Q4 2023 Winnebago Industries Inc Earnings Call
Good day and welcome to the Q4 fiscal 2023, when the bigger industries financial results Conference call. At this time, all participants are listen only mode.
Later, we will conduct a question and answer session and instructions will be given at that time.
As a reminder, this call is being recorded.
I'd like to turn the call over to Ray Casado, Vice President of Investor Relations and market Intelligence you may begin.
Good morning, everyone and thank you for joining us today to discuss our fiscal 2023 fourth quarter earnings results.
Joined on the call today by Michael Happy President and Chief Executive Officer, and Bryan Hughes Senior Vice President and Chief Financial Officer. This call is being broadcast live on our website at Investor <unk>.
Got it.
A replay of the call will be available on our website later today.
News release with our fourth quarter results was issued and posted to our website earlier this morning.
Before we start I'd like to remind you that certain statements made during today's conference call regarding Winnebago industries and its operations maybe 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 <unk>.
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 Happe, Mike.
Thanks, Greg.
Okay.
Good morning, and as always thanks for your interest in Winnebago industries and for taking the time to discuss our fiscal 2023 full year and fourth quarter results.
I will provide an overview of our performance during the quarter and the full year.
Then pass the call to Brian used to cover our financial results in more detail.
Following Brian's comments I will return and offer some closing thoughts before the Q&A portion of the call.
But tumultuous consumer outdoor market, which characterized fiscal year 2023 for our company continued as expected into the fourth quarter as lower dealer deliveries and modest retail demand persisted across the RV and marine industries.
Our dealer networks continued to demonstrate disciplined as it relates to inventory levels, given the current demand environment and an industry wide focus on selling down prior year model product.
Despite these challenges our teams have remained intently focused on rationalizing our own and channel inventory levels.
Optimizing our supply chain network and appropriately managing capacity output and cost in a strategic manner.
Sometimes at the expense of short term market share.
Those efforts combined with a disciplined approach to capital allocation have enabled us to drive meaningful profitability in our consolidated results, particularly in our total and marine segments supported by our diverse portfolio of premium brands and have allowed us to continue investing in our grid.
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Overall for our fiscal fourth quarter, we achieved $771 million in net revenues.
<unk> gross margin of 16, 5%.
And adjusted earnings per diluted share of $1 59.
Our results reflect the resilient profitability of our diversified business model in a challenging demand environment.
Despite a softening in unit sales.
Total RV and marine segments in particular continued their track record of profitability and margin performance.
Furthermore.
As inventories across most categories within the RV segments continued to normalize and marine inventories find their own equilibrium.
We will remain focused in future quarters on managing our production output accordingly, while maintaining our preparedness and ability to respond quickly and appropriately to evolving market demand conditions for better or worse.
RV retail market share performance declined slightly in our fourth quarter.
Given OEM and dealer focused on reducing prior year model product.
Operator: Good day, and welcome to the Q4 fiscal 2023 Winnebago Industries Financial Results Conference call. At this time, all participants are in listening mode. Later, we will conduct a question-and-answer session and instructions to be given at that time. As a reminder, this call is being recorded.
We're winnebago industries brands have been consistently more favorably positioned relative to the industry.
This trend has been anticipated.
And we were recently pleased to see August RV market share results from Ssi it'd be much steadier than in past months, a good sign of things to come.
Ray Posado: I would like to turn the call over to Ray Posado's Vice President of Invest Relations and Market Intelligence. You may begin. Good morning, everyone. And thank you for joining us today to discuss our fiscal 2023 fourth-quarter earnings results. I am joined on the call today by Michael Happe, President and Chief Executive Officer, and Bryan Hughes, Senior Vice President and Chief Financial Officer. This call is being broadcast live on our website at investor.wgeo.net, and the replay of the call will be available on our website later today.
Grand design Winnebago totals and Newmar all gained share in the stand alone August month.
We are being increasingly mindful of providing improve value and affordability within our RV brands.
With the intent to appeal to consumers, who are seeking premium value without sacrificing quality and access to service when needed.
Ray Posado: The news release with our fourth quarter results was issued and posted to our website earlier this morning. Before we start, I'd like to remind you that certain statements made during today's conference call regarding Winnebago Industries and its operations may be considered forward-looking statements under security laws. The company questions use 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.
Dealers continue to be very disciplined with the wholesale product they are bringing onto their lots and our intentional with their order positions as reflected in our fiscal year end 2023 backlogs.
As we enter and proceed through fiscal 2024, we anticipate gradual easing of pressure on these fronts and expect dealer orders to improve as they prepare for the spring 2024 retail season.
We are already seeing a monthly sequential increase in order backlog by our dealers in the <unk> RV segment from June through some tougher.
Michael Happe: With that, I would now like to turn the call over to our President and CEO, Michael Happe. Mike. Thanks, Ray. Good morning. And as always, thanks for your interest in Winnebago Industries and for taking the time to discuss our fiscal 2023 full year and fourth quarter results. I will provide an overview of performance during the quarter and the full year, then pass the call to Brian Hughes to cover our financial results in more detail.
For the marine market dealer Similarly started to pull back on orders to Oems as they begin to work more earnestly on right sizing the age and mix of their current inventory with retail support.
At the same time, the strength of our Bartlett our brand continues to show through as it continues to garner excitement amongst dealers and demonstrate market share stability and even further growth in some months.
Michael Happe: Following Brian's comments, I will return and offer some closing thoughts before the Q&A portion of the call. The tumultuous consumer outdoor market which characterized fiscal year 2023 for our company continued as expected into the fourth quarter, as lower dealer deliveries and modest retail demand persisted across the RV and marine industries. Our dealer networks continued to demonstrate discipline as it relates to inventory levels given the current demand environment and an industry-wide focus on selling down prior year model product.
Among <unk> latest releases for model year 2024 is the industry's first pontoon boat with twin engines mounted in the center of the boats transom.
Available on the <unk> 25, Ultra lounge, and meridian floor plans.
And the New reserve was Vera a simplified <unk> content and offering of the ultra high end reserve.
Both offerings will begin shipments in December of this calendar 2023 years.
We are incredibly proud of the portfolio, our premium businesses and the family of products. We have in the market today and innovation remains a core pillar of our strategy as we continue to invest in new products, including Grand designs, New Sir Inova and up.
Michael Happe: Despite these challenges, our teams have remained intently focused on rationalizing our own and channel inventory levels, optimizing our supply chain network and appropriately managing capacity, output and cost in a strategic manner, sometimes at the expense of short-term market share. Those efforts, combined with a disciplined approach to capital allocation, have enabled us to drive meaningful profitability in our consolidated results, particularly in our total and marine segments, supported by our diverse portfolio of premium brands and have allowed us to continue investing in our growth initiatives.
Scale modern single axle travel trailer designed for towing by Suvs and available in three differentiated floor plans with distinct and unique attributes.
Along with the new reflection 100.
Affordably priced below our current reflection fifth wheel model line.
While maintaining the key attributes of quality and I appeal of the existing lineup.
Michael Happe: While creating meaningful value for our share- Overall, for our fiscal fourth quarter, we achieved $771 million in net revenues, consolidated gross margin of 16.5%, and adjusted earnings per diluted share of $1.59. Our results reflect the resilient profitability of our diversified business model in a challenging demand environment. Despite a softening in unit sales, the total RV and marine segments in particular continued their track record of profitability and margin performance. Furthermore, as inventories across most categories within the RV segments continue to normalize, and marine inventories find their own equilibrium, we will remain focused in future quarters on managing our production output accordingly while maintaining our preparedness and ability to respond quickly and appropriately to evolving market demand conditions for better or worse.
The new Winnebago access stick and tin product marks Winnebago towboat entrants into the conventional travel trailer market with an MSRP starting below $30.
The access emphasizes premium features such as an enclosed and heated underbelly with a 12 volt take pad heater power stabilization jacks and factory supplies solar and prep for Wi Fi.
As we have shared in the past a core tenet to our business is expanding our capabilities and innovation drivers.
In Q3 of this year, we announced the acquisition of Lithia Onyx battery, a leading provider of lithium ion battery solutions with best in class performance quality and safety.
The acquisition of lithium ion battery has bolstered our house battery solutions differentiation.
Energized, our electrical supply ecosystem and positioned Winnebago industries as a future leader in electrification.
The integration of lithium ion X into the Winnebago industries family is proceeding as planned and we are continuing to develop exciting new power generation solutions, and winning business with organic and new customers within the outdoor mobility space.
Michael Happe: RV retail market share performance declined slightly in our fourth quarter, given OEM and dealer focus on reducing prior year model product. Where Winnebago Industries brands have been consistently more favorably positioned, relative to the industry. This trend has been anticipated, and we were recently pleased to see August RV market share results from SSI be much steadier than in past months. A good sign of things to come. Grand design, Winnebago Toebles, and Newmark all gain share in the standalone August month.
Our lithia on X team recently showcased several of its capabilities and new products at the IBEX Marine show earlier this month in Tampa signaling a strong intent to offer its innovation to the rest of the marine industry.
Complementing this acquisition the Winnebago brand recently announced the release of the Winnebago Soulless pocket 36 B van.
Michael Happe: We are being increasingly mindful of providing improved value and affordability within our RV brands, with the intent to appeal to consumers who are seeking premium value without sacrificing quality and access to service when needed. Dealers continue to be very disciplined with the wholesale product they are bringing onto their lots, and are intentional with their order positions, as reflected in our fiscal year in 2023 backlogs. As we enter and proceed through fiscal 2024, we anticipate gradual easing of pressure on these fronts, and expect dealer orders to improve as they prepare for the spring 2024 retail season.
Which features our exclusive Winnebago plus ego flow power kit pro.
This power management controller, Optimizes energy efficiency reduces weight and simplifies vehicle operations by replacing five central power components. The inverter shore power converter battery energy converter solar energy converter and alternator energy Optima.
Sir.
All into a single lightweight system.
Even further this groundbreaking integrated 48 volt solution reduces charging time improves battery recovery and introduces a simplified and more intuitive user interface.
Michael Happe: We are already seen a monthly sequential increase in order backlog by our dealers in the Toebles RV segment, from June through September. For the marine market, dealers similarly started to pull back on orders to OEMs, as they began to work more earnestly on right sizing the age and mix of their current inventory with retail support. At the same time, the strength of our Barletta brand continues to show through, as it continues to garner excitement amongst dealers and demonstrate market share stability, and even further growth in some months.
The new sustainability focused soulless pocket 36, b packs more into a compact size product than any other RV, providing customers with many of the features and conveniences of a full size Rb.
Now turning to the full year.
Overall for our fiscal 2023 full year.
We achieved $3 5 billion in net revenues consolidated gross margin of 16, 8% and adjusted earnings per diluted share of $7 67.
