one question I guess on the RV pricing and then maybe it's sort of a fuzzy question, but when you think about higher prices on an absolute basis as well as less discounting off of MSRP at the dealership do you have a feeling for what the real inflation in RV prices were in 'twenty, one and I guess, maybe do you have an outlook for 'twenty two maybe.

More discounting as inventory rebuilds, but how do you think the rate of inflation is for the retail transaction.

Well certainly the rate of inflation at retail is probably higher than the numbers I gave you earlier at times, because I was referencing more wholesale inflation in terms of our prices to our dealers. So when I said, there was a range of probably 8% to 30% within our portfolio.

You can probably layer.

Several points on top of that.

Four.

Retail inflation as dealers have been able to get in many cases, a full retail as inventory has been limited so I don't want to quote any numbers because.

Pricing does vary by dealer, we don't set that final retail price that's really the decision by the dealer, but you can probably take the numbers I gave you in and add a little pad to that to try to get to a retail inflation number and again it varies by category and it varies by brand.

Yeah.

Great. Thank you.

Thank you.

And our next question comes from David Whiston from Morningstar. Your line is now open.

Yes.

Thanks, Good morning.

Another aspect to supply chains as it can be labor shortages I was just curious if either you guys or upstream or are you, having any labor shortages that your suppliers.

So I can't speak.

Articulately to the supply base I mean, certainly our suppliers, let us know that they are battling labor.

Labor challenges.

But that isn't always the primary reason for why perhaps they haven't been able to deliver or something.

We also have to remember as I think we're all acutely aware here recently that we're still in the midst of the pandemic and.

The newest variant AUM across is something I think all of US are business are watching and trying to manage.

Our businesses every day are challenged by labor.

In terms of making sure that we have the people we need.

Either because of Covid or just gross numbers to continue to build.

Two our future targets.

So it isn't getting any easier David.

But we do not listed today.

As a extreme constraint to our ability to grow.

In the businesses or industries that we compete in today.

Now, we do have manufacturing facilities in some.

Some rural counties in Iowa, and Indiana.

That we that we have some limited talent.

Pools to draw from and in many cases, there we work with.

The local.

Development organizations to try to.

Attract people to our industry into that geographic area, but I can tell you in some of the larger markets like where Chris craft is in Sarasota.

We do not have as many people as we'd like to have there either so it is a constant.

It has represented a slight.

Inflationary pressure to internally.

Certainly we have to compete for that labor at a higher wage.

And we are committed to fair wages, but.

Our businesses continue to figure out ways to be more productive with the people that we can get and consequently deliver great product.

Okay, Thanks and on.

Chris craft in particular.

Just curious are those customers interested at all in zero emission boating and do you see boding about to go into any kind of big zero emission product cycle.

I would say that we have customers across the outdoor segments. We compete in that are interested in alternative.

Power technology or zero emissions technology.

And so it's not just those highly affluent customers that you would see.

That would buy.

Bye, Chris craft brand.

The marine industry is absolutely.

Engaging in emerging technology.

Work to.

To try to bring.

More efficient.

Yes.

Power propulsion to that industry.

But that's also the same in the automotive and the recreational vehicle industry as well so.

I truly believe that over the course of the next.

Three to five to 10 years.

In the outdoor industries that we compete in.

That the power platforms that many of our products use.

We'll be evolving pretty meaningfully.

And our company will do everything we can to be a leader in highly competitive when that happens.

So yes, we are seeing some of that new <unk>.

Development beginning to happen.

But we believe it is not specific to the Chris craft brand it will affect all of our businesses and brands over time.

Okay and.

Can you just speak briefly what the $4 million litigation charges for.

Well, let me make a comment that and then I'll ask Brian if he has anything to add.

This was.

In event that occurred several years ago.

In our business.

Related to some of our business development activities and.

A point of contention that obviously found its way into the.

The legal system that is a process that's still is.

Active.

But one that we.

Had to make a.

Sure.

Financial entry for.

In this latest quarter.

Not going to share a lot of details about it.

But it certainly is something that we had to book in this quarter because of the progress.

The legal process to.

B.

<unk> take that one step further so we received an adverse judgment that we do not agree with.

And we have appealed the full amount of the judgment has been reserved in this quarter, which could ultimately be less if we prevail on appeal.

Okay, Great. That's helpful. Thank you.

And thank you.

And our next question comes from Joe Ultra Delek from Raymond James Your line is now open.

Thanks, Hey, guys. Good morning, I appreciate it most of my questions have been asked and answered, but I did want to go back to the topic of dealer inventory and it sounds like Mike you still think that it's going to take.

A couple of years before things to normalized call. It late your fiscal 'twenty three.

My math is right over the last call it four years.

Retail has outstripped wholesale by about 160000 units.

In the industry and.

If we don't get back to normal current.

Current levels and turns remain elevated.

What's the number of units.

Do you think we need we need to over ship over the next call. It couple of years to get back to normalization is it is it half of that is the 100000 units for example.

Yes, good morning, Joe.

I would like to clarify.

The first part of your question in this sense I don't think I stated a specific <unk>.

Timeline for when some of these categories would reach.

A macro level that the dealers are comfortable with.

I do believe the towboat category, well, we'll be first to normalize.

That will not take a couple of years.

That will happen much more quickly than that.

But then motorized and boats will follow and again there are a lot of variables to this so but I do not believe it will take.

Probably till the end of our fiscal 2023 year for all of that.

Happened some of that will certainly happen sooner and possibly some of it is still here.

Sure.

This fiscal 2022 year, especially on <unk>.

With all due respect I would like to not get into specific numbers.

From an industry standpoint of how much I think.

What needs to be refilled within a certain timeframe and part of that is because.

Candidly.

We have about 13% of the RV market and so I can't speak with any confidence on the intent or the practices.

The capacity of.

Some of our larger competitors, who candidly are dictating the pace and the quantity of field inventory.

In a higher more meaningful way than even we are.

So that may be a better question for some of our some of our larger competitors again, we're going to be very focused on <unk>.

Try not to overproduce too.

Our detriment or the dealers detriment.

Everything we make on the product line, we will either have a retail customers name or a dealer's name on it that they want and we will be.

Looking for those canaries in the coal mine that signal that dealers.

Are starting to.

Resist any any excess product.

That they have on order.

We do not want to have any open inventory on our lots.

That.

Forces us to go to the dealers to beg them to take at a discount that as a business practice.

That we used to.

Do in some of our businesses that we are trying to get away from.

So.

