Q4 2022 Winnebago Industries Inc Earnings Call

October 19, 2022

Yeah.

Good day and thank you for standing by welcome to the fourth quarter 2022, when the Baker Industries Financial results Conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need a press star one on your Touchtone telephone. Please be advised that today's conference maybe recorded.

I would now like to hand, the conference over to your speaker today raped Sardis, Vice President of Investor Relations and market Intelligence. Please go ahead.

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

Our fiscal 2022 fourth quarter and full year earnings results. As you May know I am new to Winnebago industries and excited to be working with the team as we continue to partner with our analysts and investors seek to deepen our relationships with the investment community I look forward to connecting with more of you in the months ahead.

I am joined on the call today by Mike <unk>, President and Chief Executive Officer, and Bryan Hughes, Vice President and Chief Financial Officer.

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

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

The news release with our fourth quarter and full year results was issued and posted to our website earlier. This morning, along with the fourth quarter, earning supplement.

Before we start I would like to remind you that certain statements made during today's conference call regarding Winnebago industries and its operations, maybe considered forward looking statements under securities laws.

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 Ray.

And let me officially welcome you to the team.

We look forward to your contribution certainly.

Additionally, I would like to thank Steve Stuber for his efforts in the past several years as our Investor Relations leader.

And wish him well as he transitions internally to the CFO position within our Grand design RV subsidiary.

We are truly grateful to have both ray and Steve on our team here.

Good morning, everyone.

As always we appreciate your interest in Winnebago industries, and taking the time to discuss our fiscal 2022 full year and fourth quarter results.

I will start the call with an overview of our performance during the quarter and the full year.

Then pass it to Brian Hughes to cover our financial results in more detail.

Subsequently I will offer some closing thoughts before we turn to your questions.

As those who follow Winnebago industries, no well over the past seven fiscal years, we have been laser focused on enhancing and strengthening our enterprise portfolio.

The success of those initiatives has created a more diversified resilient competitive and profitable Winnebago industries.

This was never more evident than in fiscal year 2022 when.

When our company achieved record revenue profitability and overall outdoor market share.

Today, we have five premium outdoor brands spanning two large and secondarily strong outdoor recreation industries recreational vehicles and marine.

Both enabling us to connect with a broad range of outdoor consumers.

We have also substantially grown our overall market penetration as more outdoor lifestyle consumers recognize and respond to the golden threads of quality service and innovation they see throughout the Winnebago industries portfolio.

It is no secret that demand for outdoor products exploded in the last two years and that new consumer trends have emerged which will impact our industry's forever.

Thanks to the relentless focus commitment and part of our World class team here.

We delivered an unprecedented levels of demand for our premium products as new and existing consumers embrace the outdoor lifestyle.

While recognizing the inevitable normalization of short term outdoor demand.

We continue to believe that growing interest in the outdoors by an increasingly diverse range of consumers are lasting in the long term.

And that we at Winnebago industries are better positioned more than ever to serve a wide range of consumers with our diversified portfolio.

The past year has ushered in a new landscape in.

Inflation and rising interest rates are reshaping the economy on a macro level.

These trends are certainly impacting the strong retail demand environment that Winnebago industries has been so successful at capitalizing on.

However, we feel confident that our business is positioned to continue to perform well through economic cycles.

I will touch on the multiple ways, we are adjusting to ensure that we continue to deliver strong profitability and shareholder value.

Our recent performance in fiscal year, 2022, best demonstrates our flexibility and ability to deliver in a volatile environment.

Winnebago industries fourth quarter results were a strong finish to an outstanding year in which we delivered record revenue and profitability.

We recorded fourth quarter net revenues of $1 $2 billion, which represent a 14% increase over the same period last year.

Our performance was driven by the same key dynamics that have shaped the last few quarters.

First a sustained excitement for the outdoor lifestyle remains a powerful tailwind driving demand for Winnebago industries premium products.

Our leading brands continue to win with our increasingly diverse consumer base, allowing us to maintain our strong market share positions within a challenging economic environment.

Second our team's relentless demonstration of operational excellence enabled us to deliver for our consumers and our dealer partners efficiently and profitably.

The team has delivered on the bottom line through the pricing power of our brands the innovation of our products the agility of our supply chain, the increasing efficiency of our operations.

And disciplined investments in SG&A.

As I have discussed in previous quarters in this constantly evolving macro environment. The holistic supply chain for each of our segments are experiencing varying degrees of disruption, which in turn impacts dealer inventory levels in different ways.

For example, we continue to manage total RV production levels to align with ongoing consumer end market demand, while our motor home RV and marine businesses work to replenish dealer inventories carefully.

Responsibly, producing and maintaining appropriate field inventory levels remains a priority and we are working closely with each of our dealer partners to sustainably ensure they have the supply they need.

I have confidence that the world class Winnebago industries team will rise to the challenge as they always have.

Our performance throughout fiscal 2022 is a testament to the power of our people the strength of our operations and the extra ordinary quality of our products.

Early in the year, we delivered on voracious demand running our production at full capacity to achieve tremendous growth.

Even then we likely lost shipment share in select RV categories. As we maintained an ongoing sense of discipline and shipments versus other industry players appetites.

As market conditions have recently Downshifted, we have exercised further rigor and a focus on sustainable long term value by constantly adjusting production in certain business segments to calibrate to the needs of our dealers and the end consumer demand levels there.

Additionally, our team executed and manage the businesses through supply shortages and pricing actions to cover significant cost inflation through the year delivering annual record net revenues of $5 billion.

Record annual RV market share of 12, 7% and a record gross margin of 18, 7%.

And finally, we returned a record levels of cash to our shareholders, which Brian will touch on during his commentary.

Most importantly, we continue to innovate here and add strategic investments in talent.

Earlier this year, we introduced the <unk> RV. The first all electric zero emission motor home concept from a major RV manufacturer.

And we even drove the product more than 1300 miles on a single road trip.

We are moving closer to commercialization with multiple prototypes being tested by actual end customers as we approach calendar year end.

At the recent open house RV event in late September each of our RV business units introduced multiple new products, many of which one category awards and we received very positively by our dealer base.

We also added new senior leadership to our team this year, including KC Covenant as numerous president Geoff Haire Dine as bar letters President and.

And Amber home as Winnebago industry's first ever Chief marketing officer.

Significantly enhancing our team with experience and exciting new capabilities.

Overall, I am incredibly proud of our performance in fiscal 2022, a record results show that our strategy is working while our team continues to deliver outstanding results in the face of a future volatile macro environment.

I look forward to continuing that focus with our team and continuing to create value as we move into fiscal 2023.

With that summary, I will now turn the call over to our Chief Financial Officer, Bryan Hughes to review, our fiscal 2022 fourth quarter and full annual financial results in more detail.

Brian .

Okay.

Thanks, Mike and good morning, everyone.

As Mike noted Winnebago Industries' fourth quarter results represented a strong finish to a record year.

Fourth quarter revenues were $1 2 billion, reflecting an increase of 14% compared to $1 billion for the year ago period.

Excluding <unk>, our organic growth for fourth quarter, with 4% driven by pricing actions and increased motorized unit shipment.

Which was partially offset by a decline in unit shipments on a tolerable RV segment.

As we pulled back on production and shipments during the quarter in response to the level of inventory in the channel.

As a reminder, this is the last quarter that we will be reporting organic results. Excluding barletta, given we close the transaction very early in the first quarter of fiscal 2022.

Gross profit for the quarter increased 12, 4% to $210 4 million compared to $187 2 million for the fourth quarter of fiscal 2021.

Gross profit margin of 17, 8% with 30 basis points lower than last year as a result of higher material and component costs <unk>.

Including higher logistics costs.

And lower volume and the total segment and associated deleverage.

Partially offset by pricing actions and the timing of those actions as compared to the realization of increases to our input costs.

Operating income, therefore increased 3% to $123 6 million for the quarter.

<unk> to $120 million for the fourth quarter of last year.

Fourth quarter reported diluted earnings per share with $2 61.

Compared to $2 45 in the same period last year.

Adjusted earnings per diluted share increased 14% to $3 <unk>.

Compared to $2 65 in the same period last year.

Consolidated adjusted EBITDA increased seven 9%.

Two $139 2 million for the quarter.

Compared to $129 million last year.

Turning now to the fiscal 2020 to annual results.

Capitalizing on strong consumer demand and the need to replenish dealer inventories.

Winnebago industries delivered record annual consolidated fiscal 2022 results, including record revenues of $5 billion.

Our record gross profit margin of 18, 7% and record reported earnings per diluted share of $11 84.

And adjusted earnings per diluted share of $13 81.

Sales growth of 36, 6% was driven by the recently acquired by a lot of business.

<unk> action and strong volume growth in every business.

Supported by sustained demand and a particularly low field inventories we had in our dealer network as we entered the year.

Our annual gross profit margin increased 80 basis points over the prior year as a result of operating leverage and the well timed price increases that serve to offset inflationary pressures.

Our team also worked extremely hard throughout the year battling constant supply constraints, which were studied disruption to our production environment and caused operational inefficiencies.

Now turning to performance by segment.

Total revenues were $494 2 million for the fourth quarter fiscal 2022 down 11, 8% compared to the fourth quarter of fiscal 2021.

As Mike mentioned, we adjusted our production schedule in the fourth quarter in response to fully replenish dealer inventories, resulting in a 33% decline in unit shipments.

Adjusted EBITDA for the total segment with $53 2 million down 36, 2% from the prior year period.

Adjusted EBITDA margin of 10, 8% decreased 410 basis points compared to the prior year due to higher material and component costs and deleverage, partially offset by pricing actions.

This lower margin in the quarter was anticipated as earlier in the year. We priced ahead of inflation with the expectation that inflation would have an impact over time.

Given the market dynamics the state of inventory in the channel and in anticipation of our dealer events in September we elected to forgo further price increases in our fourth quarter.

Backlog decreased to $576 5 million down 66, 2% from the prior year due.

Due to normalized dealer inventory levels and the extensive order fulfillment throughout our fiscal year.

For the full year revenues for the total segment were $2 6 billion.

Up 29, 2% over fiscal 2021, driven by strong consumer demand and pricing actions that were taken to offset higher material and component costs.

Segment, adjusted EBITDA was $383 6 million for fiscal 2022 up 32, 7% year over year.

Adjusted EBIT margin of 14, 8% increased 40 basis points over fiscal 2021.

The motor home segment continued to perform well with fourth quarter revenues of $555 8 million up 23, 8% from the prior year due to continued strong unit sales and pricing actions related to higher material and component costs.

Adjusted EBITDA of $77 4 million increased 53, 4% compared to the fourth quarter of last year.

Adjusted EBITDA margin for the quarter was 13, 9%.

Representing an increase of 270 basis points over the prior year due to pricing actions and production efficiencies, partially offset by higher material and component costs.

Backlog decreased to $1 7 billion down 26, 7% from the prior year.

On an annual basis motor home revenues increased 24, 2% year over year to $1 9 billion due to pricing actions related to higher material and component costs and increased unit sales.

Segment, adjusted EBITDA was $238 million up 47% from fiscal 2021.

Adjusted EBITDA margin of 12, 5% grew 150 basis points compared to fiscal 2021.

Total marine revenues for the fourth quarter were $122 1 million driven by the continued strength of bond ladder and good performance from Chris craft.

Excluding <unk> revenues were $23 7 million, representing 41, 8% organic growth compared to the same period last year.

Segment adjusted EBITDA for the quarter was $17 5 million.

Up $15 8 million increase over last year.

Adjusted EBITDA margin was 14, 3%.

Backlog for the Marine segment with $314 7 million and remains elevated as low dealer inventories persist in this segment.

Consolidated Marine results for fiscal 2022 include revenues of $425 3 million.

