Q1 2024 Winnebago Industries Inc Earnings Call
Okay.
Good day and thank you for standing by. Welcome to the Q1 fiscal 2024 Winnebago Industries Financial Results Conference call. At this time all participants are in a listen-only mode.
Good day and thank you for standing by welcome to the Q1 fiscal 2020 for Winnebago Industries financial results Conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1 1 again.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will then hear an automated message advising you. Your hand, just raised to withdraw your question. Please press star one again please.
Please, the advice of today's conference is being recorded. I would now like to hand the conference over to your speaker, Ray Posadas, Vice President of Investor Relations and Market Intelligence. You may begin.
Please be advised that today's conference is being recorded.
I'd now like to hand, the conference over to your Speaker Ray Passado, 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 2024 first quarter earnings results. I'm joined on the call today by Michael Happy, President and Chief Executive Officer and Brian Hughes, Senior Vice President and Chief Financial Office.
Ray Passado: Good morning, everyone and thank you for joining us today to discuss our fiscal 2024 first quarter earnings results I'm 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.wgo.net and a replay of the call will be available on our website later today. The news release with our first quarter results was issued and posted to our website earlier this morning.
Ray Passado: This call is being broadcast live on our website at Investor <unk> Dot net and a replay of the call will be available on our website later today.
Ray Passado: News release with our first 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 securities laws.
Ray Passado: Before we start I'd like to remind you that certain statements made during today's conference call regarding Winnebago industries and its operations may be considered forward looking statements under securities laws.
The company cautioned you that forward-looking statements involve a number of risks and are inherently uncertain, and a number of factors, many of which are beyond the company's control, could cause actual results to differ materially from these statements.
Ray Passado: The company cautions you that forward looking statements involve a number of risks and are inherently uncertain and a number of factors many of which are beyond the company's control could cause actual results to differ materially from these statements.
These factors are identified in our SEC filings, which I encourage you to read.
Ray Passado: These factors are identified in our SEC filings, which I encourage you to read.
With that, I would now like to turn the call over to our president and CEO , Michael Happy.
Ray Passado: With that I would now like to turn the call over to our President and CEO, Michael Happy Mike.
Thanks, Ray. Good morning. And as always, thank you for your interest in Winnebago Industries, and for taking the time to discuss our fiscal 2024 first quarter results.
Michael Happy: Thanks, Rick Good morning, and as always thank you for your interest in Winnebago industries and for taking the time to discuss our fiscal 2024 first quarter results.
I will provide an overview of performance during the quarter, then pass the call to Brian Hughes to cover our financial results in more detail.
Michael Happy: I will provide an overview of our performance during the quarter, then pass the call to Brian fused 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.
Michael Happy: Following Brian's comments I will return and offer some closing thoughts before the Q&A portion of the call.
As we entered our fiscal 2024 year this past September , the outdoor recreation market in North America continued to face numerous short-term challenges.
Michael Happy: As we entered our fiscal 2024 year this past September.
Michael Happy: The outdoor recreation market in North America continued to face numerous short term challenges.
Consumer confidence was unsteady given macroeconomic fact.
Michael Happy: Consumer confidence was unsteady given macroeconomic factors.
affordability of the RV and boating lifestyle, while still competitive with other forms of leisure travel, had become difficult for potential new customers.
Michael Happy: Affordability of the RV and boating lifestyle, while still competitive with other forms of leisure travel had.
Michael Happy: It had become difficult for potential new customers.
and dealers were aggressively managing inventory by constraining inbound wholesaleships.
Michael Happy: And dealers were aggressively managing inventory by constraining inbound wholesale shipments.
We stated during the October earnings call that our first two fiscal quarters in 2024 would face formidable headwind.
Michael Happy: We stated during the October earnings call that our first two fiscal quarters in 2024 would face formidable headwinds, especially as it related to dealer appetite for new RV and marine products and.
especially as it related to dealer appetite for new RV and marine products.
And that we were hopeful our last two quarters in fiscal year 2024 would show real improvement relative to an anticipated future one-to-one retail ratio to wholesale replenishment rate developed by the fiscal year 2024.
Michael Happy: And that we were hopeful our last two quarters in fiscal year 2024 would show real improvement relative to an anticipated future wonder one retail ratio.
Michael Happy: So wholesale replenishment rate developing within the channels.
The projection for fiscal year 2024 has proven true three months into this first half period.
Michael Happy: The projection for fiscal year 2024 has proven true three months into this first half period.
Retail demand is generally in line with our projection.
Michael Happy: Retail demand is generally in line with our projections, if not a little better than anticipated in barletta boats and Grand design totals.
if not a little better than anticipated in Barletta boats and Grand Design Tobles.
While dealers were very selective in Q1 with what they brought in from our premium brands and have done an excellent job in driving their inventories lower.
While dealers were very selective in Q1 with what they brought in from our premium brands and have done an excellent job in driving their inventories lower.
We believe continued strong wholesale constraints during a seasonally lighter retail period of the year in December through February .
Michael Happy: We believe continued strong wholesale constraints during a seasonally lighter retail period of the year in December through February.
and subsequent further reduced production by our businesses over the holidays will also have a similar impact on Q2 financial results as well.
Michael Happy: Subsequent further reduced production by our businesses over the holidays.
Michael Happy: We will also have a similar impact on Q2 financial results as well.
Brian Hughes will discuss this Q2 outlook in more detail later in the call.
Michael Happy: Bryan Hughes will discuss this Q2 outlook in more detail later in the call.
Despite these challenges, the Winnebago Industries team remains focused on two core objectives.
Michael Happy: Despite these challenges the Winnebago industries team remains focused on two core objectives.
A, the preservation of solid profitability and a strong balance sheet in the short term balanced with the reinforcement of robust market positions, lot and retail share, across our outdoor portfolio.
Michael Happy: A the preservation of solid profitability and a strong balance sheet in the short term balanced with the reinforcement of robust market positions lot and retail share across our outdoor portfolio.
and B, our commitment to amplifying investments that nurture the long-term health, vitality, and value proposition for our brands and the enterprise as we prepare for what we believe will be a strong, rebounding outdoor economy in the back half of calendar year 2024 and especially into 2025.
Michael Happy: And b, our commitment to amplify and investments that nurture the long term health vitality and value proposition for our brands and the enterprise as we prepare for what we believe will be a strong rebounding outdoor economy in the back half of calendar year 2024.
Michael Happy: And especially into 2025.
Our fiscal year 2024 Q1 SGNA numbers include elevated investments in engineering, digital asset development, and increased data and IT capability.
Michael Happy: Our fiscal year 2020 for Q1 SG&A numbers include elevated investments in engineering digital asset development and increased data and it capabilities.
These initiatives are incremental to historical spending and intentional.
Michael Happy: These initiatives are incremental to historical spending and intentional.
Overall, we maintain our bullish position on the future of the RV and marine industries, and our brands will be well situated to participate strongly in the cyclical upswing when it occurs.
Michael Happy: Overall, we maintain our bullish position on the future of the RV and Marine industries, and our brands will be well situated to participate strongly in the cyclical upswing when it occurs.
Michael Happy: Our fiscal year 2020 for Q1 results demonstrate the resilience of our diversified portfolio and variable cost structure.
Our fiscal year 2024 Q1 results demonstrate the resilience of our diversified portfolio and variable cost structure.
as well as our production, discipline, and pursuit of operational excellence improvement.
Michael Happy: As well as our production discipline and pursuit of operational excellence improvements.
We are also focused within the towable RV and marine segments in addressing vital considerations surrounding affordability with multiple new product releases.
Michael Happy: We are also focused within the total RV and marine segments in addressing vital considerations surrounding affordability with multiple new product releases.
while maintaining our commitment to customer satisfaction via outstanding product quality and aftermarket service.
Michael Happy: While maintaining our commitment to customer satisfaction via outstanding product quality and aftermarket service.
Overall, for our fiscal first quarter, we achieved $763 million in net revenues as we navigated softness in motorhome RV and marine unit sales.
Overall for our fiscal first quarter.
Michael Happy: We achieved $763 million in net revenues as we navigated softness in motor home RV and Marine unit sales.
Our consolidated gross margin of 15.2 percent was driven by strong margin performance in our towable RV segment.
Michael Happy: Our consolidated gross margin of 15, 2% was driven by strong margin performance in our total RV segment.
Overall, we delivered adjusted earnings per diluted share of $1.06.
Michael Happy: Overall, we delivered adjusted earnings per diluted share of $1 and <unk>.
Within the RV industry, gross unit inventories across the motorhome and towable segments are at historically low levels. In some cases not seen for more
Michael Happy: Within the RV industry gross unit inventories across the motor home and <unk> segments are at historically low levels in some cases not seen for more than a decade.
And Winnebago Industries field inventory turn rates have returned to pre-COVID status.
Michael Happy: And Winnebago Industries' field inventory turn rates have returned to pre COVID-19 status.
The RV industry added unit inventory for the first time in many months during October of 2023.
Michael Happy: The RV industry added unit inventory for the first time in many months during October of 2023.
And we do not anticipate significant further destocking industry-wide as we turn towards spring.
Michael Happy: And we do not anticipate significant further destocking industry wide as we turn towards spring.
Dealers continue to work through model year 2023 inventory during this quieter period of the year and mitigate the cost implications of higher inventory financing rates on their business.
Dealers continue to work through model year 2023 inventory during this quieter period of the year and mitigate the cost implications of higher inventory financing rates on their business.
We continue to proactively manage our own capacity, output, and costs in a targeted manner given dynamic marketplace conditions.
Michael Happy: We continue to proactively manage our own capacity output and cost in a targeted manner given dynamic marketplace conditions.
Importantly, our consolidated RV retail market share is showing signs of stabilization.
Michael Happy: Importantly, our consolidated RV retail market share is showing signs of stabilization.
following an anticipated pullback last year in connection with broader market focus on lower price points and further rationalization of second and third tier brand inventory.
Michael Happy: Following an anticipated pullback last year in connection with broader market focus on lower price points and further rationalization of second and third tier brand inventory.
Grand Design specifically is seeing solid retail performance as we speak and has added retail share in recent SSI report.
Grand designs, specifically is seeing solid retail performance as we speak and has added retail share in recent Ssi reports.
Last quarter, we highlighted several new RV models across our organic brands, providing customers with terrific value and attractive price points for premium products.
Michael Happy: Last quarter, we highlighted several new RV models across our organic brands, providing customers with terrific value at attractive price points for premium products.
The Grand Design Suranova and Reflection 100, as well as the new Winnebago branded access are examples of these introductions.
Michael Happy: The Grand design, Terra, Nova and reflection 100.
Michael Happy: As well as the new Winnebago branded access are examples of these introductions.
The new Winnebago M-Series trailer and Grand Designs modestly priced luxury fifth wheel Influence are also strong additions to the model year 2024 lineup.
Michael Happy: The new Winnebago M series trailer and Grand designs modestly priced luxury fifth wheel influence are also strong additions to the model year 2024 lineups.
In Q2, the Winnebago brand of motorhomes will officially launch the next generation of the popular Rebel and Echo motorhomes.
In Q2, the Winnebago branded Motorhomes will officially launch the next generation of the popular rebel and Echo motor homes.
The new Winnebago Rebel 44E is the next generation of the industry's first all-wheel-drive class B motorhome built on the Mercedes-Benz Sprinter chassis.
The new Winnebago rebel 40, <unk> is the next generation of the industry's first all wheel drive class B Motorhomes built on the Mercedes sprinter.
Michael Happy: Sprinter chassis.
The new Revel 44E boasts extended season capabilities, a Winnebago power package featuring our own Lithionics GTO battery, and upgraded interior and exterior features.
Michael Happy: The new rebel 44 E boast extended season capabilities at Winnebago power package, featuring our own let me, Alex GTO battery and upgraded interior and exterior features.
The new Winnebago Echo 23B2, a Class C motorhome.
The new Winnebago Echo 23 <unk>.
Michael Happy: A class C motor homes.
is also built on a Mercedes-Benz all-wheel-drive Sprinter chassis, both advanced all-season features, a multi-use living space, and an advanced solar lithium battery combination.
Michael Happy: Is also built on a Mercedes Benz all wheel drive sprinter chassis. Both advance all season features a multi use living space and an advanced solar lithium battery combination.
Both the Revel and the Echo models begin shipping in January of 2024.
Both the rebel and the Echo models begin shipping in January of 2024.
Coming off a banner year for our marine segment in fiscal year 2023, our marine dealers, as anticipated, began to pull back on orders in the first quarter of fiscal 2024 due to elevated inventory levels and costs.
Michael Happy: Coming off a banner year for our marine segment in fiscal year 2023.
Michael Happy: Our marine dealers as anticipated began to pull back on orders in the first quarter of fiscal 2024 due to elevated inventory levels.
And costs.
This meaningfully impacted quarter one shipments and will continue to do so even more strongly in quarter two.
Michael Happy: This meaningfully impacted quarter, one shipments and we'll continue to do so even more strongly in quarter two.
However, we are encouraged by the retail trends we are seeing specifically in the pontoon segment.
Michael Happy: However, we are encouraged by the retail trends, we are seeing specifically in the pontoon segment.
Our Barletta business has run positive comps to date in fiscal year 2024 and continues to gain share in the aluminum, pontoon segment.
Michael Happy: <unk> business has run positive comps to date in fiscal year 2024, and continues to gain share in the aluminum pontoon segment.
reaching now above eight plus points of share in recent SSI report.
Reaching now above eight plus points of share in recent Ssi reports.
However, we are working closely with barletta dealers, especially in the northern freshwater markets, to optimize their inventory positions as the winter months go, so that they feel more comfortable with reorder capabilities as the spring season approaches.
However, we are working closely with barletta dealers, especially in the northern freshwater markets to optimize their inventory positions as the winter months go so that they feel more comfortable with reorder capabilities as the spring season approaches.
Similar to our RV brands, our marine businesses continue to innovate with new releases for model year 2024. During the Fort Lauderdale Boat Show this past October , the Criss-Craft brand introduced the highly anticipated Canalina 28, offering customers a center console with versatile seeding configurations and boasting groundbreaking sea-keeper ride technology.
Michael Happy: Similar to our RV brands, our marine businesses continue to innovate with new releases for model year 2024 <unk>.
Michael Happy: During the Fort Lauderdale boat show this past October the Chris Craft brand introduced the highly anticipated cannot Lena 28, offering customers a center console with versatile seating configurations and boasting groundbreaking <unk> technology.
Barletta has unveiled the industry's first pontoon boat with twin engines mounted in the center of the boat's transom, a patent pending feature.
Michael Happy: Barletta has unveiled the industry's first pontoon boat with twin engines mounted in the center of the boats transom a.
Pending feature.
In addition, the new Reserve Lazera is a simplified, decontented offering of the ultra high-end reserve and has released a refreshed year two version of the entry-level ARIA model line as well.
Michael Happy: In addition, the new reserve loss era is a simplified the content offering of the Ultra high end reserve and has released a refreshed year two version of the entry level ARIA model line as well.
Affordability with a premium look and feel.
Michael Happy: Affordability with a premium look and feel.
As I have often mentioned, Winnebago Industries will continue to responsibly invest, innovate, and position our businesses for long-term success through the entirety of the economic cycle.
Michael Happy: As I have often mentioned Winnebago industries will continue to responsibly invest innovate and position our businesses for long term success through the entirety of the economic cycle.
We will prioritize profitability through disciplined production and cost management, leveraging our highly variable cost structure, and collaborate closely with dealers to align on win-win inventory approaches to the market.
We will prioritize profitability through disciplined production and cost management, leveraging our highly variable cost structure and collaborate closely with dealers to align on win win inventory approaches to the market.
Winnebago Industries remains well-positioned to further strengthen our enterprise capabilities, capitalize on future growth opportunities, and achieve long-term shareholder value creation goals. With that, I will now hand this over to Brian Hughes.
Michael Happy: Winnebago industries remains well positioned to further strengthen our enterprise capabilities capitalize on future growth opportunities and achieve long term shareholder value creation goals.
Michael Happy: With that.
Michael Happy: I will now hand, this over to Bryan Hughes.
Bryan Hughes: Thanks, Mike and good morning, everyone.
Before I begin, I would like to refer you to our earnings release document as well as our earnings supplement document that are on our Investor Relations website.
Bryan Hughes: Before I begin I would like to refer you to our earnings release document.
Bryan Hughes: As well as our earnings supplement document that are on our Investor Relations website.
On past calls, I have verbally reviewed all the key financial results, and I will refrain from doing so today, and to improve efficiency, we'll instead focus solely on key drivers of our performance.
Bryan Hughes: On past calls I have verbally reviewed all the key financial results and I will refrain from doing so today and to improve efficiency, we'll instead focus solely on key drivers of our performance.
Our first quarter consolidated revenues reflect a decrease of 19.9% compared to the fiscal 2023 period.
Bryan Hughes: Our first quarter consolidated revenues reflect a decrease of 19, 9% compared to the fiscal 2023 period.
Driven by lower unit sales related to market conditions.
Bryan Hughes: Driven by lower unit sales related to market conditions.
product mix reflected by lower average selling price.
Bryan Hughes: Product mix reflected by lower average selling prices.
and higher discounts and allowances across all segments.
Bryan Hughes: And higher discounts and allowances across all segments.
partially offset by carryover price increases related to higher motorized chassis costs.
Bryan Hughes: Partially offset by carryover price increases related to higher motorized chassis costs.
By extension, our gross profit for the quarter decreased 27.8% year over year, but we are proud to have delivered 15.2% gross profit margins despite the deleveraging impact of slowing sales, which was the greatest driver of our margin decline, and higher discounts and allowances.
By extension, our gross profit for the quarter decreased 27, 8% year over year.
Bryan Hughes: But we are proud to have delivered 15, 2% gross profit margin. Despite the deleveraging impact of slowing sales, which was the greatest driver of our margin decline.
And higher discounts and allowances.
Our ongoing profitability is the result of our variable cost structure, the strength of our relationships with our supplier partners and dealers,
Bryan Hughes: Our ongoing profitability is the result of our variable cost structure.
Bryan Hughes: The strength of our relationships with our supplier partners and dealers.
and the relentless pursuit of operational excellence across each of our businesses.
And the relentless pursuit of operational excellence across each of our businesses.
Maintaining healthy growth margins enabled delivery of EBITDA margins of 7.1% which includes investments in our advanced technology, digital transformation, and IT capabilities. I'll now
Bryan Hughes: Maintaining healthy gross margins enabled delivery of EBITDA margins of seven 1%, which includes investments in our advanced technology digital transformation and it capabilities.
Bryan Hughes: I will now cover our performance by segment.
Revenues for the towable RV segment were down 4.8% compared to the prior year. A strong unit sales growth and lower ASP travel trailers contributed to an unfavorable product mix.
Bryan Hughes: Revenues for the total RV segment were down four 8% compared to the prior year as strong unit sales growth and lower ASP travel trailers contributed to an unfavorable product mix.
Tollable RV segment adjusted EBITDA was down 8.8% versus the prior year period.
Bryan Hughes: Total RV segment, adjusted EBITDA was down eight 8% versus the prior year period.
Adjusted EBITDA margin was 10 percent, down 50 basis points year over year, primarily due to deleverage and new product startup costs.
Bryan Hughes: Adjusted EBITDA margin was 10% down.
Bryan Hughes: <unk> 50 basis points year over year, primarily due to deleverage and new product startup costs.
Bryan Hughes: Revenues for the motor home segment were down 28% from the prior year. This.
Revenues for the motorhome segment were down 28% from the prior year. This decline was driven by the lower unit sales as a result of current market conditions and a higher level of discounts and allowances.
Bryan Hughes: This decline was driven by lower unit sales as a result of current market conditions, and a higher level of discounts and allowances.
Partially offset by favorable product mix and price increases related to higher motorized chassis costs.
Partially offset by favorable product mix and price increases related to higher motorized chassis costs.
Segment adjusted EBITDA margin was 6.4%, down 440 basis points versus the prior year due to volume to leverage, higher discounts and allowances, and some operational inefficiencies.
Bryan Hughes: Segment, adjusted EBITDA margin was six 4% down 440 basis points versus the prior year due to volume deleverage higher discounts and allowances and some operational inefficiencies.
As Mike shared during our prior earnings call, we are excited by the launch of Grand Design Motorhome and look forward to seeing those new models begin to enter the market later this fiscal year.
Bryan Hughes: As Mike shared during our prior earnings call. We are excited by the launch of Grand design Motor home and look forward to seeing those new models begin to enter the market later this fiscal year.
Our investment behind this initiative is reported in the corporate all other category within our financial results and therefore will not be diluted to our motorhome RV segment until grand design motorhomes becomes operational.
Our investment behind this initiative as reported in the corporate all other category within our financial result, and therefore will not be dilutive to our motor home RV segment until Grand design motor homes becomes operational.
Overall, we anticipate that the bottom line impact to Winnebago Industries will be dilutive to our pre-tax income by about $10 to $15 million throughout fiscal year 2024 due to sizable startup costs with limited revenue at the initial launch.
Bryan Hughes: Overall, we anticipate that the bottomline impact to Winnebago industries will be dilutive to our pretax income by about $10 million to $15 million throughout fiscal year 2024, due to sizeable startup costs with limited revenue at the initial launch.
However, we believe this is a powerfully accretive strategy and financial opportunity for the company in future years.
Bryan Hughes: However, we believe this is a powerfully accretive strategy and financial opportunity for the company in future years.
As expected, our spending was approximately $1 million in Q1, and we anticipate ramping that investment to between $4 million to $5 million by Q4.
As expected our spending was approximately $1 million in Q1.
Bryan Hughes: And we anticipate ramping that investment to between 4 million to $5 million by Q4.
Keep in mind, we expect our investment to be accretive to our fiscal 2025 results.
Speaker Change: Keep in mind, we expect our investment to be accretive to our fiscal 2025 results.
Speaker Change: Let's turn to our marine segment.
Revenues were down 33.5% from the prior year as a result of a decline in unit volume related to slow dealer demand in an elevated interest rate environment and higher discounts and allowances, partially offset by carryover.
Revenues were down 33, 5% from the prior year as a result of a decline in unit volume related to slow dealer demand and an elevated interest rate environment and.
Speaker Change: And higher discounts and allowances.
Speaker Change: Partially offset by carryover price increases.
Marine segment adjusted EBITDA margin of 8.2%, decreased 590 basis points versus the prior year primarily due to volume due leverage.
Speaker Change: Marine segment, adjusted EBITDA margin of eight 2% decreased 590 basis points versus the prior year, primarily due to volume deleverage.
but also impacted by higher levels of discounting.
Speaker Change: But also impact by impacted by higher levels of discounting.