So that's what I will just comment on for your question.

It's definitely a fair point.

Can you talk about fiscal 'twenty three in the past I wasn't sure if there was any.

Change there.

I guess one question on marine.

That business is obviously still supply chain constraint is the Q1 unit number a good run rate for fiscal 'twenty, two or should we assume that steps up over the balance of the year spin.

Specifically, Joe on the Marine.

Reporting segment.

I would say we saw.

Good production from Barletta in Chris craft during our quarterly first year.

But I would not suggest that both those businesses were so efficient and productive but that's all they could do so each quarter is a little bit different because of holidays in the weeks off we give to our employees.

Yes.

So I think it's directionally a good number.

But I.

I wouldn't I wouldn't suggest that it won't be different either either because of seasonality from a plant standpoint or.

The businesses have a supply chain or productivity.

<unk> that allow them to produce at higher levels. So so we're pleased especially with the first three months that barletta has been in the portfolio and that team is engaged.

The integration process is going well.

And the business is performing every bit as well as we had hoped and so we're very excited and optimistic about that brand's future within the marine industry and especially our portfolio.

Got it Scott.

Great market share trends as well it was one of the things that attracted us to that business.

And we certainly expect continued market share accretion too.

Got it thank you guys happy holidays.

Same to you Joe.

Thank you.

And I am showing no further questions I would now like to turn the call back to Steve Stuber for closing remarks.

Thank you Justin.

Thank you everyone for joining our call today happy holidays from all of US here at Winnebago industries and as Mike mentioned, please have a safe and happy holiday season and have a good day.

This concludes today's conference call. Thank you for participating you may now disconnect.

[music].

[music].

[music].

Good day, and thank you for standing by and welcome to the Q1 fiscal 2020 to Winnebago Industries Conference call I would now like to hand, the conference over to your host today, Steve Stuber, Vice President of Investor Relations. Please go ahead.

Thank you Justin.

Morning, everyone and thank you for joining us today to discuss Winnebago Industries' fiscal 2022 first quarter earnings results.

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

This call is being broadcast live on our website at Investor <unk> and.

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

News release, as well as our third quarter.

The news release with our third quarter results as well as the Q1 earnings supplement for issued and posted to our website earlier this morning before.

Before we start I'd like to remind you that certain statements made during today's 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 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.

Thanks, Steve Good morning, everyone and thank you for joining us today.

As always we deeply appreciate your interest in Winnebago industries and taking the time this morning to discuss our fiscal 2022 first quarter results.

I'll begin this morning with a discussion of the drivers of our performance for the quarter before turning it over to Bryan Hughes, Our Chief Financial Officer, who will discuss our financial results in more detail.

Then I will offer some closing comments and thoughts before we turn to your questions.

Winnebago industries started our fiscal 2022 year. This past September by building on our sustained momentum and continuing to demonstrate the outsized growth and profitability.

Our expanded portfolio a premium outdoor lifestyle brands can deliver.

Our golden threads of quality service and innovation continue to differentiate our premium brands propelling continued retail market share gains across the portfolio.

The way in which consumers have increasingly embraced and excitement for the outdoor lifestyle remained a powerful tailwind driving demand for Winnebago industries premium products, whether on land or water.

Winnebago industries grew first quarter revenues, 46% year over year.

Including for the first time results from Barletta boats.

And revenues grew 38% on an organic basis, excluding butler.

The strength of consumer demand for our products drove our RV performance ahead of the overall market.

Resulting in further retail market share gains during the quarter.

On a trailing three month basis through October our RV market share is 13, 3% one three share points ahead of the same period last year.

The catalyst continues to be our Grand design, RV brand, which consistently delivers record results and outstanding support for our dealers and end consumers.

Newmar branded diesel Motorhomes share and Winnebago brand Towles growth also contributed nicely.

In the Marine segment, our letter continues to grow ahead of the pontoon market.

Capturing five 3% retail market share on a trailing three month basis through October.

One and a half share points ahead of the same period last year.

Our outstanding team and their commitment to operational excellence enabled us to deliver for consumers, while simultaneously expanding our gross margin to an all time high.

Winnebago industries delivered gross margin of 19, 8% in the first quarter.

A 250 basis point improvement versus last year.

Our commitment to a make to confirm dealer order business model across the enterprise and a highly effective enterprise wide strategic sourcing team were particularly helpful. As we continue to navigate supply chain challenges and inflationary cost input pressures.

That we fully expect will be an ongoing reality during our fiscal 2022.

Before I continue I want to recognize the superb Winnebago industries employee team.

Now more than 7200 strong across our five brands. Our employees have worked diligently to drive our continued momentum and provide the high quality products and exceptional service our customers and dealer partners have come to expect.

They are collectively phenomenal.

Now in the face of record backlogs and working hard to replenish dealer inventories.

Our team's focus and drive remains a key contributor to Winnebago industries and driving our market growth.

We continue to believe that the accelerated demand for our products catalyzed by COVID-19 by bringing even more people into the outdoor lifestyle and ultimately our premium brands is a lasting foundation to further build on.

Recent RV IAA survey data showed that an astounding $9 6 million additional households say they are considering buying an RV in the next five years combined with over 14 million households, who have camp for the first time during 2020 and 2021.

Now we fully recognize that not all of these potential customers will actually buy a recreational vehicle.

But we do agree that future demand will be reasonably sustained at higher historical levels in large part because of consumer interest and participation in the outdoors being at all time highs.

Winnebago industries is uniquely well positioned to continue to capture an outsized portion of the market's growth and deliver that value to our employees communities and shareholders as more families take to the great outdoors and enjoy the outdoor lifestyle.

Winnebago industries continues to invest in the long term.

<unk> to the increasingly diverse number of consumers turning to the outdoors in both recreational vehicles and marine.

Providing a strong foundation for additional growth.

As evidence of that today, we are reporting our marine segment for the first time, consisting of our premium branded Chris craft and Barletta businesses.

We are convicted in our intent to profitably grow this segment meaningfully in the years ahead.

As Brian's remarks will outline in more detail our marine segment is performing well and in line with the high expectations, we have for Bard letter the.

The results highlight the strength of the pontoon market and bar letters unique offering and strong brand affinity, which has integrated smoothly into our portfolio and delivered on the high growth expectations, we anticipated.

Our letter extended our reach into one of the fastest growing boating segments. The pontoon category and we see tremendous opportunity to further leverage their unique product innovation quality dealer network and service offerings strengths to sustained retail market share growth.