Up $365 1 million from fiscal 2021, driven primarily by the addition of the <unk> business.

Segment, adjusted EBITDA was $60 8 million up $55 $7 million over fiscal 2021.

Turning to Winnebago industries balance sheet.

As of the end of the fiscal year, we had $545 8 million in total outstanding debt composed of $600 million in debt net of convertible note discount of $45 3 million and net of debt issuance costs of $8 9 million.

We also had working capital of.

$571 7 million.

Winnebago industries continues to hold a very healthy liquidity position and recently added to it by securing an increased asset based lending credit facility of $350 million.

This upgrade with fully driven by the need to right size, our ABL facility to the current size of our business from our previous $192 5 million facility.

Our current net debt to adjusted EBITDA ratio is 0.5 times, which remains below our targeted range of <unk>, 9% to one five times.

Allowing us to execute on our balanced capital allocation strategy to make strategic investments serving the growth in our business. While also returning cash to shareholders.

As evidence of our commitment to these priorities Winnebago industries recently increased the dividend by 50% to <unk> 27 per share for this most recent quarterly dividend payment.

This increase reflects our continued confidence in Winnebago industries ability to remain resilient through the volatile market conditions that we are currently facing and maintain strong profitability.

In addition, we bought back 80 million of shares during the fourth quarter, a new record.

Fully depleting, our previous share repurchase authorization and resulting in our board of directors approving a new $350 million authorization.

We executed approximately $210 million of share repurchases.

Around 11% of shares outstanding at fiscal year end 2021 during the course of fiscal 2022.

We are pleased to have exercised all levers of our capital allocation priorities. During fiscal 2022. In addition to investing in organic and inorganic growth to capture the strategic opportunities within reach Winnebago industries returned a record $233 million to shareholders.

In the form of share buybacks and dividends.

And all of this while maintaining a healthy balance sheet that allows us to continue to invest for outsized return on behalf of our shareholders.

That concludes my review of our financials for the quarter and full year I will now turn the call back to Mike to provide some closing comments Mike.

Thanks, very much Brian .

As we reflect on fiscal 2022, we are proud of the financial organizational and cultural strides we have made.

While we anticipate some select supply chain constraints will linger into fiscal 2023.

Particularly in the motor home and marine segments.

We continue to make progress and become more effective at minimizing the related impacts by collaborating closely with our suppliers.

We also continue to monitor inflation, while trying to balance pricing actions in a tougher demand environment and affordability of our premium products for our customers.

In addition, we continued to leverage operating efficiencies.

And leverage our variable cost structure to help maximize profit margins as possible.

We will build on our strong momentum by continuing to focus on executing our proven strategies and introducing new products across all our brands.

I was particularly excited to witness the many new products showcased at the recent RV Open house event in Elkhart County, Indiana.

Our Winnebago Grand design, and Newmar products were impressively displayed for dealers and industry partners to experience.

Each of these RV brands also received the latest RV dealer satisfaction awards as presented in recent weeks.

I look forward to seeing the results of our collective efforts in the months to come.

The unique strength of our Winnebago industries brands, well positioned us to continue to win with consumers building on our growing <unk> trailing 12 month RV market share of 12, 7%.

And moving the Barletta brand currently at six 9% market share in the latest Ssi report firmly into the top five.

In the pontoon market.

Now I want to quickly touch on expectations for the RV industry for the upcoming year.

As mentioned previously we are monitoring closely the macroeconomic environment to help assess outdoor leisure retail demand.

All things considered and knowing that there are numerous factors that can impact forward looking estimates materially.

We are generally align with RBI as recently released data.

And are projecting a range of 490000 to 500000 in shipment units for calendar year 2022.

Concerning calendar year 2023.

We believe industry RV shipments.

Will likely trend closer.

To a range of 400 to 410000 units for that period.

Slightly lower than the latest RV IAA forecast.

For retail.

We estimate 450000 RV units for calendar year 2022.

And retail units equivalent to wholesale shipments in 2023.

Overall and in the long term, we are confident that Winnebago industries has significant headroom for sustained profitable growth and enhanced value creation for our end consumers dealers employees and shareholders.

The confidence we have in our ability to drive continued value is highlighted by the recent 50% increase in our dividend and the commitment to repurchasing record levels of shares.

We look forward to telling you more about how we are building on our accomplishments over the last several years and why we believe Winnebago industries is well positioned to continue driving value for shareholders at our upcoming Investor day.

On November 15th at Lake Lanier Islands in Georgia.

We hope to see many of you there in person.

Lastly.

I want to acknowledge the efforts.

Of our 7400 plus employees here at Winnebago industries.

And thank them immensely for their contributions.

Too often Brian and I get more credit than we deserve as the messengers of our outstanding results.

This company and our culture are successful because all our employees care deeply about our in customers strategic business partners and each other.

We are incredibly privileged to work alongside each of them on a daily basis.

Their dedication to excellence and inclusivity is inspiring.

We recently saw evidence of this when Winnebago industries was awarded the champion of Women Award this month by the RV Womens Alliance.

What a great achievement for our team.

That concludes our prepared remarks this morning.

I will now turn the call back over to the operator.

Thank you for your time.

Thank you to ask a question at this time, you will need to press star one on your telephone.

Please limit yourself to one question one follow up before returning to the queue. Please standby, while we compile our Q&A roster.

Okay.

And our first question comes from the line of <unk>.

Tristan Thomas with BMO. Your line is open. Please go ahead.

Hi, good morning.

Two questions could you maybe help us quantify the margin bridge.

For motorized and <unk> adjusted EBITDA basis, just what the.

Interplay between lower production rates from a certain return.

And then commodity costs and the price increases.

Yes. Good morning, Jason This is Brian I'll take that one.

And I'll go into some level of detail here, we had as I think you know overall, a strong quarter and gross margins at 17, 8%.

Our segment level EBITDA margins results were mixed I would say our motor home EBITDA margins for the year at 12, 5%.

We're very strong and for the quarter at 13, 9% we're at record levels.

Marine EBIT margins for the quarter and the year were 14, 3% the strongest across our three segments.

And demonstrates the strength of our brands and why we have entered this segment through our two acquisitions of Chris craft and more recently by the letter.

And the total segment, we had record level margins for the full year at 14, 8%. So we're very pleased with that obviously through this year, we saw EBITDA margins in excess of 15% a couple of quarters and even as high as 17, 2% as you recall in Q1 of fiscal 'twenty.

Two weeks.

We've talked in past quarters that we've tried to navigate the inflationary pressures with well timed pricing and in some cases that timing did noise match perfectly within an individual quarter, but that we were managing this equation over a longer period of time.

And also with market dynamics in mind of course.

The EBITDA margins for the total segment, we saw in the quarter at 10, 8%. Likewise reflected this timing as we entered the fall we have reinstituted the traditional fall programming prices and those practices that encourage the dealers to take on product during the seasonal low periods and this is certainly something that <unk>.

<unk> margins in Q4, and we will have a more normalized impact on our Q1 margins.

The inflationary impacts for the total segment, including some heightened logistics cost we absorbed continue to be very dynamic, but are now showing some stabilization. If you look at our cost today as compared to the summer months.

Weighing all factors and as dealer inventories normalize and as market dynamics. Likewise normalize we believe that over the long term EBITDA margins for the total segment will stabilize at historical levels and our premium brands will continue to deliver.

EBITDA margins that are industry, leading.

So while I didn't give you a breakdown nor do we ever of the <unk>.

The impact rather of pricing versus inflation versus other drivers I think that gives you some additional color to help understand the margins.

Okay, I guess, just trying to when you everyone's trying to figure out how to model margins moving forward.

So even.

Even if you could just rank order kind of.

What was the biggest impact this quarter.

I think thats going to stick around.

Yes, I think certainly as I mentioned, the timing of how this stuff plays across the P&L. It's a very dynamic cost environment right now and we're going to be really thoughtful about when we institute pricing and what amount.

And then also taking into account our forward view of the costs are inflationary environment as well and so that that certainly factors into our decisions in the short term.

We clearly we don't manage margins for quarter, we're managing them much more long term than that and so I think that thats, certainly something that we want to convey as well.

Okay.

I'll hop back in the queue. Thank you.

Thank you.

One moment for our next question.

And our next question comes from the line of Scott Zeller with.

Cam.

Our U K M partners. Your line is open. Please go ahead.

Great. Thanks for taking my questions guys.

Hey, good morning, Scott.

Can you maybe talk about open house, obviously heading into this event, while we didn't have any in the last two years, but.

A little bit unique we have an imbalance of lower priced trailers in the system and then we have the current pricing environment, but dealers.

Seemingly a little bit reluctant to order 2023 product that these prices can you talk about how that dynamic took place a couple of weeks ago and.

What you saw from an order intake perspective at open house.

Good morning, Scott This is Mike.

Yes, I thought we had a really good open house event and I'll start first and foremost with the quality of the product.

The lines that we showed during open house in fact, several industry trade magazines and some other future additions will be awarding many of our brands with some awards concerning the <unk>.

Innovative products that we showed at open House Secondly, we had great discussions honest discussions.

With our dealers.

Open house had not been held since 2019.

It was good to see a majority of the country's dealers show back up in Elkhart County, and spend time with not only our brands, but I am sure all of the other OEM brands that display.

And anytime you have a chance to spend quality time with one of your customers you get the chance to share perspectives and talk about the future in a productive manner.

As I said are very small investor event.

That morning.

In Elkhart.

Our programming and pricing for.

The 2022 open house was candidly very similar in terms of discounts or promotions.

As it had been in the past.

We stated very clearly that we were not sure.

Boeing up in Elkhart that week to to offer steep discounts in order to incentivize dealers to take product.

<unk>.

Some cases, they shouldnt take.

Especially on the <unk> side inventory in the field continues to be.

At a healthy level.

And.

While we would love to collect.

Record breaking levels of orders at an event like open house. This was not the year to do that particularly on the total side. So our teams walked away with a.

Solid amount of orders.

But more importantly, we probably walked away with better alignment with our dealers about how we're going to work with them on a daily basis going forward Open house is an important event. It is not an event where we collect.

Hypothetically a majority of the orders for the season, we tend to obviously collect orders for the next several months.

Hitting into the winter and then the spring <unk>.

Particularly around the latest model year.

So I think our teams were pleased overall with the event.

We have no problem in terms of communicating with our dealers about their needs.

And so we have we have the orders we need to keep running the business.

Productive and disciplined fashion.

Alright, and then just the last question, assuming you guys stay true to your pricing disciplines.

Just for the sake of modeling at least early in the year could you just give us an indication of.

Totals versus motorized versus marine what we're running at.

Production just so we can have an idea.

With the numbers need to make.

Yes, certainly Scott I'll talk in terms of relativity.

We continue to maintain that are tumor rain businesses are in the healthiest position.

Both in terms of the industry dynamics.

The runway that they have with their dealers Chris.

Chris Craft's field inventory is the lowest it's been candidly in the time that we've owned the business, we're standing up a new assembly plants in Sarasota. Unfortunately, we saw.

Many of our dealers or customers in southwest, Florida have several of their boats.

Damn I understand and so there'll be a.

There'll be a benefit and an unfortunate way for those consumers and dealers down the road for us.

The.

Hi.

Two market, while it is slowing in macro in terms of retail demand.

It continues to be a very strong category for us with our <unk> brand.

Burletta in the trailing three months retail data now has six 9% market share thats up 200 basis points over that.

Mark a year ago.

And so we are also introducing an barletta.

New product lines, both on the lower end and on the highest end.

And so the marine segment for US is one where we remain bullish and the segment overall that we will most likely continue to invest in.

From a BD standpoint in the future.

You can expect I think good margin stability on our marine business for a good portion of the fiscal 'twenty three year.