Michael Happe: Among Barletta's latest releases for model year 2024 is the industry's first pontoon boat with twin engines mounted in the center of the boat's trance. Johnson, available on the L-25 Ultra Lounge and Meridian Floor Plans. And the new reserve was era, a simplified, decontented offering of the Ultra High End Reserve. Both offerings will begin shipments in December of this calendar 2023 year. We are incredibly proud of the portfolio of premium businesses. And the family of products we have in the market today, and innovation remains a core pillar of our strategy as we continue to invest in new products, including Grand Design's new Cironova, an upscale modern single-axle travel trailer designed for towing by SUVs and available in three differentiated floor plans with distinct and unique attributes.
While our results are down from the historic year ago period, we maintained strong profitability due to the strength of our evolving a diversified portfolio of premium outdoor recreation brands.
I am incredibly pleased that the foundation of the transformed company. We have built over the last seven years can produce the results. We just completed in a difficult market environment.
We remain committed to the continuous improvement of our bottom line with a focus on operational excellence.
Further work on productivity cost containment and fixed overhead rationalization.
Along with collaboration with our dealer partners to maintain an appropriate and balanced product mix in the field.
We are also continuing to look ahead to further developments and investments in innovation to ensure our diverse portfolio of premium brands continues to resonate with consumers and grow our market share.
Michael Happe: Along with the new Reflection 100, affordably priced below our current Reflection 5th Wheel Model Line, while maintaining the key attributes quality and eye appeal of the existing lineup. The new Winnebago Access Stick Intent Product marks Winnebago Tollville's entrance into the conventional travel trailer market with an MSRP starting below $30,000. The Access emphasizes premium features such as an enclosed and heated underbelly with a 12-volt take pad heater, power stabilization jacks, and factory supplied solar and prep for Wi-Fi.
Our new advanced Technology Center opens this fall.
All of these efforts and investments will be greatly beneficial to scaling the business successfully when headwinds turn back around to tailwind in the future.
I will now turn the call over to our Chief Financial Officer, Bryan Hughes to review, our fiscal 2023 full year and fourth quarter financial results in more detail.
Brian .
Thanks, Mike and good morning, everyone.
Fourth quarter consolidated revenues were $771 million.
Michael Happe: As we have shared in the past, a core tenant to our business is expanding our capabilities and innovation drivers. In Q3 of this year, we announced the acquisition of Lithionics Battery, a leading provider of lithium-ion battery solutions with best-in-class performance, quality, and safety. The acquisition of Lithionics Battery has bolstered our house battery solutions differentiation, energized our electrical supply ecosystem, and positioned Winnebago Industries as a future leader in electrification. The integration of Lithionics into the Winnebago Industries family is proceeding as planned.
34, 6% lower than the $1 2 billion recorded during the fourth quarter of fiscal 2022, driven by lower unit sales related to current market conditions.
Michael Happe: And we are continuing to develop exciting new power generation solutions and winning business with organic and new customers within the outdoor mobility space. Our Lithionics team recently showcased several of its capabilities and new products at the Ivex Marine Show earlier this month in Tampa, signaling a strong intent to offer its innovation to the rest of the marine industry. Complementing this acquisition, the Winnebago brand recently announced the release of the Winnebago Solus Pocket 36B van, which features our exclusive Winnebago plus EcoFlow PowerKit Pro.
Efforts to reduce inventories with a focus on prior year model product.
And higher discounts and allowances compared to prior year.
Partially offset by carryover price increases.
As we navigate a challenging environment, we continued to demonstrate resilient profitability and strong margins in the total RV and marine segments.
Gross profit was $127 5 million a decrease of 39, 4% compared to $210 4 million for the fiscal 2022 period.
Gross profit margin decreased 130 basis points in the quarter to 16, 5%.
These declines were driven by volume deleverage and higher discounts and allowances compared to prior year.
Fourth quarter operating income was $57 5 million a decrease of 53, 4% compared to $123 6 million for the fourth quarter of last year.
Fourth quarter net income was $43 8 million.
<unk> to $82 6 million in the prior year quarter.
Reported earnings per diluted share was $1 28, compared to reported earnings per diluted share of $2 61.
Michael Happe: This power management controller optimizes energy efficiency, reduces weight, and simplifies vehicle operations by replacing five essential power The inverter, short power converter, battery energy converter, solar energy converter, and alternator energy optimizer all into a single light weight system. Dataability focused solar pocket 36V packs more into a compact size product than any other RV, providing customers with many of the features and conveniences of a full size RV.
In the same period last year.
Adjusted earnings per diluted share was $1 59, compared to adjusted earnings per diluted share of $3 <unk> in the same period last year.
Consolidated adjusted EBITDA was $72 9 million for the quarter compared to $139 2 million last year.
Turning now to the fiscal 2023 annual results.
Fiscal 2023 revenues were $3 5 billion gross profit margin was 16, 8%.
And adjusted earnings per diluted share was $7 67.
Adjusted EBITDA was 355 million or 10, 2% of sales.
Free cash flow with $211 million.
Michael Happe: Now, turning to the full year. Overall, for our fiscal 2023 full year, we achieved $3.5 billion in net revenues, consolidated gross margin of 16.8%, and adjusted earnings per diluted share of $7.67. While our results are down from the historic year ago period, we maintain strong profitability due to the strength of our evolving and diversified portfolio of premium outdoor recreation brands. I am incredibly pleased that the foundation of the transformed company we have built over the last seven years can produce the results we just completed in a difficult market environment.
I will now cover our performance by segment.
Revenues for the Towable RV segment were $341 4 million for the quarter down 39% compared to the fourth quarter of 2022.
This was primarily driven by a decline in unit volume associated with retail market conditions, and a cautious dealer network that remains reluctant to add inventory and has prioritized the selling down of prior year model product.
As well as higher levels of discounts and allowances compared to prior year.
Looking ahead, we will continue to be responsive to evolving market conditions manage discounts and pricing accordingly, and introduced new models to confront competition and meet the shifting needs of our customers.
Michael Happe: We remain committed to the continuous improvement of our bottom line with a focus on operational excellence, further work on productivity, cost containment, and fixed overhead rationalization along with collaboration with our dealer partners to maintain an appropriate and balanced product mix in the field. We are also continuing to look ahead to further developments and investments and innovation to ensure our diverse portfolio of premium brands continues to resonate with consumers and grow our market share.
Total RV segment adjusted EBITDA margin was 12, 5% up 170 basis points year over year, reflecting cost reduction efforts and favorable warranty experience, which overcame volume deleverage and higher levels of discounting and allowances.
Total RV segment profitability continues to demonstrate resiliency despite current retail dynamics.
Backlog decreased to $208 1 million down 63, 9% from the prior year due to continued softness in retail conditions and a cautious dealer network.
Michael Happe: Our new Advanced Technology Center opens this fall. All of these efforts and investments will be greatly beneficial to scaling the business successfully when headwinds turn back around to tailwinds in the future.
On an annual basis revenues for the Towable RV segment were $1 4 billion down 45, 5% versus fiscal 2022, driven by a decline in unit volume associated with retail market conditions, a reduction in dealer inventories and higher levels of.
Bryan Hughes: I will now turn the call over to our chief financial officer Brian Hughes to review our fiscal 2023 full year and fourth quarter financial results in more detail. Brian, thanks Mike and good morning everyone. Fourth quarter consolidated revenues were $771 million, $34.6% lower than the $1.2 billion recorded during the fourth quarter of fiscal 2022. Driven by lower unit sales related to current market conditions, dealer efforts to reduce inventories with a focus on prior year model product, and higher discounts and allowances compared to prior year, partially offset by carry over price increases.
Discounts and allowances compared to prior year, partially offset by carryover price increases.
Segment, adjusted EBITDA margin of 12, 2% decreased 260 basis points for the full year versus fiscal 2022, primarily due to volume deleverage and higher discounts and allowances, partially offset by successful cost reduction initiatives.
And favorable warranty experience.
Turning to our motor home RV segment.
Revenues were $317 7 million for the fourth quarter down 42, 8% from the prior year driven by lower unit sales associated with retail market conditions, and higher discounts and allowances compared to prior year, partially offset by price increases related to higher chassis costs.
Bryan Hughes: As we navigate a challenging environment, we continue to demonstrate resilient profitability and strong margins in the total RB and marine segment. Gross Profit was 127.5 million, a decrease of 39.4 percent compared to 210.4 million for the fiscal 2022 period. Gross Profit Margin decreased 130 basis points in the quarter to 16.5 percent. These declines were driven by volume-d leverage and higher discounts and allowances compared to prior year. Fourth quarter operating income was 57.5 million, a decrease of 53.4 percent compared to 123.6 million for the fourth quarter of last year.
As a reminder, our model home dealer inventory with notably below desired levels throughout the selling season in the spring and summer of 2022.
And as a result, there was an intentional build of dealer inventory in the prior year's Q4, and therefore, a tough comp this year.
Also in the current year Q4, we experienced the cautious dealer network that was hesitant to place orders given soft and unpredictable retail demand.
And we responded by allowing dealer inventory to ease during the quarter as retail for our product outpaced wholesale shipments.
Bryan Hughes: Fourth quarter net income was 43.8 million compared to 82.6 million in the prior year quarter. Reported earnings per diluted share was $1.28 compared to reported earnings per diluted share of $2.61 in the same period last year. At just at earnings per diluted share was $1.59 compared to adjusted earnings per diluted share of $3.02 in the same period last year. Consolidated adjusted EBITDA was 72.9 million for the quarter compared to 139.2 million last year.
Of note and as mentioned during our Q3 earnings call. We experienced some challenges in the implementation of the latest phase of our ERP platform and the Winnebago branded motor home business.
While the system is functioning as designed we continued to experience business process adoption and change management challenges during the fourth quarter and use the softer dealer demand environment to continue to constrain production throughput and make the necessary business process improvements to stabilize the environment.
This also reduced shipments into the dealer network compared to what we otherwise could have executed.
Our continuous improvement initiatives related to the system implementation continues to this day in our management of capacity and shipments are being thoughtfully metered in the context of a soft retail environment and a hesitant dealer network as we head into calendar Q4, the slow season of RV retail demand.
Bryan Hughes: Turning now to the fiscal 2023 annual results. Fiscal 2023 revenues were 3.5 billion gross profit margin was 16.8 percent and adjusted earnings per diluted share was $7.67. Adjusted EBITDA was 355 million or 10.2 percent of sales. Three cash flow was 211 million.
As a result of these actions our dealer inventory and the motor homes segment as of the end of our fiscal year reflected in retail turns are largely in line with what we are targeting.
Bryan Hughes: I will now cover our performance by segment. Revenues for the tollable RV segment were 341.4 million for the quarter down 30.9 percent compared to the fourth quarter of 2022. This was primarily driven by decline in unit volume associated with retail market conditions and a cautious dealer network that remains reluctant to add inventory and has prioritized the selling down of prior year model product. As well as higher levels of discounts and allowances compared to prior year.
We anticipate a cautious dealer network prevailing until retail stability materializes and the 2020 for selling season demonstrates some more concrete inventory requirement.
Motor home RV segment, adjusted EBIT margin was 7%.
<unk> 690 basis points versus the prior year, and 20 basis points sequentially due to volume deleverage higher discounts and allowance.
In operational efficiency challenges.