Speaker Change: Backlog for the Marine segment declined 55, 9% compared to the first quarter of the prior year due to cautious dealer sentiment this off season as compared to last.
Backlog for the marine segment declined 55.9% compared to the first quarter of the prior year due to cautious dealer sentiment this off season as compared to last.
Speaker Change: Moving now to the balance sheet.
At the end of the quarter, Winnebago Industries had a net debt to EBITDA ratio of approximately 1.2 times, which is at the middle of our
Speaker Change: At the end of the quarter Winnebago industries had a net debt to EBITDA ratio of approximately one two times.
Speaker Change: Which is at the middle of our targeted range.
Maintaining a strong balance sheet is core to the Winnebago Industries investment thesis and has continued to allow us to execute our balanced capital allocation strategy, which prioritizes digital and strategic investments in our business, like the opening of the ATG Innovation Center, for example, or strategic acquisitions like Lithionics, most recently, while also returning significant capital to shareholders.
Speaker Change: Maintaining a strong balance sheet is core to the Winnebago industries investment thesis.
Speaker Change: And has continued to allow us to execute our balanced capital allocation strategy, which prioritizes digital and strategic investments in our business like the opening of the Atg Innovation Center for example, or strategic acquisitions like lithium ion X most recently.
Speaker Change: While also returning significant capital to shareholders.
During the first quarter, we executed share repurchases of $40 million and increased our quarterly cash dividend by 15% to $0.31 per share.
Speaker Change: During the first quarter, we executed share repurchases of $40 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 over the long term.
Reflecting the confidence we have in our ability to profitably grow revenues capitalize on new opportunities and gain market share over the long term.
These actions further underscore our confidence in and our commitment to the long-term strength and trajectory of our business.
Speaker Change: These actions further underscore our confidence in and our commitment to the long term strength and trajectory of our business.
Before turning the call back to Mike, I would like to provide more context on the previous comments Mike made about our upcoming second quarter.
Speaker Change: Before turning the call back to Mike I would like to provide more context on the previous comments, Mike made about our upcoming second quarter.
We anticipate Q2 consolidated sales are likely to be reduced from Q1 levels.
We anticipate Q2 consolidated sales are likely to be reduced from Q1 levels.
Speaker Change: This has historically been the pattern from Q1 into Q2 due to production utilization over the upcoming holiday period, and we expect that to be the case this year as well.
This also reflects our continued efforts to maintain a very disciplined approach to our production output during a time when dealers are steadfast in minimizing inventory during the off-season months and as evidenced by the lower backlog with which we ended the first quarter.
Speaker Change: This also reflects our continued efforts to make <unk>, a very disciplined approach to our production output. During a time when dealers are steadfast in minimizing inventory during the off season months and as evidenced by the lower backlog with which we ended the first quarter.
This preference by the dealer network this year has been further influenced by the higher interest rate environment and the corresponding high carrying cost that the dealer network has been experiencing.
This preference by the dealer network. This year has been further influenced by the higher interest rate environment and the corresponding high carrying cost that the dealer network has been experiencing.
Negative dealer sentiment related to current inventory levels is most acute in our toolable RV and marine businesses.
Negative dealer sentiment related to current inventory levels is most acute in our towable RV and marine businesses.
And therefore, our current expectation is that the sequential sales performance for our towable RV and marine businesses will reflect this dealer sentiment most notably and will produce lower sales both sequentially from Q1 to Q2 as well as year-over-year for Q2.
Speaker Change: And therefore, our current expectation.
Speaker Change: The sequential sales performance for our total RV and marine businesses will reflect this dealer sentiment most notably.
Speaker Change: And will produce lower sales both sequentially from Q1 to Q2 as well as year over year for Q2.
we are currently anticipating that Q2 profitability will be impacted by the modest sequential reduction to sales in Q2.
Speaker Change: We are currently anticipating that Q2 profitability will be impacted by the modest sequential reduction to sales in Q2.
We do not currently expect sales incentives to change materially in Q2 from what was experienced in Q1.
Speaker Change: We do not currently expect sales incentives to change materially in Q2 from what was experienced in Q1.
These prior comments are specific to Q2. As we look ahead to the back half of our fiscal year, we continue to expect dealer ordering patterns to return to a relationship where one retail sale will produce one wholesale shipment.
Speaker Change: These prior comments are specific to Q2 as we look ahead to the back half of our fiscal year. We continued to expect dealer ordering patterns to return to a relationship where one retail sale will produce one wholesale shipment.
Speaker Change: Retail activity from the last several weeks and really the last few months continues to support a forward looking estimate of 350000 retailed units for the RV industry in calendar 2024.
Retail activity from the last several weeks and really the last few months continues to support a forward looking estimate of 350,000 retail units for the RV industry in calendar 2024.
and is consistent with the most recent RVIA estimate of approximately 350,000 shipments.
And is consistent with the most recent RV EIA estimate of approximately 350000 shipments.
with 2023 expected to produce shipments in the range of 300,000 units.
Speaker Change: With 2023 expected to produce shipments in the range of 300000 units.
The current expectation is that the industry would therefore realize an approximate 17% increase in shipments for calendar 2024.
Speaker Change: The current expectation is that the industry with therefore realize an approximate 17% increase in shipments for calendar 2024.
We expect that the back half of our fiscal year will therefore realize a pro rata portion of this expected increase.
Speaker Change: We expect that the back half of our fiscal year will therefore realize a pro rata portion of this expected increase.
Speaker Change: With that I will now turn the call back to Mike to provide some closing comments Mike back to you.
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 closing comments before we get to the Q&A session.
Mike: Thanks, Brian and now a few closing comments before we get to the Q&A session.
As many on this call are aware, and as Brian just stated, the RV Industry Association recently revised their expectations for calendar 2024 RV shipments to a mid-range estimate of 350,000 units.
Mike: As many on this call are aware and as Brian just stated the RV industry Association recently revise their expectations for calendar 2024, RV shipments to a mid range estimate of 350000 units.
We are aligned with that projection at this time, and believe this number will closely correlate with calendar year industry retail as well.
Mike: We are aligned with that projection at this time and believe this number will closely correlate with calendar year industry retail as well.
as we assess the implications of the upcoming 2024 retail season.
Mike: As we assess the implications of the upcoming 2024 retail season.
We will provide the investor community with an update to our long range financial and operational targets originally provided during our 2022 investor day.
Mike: We will provide the investor community with an update to our long range financial and operational targets.
Mike: Originally provided during our 2022 Investor day.
during our second quarter earnings call in March.
Mike: During our second quarter earnings call in March.
On our last earnings call, we announced significant news concerning the pending launch of a grand design motorhome lineup, offering a strong complimentary set of products to our current Winnebago and Newmar motorhome brand portfolio.
On our last earnings call, we announced significant news concerning the pending launch of a Grand design motor home lineup offering a strong complementary set of products to our current Winnebago and Newmar motor home brand portfolios.
Grand Design continues to reinforce its reputation as one of the most successful RV brands ever created. Receiving the RV Dealer Association Dealer Satisfaction Index Award for every one of its core product brands this past fall. An honor they have never failed to receive.
Mike: Grand design continues to reinforce its reputation as one of the most successful RV brands ever created receiving the RV dealer Association dealer satisfaction Index Award for every one of its core product brands. This past fall and honored they have never failed to receive.
We have no doubt this excellence will carry on to their new motorhome lineup, which will be unveiled later in fiscal year 2024, with anticipated shipments beginning in our fiscal fourth quarter.
Mike: We have no doubt this excellence will carry on to their new motor home lineup, which will be unveiled later in fiscal year 2024 with anticipated shipments beginning in our fiscal fourth quarter.
Also, in the first quarter, Winnebago Industries opened our advanced technology groups, New Innovation Center, which will serve as a center of excellence for Horizon 2 and 3 engineering efforts within the company.
Mike: Also in the first quarter Winnebago industries opened our advanced technology groups, New Innovation Center.
Mike: Which will serve as a center of excellence for Horizon, two and three engineering efforts within the company and.
In the years ahead, the Center will support the design of a new generation of RV and marine products that will harness and apply emerging technology.
Mike: In the years ahead, the center will support the design of a new generation of RV and marine products that will harness it apply emerging technologies.
Our integration of lithionics battery continues to go well, roughly eight months following this important strategic vertical technology acquisition.
Mike: Our integration of lifting Alex battery continues to go well roughly eight months. Following this important strategic vertical technology acquisition.
Lithionics is expanding its electrical products offering, penetrating the Winnebago Industries product portfolios with its exciting battery packs and battery management system offerings, expanding business with other outdoor mobility OEMs, and preparing its catalog of products for application into the marine industry.
Mike: Let me Alex is expanding its electrical products offering penetrating the winnebago industries product portfolios with its exciting battery packs and battery management system offerings.
Mike: Spanned a business with other outdoor mobility Oems and preparing its catalogue of products for application into the marine industry.
While the top-line sales impact to Winnebago Industries from lithionics will be modest for a few years, the profit, dollars, and yield impact will be more significant, in addition to the value of building a knowledge base here at the company on portable power technology across our businesses.
While the top line sales impact of Winnebago industries from lithium ion X will be modest for a few years the profit dollars and yield impact will be more significant.
Mike: In addition to the value of building a knowledge base here at the company on portable power technology across our businesses.
Very importantly, Winnebago Industries released last week its 5th Annual Corporate Responsibility Report. The report aligns with the global reporting initiative, universal standards, and features an index aligned with recommendations from the Task Force on Climate Related Financial Disclosures.
Mike: Very importantly, Winnebago industries released last week, its fifth annual corporate responsibility report the.
The report aligns with the global reporting initiative Universal standards and features an index aligned with recommendations from the task force on climate related financial disclosures as.
as well as the company's first Sustainability Accounting Standards Board's index.
Mike: As well as the company's first sustainability accounting standards Board index.
Highlights of Winnebago Industries corporate responsibility progress include
Mike: Highlights of Winnebago industries corporate responsibility progress include.
Submitting the company's first CDP climate change questionnaire, representing another large step toward enhancing their climate-related disclosures.
Mike: Submitting the company's first CDP climate change questionnaire, representing another large step towards enhancing their climate related disclosures.
progressing towards the company's waste reduction goal, improving to 62% diversion from landfills across our enterprise.
Mike: Progressing towards the company's waste reduction goal improving to 62% diversion from landfills across our enterprise.
initiating a strategic partnership with the Nature Conservancy to promote conservation and protect the outdoors.
Mike: Initiating a strategic partnership with the nature Conservancy to promote conservation and protect the outdoors.
a 20% reduction in the company's absolute Scope 1 and Scope 2 greenhouse gas emissions since 2020.
Mike: A 20% reduction in the company's absolute scope, one and scope two greenhouse gas emissions since 2020.
reduced total recordable incident rates by 16% compared to fiscal year 2022.
Mike: Reduced total recordable incident rates by 16% compared to fiscal year 2022.
provided more than $3 million in financial, product, and volunteer contributions to the communities Winnebago Industries serves in fiscal year 23.
Mike: Provided more than $3 million in financial product and volunteer contributions to the communities Winnebago industries serves in fiscal year 'twenty three.
an increase of 20 times in giving since 2016.
Mike: An increase of 20 times and giving since 2016.
Introducing new innovations that will support sustainability efforts, including the all-electric concept boat from ChrisCraft, further upgrades to an all-electric RV prototype, the ERV2,
Mike: Introducing new innovations that will support sustainability efforts, including the all electric concept boat from Chris craft further upgrades to an all electric RV prototype the ERP too and.
In the acquisition of a lithium ion battery manufacturer, Lithionics Battery.
Mike: And the acquisition of a lithium ion battery manufacturer lifting Alex battery.
increased board gender and racial diversity from 14% women and no directors of color in 2015 to 30% women and 20% directors of color in 2023.
Mike: Increased board gender and racial diversity from 14% women and no directors of color in 2015% to 30% women and 20% directors of color in 2023.
Lastly, I would like to extend my gratitude to the entire Winnebago Industries team of employees for their continued hard work and dedication.
Mike: Lastly, I would like to extend my gratitude to the entire Winnebago industries team of employees for their continued hard work and dedication.
they have faced a significant amount of change in the past many years and continue to demonstrate resilience and agility as we navigate very dynamic market conditions.
Mike: They have faced a significant amount of change in the past many years and continue to demonstrate resilience and agility as we navigate very dynamic market conditions.
We have a tremendous team here and I wish each of them and their families a safe and happy holiday season.
Mike: We have a tremendous team here.
Mike: And I wish each of them and their families a safe and happy holiday season.
And those same wishes are extended to all of you listening in on this call as well. That concludes
Mike: And those same wishes are extended to all of you listening in on this call as well.
Mike: That concludes our prepared remarks this morning.
I will now turn the call back over to the operator who will open up the line for your question.
Mike: I will now turn the call back over to the operator, who will open up the line for your questions.
Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment while we compile our Q&A roster.
Mike: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment, while we compile our Q&A roster.
And our first question is going to come from the line of Michael Schwartz with Truist Securities. Your line is open. Please go ahead.
Speaker Change: And our first question is going to come from the line of Michael Swartz with <unk> Securities. Your line is open. Please go ahead.
Hey, good morning, guys. Maybe just to drill down into the second quarter commentary that you made. I mean, obviously, it sounds like revenue will be down sequentially versus the first quarter, which I don't think is a big surprise, given it's a seasonally smaller period anyway. But I just wanted to maybe dig down on on the margin outlook and maybe even EPS. I mean, are you trying to get across that that sequentially EPS will be down quarter over quarter?
Michael Swartz: Hey, good morning, guys.
Michael Swartz: Maybe just to drill down into the second quarter commentary that you made I mean, obviously it sounds like <unk>.
Michael Swartz: Revenue will be down sequentially versus the first quarter, which I don't think is a big surprise given it's a seasonally smaller period anyway, but I just wanted to maybe dig down on the margin outlook and maybe even EPS. I mean are you trying to get across that sequentially EPS will be down.
Quarter over quarter.
Michael Swartz: And Mike Good morning, this is Brian.
With the deleverage we've experienced, that's been the biggest driver by far of our margins, you know, versus last year and even sequentially. And as I said in the prepared remarks, the allowances and discounts aren't going to be meaningfully different, so I think you should interpret the comments as such, that the lower sales volume will deliver through deleverage a lower profit.
Brian: With the deleverage we've experienced.
Mike: That's been the biggest driver by far of our margins.
Versus last year, and even sequentially and as I said in the prepared remarks, the allowances and discounts aren't going to be meaningfully different. So I think you should interpret the comments as such that the lower sales volume.
Mike: We will deliver through deleverage a lower profit number.
You know, obviously we're doing a lot of things to manage the expenses, the cost, we leverage our variable cost structure to the extent that we can.
Mike: Obviously, we're doing a lot of things to manage the expenses the cost we leverage our variable cost structure to the extent that we can.
Mike: But that's the message we're conveying.
Got you. Okay. Thank you. And then second question, just, and I think Mike, you were, you were discussing this in your, in your, in the preamble, just in terms of the retail environment, maybe in the past 30 to 60 days, I sensed, I guess, a little more, maybe optimism versus where we were when we last talked back in October . And could you just give us a, maybe a little more flavor color what you've actually seen on the retail environment, you know, both in the RV and the Marine industry.
Speaker Change: Got you okay. Thank you.
Speaker Change: Question, just and I think Mike you were you were.
Speaker Change: Discussing this in the preamble just in terms of the retail environment, maybe in the past 30 to 60 days I guess, a little more maybe optimism versus where we were when we last talked back in October.
Speaker Change: Could you just give us some maybe a little more flavor or color, what you've actually seen on the retail environment, both in the RV and marine industries.
Yeah, good morning, Mike. You know, as my comments indicated, you know, we aren't seeing a lot of surprises in the retail environment right now. It has generally been tracking.
Speaker Change: Yes, good morning, Mike.
Speaker Change: As my comments indicated.
Speaker Change: We aren't seeing a lot of surprises in the retail environment right now it has generally been tracking on.
both the RV and marine side to the internal projections that we have had for both calendar 23 and sort of the trend line that's headed towards obviously calendar 24 here and in the coming weeks. I did mention that we are seeing positive retail from both Grand Design RV and Barletta and when I say positive I mean positive over same weeks the year prior.
Speaker Change: On both the RV and marine side to the internal projections that we have had for both calendar 'twenty three and.
Speaker Change: And sort of the trend line, that's headed towards obviously calendar 'twenty four here in the coming weeks I did mention that we are seeing.
Speaker Change: Positive retail from both Grand design, RV, and Barletta and when I say positive I mean positive over.
Speaker Change: Same weeks the year prior so truly positive.
The other businesses are, again, trending as we expected and are, you know, gradually improving in a comp standpoint versus the year prior.
The other businesses are are again trending as we expected.
Speaker Change: And are gradually improving.
Comp standpoint versus the year prior.
As Brian and I both indicated, if we are to reach, you know, that 2024 retail level of 350,000 units approximately, we'll have to gradually see an overall
Speaker Change: As Brian and I, both indicated if we are to reach.
Speaker Change: That 2024 retail level of 350000 units approximately we will have to gradually see an overall.
trend of RV, you know, retail comps closer to ultimately, you know, flat to maybe late later in calendar 24 positive versus the year prior.
Speaker Change: The trend of RV retail comps closer to ultimately flat to maybe late later in calendar 'twenty four positive versus the year prior.
So, no surprises on the trends that we're projecting internally and, you know, the bigger challenge in the current short term is, you know, dealers just continuing to very carefully manage their own inventories.
Speaker Change: So no surprises on.
On the trends that were that were projecting internally and the bigger the bigger challenge in the current short term as dealers just continuing to very carefully manage their own inventories.
Speaker Change: Great. Thank you.
Speaker Change: Yes.
Thank you and one moment as we move on to our next question.
Speaker Change: Thank you and one moment as we move on to our next question.
And our next question is going to come from the line of Craig Kinison with Baird. Your line is open. Please go ahead.
Speaker Change: And our next question is going to come from the line of Craig Kennison with Baird. Your line is open. Please go ahead.
Hey, good morning. Thanks for taking my question as well. I wanted to follow up on Mike's last question, just it would seem to me that RV affordability has improved significantly given, you know, model year 2024 prices and the moving interest rates. I'm just curious if you're hearing anything from your channel partners that suggests, you know, any movement by consumers based on that map.
Craig Kennison: Hey, good morning, Thanks for taking my question as well I wanted to follow up on.
Speaker Change: Mikes last question.
Speaker Change: It would seem to me that RV affordability has improved significantly given model year 'twenty 'twenty four prices and the move in interest rates I'm just curious if you're hearing anything from your channel partners.
Speaker Change: Suggest.
Speaker Change: Any movement by consumers based on that math.
Yeah, good morning, Craig. You know, I, I think any movements to that end would be very subtle at this time. You know, we are trying to address.
Speaker Change: Yes, good morning, Greg.
Speaker Change: I think any movement to that and would be very subtle at this time.
Speaker Change: We are trying to address.
the affordability challenge in the marketplace for new consumers of RVs and boats through a variety of tactics.
Speaker Change: The affordability challenge in the marketplace for four.
Speaker Change: New consumers of Rvs and boats through a variety of tactics.
Certainly, some of that includes support for units and dealer inventory that are either aging in place or may be particularly pressured from a price standpoint. We have also introduced, as we said in the script, several new models within a few of our brands that we believe will be more attractive to consumers shopping for lower price points.
Speaker Change: Certainly some of that includes support.
Speaker Change: Four units in dealer inventory that are either aging in place or maybe particularly pressured from a price standpoint.
We have also introduced as we said in the script several new models within a few of our brands that we believe will be more attractive to consumers shopping for lower prices price point.
And then, you know, the last thing that we're definitely, you know, doing is we are passing on the benefits of reduced inflation, or in some cases, even, you know, disinflation, you know, to deflation to our dealers as well. You know, our businesses are being fair at the time where we have a bill of material that is...
Speaker Change: And then.
Speaker Change: The last thing that we are definitely.
Speaker Change: Doing is we are passing on the benefits of reduced inflation.
Speaker Change: Or in some cases even.
Speaker Change: Disinflation.
Speaker Change: Two deflation to our <unk>.
Speaker Change: <unk> as well.
Our businesses are being fair at the time, where we have a bill of material that is.
you know, going the right direction in terms of a lower cost of goods, you know, those products are seeing that benefit pass through to the dealers as well. But, you know, this time of year, Craig, retail-wise, difficult to see, you know, a significant movement by consumers reacting to affordability easing in the marketplace.
Speaker Change: Going the right direction in terms of a lower cost of goods.
Speaker Change: Those those products are seeing that benefit pass through to the dealers as well, but this time of year, Craig retail wise difficult to see.
Speaker Change: A significant movement by consumers reacting to affordability easing in the marketplace.
Thanks, Mike. And then could you comment on the freshness of dealer inventory, basically like the mix of model year 2024 units versus prior year models and how that would be compared to prior year.
Speaker Change: Thanks, Mike and then could you comment on the freshness.
Speaker Change: Inventory basically like the mix of model year, 2024 units versus prior year models, and how that would be compared to prior years at this time. Thank you.
Yeah, Craig, I can speak to that. I won't get into any specifics by brand, but we feel we are in good relative condition to the rest of the the industry. When we look across all of our businesses, RV and Marine.
Yes, Craig I can speak to that I won't get into any specifics by brand, but we feel we are in good relative conditioned to the rest of the industry. When we look across all of our businesses RV and marine.
We think that less than 5% of our inventory at the end of quarter one was model year 2022.
We think that less than 5% of our inventory at the end of quarter. One was model year 2022.
We believed somewhere in the neighborhood of, you know, 40 to 45 percent was model year 23.
Speaker Change: We believed somewhere in the neighborhood of <unk>.
Speaker Change: 40% to 45% was model year 'twenty three and subsequently that means about half of our inventory was model year 2024, if you compare that to the.
subsequently that means about half of our inventory was model year 2024. If you compare that to the previous fiscal years at that point in time, end of Q1, we are a little bit heavier.
Speaker Change: Previous fiscal years at that point in time in Q1.
Speaker Change: We are a little bit heavier.
prior model year inventory, in this case that would be model year 2023, and a little bit lighter on current model year inventory, that being model year 2024. The numbers that I just quoted, generally the RV numbers as part of that are a little bit lower, you know, in a positive way, you know, meaning we have less
Speaker Change: The prior model year inventory in this case that would be model year, 2023, and a little bit lighter on current model year inventory that been model year 2024.
Speaker Change: The numbers that I, just quoted generally be RV numbers as part of that are a little bit lower.
Speaker Change: Positive way, meaning we have less.
you know, prior model year inventory. In the marine side, we probably have a little bit more prior model year inventory that we're working through. I've seen some notes from some of the fell site analysts that are probably on the call today that have probably done some scrapes.