The motorized segment has certainly been working its way back to our field inventory position that is healthier.

There are pockets of the motorized RV segment, where the dealers still need inventory and there are candidly some pockets where they are probably reaching.

Where they where they want to be in terms of a churn level, we continue to see very solid profitability.

Particularly.

On the class B product line some of our class C and I've been very pleased as of late with the way Newmar has been running their business on the class eight side in terms of profitability yield.

As well so motorized margins.

We'll probably settle a bit as field inventory normalizes to a full extent over the course of fiscal year 2003, but as we've intimated, we sincerely believe that motorized profitability yield on the bottom line, we will maintain a double digit position.

Within our within our portfolio, Brian Lastly talked about the total segment and timing is the biggest element of what you saw in fourth quarter, we made a very conscious decision to.

To take our fault programs to the market ahead of open house.

And that pushed some expense into the month of August specifically.

And candidly the as Brian also talked about the inflation pricing dynamics also.

Played a role just overall in terms of timing.

As Brian stated, we believe that total margins will maintain.

A industry, leading position and that you will likely see them stabilize at historically normal levels.

As we travel through the rest of fiscal 'twenty, three that will be a gradual development.

We have confidence that that will happen.

Got it Thats all I have thank you.

Yes.

Thank you and one moment for our next question. Please.

And our next question comes from the line of Michael Swartz with Truest. Your line is open. Please go ahead.

Yeah, Hey, good morning, guys.

Mike just wanted to follow up with the last part of your answer to Scott I think you had said you expect total margins to gradually improve through fiscal 'twenty three and there were some timing issues in the fourth quarter understood.

So does that is that another way of just saying that that kind of the low 0.4th quarter should be the low point for total margins maybe over the next 12 months or so.

Okay.

Well, Mike Good morning, and thanks for the question I, certainly wont ever commit to what is either at peak or a low point.

We've seen enough volatility in the last two two and a half years with the pandemic supply chain disruption inflation the war in Ukraine, you name it.

So I won't commit that our guardrails are permanent.

We believe that what you saw in the fourth quarter.

May have been a little bit lower margin than some on the street we're anticipating.

It is by no means a sign of.

Deterioration of margins, that's going to continue in earnest.

So we are seven and a half weeks into our first quarter, Brian and I sit here with a decent understanding of.

Of how the business has performed in those seven weeks.

We do not believe that.

Youre going to see significant deterioration in the total margins.

In the near term, but.

As cost stabilize as especially the Grand design team.

Works through their opportunities regarding their their model year 'twenty three product line.

That margin stabilization will most likely be gradual here.

Over over the next one to three quarters.

But we are not panicking about total margins to any degree here at Winnebago industries.

Okay. That's helpful. And then maybe just a follow up quickly on that.

You said the retail outlook for fiscal year 'twenty three I think.

Some of the parameters you gave.

Just that Youre thinking about something maybe similar to what we saw in 2019.

Maybe give us maybe walk through some of your thoughts on maybe how the business has changed in 2019, because I think the comment that you made people were to look back at 2019 and say, okay, that'd be earning power. So maybe give us some context by the business is different today and maybe how we should be thinking about some of the.

The drivers maybe some of the puts and takes to that 2019 earnings number relative to your 'twenty three outlook.

Yes, Thanks, Mike.

Let me talk with why and how I think the company is different.

Mid October of 2022 versus.

Candidly, probably the same months in 2019.

First and foremost we've added two pretty significant material businesses, probably almost a $1 billion of revenue.

<unk> has been added in terms of.

Acquired businesses first starting with Nomura.

Back in.

The fall of 2019.

We added.

Fantastic.

<unk> that has been taking significant share and class a diesel class a gas and.

Early on here and Super C as well.

That business grew in revenue from fiscal year 'twenty two versus fiscal year 'twenty, one and we expect new March would be a bigger more profitable business in the future yeah.

Compliments.

The Winnebago line very well in terms of brand positioning, but also product line assortment. The second business, we acquired was barletta.

<unk> fastest growing pontoon company most likely in the history of the pontoon industry and very candidly one of the fastest growing marine companies in the industry today as well.

And we had we had stated at time of acquisition in late August of 2021, what we anticipated that they would do.

Calendar year, 2021 sales and I can tell you that their fiscal 2022 sales and profits exceeded what they did in calendar 'twenty. One in terms of revenue and profits in that business continues to grow. So the first answer to how are we different is we have to.

Significant new acquisitions.

We are headed in the right direction and have significant runway secondly, as we've improved the profitability of several of our other businesses organically not the least of which is winnebago branded motorhomes Winnebago branded Motorhomes has seen a profit transformation in the last four or five years at our company through a variety of elements.

Not the least of which is innovative new product, but also significant work on the operational side to drive inefficiency and waste out.

And as I indicated just minutes ago, I think our profitability in that segment is sustainable.

Yes.

And.

That is dramatically different than three years ago.

I would say lastly, we're gaining share.

We had a.

Different level of share in 2019, I think we finished with nine 5% points of share in the RV space at the end of fiscal 19, we enter fiscal 'twenty three with almost 13 points of share we had very low share in the marine industry and in fact, we had zero share of the pontoon market in 2019.

And as we sit here today, we have almost 7% on our way to double digit someday. So all of those combined to make us more resilient.

Diversified set of revenue streams a.

A profitability slower that has been raised.

And our runway that we are quite bullish on so.

We're proud of fiscal 'twenty, two we're proud of the fourth quarter. We recognized there are always nuances in the numbers.

But we head into fiscal 'twenty three.

Competitively I think in a good place to manage through whatever the market gives to us.

That's very helpful. Thanks, Mike.

Thank you.

Next question please.

And our next question comes from the line of Craig Kennison with R. W. Baird. Your line is open. Please go ahead.

Hey, Thanks for taking my question I guess I wanted to ask about RV affordability.

Some things you can't control interest rates are moving significantly higher and that increases the monthly cost for your consumer and I think thats been a pain point in the channel but other.

Other things that are more within the industry of control would be the dealer margin.

And also your cost.

From a dealer perspective, how are your input costs trending on a like for like unit might we see.

Any deflationary pressure in some of those categories and then might we see some dealers.

Offer a sharper prices just as competition.

Increases with more inventory in the channel.

Yes, good morning, Craig. Thanks for your question I'll speak first to what we're seeing.

In terms of some of our cost inputs I, certainly wont get into some of the specifics, but the good news is on many of our raw materials, particularly steel aluminum and lumber.

Have seen.

A significantly better environment over the course of the last calendar year.

Steel is candidly probably.

On.

The spot market, 50% cheaper than it was at its peak aluminum is probably 30% cheaper than it was as a peak and lumber candidly is probably 60%, 65% cheaper than it was at its peak now that doesn't mean that we are always able to acquire those commodities or our suppliers acquire those commodities exactly.

At the right time to take full advantage of some of those those drops.

But the reality is as the.

The raw material market has definitely improved and that is going to be of some benefit I think to our suppliers, which hopefully trickles to us we do some vertical integration with those materials and that should help us as well over time.

However, continuing to see some cost pressure in areas, where the supply chain is still constricted.

Motorized chassis is a good example of that because of the semiconductor situation and the automotive capacity.

Limitations in many cases, they're putting on themselves.

Certain certain types of.

Component systems.

We have not seen.

Sort of the.

In most cases, we've not seen deflation at all from our suppliers, but there are still categories, where inflation is a little bit higher than we would like on either a sequential basis quarter to quarter or year over year, but the environment is getting better.

Now on the flip side, the retail environment is a little tougher and so therefore, our pricing power is going to look a little bit differently in fiscal 'twenty three than it did in fiscal 'twenty two.

Sure.

I'll comment very carefully on dealer margins dealer margins is a topic that we care deeply about.

We want dealers to be financially healthy and candidly, we want our brands both on the RV and marine side to be near the top of the list with our dealers in terms of of.

Turns and retail, but also profitability by brand and we think in many cases, we are that being said.

Dealers.

Have stated to us and to other sources.

They are not operating their business at probably the peak margin status. They were in during the height of the retail demand.

And some of the.

The field inventory constraints that they had.

In many cases dealers, though are operating at levels that we've heard that are closer to pre COVID-19 levels.

So relatively normal historically.

The affordability of Rvs, particularly is something that I think is important generically to the industry. We are often not the opening price point brands in most of our dealers we tend to be the brands that people step up too. So we pay more attention most likely Craig to the premium price.

A differential that we asked consumers to pay for our brands versus the value brands, our job is to keep that that gap.

Manageable for consumers to make that step up yourself.

I think dealers are financially healthy right now.

They'd like to run their business at slightly higher turns.

And we're fine with both those we want the dealers to be in great position.

The wins kind of returned behind our sales in the future.

Thanks, Mike.

Thank you and one moment for our next question. Please.

And our next question comes from the line of Greg Whitman with Wolfe Research. Your line is open. Please go ahead.

Hey, guys. Good morning could you dig in a little bit more on to the motorized backlogs.

It looks like there was a pretty big sequential change given sort of what you guys booked on the sale side. So.

That cancellations was that.

Something else that was going on there.

Give me a bit more.

Yes, good morning, Fred This is Mike.

Yes.

Sure.

And Astro as I answered. This question, we've always stated that we all need to be careful in terms of.

Backlogs as an indicator of our future.

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We are comfortable with where our backlogs are today in terms of what we believe our financial performance will be in the future.

And we.

We are monitoring monitoring carefully dealers commitment to those to those orders that they have with us.

I'd say from a motor home perspective.

Decrease is probably simply assign a field inventory getting healthier.

And dealers, mostly slowing down the placement of new orders based on either the retail pace of motor homes.

Turning in the market.

Or where they'd like to set their turn levels in the future.

We have not seen an inordinate amount of units canceled on either motor homes or toggles, we are not immune to dealers either delaying the receipt of committed orders or canceling orders, but it is not something that is epidemic right now at Winnebago industries with any of our RV brands.

There was a little bit of open inventory on our lots.

It is something that we will work through efficiently here over the coming weeks.

So.

The motor home backlog candidly Fred is in summary, just a sign of the.

The field filling.

And dealers adjusting their appetite to what they see in terms of future retail.

Makes sense.

And then Mike you had touched on sort of the hurricane impact or potential impact on the marine side, but is that something that you think could have an impact on the RV side as well either from a replenishment standpoint, or maybe housing or not.

Yes.

I think it's too early for us to really make a strong statement about it candidly I don't think hurricane in and sort of the.

The implications of that now we're going to be incredibly material to our company. We generally have not been first at the table with organizations like FEMA on trailers or temporary housing.

Our units are not necessarily constructed for those purposes, our brands are not positioned to.

So necessarily be that specific solution.

Should there be a need for those types of units I think some of our lower cost higher volume competitors are more in line for that.

There is no doubt that some of our customers were impacted significantly first and foremost through the loss of probably their homes in some cases or at least major damage.

But we have seen pictures of boats and rvs.

Heavily damaged in.

Ending up in places that you could have never imagined because of that storm.

So we're going to let the dust settle our teams are in contact with our dealers in those areas and we will provide our dealers and consumers all the support we can and there will most likely be a sort of a geographical bump in.

In sales in those categories in that area over the next couple of years as people begin to sort of rebuild rebuild their lives. So people's passion for the outdoors is pretty strong and.

While it is not going to be number one on their list of things to replace.

People will want to get back out onto the water or back onto the road and so we do believe any consumers who lost units most of them will replace them in the future.

Makes sense. Thank you guys.

Thank you and one moment for our next question. Please.

Okay.

And our next question comes from the line of Bret Jordan with Jefferies. Your line is open. Please go ahead.

Good morning, guys. This is Patrick Buckley on for Bret Jordan, Thanks for taking our questions.