Backlog decreased to $688 6 million down 59, 2% from the prior year.
Bryan Hughes: Looking ahead we will continue to be responsive to evolving market conditions, manage discounts and pricing accordingly and introduce new models to confront competition and meet the shifting needs of our customers. Total RV segment adjusted EBITDA margin was 12.5 percent of 170 basis points year over year reflecting cost reduction efforts and favorable warranty experience which overcame volume delivery and higher levels of discounting and allowances. Total RV segment profitability continues to demonstrate resiliency despite current retail dynamics.
Driven by continued softness in retail conditions, and a cautious dealer network.
For the full year revenues for the motor home RV segment were $1 6 billion down 18, 4% from fiscal 2022, driven by unit volume declines related to retail market conditions.
And higher levels of discounts and allowances compared to prior year.
We offset by price increases related to higher chassis costs.
Segment, adjusted EBITDA margins were nine 1% for fiscal 2023.
Bryan Hughes: Backlog decreased to 208.1 million down 63.9 percent from the prior year due to continued softness in retail conditions, and a cautious dealer network. On an annual basis, revenues for the Tobal RB segment were 1.4 billion down 45.5 percent versus fiscal 2022, driven by a decline in unit volume associated with retail market conditions, a reduction in dealer inventories, and higher levels of discounts and allowances compared to prior year, partially offset by carry-over price increases.
Given the current retail landscape, we are targeting a high single digit adjusted EBIT margin for the motor home RV segment in the near term returning to our ongoing double digit EBITDA margin in the longer term.
Let's turn to our marine segment.
Revenues were $96 4 million for the fourth quarter down 21% from the prior year driven by lower unit sales related to current market conditions, and higher discounts and allowances, partially offset by price increases.
Marine segment adjusted EBITDA margin of 10, 6% decreased 370 basis points versus the prior year due to volume deleverage and higher discounts and allowances.
Bryan Hughes: Segment adjusted EBITDA margin of 12.2 percent decreased 260 basis points for the full year versus fiscal 2022. Primarily due to volume de-leverage and higher discounts and allowances, partially offset by successful cost reduction initiatives and favorable conditions were 317.7 million for the fourth quarter, down 42.8 percent from the prior year, driven by lower unit sales associated with retail market conditions, and higher discounts and allowances compared to prior year, partially offset by price increases related to higher chassis costs.
Backlog for the Marine segment was $194 7 million down 38, 1% from the prior year, primarily driven by cautious dealer sentiment related to rising inventories.
Consolidated Marine result for the full year fiscal 2023 include revenues of $469 7 million up 10, 5% from fiscal 2022, driven by price increases, partially offset by higher discounts and allowances.
For the full fiscal year marine comprised 13% of our overall sales mix.
Bryan Hughes: As a reminder, a remote home dealer inventory was notably below desired levels throughout the selling season in the spring and summer of 2022. And as a result, there was an intentional build of dealer inventory in the prior year's Q4 and therefore a tough comp this year. Also in the current year Q4, we experienced the cautious dealer network that was hesitant to place orders given soft and unpredictable retail demand. And we responded by allowing dealer inventory to ease during the quarter as retail for our product outpaced wholesale shipments.
Reflecting our more balanced portfolio as compared to our historical mix.
Segment adjusted EBITDA margins for the full fiscal year were 12, 9% down 140 basis points for the full year versus fiscal 2022, due to higher discounts and allowances compared to prior year.
Moving now to the balance sheet.
As of the end of the quarter Winnebago industries had approximately $592 4 million and outstanding debt, representing a net debt to EBITDA ratio of approximately 0.8 times, which is just under the low end of our targeted range of <unk> nine to one five times.
Bryan Hughes: Of note, and as mentioned during our Q3 earnings call, we experienced some challenges in the implementation of the latest phase of our ERP platform in the win of Bego branded motor home business. While the system is functioning as designed, we continued to experience business process adoption and change management challenges during the fourth quarter and used the softer dealer demand environment to continue to constrain production throughput and make the necessary business process improvements to stabilize the environment.
Cash flow from operations was a very healthy $294 5 million in fiscal 2023, although a decrease of $106 1 million compared to the record $400 6 million delivered last year, driven by lower profitability adjusted for noncash items, partially offset.
Bryan Hughes: This also reduced shipments into the dealer network compared to what we otherwise could have executed. Our continuous improvement initiatives related to the system implementation continue to this day and our management of capacity and shipments are being thoughtfully metered in the context of a soft retail environment and a hesitant dealer network as we head into calendar Q4 to slow season of our retail demand. As a result of these actions, our dealer inventory in the motor home segment as of the end of our fiscal year reflected in retail turns are largely in line with what we are targeting.
Set by net favorable changes in our working capital.
As I mentioned earlier the company generated strong free cash flow of $211 3 million in fiscal 2023, including $122 9 million in the fourth quarter.
At down 32, 4% from $312 6 million and full year fiscal 2022.
Our balance sheet remains a source of financial strength for us and supports our capital allocation strategy focused on delivering value through strategic investments in our business to drive growth as evidenced by fiscal 2020 threes acquisition of lithium battery.
Our strong balance sheet further support organic growth initiatives, our continuous efforts to improve our operations increase our capacity where appropriate and return capital to shareholders.
Bryan Hughes: We anticipate a cautious dealer network prevailing until retail stability materializes and the 2024 selling season demonstrates a more concrete inventory required. Motorhome RV segment adjusted EBITDA margin with 7%, down 690 basis points versus the prior year and 20 basis points sequentially due to volume-delivered, higher discounted allowance and operational efficiency challenges. Backlog decreased to 688.6 million, down 59.2% from the prior year, driven by continued softness and retail conditions in a cautious dealer network.
During the fourth quarter, we executed share repurchases of $30 million and increased our quarterly cash dividend by 15% to 31 per share reflecting the confidence we have in our ability to profitably grow revenues capitalize on new opportunities and gain market share in the coming years.
These actions further underscore our commitment to the long term strength and trajectory of our business.
Before I turn things back to Mike I wanted to reiterate the strength of our performance despite the challenging market conditions.
Bryan Hughes: For the full year, revenues for the Motorhome RV segment were 1.6 billion, down 18.4% from fiscal 2022, driven by unit volume declines related to retail market conditions and higher levels of discounts and allowances compared to prior year, partially offset by price increases related to higher chassis costs. Segment adjusted EBITDA margins were 9.1% for fiscal 2023.
To illustrate this bear with me as I once again share our performance for fiscal 2023 relative to the pre pandemic fiscal year 2019.
Wholesale RV industry shipments in our fiscal year. Just concluded were 317000, that's down 23% from the 414000 industry shipments during our fiscal 2019.
Despite that decline in the RV industry, our sales were up 76% in 2023 versus our fiscal year 2019, our adjusted EBITDA margins are up 120 basis points versus 2019.
Bryan Hughes: Given the current retail landscape, we are targeting a high single digit adjusted EBITDA margin for the Motorhome RV segment in the near term, returning to our ongoing double digit EBITDA margin in the longer term.
Our adjusted EBIT dollars are up 97% versus 2019.
Bryan Hughes: Let's turn to our marine segment. Revenues were 96.4 million for the fourth quarter, down 21% from the prior year, driven by lower unit sales related to current market conditions and higher discounted allowances, partially offset by price increases. Marine segment adjusted EBITDA margin of 10.6% decreased to 370 basis points versus the prior year due to volume delivery and higher discounted allowances.
Our free cash flow is up 127% versus 2019, and our reported GAAP EPS is up 77% versus 2019, while our adjusted EPS has more than doubled.
These increases are driven by strong organic growth, but are also the result of strategic acquisition, we have executed.
In summary, we are a much stronger and more diverse company today than we were in 2019 and as a result of our entrance into the pontoon market with the acquisition of <unk> and the electrification opportunity with the acquisition of lithium ion X, we havent, even larger market opportunity to capitalize on in the years ahead.
Bryan Hughes: Backlog for the marine segment was 194.7 million, down 38.1% from the prior year, primarily driven by cautious dealer sentiment related to rising inventories. Consolidated marine results for the full year fiscal 2023 include revenues of 469.7 million up 10.5% from fiscal 2022, driven by price increases, partially offset by higher discounts and allowances. For the full fiscal year, marine comprise 13% of our overall sales mix, reflecting on more balanced portfolio as compared to our historical mix. Segment adjusted EBITDA margins for the full fiscal year were 12.9%, down 140 basis points for the full year versus fiscal 2022 due to higher discounted allowances compared to prior year.
Ed.
With that I will now turn the call back to Mike to provide some closing comments Mike back to you.
Thanks, Brian .
And now a few final comments before we get to the Q&A session.
I am proud of and grateful for the women the Winnebago industries team as we continue to navigate dynamic market conditions.
While maintaining our focus on quality innovation and service.
In addition to doing well, we continue to invest in our high performing culture and focus on doing good in the communities, where our customers and teammates live work and play.
During our fiscal year 2023 week.
Bryan Hughes: Moving now to the balance sheet. As of the end of the quarter, Winnebago Industries had approximately 592.4 million in outstanding debt, representing a net debt to EBITDA ratio of approximately 0.8 times, which is just under the low end of our targeted range of 0.9 to 1.5. Cash Low from Operations was a very healthy 294.5 million in fiscal 2023, although a decrease of 106.1 million compared to the record, 400.6 million delivered last year.
We gave away a record breaking $2 million plus financially from the Winnebago Industries Foundation.
Focusing on community outdoors and access.
This is on top of countless hours of physical volunteerism from our team members.
Our organization continues to make meaningful progress on all areas of corporate responsibility.
And we look forward to releasing later this calendar year or next generation corporate responsibility report.
Outlining our specific progress and inclusion sustainability, giving employee safety and other dimensions.
Bryan Hughes: Driven by lower profitability adjusted for non-cash items, partially offset by net favorable changes in our working capital. As I mentioned earlier, the company generated strong free cash flow of 211.3 million in fiscal 2023, including 122.9 million in the fourth quarter. I'll be at down 32.4% from 312.6 million in full year fiscal 2022.
Today also marks another milestone in our company's history.
As we are excited to announce the forthcoming launch of a grand design branded motor home lineup.
Scheduled for release late in our fiscal year 2024.
Bryan Hughes: Our balance sheet remains a source of financial strength for us and supports our capital allocation strategy, focused on delivering values, strategic investments in our business to drive growth, as evidenced by fiscal 2023's acquisition of Lithianic battery. Our strong balance sheet further supports organic growth initiatives, our continuous efforts to improve our operations, increase our capacity we're appropriate and return capital to shareholders. During the fourth quarter, we executed share repurchases of 30 million, and increased our quarterly cash dividend by 15% to 31 cents per share, reflecting the confidence we have in our ability to profitably grow revenues, capitalize on new opportunities, and gain market share in the coming years. These actions further underscore our commitment to the long-term strength and trajectory of our business.
These new models will represent the inaugural foray into the motor home market under one of the most successful RV brands created and will be a differentiated and complementary offering to our current winnebago and Newmar brand motorized businesses.