<unk> is delivering both an exciting growth platform and a natural fit with our broader portfolio of premium brands.

Within our Marine segment, our Atlanta is balanced by the iconic Chris craft brand.

Which was our initial entree into marine and a truly strategic entity in our premium brand portfolio.

Together, they are enabling winnebago industries to capture more of the industry wide demand for the outdoor lifestyle and drive incremental growth.

Overall, we see a meaningful runway for further growth across our portfolio.

As Winnebago industries is well positioned to tap into the secular demand shift of consumers embracing the outdoor lifestyle.

We are also investing significant energy and resources around emerging technologies and anticipate being an active innovator in the future as consumer demand for new technology application rises.

I want to thank our world class team are dedicated dealer network.

And supplier partners for their ongoing hard work.

And strong execution.

With that opening summary, I will now turn the call over to our Chief Financial Officer, Bryan Hughes to review, our fiscal 2022 first quarter financials in more detail.

Brian.

Thanks, Mike and good morning, everyone.

First quarter record level consolidated revenues, including results for Barletta were $1 2 billion, reflecting an increase of 46% compared to $793 1 million for the fiscal 2021 period.

Excluding by led US performance, our organic growth for fiscal 2020 to Q1 with 38%.

Our growth was driven by continued strong end consumer demand for our premium branded products and pricing initiatives.

We delivered another period of very strong profitability in the first quarter of fiscal 2022.

Gross profit was $229 4 million, representing an increase of 67% compared to $137 million for the fiscal 2021 period.

Gross profit margin increased 250 basis points in the quarter to a record 19, 8% driven.

Driven by pricing productivity initiatives.

Operating leverage in RV segment mix, partially offset by higher material and component costs.

Operating income was $146 4 million for the quarter.

An increase of 72% compared to $85 million for the first quarter of last year.

Note that our first quarter operating income includes $3 4 million in acquisition related costs.

And $4 6 million of incremental amortization of intangible assets related to the <unk> acquisition.

Fiscal 2022 first quarter net income was $99 6 million, an increase of 74% compared to $57 4 million in the prior year quarter.

Note that fiscal 2022 net income includes $6 4 million of contingent consideration fair value adjustment.

Which is included in non operating income.

Related to the earn out included in the deal structure associated with the buyer letter acquisition.

Yeah.

Reported earnings per diluted share was a record $2 90 compared to reported earnings per diluted share of $1 70 in the same period last year.

Adjusted earnings per diluted share was a record $3 51.

An increase of 97% compared to adjusted earnings per diluted share of $1 78 in the same period last year.

Consolidated adjusted EBITDA was $167 2 million for the quarter compared to $89 3 million last year, which.

Which represents an increase of 87% driven by higher revenues.

Pricing intended in part to cover current and anticipated higher material and component costs.

And productivity initiatives.

Now I will turn to our segment performance, which includes a new marine segment comprised of <unk> and Chris craft, we will start with the total segment.

Total segment revenues for the first quarter were $651 million up 43% from $454 9 million in the prior year.

Driven by strong continued end consumer demand and pricing actions.

Segment, adjusted EBITDA was $112 1 million up 78% over the prior year period.

Adjusted EBITDA margin of 17, 2% increased 330 basis points primarily.

Primarily due to pricing ahead of anticipated material and component cost inflation and.

And operating leverage.

Next let's turn to our motor home segment.

In the first quarter revenues for the motor home segment were $421 5 million up 31% from the prior year driven.

Driven by strong end consumer demand, particularly in class B and class a products.

And pricing actions.

Segment, adjusted EBITDA was $50 2 million up 65% from the prior year.

Adjusted EBITDA margin was a robust 11, 9% and increased 250 basis points over last year, and 70 basis points sequentially, driven by operating leverage pricing and productivity initiatives.

Partially offset by material and component cost inflation.

Finally, let's turn to our marine segment.

In the first quarter revenues for the Marine segment were $79 3 million up $67 4 million or 567%.

Driven primarily by the addition of Barletta.

Excluding results from Barletta boats Marine revenues increased 19% from the first quarter of fiscal 2021.

As communicated during the course of acquiring buyer letter or letters margin profile is accretive to the company.

Marine segment adjusted EBITDA of $10 6 million was $9 7 million higher than the same period last year and adjusted EBITDA margin was 13, 3% 610 basis points higher than the seven 2% recorded last year.

Turning to the balance sheet.

As of November 27th 2022, the company had outstanding debt of $532 7 million comprised of $600 million of debt net of convertible note discount of $56 7 million and the debt issuance cost of $10 5 million.

The company also had working capital of $502 5 million and cash flow from operations of $56 5 million, which compared favorably to last year's cash outflow of $2 7 million and was achieved despite continued supply chain constraints, causing disruptions to material flow.

And fluctuating inventory levels.

We continued to maintain a very healthy liquidity position at the close of our fiscal quarter, we had liquidity of approximately $404 million, including an untapped ABL of $192 5 million.

During the first quarter, we completed the <unk> acquisition.

Reinvested back in our businesses.

Our first capital allocation priority and we returned approximately $26 million to shareholders through dividends and share repurchases.

And finally as noted earlier, we recorded higher intangible amortization expense this quarter of $4 6 million due to amortization associated with the <unk> acquisition.

Assuming a steady state business or no additional acquisitions are consummated intangible amortization expense for both Q2 and Q3 is currently anticipated to be $8 million and.

And $5 2 million for Q4.

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

Yeah.

Thanks, very much Brian.

Looking beyond our strong financial performance during the quarter I want to take a few minutes to highlight progress in another area of our business that is central to our overall success corporate responsibility.

As I briefly mentioned during our last earnings call. We continued to build on our track record of initiatives that positively impact our communities during the first quarter.

At the end of August we mobilized resources through our Winnebago Industries Foundation.

To support natural disaster relief and employee hardship.

And more recently announced dependent scholarship programs for our employees families.

We have taken it upon ourselves to ensure we do everything in our power to help because we understand that we are stronger together.

In that spirit the year round go together fund we launched is intended to be available for any of our employees are they are impacted by a natural or personal disaster in the future.

Additionally in October we announced that we are joining business ambition for one and a half degrees Celsius.

He campaign led by the Science based targets initiative in partnership with the UN Global compact and the we mean business coalition.

And joining the project, we set a goal for ourselves to achieve net zero greenhouse emissions by 2050.

And committed to setting a science based targets through the science based targets initiative.

We also announced important targets on water usage waste reduction and overall product lifestyle lifecycle and sustainability composition.