Speaker Change: Prior model year inventory in the marine side, we probably have a little bit more prior model year inventory that we're working through I've seen some notes from some of the sell side analysts that are probably on the call today that have probably done some scrapes.
of online dealer inventory, and it appears that we are in good shape versus the rest of the industry in terms of inventory positions. So a little elevated, but not anything that is causing us great consternation.
Speaker Change: Online dealer inventory.
And it appears that we are in good shape versus the rest of the industry in terms of inventory position. So a little elevated but not anything that is causing us great consternation at this time.
We do think that that is one of the things that will impact Q2 as well. I mentioned, as did Mike, the dealer sentiment having an impact on Q1 and ordering patterns.
Speaker Change: We do think that that is one of the things that will impact Q2, as well I mentioned, Mike the dealer sentiment, having an impact on Q1 and ordering patterns.
into Q2. That's certainly one of the things that we hear from dealers is that they want to minimize.
Into Q2.
Speaker Change: Certainly one of the things that we hear from dealers is that they.
Speaker Change: You don't want to minimize.
model your 24 purchases until they see more progress, you know, industry-wide on those model your 23s on their lots.
Speaker Change: Model year, 'twenty four purchases until they see more progress industrywide on those model year 'twenty threes on their lots.
Speaker Change: That's very helpful happy holidays.
Speaker Change: Thank you Greg.
Thank you, and one moment as we move on to our next question.
Speaker Change: Thank you and one moment as we move onto our next question.
And our next question is going to come from the line of Brett Jordan with Jeffries. Your line is open. Please go ahead.
Speaker Change: And our next question is going to come from the line of Bret Jordan with Jefferies. Your line is open. Please go ahead.
Bret Jordan: Hey, good morning, guys.
Could you talk a little bit more about the incremental SG&A investment? I think you talked around sort of engineering, data, IT. Could you give us a bit more color there and, you know, how we should think about that in sort of in 24?
Bret Jordan: Could you talk a little bit more about the incremental SG&A investment I think you talked around sort of engineering data.
Bret Jordan: Would you give us a bit more color there and how we should think about that in sort of in 'twenty four.
Yes. Good morning, Brett This is Mike I'll begin and then Brian will probably add some additional context as well.
Yeah, good morning, Brett. This is Mike. I'll begin and then Brian will probably add some additional context as well. You know, I had felt candidly through the last month or so that the street was modeling our a little lower than what we had been planning.
Had felt candidly through the last month or so that the street was modeling our SG&A a little lower than what we had been planning.
Our SGNA for quarter one actually came in lower than what our management plan on SGNA was for quarter one.
Bret Jordan: Our SG&A for quarter, one actually came in lower than what our management plan on SG&A was for quarter one.
So SG&A is a little bit different in its variable cost nature than really the manufacturing side of our business. And Brian can probably speak to that a little bit more articulately than I can. But as we returned to a new fiscal year, you know, you saw some things roll over as one example would be the reset of bonuses for, you know, certain employees, you know, in the organization.
Bret Jordan: So SG&A is a little bit different in its variable cost nature than really the manufacturing side of our business and Brian can probably speak to that a little bit more articulately than I can but as we return to a new fiscal year.
Bret Jordan: Some things roll over as.
Brian: One example would be the reset of bonuses for certain employees.
Brian: In the organization.
But I'm going to speak to the specific things I referenced in the call, engineering being one of them. We are spending intentional dollars around the development of new products.
Brian: But I'm going to speak to the specific things I referenced in the call.
Brian: Engineering being one of them.
Brian: We are spending.
Brian: Intentional dollars around the development of new products around.
around work in the advanced technology area on topics like electrification, and even within our businesses, our businesses are keeping their foot to the pedal in terms of new products that will be introduced later in this fiscal year or future fiscal years. I talked about digital...
Work in the advanced technology area on topics like electrification.
Brian: And even within our businesses our businesses are keeping their foot to the pedal in terms of new products that will be introduced later in this fiscal year or future fiscal years I talked about digital assets.
You know, the world is changing from a, you know, brick and mortar analog environment, you know, to more of an online digital world, and we are investing in numerous tools.
Brian: World is changing from a brick and mortar analog environment to more of an online digital.
Brian: World and we are investing in numerous tools.
within our businesses that will help us compete effectively in the future from a digital engagement standpoint with consumers. And lastly, IT...
Brian: Within our businesses that will help us compete effectively in the future from a digital engagement standpoint, with consumers and lastly systems Winnebago industries. When I joined the company now almost eight years ago, just was not modernized in the way we did business in particularly the foundation of it.
You know, Winnebago Industries, when I joined the company now almost eight years ago.
just was not modernized in the way we did business, and particularly the foundation of IT systems. And we continue.
Brian: Systems, and we continue to.
to travel along that path. And we are making intentional investments in ERP systems, in customer service phone systems. We're making investments in financial systems. We're making investments in customer relation management systems.
Brian: To travel along that path and we are making intentional investments in ERP systems.
Brian: In customer service phone systems, we're making investments in financial systems, we're making investments and customer relation management systems, all with the intention of obviously modernizing the business and setting the stage for success in the future. So we probably had a little bit of a misalignment with the street.
all with the intention of obviously modernizing the business and setting the stage for success.
in the future. So, you know, we probably had a little bit of a misalignment with the street this quarter on, you know, that impact of both resetting SG&A, but also adding in some of those investments. But, you know, now you guys are aware of our approach on that. Brian , any other context? Yeah, I'll give you a little more context, Brett. You know, we have historically talked about our cost structure being 85% variable.
Quarter on that impact of both resetting SG&A, but also adding in some of those investments but.
Speaker Change: Now you guys are aware of our approach on that Brian any other context, yes, I'll give you a little more context Brett.
Historically talked about our cost structure being 85% variable.
Brett: <unk> is clearly a really small part of our cost structure.
But it's much more fixed. I would use more of a 25% variable as a.
But it's much more fixed I would I would use more of a 25% variable.
Brett: As a high level estimate.
So, that might help some of the modeling. We've also added lithionic.
Brett: So that might help some of the modeling. We've also added lithium ion X, obviously that business unit SG&A since last year not since Q4, so not sequentially, but versus last year, that's an AD as well as the purchase accounting impact.
Obviously that business unit SG&A since last year, not since Q4, so not sequentially, but versus last year, that's an add, as well as the purchase accounting impact.
from that deal. Mike mentioned the investments we're making, all very intentional. He also mentioned the bonus plans and the variability that that might cause from one quarter to the next.
Brett: From that deal Mike mentioned, the investments, we're making all very intentional you also mentioned the bonus plans and the variability that that might cause from one quarter to the next so in general you got also appreciate that SG&A is more subject to volatility from one quarter to the next as we deal.
So, in general, you know, you've got to also appreciate that SG&A is more subject to volatility from one quarter to the next as we deal with some non-recurring type items as well. So, we'll continue to provide commentary around those types of things as they occur. But I guess that was the additional context I would add. Okay, great. Thank you.
Brett: With some nonrecurring type items as well so we'll continue to provide commentary around those types of things as they occur.
Brett: But I guess that would be additional context I would add.
Speaker Change: Okay, great. Thank you and then a quick question I guess.
The last couple of years, the RBIA started out pretty high and ended up, you know, substantially lower and it seems like they've taken the number down a little bit already for 24. You know, I guess.
Speaker Change: Last couple of years, the RV EIA started out pretty high it ended up being at a substantially lower and it seems like they've taken the number down a little bit already for 24.
Speaker Change: Yes.
It's in line with your forecast. I guess, do you think that's substantially de-risked? I guess, what would you see that could happen that would cause the RVIA number to come in 20 plus percent below the initial forecast as it has the last couple of years? Or are they conservative enough at this point, do you think?
Speaker Change: In line with your forecast I guess do you think thats substantially de risked I guess, what would you see that could happen that would that would cause the RV IAA number to come in 20 plus percent below the initial forecast as it has the last couple of years or are they conservative enough at this point do you think.
You know, Brett, we have members of our leadership team that participate in the process with our VIA on the market statistics committee to help set that number. So So So So So So So So So So So So So So So So So
Speaker Change: Brett we have members of our leadership team that that participate in the process with our view on the market Statistics committee to to help set that number so.
And that's a good thing that OEMs and suppliers are working with our VIA to try to come up with a collective projection for shipments.
And that's a good thing.
Oems and suppliers are working with RBA to try to come up with a collective projection for shipments.
The element that comes to mind when you ask that question for me is timing.
Speaker Change: The element that comes to mind. When you asked that question for me is timing.
you know i i think that the the question here is when will dealers you know begin to feel more confident
Speaker Change: I think the question here is when will dealers.
Speaker Change: Begin to feel more confident.
in trending towards that one-to-one retail to wholesale replenishment ratio that not only Winnebago Industries has referenced, but some of our peers as well.
Speaker Change: In.
Speaker Change: Trending towards that one to one.
Speaker Change: Retail to wholesale replenishment ratio that.
Speaker Change: Not only Winnebago industries is reference, but some of our peers as well and I think.
And I think late, you know, we're not anticipating a large retail difference in calendar 24 versus calendar 23. We think it'll be a relatively flat environment. And so it really comes down to channel confidence in terms of, you know, taking more inventory to put on their lots to
Speaker Change: We're not anticipating a large retail difference in calendar 'twenty four versus calendar 'twenty three we think it'll be a relatively flat environment and so it really comes down to channel confidence in terms of.
Speaker Change: Taking more inventory to put on their lots to support.
you know, a healthy retail environment with consumers. And I think the timing of that sort of, you know, channel shipment flow trend will be what, you know, ultimately determines the shipment number.
Speaker Change: A healthy retail environment with consumers and I think the timing of that sort of channel shipment flow trend will be what ultimately determines the shipment number.
Certainly, if retail is positive, if the fed cuts interest rates of consumers
Certainly if retail is positive if the fed cuts interest rates of consumers.
you know, feel some easing and start to return to spending, you know, in the RV and marine industries, you know, that retail boost or energy could certainly also, you know, help deliver that higher confidence to our dealers. So I think it's timing, and I think the RVIA shipment number is probably more balanced in terms of upside and downside at this new 350 number.
Speaker Change: Feel some easing and start to return to spending.
Speaker Change: In the RV and Marine industries.
That retail booster NRG could certainly also helped deliver that higher confidence to our dealers. So so I think its timing and I think the RBA shipment number is is probably more balanced in terms of upside and downside at this new $3 50 number.
Speaker Change: Okay, great. Thank you.
Thank you and one moment as we move on to our next question.
Speaker Change: Thank you and one moment as we move on to our next question.
Our next question is going to come from the line of Tristan Thomas-Martin with BMO Capital Markets. Your line is open. Please go ahead. Hey, good morning.
Our next question is going to come from the line of Tristan Tristan Thomas Martin with BMO capital markets. Your line is open. Please go ahead.
Speaker Change: Hey, good morning.
Has your view on ASPs for the full year changed since last quarter?
Speaker Change: Thank you.
Speaker Change: Your view on Asps for the full year changed since last quarter.
You know, on the tolbo side, what we're seeing is probably a stronger shift in mix.
On the towable side, what we're seeing is probably a stronger shift in mix.
Tristan, at least in the near term, in Q1 and probably to be continued in Q2 towards travel trailers versus fifth wheels, as consumers migrate to a more affordable product. I think MIX will continue to have a bigger impact on ASP than what we have conveyed, you know, and I think as recently as last quarter, we conveyed a number. On the motorized and marine side, pretty consistent still from what we're seeing in terms of ASPs.
Speaker Change: Tristan at least in the near term in Q1, and probably to be continued in Q2 towards travel trailers versus fifth wheels as consumers migrate to more affordable product I think I think mix will continue to have a bigger impact on asps and what we have conveyed.
Speaker Change: And I think as recently as last quarter, we conveyed a number.
On the motorized and marine side.
Speaker Change: Pretty consistent Philip from what we're seeing in terms of Asps.
The tolerable ASP being much more influenced by MEX versus a like for like rate.
Speaker Change: The <unk> ASP.
Speaker Change: Being much more influenced by mix versus like for like rate.
Reduction, you know, we still see that and probably on the rate side and the low to mid single digit You
Speaker Change: Reduction, we still see that probably on the rate side.
Low to mid single digit.
Speaker Change:
Decline for Asps on <unk>.
Okay, that's kind of like for like, okay. So the, the, the mix impact. That drove the reduction here in Q1, uh, that.
Okay. So like for like Okay. So that the mix impact that drove the reduction here in Q1.
Speaker Change: That was much larger.
Okay, I looked at the last part, didn't you say down mid to high single digits on a mixed neutral basis? Now, is it down low to mid? Is that what you're saying? Sorry, strongest way. Yeah, I'd say it's moderating. We're seeing inflation that's quarter to quarter, pretty neutral at this stage.
Speaker Change: Okay.
Speaker Change: Gordon you stay down mid to high single digits on a mixed neutral basis.
Speaker Change: It was down low to mid <unk> is that what you're saying.
Speaker Change: I'd say, it's moderating we're seeing.
Speaker Change: Inflation thats quarter to quarter pretty neutral at this stage.
Okay. And then just one more thing to square. Your total shipments were much greater than the industry, at least over the two months of reported industry data. What was kind of the delta there in the university industry?
Speaker Change: Okay.
Speaker Change: And then just one more thing to square your total shipments are.
Speaker Change: Much greater than the industry at least over the two months of the reported industry data what was kind of the delta there versus the industry.
Tristan, this is Mike, you know, I think we continue to, I'm assuming you're referencing the RV industry, you know, we continue to see some benefit, you know, from the totals, you know, business, particularly grand design, re-establishing, I think.
Mike: Chris This is Mike.
Mike: I think we continue to I'm, assuming you're referencing the RV industry, we're continuing to see some benefit.
Mike: From.
Mike: The <unk> business, particularly Grand design, Reestablishing I think a solid lot share foundation.
a solid lot share foundation. We had talked for several years, it seemed, on this influx of second and third tier brands that dealers took on during the COVID frenzy. That issue is largely gone now and a brand like Grand Design has really worked hard with its dealers to reestablish the right share of
Mike: We had talked for several years it seemed on.
Mike: This influx of second and third tier brands that.
Mike: Dealers took on during the Covid frenzy that issue is largely gone now.
Mike: A brand like Grand design is.
Mike: Really worked hard with its dealers to reestablish.
Mike: The right share of what.
Uh, you know, from that standpoint, you know, I would say our new, more business has also done a good job working with its dealers.
From that standpoint, I would say our Newmar business has also done a good job working with its dealers to make sure that stocking inventory levels are where we think are appropriate and so.
to make sure that stocking inventory levels are where, you know, we think are appropriate. And so, you know, I don't think our lot share has swung in an unhealthy way, you know, based on, you know, shipments the last couple of months.
Mike: Think our lot share has swung in an unhealthy way.
Based on shipments the last couple of months I think it's back to where we think it needs to be.
I think it's back to where we think it needs to be. And we're starting to see some retail share benefits as well, we think.
Mike: And we're starting to see some retail share benefits as well we think from some of that activity is as I mentioned on the call, particularly with Grand design RV.
from some of that activity. As I mentioned on the call, particularly with Grand Design RV.
Um, you know, their retail has not just stabilized, but started to take some some small ticks up in the right direction, which we think is
Retail is not just stabilize but started to take some some small ticks up in the right direction, which we think is.
you know, a sign of more positive things to come on that.
Mike: A sign of more positive things to come in on that brand.
Okay, I'm going to sneak one more in about. Okay. Can you remind everyone your stance on building open orders? Thank you.
Speaker Change: Okay, I'm going to sneak one more in if that's okay can you remind everyone. Your stance on building open orders.
Speaker Change: Yes.
Well, our stance on open orders, you know, has certainly evolved through the years. Many, many years ago, the Winnebago brand of motorhomes used a predominantly open order position. But as we've added quality businesses and as we've improved our production planning processes, as most of you on the call know, we shifted to largely a non-open order production planning cycle.
Speaker Change: Well our stance on open orders has certainly evolved through the years. Many many years ago. The Winnebago brand of Motorhomes used a predominantly open order position.
Speaker Change: But as we've added quality businesses and as we've improved.
Speaker Change: Our production planning processes as most of you on the call, though we shifted to largely a non open order production planning cycle now that's been challenged in a number of different ways as the cycles have happened.
Now, that's been challenged in a number of different ways as the cycles have happened.
Supply chain challenges have happened at this current time, our intention is still to minimize the number of open production units that we build to a reasonable number so each of our business probably still builds a small percentage of their production that is.
So each of our business probably still builds a small percentage of their production that is, you know, that is open, but we are working hard with our sales teams to stay far enough ahead of our business to have, you know, to have orders when we begin that unit on the production line.
That is open but we are working hard with our sales teams to stay far enough or ahead of our business to have.
Speaker Change: To have orders when we begin that unit on the production line as you saw from our backlog.
As you saw from our backlog, you know, working its way down, our sales teams have to, you know, work hard and effectively to make sure that we have, you know, orders that we can match to the production process. So we're going to be as disciplined as we can, both in terms of quantity of production.
Speaker Change: Working its way down.
Speaker Change: Our sales teams have to work hard and effectively to make sure that we have orders that we can match to the production process. So we're going to we're going to be as disciplined as we can both in terms of quantity of production.
But also, you know, trying to manage open-order production to a reasonable amount. We are not building lots full of open units waiting for spring to happen.
Speaker Change: But also.
Speaker Change: Trying to manage open order production to a to a reasonable amount.
Speaker Change: We are not building lots full of open units waiting for spring to happen and dealers to take those units.
That's that's not generally been our approach and that's why we have some extended down times here over over the holidays in some of our plants
Speaker Change: That's not generally been our approach and Thats why we have some extended downtime here over over the holidays and some of our plants.
Okay. Thank you.
Thank you and one moment as we move on to our next question.
Speaker Change: Thank you and one moment as we move on to our next question.
Our next question is going to come from the line of Joe Altavarro with Raymond James. Your line is open. Please go ahead. Thanks. Hey, guys. Good morning. First question on travel trailers and the mid-shift away from drift wheels. How does that coupled with the improvement in your expectation for base pricing on towables overall impact, you know, segment margins? Do you guys still expect to see margin expansion in towables this year?
Speaker Change: Our next question is going to come from the line of Joe <unk> with Raymond James Your line is open. Please go ahead.
Joe: Hey, guys good morning.
Joe: First a question on travel trailers.
Joe: Mix shift away from fifth wheels, how does that coupled with the improvement.
Joe: And your expectation for base pricing on payables overall impact segment margins do you guys still expect to see margin expansion.
Joe: <unk> this year.
Yeah, Joe, this is Brian . You know, the, I think, as I mentioned, the total business will continue to show in the near term here, Q1, Q2, will continue to show growth that outpaces the fifth wheel. I think that's just where the consumer is at right now. And their preference for a lower priced unit.
Joe: Yes, Joe this is Brian.
Brian: I think as I mentioned, the total business will continue to show in the near term here Q1, Q2, we will continue to show growth that outpaces. The fifth wheel I think thats, just where the consumer is at right now.
Brian: And their preference for lower priced unit.
I think that as we continue to see some of the positive developments, and some of them have been mentioned already on the call, you know, interest rates perhaps showing a more
Brian: I think that as we continue to see some of the positive developments in some of them had been mentioned already on the call interest rates.
Brian: <unk> showing a more dovish.
approach, consumer confidence improving, you know, fuel costs that seem to be, you know, on a downward trend, certainly moderating inflation, both broadly speaking and the impact that has on consumer wallets as well as specific to our products. I think as we continue to see those things, some of that will normalize in the go-forward periods. In other words, we'll see.
Brian: Approach consumer confidence improving.
Brian: Fuel costs that seem to be.
Brian: On a downward trend.
Brian: Moderating inflation.
Brian: Both broadly speaking and the impact that has on consumer wallets as well as specific to our products I think as we continue to see those things some of that will normalize in the go forward periods in other words, we'll see.
you know, a more consistent growth pattern between towables and fifth wheels. So that's the current expectation. You know, I think your question really gets to, you know, does gross margin differ materially across our price points? I guess the message I would send there is no, it really doesn't. You know, there's a little bit, as there is on all product categories in other industries. Ours is probably not an exception there. But, you know, we really build units.
Brian: A more consistent growth pattern between October 5th wheel. So.
Brian: That's the current expectation.
Brian: Your question really gets to.
Brian: Gross margin differ materially across our price points the message I would say there is.
Speaker Change: No it really doesn't.
Speaker Change: There is a little bit as there is in all product categories. In other industries are probably not an exception there, but we really build units.
a bill of materials perspective and price them to deliver a pretty consistent margin from the lower price to the higher price. I'd say we're always striving for innovation and differentiation and in products where we think that we have a, you know, a better position in our competition we might realize some some higher margins than the average, you know, some more differentiation or innovation driven versus price point driven.
Bill of materials perspective, and price them to deliver a pretty consistent margin.
Speaker Change: From the lower priced at a higher price I would say, we are always striving for innovation and differentiation and in products, where we think that we have a <unk>.
Speaker Change: <unk> position than our competition, we might realize them some higher margins than the average for more differentiation and innovation driven versus price point driven.
But that's how we approach things and that's what you should assume in the model.
Speaker Change: But that's that's how we approach things and Thats.
What you should assume in the modeling.
Okay, that's helpful. And maybe on motorhomes, you called out some operational issues in the press release. Is this the same issue or issues that you saw last quarter or are they new issues?
Speaker Change: Okay. That's helpful and maybe on on motor homes, you called out some operational issues.
Speaker Change: In the press release is this the same issue or issues that you saw last quarter or the new issues.
Yes.
I'm, sorry, I'll start Mike and then you can add.
You know, a lot of similar things, we did have in Q1 though, we had some rework that was associated with some recall activity that was necessary. We did see some lower productivity on some of the newer products that we have going down the line right now. So that was occurring. There was some flexed workforce or some.
Speaker Change: A lot of similar things we did have in Q1, though we had some rework that was associated with some recall.
Speaker Change: Activity that was necessary.
We did see some lower productivity on some of the newer products that we have going down the line right now so that was occurring there was some flex workforce.
Speaker Change: Some <unk>.
additional workforce in certain verticals, that might have had a bit of an impact as well. And I'm speaking really to the motorhome margins specifically here, okay. And then just generally higher, some higher warranty costs.
Speaker Change: Additional work for some certain verticals that might have had a bit of an impact as well and I'm speaking really to the motor home.
Speaker Change: <unk> specifically here okay.
Speaker Change: And then just generally higher some higher warranty costs.
associated with some specific recall activity. So, those are probably the call-outs.