Leveraging grand designs inherent strength and unwavering appeal.
Along with its dedicated and loyal consumer base, we are poised to make a bold entry into this segment.
The Grand design team is working diligently to bring this exciting launch to life and we anticipate showcasing prototype models to select dealers in early calendar 2024.
With shipments beginning late in our fiscal 2024 year.
As we are currently active in product development standing up the manufacturing infrastructure and our supply chain network and beginning to engage potential dealers for distribution of this new strategy.
Bryan Hughes: Before I turn things back to Mike, I want to reiterate the strength of our performance despite the challenging market conditions. To illustrate this, bear with me as I once again share our performance for fiscal 2023 relative to the pre-pandemic fiscal year 2019. Whole sale RV industry shipments in our fiscal year just concluded were 317,000. That's down 23% from the 414,000 industry shipments during our fiscal 2019. Despite that decline in the RV industry, our sales were up 76% in 2023 versus our fiscal year 2019.
We wanted to confirm today, the increasing positive chatter and rumors in the marketplace.
The bottom line impact to Winnebago industries will be meaningfully dilutive in fiscal year 2024, due to sizeable startup costs.
With limited revenue.
But this isn't an incredibly accretive strategy and financial opportunity for the company in future years.
In the coming months, we look forward to the Grand design team sharing more details about our premium product offerings from Grand design Motor home.
Bryan Hughes: Our adjusted EBITDA margins are up 120 basis points versus 2019. Our adjusted EBITDA dollars are up 97% versus 2019. Our free cash flow is up 127% versus 2019, and our reported gap EPS is up 77% versus 2019 while our adjusted EPS has more than doubled. These increases are driven by strong organic growth but are also the result of strategic acquisitions we have executed.
The excitement surrounding this brand extension is palpable and we cannot wait to bring these exceptional motor homes to market.
Thereby further enriching our portfolio and delighting our valued customers.
It is also important to note that the leader and one of the founding partners of the Grand design business. Don Clark has recently agreed to a five year employment extension with Winnebago industries as well.
We are thrilled for Dod and continue to support and appreciate his contributions to the company.
Bryan Hughes: In summary, we are a much stronger and more diverse company today than we were in 2019. And as a result of our entrance into the pontoon market with the acquisition of Barletta and the electrification opportunity with the acquisition of Lithionics, we have an even larger market opportunity to capitalize on in the years, ahead.
As we enter fiscal year 2024.
My confidence in the enduring strength of our diverse portfolio of premium brands within the outdoor recreation industry continues to grow.
This diversity not only bolsters, our resilience, but also places Winnebago industries in an enviable position to harness the upcoming market recovery and drive our results and share gains.
Michael Happe: With that, I will now turn the call back to Mike to provide some closing comments. Mike back to you. Thanks, Bryan.
Michael Happe: And now a few final comments before we get to the Q&A session. I am proud of and grateful for the Winnebago Industries team as we continue to navigate dynamic market conditions while maintaining our focus on quality innovation and service. In addition to doing well, we continue to invest in our high performing culture and focus on doing good in the communities where our customers and teammates live, work, and play. During our fiscal year 2023, we gave away a record breaking $2 million plus financially from the Winnebago Industries Foundation, focusing on community, outdoors, and access. This is on top of countless hours of physical volunteerism from our team members.
Our unwavering commitment remains fixed on two core objectives.
First the preservation of profitability balanced with the reinforcement of our already robust market share positions.
Simultaneously and second we are resolute in our dedication to amplify and investments that nurture the long term health and vitality of our enterprise.
This unwavering focus extends to champion in quality and innovation across our extensive brand portfolio.
Collaborations with our steam dealer partners will also remain a top priority.
We recognize the pivotal role they play in maintaining the optimal product mix and actively managing inventory together.
We aim to navigate the dynamic market landscape with position and agility together with our dealers.
Michael Happe: Our organization continues to make meaningful progress on all areas of corporate responsibility, and we look forward to releasing later this calendar year, our next-generation corporate responsibility report, outlining our specific progress in inclusion, sustainability, giving, employee safety, and other dimensions.
Furthermore, we proudly express our enthusiasm for our recent and forthcoming new product releases, including the new Winnebago access and class <unk> offerings as well as the Grand design, a reflection of 100 and influence models.
These exciting new offerings not only you epitomize. The innovation features our discerning customers have come to expect from our premium brands.
But also address vital considerations surrounding affordability.
Michael Happe: Today also marks another milestone in our company's history, as we are excited to announce the forthcoming launch of a grand design branded motor home lineup scheduled for release late in our fiscal year 2024. These new models will represent the inaugural foray into the motor home market under one of the most successful RV brands created and will be a differentiated and complimentary offering to our current Winnebago and New Mart brand motorized businesses.
Aligning perfectly with our commitment to customer satisfaction and excellence.
In addition to our unwavering commitment to our existing portfolio, we remain dedicated to the exploration of exciting innovation and the pursuit of strategic market expansion opportunities. This.
This commitment is evidenced through our recently announced endeavors, which include the forthcoming launch of Grand design Motor home.
And the strategic acquisition of lifting Alex battery.
These and other strategic initiatives and investments under development demonstrate our dedication to anticipating and surpassing customer needs as well as our commitment to reinforcing and growing our market share.
Michael Happe: Leveraging grand designs, inherent strength, and unwavering appeal along with its dedicated and loyal consumer base, we are poised to make a bold entry into this segment. The grand design team is working diligently to bring this exciting launch to life, and we anticipate showcasing prototype models to select dealers in early calendar 2024. With shipments beginning late in our fiscal 2024 year, as we are currently active in product development, standing up the manufacturing infrastructure, and our supply chain network, and beginning to engage potential dealers for distribution of this new strategy.
Together, they reflect our relentless pursuit of excellence and innovation in the ever evolving landscape of the outdoor recreation industry.
Looking ahead as we enter fiscal 2020 for wheat.
We expect the continued pressure of current retail market dynamics coupled.
Coupled with dealer apprehension to take on additional inventory amidst those retail challenges.
Particularly through the first half of our fiscal year.
Our first and second quarters will be for medical.
However, we anticipate that as inventory levels further normalize and consumer demand stabilizes dealers will exhibit a growing willingness to rebuild inventories and bring in additional models as we enter the back half of fiscal 2024.
Michael Happe: We wanted to confirm today the increasing positive chatter and rumors in the marketplace. The bottom line impacts the Winnebago industries will be meaningfully dilutive in fiscal year 2024 due to sizeable startup costs, with limited revenue. But this is an incredibly accretive strategy and financial opportunity for the company in future years. In the coming months we look forward to the grand design team sharing more details about our premium product offerings from grand design motorhome.
As we embark on fiscal year 2024, we do so with a robust balance sheet and an improving inventory and working capital position showcasing the chance tangible results of our dedicated teams tireless efforts, which persistently prioritize the streamlining of inventory the optimization of the supply.
And the meticulous management of capacity production and expenses.
Michael Happe: The excitement surrounding this brand extension is palpable and we cannot wait to bring these exceptional motorhomes to market there by further enriching our portfolio and delighting our valued customers. It is also important to know that the leader and one of the founding partners of the grand design business Don Clark has recently agreed to a five year employment extension with Winnebago Industries as well. We are thrilled for Don and continue to support and appreciate his contributions to the company.
These efforts combined with prudent capital allocation and the exceptional talents of our more than 6250 employees have consistently underpinned our solid performance resilient profitability and healthy operating cash flow within our overall results our strong balance sheet served as.
The foundation for returning more than $80 million to our valued shareholders throughout fiscal year 2023 executed through a combination of share repurchases and dividends, notably over $38 million of this return occurred during the fourth quarter, which unequivocally.
Michael Happe: As we enter fiscal year 2024 by confidence in the enduring strength of our diverse portfolio of premium brands within the outdoor recreation industry continues to grow. This diversity not only bolsters our resilience but also places Winnebago Industries in an enviable position to harness the upcoming market recovery and drive our results and share games. Our unwavering commitment remains fixed on two core objectives. First, the preservation of profitability balanced with the reinforcement of our already robust market share positions.
Underscores our unwavering confidence in the enduring strength and potential of our business in the long term.
As we continue to navigate the ever evolving dynamics of the market our commitment to adaptability remains unwavering, we will diligently monitor and adjust in response to shifting market conditions with a steadfast focus on profitability, maintaining competitiveness and securing a preferred market.
<unk> for our steam to premium brands through collaborative partners partnerships with our channel associates.
Michael Happe: Simultaneously and second, we are resolute in our dedication to amplifying investments that nurture the long-term health and vitality of our enterprise. This unwavering focus extends to championing quality and innovation across our extensive brand portfolio. Collaboration with our esteemed dealer partners will also remain a top priority. We recognize the pivotal role they play in maintaining the optimal product mix and actively managing inventory together. We aim to navigate the dynamic market landscape with precision and agility together with our dealers.
That concludes our prepared remarks for this morning.
I will now turn the call back over to the operator.
Who will open the line to your questions.
Thank you if you'd like to ask a question. Please press star one one.
If your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Again, that's star one wanted to ask a question.
Our first question comes from James Hardiman with Citi. Your line is open.
Hey, good morning.
For taking.
I have two questions here.
Michael Happe: Furthermore, we proudly express our enthusiasm for our recent and forthcoming new product releases, including the new Winnebago Access and End Class Tollable offerings as well as the grand design reflection 100 and influence models. These exciting new offerings not only epitomize the innovation features our discerning customers have come to expect from our premium brands. But also address vital considerations surrounding affordability, aligning perfectly with our commitment to customer satisfaction and excellence.
I guess, let's start with the Grand design News I guess first congratulations on getting that move out there.
Maybe quantify what that does that mean to margins in 2024, I'm, assuming that's going to be coming out of the motorized segment.
EBIT.
But then earlier in the prepared remarks, I think you talked about high single digit EBITDA margin.
In the near term is that inclusive of the dilution from the Grand design startup costs.
Assuming that dilution will intensify as we can we make our way through the year.
Michael Happe: In addition to our unwavering commitment to our existing portfolio, we remain dedicated to the exploration of exciting innovation and the pursuit of strategic market expansion opportunities. This commitment is evident through our recently announced endeavors, which include the forthcoming launch of grand design motor home, and the strategic acquisition of Lithionic Spattering. These and other strategic initiatives and investment under development demonstrate our dedication to anticipating and surpassing customer needs as well as our commitment to reinforcing and growing our market share. Together they reflect our relentless pursuit of excellence and innovation in the ever evolving landscape of the outdoor recreation industry.
Hey, Good morning, James This is Brian I'll take that one our investment in total is dilutive to pretax income by $10 million to $15 million.
In fiscal 2024, it ramps up from $1 million to $2 million in Q1 to $4 million to $5 million by Q4.
We expect that investment to be accretive of course to our fiscal 2025.
This will initially be a corporate investment James that is reported in corporate other and will therefore, not be dilutive to our motor home RV segment.
Until such time as we become operational.