As an outdoor lifestyle company, we recognize the importance of protecting our outdoor destinations. So that they can be enjoyed for generations to come.

On December 10th we published our third annual 2021 corporate responsibility report.

Which outlines our progress over the last year in this area and so many more.

The report details all the ways, we are advancing environmental social and governance initiatives across our organization and alignment with widely accepted ESG reporting frameworks and UN sustainable development goals.

The initiatives are fully integrated with our enterprise strategy and.

And we take pride in our ability to consistently apply them in our normal course interactions with all our important stakeholders.

These tenants will remain central to our business and we will continue to support our commitment to be great outdoors.

Now turning to our outlook for the rest of fiscal 'twenty two.

Looking at the RV industry at a macro level, we anticipate consumer demand to remain elevated compared to pre pandemic levels.

We are aligned with RV I as prediction of over 600000 wholesale shipments for calendar 2022.

But we will be monitoring closely the retail demand rhythm as the industry works to replenish low levels of dealer inventory.

However, we as one OEM in the RV industry will be working very closely with all our brands to responsibly produce and ship product.

Our dealers deserve ample margins and high returns as well and our production strategies influence that outcome.

While we anticipate the supply chain constraints and inflation to continue we have found a good cadence and working closely with our suppliers to mitigate the impact as much as possible.

Most importantly, we will continue to match our production levels with confirmed dealer orders.

This enterprise wide mandate is an important part of our business model and is especially important as the industry works to replenish, but not overdrive dealer inventory levels.

We continue to believe RV industry retail in our fiscal 2022 period will be at its second highest level.

Only behind our fiscal 2021 cycle.

We fully expect Winnebago industries portfolio to continue gaining retail market share in the RV market behind our steadfast commitment to quality service and innovation.

Additionally, we will also continue integrating and realizing the full potential of our letters premier products and expect the brand to further gain retail market share as that market for pontoon boats remains at near record levels.

In short we are relentlessly focused on sound execution of our winning strategy to build on our strong momentum.

That concludes our prepared remarks this morning.

I would like to wish each of you on the call.

Our dealer and supplier partners are in customers.

And especially our employees and their families a safe and happy holiday season.

I will now turn it back over to the operator for the Q&A session.

Thank you very much for your time this morning.

And.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster and once again that is star one if you'd like to ask a question.

And our first question comes from Craig Kennison from Baird.

Your line is now open.

Hey, good morning, Thanks for taking my question.

Lots to talk about but really impressive gross margin in the quarter and really over the last.

Four quarters, you have sustained over 18% gross margin you've added.

<unk>, which seems to be higher margin is there any way to frame what you think of as the structural new gross margin level for this business once like discounting normalizes in the environment.

Normalizes with more inventory in the channel.

Yeah. Good morning, Craig This is Mike.

We certainly are pleased with the financial performance of the company over a very tumultuous period here the last four to candidly six or seven quarters.

And yes, we have been able to consistently reach levels of profitability during the past year that have been historically higher than that we are pleased with.

It is difficult to fully predict.

The different curve balls, which could affect the business in the future concerning inflation or supply chain disruption.

And we certainly recognize many have questions about the sustainability of our profit profile.

I can just tell you organically that we come to work every day.

Working to do our best to earn a premium price in the market through our dealers with our end consumers and we work internally to continue to transform the business to be as efficient as possible.

So that we can manage the <unk>.

Costs within the business.

We also continue to change the profile of the company and from an overall portfolio standpoint.

And in the course of the last 25 months now as we sit here today, we have added two important businesses and Newmar and then as you mentioned barletta.

And we anticipate over the next several years that we will continue to manage the portfolio profile.

So that we give ourselves the best chance to continue to improve.

And maintain the profitability of the company going forward, but I will turn it over to Bryan Hughes for any comments in the near term on some of the structural dynamics happening.

Yeah, I guess, Mike the comment that I would add are first and foremost we have talked for some time, Craig about the product portfolio being the primary driver of margins long term.

The innovation that we intend to bring the quality differentiation that we very much intend to bring and continue to bring and then the post sale service.

That our products are intended to be supported by so that's the most important thing.

For our long term margin profile.

Certainly we when we price we do so with cost inputs and inflationary pressures in mind.

But even more so we price to the marketplace and what we think the market.

We'll support for our innovation and our quality and our service.

We've also as we've talked about in the past pursued productivity initiatives. We believe those have been a meaningful contributor.

Two our businesses, we've talked historically about motor home, but I don't also want to undersell the.

The things that the <unk> business has done.

Over time, as well to get more out of their existing facilities increase their output their throughput and they've done a phenomenal job at that and that is reflected certainly in the margins.

That we saw in Q1 and the elevated margins frankly that we've seen in the <unk> segment <unk>.

Historically.

So I know, there's a lot of <unk>.

Open questions about gosh looking forward is it going to be <unk>.

<unk>.

From marketplace dynamics.

Cost inflation, while sure theres going to be headwinds my point is that we're going to continue to fight those headwinds with.

With tailwind.

And the things that we have done historically and we'll continue to pursue.

Mike and I believe that there is more to be done in our business to capture the opportunity and we.

We need to continue to do that obviously, our internal expectations are for elevated margins.

Relative to others, you may see in the industry.

<unk> by innovation quality and service great product out in the marketplace.

Yes. Thanks, a lot I appreciate that I think the market is trying to value your business kind of post pandemic way, assuming post pandemic volume and post pandemic margin. So any input you can share with respect to those those variables I think would be helpful. Clearly.

With your stock trading where it's at today people are using pretty low numbers for those inputs.

So anything you can provide is helpful.

Meanwhile, on the on the buyback it looks like you were active in the quarter.

Maybe just comment on on your capital allocation priorities and whether you would still elevated buybacks versus other priorities in this environment.

Yes, thanks, Greg for that question.

<unk> continues to be growth.

We have opportunity to invest in the business organically and we've talked about some of the things that we're doing.

Two to expand our capacity you see elevated capex in our Q1 versus.

<unk> last year and versus our run rate quarterly as a result of those investments.

That remains a priority for us, especially in the environment that we're in and the market share.

Accretion that we are realizing we also have every intention of continuing to grow our business Inorganically. We have stated that many times strategically so that growth remains our first priority.

We continue.

Continue to ensure our liquidity is in a good spot.

Had a leverage ratio of 0.7 at the end of the quarter that reflects the barletta acquisition. It is continuing to be underneath are.