Associated with some specific recall activity. So those are probably the the callout.
altogether, you know, an EBITDA margin impact of one to one and a half points in that range. So certainly not as big as the deleveraging impact in the, you know, allowances and discounts that we've called out as the primary drivers, but it was still, I thought, worth calling out as an EBITDA margin impact in the quarter.
Speaker Change: Altogether.
Speaker Change: And EBITDA margin impact of one to one five points in that range.
Speaker Change: So certainly not as big as the deleveraging impact in the <unk>.
Speaker Change: Allowances and discounts that we've called out as the primary drivers, but it was still I thought worth calling out.
Speaker Change: As an EBITDA margin impact in the quarter.
Speaker Change: Okay, great. Thank you guys.
Thank you, and one moment as we move on to our next question.
Speaker Change: Thank you and one moment as we move on to our next question.
And our next question comes from the line of Scott Stimber with Ross MKM. Your line is open. Please go ahead. Good morning and thanks for taking my.
Speaker Change: And our next question comes from the line of Scott <unk> with Ross your.
Scott: Your line is open. Please go ahead.
Good morning, and thanks for taking my questions guys.
Speaker Change: Good morning, Scott, Let me Scott.
Mike, can you maybe just talk a bigger picture? I know it's hard to tell right now what's going to happen, but obviously a lot has changed in the dynamics for the dealers, the cost of carrying product. Are you hearing through any discussions that maybe the order patterns...
Speaker Change: Mike can you maybe just talk bigger picture I know, it's hard to tell right now what's going to happen.
Speaker Change: Obviously, a lot has changed in the dynamics for the dealers the cost of carrying products.
Speaker Change: Are you hearing any discussions that may be.
Speaker Change: <unk>.
Speaker Change: The order patterns.
will change materially going forward, meaning more of a just-in-time batch kind of scenario versus the prior big chunks of orders that you would see? And if so, do you have to adjust your cost structure at all to handle?
Speaker Change: We'll change materially going forward, meaning more of a just in time batch kind of scenario.
Speaker Change: Versus the prior.
Speaker Change: Big chunks of orders that you would see and if so.
Speaker Change: Do you have to adjust your cost structure.
Speaker Change: At all to handle that.
Thanks, Scott, for the question. So, yeah, a couple elements there. You know, I mean, dealer ordering patterns have certainly changed in recent months. You know, and I think your observation that...
Speaker Change: Thanks, Scott for the question so a couple of elements there.
Speaker Change: Yes, I mean dealer ordering patterns have certainly changed in recent months.
Speaker Change: And I think your.
Observation that the dealers.
you know, to have a higher sense of confidence that they can get new product more quickly that they don't have on their lots at the present time, or if they have a retail customer who orders something that's not on their lots, that they can secure that. I think that's generally correct in terms of, you know, dealer anticipation that the lead time for new product from OEMs, you know, is going to be shorter.
Speaker Change: To have a higher sense of confidence that they can get new product more quickly that they don't have on their lots at the present time or if they have a retail customer.
Speaker Change: Order something thats not on their lots that they can secure that I think thats generally correct in terms of.
Speaker Change: Dealer.
Anticipation that the lead time for new product from Oems.
Speaker Change: Is going to be shorter.
I think we all have to be careful in the industry about how aggressive we get to that end, because on certain products, particularly motorized, but even, you know, a few of the towables and certainly some of the boats as well, there are elements of the supply chain which are still, you know, just, you know, have longer lead times as well. So I think there'll be some natural friction that will put that pendulum in, you know, a good place going forward.
Speaker Change: I think we all have to be careful in the industry about how aggressive we get to that end because on certain products, particularly motorized but even.
Speaker Change: Few of the totals.
Speaker Change: And certainly some of the boats as well.
Speaker Change: There are elements of the supply chain, which are still.
Speaker Change: Just.
Speaker Change: Have longer lead times as well, so I think there'll be some natural friction that will put that pendulum.
A good place going forward.
Obviously, our comments today around Q2, you know, should certainly be viewed as a confirmation that, you know, the order base that we see for, you know, that particular period of shipment months.
Speaker Change: Obviously our.
Speaker Change: Comments today around Q2.
Speaker Change: Should certainly be viewed as a confirmation that the order base that we see for that particular period of shipment months.
uh... you know we believe will be uh... you know more moderate and more constrained in the very in the very short term uh... i think dealer ordering pattern change in the future will really depend on any uh... spike of positivity
Speaker Change: We believe we will be.
Speaker Change: More moderate and more constrained in the very in the very short term.
Speaker Change: I think dealer ordering pattern change in the future will really depend on any.
Speaker Change: Spike of positivity.
you know, at retail, and the dealers potentially, you know, gaining confidence at the same time and beginning to compete again for that OEM production capacity.
At retail and the dealers potentially gaining confidence at the same time and beginning to compete again for that OEM production capacity.
Certainly, your second, the second part of your question around, you know, looking at the cost structure, we've been doing that.
Certainly your second the second part of your question around looking at the cost structure, we have been doing that.
all along, and as we talked about the variable cost nature, that is part of the dial that we use. Unfortunately, that has...
Speaker Change: All along.
Speaker Change: And as we've talked about the variable cost nature that as part of the dial that we use unfortunately that has obviously.
you know, resulted in less manufacturing employees being needed within our businesses. You know, we had a peak of, you know, 7700 employees, you know, at one point, and we're running roughly at about 6100 employees.
Speaker Change: Resulted in.
Speaker Change: Less manufacturing employees are being needed within our businesses. We had a peak of 7700 employees at one point and we're running roughly at about 6100 employees.
at the end of the first quarter, but we are also looking at, you know,
Speaker Change: At the end of the first quarter.
Speaker Change: But we are also looking at.
cost structure from an infrastructure standpoint and a more systemic standpoint as well.
Speaker Change: Cost structure from a from an infrastructure standpoint, and a more systemic standpoint as well.
should we have a sort of permanently low-growth environment develop here over the next, you know, several years. So we have to be prepared for any of those scenarios and we'll certainly update our investors appropriately with any news if we decide to change, you know, the cost structure of the business in a, you know, in a very material and meaningful way above and beyond, you know, the variable playbook that we've used through the...
Should we have a sort of permanently low growth environment develop here over the next several years so.
Speaker Change: So we have to be prepared for any of those scenarios and we'll certainly update our investors appropriately with any news if we decided to change the cost structure of the business and Ah.
Speaker Change: In a very material and meaningful way above and beyond the variable playbook that we've used through the years.
Got it. Very helpful. And then last question, just on cash flow, I know you guys don't guide, but how should we look at 24 from a free cash flow perspective, higher, lower than the last couple of years and, you know, the, again, the, the, the deployment of capital, how should we look at that as far as proper?
Speaker Change: Got it very helpful. And then last question just on cash flow I know you guys don't guide, but how should we look at 'twenty four from a free cash flow perspective, higher or lower than the last couple of years and.
Again.
Speaker Change: The deployment of capital how should we look at that as far as profits.
Yeah, I'll take a first stab at that. Scott and Mike can add on, you know, historically speaking Q1 Q2 has, you know, they've not been cash generating quarters for
Speaker Change: I'll take first stab at that Scott and Mike can add on.
Speaker Change: Historically speaking Q1 Q2 is they have not been cash generating quarters for us.
And the same is likely to be the case this year, particularly with the dealer ordering patterns that we were just talking about for QT.
Speaker Change: And the same is likely to be the case this year, particularly with.
Speaker Change: The dealer ordering patterns that we were just talking about for Q2.
One of the things that we have continuously been challenged by is the management of working capital in this difficult environment. You know, you have production plans, long lead times, as Mike mentioned earlier, that certainly impact that in a negative way, when you just don't see the top line getting the traction and you have to curtail your production as a result. So that's what we're fighting right now.
One of the things that we have continuously been challenged by as the management of working capital in this difficult environment. You have production plans long lead times as Mike mentioned.
Earlier that certainly impact that in a negative way when you just don't see the topline getting the traction and you have to curtail your production as a result, so that's.
Speaker Change: What we're fighting right now.
And we expect that as Q3, Q4, as we start to get into the season, as those volumes start to tick up, that we'll be in a position of managing working capital a little bit more aggressively. So it's working capital that we're really focusing on. Scott, I think your question might be getting a little bit into capital deployment, more broadly speaking. And we had some pretty aggressive share repurchase here in Q1.
Speaker Change: We expect that as Q3 Q4, as we start to get into the season.
Speaker Change: Those volumes start to tick up that.
Speaker Change: That will be in a position to managing working capital a little bit more aggressively. So it's working capital that we're really focusing on Scott I think your question might be getting a little bit into capital deployment.
Speaker Change: More broadly speaking and we had some pretty aggressive share repurchase here in Q1.
which we thought was the the right thing to do, all things considered, and we'll continue to use that as a mechanism of returning cash to shareholders as well. So those are the comments that I would add. Great.
Speaker Change: Which we thought was the right thing to do all things considered and will continue to use that is.
Speaker Change: Our mechanism of returning cash to shareholders as well so.
Speaker Change: The comments that I would add.
Speaker Change: Great.
Speaker Change: Thats all I have thanks, guys.
Speaker Change: Scott.
Thank you and one moment as we move on to our next question.
Speaker Change: Thank you and one moment as we move on to our next question.
Speaker Change: Okay.
Okay.
And our next question is going to come from the line of Fred Whiteman with Wolf Research. Your line is open. Please go ahead.
Speaker Change: And our next question is going to come from the line of Fred Wightman with Wolfe Research. Your line is open. Please go ahead.
Hey guys, just one quick one. If we think about the back half improvement that you guys are talking about for calendar 24, are you assuming rate cuts and then how quickly do you think if we do see cuts that could impact retail and potentially wholesale?
Fred Wightman: Hey, guys. Just one quick one if we think about the back half improvement that you guys are talking about for calendar 'twenty. Four are you assuming rate cuts and then how quickly do you think if we do see cuts that could impact <unk>.
Fred Wightman: Retail and potentially wholesale.
Okay.
Good morning, Fred. You know, we put our management plan together for our fiscal year, you know, back in the, you know, the July , August time period. And we felt at that time, that the back half of fiscal year 2024 had an improved chance, you know, of, you know, an upward swing, especially on shipments, than
Speaker Change: Hey, good morning, Fred.
Speaker Change: We put our management plan together for our fiscal year back in the.
Speaker Change: July August time period, and we felt at that time that the back half of fiscal year 2024 had an improved chance.
Speaker Change: Upward swing, especially on shipments.
Speaker Change: Then the first half.
And as we've indicated, I don't think that stance has changed.
Speaker Change: And as we've indicated I don't think that stance has changed although I would say.
Although I would say, you know, a couple of things probably are working to maybe balance themselves out. One is, you know, dealers appear to be.
Speaker Change: Couple of things probably are working to maybe balance themselves out one as dealers appear to be probably even more discipline than we anticipated.
probably even more disciplined than we anticipated, you know, on bringing inventory in in advance of the spring retail selling season. And, you know, particularly, and we haven't talked about it much yet in the Q&A, but, you know, the pontoon dealers are being, you know, very disciplined as well, even though we have probably the most preferred brand of choice right now, you know, in that category. The dealers are still, you know, taking care of their businesses.
Speaker Change: On bringing inventory in advance of the spring retail.
Speaker Change: Selling season.
Speaker Change: And particularly we haven't talked about it much yet in the Q&A, but the pontoon dealers are being very disciplined as well, even though we have probably the most preferred brand of choice right now in that category of the dealers are still.
Speaker Change: Taking care of their businesses.
uh... you know by managing inventory so that that has been a little bit bigger of a headwind versus uh... you know our our management plan expectations
Speaker Change: By managing inventory, so that that has been a little bit bigger of a headwind versus our management plan expectations.
To your point, though, we did not factor in any rate cuts specifically, you know, into our fiscal 24 planning. And so the.
Speaker Change: To your point, though we did not factor in any rate cuts specifically into our fiscal 2000 and for planning and so.
Speaker Change: <unk>.
uh... the comments obviously that the fed delivered you know a week or so ago about probably increase
Speaker Change: The comments, obviously that the fed delivered a week or so ago about probably an increased.
chance of rate cuts in calendar 24, you know, certainly is a positive sign. I think the relation of a rate cut to retail will depend on the degree of the cut and the frequency of cuts, you know, quantity-wise, and just the general, you know, economic
Speaker Change: Chance of cuts in calendar 'twenty four certainly is a positive sign.
Speaker Change: Think the relation of a rate cut to retail will depend on.
Speaker Change: The degree of the cut and.
Speaker Change: The frequency of cuts quantity wise.
Speaker Change: And just the general <unk>.
Speaker Change: Economic.
know, view by consumers going forward. You know, certainly the equity market bouncing back helps with, you know, certain, you know, consumers in terms of spending power in the future. But, you know, as of this point, I think we're we're still generally holding, you know, to what, you know, we believe our management plan is in the third and fourth quarter, but watching carefully giving that Q2 is going to be more pressured, you know, than we had hoped.
Speaker Change: View by consumers going forward certainly the equity market bouncing back helps with certain consumers in terms of spending power in the future.
Speaker Change: But as of this point I think we're we're still generally holding to what we believe our management plan is in the in the third and fourth quarter, but watching carefully given that Q2 is going to be more pressured.
Speaker Change: Than we had hoped.
Speaker Change: Makes sense. Thank you.
Thank you, and one moment as we move on to our next question.
Speaker Change: Thank you and one moment as we move on to our next question.
Our next question is going to come from the line of Jane Partyman with Citi. Your line is open. Please go ahead.
Speaker Change: Our next question is going to come from the line of James Hardiman with Citi. Your line is open. Please go ahead.
Hey, good morning. Thanks for taking my questions. So, I just wanted to clarify.
James Hardiman: Hey, good morning, Thanks for taking my questions. So I just wanted to clarify.
a previous line of questioning. Brian , last quarter when we talked about sort of the ASP changes, I think we were saying that all-in towables were going to be down mid to high single digits, motorized were going to be up modestly in terms of ASPs. Where do those numbers stand today if I'm factoring in both the apples-to-apples changes and then the mixed?
James Hardiman: Our previous line.
James Hardiman: Question and Brian.
James Hardiman: Last quarter, when we talked about sort of the ASP.
James Hardiman: ASP changes.
James Hardiman: I think we were saying that all in <unk>. So we're going to be down mid to high single digits motorized we're going to be up modestly in terms of afg's, where do those numbers stand today, if I'm if I'm factoring in both the apples to apples changes and then the mix shift.
Yeah, the like for like, you know, one product.
Yes.
James Hardiman: Like for like.
James Hardiman: One product.
James Hardiman: Price today versus what it was a year ago on the <unk> business.
what it was a year ago on the towables business. I'm saying like for like of down low to mid single digits right now. All in we had a, what was I think a 13% decline in ASP for towables, so the large portion of that reduction in ASP driven by mid.
James Hardiman: Like for like of down low to mid single digits right now all in we had a I think a 13% decline in ASP for <unk>.
James Hardiman: So the large portion of that reduction in ESP driven by mix.
I think that that's probably the right go forward assumption sitting here today knowing what we know. As I mentioned, we're seeing some stability quarter to quarter in our bill of material or our cost.
James Hardiman: I think that Thats, probably the right go forward assumption sitting here today, knowing what we know as I mentioned, we're seeing some stability.
James Hardiman: Quarter to quarter in our bill of material on our costs.
And so we'll see what the consumer shift might be as it relates to impacting that mix.
James Hardiman: And so we'll see what the consumer shift might be as it relates to impacting that mix.
You know, I'm not intending to provide any commentary sitting here today that we expect a mixed shift.
James Hardiman: Intending to provide any commentary sitting here today that we expect a mix shift.
I'll let Mike comment on his expectations for MIX. But that's kind of what I'm saying on the tolerable side. For Motorhome and Marine, I think we'll continue to see some increases related to specifically motorized chassis cost increases that we continue to need to price for. And likewise, some inflationary pressure is still on motors within Marine.
Speaker Change: I'll, let Mike comment on.
Speaker Change: His expectations for mix, but thats kind of what im saying on the total side.
Speaker Change: For motor home and Marine I think we'll continue to see.
Speaker Change: Some increases related to specifically motorized chassis cost increases that we continue to need to price for.
Speaker Change: And likewise, some inflationary pressure still on.
Speaker Change: Motors within marine.
So I guess those are the clarifying comments I'd make, Mike, anything to add on?
Speaker Change: I guess, the clarifying comments I'd make Mike anything to add on yes, James I would say our business is not yet seen the full impact at retail or certainly at shipments of the new products that are <unk> businesses are introducing and so the winnebago brand with the access to contend trailer.
Yeah, James, I would say our business has not yet seen the full impact at retail or certainly at shipments.
of the new products that our total businesses are introducing. And so the Winnebago brand with the Access to Contend trailer, with the M-Series travel trailer, Grand Design with the Reflection 100, the Influence.
Mike: With the M series travel trailer.
Michael: Grand design with the reflection 100.
Michael: The influence.
uh... uh... fifth wheel with the uh... serra nova trailer all of those are heard are really in the very early stages of being produced and shipped to the market
Michael: Fifth wheel with the Sarah Nova trailer all of those are really in the very early stages of being produced and shipped to the market.
And so, from a mixed standpoint, we will be putting into the market products we've never had before in our line at ASPs and price points that ultimately are retail that are more competitive than some of our, you know, historical products. And so, you know, I think, you know, we'll have to watch that trend over future, you know, future quarters. And that, you know, that's why we're.
Michael: And so from a mix standpoint, we will be putting into the market products, we've never had before and our line at the Asps and price points that ultimately a retail that are more competitive.
Michael: And then some of our historical products and so I think we'll have to watch that trend over future future quarters in that.
Michael: Thats why we are.
know, reasonably optimistic about our ability to continue to hold and fight for market share in the future, our new product launches like that on the 12th.
Michael: Reasonably optimistic about our ability to continue to hold and fight for market share.
Michael: In the future, our new product launches like that on the <unk> side.
Got it. But just to clarify the clarification here, I apologize. Brian , when you say that all-in totals down 13% ASPs, that's the right go-forward assumption. Are we saying that for the full year, we should expect something down double digits in terms of ASPs, or should I think about that as call it a $42,000 ASP is a decent assumption for the rest of the year? Just making sure we're on the same page.
Speaker Change: Got it but just to clarify.
Speaker Change: I apologize, Brian when you say all.
Brian: All in total was down 13% AFP you've got the right go forward assumption are we saying that for the full year, we should expect something down double digits in terms of asps or should I think about that as well.
Brian: Call it a $42000 ASP.
Brian: As a decent assumption for the rest of the year, just making sure. We're on the same page.
Yeah, I think a double-digit decline in ASP is a reasonable assumption going forward for the totals business at this stage, considering the mixed shifts as well as the like-for-like prices.
Speaker Change: Yes, I think a double digit decline in Asps is a reasonable assumption going forward for the total business at this stage, considering kind of mix shifts as well as the like for like pricing.
Speaker Change: Got it.
Speaker Change: Very helpful and then.
Mike, you've mentioned that when you looked at the street models, we were not modeling SG&A correctly. That's certainly helpful. Then obviously, with a lot of your commentary, where you're directing us for Q2 is substantially beneath where the street was. I guess as we look to the second half, and I don't expect guidance here per se, but the street is.
Speaker Change: Mike you've mentioned that that when you look at the Street models, we were not modeling SG&A correctly.
Speaker Change: Certainly helpful.
Speaker Change: And then obviously with a lot of your commentary where you are directing us for Q2.
Speaker Change: Substantially beneath where the street was.
Speaker Change: I guess as we look to the second half and I don't expect guidance here per se, but the street is.
You know, after, you know, what sounds like it's going to be about $2 of earnings or less in the 1st half, the street is modeling $4 roughly of earnings in the.
Speaker Change: After what sounds like it's going to be about $2 of earnings or less in the first half the street is modeling.
$4 roughly of earnings in the second half or.
Is there anything that jumps out of you in terms of where the street is positioned? Do you think that's too high, too low, just right? Any, any help with how the street is currently positioned for the second half?
Speaker Change: Or anything that jumps out at you.
Speaker Change: In terms of where the street is position do you think thats too high too low right.
Speaker Change: Any help with how the street is currently positioned for the second half.
Yeah, James, you know, we appreciate the question, you know, at this time, you know, we're not going to offer, you know, commentary on the full year. You know, at this point.
Speaker Change: Yes James.
Speaker Change: I appreciate the question at this time, we're not going to offer commentary on the full year.
Speaker Change: At this point.
We may choose to change our position in the future on, on, you know, annual guidance, you know, commentary, but, you know, at this time, we're going to focus our, you know, our comments.
Speaker Change: We.
Speaker Change: We may choose to change our position in the future on an annual guidance.
Speaker Change: Commentary, but at this time.
Going to focus are our.
Speaker Change: Our comments.
To you all on Q2, there's a bit more certainty, certainly considering timing around that period.
Speaker Change: To you all on Q2, there is a bit more certainty certainly considering timing around that period.
And so I just won't offer any additional comments at this time about the back half of the year and subsequently what that full year would be.
And so.
Speaker Change: Won't offer any additional comments at this time about the back half of the year and subsequently what that full year with them.
Fair enough. Let me let me ask the question this way, then.
Speaker Change: Fair enough, let me let me ask the question. This way then.
you made the comment about and some of this.
Speaker Change: You made the comment about.
Speaker Change: And some of this.
Sort of overlaying the calendar year and the fiscal year, right? But ultimately, when things stabilize and ultimately improve.
Speaker Change: Sort of overlaying the calendar year in the fiscal year, right, where ultimately when things stabilize and ultimately improve.
You know, you're talking about retail and wholesale getting better mid to late calendar 24.
Speaker Change: Youre talking about retail and wholesale getting better mid to late calendar 'twenty four.
which is really fiscal 25 for you guys, effectively. But then there was a comment in the prepared remarks where you said that you thought the second half of your fiscal year would realize at least a pro rata portion of this expected increase, right? The industry is, you know, the shipment assumptions from RVIA do assume a meaningful increase in shipments. Can you just clarify all of that? It sounds like you're still saying you think wholesale is going to be up materially during the second half of the year, but I just.
Speaker Change: Which is really fiscal 'twenty five for you guys effectively but then there was a comment in the prepared remarks, where you said that you thought the second half of your fiscal year would realize at least the pro rata portion of this expected increase right the industry.
Speaker Change: The shipment assumptions from RBI.
Speaker Change: RV IAA do assume.
Speaker Change: A meaningful increase.
Speaker Change: Shipments can you just clarify all of that it sounds like Youre still saying you think wholesale is going to be up materially during the second half of the year, but I just want to make sure.