We will keep you all posted in the forthcoming quarters as to which segment that investment is reported but thats our intent sitting here today.
Got it that makes that makes a lot of sense and then maybe we could just dig in.
Michael Happe: Looking ahead as we enter fiscal 2024, we expect the continued pressure of current retail market dynamics. Coupled with dealer apprehension to take on additional inventory amidst those retail challenges, particularly through the first half of our fiscal year. Our first and second quarters will be formidable. However, we anticipate that as inventory levels further normalize and consumer demand stabilizes, dealers will exhibit a growing willingness to rebuild inventories and bring in additional models as we enter the back half of fiscal 2024.
There's a lot of questions around asps.
Your biggest competitor talked about a high single digit decline.
Or I guess call it a 10% decline in total both a little bit less in motorized.
How would you obviously you guys don't give guidance, but how do you characterize the IP outlook.
How should we think about phasing.
And then maybe you could speak to affordability for the consumer right.
Pricing into the channel and there's pricing out of the channel.
There is a decent amount of discounting last year, but if we think about the next 12 months.
It seems like pricing is probably going to be coming down.
Michael Happe: As we embark on fiscal year 2024, we do so with a robust balance sheet and an improving inventory of working capital position showcasing the tangible results of our dedicated team's tireless efforts, which persistently prioritized the streamlining of inventory, the optimization of the supply chain and the meticulous management of capacity, production and expenses. These efforts, combined with prudent capital allocation and the exceptional talents of our more than 6,250 employees, have consistently underpinned our solid performance, resilient profitability and healthy operating cash flow within our overall results.
Triste rates at least in the first half of the year are up.
Net net how is the consumer going to interpret all of this.
And do you think that that some of the actions being taken by you guys and the rest of the industry will help spur demand.
James I'll start with that and then I'll turn it to Mike for some commentary as well because there's a lot there in your question.
Starting with AFP.
Typically in the discounting and allowances that were.
Witnessing in the marketplace today.
In Q4, we talked about elevated discounts and allowances that was against as you know prior year, where it was a pretty robust market still so while we talk about elevated discounts and allowances I would say that they are not out of line with where they have been historically thinking of it as a.
Michael Happe: Our strong balance sheet served as the foundation for returning more than $80 million to our valued shareholders throughout fiscal year 2023. Executed through a combination of share repurchases and dividends. Notably, over $38 million of this return occurred during the fourth quarter, which unequivocally underscores our wavering confidence in the enduring strength and potential of our business in the long term.
As a percent to gross sales okay.
I'd say they are normalized I wouldn't say that they have or characterize them as having spiked relative to prior years.
So.
Having said that Asps are also certainly a function not just of the competitive marketplace, but also of the inflationary environment for the motor home space I'll go segment by segment here, just briefly with modal Motorhomes space, we continue to see price pressure, specifically on our motor home chassis.
Michael Happe: As we continue to navigate the ever evolving dynamics of the market, our commitment to adaptability remains unwavering. We will diligently monitor and adjust and respond to shifting market conditions when they step fast focus on profitability, maintaining competitiveness, and securing a preferred market position for our esteemed premium brands through collaborative partnerships with our regional associates.
And because of that we expect.
Modest ASP increase is still absent mix impacts okay, but.
On a unit by unit basis modest.
Michael Happe: That concludes our prepared remarks for this morning.
Asps increased in the low single to mid single digit range. That's what we're currently expecting now we'll see what happens to the ongoing pressures we see on the motorized chassis.
Operator: I will now turn the call back over to the operator who will open the line to your questions. Thank you.
Operator: If you'd like to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself in the queue, please press star 11 again. Again, that's star 11 to ask a question.
On the total space, we are in fact seeing some deflationary.
Impacts across the components the core.
Commodity inputs.
I would sitting here today expect.
James Hardiman: Our first question comes from James Hardiman with City. Your line is open. Hey, good morning. And thanks for taking, I have two questions here. I guess I'll start with the grand design news. I guess first congratulations on getting that news out there. Maybe quantify what that does or that means to margins in 2024. I'm assuming that's going to be coming out of the motorized. Segment. But then earlier in the prepared remarks, I think you talked about high single digit motorized eb at that margin.
Deflationary impacts in the mid to high single digit range on Asps.
As we seek to pass along some of those deflationary impacts to our dealers and our end consumers.
Marine is more in the neighborhood of motorized RV and that we're still seeing some price pressure inflationary pressures from the.
From the propulsion or the motors within Marine I would say everything else is pretty.
Stable I'd characterize it as stable, but the.
James Hardiman: In the near term, it is that inclusive of the dilution from the grand design start of cost. And I'm assuming that dilution will intensify as we make our way through the year. Good morning, James. This is Brian. I'll take that one. Our investment in total is diluted to pre-tax income by 10 to 15 million in fiscal 2024. It ramps up from 1 to 2 million in Q1 to 4 to 5 million by Q4.
The motors and the marine caused us to see some some mild increases the ASP as we sit here today looking forward into our fiscal 2024. So that's how I would characterize some of the ASP moves the discounting allowances, yes, some other questions.
Mike.
Take it from here to add any other color that he sees.
As it relates to your question.
Good morning, James say I'll address the affordability.
Question in this way.
We have decided to attack affordability through the introduction of new models.
James Hardiman: We expect that investment to be a creative, of course, to our fiscal 2025. This will initially be a corporate investment, James, that is reported and corporate other and will therefore not be diluted to our motor home RB segment. Until such time has become operational. We'll keep you all posted in the forthcoming quarters as to which segment that investment is reported. But that's our intent sitting here today. Got it. That makes that makes a lot of sense.
That get our brands too.
Potentially new and different price points or fill some gaps in our product lineups that we think are important from an affordability standpoint, and I'll point to four quick examples in fiscal 'twenty three in the pontoon market under our <unk> brand, we introduced the ARIA.
Product, which expanded our total addressable market.
Price point wise from 40% to 70% of the market. So the <unk> is the opening price point brand for the for the <unk>.
James Hardiman: And then maybe we could just dig in. You know, there's a lot of questions around AFPs, your biggest competitor talked about a high single digit decline. Or I guess a lot of 10% decline in total is a little bit less in motorized. How would you, obviously, you guys don't give guidance, but how do you characterize the SP outlook? How should we think about phasing? And then maybe you could speak to affordability for the consumer, ready to mean there's pricing into the channel and then there's pricing out of the channel.
<unk> business.
We showed at open house, the Winnebago branded access which is that particular brands entrance into the conventional travel trailer market with MSRP targets at $30000 or below and then the Grand design business has introduced two new brands the <unk>.
Fluids, which is an affordable fifth wheel between our reflection in solitude.
James Hardiman: There's a decent amount of discounting last year. But if we think about the next 12 months, you know, it seems like pricing is probably going to be coming down interest rates, at least in the first half of the year are up. Net net, how is the consumer going to interpret all of this? And do you think that some of the action being taken by you guys and the rest of the industry will help spur demand?
Models.
And we've also introduced the reflection 100, which is affordably priced below the traditional reflection fifth wheel line and so as opposed to a D content ing.
And.
Dropping margin on existing Skus, we've really chosen to go after affordability with our business through the introduction of new products and.
We anticipate that we'll be successful here as we go through our fiscal 2004 years.
James Hardiman: James, I'll start with that and I'll turn it to Mike for some commentary as well. There's a lot there in your question. Starting with AFP specifically in the discounting allowance, that we're witnessing in the marketplace today. In Q4, we talked about elevated discounts and allowances. That was against, as you know, a prior year, where it was a pretty robust market still. So while we talk about elevated discounts and allowances, I'd say that they're not out of line with where they have been historically, you know, thinking of it as a percent to grow sales.
That is extremely helpful. I've taken up a lot of your time, but I just wanted to clarify Brian It seems like the way that your.
I'm talking about.
Cost pressures and what that is ultimately going to do to ASP.
It seems like the goal through all of this is to ultimately.
<unk> margin as I think about the year, rather than sort of <unk>.
Giving up a little margin in an effort to spur demand is that is that accurate.
Yes, yes, I think thats fair to characterize our efforts around profitability and margin are certainly am and focus.
James Hardiman: Okay, so they've, I'd say they've normalized. I wouldn't say that they have or characterize them as having spiked relative to prior use. Okay, so having said that, ASPs are also certainly a function not just of the competitive marketplace, but also of the inflationary environment for the motor home space, but you know on a unit by unit basis, modest ASP increase in the low single, the mid single digit range. That's what we're currently expecting now, we'll see what happens to the ongoing pressures we see on the motorized chassis.
We will continue to react as we always do in line with what Mike just said as well as it relates to that balance between margin profitability performance and market share and so that's that would be our intent and how I'd like to characterize the change.
Got it I appreciate it guys.
Thank you. Our next question comes from Scott <unk> with Roth <unk>. Your line is open.
Good morning, guys and thanks for taking my questions.
Good morning, Scott.
And talking about the reluctance of dealers to take inventory outside of price are there any other.
Economic factors.
The dealers are facing like floor plan costs, which are keeping them from.
Ordering are they asking you guys to participate in some of that during the slower months.
Okay. Good morning, this is Mike.
James Hardiman: On the tollable space, we are in fact seeing some deflationary impacts across the components, the commodity inputs. I would sitting here today expect deflationary impacts in the mid to high single digit range on ASPs as we seek to pass along some of those deflationary impacts to our dealers. And our end consumers. Marine is more in the neighborhood of motorized RV and that, you know, we're still seeing some price pressure, inflationary pressures from the from the propulsion or the motors within Marine.
I think the dimension you touched on is probably one of the bigger elements as I think most of us in the industry no. The dealers are facing.
Higher floorplan cost.
Due to higher interest rates.
And that is certainly factoring into their <unk>.
<unk> to Adrian models, but also certainly the total amount of product that they are willing.
To carry I do want to state, though that that on the RV side of our business specifically.
Where we see this.
This element most in play.
We are pleased with where we stand with our inventory position as of today.
And in fact since the end of our fourth quarter.
James Hardiman: I'd say everything else is pretty stable, it characterized it as stable, but the motors and the Marine caused us to see some mild increases the ASP as we sit here today. Looking forward into our fiscal 2024. So that's how I characterize some of the ASP moves, the discounting allowances, yes, some other questions. I'll ask Mike to take it from here and add any other color that he sees as it relates to your question.
Our RV field inventory is down probably another 500 units in growth between the end of August in this call. This morning and so.
We believe our inventory.
As fresh as fresh as it can be.
We believe that the inventory volume in total is appropriate.
And we will continue to partner with our dealers to make sure that they're comfortable with the inventory they are carrying.
James Hardiman: Good morning, James. Say I'll address the affordability question in this way. We have decided to attack affordability through the introduction of new models that get our brands to, you know, potentially new and different price points or fill some gaps in our product lineups that we think are important from an affordability standpoint. And I'll point to four quick examples. In fiscal 23 in the pontoon market under the Barletta brand, we introduced the ARIA product, which expanded our total addressable market price point wise from 40% to 70% of the market.
We anticipate any further destocking on our brands of Rovs to be.