A long range target of $3 nine to $1 five.

But maintaining that balance sheet health.

He is also a priority.

And then lastly, but certainly.

Not the least of our priorities I would say is returning cash to shareholders.

We've increased our dividend notably.

Since the prior year, 50% increase.

We also to your point of your question we have.

Recently.

Received authorization from our board for a $200 million share repurchase program, which we took advantage of and frankly, we like to have that opportunity to return cash to shareholders through the share repurchase program. We did it at an elevated level in Q1, and we will continue to utilize that as a means of generating.

Return of cash to our shareholders going forward it will certainly depend on.

The other priorities the growth initiatives in particular.

And what the current environment.

Enables for us in that regard, but we will continue to use the share repurchase program.

As another means.

Thank you.

And thank you and our next question comes from Garrick Johnson from BMO capital market.

Your line is now open.

Hey, good morning.

Just kind of interested in the accessibility enhanced portfolio have.

In my mind, probably a growing category over time.

The adventure.

Is about $60 $65000.

More expensive on a wholesale level than the base adventure.

Kind of incremental margins do you get that accessibility and hence business and maybe also if you could talk about margins in commercial.

Yes, good morning, Garik This is Mike.

We are working on increasing.

Both the size, but also the profitability of our accessibility enhanced line.

And as you mentioned that continues to grow with the adventure class a but also here recently.

A really need class b product called the role that we have been showing it.

Some of the trade events around that particular market.

We're not going to share specific margins within the specialty vehicle business.

But.

Can can only assure you that the expectations for that business from a profitability standpoint, especially in the long term as it grows.

Is to be accretive to the overall <unk>.

<unk> of the company.

And.

That is largely because as Brian indicated in his prior comments, we truly believe that we can create innovative solutions for.

For consumers with especially physical disabilities to be able to reach and participate and enjoy the outdoors.

We have stated in the past that we believe there are millions several millions of consumers.

That have a interest in the recreational vehicle lifestyle.

But have not been able to find the exact right product that allows them to safely and effectively.

Engage in the outdoors and our specialty vehicles team.

Amongst many other market strategies they are exploring.

<unk>.

Continues to expand that accessibility enhance.

Product line.

So we do anticipate over time that especially with scale that it will be.

Be accretive to the portfolio I will just remind you and other investors listening to the call that it is currently a.

Financially immaterial part of the portfolio strategically important currently but one we intend to continue to invest in.

Great. Thank you Mike.

Okay.

Yeah.

And thank you.

And our next question comes from Scott timber from C. L. King your.

Your line is now open.

Good morning, guys and thanks for taking my questions. Good morning, Scott.

Mike you talked about it.

At least from a supply chain that you've.

<unk>.

I guess, a reasonable spot to be in right now, which I guess implies that things have improved modestly.

Can you maybe talk about that on the supply chain side and just from a production standpoint.

Your views on when.

On the dealer channel, we will get back to be where it needs to be.

Good morning, Scott. Thank you for the questions I'll start with the.

The health of the supply chain and our point of view on that certainly from a macro output level.

Supply chain continues to improve otherwise you would not have seen.

In the example of the recreational vehicle industry.

Several months in a row now of record.

RV shipments.

The challenge with the supply chain continues to be its inconsistency on almost a daily and a fairly a weekly basis.

And so we continue to battle within all of our businesses.

<unk> disruptions in many different materials.

<unk>.

So we would we would certainly state that its healing in quantity.

It is not all that much different in the consistency of delivery and we also worry very much about the quality.

And have processes in place to work with our suppliers to try to maintain a high level of quality.

And our teams as we stated in our prepared comments, we think have done as good a job if not better than many of our competitive peers and continuing to navigate that but but that.

That drama is not over by any means as we enter calendar 2022.

Your second question had to do with.

The field inventory levels and.

We would talk about it in this way.

Okay.

You have to look at field inventory normalization in the context of several elements.

One will just take category.

Sure.

The category that is that is.

Most quickly progressing towards normalization in terms of inventory turns is the recreational vehicle tovel space.

We are seeing.

A meaningful.

Meaningful increase in.

Travel trailers, and even fifth wheels being supplied to the dealer channel.

Bolstering one year comps, but also in a two year comp factor. So that's the category that will probably reach.

The level that dealers aspire to have sooner than everything else.

The second category would be the motor home category that will happen later.

Yes.

All of them the towboat category the turns are higher currently.

Production output is lower.

On the towable side.

And so that will be it will take longer than the last category I would point out that we believe will take the longest is the boat category pontoons and.

The.

Luxury run our routes from our fiberglass standpoint that we're in.

So.

The supply chain retail and dealers appetite for where they are forward looking turns will be all factor into the pace and timing and so I just would ask us all to make sure that when people say are we nearing inventory normalization.

We think about it in a more nuanced setting.

Then just sort of a peanut butter spread.

Context going forward, we believe there continues to be.

Especially against a two year forward looking turned targets.

We think there continues to be ample runway in several of our categories to continue to provide dealers with the product that they are asking for.

Got it and then just a quick last question looking at your backlog and totals and in motorized.

It seems to be some pretty big implied ASP growth. There can you talk about is that.

Future price increases related to your anticipation of raw materials going up or maybe just talk about that dynamic a little.

Yes.

We have seen a rise in backlogs and I know many people ask questions about that and wonder about the integrity of that.

Again, not all companies measure backlogs the same way our backlogs are intended to reflect orders from dealers that we can confirm our desire to be delivered within a six month period.

I routinely tell people that the front half of that backlog.

Probably has more validity and integrity as it relates to future production planning purposes, and the back half of the backlog is probably a little bit more fluid and it's dynamic.

Context.

In terms of future reliability, but as you also indicated you can also see some of the pricing.

Power that we've had.

Via the value of the backlog and.

And we've talked of.

<unk> Scott.

Our price increases on a year over year basis within our portfolio, probably range anywhere from 8% to 30% depending on the brand or the product category and so I think you do see that reflected in the backlogs in terms of sort of the wholesale value.

<unk>.

The dollar backlog.

We'll tell you candidly that backlogs are not always the best reflection of the health of our business and in fact, it would be my desire over time to probably see our backlog get a little skinnier because that means that we're probably moving the operational model.

Two a more just in time.

Better better deliver our product to the dealer.

State.

But we recognize that people think bigger is greater.

We continue to focus on sort of the integrity of the backlog and giving dealers exactly the products that they are asking for and not too much.

Got it that was very helpful. Thank you.