Yes. Good morning, good morning, I know you've talked about it a bit here, but do you have any additional commentary on the pricing environment moving forward.

<unk> progressed with conversations with the dealers.

Have you seen any effects of changes at the retail level, obviously entering a bit of a different environment in the financing environment with higher rates have you seen signs of higher down payments longer loan terms or a higher portion of cash buyers.

Okay.

Yes, good morning all.

Maybe the first half of that in terms of maybe what we're seeing from a pricing standpoint, and ill defer to Brian here. If he has any comments on the retail or inventory financing side of the equation.

I think as I mentioned earlier.

One of the earlier questions.

We are seeing dealers.

<unk>.

Be more aggressive in terms of.

Pricing in the market, particularly on <unk>, but even in some categories like class B vans were.

There is there is significant consumer demand and and dealers are fighting for share themselves as well.

We don't see that pricing is irrational by the dealer community.

As I said earlier I think a lot of their margins have been trending back towards sort of historically normal margins here over the late summer and fall months.

And so.

I mentioned earlier as well that our pricing power in fiscal 'twenty three because of softer retail conditions is probably going to be less but that doesn't mean that if we see meaning.

Meaningful inflation that we we will we will protect our profitability as necessary over the long haul and.

And.

Put pricing in place should we see I think we're going to be more sensitive, though to the market and to the timing.

Of those price increases.

Just given everything our dealers are facing on a daily basis, So Brian any comments on maybe the health of the consumer or financing in general.

Yeah. Good morning, Brett we've always we've always struggled a bit with.

Pinpointing the percentage of those buyers that are cash buyers versus financed buyers because as you can appreciate EMEA often show up with cash in hand from a HELOC or other.

Source of financing so it's a bit hard to pinpoint we've not yet heard of any change in that mix of cash buyers versus financed buyers.

Rates are probably anywhere from 200 to 300 points higher on the retail side versus where they had been.

For the past couple of years and still given the duration also which has not changed I think that was another one of your questions. We've not heard of that retail duration of.

Loan changing to a shorter or longer duration at least.

That we've heard yet still widely available that is the financing is still widely available on the retail side.

Personal balance sheets remain relatively strong as well. So we think that that will be one of those factors that helps to sustain retail demand.

In the near future so.

There is some additional perspective I'd share.

But no significant changes really to that financing environment and the retail customer remains pretty healthy from a balance sheet perspective.

Great. Thank you that's very helpful. And then also are you guys able provide an estimate or give any color on inventory that's been built but it hasnt been centered dealer lot.

Maybe just sort of relative to where you've historically been are there any changes in <unk>.

<unk> inventory levels there.

Our inventories are elevated but not for reasons in terms of a massive amount of finished goods sitting on our lot. We continue to manage working capital as best we can and that includes a number of areas but.

Inventory is certainly a part of that.

We manage raw materials work in process and finished goods.

As I stated earlier with a comment on open order inventory.

We are not sitting with what I would call it excessive amount of.

Inventory on our on our lots.

Some of our businesses are turning it as soon as it comes off the production line.

And in some cases inventory sits.

While the dealer and the transportation company work out the best time to take it so.

No no major areas of concern that I have at this time.

Great. Thank you.

Thank you and one moment for our next question.

And our next question comes from the line of.

Yeah.

Maarten Montella with Raymond James Your line is open. Please go ahead.

Hi, This is Martin Lundstedt here for Joe I'll Cabello, Raymond James a quick question for you when it comes to total unit shipments were down over 30% year to year, while revenue per unit was up over 30%, Okay. If I could be sustainable so where do you see price trending in fiscal 2023.

Can I ask a question of clarification are you asking about wholesale price from us to our dealers or are you asking about retail price in the market.

Our retail price in the market.

Yes, I think youll see candidly a much more stable retail price environment.

The next 12 to 14 months.

Assuming inflation is relatively stable.

Dealers don't see.

Significant price increases from <unk>.

From the Oems.

As we've talked I mean dealers have begun to be more aggressive on retail pricing on some of the categories already.

In light of the market conditions and their inventory.

But I think youll see less volatility in total.

I think mostly on the call know this but over the last 24 months <unk> seen in some cases.

An increase of.

30% plus.

In terms of suggested MSRP for many of these units now the units arent always sold at MSRP. So now youre starting to see some of the discounts from that happened in the retail environment, but you won't see nearly the I think volatility of retail pricing in fiscal and calendar year 'twenty three as we saw in 'twenty one.

And 'twenty two so I think there'll be a little bit more certainty for the consumers.

Those consumers who haven't been in the market for three years to four years, we will see some prices that they're maybe not as used to.

The dealers do a great job of.

Selling the ROI in terms of the lifestyle and the economic benefits of being in an RV versus on airplanes and in hotels.

Thank you and as my follow up actually would you mind, giving a little bit of color to where you expect price trending for wholesale.

Okay.

We tend not to provide any forward looking forecasts in terms of pricing.

As I mentioned earlier.

The need to price because of lower inflation in our business.

And our pricing power is different and especially the last fiscal year.

But at this time, we won't share any forward looking comments on intended pricing actions.

Okay. Thank you.

Thank you and one moment for our next question.

Okay.

Our next question comes from the line of James Hardiman with Citi. Your line is open. Please go ahead.

Hey, good morning, So I wanted to circle back to your RV guidance.

Guidance commentary.

Sounds like you think.

Maybe a little bit lower than what theyre looking for in terms of shipments, but I guess more importantly, inline retail and wholesale so I guess my question is.

Is that a fair way to think about your business over the next year similar level of unit for wholesale and retail and maybe if you see big differences between motorized and global that would help as well.

Yeah from an industry perspective, what we stated this morning was for calendar year 2022 on Rvs, we think that 500000 shipment number is possibly attainable it could come in a little bit under that but I think 500000 is a good target for the calendar year, we do think calendar year 2023.

You will see probably somewhere in the range of 400 to 410000 units shipped to the market.

Conversely, we think in calendar 2023 that at a macro level youll see a similar number of retailed RV units somewhere in that four.

400000, plus range now with that would insinuate is at a not a lot of field inventory and macro would be coming out of the field. I think this is a mix or a balance topic I.

I do think youre going to see some total inventory come out of the market in calendar 'twenty three you'll see a little bit of motorized inventory built up on the marine side, both of our businesses will probably continue to.

Very carefully raise inventory levels, where they are dealers barletta as an example has dozens of open markets around the country, where we do not have a dealer presence and so you have to sometimes look at a company's field inventory position in the context of market share dealer penetration the momentum of its businesses overall.

<unk>.

I think theres more opportunity for Winnebago industries to add some inventory than maybe some of our competitors.

But we'll see how the next several months ago.

That makes sense, and then I'm going to ask.

Ask the question that I don't think anybody knows the answer to but I figure I might as well at.

<unk>.

Think about this retail slowdown.

There's sort of two.

Two issues that play right when we had the COVID-19 surge.

And maybe there is some there was some demand pull forward there and so we're seeing the other side of that but then there are all these macro issues at play.

Are you at all able to tease out what what do we think about this retail slowdown and I guess the reason I ask the question.

I think there is some debate as to whether or not we're looking at sort of a one year shakeout, right, which would be I think consistent with maybe what we've seen in the past 2018 2019 timeframe.

Where it was sort of an industry right sizing itself or versus <unk>.

2024 is there sort of more decline to come which would maybe be more confusing than it had been.

There are macro pressures mounting.

Well, let me be clear, we will operate our business.

With the paranoia that debt.

Net headwinds could last for a little while but we will certainly hope.

They don't last very long.

Every slight downturn in a cyclical industry has its own different elements and dynamics of this one is no different. This one is different than 2018 in 2019, which.

I believe was.

So tied to some industry.

Unit Overstocking in the RV world during that period I think the major pressures, we're seeing right now in terms of.

Consumer spending on outdoor recreation.

Is a pressure on discretionary spending capabilities due to higher food cost gasoline costs.

Other service costs, they might be experiencing number two the inflation of the products themselves.

In the outdoor rec category that Theyre looking and three we are seeing a meaningful rise in interest rates now interest rates are still historically in.

In a decent spot, but these are products that probably two thirds of our customers' finance over a 15 to 20 months period and they have seen interest rates in the last.

Nine to 12 months take a meaningful step up and so they.

They will they will analyze that in terms of the timing.

And the ability to purchase.

So if we can see some of the macroeconomic shifts to.

To help.

Relieve some pressure on any of those variables are business, we'll most likely.

Recover.

Remember the RV business is generally one of the first industries to see some of the softness and a macroeconomic recession. It's also one of the first businesses to potentially act with optimism when consumers are starting to feel more confident so we don't have a crystal ball either on the timeline.

So we will manage the business week to week month to month.

It would be very prudent with how we're managing it but we'll be very well positioned to take advantage of a healthier market when that day comes.

Yes.

Great. That's some good color on it.

Obviously, a tough question for all of us. Thank you.

Yeah.

Thank you and our next question will be in just a moment.

Okay.

And our next question comes from the line of John Healy with Northcoast Research. Your line is open. Please go ahead.

Thank you for taking my question I wanted to kind of switch gears, just a bit thinking about capital allocation obviously.

You saw the business kind of move in this direction throughout the quarter and to some degree you kind of saw this coming.

But you were extremely active on the buyback front this quarter, which I feel like is kind of counterintuitive to what I see a lot of companies do it easily buy their stock back when the business is great you buy your stock back when business is softening up.

How do we think about that for fiscal 'twenty three.

The framework of the low four hundreds.

Number would you expect to be hitting the buyback in the same way you have or do you pause there and what are your thoughts about M&A as the industry shakes out a little bit either under vote.

RV side of things do you step on the accelerator there a little bit.

Hey, Good morning, John This is Brian I will address that initially here and if Mike has any follow up I'll of course leave that to him.

We really haven't changed our capital allocation strategy, even in this past year, we stuck to our strategy we invested organically.

Pretty significantly with.

Some capacity expansions that were that were certainly necessary given the demand on the product we acquired Bard leader and so we allocated capital to that strategic growth. We maintained our liquidity very nicely, we actually expanded our liquidity with that $350 million ABL.

And then we return cash to shareholders and so that that was certainly evident in our dividend increase 50% increase on top of a 50% increase from the prior year and then as you highlighted in your question the share repurchase was was very much in.

Notable and very intentional.

Use of our cash to get that back to shareholders.

I don't see that changing going forward, we will continue to look for the strategic growth opportunities, which we believe to still be plentiful.

Manage our balance sheet very thoughtfully, we will certainly look to return cash to shareholders. We as you noted in August announced the $350 million share repurchase authorization that our board approved and so we'll continue to tap into that as we deem prudent.

But I don't see it changing it hasnt changed this past year.

Much stuck to our narrative on capital allocation and we will continue to do so going forward share repurchase is a great opportunity for us we felt and still feel that our our shares represent good value and so that enters into the calculus as we consider when and what magnitude we go to the market.

To do share repurchases that will continue to be the case, but.

We view going forward that our allocation priorities really will remain as I stated.

Great. Thank you.

Thank you and one moment for our next question.

And our next question comes from the line of Brandon <unk> with D. A Davidson. Your line is open. Please go ahead.

Good morning. Thank you for squeezing me in here just a follow up on total margins are you, saying that we shouldnt see a sequential decline from here or are you expecting to see a little more stabilization in the first half before settling out in the.

The second half of fiscal year 2023.

Yes, Thanks, Brandon I guess I'd.

I'd point to a little bit of history, we've referenced in our prior answers that we expect margins to normalize if you look back at some of the prior margins or EBITDA margins, we've realized in the towboat business specifically they have been in that 10 10, 5% range in previous Q1s.

We've mentioned that hearing in our fall Q4 period that we pulled forward some of the.