Lightly incremental going forward, we don't anticipate any significant further drops.
In retail volume and optimism will really be we think the determining factor for dealers to begin taking more inventory onto their lots in the months to come.
Got it and then last questions looking at motorized backlog was down a bunch, but dealer inventories were up how much of that was related to the ERP issue and I remember at your open House, maybe Mike you did talk about maybe on the class BS.
James Hardiman: So the ARIA is the opening price point brand for the Barletta business. We showed it open house the Winnebago branded access, which is that particular brand's entrance into the conventional traveler market with MSRP targets at $30,000 or below. And then the grand design business is introduced to new brands, the influence, which is an affordable fifth wheel between our reflection and solitude models. And we've also introduced the reflection 100, which is affordably priced below the traditional reflection fifth wheel line.
The inventory was getting a little bit rich.
Is it a combination of both of those items.
Our class B inventory in the field is.
Probably in the neighborhood of 15% to 20% lower today than it was a year ago.
Any previous comments about tightness probably were specific to potentially.
Certain certain skus.
Again were.
The motorized business has been a little bit different from the <unk> business in terms of inventory comps year over year. The <unk> business was probably the part of the industry that.
James Hardiman: And so as opposed to decontenting and dropping margin on existing skews, we've really chosen to go after affordability with our business through the introduction of new products. And we anticipate that will be successful here as we go through our fiscal 20, for a year. That is extremely helpful. I've taken up a lot of your time, but I just want to clarify, Bryan, it seems like the way that you're talking about cost pressures and what that's ultimately going to do to ASP.
A year or so ago was more rich in terms of the volume of inventory, but also.
Probably more challenged in terms of the mix with prior model years, and lower tier brands, whereas the motorized segment fell to low levels in that 2021 and the beginning of calendar 2022 period.
But because of the supply chain challenges around chassis, we've really haven't.
Had the had the need to correct field inventory levels in the motorized segment to the degree that we've had two on the <unk> side, So again, I'm comfortable with where our motorized field inventory stands today, I'm comfortable with where our <unk> field inventory stands today.
James Hardiman: It seems like the goal through all of this is to ultimately hold margin, as I think about the year rather than giving up a little margin in an effort to spur demand. Is that accurate? Yeah, I think that's fair to characterize our efforts around profitability and margin are certainly in focus. We'll continue to react as we always do in line with what Mike just said as well as it relates to that balance between margin profitability performance and market share and so that that would be our intent and how I'd like to characterize the change. Got it. Appreciate it, guys. Thank you.
And again, we look forward to earning.
The business of the dealers going forward to increase.
Lot sure we have run some selective promotions.
Around floor plan.
Inventory.
Our rate support.
Here as we ran into open house.
But we don't anticipate having the need to do that extensively throughout the 24 year.
Scott Stember: Our next question comes from Scott Stember with Ross MKM. Your line is open. Good morning, guys. Thanks for taking my questions. Good morning, Scott.
Got it that's all I had thank you.
Thank you. Our next question comes from Craig Kennison with Baird. Your line is open.
Michael Happe: In talking about the reluctance of dealers to take inventory outside of price, are there any of their economic factors that the dealers are facing like floor playing costs, which are keeping them from ordering, are they asking you guys to participate in some of that during the slower months? Thank you. Good morning. This is Mike. I think the dimension you touched on is probably one of the bigger elements as I think most of us in the industry know the dealers are facing higher floor playing costs due to higher interest rates and that is certainly factoring into their attention to aging models but also certainly the total amount of product that they're willing to carry.
Craig Kennison your line is open.
If your telephones muted please on mute.
So let's come back to Craig, let's move to the next one will come back to Craig later on in the call. Our next question comes from Joe I'll Cabello with Raymond James Your line is open.
Thanks, guys good morning.
I guess the first question on the lending side are you seeing or hearing of any lenders, becoming more cautious from a retail perspective.
Michael Happe: I do want to state though that on the RV site of our business specifically where we see this element most in play, we are pleased with where we stand with our inventory position as of today. And in fact, since the end of our fourth quarter, our RV field inventory is down probably another 1,500 units in gross between the end of August and this call this warning. And so we believe our inventory is fresh as fresh as it can be.
Joe Good morning. This is Mike we're not hearing material weakening of retail financing in our business at this time I would say the headwind that probably is most prevalent at retail for our dealers, especially.
With existing customers.
Is some of the challenges around what to do with that existing unit that an existing customer has that they would like to trade in in some cases, depending on when they bought it.
They are in a negative equity situation and may have to write a sizeable check to get out of that current product.
Michael Happe: We believe that the inventory volume and total is appropriate and we will continue to partner with our dealers to make sure that they're comfortable with the inventory they're carrying but we anticipate any further destocking on our brands of RVs to be lightly incremental going for. We don't anticipate any significant further drops and retail volume and optimism will really be, we think the determining factor for dealers to begin taking more inventory onto their lots in the months, to come. Got it.
Upgrade or get into a new product and so.
I would say the trade in.
<unk> is probably a much bigger factor than any retail financing challenges that we're seeing at the present time and the availability is there just to echo what Mike said the availability is there but the cost is certainly up as you can imagine right Joe So.
We're seeing retail lending rates now with $8 nine handles and even some with lower credit ratings getting into double digits. So that higher cost is certainly a factor.
You read my mind with respect to my next question with a follow up to that maybe some thoughts on the relationship that you have got now with camping world.
Michael Happe: And then last questions, looking at motorized your backlog was down a bunch, but deal of inventory is where how much of that was related to the ERP issue. And I remember at your open house meeting, Mike, you did talk about maybe on the class Bs that the some of the inventory was getting a little bit rich is a combination of both of those items. Well, our class B inventory in the field is probably in the neighborhood of 15 to 20% lower today than it was a year ago.
And perhaps opening additional stores like the new Grand design stores that you have now in Green Bay.
Yes, let me start with more of the historical relationship with camping World that we've had in our Winnebago branded business.
We have done business with camping world through the Winnebago brand for many years.
Mostly on the motorized side, but often on winnebago totals as well and we continue to do business on the Winnebago side in dozens of different locations.
Have a healthy relationship with camping world there.
Michael Happe: So, any previous comments about tightness probably were specific to, potentially certain skews. Again, the motorized business has been a little bit different from the towables business in terms of inventory comps year over year. The towables business was probably the part of the industry that a year or so ago was more rich in terms of the volume of inventory, but also probably more challenged in terms of the mix with prior model years and lower tier brands, whereas the motorized segment, you know, fell to, you know, low levels in those that 2021 and the beginning of calendar 2022 period.
Not all of those locations are full line locations. They carry select models of the Winnebago motorized line and we've had some productive conversations with camping world around the Winnebago <unk> line.
As of recently.
At the open house event in Indiana, a few weeks ago.
You did reference the Grand design.
Camping World store, we recently co opened an exclusive Grand design store with camping World in the Green Bay, Wisconsin market.
Looks fantastic. Thank the Grand opening was this past weekend.
And.
That is an opportunity for us too.
Influence more of the customer experience in an exclusive store format working with camping world team.
Michael Happe: But because the supply chain challenges around chassis, we've really haven't, you know, you know, had the need to correct field inventory levels in the motorized segment to the degree that we've had to on the towable side. So again, I'm comfortable with where our motorized field inventory stands today. I'm comfortable with where our towables field inventory stands today. And again, we look forward to earning, you know, the business of the dealers going forward to increase lot share.
Admittedly this is grand designs first location with camping world since the inception of that brand.
And we are having some discussions about possible other markets, but we will be very selective in our conversations with camping world.
And really kind of take it in a.
Crawl before we walk style to make sure that this is a productive <unk>.
Relationship.
Just so you know, but also any stakeholders listening to this call know.
Michael Happe: We have run some selective promotions around floor plan, inventory, you know, rate support, you know, here as we ran into open house, but we don't anticipate having the need to do that extensively throughout the 24 year. Got it.
Our relationships with our dealers are not focused solely on sales. They are also focused on the complete experience for our customers and especially how our customers are cared for in the aftermarket. So any expansion with any dealer includes a conversation on the service side as well where we.
Scott Stember: That's all I have. Thank you.
Need to get comfortable with.
Both both the OEM and the dealer taking care of the customer at a high level and so that conversation is definitely a part of.
Craig Kennison: Our next question comes from Craig Kenneson. What's there? Your line is open. Craig Kenneson, your line is open. Every telephone is muted. Please unmute.
Any any grand design expansion discussions with any of their retailers.
<unk> camping world.
Got it thank you guys.
Thanks tore.
Our next question comes from Tristan Thomas Martin with BMO. Your line is open.
Good morning.
Operator: Michelle, let's come back to Craig.
You gave us some kind of guidance for motor home EBITDA margin short term, how should we think about <unk> margins and then kind of by extension of that.
Operator: Let's move to the next one. We'll come back to Craig later on in the call.
Joseph Altobello: Our next question comes from Joe Altebello with Raymond James. Your line is open. Hey, thanks guys.
The ASP declined down mid to high single digits could you quantify what type of headwind that is on your margin profile.
Michael Happe: Good morning. I guess first question on the lending side. Are you seeing or hearing of any lenders becoming more cautious from a retail perspective? Joe, good morning. This is Mike. We are not hearing material weakening of retail financing in our business at this time. I would say the headwind that probably is most prevalent at retail for our dealers, especially with existing customers is some of the challenges around what to do with that existing unit that an existing customer has that they would like to trade in.
Yes, we think we'd be able to even with that kind of a.
Reduction to ESP Tristan.
It's really tied to in many regards our ability to manage the cost equation as well, including the cost inputs or the deflation. So I don't want to convey that we are.
Anticipating giving up margin.
As we ease some of those Asp's I think with the initiatives, we have in place, including the product initiatives that Mike already alluded to that.
That we're introducing great new products and continue to expect those to be differentiated versus competition.
Michael Happe: In some cases, depending on when they bought it, they are in a negative equity situation and may have to write a sizable check to get out of that current product and upgrade or get into a new product. And so I would say the trade in headwind is probably a much bigger factor than any retail financing challenges that we're seeing at the present. And the availability is there, just to echo what Mike said, the availability is there, but the cost is certainly up as you can imagine, right Joe?
As well as the other cost initiatives that we have on an ongoing basis.
That will be able to continue to see <unk> margins.
In the range that we saw here for Q4.
Plus or minus.
A reasonable amount here to keep them in double digit.
As we look forward both in the near term and then long term as well as the volume starts to recover.
The leverage impact of higher volume should provide that tailwind as well that will help us.
Michael Happe: So you know, we're seeing retail lending rates now with eight, nine handles and even some with lower credit ratings, getting into double digits. So that higher cost is certainly a factor. And perhaps opening additional stores like the new grand design stores that you have now in Green Bay.
Continuing to generate really strong margins in the total business.
Okay got it and then.
What are you getting are you seeing anything in terms of supplier support as you are trying to address affordability and bring down pricing.
Kristen we are having productive conversations with most of our key suppliers about the need for them to pass on.