Uh, at this time, you know, we have stated for calendar year 24, uh, a retail to wholesale, uh, you know, uh, equity number of, of.
Speaker Change: At this time.
Speaker Change: Stated for calendar year, 'twenty for a retail to wholesale.
Speaker Change: Equity number of 350000 units as I mentioned.
350,000 units. As I mentioned in a question that was asked earlier, I think it's about the timing of when dealers begin to move more aggressively towards that one-to-one ratio.
Speaker Change: A question that was asked earlier I think it's about the timing of when dealers begin to move more aggressively towards that one to one ratio.
I think dealers are waiting on both the RV and marine side.
Dealers are waiting on both the RV and marine side for some of these early spring.
for some of these early spring retail shows to happen across the country. We have Tampa coming up in a few weeks, which is obviously one of the Bellwether RV shows. We have some large marine shows, including the Minneapolis boat show coming up here in about a month, a month and a half.
Retail shows two to happen across the country, we have Tampa coming up in a few weeks, which is obviously one of the bellwether RV shows we have some large marine shows, including the Minneapolis boat show coming up here about a month month and a half.
I think some of the dealers are waiting to see some green shoots of retail stability as we're going into the year, but if you do the math on.
Some of the dealers are waiting to see some green shoots of retail stability.
you know, as we're going into the year. But if you do the math on, you know, historical turns, and even if the dealers want to run their business at slightly elevated turns,
Speaker Change: Historical turns and even if the dealers want to run their business at slightly elevated turns they would need to begin to.
They would need to begin to, you know, managing their inventory, you know, to a, you know, a little bit higher level going into, you know, the meat of the retail season, you know, in that March through July period. So we do anticipate that some of our fiscal year 24 will see the benefit of this movement back towards a one-to-one. And as Brian said, in calendar 24, I think a 17% increase projected in wholesale shipment.
Speaker Change: Managing their inventory to a.
Speaker Change: Little bit higher level going into the meat of the retail season in that March through July period. So we do anticipate that some of our fiscal year 'twenty four we will see the benefit of this movement back towards a one to one and as Brian said in calendar 'twenty four I think a 17% increase projected.
Speaker Change: In wholesale shipments timing will be the wildcard as to how much of our fiscal year gets the benefit of that.
Timing will be the wild card as to how much of our fiscal year gets the benefit of that.
But you know we we do anticipate seeing a lift in shipments in quarter three and quarter four You know that that is Material obviously if that doesn't develop you know we'll we'll manage our business accordingly To continue to be disciplined and patient to that end But that is you know that is what we're planning for is a you know is a rebound here this next late spring and summer Got it
Speaker Change: But we do anticipate seeing a lift in shipments.
Speaker Change: In quarter, three and quarter four.
Speaker Change: That is <unk>.
Speaker Change: <unk>, obviously, if that doesn't develop.
Speaker Change: We will manage our business accordingly to continue to be disciplined and patient.
Speaker Change: To that end, but that is.
Speaker Change: That is what we're planning for is a is a rebound here. This next late spring and summer.
Speaker Change: Got it and understood. Thanks, guys.
Speaker Change: Thanks, Dan.
Thank you, and one moment as we move on to our next question.
Speaker Change: Thank you and one moment as we move on to our next question.
Our next question is going to come from the line of Noah Zaskin with KeyBank Capital Markets. Your line is open, please go ahead.
Speaker Change: Our next question comes from the line of Noah was asking with Keybanc capital markets. Your line is open. Please go ahead.
Hi, thanks for taking my question. Most of my questions have been asked and answered, but given the move in steel prices in recent months, just wondering if there's any way to think about the margin implications, maybe the size of the impact as you see it in the second quarter or the back half.
Noah: Hi, Thanks for taking my question most of my questions have been asked and answered but yes.
Given the move in steel prices in recent months just wondering if there's any way to think about the margin implications.
Speaker Change: Maybe that may be the size of the impact as you see it in the second quarter for the back half. Thanks.
Yeah, we've seen easing in a lot of our key commodities, steel being one of them, certainly aluminum, lumber as well. You know, typically what we're going to do in this environment.
Speaker Change: Yes, we've seen easing and a lot of our key commodities steel being one of them certainly at aluminum lumber as well.
Speaker Change: Typically what were going to do in this environment.
you know, Noah, as we experience some, some easing of.
Speaker Change: As we experienced some some easing of of some cost inputs that might have ties back to commodities, we're going to manage our margin very carefully obviously as we've talked about earlier in the call. We're doing all that we can to pass along any kind of price reductions that we can really.
of some cost inputs that might have ties back to commodities. We're going to manage our margin very carefully. Obviously, as we've talked about earlier in the call, we're doing all that we can to pass along any kind of price reductions that we can realize to the end customer as well as to the dealer network so that they're able to price more aggressively to the end customer. I think that's the best way of thinking about some of those commodities easily.
Speaker Change: <unk> to the end customer as well as to the dealer network. So that they are able to price more aggressively to the end customer I think that's the best way of thinking about.
Speaker Change: Some of those commodities easing.
You know, we talked about like-for-like ASP reductions, for example, in the towable space.
Speaker Change: We talked about like for like AFP reductions for example in the.
Speaker Change: And the total space.
That would be one example of how we intend to handle any kind of commodities easing and our cost inputs easing as a result. But I think that's my guidance to you would be that we're going to manage margins to the extent we can, but try to pass along to end customers any cost favorability.
Speaker Change: That would be one example of how we intend to handle any kind of commodities easing in our cost inputs easing as a result, but I think thats my guidance to you would be that we're going to manage.
Speaker Change: Margins to the extent, we can but try to pass along to end customers any cost favorability.
Helpful. Maybe, you know, not too fine of a point on the second quarter, but I think you kind of mentioned to expect quarter-over-quarter decline in profit. Is a quarter-over-quarter decline in EBITDA the right way to think about it?
Speaker Change: Helpful, maybe not to put too fine of a point on the second quarter.
Speaker Change: But I think you kind of mentioned to expect quarter over quarter decline in profit is it quarter over quarter decline in EBITDA, the right way to think about it.
Yeah, certainly, we've been clear that we expect a top line that's a little softer in Q2 relative to Q1, so sequential decline. I also mentioned that there's going to be the usual deleverage associated with that and pretty consistent allowances or discounts.
Speaker Change: Yes, certainly we've been clear that we expect our top line that is a little softer.
Speaker Change: In Q2 relative to Q1 sequential decline.
I also mentioned that there's going to be the usual deleverage associated with that and pretty consistent allowances or discounts.
from Q1 to Q2. So net-net, through those comments, I guess I'd be guiding you towards a slightly lower EBITDA margin in Q2.
Speaker Change: Q1 to Q2, so net net.
Speaker Change: No.
Speaker Change: With those comments I guess that'd be.
Speaker Change: Guiding you.
Speaker Change: Towards a slightly lower EBIT margin.
Speaker Change: In Q2 versus Q1.
Speaker Change: Thank you.
Thank you and one moment as we move on to our next question.
Speaker Change: Thank you and one moment as we move on to our next question.
Our next question is going to come from the line of Brandon Roll with DA Davidson. Your line is open. Please go ahead.
Speaker Change: Our next question is going to come from the line of Brandon Ross with D. A Davidson. Your line is open. Please go ahead.
Good morning. Thank you for taking my questions here. Just first, on the inventory de-stocking you're seeing in the environment right now, could you comment on what you're seeing in the tollables space versus motorhomes and kind of the timeline for those two segments?
Brandon Ross: Good morning. Thank you for taking my questions here just first on the inventory Destocking you are seeing in the environment right now could.
Brandon Ross: Could you comment on what Youre seeing in the <unk> space versus motor homes, and kind of the timeline for those two segments.
Yeah, good morning Brandon and thanks for the question.
Yes, good morning, Brandon and thanks for the question.
Yeah, they're definitely they're definitely moving a little bit differently. I think the motorhome category still has potentially a little bit of destocking left to do in some in some places. And and some of that certainly will depend as we've talked on on retail.
Speaker Change: Yes, they are definitely definitely moving a little bit differently I think more of the motor home category still has potentially a little bit of Destocking left to do in some in some places and.
Speaker Change: Some of that certainly will depend as we've talked on on retail.
But if I were to pick, you know, a couple of places where we could see further.
But if I were to pick a couple of places where we could see further inventory destocking on the motorized side it would probably be class a.
Inventory destocking on the motorized side, it would probably be, you know, Class A, you know, you know, some parts of that, you know, particularly potentially Class A diesel.
Speaker Change: <unk>.
Speaker Change: Some parts of that.
Particularly potentially class a diesel and then and then some parts of the class B category as well.
and then some parts of the Class B category as well.
As all of you know, the Class B category has been very frenetic from a competitive intensity standpoint.
Speaker Change: As all of you know the class B category has been very frenetic from a competitive intensity standpoint.
A lot of new brands and players getting into the game. A lot of motorized chassis have become available, you know, as the overall demand for van chassis around the world has been reduced.
Speaker Change: A lot of new brands and players getting into the game a lot of motorized chassis have become available.
Speaker Change: As is the overall demand for van chassis around the world has been reduced.
So I think there could be a little bit more de-stocking on the motorized side in certain sub-segments. The tollable side, our hope is that the de-stocking...
Speaker Change: So I think there could be a little bit more destocking on the motorized side.
Speaker Change: In certain sub segments, the total side or.
Speaker Change: Our hope is that the Destocking is largely finished and if you look at October.
And if you look at October , you know, RVIA shipments and the SSI results.
Speaker Change: RV shipments in the Ssi results, we actually feel as if some total inventory was added back into the channel during that month.
We actually feel as if some total inventory was added back into the channel during that month, but we'll see how quarter two fiscally for us plays out. I think dealers are going to try to kind of hold in place through the end of the calendar year here these last couple weeks.
Speaker Change: Months, but yes.
Speaker Change: We'll see how quarter two fiscal leave for US plays out I think dealers are going to try to kind of hold in place through the end of the calendar year here. These last couple of weeks.
And then we'll see how January and February play out. But we don't anticipate, as our comments said, you know, meaningfully, you know, material destocking continuing on tollables here, you know, as we begin calendar 2024. But we'll watch that.
Speaker Change: And then we'll see how January and February play out, but we don't anticipate as our comments said.
Speaker Change: Meaningfully.
Speaker Change: Material Destocking continuing on <unk> here.
Speaker Change: As we begin calendar 2024, but we'll watch that carefully.
Great. And just one last quick question. You had talked about addressing affordability through different tactics. Could you touch on, if you're able to, your conversations with your suppliers and maybe any additional price concessions that you might feel are coming down the pipeline as you negotiate pricing? Thank you.
Speaker Change: Great and just one last quick question, you had talked about addressing affordability through different tactics.
Speaker Change: You touch on if you are able to your conversations with your suppliers.
And maybe any additional price concessions that you might feel are coming down the pipeline as you negotiate pricing. Thank you.
Yeah, our purchasing teams on a daily basis within the businesses and our strategic sourcing team here at the enterprise level that really works to leverage our scale and realize synergy across the portfolio. We've been very honest with our suppliers about
Speaker Change: Yes.
Speaker Change: Purchasing teams on a daily basis within the businesses and our strategic sourcing team here at the enterprise level that really works to leverage our scale and.
Speaker Change: <unk> realized synergy across the portfolio, we've been very honest with our suppliers about.
uh... you know the uh... the fairness needed in in dealing with any deflation that's happening uh... in the marketplace and that uh... you know we need to realize some of that we do have some contracts that are commodity-based enough for the index based
Speaker Change: The fairness needed in dealing with any deflation thats happening in the marketplace in that.
Speaker Change: We need to realize some of that we do have some contracts that are commodity based and thus sort of index based in terms of where those lower costs and how they go and where they are distributed.
in terms of, you know, where those lower costs and how they're just go and where they're distributed.
And then in some other relationships, you know, that's more of a negotiation based on the transparency of the supplier. I will say we remain consistent that one source...
Speaker Change: And then in some other relationships that's more of a negotiation based on the transparency of the supplier I will say, we remain consistent that one source of bill of material pressure will continue to be motorized chassis.
of bill of material pressure will continue to be motorized chassis.
Uh, you know, that, uh, that category is not seeing the deflation, uh, that, um, some of the other categories are across our RV, uh, and marine, uh, you know, uh, businesses. And, uh, we are working carefully while all the major, you know, automotive chassis, uh, suppliers on, uh, how they can.
Speaker Change: That that category is not seen the deflation.
That some of the other categories are across our RV and marine.
Speaker Change: Businesses, and we are working carefully with all the major automotive chassis suppliers on how they can.
you know, manage their costs to make sure that we can work with our dealers.
Speaker Change: Manage their costs to make sure that we can work with our dealers and then consumers on affordability there as well we're a premium manufacturer our strategy is not to strip or.
and then consumers on affordability there as well. We're a premium manufacturer.
You know, our strategy is not to strip or decontent our motorhome products to the bare minimum in order to, you know, you know, keep the business flowing. So, we need we need some help from our suppliers on the motorized chassis side to continue to navigate some of the pressures that that they are seeing.
Speaker Change: Or the content, our motor home products to the bare minimum in order to.
Speaker Change: No.
Speaker Change: Keep the business flowing.
Speaker Change: So we need we need some help from our suppliers on the motorized chassis side to continue to navigate some of the pressures that they are seeing.
Speaker Change: Great. Thank you.
Thank you, and one moment as we move on to our next question.
Speaker Change: Thank you and one moment as we move on to our next question.
And our next question is going to come from the line of John Healy with North Coast Research. Your line is open. Please go ahead.
Speaker Change: And our next question is going to come from the line of John Healy with Northcoast Research. Your line is open. Please go ahead.
Thank you. Just one kind of off the trail kind of question here. Mike, I think you mentioned in the prepared remarks that on 2Q that you guys would give kind of an update to the longer term view of the business or financial profile of it. You know, given that you guys laid that out maybe 18, 24 months ago, I'm just kind of curious what's prompting the update on that and if there's anything you might kind of steer us to, to thinking about that you guys might be evaluating as it relates to those items.
John Healy: Hi, Thank you just one kind of off the.
John Healy: The trail kind of question here, Mike I think you mentioned in the prepared remarks that in <unk> that you guys would give kind of an update to the longer term view of the business or.
John Healy: The financial profile of it.
Speaker Change: Given that you guys laid that out maybe.
Speaker Change: 18 to 24 months ago, just kind of curious, what's prompting the update on that and if there's anything you might kind of steer as to thinking about.
Speaker Change: You guys might be evaluating as it relates to those items.
Yeah, thanks, John , for the question in November of 2022. We communicated financial and operational targets relative to the end of our fiscal year 2025.
Speaker Change: Yes, Thanks, John for the question in November of 2022, we communicated financial and operational targets relative to the end of our fiscal year 2025. So it was a three year long range set of targets and given that the marketplace has changed dramatically. Since we were together were investors in November.
So it was a three-year long-range set of targets.
And given that the marketplace has changed dramatically since we were together, we're investors in November of 2022, we felt it was time to formally update those and we'll work to do so during our March 2024 earnings call. And I think what you'll see during that call, we'll probably have a little bit longer time range. We probably won't talk about fiscal 25 in terms of long range targets. We'll, we'll probably be a little further out from that.
Thousand 22.
Speaker Change: We felt it was time to formally update those and we'll work to do so during our March 2024 earnings call I think what youll see during that call, we'll probably have a little bit longer time range, we probably won't talk about fiscal 'twenty five in terms of long range targets, we will will probably be a little further.
And you'll see an updated and refreshed set of financial and operational targets based on our best assessment.
Speaker Change: From that.
Speaker Change: And Youll see an updated and refreshed set of financial and operational targets based on our best assumptions candidly, we're just trying to be helpful.
Candidly, we're just trying to be helpful to our investors and to especially you, the analysts.
To our investors in two especially.
Speaker Change: You the analysts.
with some some longer range guidance, you know, for purposes of modeling and where we think, you know, especially the organic business can head in the future. So stay tuned. We'll give you an update in March.
Speaker Change: With some some longer range guidance.
Speaker Change: For purposes of modeling and where we think.
Speaker Change: Especially the organic business can head in the future. So stay tuned we'll give you an update in March.
Speaker Change: Alright, Thank you guys.
Thank you, and one moment as we move on to our next question.
Speaker Change: Thank you one moment as we move on to our next question.
Our next question is going to come from the line of David Wiston with Morningstar. Your line is open. Please go ahead.
Speaker Change: Our next question is going to come from the line of David Whiston with Morningstar. Your line is open. Please go ahead.
David Whiston: Thanks, Good morning, I wanted to go back to the SG&A buckets, you laid out Mike in terms of just the incremental spending.
Thanks. Good morning. I wanted to go back to the SG&A buckets you laid out, Mike, in terms of just the incremental spending. Basically, some of that is very customer focused and product focused. And some of that is more your internal systems. And I'm just curious if you could talk a little bit more about how much at a very high level, how much is more of a going to the product side or to the internal side? And you mentioned ERP. I mean, you guys have been doing ERP upgrades. I think for years. Is this a new upgrade or the ongoing one? That was a multi year one.
David Whiston: Basically.
David Whiston: Some of that is very customer focused and product focus and some of that is more your internal systems and I'm. Just curious if you could talk a little bit more about how much <unk> got a very high level. How much is more of a go into the product side or just the internal side and you mentioned ERP. I mean, you guys have been doing ERP upgrade. So I think for years is this a new upgrade or the ongoing one that was a multiyear one in the <unk>.
David Whiston: First place.
Yeah, thank you and good morning David. I'll talk about ERP here real quickly. We continue to finish.
Speaker Change #101: Yes, Thank you and good morning, David I'll talk about ERP here real quickly we continue to finish.
The long project we've had around our Winnebago branded businesses and some of our enterprise functions relative to an ERP system there, and there is a light at the end of the tunnel here over probably the next...
Speaker Change #101: The long project we've had.
Speaker Change #101: Around our Winnebago branded businesses in some of our enterprise functions relative to an ERP system there.
Speaker Change #101: And there is a light at the end of the tunnel here over probably the next.
probably the next 18 to 24 months in terms of that project.
Speaker Change #101: Probably the next 18 to 24 months in terms of that project.
But we have now other ERP systems that we've obviously inherited through acquisitions of the other brands.
But we have now other ERP systems that we've obviously inherited through acquisitions of the other brands.
And, you know, we have to do some moderate upgrades to those from time to time. And there's one, you know, particularly here in the short term, and I won't get into the specifics, but, you know, we will, you know, we are working on, I would say, you know, the, you know, probably.
Speaker Change #101: We have to do some.
Speaker Change #101: Moderate upgrades to.
Speaker Change #101: To those from time to time and there is one particularly here in the short term and I won't get into the specifics of that.
Speaker Change #101: We will we are working on I would say.
Speaker Change #101: Probably.
The balance of the SG&A investments we're making around those three areas, engineering, digital asset investment, and IT systems, is probably relatively evenly balanced.
Speaker Change #101: The balance of the SG&A investments, we're making are about around those three areas engineering digital asset investment and it systems is probably relatively evenly balanced.
You know, we, you know, the SG&A impact on an annual basis is definitely, you know, eight figures, you know, incremental to what we have historically planned.
Speaker Change #101: The SG&A impact on an annual basis is definitely <unk>.
Speaker Change #101: <unk> eight figures.
Speaker Change #101: Incremental to what we have historically planned.
But, you know, we think it's the right thing to do to be competitive and prepare the business for, you know, the future. And so we're obviously being as disciplined as we can, and we're spreading those out across obviously each of the quarters.
Speaker Change #101: But we think we think it's the right thing to do.
Speaker Change #101: To be competitive and prepare the business for.
Speaker Change #101: The future and so we're obviously being as disciplined as we can and we're spreading those out across obviously each of the quarters.
But, you know, it's eight figures of incremental spending on an annualized basis that we're adding here. Now, if the business...
Speaker Change #101: But it's eight eight figures of incremental spending on an annualized basis that that.
Speaker Change #101: We're adding here now if the business.
faces tougher market conditions, we will turn the dial as we can on those as well. So just so everybody knows, we are going to be very prudent and reasonable as we make investments in those areas.
Speaker Change #101: Faces tougher market conditions.
We will turn the dial as we can on those as well so just so everybody knows.
Speaker Change #101: We are we are going to be very prudent and reasonable as we make investments in those areas.
Thanks. And just going back to capital allocation discussed earlier, can you say if buybacks or M&A would be a priority between those two in fiscal 24?
Speaker Change #102: Thanks, and just going back to capital allocation discussed earlier can you say, if buybacks or M&A would be a priority.
Speaker Change #102: Between those two in fiscal 'twenty four.
Speaker Change #102: I guess broadly speaking.
Speaker Change #102: The M&A environment.
I guess, continues to cure off the dislocation that we've seen over the past couple of years, as you can appreciate at the peak.
Speaker Change #102: I guess continues to cure off the dislocation that we've seen over the past couple of years as you can appreciate at the peak.
Speaker Change #102: Companies in our space wanted to sell.
Speaker Change #102: Off that peak with very high prices and then.
Speaker Change #102: You hit a trough and then companies want to sell on a forward view, it's just really hard to find that.
Speaker Change #102: <unk>.
Speaker Change #102: Price that both buyers and sellers can agreed to I think as we start to see some normalization on retail.
Speaker Change #102: Get a clearer view of the year ahead, and what the right multiple would be to pay we'll see some.
Speaker Change #102: Better M&A environment, I'd say to allow us to.
Speaker Change #102: Way certain certain targets.
And hopefully some additional investments in that area. So.
Speaker Change #102: Share repurchases clearly a function of our success on the M&A front.
without some bigger targets that we can execute on, we've had some elevated share repurchase.
Speaker Change #102: Without some bigger targets that we can execute on we've had some elevated share repurchases over the past two to three years.
over the past 2-3 years. Our goal is to continue to prioritize growth.
Speaker Change #102: Our goal is to continue to prioritize growth.
We have stated that historically, that's still the case. We're going to prioritize growth in the form of both organic investments, Mike just talked about some of those, as well as inorganic.
Speaker Change #102: We have stated that historically that that's still the case, we're going to prioritize growth in the form of both organic investments, Mike just talked about some of those.
Speaker Change #102: As well as inorganic investments.
So that will be our priority. We'll continue to use.
Speaker Change #102: That will be our priority will continue to use.
Share repurchase is a great mechanism of returning the cash to shareholders in the absence of M&A.
Speaker Change #102: Share repurchase is a great mechanism of returning to cash to shareholders in the absence of M&A.
Speaker Change #103: Alright, thanks very much.
Thank you, and I would now like to turn the conference back over to Ray Posadas for closing remarks.
Speaker Change #104: Thank you and I would now like to turn the conference back over debates.