Program.

Discounting for open house that that affected the margins in part here in Q4, so even in those years previously where we've had 10 10, 5% margins in Q1, we ended the year in that 13%, 14% range and I think the best the message. We're trying to convey here is how you look at one quarter, we still have a lot of.

Confidence in our product line and the strength of our portfolio to deliver than that that 13%, 14% EBIT margin range for the total business over the long term.

We don't necessarily view.

Our calendar year 2023, any differently sitting here today.

Yes.

Volatility environment, we're dealing with in terms of the inflationary pressures the cost Mike cited some of the commodity volatility and a lot of which are coming down here.

As one of those factors and we're trying to weigh the forward view of cost and what's going on as it relates to our cost input.

And the impact that that has on our near term pricing decisions. So.

Very clearly we're not managing the quarters, we always have our eyes on the quarter, certainly and believe that we're doing our best to manage within a quarter, but that's not how we make decisions we make decisions for the long term and what we think is best for the portfolio. So I guess that hopefully that additional color and just helping helping all of you recall.

The margins that we've had in the fall periods in past years.

While still delivering very healthy margins in the towboat segment for the full fiscal year.

Great and just one quick follow up on your retail guidance for next year kind of implies down 10%.

Kind of where do you see your brand shaking out versus the industry do you feel like.

Youll be able to outpace the market by 10 to 15 percentage points or.

Your brands kind of trending in line with that guidance.

Brandon This is Mike I would answer that with this phrase the standard is the standard here, we have been taking share consistently over the last.

Six to seven years in the RV business as we've acquired brands and then grown them organically. After they are in our portfolio.

And we expect to continue to do that.

We're well aware of the competitive landscape.

But the expectations at Winnebago industries is for each of our five brands to take share in their respective outdoor categories.

And so some years, so that will be more some years that will be less but the expectation is is.

Similar year to year I can tell you and I usually do this.

Each call.

Retail through the first.

Part of the first quarter.

Is relatively stable versus what we saw at the end of Q4 and in fact has been trending a little healthier from a comp percentage standpoint.

So we're not seeing in some of our latest retail results on the RV side specifically.

Our comp percentage decline that is as steep as it was in the July August months.

And so that's a little bit of <unk>.

Factor of.

The comparative is getting a little bit easier.

But.

This industry.

If this industry retails 400000 units in calendar year, 2023, which is our current estimate as of this date.

That's a healthy amount of consumer retail here.

Historically in this space and.

And especially in a post COVID-19 environment. So we'll compete for everything we can get.

Great. Thank you.

Thank you and one moment for our next question.

Okay.

And our next question is a follow up question from Tristan Thomas Martin with BMO. Your line is open. Please go ahead.

Thanks, a lot I hopped up everything I was going to happen.

Thanks, guys.

Thanks, Jason.

Thank you and I'm showing no further questions at this time I would like to hand, the conference back over to Greg <unk> for any further remarks.

Thank you everyone for joining today's call.

This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

Yes.

The conference will begin shortly to raise your hand during Q&A you can dial star one one.

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Good day, and thank you for standing by welcome to the fourth quarter 2022.

Tobacco industry financial results conference call at this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your Touchtone telephone. Please be advised that today's conference maybe recorded.

I would now like to hand, the conference over to your speaker today right.

Vice President of Investor Relations and market Intelligence. Please go ahead.

Everyone and thank you for joining us today to discuss our fiscal 2022 fourth quarter and full year earnings results. As you May know I'm, new to Winnebago industries and excited to be working with the team as we continue to partner with our analysts and investors and seek to deepen our relationships with the investment community.

Forward to connecting with more of you in the months ahead.

I am joined on the call today by Mike Happy President and Chief Executive Officer, and Bryan Hughes, Vice President and Chief Financial Officer.

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

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

The news release with our fourth quarter and full year results was issued and posted to our website earlier. This morning, along with the fourth quarter, earning supplement.

Before we start I would 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 Ray.

And let me officially welcome you to the team.

We look forward to your contributions certainly.

Additionally, I would like to thank Steve Stuber for his efforts in the past several years as our Investor Relations leader.

And wish him well as he transitions internally to the CFO position within our Grand design RV subsidiary.

We are truly grateful to have both ray and Steve on our team here.

Good morning, everyone.

As always we appreciate your interest in Winnebago industries, and taking the time to discuss our fiscal 2022 full year and fourth quarter results.

I will start the call with an overview of our performance during the quarter and the full year.

And then pass it to Brian Hughes to cover our financial results in more detail.

Subsequently I will offer some closing thoughts before we turn to your questions.

As those who follow Winnebago industries, no well over the past seven fiscal years, we have been laser focused on enhancing and strengthening our enterprise portfolio.

The success of those initiatives has created a more diversified resilient competitive and profitable Winnebago industries.

This was never more evident than in fiscal year 2022.

When our company achieved record revenue profitability and overall outdoor market share.

Today, we have five premium outdoor brands spanning two large and secondly, strong outdoor recreation industries recreational vehicles and marine.

Both enabling us to connect with a broad range of outdoor consumers.

It is no secret that demand for outdoor products exploded in the last two years and that new consumer trends have emerged which will impact our industry's forever.

Thanks to the relentless focus commitment and part of our World class team here.

We delivered an unprecedented levels of demand for our premium products as new and existing consumers embrace the outdoor lifestyle.

While recognizing the inevitable normalization of short term outdoor demand.

We continue to believe that growing interest in the outdoors by an increasingly diverse range of consumers are lasting in the long term.

And that we at Winnebago industries are better positioned more than ever to serve a wide range of consumers with our diversified portfolio.

The past year has ushered in a new landscape in.

Inflation and rising interest rates are reshaping the economy on a macro level.

These trends are certainly impacting the strong retail demand environment that Winnebago industries has been so successful at capitalizing on.

However, we feel confident that our business is positioned to continue to perform well through economic cycles.

I will touch on the multiple ways, we are adjusting to ensure that we continue to deliver strong profitability and shareholder value.

Our recent performance in fiscal year, 2022, best demonstrates our flexibility and ability to deliver in a volatile environment.

Winnebago industries fourth quarter results were a strong finish to an outstanding year in which we delivered record revenue and profitability.

We recorded fourth.

Quarter net revenues of $1 2 billion, which represent a 14% increase over the same period last year.

Our performance was driven by the same key dynamics that have shaped the last few quarters.

Our sustained excitement for the outdoor lifestyle remains a powerful tailwind driving demand for Winnebago industries premium products are leading brands continue to win with our increasingly diverse consumer base, allowing us to maintain our strong market share positions within a <unk>.

<unk> economic environment.

Second our team's relentless demonstration of operational excellence enabled us to deliver for our consumers and our dealer partners efficiently and profitably.

Team has delivered on the bottom line through the pricing power of our brands the innovation of our products the agility of our supply chain, the increasing efficiency of our operations.

And disciplined investments in SG&A.

For example, we continue to manage total RV production levels to align with ongoing consumer end market demand.

Our motor home RV and marine businesses work to replenish dealer inventories carefully.

I have confidence that the world class Winnebago industries team will rise to the challenge as they always have.

Our performance throughout fiscal 2022 is a testament to the power of our people the strength of our operations and the extra ordinary quality of our products.

Early in the year, we delivered on voracious demand running our production at full capacity to achieve tremendous growth.

Even then we likely lost shipment share in select RV categories. As we maintained an ongoing sense of discipline and shipments versus other industry players appetites.

As market conditions have recently down shifted we have exercised further rigor and a focus on sustainable long term value by constantly adjusting production in certain business segments to calibrate to the needs of our dealers and the end consumer demand levels.

Record annual RV market share of 12, 7% and a record gross margin of 18, 7%.

And finally, we returned a record levels of cash to our shareholders, which Brian will touch on during his commentary.

Most importantly, we continue to innovate here and add strategic investments in talent.

Earlier this year, we introduced the ERP the first all electric zero emission motor home concept from a major RV manufacturer.

And we even drove the product more than 1300 miles on a single road trip.

We are moving closer to commercialization with multiple prototypes being tested by actual end customers as we approach calendar year Ed.

We also added new senior leadership to our team this year, including KC Tubman as numerous precedent Geoff Haire dine as Bart led us president and.

And Amber home as Winnebago industry's first ever Chief marketing officer.

Significantly enhancing our team with experience and exciting new capabilities.

Overall, I am incredibly proud of our performance in fiscal 2022, a record results show that our strategy is working well our team continues to deliver outstanding results in the face of a future volatile macro environment.

I look forward to continuing that focus with our team and continuing to create value as we move into fiscal 2023.

With that summary, I will now turn the call over to our Chief Financial Officer, Bryan Hughes to review, our fiscal 2022 fourth quarter and full annual financial results in more detail.

Brian .

Okay.

Thanks, Mike and good morning, everyone.

As Mike noted Winnebago Industries' fourth quarter results represented a strong finish to a record year.

Fourth quarter revenues were $1 2 billion, reflecting an increase of 14% compared to $1 billion for the year ago period.

Excluding <unk>, our organic growth for fourth quarter was 4% driven by pricing actions and increased motorized unit shipment.

Which was partially offset by a decline in unit shipments on the total RV segment.

As we pulled back on production and shipments during the quarter in response to the level of inventory in the channel.

As a reminder, this is the last quarter that we will be reporting organic results. Excluding barletta, given we close the transaction very early in the first quarter of fiscal 2022.

Gross profit for the quarter increased 12, 4% to $210 4 million compared to $187 2 million for the fourth quarter of fiscal 2021.

Gross profit margin of 17, 8% with 30 basis points lower than last year as a result of higher material and component cost <unk>.

Including higher logistics costs.

And lower volume and the total segment and associated deleverage.

Partially offset by pricing actions and the timing of those actions as compared to the realization of increases to our input costs.

Operating income, therefore increased 3% to $123 6 million for the quarter.

<unk> to $120 million for the fourth quarter of last year.

Fourth quarter reported diluted earnings per share with $2 61.

Compared to $2 45 in the same period last year.

Adjusted earnings per diluted share increased 14% to $3 two <unk>.

Compared to $2 65 in the same period last year.

Consolidated adjusted EBITDA increased seven 9%.

Two $139 2 million for the quarter.

Compared to $129 million last year.

Turning now to the fiscal 2020 to annual results.

Capitalizing on strong consumer demand and the need to replenish dealer inventory.

Winnebago industries delivered record annual consolidated fiscal 2022 results, including record revenues of $5 billion.

Our record gross profit margin of 18, 7% and record reported earnings per diluted share of $11 84.

And adjusted earnings per diluted share of $13 81.

Sales growth of 36, 6% was driven by the recently acquired by a lot of business.

<unk> action and strong volume growth in every business.

Supported by sustained demand and the particularly low field inventories we had in our dealer network as we entered the year.

Our annual gross profit margin increased 80 basis points over the prior year as a result of operating leverage and the well timed price increases that serve to offset inflationary pressures.

Our team also worked extremely hard throughout the year battling constant supply constrained, which were a steady disruption to our production environment and caused operational inefficiencies.

Now turning to performance by segment.

Total revenues were $494 2 million for the fourth quarter fiscal 2022 down 11, 8% compared to the fourth quarter of fiscal 2021.

As Mike mentioned, we adjusted our production schedule in the fourth quarter in response to fully replenish dealer inventories, resulting in a 33% decline in unit shipments.

Adjusted EBITDA for the total segment with $53 2 million down 36, 2% from the prior year period.

Adjusted EBITDA margin of 10, 8% decreased 410 basis points compared to the prior year due to higher material and component costs and deleverage, partially offset by pricing actions.

This lower margin in the quarter was anticipated as earlier in the year. We priced ahead of inflation with the expectation that inflation would have an impact over time.