Michael Happe: Yeah, let me start with more of the historical relationship with Camping World that we've had in our Winnebago branded business. You know, we have done business with Camping World through the Winnebago brand for many years, mostly on the motorized side, but often on Winnebago tollables as well. And we continue to do business on the Winnebago side in dozens of different locations and have a healthy relationship with Camping World there. Not all of those locations are full line locations.
The reductions they are seeing in cost on their raw materials are from there.
They are suppliers to us and in many cases that is happening.
In some situations, we have an index based relationship with certain suppliers.
That just follows the curve of those indexes, but.
We are having good productive conversations with our larger suppliers on cost management I would say where those discussions are the most challenging.
And where we continue to see headwinds concerning our cost is in the motorized chassis category.
Michael Happe: They carry select models of the Winnebago motorized line, and we've had some productive conversations with Camping World around the Winnebago tollables line. And as of recently at the open house event in Indiana a few weeks ago, you did reference the grand design Camping World store. We recently co-opened an exclusive grand design store with Camping World in the Green Bay Wisconsin market. It looks fantastic. I think the grand opening was this past weekend, and that is an opportunity for us to, you know, influence more of the customer experience in an exclusive store format working with the Camping World team.
Those suppliers are.
A little less agile in changing cost.
And in some cases are still experiencing some cost increases that they are needing to pass on to.
Two to Oems like us so net.
We're getting good responses from our suppliers on.
Continuing to manage and in some cases lower the cost of our bill of materials.
Got it thank you.
Thank you. Our next question comes from Fred Wightman with Wolfe Research. Your line is open.
Michael Happe: Admittedly, this is grand design's first location with Camping World since the inception of that brand. And we are having some discussions about possible other markets, but we will be very selective in our conversations with Camping World and really kind of take it in a, you know, in a crawl before we walk style to make sure that this is a productive relationship. Just, you know, so you know, but also any stakeholders listening to this call know our relationships with our dealers are not focused solely on sales.
Hey, guys. Good morning, I wanted to come back to the Grand design motorized launch I mean, if we just go back to when you guys acquired the brand back in 2016, you've seen a meaningful increase in sort of the consolidated market share.
That's for the company and you've also talked about getting to something over 20% longer term. So can you just frame sort of what you think aspiration or contribution from that could be from a market share perspective for how you're sizing the potential.
<unk> down the road.
Spread today between our two existing brands Winnebago and Newmar, we run somewhere between and it varies by quarter and by year, but we've run somewhere between 18% to 20% total market share.
Michael Happe: They are also focused on the complete experience for our customers and especially how our customers are cared for in the after market. So any expansion with any dealer includes a conversation on the service site as well, where we need to get comfortable with, you know, both both the OEM and the dealer taking care of the customer at a high level. And so that conversation is definitely a part of any any grand design expansion discussions with any of their retailers, including Camping World.
Operator: Thank you guys.
In the.
In the motorized segment between those two brands.
We absolutely believe that the addition of Grand design motorized into our business strategy will be net incremental to that market share I'm not going to share a specific target at this time.
Operator: Thank you.
But we would not be funding from a capital standpoint, the investment in this business strategy.
If it didn't have a stand alone.
Tristan Thomas: Our next question comes from Tristan Thomas Martin with BMO. Your line is open. Good morning. You gave us some kind of guidance for motor home, even on market short term. How should we think about toable margin and then kind of by extension of that the ASP decline down at the high single digits. Could you quantify what type of headline that is under margin profile? We seem to be able to, even with that kind of a reduction to ASP, Tristan, it's really tied to in many regards our ability to manage the cost equation as well, including the cost inputs or the deflation.
ROI that was projected to be positive, but b it was.
Meaningfully accretive.
Two our overall share we have been very intentional with internal conversations about minimizing cannibalization of our existing motorized.
Revenue and share to the best of our ability as the Grand design team Rolls out. This line our lineup over the course of the next several years and this will be a graduated a rollout of a product over probably the next.
Two to three years, beginning in probably our fourth quarter of fiscal 'twenty four.
<unk>.
So.
We anticipate that this will be.
Bryan Hughes: So I don't want to convey that we are anticipating giving up margin as we ease some of those ASPs. I think with the initiatives we have in place, including the product initiatives that Mike already alluded to, that we're introducing great new products and continue to expect those to be differentiated versus competition, as well as the other cost initiatives that we have on an ongoing basis that will be able to continue to see a total of margins, you know, in the range that we saw here for Q4 plus or minus, you know, a reasonable amount here.
That target will be 20% plus.
And I guess as we are ready to unveil. Some further details we can potentially get more specific on what those aspirations are but.
Just know that for us it has to be and will be incremental and that will that will mean that the product will be important from a differentiation differentiation standpoint, but the way we attack the market from a dealer standpoint will also be important.
We will be crafting.
A new Grand design Motor home dealer network.
That will consist of some of our existing Grand design <unk> dealers, but it will potentially consist of some dealers who do not carry the Grand design total signed today and some of these dealers may or may not carry some of our existing motorized brands Winnebago and newmar. So.
Bryan Hughes: Keep them in double digit as we look forward, both in the near term and then long term as well as the volume starts to recover and the leverage impact of higher volume should provide that tailwind as well that will help us continue to generate really strong margins in the total business. Okay. Got it. And then what are you getting? Are you seeing anything in terms of supply or support as you are trying to address portability and bring down pricing?
More details to come.
That's helpful and then Mike in the past you've given some high level commentary on the industry retail in sort of the wholesale outlooks I didn't hear that in your prepared remarks. Today is there anything that you could sort of share there or maybe why you decided to stop commenting on that if that's the case.
Bryan Hughes: First and we're having productive conversations with most of our key suppliers about the need for them to pass on the reductions they are seen in cost on their raw materials or from their, you know, their suppliers to us. And in many cases that is happening in some situations, we have an index based relationship with certain suppliers, you know, that just follows the curve of those indexes, but we are having good productive conversations with our larger suppliers on cost management.
Great. Thanks for the question.
We really didn't plan to not comment we just did not include that topic, specifically in our script.
Our position really hasnt, probably materially changed since our last earnings call and I'll explain what I mean by that.
As we look at calendar 2024.
There there are.
Many retail estimates out in the marketplace. Our latest on record comment was around 350000 units of retail in calendar 2024.
Bryan Hughes: I would say where those discussions are the most challenging and where we continue to see headwinds concerning a cost is in the motorized chassis category, you know, those suppliers are a little less agile in changing cost. And in some cases are still experiencing some cost increases that they are needing to pass on to OEMs like us. So on net, you know, we're getting good responses from our suppliers on, you know, continuing to manage and in some cases lower the cost of our bill of materials. Got it.
It would be roughly flat to where we think calendar 2023 will end.
And so we continue to believe that that is an appropriate target for calendar 2024.
Bryan Hughes: Thank you.
We do believe in calendar 2020 for that by the end of that period that wholesale shipments could approach a one to one.
Total with that retail number and so wholesale shipments could also equal 350000 in calendar 2024 sands any unexpected.
Macroeconomic developments.
Or other issues and so that's our current position, which I don't believe has meaningfully changed from the prior the prior quarter.
Frederick Wightman: Our next question comes from Fred Whiteman with Wolf Research. Your line is open. Hey guys, good morning.
Michael Happe: I wanted to come back to the grand design motorized launch. And if we just go back to when you guys acquired that brand and back in 2016, you've seen a meaningful increase in sort of the consolidated market share stats for the company. And you've also talked about getting to something over 20% longer term. So can you just frame sort of what you think the aspiration or contribution from that could be from a market share perspective or how you're sizing the potential contribution down the road.
That's where we stand.
Perfect. Thank you.
Yes.
Thank you. Our next question comes from Bret Jordan with Jefferies. Your line is open.
Hey, good morning, guys.
In total ASP expectations for mid single digit to high single digit.
Decrease could you talk about what you see being mix the opening price point offerings that you're rolling out versus deflation just passing through lower same SKU prices.
Michael Happe: Bret, today between our two existing brands, Winnebago and Neumar, we run somewhere between and it varies by quarter and by year, but we've run somewhere between 18 to 20% total market share in the motorized segment between those two brands. We absolutely believe that the addition of grand design motorized into our business strategy will be net incremental to that market share. I'm not going to share a specific target at this time, but we would not be funding from a capital standpoint the investment in this business strategy if it didn't A have a standalone ROI that was projected to be positive, but B, it was meaningfully accretive to our overall share.
Yeah, we introduced the as you know Brad I think.
From our open house, we introduced the Winnebago access which might have some mix impacts.
So much smaller part of our portfolio in the Winnebago brand versus the larger portfolio of Grand design.
The intended message there of five to eight.
8% say down is more of a mixed neutral basis, but I don't see now sitting here today I don't expect mix to play out.
Really significant role in that ESP calculation.
That might change as time progresses through calendar 'twenty, four but thats, how we see it sitting here today.
Michael Happe: We have been very intentional with internal conversations about minimizing cannibalization of our existing motorized revenue and share to the best of our ability as the grand design team rolls out this line-up over the course of the next several years, and this will be a graduated rollout of a product over probably the next two to three years, beginning in probably our fourth quarter of fiscal 24. We anticipate that that target will be 20% plus, and I guess as we are ready to unveil some further details, we can potentially get more specific on what those aspirations are, but just know that for us it has to be and will be incremental, and that will mean that the product will be important from a differentiations standpoint, but the way we attack the market from a dealer standpoint will also be important.
Okay, Great and then a question on the sort of the dealer sentiment at the open house and the timing of the backlog expectation I know you guys are sort of talking about the first half of the fiscal year being a challenge but.
Are you expecting that they sit on those orders and hope for delivery. After the Tampa show I mean, how do we think about the rest of calendar 'twenty three from.
Dealer sentiment production schedule.
Brett This is Mike Good morning, let me comment on that first let me talk about what we experienced at open house with our businesses. So at open House, we had each of our three brands displaying the Winnebago brand essentially has two sub businesses under it motor home and <unk>.
Each of our four businesses at open House Newmar Grand design, Winnebago motorized Winnebago <unk> experienced an order increase at open house 2023 versus <unk>.
The open house in 2022 during that open house week. So we were really pleased coming out of open house 2023.
Michael Happe: We will be crafting a new grand design motorhome dealer network that will consist of some of our existing grand design toables dealers, but it will potentially consist of some dealers who do not carry the grand design toables line today, and some of these dealers may or may not carry some of our existing motorized brands one of big O or new bar, so more details to come.
In spite of a very tepid dealer ordering environment to see that increase in some of that is due to.
The new products that we've referenced.
Here today.
And even some we haven't mentioned like the echo on a Mercedes Benz chassis underneath the Winnebago motor home business that also drew a nice amount of orders in Elkhart.
We have seen backlog sequentially improve in our largest segment tables from June through September .
Michael Happe: That's helpful, and then Mike, in the past you've given some high level commentary on industry retail and sort of the wholesale outlooks. I didn't hear that in your prepared remarks today. Is there anything that you could sort of share there or maybe why you decide to stop commenting on that, if that's the case? Fred, thanks for the question. We really didn't plan to not comment. We just did not include that topic specifically in our script.