Speaker Change #104: Closing remarks.
That is the end of our first quarter earnings call. Thank you everyone for joining us. We hope you all have a safe and happy holiday season. Enjoy the rest of your day.
That at the end of our first quarter earnings call. Thank you everyone for joining US. We hope you all have a safe and happy holiday season, and joining the rest of your day. Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change #104: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change #104: Okay.
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Speaker Change #104: Thanks.
Speaker Change #104: Sure.
Speaker Change #104: Thank you.
Speaker Change #104: Yes.
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Speaker Change #104: Okay.
Good day and thank you for standing by. Welcome to the Q1 Fiscal 2024 Winnebago Industries Financial Results Conference Call. At this time, all participants are in a listen-only mode.
Speaker Change #104: Good day and thank you for standing by welcome to the Q1 fiscal 2020 for Winnebago Industries financial results Conference call.
Speaker Change #104: At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 11 again.
Speaker Change #104: After the speaker's presentation, there will be a question and answer session to ask a question. During this session you will need to press star one on your telephone you will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Ray Posadas, Vice President of Investor Relations and Market Intelligence. You may begin.
Speaker Change #104: Please be advised today's conference is being recorded.
Speaker Change #104: I would now like to hand, the conference over to your Speaker Ray Posada, 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 2024 first quarter earnings results. I am joined on the call today by Michael Happy, President and Chief Executive Officer, and Brian Hughes, Senior Vice President and Chief Financial Officer.
Ray Posada: Good morning, everyone and thank you for joining us today to discuss our fiscal 2024 first quarter earnings results I am 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.wgo.net, and a replay of the call will be available on our website later today. The news release with our first quarter results was issued and posted to our website earlier this morning.
Ray Posada: This call is being broadcast live on our website at Investor <unk> Dot net and a replay of the call will be available on our website later today.
Ray Posada: The news release with our first 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 securities laws.
Speaker Change #106: Before we start I'd like to remind you that certain statements made during today's conference call regarding Winnebago industries and its operations may be considered forward looking statements under securities laws.
The company cautions you that forward-looking statements involve a number of risks and are inherently uncertain, and a number of factors, many of which are beyond the company's control, could cause actual results to differ materially from these statements.
Speaker Change #106: The company cautions you that forward looking statements involve a number of risks and are inherently uncertain and a number of factors many of which are beyond the company's control could cause actual results to differ materially from these statements.
These factors are identified in our FCC filings, which I encourage you to read.
Speaker Change #106: 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.
Michael Happy: With that I would now like to turn the call over to our President and CEO, Michael Happy Mike.
Thanks, Ray. Good morning. And as always, thank you for your interest in Winnebago Industries and for taking the time to discuss our fiscal 2024 first quarter results.
Michael Happy: Thanks, Rick Good morning, and as always thank you for your interest in Winnebago industries and for taking the time to discuss our fiscal 2024 first quarter results.
I will provide an overview of performance during the quarter, then pass the call to Brian Hughes to cover our financial results in more detail.
Michael Happy: I will provide an overview of our performance during the quarter then pass the call to Brian Hughes 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.
Brian Hughes: Following Brian's comments I will return and offer some closing thoughts before the Q&A portion of the call.
As we entered our fiscal 2024 year this past September , the outdoor recreation market in North America continued to face numerous short-term challenges.
Brian Hughes: As we entered our fiscal 2024 year this past September.
Brian Hughes: The outdoor recreation market in North America continued to face numerous short term challenges.
Consumer confidence was unsteady given macroeconomic factors.
Brian Hughes: Consumer confidence was unsteady given macroeconomic factors.
affordability of the RV and boating lifestyle, while still competitive with other forms of leisure travel, had become difficult for potential new customers.
Brian Hughes: Affordability of the RV and boating lifestyle, while still competitive with other forms of leisure travel had.
Brian Hughes: <unk> become difficult for potential new customers.
and dealers were aggressively managing inventory by constraining inbound wholesale shipments.
Brian Hughes: And dealers were aggressively managing inventory by constraining inbound wholesale shipments.
We stated during the October earnings call that our first two fiscal quarters in 2024 would face formidable headwinds.
Brian Hughes: We stated during the October earnings call that our first two fiscal quarters in 2024 would face formidable headwinds, especially as it related to dealer appetite for new RV and marine products and.
especially as it related to dealer appetite for new RV and marine products.
and that we were hopeful our last two quarters in fiscal year 2024 would show real improvement relative to an anticipated future one-to-one retail ratio.
Brian Hughes: And that we were hopeful our last two quarters in fiscal year 2024 would show real improvement relative to an anticipated future wonder one retail ratio.
to wholesale replenishment rate developing within the channel.
Brian Hughes: So wholesale replenishment rate developing within the channels.
The projection for fiscal year 2024 has proven true three months into this first half period.
Brian Hughes: The projection for fiscal year 2024 has proven true three months into this first half period.
Retail demand is generally in line with our projection.
Brian Hughes: Retail demand is generally in line with our projections, if not a little better than anticipated in barletta boats and Grand design totals.
if not a little better than anticipated in Barletta Boats and Grand Design Total.
While dealers were very selective in Q1 with what they brought in from our premium brands and have done an excellent job in driving their inventories lower.
Brian Hughes: While dealers were very selective in Q1 with what they brought in from our premium brands and have done an excellent job in driving their inventories lower.
We believe continued strong wholesale constraints during a seasonally lighter retail period of the year in December through February .
Brian Hughes: We believe continued strong wholesale constraints during a seasonally lighter retail period of the year in December through February.
and subsequent further reduced production by our businesses over the holidays will also have a similar impact on Q2 financial results as well.
Brian Hughes: And subsequent further reduced production by our businesses over the holidays will also have a similar impact on Q2 financial results as well.
Brian Hughes will discuss this Q2 outlook in more detail later in the call.
Speaker Change #108: Bryan Hughes will discuss this Q2 outlook in more detail later in the call.
Despite these challenges, the Winnebago Industries team remains focused on two core objectives.
Speaker Change #108: Despite these challenges the Winnebago industries team remains focused on two core objectives.
A, the preservation of solid profitability and a strong balance sheet in the short-term balanced with the reinforcement of robust market positions, lot and retail share, across our outdoor portfolio.
Speaker Change #108: A the preservation of solid profitability and a strong balance sheet in the short term balanced with the reinforcement of robust market positions lot and retail share across our outdoor portfolio.
and B, our commitment to amplifying investments that nurture the long-term health, vitality, and value proposition for our brands and the enterprise as we prepare for what we believe will be a strong, rebounding outdoor economy in the back half of calendar year 2024, and especially into 2025.
Speaker Change #108: And B our.
Speaker Change #108: To amplify and investments that nurture the long term health vitality and value proposition for our brands and the enterprise as we prepare for what we believe will be a strong rebounding outdoor economy in the back half of calendar year, 2024, and especially into 2020.
Five.
Our fiscal year 2024 Q1 SG&A numbers include elevated investments in engineering, digital asset development, and increased data and IT capabilities.
Speaker Change #108: Our fiscal year 2020 for Q1 SG&A numbers include elevated investments in engineering digital asset development and increased data and it capabilities.
These initiatives are incremental to historical spending and intentional.
Speaker Change #108: These initiatives are incremental to historical spending.
Speaker Change #108: And intentional.
Overall, we maintain our bullish position on the future of the RV and marine industries, and our brands will be well situated to participate strongly in the cyclical upswing when it occurs.
Speaker Change #108: Overall, we maintain our bullish position on the future of the RV and Marine industries, and our brands will be well situated to participate strongly in the cyclical upswing when it occurs.
Our fiscal year 2024 Q1 results demonstrate the resilience of our diversified portfolio and variable cost structure.
Speaker Change #108: Our fiscal year 2020 for Q1 results demonstrate the resilience of our diversified portfolio and variable cost structure as.
as well as our production discipline and pursuit of operational excellence improvement.
Speaker Change #108: As well as our production discipline and pursuit of operational excellence improvements.
We are also focused within the total RV and marine segments in addressing vital considerations surrounding affordability with multiple new product releases.
Speaker Change #108: We are also focused within the total RV and marine segments in addressing vital consideration surrounding affordability with multiple new product releases.
while maintaining our commitment to customer satisfaction via outstanding product quality and aftermarket service.
Speaker Change #108: While maintaining our commitment to customer satisfaction via outstanding product quality and aftermarket service.
Overall, for our fiscal first quarter, we achieved $763 million in net revenues as we navigated softness in motorhome RV and marine unit sales.
Speaker Change #108: Overall for our fiscal first quarter.
Speaker Change #108: We achieved $763 million in net revenues as we navigated softness in motor home RV and Marine unit sales.
Our consolidated gross margin of 15.2% was driven by strong margin performance in our towable RV segment.
Speaker Change #108: Our consolidated gross margin of 15, 2% was driven by strong margin performance in our total RV segment.
Overall, we delivered adjusted earnings per diluted share of $1.06.
Speaker Change #108: Overall, we delivered adjusted earnings per diluted share of $1 and <unk>.
Within the RV industry, gross unit inventories across the motorhome and towable segments are at historically low levels, in some cases, not seen for more than a year.
Speaker Change #108: Within the RV industry gross unit inventories across the motor home and <unk> segments are at historically low levels in some cases not seen for more than a decade.
And Winnebago Industries field inventory turn rates have returned to pre-COVID status.
Speaker Change #108: And Winnebago Industries' field inventory turn rates have returned to pre COVID-19 status.
The RV industry added unit inventory for the first time in many months during October of 2023.
Speaker Change #108: The RV industry added unit inventory for the first time in many months during October of 2023.
And we do not anticipate significant further destocking industry-wide as we turn towards spring.
Speaker Change #108: And we do not anticipate significant further destocking industry wide as we turn towards spring.
Dealers continue to work through model year 2023 inventory during this quieter period of the year and mitigate the cost implications of higher inventory financing rates on their business.
Speaker Change #108: Dealers continue to work through model year 2023 inventory during this quieter period of the year and mitigate the cost implications of higher inventory financing rates on their business.
We continue to proactively manage our own capacity, output, and costs in a targeted manner given dynamic marketplace conditions.
Speaker Change #108: We continue to proactively manage our own capacity output and cost in a targeted manner given dynamic marketplace conditions.
Importantly, our consolidated RV retail market share is showing signs of stabilization.
Speaker Change #108: Importantly, our consolidated RV retail market share is showing signs of stabilization.
following an anticipated pullback last year in connection with broader market focus on lower price points and further rationalization of second and third tier brand inventory.
Speaker Change #108: Following an anticipated pullback last year in connection with broader market focus on lower price points and further rationalization of second and third tier brand inventory.
Grand Design specifically is seeing solid retail performance as we speak and has added retail share in recent SSI reports.
Speaker Change #108: Grand designs, specifically is seeing solid retail performance as we speak and has added retail share in recent Ssi reports.
Last quarter, we highlighted several new RV models across our organic brands, providing customers with terrific value at attractive price points for premium products.
Speaker Change #108: Last quarter, we highlighted several new RV models across our organic brands, providing customers with terrific value at attractive price points for premium products.
The Grand Design Serenova and Reflection 100, as well as the new Winnebago-branded AXS, are examples of these introductions.
Speaker Change #108: The Grand design, Terra, Nova and reflection 100.
Speaker Change #108: As well as the new Winnebago branded access are examples of these introductions.
The new Winnebago M-Series trailer and Grand Designs modestly priced luxury fifth wheel Influence are also strong additions to the model year 2024 lineup.
The new Winnebago M series trailer and Grand designs modestly priced luxury fifth wheel influence are also strong additions to the model year 2024 lineups.
In Q2, the Winnebago brand of motorhomes will officially launch the next generation of the popular Revel and Echo motorhomes.
Speaker Change #108: In Q2, the Winnebago branded Motorhomes will officially launch the next generation of the popular rebel and Echo motor homes.
The new Winnebago Rebel 44E is the next generation of the industry's first all-wheel drive Class B motorhome, built on the Mercedes-Benz Sprinter chassis.
Speaker Change #108: The new Winnebago rebel 40, <unk> is the next generation of the industry's first all wheel drive class B Motorhomes built on the Mercedes Benz sprinter.
Speaker Change #108: Sprinter chassis.
The new Revel 44E boasts extended season capabilities, a Winnebago power package featuring our own Lithionics GTO battery, and upgraded interior and exterior features.
Speaker Change #108: The new rebel 44 E boast extended season capabilities, a winnebago power package, featuring our own let me, Alex GTO battery and upgraded interior and exterior features.
The new Winnebago Echo 23B-2, a Class C motorhome.
Speaker Change #108: The new Winnebago Echo 23 <unk>.
Speaker Change #108: A class C motor homes.
It's also built on a Mercedes-Benz all-wheel drive Sprinter chassis, boasts advanced all-season features, a multi-use living space, and an advanced solar lithium battery combination.
Speaker Change #108: <unk> also built on a Mercedes Benz all wheel drive sprinter chassis. Both advance all season features a multi use living space and an advanced solar lithium battery combination.
Both the Revel and the Echo models begin shipping in January of 2024.
Speaker Change #108: Both the rebel and the Echo models begin shipping in January of 2024.
Coming off a banner year for our marine segment in fiscal year 2023, our marine dealers, as anticipated, began to pull back on orders in the first quarter of fiscal 2024 due to elevated inventory levels and costs.
Speaker Change #108: Coming off a banner year for our Marine segment in fiscal year 2023, our marine dealers as anticipated began to pull back on orders in the first quarter of fiscal 2024, due to elevated inventory levels and costs.
This meaningfully impacted Quarter 1 shipments and will continue to do so even more strongly in Quarter 2.
Speaker Change #108: This meaningfully impacted quarter, one shipments and we will continue to do so even more strongly in quarter two.
However, we are encouraged by the retail trends we are seeing specifically in the pontoon segment.
Speaker Change #108: However, we are encouraged by the retail trends, we are seeing specifically in the pontoon segment.
Our Barletta business has run positive comps to date in fiscal year 2024 and continues to gain share in the aluminum, pontoon segment.
Speaker Change #108: <unk> business has run positive comps to date in fiscal year 2024, and continues to gain share in the aluminum pontoon segment.
reaching now above eight plus points of share in recent FSI reports.
Speaker Change #108: Reaching now above eight plus points of share in recent Ssi reports.
However, we are working closely with Barletta dealers, especially in the northern freshwater markets, to optimize their inventory positions as the winter months go, so that they feel more comfortable with reorder capabilities as the spring season approaches.
Speaker Change #108: However, we are working closely with barletta dealers, especially in the northern freshwater markets to optimize their inventory positions as the winter months go so that they feel more comfortable with reorder capabilities as the spring season approaches.
Similar to our RV brands, our marine businesses continue to innovate with new releases for model year 2024. During the Fort Lauderdale boat show this past October , the Chris Craft brand introduced the highly anticipated Catalina 28, offering customers a center console with versatile seating configurations and boasting groundbreaking SeaKeeper ride technology.
Speaker Change #108: Similar to our RV brands, our marine businesses continue to innovate with new releases for model year 2024.
Speaker Change #108: During the Fort Lauderdale boat show this past October the Chris Craft brand introduced the highly anticipated cannot Lena 28, offering customers a center console with versatile seating configurations and boasting groundbreaking <unk> technology.
Barletta has unveiled the industry's first pontoon boat with twin engines mounted in the center of the boat's transom, a patent-pending feature.
Speaker Change #108: Our Atlanta has unveiled the industry's first pontoon boat with twin engines mounted in the center of the boats transom a patch.
Speaker Change #108: <unk> pending feature.
In addition, the new Reserve Lazera is a simplified decontented offering of the ultra-high-end Reserve and has released a refreshed Year 2 version of the entry-level ARIA model line as well.
Speaker Change #108: In addition, the new reserve loss era is a simplified the content offering of the Ultra high end reserve and has released a refreshed year two version of the entry level ARIA model line as well.
Affordability with a premium look and feel.
Speaker Change #108: Affordability with a premium look and feel.
As I have often mentioned, Winnebago Industries will continue to responsibly invest, innovate, and position our businesses for long-term success through the entirety of the economic cycle.
Speaker Change #108: As I have often mentioned Winnebago industries will continue to responsibly invest innovate and position our businesses for long term success through the entirety of the economic cycle.
We will prioritize profitability through disciplined production and cost management, leveraging our highly variable cost structure, and collaborate closely with dealers to align on win-win inventory approaches to the market.
Speaker Change #108: We will prioritize profitability through disciplined production and cost management, leveraging our highly variable cost structure and collaborate closely with dealers to align on win win inventory approaches to the market.
Winnebago Industries remains well-positioned to further strengthen our enterprise capabilities, capitalize on future growth opportunities, and achieve long-term shareholder value creation goals. With that, I will now hand this over to Brian Hughes.
Speaker Change #108: Winnebago industries remains well positioned to further strengthen our enterprise capabilities capitalize on future growth opportunities and achieve long term shareholder value creation goals.
Speaker Change #108: With that.
Speaker Change #108: I will now hand, this over to Bryan Hughes.
Bryan Hughes: Thanks, Mike and good morning, everyone.
Before I begin, I would like to refer you to our earnings release document, as well as our earnings supplement document that are on our investor relations website.
Bryan Hughes: Before I begin I would like to refer you to our earnings release document.
Bryan Hughes: As well as our earnings supplement document that are on our Investor Relations website.
On past calls, I have verbally reviewed all the key financial results and I will refrain from doing so today, and to improve efficiency, we'll instead focus solely on key drivers of our performance.
Bryan Hughes: On past calls I have verbally reviewed all the key financial results and I will refrain from doing so today and to improve efficiency, we'll instead focus solely on key drivers of our performance.
Our first quarter consolidated revenues reflect a decrease of 19.9% compared to the fiscal 2023 period.
Bryan Hughes: Our first quarter consolidated revenues reflect a decrease of 19, 9% compared to the fiscal 2023 period.
driven by lower unit sales related to market conditions.
Driven by lower unit sales related to market conditions.
Product mix reflected by lower average selling prices.
Bryan Hughes: Product mix reflected by lower average selling prices.
and higher discounts and allowances across all segments.
Bryan Hughes: And higher discounts and allowances across all segments.
partially offset by carryover price increases related to higher motorized chassis costs.
Bryan Hughes: Partially offset by carryover price increases related to higher motorized chassis costs.
By extension, our gross profit for the quarter decreased 27.8% year over year, but we are proud to have delivered 15.2% gross profit margins despite the deleveraging impact of slowing sales, which was the greatest driver of our margin decline, and higher discounts and allowances.
Bryan Hughes: By extension, our gross profit for the quarter decreased 27, 8% year over year.
Bryan Hughes: But we are proud to have delivered 15, 2% gross profit margin. Despite the deleveraging impact of slowing sales, which was the greatest driver of our margin decline.
Bryan Hughes: And higher discounts and allowances.
Our ongoing profitability is the result of our variable cost structure, the strength of our relationships with our supplier partners and dealers.
Bryan Hughes: Our ongoing profitability is the result of our variable cost structure.
Bryan Hughes: The strength of our relationships with our supplier partners and dealers.
and the relentless pursuit of operational excellence across each of our businesses.
Bryan Hughes: And the relentless pursuit of operational excellence across each of our businesses.
Maintaining healthy growth margins enabled delivery of EBITDA margins of 7.1 percent, which includes investments in our advanced technology, digital transformation, and IT capabilities. I'll now
Bryan Hughes: Maintaining healthy gross margins enabled delivery of EBITDA margins of seven 1%, which includes investments in our advanced technology digital transformation and it capabilities.
Speaker Change #109: I will now cover our performance by segment.
Revenues for the towable RV segment were down 4.8% compared to the prior year. A strong unit sales growth and lower ASP travel trailers contributed to an unfavorable product mix.
Speaker Change #109: Revenues for the total RV segment were down four 8% compared to the prior year as strong unit sales growth and lower ASP travel trailers contributed to an unfavorable product mix.
Towable RV segment adjusted EBITDA was down 8.8% versus the prior year period.
Speaker Change #109: Total RV segment, adjusted EBITDA was down eight 8% versus the prior year period.
Adjusted EBITDA margin was 10 percent, down 50 basis points year over year, primarily due to deleverage and new product startup costs.
Speaker Change #109: Adjusted EBITDA margin was 10% down 50 basis points year over year, primarily due to deleverage and new product startup costs.
Revenues for the motorhome segment were down 28 percent from the prior year. This decline was driven by the lower unit sales as a result of current market conditions and a higher level of discounts and allowances.
Speaker Change #109: Revenues for the motor home segment were down 28% from the prior year.
Speaker Change #109: This decline was driven by lower unit sales as a result of current market conditions, and a higher level of discounts and allowances.
Partially offset by favorable product mix and price increases related to higher motorized chassis costs.
Speaker Change #109: Partially offset by favorable product mix and price increases related to higher motorized chassis costs.
Segment adjusted EBITDA margin was 6.4%, down 440 basis points versus the prior year due to volume to leverage, higher discounts and allowances, and some operational inefficiencies.
Speaker Change #109: Segment, adjusted EBITDA margin was six 4% down 440 basis points versus the prior year due to volume deleverage higher discounts and allowances and some operational inefficiencies.
As Mike shared during our prior earnings call, we are excited by the launch of Grand Design Motorhome and look forward to seeing those new models begin to enter the market later this fiscal year.
Speaker Change #109: As Mike shared during our prior earnings call. We are excited by the launch of Grand design Motor home and look forward to seeing those new models begin to enter the market later this fiscal year.
Our investment behind this initiative is reported in the corporate all other category within our financial results and therefore will not be diluted to our motorhome RV segment until grand design motorhomes becomes operational.
Speaker Change #109: Our investment behind this initiative as reported in the corporate all other category within our financial result, and therefore will not be dilutive to our motor home RV segment until Grand design motor homes becomes operational.
Overall, we anticipate that the bottom line impact to Winnebago Industries will be dilutive to our pre-tax income by about $10 to $15 million throughout fiscal year 2024 due to sizable startup costs with limited revenue at the initial launch.
Speaker Change #109: Overall, we anticipate that the bottomline impact to Winnebago industries will be dilutive to our pretax income by about $10 million to $15 million throughout fiscal year 2024, due to sizeable startup costs with limited revenue at the initial launch.
However, we believe this is a powerfully accretive strategy and financial opportunity for the company in future years.
However, we believe this is a powerfully accretive strategy and financial opportunity for the company in future years.
As expected, our spending was approximately $1 million in Q1, and we anticipate ramping that investment to between $4 million to $5 million by Q4.
Speaker Change #109: As expected our spending was approximately $1 million in Q1.
Speaker Change #109: And we anticipate ramping that investment to between 4 million to $5 million by Q4.