Given the market dynamics the state of inventory in the channel.

And in anticipation of our dealer events in September we elected to forgo further price increases in our fourth quarter.

Backlog decreased to $576 5 million down 66, 2% from the prior year due.

Due to normalized dealer inventory level and the extensive order fulfillment throughout our fiscal year.

For the full year revenues for the total segment were $2 6 billion.

Up 29, 2% over fiscal 2021, driven by strong consumer demand and pricing actions that were taken to offset higher material and component costs.

Segment, adjusted EBITDA was $383 6 million for fiscal 2022 up 32, 7% year over year.

Adjusted EBITDA margin of 14, 8% increased 40 basis points over fiscal 2021.

Adjusted EBITDA of $77 4 million increased 53, 4% compared to the fourth quarter of last year.

Adjusted EBITDA margin for the quarter was 13, 9%.

Representing an increase of 270 basis points over the prior year due to pricing actions and production efficiencies.

Actually offset by higher material and component costs.

Backlog decreased to $1 7 billion down 26, 7% from the prior year.

On an annual basis motor home revenues increased 24, 2% year over year to $1 9 billion due to pricing actions related to higher material and component costs and increased unit sales.

Segment, adjusted EBITDA was $238 million up 47% from fiscal 2021.

Adjusted EBITDA margin of 12, 5% grew 150 basis point compared to fiscal 2021.

Total marine revenues for the fourth quarter were $122 1 million driven by the continued strength of bond ladder and good performance from Chris craft.

Excluding <unk> revenues were $23 7 million, representing 41, 8% organic growth compared to the same period last year.

Segment adjusted EBITDA for the quarter was $17 5 million.

Up $15 8 million increase over last year.

Adjusted EBIT margin was 14, 3%.

Backlog for the Marine segment with $314 7 million and remained elevated as low dealer inventories persist in this segment.

Consolidated Marine results for fiscal 2022 include revenues of $425 3 million.

Up $365 1 million from fiscal 2021, driven primarily by the addition of the <unk> business.

Segment, adjusted EBITDA was $60 8 million up $55 7 million over fiscal 2021.

Turning to Winnebago industries balance sheet.

As of the end of the fiscal year, we had $545 8 million and total outstanding debt composed of $600 million in debt net of convertible note discount of $45 3 million and net of debt issuance costs of $8 9 million.

We also had working capital.

$571 7 million.

Winnebago industries continues to hold a very healthy liquidity position and recently added to it by securing an increased asset based lending credit facility of $350 million.

This upgrade with fully driven by the need to right size, our ABL facility to the current size of our business from our previous $192 5 million facility.

Our current net debt to adjusted EBITDA ratio is 0.5 time.

With remains below our targeted range of <unk>, 9% to one five times.

Allowing us to execute on our balanced capital allocation strategy to make strategic investments that are being the growth in our business. While also returning cash to shareholders.

As evidence of our commitment to these priorities Winnebago industries recently increased the dividend by 50% to <unk> 27 per share for this most recent quarterly dividend payment.

In addition, we bought back 80 million of shares during the fourth quarter, a new record.

Fully depleting, our previous share repurchase authorization and resulting in our board of directors approving a new $350 million authorization.

We executed approximately $210 million of share repurchases.

Around 11% of shares outstanding at fiscal year end 2021 during the course of fiscal 2022.

In the form of share buybacks and dividend.

All of this while maintaining a healthy balance sheet that allows us to continue to invest for outsized return on behalf of our shareholders.

That concludes my review of our financials for the quarter and full year I'll now turn the call back to Mike to provide some closing comments Mike.

Thanks, very much Brian .

As we reflect on fiscal 2022, we are proud of the financial organizational and cultural strides we have made.

While we anticipate some select supply chain constraints will linger into fiscal 2023.

Particularly in the motor home and marine segments.

We continue to make progress and become more effective at minimizing the related impacts by collaborating closely with our suppliers.

We also continue to monitor inflation, while trying to balance pricing actions in a tougher demand environment and affordability of our premium products for our customers.

In addition, we continue to leverage operating efficiencies.

And leverage our variable cost structure to help maximize profit margins as possible.

We will build on our strong momentum by continuing to focus on executing our proven strategies and introducing new products across all our brands.

I was particularly excited to witness the many new products showcased at the recent RV Open house event in Elkhart County, Indiana.

Our Winnebago Grand design, and Newmar products were impressively displayed for dealers and industry partners to experience.

Each of these RV brands also received the latest RV dealer satisfaction awards as presented in recent weeks.

I look forward to seeing the results of our collective efforts in the months to come.

The unique strength of our Winnebago industries brands, well positioned us to continue to win with consumers building on our growing <unk> trailing 12 month RV market share of 12, 7%.

And moving the Barletta brand currently at six 9% market share in the latest Ssi report.

Firmly into the top five.

In the pontoon market.

Now I want to quickly touch on expectations for the RV industry for the upcoming year.

As mentioned previously we are monitoring closely the macroeconomic environment to help assess outdoor leisure retail demand.

All things considered and knowing that there are numerous factors that can impact forward looking estimates materially.

We are generally aligned with RBI as recently released data.

And are projecting a range of 490000 to 500000 in shipment units for calendar year 2022.

Concerning calendar year 2023.

We believe industry RV shipments.

We will likely trend closer.

To a range of 400 to 410000 units for that period.

Slightly lower than the latest RV IAA forecast.

For retail.

We estimate 450000 RV units for calendar year 2022.

And retail units equivalent to wholesale shipments in 2023.

Overall and in the long term.

We are confident that Winnebago industries has significant headroom for sustained profitable growth and enhanced value creation for our end consumers dealers employees and shareholders.

The confidence we have in our ability to drive continued value is highlighted by the recent 50% increase into our dividend and the commitment to repurchasing record levels of shares.

We look forward to telling you more about how we're building on our accomplishments over the last several years and why we believe Winnebago industries is well positioned to continue driving value for shareholders at our upcoming Investor day.

On November 15 at Lake Lanier Islands in Georgia.

We hope to see many of you there in person.

Lastly.

I want to acknowledge the efforts.

Of our 7400 plus employees here at Winnebago industries.

And thank them immensely for their contributions.

Too often Brian and I get more credit than we deserve as the messengers of our outstanding results.

This company and our culture are successful because all our employees care deeply about our customers strategic business partners and each other.

We are incredibly privileged to work alongside each of them on a daily basis.

Their dedication to excellence and inclusivity is inspiring.

We recently saw evidence of this with Winnebago industries was awarded the champion of Women Award this month by the RV Womens Alliance.

What a great achievement for our team.

That concludes our prepared remarks this morning.

I will now turn the call back over to the operator.

Thank you for your time.

Thank you to ask a question at this time, you will need to press star one one on your telephone.

Can you please limit yourself to one question one follow up before returning to the queue. Please standby, while we compile our Q&A roster and our first question comes from the line of.

Tristan Thomas with BMO. Your line is open. Please go ahead.

Two questions could you maybe help us quantify the margin kind of bridge.

Our motorized and <unk> adjusted EBITDA basis.

The interplay between lower production rates promo certain return.

I think commodity costs and the price increases.

Yes. Good morning, Tristan this is Brian I'll take that one.

And I'll go into some level of detail here, we had as I think you know overall, a strong quarter and gross margins at 17, 8%.

Our segment level EBITDA margins results were mixed I would say our motor home EBITDA margins for the year at 12, 5%.

We're very strong and for the quarter at 13, 9% we're at record levels.

Marine EBIT margins for the quarter and the year were 14, 3% the strongest across our three segments.

And demonstrates the strength of our brands and why we have entered this segment through our two acquisitions of Chris craft and more recently by a letter.

And the total segment, we had record level margins for the full year at 14, 8%. So we're very pleased with that.

Obviously through this year, we saw EBITDA margins in excess of 15% a couple of quarters and even as high as 17, 2% as you recall in Q1 of fiscal 'twenty two.

And also with market dynamics in mind of course.

The EBITDA margins for the total segment, we saw in the quarter at 10, 8% Likewise reflected this timing.

As we entered the fall we have reinstituted the traditional fall programming prices and those practices that encourage the dealers to take on product during the seasonal low periods and this is certainly something that impacted margins in Q4 and will have a more normalized impact on our Q1 margins.

The inflationary impact for the total segment, including some heightened logistics costs. We absorbed continue to be very dynamic, but are now showing some stabilization. If you look at our cost today as compared to the summer months.

So while I didn't give you a breakdown nor do we ever of the need.

Impact rather of pricing versus inflation versus other drivers I think that gives you some additional color to help understand the margins.

Okay.

Trying to when you everyone's trying to figure out how to model margins moving forward.

So.

Even if you could just rank order kind of.

What was the biggest impact this quarter.

We think thats going to stick around.

Yes, I think it's certainly as I mentioned the timing of how this stuff plays across the P&L. It's a very dynamic cost environment right now and we're going to be really thoughtful about when we institute pricing and what amount.

And then also taking into account our forward view of the costs are inflationary environment as well and so that that certainly factors into our decisions in the short term.

We clearly.

We don't manage margins for quarter were managing them much more long term than that and so I think that thats, certainly something that we want to convey as well.

Okay.

I'll hop back in the queue. Thank you.

Thank you.

And one moment for our next question.

And our next question comes from the line of Scott Zeller with.

Cam.

Sorry Ann km partners. Your line is open. Please go ahead.

Great. Thanks for taking my questions guys.

Hey, good morning, Scott.

Can you maybe talk about open house, obviously heading into this event, while we didn't have any in the last two years, but.

<unk> unique we have an imbalance of lower priced trailers in the system and then we.

We have the current pricing environment, but dealers.

Seemingly a little bit reluctant to order 2023 product at these prices could you talk about how that dynamic took place a couple of weeks ago and.

What you saw from an order intake perspective at open house.

Good morning, Scott This is Mike.

Yes.

Yes, I thought we had a really good open house event and I'll start first and foremost with the quality of the product.

The lines that we showed during open house in fact, several industry trade magazines and some other future additions will be awarding many of our brands with some awards.

<unk>.

The innovative products that we showed at open House Secondly, we had great discussions honest discussions.

With our dealers.

Open house had not been held since 2019.

It was good to see a majority of the country's dealers show back up in Elkhart County, and spend time with not only our brands, but I am sure all of the other OEM brands that display.

And anytime you have a chance to spend quality time with one of your customers you get the chance to share perspectives and talk about the future in a productive manner.

As I said are very small investor event.

That morning.

In Elkhart.

Our programming and pricing for.

The 2022 open house was candidly very similar in terms of discounts or promotions.

As it had been in the past.

We stated very clearly that we were not showing up in elkhart that week to to offer steep discounts in order to incentivize dealers to take product.

<unk>.

Some cases, they shouldnt take.

Especially on the <unk> side inventory in the field continues to be.

Yes.

At a healthy level.

And.

While we would love to collect.

The record breaking levels of orders at an event like open house. This was not the year to do that particularly on the <unk> side. So our teams walked away with a a.

Solid amount of orders.

Hypothetically a majority of the orders for the season, we tend to obviously collect orders for the next several months.

Hitting into the winter and then the spring <unk>.

Particularly around the latest model year.

So I think our teams where we're pleased overall with the event.

We have no problem in terms of communicating with our dealers about their needs.

And so we have we have the orders we need to keep running the business.

Productive and disciplined fashion.

Alright, and then just the last question, assuming you guys stay true to your pricing disciplines.

Just for the sake of modeling at least early in the year could you just give us an indication of.

Totals versus motorized versus marine what we're running at.

Production just so we can have an idea.

With the numbers need to make.

Yes, certainly Scott I'll talk in terms of relativity.

We continue to maintain that are tumor rain businesses are in the healthiest position.