Thank you and our next question comes from Mike Swartz from <unk> Securities. Your line is now open.

Hey, good morning, guys, maybe just starting off with Mike you've made comments around just your production philosophy and not wanting to.

Load the channel up.

With too much inventory, but can you talk about I mean, just looking at the quarter looking at the industry production. Your production. It looks like you under shipped relative to the industry are you seeing or do you believe thats, having any impact on you.

Near term share opportunity for share gain in the market I E could it be larger than what you are.

You cited earlier in the call.

Yes, good morning, Mike Thanks for the question.

A couple of thoughts there one is and we've stated this before that there's probably a timing correlation between shipment share and retail share thats as close together as has been the case for many years.

<unk>.

We have been.

Really focused on retail market share both in terms of units, but also in terms of dollars the retail market share percentage that we share on a regular basis via these earnings calls is a unit number I would contend that our dollar market share at retail is higher than the 13, 3% that we shared today.

So we are very focused on retail market share.

And we understand.

That there is some relevance between shipment share and retail share.

But but we are focused on making sure our dealers have the right mix.

Inventory of product that they need to sell.

To optimize retail we do believe that this spring, especially when retail starts to pop again seasonally.

Especially down in the South and then gradually towards the north that the increased amount of new unit inventory on dealers' lots is going to have a beneficial impact to retail velocity.

Compared to a period of year prior where they had a lot less inventory. So we certainly have to have to keep an eye on the relation between shipment share in retail market share.

But we believe that we can accomplish our retail market share goals.

By operating a disciplined production and shipment model and subsequently Thats why you don't see us talk a lot about shipment share.

In our earnings results because.

It's not the most important metric that that we operate the business with them.

Okay. That's helpful. And then maybe a question for Brian just going back to Craig's question on gross margin sustainability.

When we look at the quarter you did nearly 20% gross margin.

In the prior four quarters or so you were doing something between call it 17% 18%.

Should we look at that increment in the first quarter as the impact from taking some of the pricing ahead of cost inflation or are there other dynamics, there that we need to better think about.

Yes. There is there is so much in place there Mike or so much in play rather that to call out one specific item I don't know that that would be the right way to convey what happened in the quarter.

Certainly we called out the segment mix.

We did call out the pricing we mentioned in one case or in the case of the towable segment that it was.

For the cost increases we were seeing in the quarter, but also anticipating to hit in the future.

Look what.

What I hesitate to convey as some sort of expectation that the margins are going to come down because thats just not the way we are running the business right. Now we are running the business is to optimize our margins.

And as I mentioned earlier with with Craig we're climbing after the opportunity or the tailwind.

Aggressively and we expect that those those.

Those tailwind will do a nice job of offsetting potential headwinds and that's the way we're going to continue to run the business.

So I think that's the only thing that I would I would call out.

Okay, great. Thanks.

Thank you.

And our next question comes from Brett Andrews from Keybanc.

Your line is now open.

Hey, good morning, guys.

Just a question on restocking until walls. So you built 5000 units.

This quarter I think.

5000 would kind of gets you back to pre pandemic levels, maybe you need a little bit more than that.

You get turns in line, but if we get you close so I guess, how do you think about price in that context, I mean, how much price can you hold with a normal level of channel inventory.

Presumably.

A normal level of discounting that comes with that.

Yeah, Good morning, Brett.

So we strive to balance.

Pricing power and market share.

Progression.

And so our all of our businesses.

Have have.

Pricing decision authority within their business with certainly some oversight as needed from Brian awry.

But the direction from the enterprises to balance as Brian said margin optimization, but to do it in terms of retail share progression.

I did mention that the towboat category is certainly a category that has been refilling arguably faster than the other categories.

Now candidly I would contend that perhaps.

Perhaps the two largest companies in the total space in the industry are leading the charge as mikes question indicated on shipment share in refilling.

The dealer channel.

Our turns.

From a backward looking standpoint for our <unk> dealer inventory.

Are certainly meaningfully elevated.

Versus a couple years ago, and the combination of market share growth.

Dealer expansion new products.

We really look at turns from a forward looking standpoint internally in order to work with the dealers to get them to the levels that they want to run their business with we.

We believe dealers are going to want to.

To both sustain the margins they have been making and to sustain some higher turn rate.

And then what they were doing pre Covid and I think if you've talked to some of the especially the larger.

Dealers here recently.

Would validate that.

When inventory normalizes in the market whatever that means.

In some level of pricing competitiveness returns in the market at a higher level.

Our dealer partners, we will have the first decision to make.

How to deal with that in terms of their retail pricing decisions and their strategies will ultimately then determine.

What we would do in the future in whether we would participate.

In any of that discounting or promotional pressure.

We are not seeing significant.

Promotional or discounting pressure from our dealers on any of our outdoor brands currently.

We will continue to monitor for that.

And be prepared.

To engage in that conversation.

But that day has not arrived yet within our business.

Got it Okay, and then I think earlier you mentioned.

You phrased it is monitoring the demand rhythm right. So maybe if you could elaborate that.

On that a little bit more I guess, you have different expectations for the rate of retail growth that we're seeing here. This off season Im talking about gross compared to 19.

Maybe what you would expect to see in the selling season.

Any elaboration on that rhythm.

So yes so.

Our growth versus two years ago and pretty soon here 2019 will turn into 2020 and from a two year comp standpoint.

But our growth versus 2019 for our brands in the RV space, especially has been consistently positive.

It has slowed like the rest of the industry has but we have been consistently positive.

One of the biggest factors to the unpredictability of future retail.

Is the impact of dealers, having the inventory that consumers were looking for a year or two ago, especially a year ago.

Couldn't see to make a buying decision.

Or to or to buy something in a timeframe.

That was a reasonable.

Many of the dealer principals that we speak with.

Have some level of confidence that as inventory continues to increase on their lots and in their showrooms.

That their retail prospects have a probability of being stronger going forward.

And so for US we will be especially monitoring what begins to happen in February March and April of 2022, and there are a lot of factors, obviously that can impact overall retail demand, but we will especially be monitoring sort of the seasonal retail bounce in spring of 2022.

To see what that means in terms of whether we can continue to build inventory in the market or we will begin to borrow again at some point, especially in late spring and early summer. So theres a lot of there's a lot of unknown spud.

Hi.

I, usually tease you all on this call by making the following comment.

When I look at the retail for our brands on the in the RV space four week ending December 11.

We had extremely strong comps on a two year level.