Keep in mind, we expect our investment to be accretive to our fiscal 2025 results.
Speaker Change #109: Keep in mind, we expect our investment to be accretive to our fiscal 2025 results.
Speaker Change #109: Let's turn to our marine segment.
Revenues were down 33.5% from the prior year as a result of a decline in unit volume related to slow dealer demand in an elevated interest rate environment and higher discounts and allowances, partially offset by carryover.
Speaker Change #109: Revenues were down 33, 5% from the prior year as a result of a decline in unit volume related to slow dealer demand and an elevated interest rate environment and.
And higher discounts and allowances.
Speaker Change #109: Partially offset by carryover price increases.
Marine segment adjusted EBITDA margin of 8.2 percent decreased 590 basis points versus the prior year primarily due to volume due leverage.
Speaker Change #109: Marine segment, adjusted EBITDA margin of eight 2% decreased 590 basis points versus the prior year, primarily due to volume deleverage.
but also impacted by higher levels of discounting.
Speaker Change #109: But also impact by impacted by higher levels of discounting.
Backlog for the marine segment declined 55.9% compared to the first quarter of the prior year due to cautious dealer sentiment this off season as compared to last.
Speaker Change #109: Backlog for the Marine segment declined 55, 9% compared to the first quarter of the prior year due to cautious dealer sentiment this off season as compared to last.
Speaker Change #109: Moving now to the balance sheet.
At the end of the quarter, Winnebago Industries had a net debt to EBITDA ratio of approximately 1.2 times, which is at the middle of our.
Speaker Change #109: At the end of the quarter Winnebago industries had a net debt to EBITDA ratio of approximately one two times.
Speaker Change #109: Which is at the middle of our targeted range.
Maintaining a strong balance sheet is core to the Winnebago Industries investment thesis and has continued to allow us to execute our balanced capital allocation strategy, which prioritizes digital and strategic investment in our business, like the opening of the ATG Innovation Center, for example, or strategic acquisitions like Lithionics most recently, while also returning significant capital to shareholders.
Speaker Change #109: Maintaining a strong balance sheet is core to the Winnebago industries investment thesis and has continued to allow us to execute our balanced capital allocation strategy, which prioritizes digital and strategic investments in our business like the opening of the Atg Innovation Center for example.
Speaker Change #109: <unk> for strategic acquisitions like lithium ion X most recently.
Speaker Change #109: While also returning significant capital to shareholders.
During the first quarter, we executed share repurchases of $40 million and increased our quarterly cash dividend by 15% to $0.31 per share.
Speaker Change #109: During the first quarter, we executed share repurchases of $40 million and increased our quarterly cash dividend by 15% to 31.
Speaker Change #110: For sure.
reflecting the confidence we have in our ability to profitably grow revenues, capitalize on new opportunities, and gain market share over the long term.
Speaker Change #110: Reflecting the confidence we have in our ability to profitably grow revenues.
Speaker Change #110: Capitalized on new opportunities and gain market share over the long term.
These actions further underscore our confidence in and our commitment to the long-term strength and trajectory of our business.
Speaker Change #110: These actions further underscore our confidence in and our commitment to the long term strength and trajectory of our business.
Before turning the call back to Mike, I would like to provide more context on the previous comments Mike made about our upcoming second quarter.
Speaker Change #111: Before turning the call back to Mike I would like to provide more context on the previous comments, Mike made about our upcoming second quarter.
We anticipate Q2 consolidated sales are likely to be reduced from Q1 levels.
Speaker Change #111: We anticipate Q2 consolidated sales are likely to be reduced from Q1 levels.
This has historically been the pattern from Q1 into Q2 due to production utilization over the upcoming holiday period, and we expect that to be the case this year as well.
Speaker Change #111: This has historically been the pattern from Q1 into Q2 due to production utilization over the upcoming holiday period, and we expect that to be the case this year as well.
This also reflects our continued efforts to maintain a very disciplined approach to our production output during a time when dealers are steadfast in minimizing inventory during the off-season months, and as evidenced by the lower backlog with which we ended the first quarter.
Speaker Change #111: This also reflects our continued efforts to make <unk>, a very disciplined approach to our production output. During a time when dealers are steadfast in minimizing inventory during the off season months and as evidenced by the lower backlog with which we ended the first quarter.
This preference by the dealer network this year has been further influenced by the higher interest rate environment and the corresponding high carrying costs that the dealer network has been experiencing.
Speaker Change #111: This preference by the dealer network. This year has been further influenced by the higher interest rate environment and the corresponding high carrying cost that the dealer network has been experiencing.
Negative dealer sentiment related to current inventory levels is most acute in our toolable RV and marine businesses.
Speaker Change #111: Negative dealer sentiment related to current inventory levels is most acute in our towable RV and marine businesses.
And, therefore, our current expectation is that the sequential sales performance for our towable RV and marine businesses will reflect this dealer sentiment most notably and will produce lower sales both sequentially from Q1 to Q2 as well as year over year for Q2.
Speaker Change #111: And therefore, our current expectation is that sequential sales performance for our total RV and marine businesses will reflect this dealer sentiment most notably.
Speaker Change #111: And will produce lower sales both sequentially from Q1 to Q2 as well as year over year for Q2.
We are currently anticipating that Q2 profitability will be impacted by the modest sequential reduction to sales in Q2.
Speaker Change #111: We are currently anticipating that Q2 profitability will be impacted by the modest sequential reduction to sales in Q2.
We do not currently expect sales incentives to change materially in Q2 from what was experienced in Q1.
Speaker Change #111: We do not currently expect sales incentives to change materially in Q2 from what was experienced in Q1.
These prior comments are specific to Q2. As we look ahead to the back half of our fiscal year, we continue to expect dealer ordering patterns to return to a relationship where one retail sale will produce one wholesale shipment.
Speaker Change #111: These prior comments are specific to Q2 as we look ahead to the back half of our fiscal year. We continued to expect dealer ordering patterns to return to a relationship where one retail sale will produce one wholesale shipment.
Retail activity from the last several weeks and really the last few months continues to support a forward looking estimate of 350,000 retail units for the RV industry in calendar 2024.
Speaker Change #111: Retail activity from the last several weeks and really the last few months continues to support a forward looking estimate of 350000 retailed units for the RV industry in calendar 2024.
and is consistent with the most recent RVIA estimate of approximately 350,000 shipments.
Speaker Change #111: And is consistent with the most recent RV EIA estimate of approximately 350000 shipments.
with 2023 expected to produce shipments in the range of 300,000 units.
Speaker Change #111: With 2023 expected to produce shipments in the range of 300000 units.
The current expectation is that the industry would therefore realize an approximate 17% increase in shipments for calendar 2024.
Speaker Change #111: The current expectation is that the industry would therefore realize an approximate 17% increase in shipments for calendar 2024.
We expect that the back half of our fiscal year will therefore realize a pro rata portion of this expected increase.
Speaker Change #111: We expect that the back half of our fiscal year will therefore realize a pro rata portion of this expected increase.
With that, I will now turn the call back to Mike to provide some closing comments. Mike, back to you.
Speaker Change #111: 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 closing comments before we get to the Q&A session.
Mike: Thanks, Brian and now a few closing comments before we get to the Q&A session.
As many on this call are aware, and as Brian just stated, the RV Industry Association recently revised their expectations for calendar 2024 RV shipments to a mid-range estimate of 350,000 units.
Mike: As many on this call are aware and as Brian just stated the RV industry Association recently revise their expectations for calendar 2024, RV shipments to a mid range estimate of 350000 units. We are aligned with that projection at this time and believe this number will.
We are aligned with that projection at this time and believe this number will closely correlate with calendar year industry retail as well.
Mike: Closely correlate with calendar year industry retail as well.
as we assess the implications of the upcoming 2024 retail season.
Mike: As we assess the implications of the upcoming 2024 retail season.
We will provide the investor community with an update to our long range financial and operational targets originally provided during our 2022 investor day.
Mike: We will provide the investor community with an update to our long range financial and operational targets. Originally provided during our 2022 Investor day.
during our second quarter earnings call in March.
Mike: During our second quarter earnings call in March.
On our last earnings call, we announced significant news concerning the pending launch of a grand design motorhome lineup, offering a strong complimentary set of products to our current Winnebago and Newmar motorhome brand portfolio.
Mike: On our last earnings call, we announced significant news concerning the pending launch of a Grand design motor home lineup.
Mike: Offering a strong complementary set of products to our current Winnebago and Newmar motor home brand portfolios.
Grand Design continues to reinforce its reputation as one of the most successful RV brands ever created, receiving the RV Dealer Association Dealer Satisfaction Index Award for every one of its core product brands this past fall, an honor they have never failed to receive.
Grand design continues to reinforce its reputation as one of the most successful RV brands ever created receiving the RV dealer Association dealer satisfaction Index Award for every one of its core product brands. This past fall and honored they have never failed to receive.
We have no doubt this excellence will carry on to their new motorhome lineup, which will be unveiled later in fiscal year 2024, with anticipated shipments beginning in our fiscal fourth quarter.
Mike: We have no doubt this excellence will carry on to their new motor home lineup, which will be unveiled later in fiscal year 2024 with anticipated shipments beginning in our fiscal fourth quarter.
Also in the first quarter, Winnebago Industries opened our Advanced Technology Group's new Innovation Center, which will serve as a center of excellence for Horizon 2 and 3 engineering efforts within the company.
Mike: Also in the first quarter Winnebago industries opened our advanced technology groups, New Innovation Center.
Which will serve as a center of excellence for Horizon, two and three engineering efforts within the company and.
In the years ahead, the Center will support the design of a new generation of RV and marine products that will harness and apply emerging technologies.
Mike: In the years ahead, the center will support the design of a new generation of RV and marine products that will harness it apply emerging technologies.
Our integration of lithionics battery continues to go well, roughly eight months following this important strategic vertical technology acquisition.
Mike: Our integration of lifting Alex battery continues to go well roughly eight months. Following this important strategic vertical technology acquisition.
Lithionics is expanding its electrical products offering, penetrating the Winnebago Industries product portfolios with its exciting battery packs and battery management system offerings, expanding business with other outdoor mobility OEMs, and preparing its catalog of products for application into the marine industry.
Mike: Let me Alex is expanding its electrical products offering penetrating the winnebago industries product portfolios with its exciting battery packs and battery management system offerings.
Mike: Spanned a business with other outdoor mobility Oems and preparing its catalogue of products for application into the marine industry.
While the top line sales impact to Winnebago Industries from lithionics will be modest for a few years, the profit, dollars and yield impact will be more significant.
Mike: While the top line sales impact of Winnebago industries from lithium ion X will be modest for a few years the profit dollars and yield impact will be more significant.
in addition to the value of building a knowledge base here at the company on portable power technology across our business.
Mike: In addition to the value of building a knowledge base here at the company on portable power technology across our businesses.
Very importantly, Winnebago Industries released last week its 5th Annual Corporate Responsibility Report. The report aligns with the Global Reporting Initiative universal standards and features an index aligned with recommendations from the Task Force on Climate Related Financial Disclosures.
Mike: Very importantly, Winnebago industries released last week, its fifth annual corporate responsibility report the.
Mike: The report aligns with the global reporting initiative Universal standards and features an index in line with recommendations from the task force on climate related financial disclosures as.
as well as the company's first Sustainability Accounting Standards Board's index.
Mike: As well as the company's first sustainability accounting standards Board's index.
Highlights of Winnebago Industries corporate responsibility progress include
Highlights of Winnebago industries corporate responsibility progress include.
Submitting the company's first CDP climate change questionnaire, representing another large step toward enhancing their climate-related disclosures.
Mike: Submitting the company's first CDP climate change questionnaire, representing another large step towards enhancing their climate related disclosures.
progressing towards the company's waste reduction goal, improving to 62% diversion from landfills across our enterprise.
Mike: Progressing towards the company's waste reduction goal improving to 62% diversion from landfills across our enterprise.
initiating a strategic partnership with the Nature Conservancy to promote conservation and protect the outdoors.
Mike: Initiating a strategic partnership with the nature Conservancy to promote conservation and protect the outdoors.
a 20% reduction in the company's absolute Scope 1 and Scope 2 greenhouse gas emissions since 2020.
A 20% reduction in the company's absolute scope, one and scope two greenhouse gas emissions since 2020.
reduced total recordable incident rates by 16% compared to fiscal year 2022.
Mike: Reduced total recordable incident rates by 16% compared to fiscal year 2022.
provided more than $3 million in financial, product, and volunteer contributions to the communities Winnebago Industries serves in fiscal year 23.
Provided more than $3 million in financial product and volunteer contributions to the communities Winnebago industries serves in fiscal year 'twenty three.
an increase of 20 times in giving since 2016.
Mike: An increase of 20 times and giving since 2016.
Introducing new innovations that will support sustainability efforts, including the all-electric concept boat from ChrisCraft, further upgrades to an all-electric RV prototype, the ERV-2.
Mike: Introducing new innovations that will support sustainability efforts, including the all electric concept boat from Chris craft further upgrades to an all electric RV prototype the ERP too and.
and the acquisition of a lithium-ion battery manufacturer lithionics battery.
Mike: And the acquisition of a lithium ion battery manufacturer lifting Alex battery.
increased board gender and racial diversity from 14% women and no directors of color in 2015 to 30% women and 20% directors of color in 2023.
Mike: Increased board gender and racial diversity from 14% women and no directors of color in 2015% to 30% women and 20% directors of color in 2023.
Lastly, I would like to extend my gratitude to the entire Winnebago Industries team of employees for their continued hard work and dedication.
Mike: Lastly, I would like to extend my gratitude to the entire Winnebago industries team of employees for their continued hard work and dedication.
They have faced a significant amount of change in the past many years and continue to demonstrate resilience and agility as we navigate very dynamic market conditions.
Mike: They have faced a significant amount of change in the past many years and continue to demonstrate resilience and agility as we navigate very dynamic market conditions.
We have a tremendous team here and I wish each of them and their families a safe and happy holiday season.
Mike: We have a tremendous team here and I wish each of them and their families a safe and happy holiday season.
And those same wishes are extended to all of you listening in on this call as well. That concludes
Mike: And those same wishes are extended to all of you listening in on this call as well.
Mike: That concludes our prepared remarks this morning.
I will now turn the call back over to the operator who will open up the line for your question.
Speaker Change #112: I will now turn the call back over to the operator, who will open up the line for your questions.
Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment while we compile our Q&A roster.
Speaker Change #112: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment, while we compile our Q&A roster.
And our first question is going to come from the line of Michael Schwartz with Truist Securities. Your line is open. Please go ahead.
Speaker Change #113: And our first question is going to come from the line of Michael Swartz with <unk> Securities. Your line is open. Please go ahead.
Hey, good morning guys. Maybe just to drill down into the second quarter commentary that you made. I mean, obviously it sounds like revenue will be down sequentially versus the first quarter, which I don't think is a big surprise, given it's a seasonally smaller period anyway, but I just wanted to maybe dig down on on the margin outlook and maybe even EPS. I mean, are you trying to get across that that sequentially EPS will be down quarter over quarter?
Michael Swartz: Hey, good morning, guys.
Michael Swartz: Maybe just to drill down into the second quarter commentary that you made I mean, obviously it sounds like <unk>.
Michael Swartz: Revenue will be down sequentially versus the first quarter, which I don't think is a big surprise given it's a seasonally smaller period anyway, but I just wanted to maybe dig down on the margin outlook and maybe even EPS. I mean are you trying to get across that sequentially EPS will be down.
Michael Swartz: Quarter over quarter.
Michael Swartz: And Mike Good morning, this is Brian.
With the deleverage we've experienced, that's been the biggest driver by far of our margins, versus last year and even sequentially. And as I said in the prepared remarks, the allowances and discounts aren't going to be meaningfully different. So I think you should interpret the comments as such, that the lower sales volume will deliver, through deleverage, a lower profit.
Brian Hughes: With the deleverage we've experienced.
Mike: That's been the biggest driver by far of our margins.
Mike: Versus last year, and even sequentially and as I said in the prepared remarks, the allowances and discounts aren't going to be meaningfully different. So I think you should interpret the comments as such that the lower sales volume.
Mike: We will deliver through deleverage a lower profit number.
You know, obviously we're doing a lot of things to manage the expenses, the cost, we leverage our variable cost structure to the extent that we can.
Mike: Obviously, we're doing a lot of things to manage the expenses the cost we leverage our variable cost structure to the extent that we can.
Mike: But that's the message we're conveying.
Gotcha. Okay. Thank you. And then second question, just, and I think Mike, you were, you were discussing this in your, in your, in the preamble, just in terms of the retail environment, maybe in the past 30 to 60 days, I sensed, I guess, a little more maybe optimism versus where we were when we last talked back in October . Hey, could you just give us a, maybe a little more flavor color what you've actually seen on the retail environment, you know, both in the RV and the Marine industry.
Speaker Change #114: Got you Okay. Thank you and then second question just and I think Mike you were you were discussing this in your preamble just in terms of the retail environment, maybe in the past 30 to 60 days I sense, I guess, a little more maybe optimism versus where we were when we last talked back in October could.
Speaker Change #114: Could you just give us some maybe a little more flavor or color, what you've actually seen on the retail environment, both in the RV and marine industries.
Yeah, good morning, Mike. Um, you know, as my comments indicated, uh, you know, we aren't seeing a lot of surprises in the retail environment right now. It has generally been tracking
Yes, good morning, Mike.
Speaker Change #115: As my comments indicated.
Speaker Change #116: We aren't seeing a lot of surprises in the retail environment right now it has generally been tracking on.
both the RV and marine side to the internal projections that we have had for both calendar 23 and sort of the trend line that's headed towards obviously calendar 24 here in the coming weeks. I did mention that we are seeing positive retail from both Grand Design RV and Barletta and when I say positive I mean positive over same weeks the year prior.
Speaker Change #116: On both the RV and marine side to the internal projections that we have had for both calendar 'twenty three and.
Speaker Change #116: And sort of the trend line, that's headed towards obviously calendar 'twenty four here in the coming weeks I did mention that we are seeing.
Speaker Change #116: Positive retail from both Grand design, RV, and Barletta and when I say positive I mean positive over.
Same weeks the year prior so truly positive.
The other businesses are, again, trending as we expected and are, you know, gradually improving in a comp standpoint versus the year prior.
Speaker Change #116: The other businesses are are again trending as we expected.
Speaker Change #116: And are gradually improving.
Speaker Change #116: Comp standpoint versus the year prior.
As Brian and I both indicated, if we are to reach
Speaker Change #116: As Brian and I, both indicated if we are to reach.
You know, that 2024 retail level of 350,000 units approximately will have to gradually see an overall
Speaker Change #116: That 2024 retail level of 350000 units approximately we will have to gradually see an overall.
trend of RV, you know, retail comps closer to ultimately, you know, flat to maybe late later in calendar 24 positive versus the year prior.
Speaker Change #116: The trend of RV retail comps closer to ultimately flat to may be late later in calendar 'twenty four positive versus the year prior.
So, no surprises on the trends that we're projecting internally and, you know, the bigger challenge in the current short term is, you know, dealers just continuing to very carefully manage their own inventories.
Speaker Change #116: So no surprises on.
Speaker Change #116: On the trends that we're that we're projecting.
Speaker Change #116: <unk> internally and.
Speaker Change #116: The bigger the bigger challenge in the current short term is.
Speaker Change #116: Dealers, just continuing to very carefully manage their own inventories.
Speaker Change #116: Yes.
Speaker Change #117: Great. Thank you.
Thank you, and one moment as we move on to our next question.
Speaker Change #118: Thank you and one moment as we move on to our next question.
And our next question is going to come from the line of Craig Kinison with Baird. Your line is open. Please go ahead.
Speaker Change #119: And our next question is going to come from the line of Craig Kennison with Baird. Your line is open. Please go ahead.
Hey, good morning. Thanks for taking my question as well. I wanted to follow up on Mike's last question. Just it would seem to me that RV affordability has improved significantly given, you know, model year 2024 prices and the move in interest rates. I'm just curious if if you're hearing anything from your channel partners that suggest You know any movement by consumers based on that matter?
Craig Kennison: Hey, good morning, Thanks for taking my question as well I wanted to follow up on <unk>.
Last question.
Speaker Change #120: It would seem to me that RV affordability has improved significantly given model year 'twenty 'twenty four prices and the move in interest rates I'm just curious if you're hearing anything from your channel partners.
Speaker Change #120: Just.
Speaker Change #120: Any movement.
Speaker Change #120: Consumers based on that math.
Yeah, good morning, Craig. You know, I think any movements to that end would be very subtle at this time. You know, we are trying to address.
Speaker Change #120: Yes, good morning, Greg.
Speaker Change #121: I think any movement to that and would be very subtle at this time.
Speaker Change #121: We are trying to address.
the affordability challenge in the marketplace for new consumers of RVs and boats through a variety of tactics.
Speaker Change #121: The affordability challenge in the marketplace for new consumers of Rvs and boats through a variety of tactics.
Certainly, some of that includes support for units and dealer inventory that are either aging in place or may be particularly pressured from a price standpoint. We have also introduced, as we said in the script, several new models within a few of our brands that we believe will be more attractive to consumers shopping for lower price points.
Speaker Change #121: Certainly some of that includes support.
Speaker Change #121: Four units in dealer inventory that are either aging in place or maybe particularly pressured from a price standpoint.
Speaker Change #121: We have also introduced as we said in the script several new models within a few of our brands that we believe will be more attractive to consumers shopping for lower prices price points.
And then, you know, the last thing that we're definitely, you know, doing is we are passing on the benefits of reduced inflation, or in some cases, even, you know, disinflation, you know, to deflation to our dealers as well. You know, our businesses are being fair at the time where we have a bill of material that is...
Speaker Change #121: And then.
Speaker Change #121: The last thing that we are definitely.
Speaker Change #121: Doing is we are passing on the benefits of reduced inflation.
Speaker Change #121: Or in some cases even.
Speaker Change #121: Disinflation.
Two deflation to our <unk>.
Speaker Change #121: Dealers as well.
Our businesses are being fair at the time, where we have a bill of material that is.
you know, going the right direction in terms of a lower cost of goods, you know, those products are seeing that benefit pass through to the dealers as well. But, you know, this time of year, Craig, retail-wise, difficult to see, you know, a significant movement by consumers reacting to affordability easing in the market.
Speaker Change #121: Going the right direction in terms of a lower cost of goods.
Speaker Change #121: Those those products are seeing that benefit pass through to the dealers as well, but this time of year, Craig retail wise difficult to see.
Speaker Change #121: A significant movement by consumers reacting to affordability easing in the marketplace.
Thanks, Mike. And then could you comment on the freshness of dealer inventory, basically like the mix of model year 2024 units versus prior year models and how that would be compared to prior years?