Both in terms of the industry dynamics.

The runway that they have with their dealers Chris.

Chris Craft's field inventory is the lowest it's been candidly in the time that we've owned the business, we're standing up a new assembly plants in Sarasota. Unfortunately, we saw.

Many of our dealers or customers in southwest, Florida have several of their boats.

Damaged and so there'll be a.

There'll be a benefit and an unfortunate way for those consumers and dealers down the road for us.

The two market.

It is slowing in macro in terms of retail demand.

It continues to be a very strong category for us with our <unk> brand.

Burletta in the trailing three months retail data now has six 9% market share thats up 200 basis points over that that same mark a year ago.

And so we are also introducing an barletta.

New product lines, both on the lower end and on the highest end.

And so the marine segment for US is one where we remain bullish and segment overall that we will most likely continue to invest in.

From a BD standpoint in the future.

And so you can expect I think good margin stability on our marine business for a good portion of the fiscal 'twenty three year.

The motorized segment has certainly been working its way back to our field inventory position that is healthier there.

There are pockets of the motorized RV segment, where the dealers still need inventory and there are candidly some pockets, where they are probably reaching where they where they want to be in terms of a churn level. We continue to see very solid profitability.

Particularly on the class B product line some of our class C and I've been very pleased as of late with the way Newmar has been running their business on the class eight side in terms of profitability yield.

As well so motorized margins.

We'll probably settle a bit as field inventory normalizes to a full extent over the course of fiscal year 'twenty three but as we've intimated, we sincerely believe that motorized profitability yield on the bottom line, we will maintain a double digit position.

Within our within our portfolio, Brian Lastly talked about the total segment and timing is the biggest element of what you saw in fourth quarter, we made a very conscious decision.

To take our fault programs to the market ahead of open house.

And that pushed some expense into the month of August specifically.

And candidly the as Brian also talked about the inflation pricing dynamics also.

Played a role just overall in terms of timing.

As Brian stated, we believe that total margins will maintain.

<unk> industry, leading position and that you will likely see them stabilize at historically normal levels.

As we travel through the rest of fiscal 'twenty, three that will be a gradual development.

But we have confidence that that will happen.

Got it Thats all I have thank you.

Yeah.

Thank you and one moment for our next question. Please.

And our next question comes from the line of Michael Swartz with <unk>. Your line is open. Please go ahead.

Yeah, Hey, good morning, guys.

So does that is that another way of just saying that that kind of the low point and fourth quarter should be the low point for total margins maybe over the next 12 months or so.

Okay.

Well, Mike Good morning, and thanks for the question.

I won't ever commit to what is either at peak or a low point.

We've seen enough volatility in the last two two and a half years with the pandemic supply chain disruption inflation the war on Ukraine, you name it.

So I won't commit that our guardrails are permanent.

We believe that.

<unk>.

What you saw in the fourth quarter.

It may have been a little bit lower margin than some on the street we're anticipating.

That it is by no means a sign of deterioration.

Ration of margins Thats going to continue in earnest.

So we are seven and a half weeks into our first quarter, Brian and I sit here with a decent understanding of.

How the business has performed in those seven weeks.

We do not believe that youre going to see significant deterioration in the total margins.

In the near term Budd.

Cost stabilize as especially the Grand design team.

Works through their opportunities regarding their their model year 'twenty three.

Product line.

That margin stabilization will most likely be gradual here.

Over the next one to three quarters.

But we are not panicking about total margins to any degree here at Winnebago industries.

Okay. That's helpful. And then maybe just a follow up quickly on I think you said the retail outlook for fiscal year 'twenty three I think some of the parameters you gave would suggest that youre thinking about something maybe similar to what we saw in 2019.

Maybe give us maybe walk through some of your thoughts on maybe how the business has changed in 2019, because I think the comment that you made people really look back at 2019 and say, okay, that'd be earning power. So maybe give us some context for why the business is different today and maybe how we should be thinking about some of the drivers maybe some of the puts and takes.

2019 earnings number relative to your 'twenty three outlook.

Yes, Thanks, Mike.

Let me talk with why and how I think the company is different.

Mid October of 2022 versus cans.

Candidly, probably the same months in 2019.

First and foremost we've added two pretty significant material businesses, probably almost $8 billion of revenue.

Has been added in terms of.

Acquired businesses first starting with Newmar.

Back in.

The fall of 2019.

We added a.

Fantastic.

That has been taking significant share and class a diesel class a gas and.

Early on here and Super C as well.

That business grew in revenue from fiscal year, 'twenty two versus fiscal year, 'twenty, one and we expect newmar to be a bigger more profitable business in the future it.

Compliments, the Winnebago line very well in terms of brand positioning, but also product line assortment. The second business. We acquired was barletta the fastest growing pontoon company most likely in the history of the pontoon industry and very candidly one of the fastest growing marine companies in the industry today as well.

We had we had stated at time of acquisition in late August of 2021, what we anticipated that they would do.

Significant new acquisitions that are headed in the right direction and have significant runway secondly, as we've improved the profitability of several of our other businesses organically not the least of which is winnebago branded motorhomes Winnebago.

<unk> branded Motorhomes has seen a profit transformation in the last four five years at our company through a variety of elements not the least of which is innovative new product, but also significant work on the operational side to drive inefficiency and waste out.

As I indicated just minutes ago, I think our profitability in that segment is sustainable.

And that.

That is dramatically different than three years ago.

I would say lastly, we're gaining share.

We had a.

And as we sit here today, we have almost 7% on our way to double digit someday. So all of those combined to make us more resilient avaya.

Diversified set of revenue streams a.

A profitability floor that has been raised.

And our runway that we are quite bullish on so we're.

We're proud of fiscal 'twenty, two we're proud of the fourth quarter.

Recognize there are always nuances in the numbers, but.

But we head into fiscal 'twenty three.

Competitively I think in a good place to manage through whatever the market gives to us.

That's very helpful. Thanks, Mike.

Thank you. Our next question. Please and our next question comes from the line of Craig Kennison with R. W. Baird. Your line is open. Please go ahead.

Hey, Thanks for taking my question I guess I wanted to ask about <unk>.

<unk> affordability.

Some things you can't control interest rates are moving significantly higher than that.

Leases the monthly cost for your consumer and I think thats been a pinpoint in the channel but.

Other things that are more within the industry of control would be the dealer margin.

And also your cost.

From a dealer perspective, how are you.

Your input costs trending in a like for like unit might we see any.

Any deflationary pressure in some of those category and then might we see some dealers offer sharper prices just as competition.

Increases with more inventory in the channel.

Good morning, Craig. Thanks for your question I'll speak first to what we're seeing.

In terms of some of our cost inputs I, certainly wont get into some of the specifics, but the good news is on many of our raw materials, particularly steel aluminum and lumber.

We have seen.

A significantly better environments over the course of the last calendar year.

Steel is candidly probably.

On the.

Or our suppliers acquire those commodities exactly at the right time to take full advantage of some of those those drops.

But the reality is as.

<unk> chain is still constricted.

Motorized chassis is a good example of that because of the semiconductor situation and the automotive capacity limitations in many cases, they're putting on themselves.

Certain certain types of.

Components systems.

We have not seen.

Sort of the.

Sure.

I'll comment very carefully on dealer margins dealer margins is a topic that we care deeply about.

We want dealers to be financially healthy and candidly, we want our brands both on the RV and marine side to be near the top of the list with our dealers in terms of of.

Turns and retail, but also profitability by brand and we think in many cases, we are that being said.

Dealers.

Have stated to us and to other sources.

They are not operating their business at probably the peak margin status. They were in during the height of the retail demand.

And some of the.

The field inventory constraints that they had.

In many cases dealers, though are operating at levels that we've heard that are closer to pre COVID-19 levels.

So relatively normal historically.

Differential that we ask consumers to pay for our brands versus the value brands, our job is to keep that that gap.

Manageable for consumers to make that step up or so.

I think dealers are financially healthy right now.

They'd like to run their business at slightly higher turns.

And we're fine with both those we want the dealers to be in great position.

The wins kind of return behind our sales in the future.

Thanks, Mike.

Yes.

Thank you and one moment for our next question. Please.

And our next question comes from the line of Greg Whitman with Wolfe Research. Your line is open. Please go ahead.

Hey, guys. Good morning could you dig in a little bit more on to the motorized backlogs.

It looks like there was a pretty big sequential change given sort of what you guys booked on the sale side. So.

Is that cancellations was that.

Something else that was going on there could you just give a bit more.

Yes, good morning, Fred This is Mike.

Just as a.

And Astro as I answered. This question, we've always stated that we all need to be careful in terms of.

Backlogs as an indicator of our future.

Business.

We are comfortable with where our backlogs are today in terms of what we believe our financial performance will be in the future.

And.

We are monitoring monitoring carefully dealers commitment to those to those orders that they have with us.

I'd say from a motor home perspective.

Decrease is probably simply assign a field inventory getting healthier.

And dealers, mostly slowing down the placement of new orders based on either the retail pace of motor homes.

Turning in the market.

Or where they'd like to set their turn levels in the future.

There was a little bit of open inventory on our loss.

But it is something that we will work through efficiently here over the coming weeks.

So.

I think the motor home backlog candidly Fred is in summary, just a sign of.

The field filling.

And dealers adjusting their appetite to what they see in terms of future retail.

Sure.

Makes sense and then Mike you had touched on sort of the hurricane impact or potential impact on the marine side, but is that something that you think could have an impact on the RV side as well either from a replenishment standpoint, or maybe housing or not.

Yeah, I think it's too early for us to really make a strong statement about it candidly I don't think hurricane Ian.

And sort of that.

The implications of that now we're going to be incredibly material to our company. We generally have not been first at the table with organizations like FEMA on trailers or temporary housing.

Our units are not necessarily constructed for those purposes, our brands are not positioned.

So certainly it will be that specific solution.

Should there be a need for those types of units I think some of our lower cost higher volume competitors are more in line for that there is no doubt that some of our customers were impacted significantly first and foremost through the loss of probably their homes in some cases or at least major damage.

But we have seen pictures of boats and rvs.

Heavily damaged in.

Ending up in places that you could have never imagined because of that storm.

In sales in those categories in that area over the next couple of years as people begin to sort of rebuild rebuild their lives. So people's passion for the outdoors is pretty strong and.

While it is not going to be number one on their list of things to replace.

People will want to get back out onto the water or back onto the road and so we do believe any consumers who lost units most of them will replace them in the future.

Makes sense. Thank you guys.

Thank you and one moment for our next question. Please.

Okay.

Yes.

And our next question comes from the line of Bret Jordan with Jefferies. Your line is open. Please go ahead.

Good morning, guys. This is Patrick Buckley on for Bret Jordan, Thanks for taking our questions.

Yes. Good morning, good morning, I know you've talked about it a bit here, but do you have any additional commentary on the pricing environment moving forward.

Things have progressed with conversations with dealers.

And have you seen any effects of changes at the retail level, obviously entering a bit of a different environment in the financing environment with higher rates have you seen signs of higher down payments longer loan terms or a higher portion of cash buyers.

Okay.

Yes, good morning, I'll take maybe the first half of that in terms of maybe what we're seeing from a pricing standpoint, and ill defer to Brian here. If he has any comments on the retail or inventory financing side of the equation.

I think as I mentioned earlier.

One of the earlier questions.

We are seeing dealers.

<unk>.

Be more aggressive in terms of.

Pricing in the market, particularly on <unk>, but even in some categories like class B vans were.

There is there is significant consumer demand and and dealers are fighting for share themselves as well.

We don't see that pricing is a rational by the dealer community.

As I said earlier I think a lot of their margins have been trending back towards sort of historically normal margins here over the late summer and fall months.

And so.