They were stronger the week of December ending December 11th then they were probably a month. Prior so we've actually seen a little bit of a rebound here in two year comp retail.

On our reports.

So it is an extremely dynamic marketplace and that's subsequently one of the reasons why we can't always predict timing of any.

Field inventory normalization specifically.

Nor do we nor can we anticipate specifically when you might start to see some of that price competition that retail returned to the market.

Got it thank you.

Thank you.

And our next question.

Fred Wightman from Wolfe research.

Your line is now open.

Hey, guys. Good morning, a lot of questions on sort of retail and wholesale but I guess simplistically. When you look at the RV ecosystem do you think that dealers manufacturers and suppliers can all have higher post COVID-19 margins.

Good morning, Fred Thanks for the question.

I would hope that would be the case.

We will see if that happens I think some of that will be determined by.

The Kansas candidly the business decisions individual firms and organizations make for themselves.

<unk>.

But.

Certainly this is an industry, especially on the recreational vehicle side.

That has been extremely competitive from a gross margin standpoint for many years in the industry by and large has done a good job of keeping the retail prices of our products.

Portable for people to enter the lifestyle.

So there will be this natural tension between volume and affordability.

And.

A higher level of profitable health.

We have always maintained in our business model that the profitability of the dealer is extremely important to us and we want our brands on the dealers' lots to be some of the most profitable brands that they do business with.

So that they can continue to reinvest in the business So I.

I personally have.

Implored or had conversations with several dealer principals.

About them trying to do everything they can to maintain margins and maintain a higher turn rates.

As we get further and further away from sort of this pre COVID-19 or the start of the Covid era, and so we will see but I do believe many dealers are going to file.

Get extremely hard to maintain to maintain margins.

That makes sense that's super helpful.

Just one follow up on sort of the supply chain comments it sounds like that's getting better but any improvement on the chassis side I know that it sounds like.

Travel trailers and tow boats are going to improve before motor homes, but I know last quarter. You had cited the chassis is sort of the big bottleneck. So any improvement there any line of sight to that getting better or should we expect that to be sort of the big constriction here near term.

Yes. Thanks for the question on chassis two comments there one is semiconductor chips continue to be a meaningful constraint.

Within the motorized chassis.

Category.

We've seen a little bit of improvement of that here in late in our fiscal 'twenty, one year, but we anticipate meaningful constraints to continue to run through most of 'twenty, two probably at least through quarter three of fiscal 'twenty two.

We are very pleased with what's happened here in the last two financial quarters, with our Newmar business and while we don't break out specific.

Brand our results financially I can tell you that our newmar business has really.

<unk> performed nicely in terms of output and working their way through some of the supply chain constraints that they were facing.

A year or so ago.

So.

So that business in particular has not seen a ton of impact from chassis constraints. They are seeing some challenges with different types of components or systems that go into their products.

But yes motorized will continue to battle the semiconductor chip challenge for probably.

As I said.

Much of March of 2022.

Great. Thanks, guys.

Okay.

And thank you and our next question Brett.

Bret Jordan from Jefferies. Your line is now open.

Hey, good morning, guys.

Good morning, another supply chain question, but could you talk about the marine segment and I guess power availability, you mentioned that marine would be restocked last of the three is that because you've seen more pre sales and youre just shipping four for retail or because there is a greater supply chain.

Up there.

Yes, Brett good morning, Thanks for the question.

Again are our peers at Brunswick, and Malibu and Master craft may be in a better position to answer this from a volume perspective in the marine category, but.

Our businesses have been working very closely with the.

The engine Slash motor manufacturers.

Within the industry to ensure.

Reliable supply.

One of the motor engine manufacturers has has probably done a better job than another one for.

For both of our brands.

But we are in daily contact through those brands with those engine suppliers.

With the forecast of what we need but.

The only other comment I would make there is that because of the engine supplier constraints that we've seen in the marine business.

We've had to we've had to adjust some of our go to market strategies and production strategies to better fit with what engines are available by brand.

So it is it has been tight.

As I've said, it's been exceptionally tight on one of the brands.

The other brand has engine brand has worked really hard.

To supply us with engines in a reliable fashion for that we're grateful.

But we've had to we've had a modify some of our go to market strategies because of that we hope that improves.

2022.

And we'll see we'll see if it does but in addition to engines there are definitely.

Sure.

A plethora of other categories that we've struggled through some of the similar.

The RV industry like furniture, but some of them at times are more unique in terms of marine specific components, but.

Again I think the.

The inventory levels in the marine industry again, depending on the category are.

Broadly a little bit lower than the RV industry.

The other thing I'll just comment that in that sense is that bar letter.

Is just a significant growth opportunity for us.

And.

While bar letters dealer inventories today are higher than they were a year ago.

They're not where we want them to be in order to reach our market share targets that we have for the future of that business and we.

We are as we do in our other businesses, we have a book of confirm dealer orders that the <unk> team as is.

In a busy fashion trying to produce product for us.

Okay, and then one question I guess on RV pricing and then maybe it's sort of a fuzzy question, but when you think about higher prices on an absolute basis as well as less discounting off of MSRP at the dealership do you have a feeling for what the real inflation in RV prices were in 'twenty, one and I guess, maybe do you have an outlook for 'twenty two maybe.

Sure.

Discounting is inventory rebuilds, but how do you think the rate of inflation is for the retail transaction.

Well certainly the rate of inflation at retail is probably higher than the numbers I gave you earlier at times, because I was referencing more wholesale inflation in terms of our prices to our dealers. So when I said, there was a range of probably 8% to 30% within our portfolio.

You can probably layer.

Several points on top of that.

Four.

For retail inflation as dealers have been able to get in many cases full retail as inventory has been limited so I don't want to quote any numbers because.

Pricing does vary by dealer, we don't set that final retail price that's really the decision by the dealer, but you can probably take the numbers I gave you in and add a little pad to that to try to get to a retail inflation number and again it varies by category and it varies by brand.

<unk>.

Great. Thank you.

Okay.

Thank you.

And our next question comes from David Whiston from Morningstar. Your line is now open.

Yes.

Thanks, Good morning.

Another aspect to supply chains as it can be labor shortages I was just curious if either you guys or upstream or are you, having any labor shortages at your suppliers.

So I can't speak.

As articulately to the supply base I mean, certainly our suppliers, let us know that they are battling labor.

Labor challenges.

But that isn't always the primary reason for why perhaps they haven't been able to deliver or something.

We also have to remember as I think we are all acutely aware here recently that we're still in the midst of the pandemic and.