As a nice development and I think I may have mentioned that in the script comments.
But we are seeing.
Backlog beginning to grow again on the <unk> side from a timing standpoint, we think that this well.
Be contingent a bit on the retail pace, obviously, the dealers are experiencing as I mentioned minutes ago, we like our inventory position in the field at this time, meaning that we do not believe its excessive.
Michael Happe: Our position really hasn't probably materially changed since our last earnings call, and I'll explain what I mean by that. As we look at calendar 2024, there are many retail estimates out in the marketplace. Our latest on-record comment was around 350,000 units of retail in calendar 2024, which would be roughly flat to where we think calendar 2023 will end, and so we continue to believe that that is an appropriate target for calendar 2020- We do believe, in calendar 2024, that by the end of that period, that wholesale shipments could approach a one-to-one total with that retail number. And so wholesale shipments could also equal 350,000 in calendar 2024. It's meaningfully changed from the prior, you know, the prior quarter. That's where we stand.
Our old at all.
Bret Jordan: Perfect. Thank you.
And so.
Our sales personnel are working with the dealers to have them take product as they are comfortable.
We will not share production schedule information. This morning in terms of this fall.
But we are we are continuing to turn the dial on production rates based on that.
Short term backlog that we have we did mentioned that the first two quarters of our fiscal 2024 year could be challenging primarily because again, we think dealers are just going to be very disciplined about when they take the product.
It is tied to retail results happening at their locations <unk> any optimism they see about the market.
In the future. So again, we're pleased with our order position and some of the recent trends we've seen coming out of open house.
Great. Thank you.
Thank you. Our next question comes from Brandon Rolle with D. A Davidson your line is open.
Brandon Roll: Our next question comes from Bret Jordan with Jeffries. Your line is open. Hey, good morning, guys. Intelable ASP expectations for mid-single-digit, the high-single-digit decrease. Could you talk about what you see being mixed, you know, the opening price point offerings that you're rolling out versus deflation, just passing through lower, same-squeue prices? Can we introduce the, as you know, Bret, I think from our open house, we introduced the Winnebago access, which might have some mixed impacts to a much smaller part of our portfolio in the Winnebago brand versus the larger portfolio of grain design.
Brandon Roll your line is open.
Okay.
So I'll go ahead and move on to the.
Our next question comes from Noah <unk> with Keybanc. Your line is open.
Hi, Thanks for taking my question.
Hoping you could compare and contrast, a bit what youre seeing on the marine side in terms of retail demand dealer inventory and dealer appetite relative to the RV side and just how youre thinking about the evolution of channel dynamics, they're moving through fiscal 'twenty four thanks.
Brandon Roll: The intended message there of five to, you know, eight percent say down is more of a mix neutral basis, but I don't see, you know, sitting here today, I don't expect mix to play a really significant role in that ASP calculation. You know, that might change his time, progresses through calendar 24, but that's how we see it sitting here today. Okay, great. And then question on the sort of a dealer sentiment at the open house from the timing of the backlog expectation.
Yeah.
Yes, good morning, Noah This is Mike.
Whats interesting with.
Our marine business and just a reminder, that obviously, we have a fast growing pontoon Brandon burletta.
And a major segment of the market and then we have a.
Luxury brand and Chris graft in the.
The very high end of the market I'll speak to the pontoon segment specifically.
<unk> seen certainly dealers.
Brandon Roll: Are you guys just sort of talking about the first first half of the fiscal year being a challenge, but are you expecting that they sit on those orders and hope for delivery after the Tampa show? I mean, how do we think about the rest of calendar 23 from a sort of dealer sentiment production schedule? Bret, this is my good morning. Let me comment on that. First, let me talk about what we experienced at open house with our businesses.
Continuing to destock inventory in the pontoon segment and work on aging aspects of that inventory mix, but what's been positive about the pontoon category has been that the retail activity around that segment has been relatively stable.
Especially as compared to some of the retail trends we saw in the RV segment over the last year.
Brandon Roll: So at open house, we had each of our three brands displaying the Winnebago brand, you know, essentially has two, you know, sub businesses under it, motor home and tollables. Each of our four businesses at open house, new Mar grand design Winnebago motorized Winnebago tollables experienced an order increase at open house 2023 versus the open house in 2022 during that open house week. So we were really pleased coming out of open house 2023 in spite of a very tepid dealer ordering environment to see that increase.
In fact, our BARDA leather retail.
Fiscal year 2004 to date, the first six or seven weeks. He is up meaningfully we're up meaningfully at retail on barletta.
Through the first six weeks or so of our fiscal 'twenty four year, but we are seeing the dealers continue to use that.
To normalize their inventories, but also they are disciplined.
Taking in a product.
Also contributing to their destocking. So again similar to my comments about our first and second quarters being.
Brandon Roll: And some of that is due to the new products that we've referenced, you know, here today. And even some we haven't mentioned like the echo on a Mercedes Benz chassis underneath the Winnebago motor home business that also drew a nice amount of orders in Elkhart. We have seen backlog sequentially improve in our largest segment tollables from June through September, which is a nice development. And I think I may have mentioned that in the script comment.
Being challenged on the on the RV side, we think youll see that on the marine side as well as dealers continue to try to get their inventory and better position before some of the winter and spring Marine shows once calendar year 2024 begins but what I'm what I'm most pleased about on the pontoon.
<unk> is that we continue to see good retail for our brand and we continue to take some share were around 7% seven 1% of aluminum pontoons now with the Barletta brand and continue to be very pleased with that businesses future runway.
Brandon Roll: But we are seeing that backlog beginning to grow again on the tollable side. From a timing standpoint, we think that this will be contingent a bit on the retail pace, obviously, that dealers are experiencing. As I mentioned minutes ago, we like our inventory position in the field at this time, meaning that we do not believe it's excessive or old at all. And so, you know, our sales personnel are working with the dealers to have them take product as they're comfortable.
Thank you maybe just one quick housekeeping question.
Did you mention which class the Grand design motorized launch will be focused on.
We did not mentioned because we are not sharing specific details at this time, what we wanted to share with you. All this morning was that the business strategy is happening and is being developed and worked on the Grand design team will choose the time in the future that they are comfortable sharing.
Brandon Roll: We will not share, you know, production schedule information this morning in terms of this fall. But we are, we are continuing to, you know, turn the dial on production rates, you know, based on, you know, that, that, you know, short term backlog that we have. We did mention that the first two quarters of our fiscal 2020 24 year could be challenging primarily because again, we think dealers are just going to be very disciplined about when they take the product as it is tied to retail results happening at their locations, and or any optimism they see about the market, you know, in the future. So again, we're pleased with our order position in some of the recent trends we've seen coming out of open house. Great. Thank you.
Specific specs publicly.
<unk>.
Their new lineup that Theyre working on.
And you can probably anticipate hearing or seeing something to that end.
Probably.
In the early part of calendar year 'twenty 'twenty four.
Again more details to come.
In the future to that end.
Thank you.
Thank you.
Our next.
Michelle are you there.
Operator.
Noah Zatzkin: Our next question comes from Brandon Roll with DA Davidson. Your line is open. Brandon Roll. Your line is open. I'll go ahead and move on to the next question comes from Noah Zaskin with bank. Your line is open. Hi, thanks for taking my question.
Both on the call just give us one minute, while we explore our connection there are.
Our next question comes from Brandon Rolle with D. A Davidson your line is open.
Please check back with Craig Kennison as well operator.
Operator, please check back with Craig Kennison as well.
Brandon Roll your line is open.
Michael Happe: I'm hoping you could compare and contrast a bit what you're seeing on the marine side in terms of retail demand, dealer inventory and dealer appetite relative to the RV side. And just how you're thinking about the evolution of channel dynamics there moving through fiscal 24. Thanks. Yeah, good morning, Noah. This is Mike. You know, what's interesting with, you know, our marine business and just a reminder that, you know, obviously we have a fast growing pontoon brand in burleta in a major segment of the market.
Yeah.
So there seems to be some issues there with Brandon can you check with Craig really quick and if there is no further questions that will conclude the call.
Craig Kennison your line is open.
Michael Happe: And then we have a luxury brand in Christraft in the very high end of the market. I'll speak to the pontoon segment specifically. We are seeing certainly dealers continuing to destock inventory in the pontoon segment and work on aging aspects of that inventory mix. But what's been positive about the pontoon category has been that the retail activity around that segment has been relatively stable, especially as compared to some of the retail trends we saw in the RV segment over the last here.
Craig has left the queue.
Okay, I am not showing any further questions earlier.
Yeah.
No further questions then we can conclude the call.
Okay.
Thank you for your participation. This does conclude the program and you may now disconnect everyone have a great day.
Thank you for joining US everyone. Please enjoy the rest of your day.
[music].
Michael Happe: In fact, our Barletta retail, you know, fiscal year 24 today, the first six or seven weeks, is up meaningfully, you know, we're up meaningfully at retail on Barletta, you know, through the first six weeks or so of our fiscal 24 year. But we are seeing the dealers continue to use that to normalize their inventories, but also their discipline taking in a product is also contributing to their destocking. So, again, similar to my comments about our first and second quarters being challenged on the on the RV side, we think you'll see that on the marine side as well, as dealers continue to try to get their inventory in better position before some of the winter and spring marine shows, once calendar year 2024 begins.
Michael Happe: But what I'm most pleased about on the pontoon side is that we continue to see good retail for our brand, and we continue to take some share. We're around 7%, 7.1% of aluminum pontoons now with the Barletta brand and continue to be very pleased with that that business's future runway.
Michael Happe: Thank you. Maybe just one quick housekeeping question. Did you mention which class the grand design motorized launch will be focused on? We did not mention because we are not sharing specific details at this time. What we wanted to share with you all this morning was that the business strategy is happening and is being developed and worked on. The grand design team will choose the time in the future that they are comfortable sharing, you know, specific specs publicly about, you know, their new lineup that they're working on. And you can probably anticipate hearing or seeing something to that and, you know, probably in the, you know, early part of calendar year 2024. But again, more details to come in the future to that end.
Operator: Thank you. Our next Michelle, are you there? Operator? Those on the call just give us one minute while we explore our connection there.
Brandon Roll: Our next question comes from Brandon Roll with DA Davidson. Your line is open.
Operator: Please check back with Craig Kenneth and as well, Operator. Please check back with Craig Kenneth and as well. Brandon Roll, your line is open. Michelle, there seems to be some issues there with Brandon's mind key.
Craig Kennison: Check with Craig really quick, and if there's no further questions, then we'll conclude the call. Craig Kennison, your line is open. Craig has left the queue. Okay. I'm not sure I get any further questions earlier.
Operator: No further questions, then we can conclude the call. Thank you for your participation. This doesn't include the program, and you may now disconnect.
Operator: Everyone, have a great day. Thank you for joining us, everyone. Please enjoy the rest of your day.
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Operator: [inaudible] joining us, thank you very much joining us, thank you very much . .
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