I mentioned earlier as well that our pricing power in fiscal 'twenty three because of softer retail conditions is probably going to be less but that doesn't mean that if we see meaning.

Meaningful inflation that we we will we will protect our profitability as necessary over the long haul and.

And.

Put pricing in place should we see I think we're going to be more sensitive, though to the market and to the timing.

Of those price increases.

Just given everything our dealers are facing on a daily basis, So Brian any comments on maybe the health of the consumer or financing in general.

Yes, good morning, Brad we've always we've always struggled a bit with.

Pinpointing the percentage of those buyers that are cash buyers versus financed buyers because as you can appreciate EMEA often show up with cash in hand from a HELOC or other.

Source of financing so it's a bit hard to pinpoint we've not yet heard of any change in that mix of cash buyers versus financed buyers.

Rates are probably anywhere from 200 to 300 points higher on the retail side versus where they had been.

For the past couple of years and still given the duration also which has not changed I think that was another one of your questions. We've not heard of that retail duration of.

Loan changing to a shorter or longer duration at least.

That we've heard yet still widely available that is the financing is still widely available on the retail side.

And personal balance sheets remained relatively strong as well. So we think that that will be one of those factors that helps to sustain retail demand.

In the near future so.

There is some additional perspective I'd share.

But no significant changes really to that financing environment and the retail customer remains pretty healthy from a balance sheet perspective.

Great. Thank you that's very helpful. And then also are you guys able provide an estimate or give any color on inventory that's been built but it hasnt been centered dealer lot.

Maybe just sort of relative to where you've historically been are there any changes in <unk>.

<unk> inventory levels there.

Our inventories are elevated but not for reasons in terms of a massive amount of finished goods sitting on a lot. We continue to manage working capital as best we can and that includes a number of areas but.

Inventory is certainly a part of that.

We manage raw materials work in process and finished goods.

As I stated earlier with a comment on open order inventory.

We are not sitting with what I would call it excessive amount of.

Inventory on our on our on our lots.

Some of our businesses are turning it as soon as it comes off the production line.

And in some cases the inventory sits.

While the dealer and the transportation company work out the best time to take it so.

No no major areas of concern that I have at this time.

Great. Thank you.

Thank you and one moment for our next question and our next question comes from the line of.

Martin Montella with Raymond James Your line is open. Please go ahead.

Martin Lundstedt here for Joe I'll Cabello, Raymond James a quick question for you when it comes to total unit shipments were down over 30% year to year, while revenue per unit was up over 30%, obviously, it's not sustainable so where do you see price trending in fiscal 2023.

Yes.

Can I ask a question of clarification are you asking about wholesale price from us to our dealers or are you asking about retail price in the market.

Our retail price in the market.

I think youll see candidly a much more stable retail price environment in the next 12 to 14 months, assuming inflation is relatively stable.

Dealers don't see.

Significant price increases from.

From the Oems.

As we've talked I mean dealers have begun to be more aggressive on retail pricing on some of the categories already.

In light of the market conditions and their inventory.

But I think youll see less volatility in total.

I think mostly on the call know this but over the last 24 months you've seen in some cases.

An increase of.

30% plus.

In terms of suggested MSRP for many of these units.

The units aren't always sold at MSRP. So now youre starting to see some of the discounts from that happened in the retail environment, but you won't see nearly the I think volatility of retail pricing in fiscal and calendar year 'twenty three as we saw in 'twenty one 'twenty.

'twenty two so I think there'll be a little bit more certainty for the consumers.

Those consumers who haven't been in the market for three years to four years, we will see some prices that they are.

There are maybe not as used to.

But the dealers do a great job of.

Selling the ROI in terms of the lifestyle and the economic benefits of being in an RV versus on airplanes and then hotels.

Thank you for my follow up actually would you mind, giving a little bit of color to where you expect price trending or wholesale.

Okay.

We tend not to provide any forward looking forecasts in terms of pricing.

As I mentioned earlier.

The need to price because of lower inflation in our business.

And our pricing power is different and especially the last fiscal year.

But at this time, we won't share any forward looking comments on intended pricing actions.

Okay. Thank you.

Thank you and one moment for our next question. Our next question comes from the line of James Hardiman with Citi. Your line is open. Please go ahead.

Hey, good morning, So I wanted to circle back to your RV guidance commentary.

Sounds like you think.

Maybe a little bit lower than what theyre looking for in terms of shipments, but I guess more importantly in line retail and wholesale so I guess my question is.

Yes from an industry perspective, what we stated this morning was for calendar year 2022 on Rvs, we think that 500000 shipment number is possibly attainable it could come in a little bit under that but I think 500000 is a good target for the calendar year, we do think calendar year 2023.

You will see probably somewhere in the range of 400 to 410000 units shipped to the market.

Conversely, we think in calendar 2023 that at a macro level youll see a similar number of retailed RV units somewhere in that.

400000, plus range now with that would insinuate is at a not a lot of field inventory and macro would be coming out of the field. I think this is a mix or a balance topic I.

I do think youre going to see some total inventory come out of the market in calendar 'twenty three you'll see a little bit of motorized inventory built up on the marine side both of our businesses, we will probably continue to.

<unk>.

I think theres more opportunity for Winnebago industries to add some inventory than maybe some of our competitors.

But we'll see how the next several months ago.

That makes sense, and then I'm going to ask.

Ask the question that I don't think anybody knows the answer to but I figure.

Well at.

<unk>.

As we think about this retail slowdown.

There's sort of two there's two issues that play right. When we had the COVID-19 surge.

And maybe there is some there was some demand pull forward there and so we're seeing the other side of that.

And then there are all these macro issues at play.

Are you at all able to tease out what what do we think about this retail slowdown.

The reason I ask the question.

I think there is some debate as to whether or not we're looking at sort of a one year shakeout, right, which would be I think consistent with maybe what we've seen in the past 2018 2019 timeframe.

Where it was sort of an industry right sizing itself or versus <unk>.

2024 is there sort of more decline to come which would maybe be more consistent.

There are macro pressures mounting.

Well, let me be clear, we will operate our business.

With the paranoia that.

That headwinds could last for a little while but we will certainly hope.

They don't last very long.

Every slight downturn in a cyclical industry has its own different elements and dynamics of this one is no different. This one is different than 2018 in 2019, which.

I believe was.

Also tied to some industry.

<unk> overstocking in the RV world during that period I think the major pressures, we're seeing right now in terms of.

Consumer spending on outdoor recreation.

Is a pressure on discretionary spending capabilities due to higher food cost gasoline costs.

Other service costs, they might be experiencing number two.

The inflation of the products themselves.

In the outdoor rec category that Theyre looking and three we are seeing a meaningful rise in interest rates now interest rates are still historically.

In a decent spot, but these are products that probably two thirds of our customers' finance over a 15 to 20 months period and they have seen interest rates in the last.

Nine to 12 months take a meaningful step up and so they.

They will they will analyze that in terms of the timing.

And the ability to purchase.

So if we can see some of the macroeconomic shifts.

To help.

Relieve some pressure on any of those variables are business, we'll most likely.

Recover.

So we will manage the business week to week month to month.

It would be very prudent with how we're managing it but we'll be very well positioned to take advantage of a healthier market when that day comes.

Yes.

Great. That's some good color on it.

Obviously, a tough question for all of us. Thank you.

Okay.

Thank you and our next question will be in just a moment.

Okay.

And our next question comes from the line of John Healy with Northcoast Research. Your line is open. Please go ahead.

Thank you for taking my question I wanted to kind of switch gears, just a bit thinking about capital allocation obviously.

You saw the business kind of move in this direction throughout the quarter and to some degree you kind of saw this coming.

How do we think about that for fiscal 'twenty three.

The framework of the 100000.

Unit number would you expect to be.

The buyback is the same way you have or do you pause there and what are your thoughts about M&A as the industry shakes out a little bit either on a boat or they are.

<unk> side of things for you.

On the accelerator there a little bit.

Hey, Good morning, John This is Brian I will address that initially hearing if Mike has any follow up I'll of course leave that to him we really haven't changed our capital allocation strategy. Even in this past year, we stuck to our strategy we invested organically.

Pretty significantly with some some capacity expansions that were that were certainly necessary given the demand on the product we acquired Bard leader and so we allocated capital to that strategic growth.

We maintained our liquidity very nicely, we actually expanded our liquidity with that $350 million ABL and then we return cash to shareholders and so that was certainly evident in our dividend increase 50% increase on top of a 50% increase from the prior year and then as you highlighted in your question.

And the share repurchase was was very much a no.

Notable and very intentional.

Use of our cash to get that back to shareholders.

I don't see that changing going forward, we will continue to look for the strategic growth opportunities, which we believe to still be plentiful.

But I don't see it changing it hasnt changed this past year.

To do share repurchases that will continue to be the case, but.

We view going forward that our allocation priorities really will remain as I stated.

Great. Thank you.

Thank you and one moment for our next question.

And our next question comes from the line of Brandon <unk> with D. A Davidson. Your line is open. Please go ahead.

The second half of fiscal year 2023.

Yes, Thanks, Brandon I guess I'd.

We've mentioned that in our fall Q4 period that we pulled forward some of the.

Program.

Confidence in our product line and the strength of our portfolio to deliver than that 13%, 14% EBIT margin range for the total business over the long term.

We don't necessarily view.

Our calendar year 2023, any differently sitting here today.

Volatile environment, we're dealing with in terms of the inflationary pressures the cost Mike cited some of the commodity volatility and a lot of which are coming down here.

As one of those factors and we're trying to weigh the forward view of cost and what's going on as it relates to our cost input.

And the impact that that has on our near term pricing decisions. So.

Clearly, we're not managing the quarters, we always have our eyes on the quarter, certainly and believe that we're doing our best to manage within a quarter, but that's not how we make decisions we make decisions for the long term and what we think is best for the portfolio. So I guess that hopefully that additional color and just helping helping all of you recall.

The margins that we've had in the fall periods in past years.

While still delivering very healthy margins in the <unk> segment for the full fiscal year.

Great and just one quick follow up on your retail guidance for next year kind of implies down 10%.

Kind of where do you see your brand shaking out versus the industry do you feel like you'll.

Youll be able to outpace the market by 10 to 15 percentage points or.

Your brands kind of trending in line with that guidance.

Brandon This is Mike I would answer that with this phrase the standard is the standard here, we have been taking share consistently over the last.

Six to seven years in the RV business as we've acquired brands and then grown them organically. After they are in our portfolio.

And we expect to continue to do that.

We're well aware of the competitive landscape.

But the expectations at Winnebago industries is for each of our five brands to take share in their respective outdoor categories.

And so some years, so that will be more some years that will be less but the expectation is is.

Similar year to year I can tell you and I usually do this.

Each call.

Retail through the first.

Part of the first quarter.

Is relatively stable versus what we saw at the end of Q4 and in fact has been trending a little healthier from a comp percentage standpoint.

So we're not seeing in some of our latest retail results on the RV side specifically.

Our comp percentage decline that is as steep as it was in the July August months.

And so that's a little bit of <unk>.

Factor of.

The comparative is getting a little bit easier.

But.

This industry.

If this industry retails 400000 units in calendar year, 2023, which is our current estimate as of this date.

That's a healthy amount of consumer retail here.

Historically in this space and.

And especially in a post COVID-19 environment. So we'll compete for everything we can get.

Great. Thank you.

Thank you and one moment for our next question and our next question is a follow up question from Tristan Thomas Martin with BMO. Your line is open. Please go ahead.

I hopped up everything I was going to ask thanks Scott.

Thanks, Jason.

Thank you and I'm showing no further questions at this time I would like to hand, the conference back over to Greg <unk> for any further remarks.

Thank you everyone for joining today's call.

This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

Q4 2022 Winnebago Industries Inc Earnings Call

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