The newest variant AUM across is something I think all of us in business are watching and trying to manage.

Our businesses every day are challenged by labor.

In terms of making sure that we have the people we need.

Either because of Covid or just gross numbers to continue to build.

Two our future targets.

So it isn't getting any easier David.

But we do not listed today.

As a extreme constrained to our ability to grow.

In the businesses or industries that we compete in today.

Now, we do have manufacturing facilities in.

Some rural counties in Iowa, and Indiana.

That we that we have some limited talent.

Pools to draw from and in many cases, there we work with.

The local.

Development organizations to try to.

Attract people to our industry into that geographic area, but I can tell you in some of the larger markets like where Chris craft is in Sarasota.

We do not have as many people as we'd like to have there either so it is a constant.

It has represented a slight.

Inflationary pressure to internally.

Certainly we have to compete for that labor at a higher <unk>.

Wage and we're committed to fair wages, but.

Our businesses continue to figure out ways to be more productive with the people that we can get and consequently deliver great product.

Yes.

Okay, Thanks and on.

Chris craft in particular I was.

I'm just curious are those customers interested at all in zero emission boating and do you see boating about to go into any kind of big zero emission product cycle.

I would say that we have customers across the <unk>.

Outdoor segments, we compete in that are interested in alternative.

Power technology or zero emissions technology.

And so it's not just.

Those highly affluent customers that you would see.

That would buy.

By our Chris craft brand.

The marine industry is absolutely.

Engaging in emerging technology.

Work to.

To try to bring.

More efficient.

Yes.

Power propulsion to that industry.

But that's also the same in the automotive and the recreational vehicle industry as well so.

I truly believe that over the course of the next.

Three to five to 10 years.

The outdoor industries that we compete in.

That the power platforms that many of our products use.

We'll be evolving pretty meaningfully.

Our company will do everything we can to be a leader in highly competitive when that happens.

So yes, we are seeing some of that new.

Development beginning to happen.

But we believe it is not specific to the Chris craft brand it will affect all of our businesses and brands over time.

Okay and.

Can you just speak briefly what the $4 million litigation charges for.

Well, let me make a comment that and then I'll ask Brian if he has anything to add.

This was.

In event that occurred several years ago.

In our business.

Related to some of our business development activities and.

A point of contention that obviously found its way into the.

The legal system that is a process that's still is.

Active but one that we have.

Had to make a.

Financial entry for in this latest quarter, we're not going to share a lot of details about it.

But it certainly is something that we had to book in this quarter because of the progress.

The legal process, yes, it would be.

Take that one step further so we received an adverse judgment that we do not agree with.

We have appealed the full amount of the judgment has been reserved in this quarter, which could ultimately be lots if we prevail on appeal.

Okay, Great. That's helpful. Thank you.

And thank you.

And our next question comes from Joe also Belo from Raymond James Your line is now open.

Hey, guys. Good morning, I appreciate it most of my questions have been asked and answered, but I did want to go back to the topic of dealer inventory and it sounds like Mike you're still thinking its going to take.

Probably a couple of years before things to normalize as call. It late your fiscal 'twenty three.

If my math is right over the last call it four years.

Retail has outstripped wholesale by about 160000 units.

In the industry and if we don't get back to normal current levels and turns remain elevated what's the number of units that you think we need we need to over here over the next call. It couple of years to get back to normalization is it is it half of that is the 100000 units for example.

Yes, good morning, Joe.

I would like to clarify.

The first part of your question in this sense I don't think I stated a specific.

Timeline for when some of these categories would reach.

A macro level that the dealers are comfortable with.

I do believe the towboat category, well, we'll be first to normalize.

That will not take a couple of years.

That will happen much more quickly than that.

But then motorized and boats will follow and again there are a lot of variables to this so but I do not believe it will take.

Probably until the end of our fiscal 2023 year for all of that.

To happen some of that will certainly happen sooner and possibly some of it still here.

Sure.

This fiscal 2022 year, especially on <unk>.

Yes.

With all due respect I would like to not get into specific numbers of from an industry standpoint of how much I think.

What needs to be refilled within a certain timeframe and part of that is because.

Candidly.

We have about 13% of the RV market and so I can't speak with any confidence on the intent or the practices.

The capacity of.

<unk>.

Some of our larger competitors, who candidly are dictating the pace and the quantity of field inventory.

In a higher more meaningful way than even we are.

So that may be a better question for some of our some of our larger competitors again, we're going to be very focused on.

Try not to overproduce too.

Our detriment or the dealers detriment.

We make on the product line will either have a retail customers name or a dealer's name on it that they want and we will be.

Looking for those canaries in the coal mine that signal that dealers.

Are starting to.

Resist any any excess product.

That they have on order.

We do not want to have any open inventory on our lots.

That.

Forces us to go to the dealers to beg them to take it a discount that as a business practice.

That we used to.

Do in some of our businesses that we are trying to get away from.

So.

So that's what I will just comment on for your question.

It's definitely a fair point.

Can you talk about fiscal 'twenty three in the past I wasn't sure if there was any.

Change there.

I guess one question on marine.

That business is obviously still supply chain constraint is the Q1 unit number a good run rate for fiscal 'twenty, two or should we assume that steps up over the balance of the year spin.

Specifically, Joe on the Marine.

Reporting segment.

I would say we saw.

Good production from Barletta in Chris craft during our quarterly first year.

But I would not suggest that both those businesses were so efficient and productive but that's all they can do so each quarter is a little bit different because of holidays in the weeks off we give to our employees.

So I think it's directionally a good number.

But.

I wouldn't I wouldn't suggest that it won't be different either either because of seasonality from a plant standpoint or.

Does the businesses have a supply chain or productivity.

Gains that allow them to produce at higher levels. So so we're pleased especially with the first three months that barletta has been in the portfolio and that team is engaged.

The integration process is going well.

And the business is performing every bit as well as we had hoped and so we're very excited and optimistic about that brand's future within the marine industry and especially our portfolio. Yes. It's got it's got.

Great market share trends as well it was one of the things that attracted us to that business.

And we certainly expect continued market share accretion too.

Got it thank you guys happy holidays.

Same to you Joe.

Thank you.

And I am showing no further questions I would now like to turn the call back to Steve Stuber for closing remarks.

Thank you Justin and thank you everyone for joining our call today happy holidays from all of US here at Winnebago industries and as Mike mentioned, please have a safe and happy holiday season.

Good day.

This concludes today's conference call. Thank you for participating you may now disconnect.