Speaker Change #122: Thanks, Mike and then could you comment on.
Speaker Change #123: The freshness of dealer inventory basically like the mix of model year 2024 units versus prior year models, and how that would be compared to prior years at this time. Thank you.
Yeah, Craig, I can speak to that. I won't get into any specifics by brand, but we feel we are in good relative condition to the rest of the, the industry when we look across all of our businesses, RV and Marine.
Speaker Change #124: Yes, Craig I can speak to that I won't get into any specifics by brand, but we feel we are in good relative condition to the rest of the industry. When we look across all of our businesses RV and marine.
We think that less than 5% of our inventory at the end of quarter one was model year 2022.
We think that less than 5% of our inventory at the end of quarter. One was model year 2022.
We believed somewhere in the neighborhood of, you know, 40 to 45% was model year 23.
Speaker Change #124: We believed.
We're in the neighborhood of.
Speaker Change #124: 40% to 45% was model year 'twenty three and subsequently that means about half of our inventory was model year 2024, if you compare that to the.
subsequently that means about half of our inventory was model year 2024. If you compare that to the previous fiscal years at that point in time, end of Q1, we are a little bit heavier.
Speaker Change #124: Previous fiscal years at that point in time in Q1.
Speaker Change #124: We are a little bit heavier on the prior model year inventory in this case that would be model year, 2023, and a little bit lighter on current model year inventory that been model year 2024.
prior model year inventory, in this case that would be model year 2023, and a little bit lighter on current model year inventory, that being model year 2024. The numbers that I just quoted, generally the RV numbers as part of that are a little bit lower, you know, in a positive way, you know, meaning we have less
Speaker Change #124: The numbers that I just quoted generally the RV numbers as part of that are a little bit lower.
Speaker Change #124: In a positive way, meaning we have less.
you know, prior model year inventory. In the marine side, we probably have a little bit more prior model year inventory that we're working through. I've seen some notes from some of the fell site analysts that are probably on the call today that have probably done some scrapes.
Speaker Change #124: Prior model year inventory in the marine side, we probably have a little bit more prior model year inventory that we're working through I've seen some notes from some of the sell side analysts that are probably on the call today that have probably done some scrapes.
of, you know, online dealer inventory, and it appears that we are in good shape versus the rest of the industry in terms of inventory positions. So, a little elevated, but not anything that is causing us, you know, great consternation.
Speaker Change #124: Our online dealer inventory.
Speaker Change #124: And it appears that we are in good shape versus the rest of the industry in terms of inventory position, so a little elevated but not anything that is causing us.
Speaker Change #124: Great consternation at this time.
We do think that that is one of the things that will impact Q2 as well. I mentioned, as did Mike, the dealer sentiment having an impact on Q1 and ordering patterns.
Speaker Change #124: We do think that that is one of the things that will impact Q2, as well I mentioned, Mike the dealer sentiment, having an impact on Q1 and ordering patterns into.
into Q2. That's certainly one of the things that we hear from dealers is that they want to minimize
Speaker Change #124: Into Q2, that's certainly one of the things that we hear from dealers is that they want are minimized.
model year 24 purchases until they see more progress, you know, industry-wide on those model year 23s on their lots.
Speaker Change #124: Model year, 'twenty four purchases until they see more progress.
Speaker Change #124: Industry wide.
Speaker Change #124: Those model year 'twenty threes on their lots.
Speaker Change #125: That's very helpful happy holidays.
Speaker Change #126: Thank you Greg.
Thank you, and one moment as we move on to our next question.
Speaker Change #127: Thank you and one moment as we move onto our next question.
and our next question is going to come from the line of Brett Jordan with Jeffries. Your line is open please go ahead.
Speaker Change #127: And our next question is going to come from the line of Bret Jordan with Jefferies. Your line is open. Please go ahead.
Bret Jordan: Hey, good morning, guys.
Could you talk a little bit more about the incremental SG&A investment? I think you talked around sort of engineering, data, IT. Could you give us a bit more color there and, you know, how we should think about that in sort of in 24?
Bret Jordan: Could you talk a little bit more about the incremental SG&A investment I think you talked around sort of engineering data.
Bret Jordan: Could you give us a bit more color there and how we should think about that in sort of in 'twenty four.
Yeah, good morning, Brett. This is Mike. I'll begin and then Brian will probably add some additional context as well. You know, I had felt candidly through the last month or so that the street was modeling our a little lower than what we had been planning.
Speaker Change #128: Yeah. Good morning, Brett This is Mike I'll begin and then Brian will probably add some additional context as well.
Mike: <unk> felt candidly through the last month or so that the street was modeling our SG&A a little lower than what we had been planning.
Our SG&A for quarter one actually came in lower than what our management plan on SG&A was for quarter one.
Mike: SG&A for quarter, one actually came in lower than what our management plan on SG&A was for quarter one.
So SG&A is a little bit different in its variable cost nature than really the manufacturing side of our business. And Brian can probably speak to that a little bit more articulately than I can. But as we returned to a new fiscal year, you saw some things roll over as one example would be the reset of bonuses for certain employees in the organization. But as we returned to a new fiscal year, you saw some things roll over as one example would be the reset of bonuses for certain employees in the organization.
Mike: So SG&A is a little bit different in its variable cost nature than really the manufacturing side of our business and Brian can probably speak to that a little bit more articulately than I can but as we return to a new fiscal year.
Mike: Saw some things roll over as as one example would be the reset of bonuses for certain employees.
But I'm going to speak to the specific things I referenced in the call, engineering being one of them. You know, we are spending intentional dollars around the development of new products.
Mike: In the organization.
Mike: But I'm going to speak to the specific things I referenced in the call.
Mike: Engineering being one of them.
Mike: We are spending.
Mike: Intentional dollars around the development of new products around.
around work in the advanced technology area on topics like electrification, and even within our businesses, our businesses are keeping their foot to the pedal in terms of new products that will be introduced later in this fiscal year or future fiscal years. I talked about digital...
Mike: Work in the advanced technology area on topics like electrification.
Mike: And even within our businesses our businesses are keeping their foot to the pedal in terms of new products that will be introduced.
Mike: Later in this fiscal year or future fiscal years, I talked about digital assets.
You know, the world is changing from a brick-and-mortar analog environment to more of an online digital world, and we are investing in numerous tools.
Mike: The world is changing from a brick and mortar analog environment to more of an online digital world and we are investing in numerous tools.
within our businesses that will help us compete effectively in the future from a digital engagement standpoint with consumers. And lastly, IT services.
Mike: Within our businesses that will help us compete effectively in the future from a digital engagement standpoint, with consumers and lastly systems Winnebago industries. When I joined the company now almost eight years ago, just was not modernized in the way we did business in particularly the foundation of it.
You know, Winnebago Industries, when I joined the company now almost eight years ago.
just was not modernized in the way we did business, and particularly the foundation of IT systems. And we continue.
Mike: Systems, and we continue to.
to travel along that path, and we are making intentional investments in ERP systems, in customer service phone systems. We're making investments in financial systems. We're making investments in customer relation management systems.
Mike: To travel along that path and we are making intentional investments in ERP systems.
Mike: In customer service phone systems, we're making investments in financial systems, we're making investments and customer relation management systems, all with the intention of obviously modernizing the business and setting the stage for success in the future. So we probably had a little bit of a misalignment with the street.
all with the intention of obviously modernizing the business and setting the stage for success.
in the future. So, you know, we've probably had a little bit of a misalignment with the street this quarter on, you know, that impact of both resetting SG&A, but also adding in some of those investments. But, you know, now you guys are aware of our approach on that. Brian , any other context? Yeah, I'll give you a little more context, Brett. You know, we have historically talked about our cost structure being 85% variable.
Mike: Quarter on that impact of both resetting SG&A, but also adding in some of those investments but.
Mike: Now you guys are aware of our approach on that Brian any other context, yes, I'll give you a little more context Brett.
Brett: Historically talked about our cost structure being 85% variable.
SG&A is clearly a really small part of our cost structure.
Brett: <unk> is clearly a really small part of our cost structure.
But it's much more fixed. I would use more of a 25% variable as a high.
Brett: But it's much more fixed I would I would use more of a 25% variable.
Brett: As a high level estimate.
So that might help some of the modeling we've also added lithium
Brett: So that might help some of the modeling. We've also added lithium ion X, obviously that business unit SG&A since last year not since Q4, so not sequentially, but versus last year, that's an AD as well as the purchase accounting impacts.
that business unit SG&A since last year, not since Q4, so not sequentially, but versus last year, that's an add, as well as the purchase accounting impact.
from that deal. Mike mentioned the investments we're making, all very intentional. He also mentioned the bonus plans and the variability that that might cause from one quarter to the next.
Brett: From that deal Mike mentioned, the investments, we're making all very intentional you also mentioned the bonus plans and the variability that that might cause from one quarter to the next so in general you got also appreciate that SG&A is more subject to volatility from one quarter to the next as we deal.
So in general, you know, you got to also appreciate that SG&A is more subject to volatility from one quarter to the next as we deal with some non-recurring type items as well. So we'll continue to provide commentary around those types of things as they occur. But I guess that was the additional context I would add. Okay. Great.
Brett: With some nonrecurring type items as well so we'll continue to provide commentary around those types of things as they occur.
Brett: But I guess that would be additional context I would add.
Speaker Change #129: Okay, great. Thank you and then a quick question I guess.
The last couple of years, the RBIA started out pretty high and ended up substantially lower and it seems like they've taken the number down a little bit already for 24.
Speaker Change #129: Last couple of years, the RV EIA started out pretty high it ended up being at a substantially lower and it seems like they've taken the number down a little bit already for 24.
It's in line with your forecast. I guess, do you think that's substantially de-risked? I guess, what would you see that could happen that would cause the RBIA number to come in 20 plus percent below the initial forecast as it has the last couple of years? Or are they conservative enough at this point, do you think?
Speaker Change #130: It's in line with your forecast I guess do you think thats substantially de risked I guess, what would you see that could happen that would that would cause the RV IAA number to come in 20 plus percent below the initial forecast as it has the last couple of years or are they conservative enough at this point do you think.
You know, Brett, we have members of our leadership team that that participate in the process with our VIA on the market statistics committee to to help set that number. So.
Speaker Change #130: Brett we have members of our leadership team that participate in the process with our view on the market Statistics committee to to help set that number so.
And that's a good thing that OEMs and suppliers are working with RVIA to try to come up with a collective projection for shipments.
Speaker Change #130: And that's a good thing.
Speaker Change #130: Oems and suppliers are working with RBA to try to come up with a collective projection for shipments.
The element that comes to mind when you ask that question for me is timing.
The element that comes to mind. When you asked that question for me is timing.
You know, I think that the question here is, when will dealers, you know, begin to feel more confident?
Speaker Change #130: I think the question here is when will dealers.
Speaker Change #130: I'll begin to feel more confident.
in trending towards that one-to-one retail to wholesale replenishment ratio that not only Winnebago Industries has referenced, but some of our peers as well.
Speaker Change #130: In trending towards that one to one <unk>.
Retail to wholesale replenishment ratio that.
Speaker Change #130: Not only Winnebago industries is referenced but some of our peers as well and I think.
And I think late, you know, we're not anticipating a large retail difference in calendar 24 versus calendar 23. We think it'll be a relatively flat environment. And so it really comes down to channel confidence in terms of, you know, taking more inventory to put on their lots to
Speaker Change #130: We're not anticipating a large retail difference in calendar 'twenty four versus calendar 'twenty three we think it'll be a relatively flat environment and so it really comes down to channel confidence in terms of.
Speaker Change #130: Taking more inventory to put on their lots to support.
you know, a healthy retail environment with consumers. And I think the timing of that sort of, you know, channel shipment flow trend will be what, you know, ultimately determines the shipment number.
Speaker Change #130: A.
A healthy retail environment with consumers and I think the timing of that sort of channel shipment flow trend will be what ultimately determines the shipment number certainly if retail is positive if the fed cuts interest rates of consumers.
Certainly, if retail is positive, if the Fed cuts interest rates, if consumers.
you know, feel some easing and start to return to spending, you know, in the RV and marine industries, you know, that retail boost or energy could certainly also, you know, help deliver that higher confidence to our dealers. So I think it's timing, and I think the RVIA shipment number is probably more balanced in terms of upside and downside at this new 350 number.
Speaker Change #130: Feel some easing and start to return to spending.
Speaker Change #130: In the RV and Marine industries.
Speaker Change #130: That retail booster NRG could could certainly also helped deliver that higher confidence to our dealers. So so I think its timing and I think the <unk> shipment number is is probably more balanced in terms of upside and downside at this new $3 50 number.
Speaker Change #131: Okay, great. Thank you.
Thank you, and one moment as we move on to our next question.
Thank you and one moment as we move on to our next question.
Our next question is going to come from the line of Tristan Thomas-Martin with BMO Capital Markets. Your line is open. Please go ahead. Hey, good morning.
Speaker Change #131: Our next question is going to come from the line of Tristan Tristan Thomas Martin with BMO capital markets. Your line is open. Please go ahead.
Speaker Change #131: Hey, good morning.
Has your view on ASPs for the full year changed since last quarter?
Speaker Change #131: Hedge.
Speaker Change #131: Your view on Asps for the full year changed since last quarter.
You know, on the tolbo side, what we're seeing is probably a stronger shift in mix.
Speaker Change #131: On the towable side, what we're seeing is probably a stronger shift in mix.
Tristan at least in the near term in q1 and probably to be continued in q2 Towards travel trailers versus fifth wheels as consumers migrate to a more affordable product I think I think mix will continue to have a bigger Impact on ASP than what we have conveyed, you know, and I think as recently as last quarter we conveyed a number on the motorized and marine side Pretty consistent still from what we're seeing in terms of ASP's
Speaker Change #131: Tristan at least in the near term in Q1, and probably to be continued in Q2 towards travel trailers versus fifth wheels as consumers migrate to a more affordable product I think I think mix will continue to have a bigger impact on asps.
Speaker Change #131: And what we have conveyed.
Speaker Change #131: I think as recently as last quarter, we conveyed a number.
Speaker Change #131: On the motorized and marine side.
Speaker Change #131: Pretty consistent Philip from what we're seeing in terms of Asps.
The tollable ASP being much more influenced by mix versus a like-for-like rate.
Speaker Change #131: The <unk> ASP.
Speaker Change #131: Being much more influenced by mix versus like for like rate.
Reduction, you know, we still see that and probably on the rate side and the low to mid single digit
Speaker Change #131: Reduction, we still see that probably on the rate side.
Speaker Change #131: Low to mid single digit.
Speaker Change #131:
Speaker Change #131: Decline for Asps on <unk>.
Speaker Change #131: Okay.
Okay, that's not a like for like. Okay. So the, the, the mix impact that drove the reduction here in Q1. That.
Speaker Change #131: Okay. So like for like Okay. So that the mix impact that drove the reduction here in Q1.
Speaker Change #131: That was much larger.
Okay, last quarter, didn't you say down mid to high single digits on a mixed neutral basis? Now, is it down low to mid? Is that what you're saying? Sorry. Strongest way. Yeah, I'd say it's moderating. We're seeing inflation that's quarter to quarter, pretty neutral at this stage.
Speaker Change #131: Okay.
Speaker Change #132: Gordon you said down mid to high single digits on a mixed neutral basis.
Speaker Change #132: That was down low to mid <unk> is that what you're saying.
Speaker Change #133: I'd say, it's moderating we're seeing.
Speaker Change #133: Inflation thats quarter to quarter pretty neutral at this stage.
Okay. And then just one more thing to square. Your total shipments were much greater than the industry, at least over the two months of reported industry data. What was kind of the delta there year versus the industry?
Okay.
Speaker Change #133: And then just one more thing to square your total shipments are.
Speaker Change #133: Much greater than the industry at least over the two months of the reported industry data what was kind of the delta there versus the industry.
Tristan, this is Mike, you know, I think we continue to, I'm assuming you're referencing the RV industry, you know, we're continuing to see some benefit, you know, from the totals, you know, business, particularly grand design reestablishing, I think.
Mike: Chris This is Mike.
Mike: I think we continue to I'm, assuming you're referencing the RV industry, we're continuing to see some benefit.
Mike: From.
Mike: The <unk> business, particularly Grand design, Reestablishing I think a solid lot share foundation, we had talked for several years it seemed on.
a solid lot share foundation. We had talked for several years, it seemed, on this influx of second and third tier brands that dealers took on during the COVID frenzy. That issue is largely gone now. And a brand like Grand Design has really worked hard with its dealers to reestablish the right share of
Mike: This influx of second and third tier brands that dealers took on during the Covid frenzy that issue is largely gone now.
Mike: A brand like Grand design has.
Mike: <unk> really worked hard with its dealers to reestablish the right share of what.
Uh, you know, from that standpoint, you know, I would say our new Mar business has also done a good job working with its dealers.
Mike: From that standpoint, I would say our Newmar business has also done a good job working with its dealers to make sure that stocking inventory levels are where we think are appropriate and so.
to make sure that stocking inventory levels are where, you know, we think are appropriate. And so, you know, I don't think our lot share has swung in an unhealthy way, you know, based on, you know, shipments the last couple of months. I think it's back to where we think it needs.
Mike: I don't think our lot share has swung in an unhealthy way.
Mike: Based on shipments the last couple of months I think it's back to where we think it needs to be.
uh... and we're starting to see some retail share benefits as well we think
Mike: And we're starting to see some retail share benefits as well we think from some of that activity is that as I mentioned on the call, particularly with Grand design RV.
from some of that activity as I mentioned on the call, particularly with Grand Design RV.
You know, their retail has not just stabilized, but started to take some small ticks up in the right direction, which we think is
Mike: The retail is not just stabilize but started to take some some small ticks up in the right direction, which we think is.
you know, a sign of more positive things to come on that.
Mike: A sign of more positive things to come in on that brand.
Okay, I'm going to take 1 more and about. Okay. Can you remind everyone your stance on building open orders? Thank you.
Speaker Change #134: Okay, I'm going to sneak one more in if that's okay can you remind everyone. Your stance on building open orders. Thank you.
Speaker Change #134: Yes.
Well, our stance on open orders, you know, has certainly evolved through the years. Many, many years ago, the Winnebago brand of motorhomes used a predominantly open order position. But as we've added quality businesses and as we've improved our production planning processes, as most of you on the call know, we shifted to largely a non-open order production planning cycle.
Speaker Change #135: Well our stance on open orders has certainly evolved through the years. Many many years ago. The Winnebago brand of Motorhomes used a predominantly open order position.
Speaker Change #135: But as we've added quality businesses and as we've improved.
Speaker Change #135: Our production planning processes as most of you on the call know we shifted to largely a non open order production planning cycle now that's been challenged in a number of different ways as the cycles have happened.
Now, that's been challenged in a number of different ways as the cycles have happened and supply chain challenges have happened. At this current time, our intention is still to minimize the number of open production units that we build to a reasonable number.
Speaker Change #135: Supply chain challenges have happened at this current time, our intention is still to minimize the number of open production units that we build to a reasonable number so each of our business probably still builds a small percentage of their production that is.
So each of our business probably still builds a small percentage of their production that is, you know, that is open, but we are working hard with our sales teams to stay far enough ahead of our business to have, you know, to have orders when we begin that unit on the production line.
Speaker Change #135: That is open but we are working hard with our sales teams to stay far enough our head of our business to have.
Speaker Change #135: To have orders when we begin that unit on the production line as you saw from our backlog.
As you saw from our backlog, working its way down, our sales teams have to work hard and effectively to make sure that we have orders that we can match to the production process. So we're going to be as disciplined as we can, both in terms of quantity of production.
Speaker Change #135: Working its way down.
Speaker Change #135: Our sales teams have to work hard and effectively to make sure that we have orders that we can match to the production process. So we're going to we're going to be as disciplined as we can both in terms of quantity of production.
But also, you know, trying to manage open order production to a reasonable amount. We are not building lots full of open units waiting for spring to happen and
Speaker Change #135: But also.
Speaker Change #135: Trying to manage open order production to a to a reasonable amount.
We are not building lots full of open units waiting for spring to happen and dealers to take those units.
That's that's not generally been our approach and that's why we have some extended downtimes here over over the holidays in some of our plants
Speaker Change #135: That's not generally been our approach and Thats why we have some extended downtime here over over the holidays and some of our plants.
Speaker Change #136: Okay. Thank you.
Thank you and one moment as we move on to our next question.
Speaker Change #137: Thank you and one moment as we move on to our next question.
Our next question is going to come from the line of Joe Altavarro with Raymond James. Your line is open. Please go ahead. Thanks. Hey, guys. Good morning. First question on travel trailers and the mid-shift away from drift wheels. How does that coupled with the improvement in your expectation for base pricing on towables overall impact, you know, segment margins? Do you guys still expect to see margin expansion in towables this year?
Speaker Change #137: Our next question is going to come from the line of Joe <unk> with Raymond James Your line is open. Please go ahead.
Joe: Hey, guys good morning.
Joe: First question on travel trailers, and the mix shift away from fifth wheels, how does that coupled with the improvement.
Joe: And your expectation for base pricing on payables overall impact segment margins do you guys still expect to see margin expansion.
Joe: <unk> this year.
Yeah, Joe, this is Brian . You know, I think, as I mentioned, the tollbooth business will continue to show, in the near term here, Q1, Q2, will continue to show growth that outpaces the fifth wheel. I think that's just where the consumer is at right now and their preference for a lower priced.
Joe: Yes, Joe this is Brian.
Brian Hughes: I think as I mentioned, the total business will continue to show in the near term here Q1, Q2, we will continue to show growth that outpaces. The fifth wheel I think thats, just where the consumer is at right now.
Brian Hughes: And their preference for lower priced unit.
I think that as we continue to see some of the positive developments, and some of them have been mentioned already on the call, you know, interest rates perhaps showing a more
Brian Hughes: I think that as we continue to see some of the positive developments in some of them had been mentioned already on the call interest rates, perhaps showing a more dovish.
approach, consumer confidence improving, you know, fuel costs that seem to be, you know, on a downward trend, certainly moderating inflation, both broadly speaking and the impact that has on consumer wallets as well as specific to our products. I think as we continue to see those things, some of that will normalize in the go-forward periods. In other words, we'll see.
Brian Hughes: Approach consumer confidence improving.
Brian Hughes: <unk> costs that seem to be.
Brian Hughes: On a downward trend.
Brian Hughes: Moderating inflation.
Both broadly speaking and the impact that has on consumer wallets as well as specific to our products I think as we continue to see those things some of that will normalize in the go forward periods in other words, we'll see.
you know, a more consistent growth pattern between towables and fifth wheels. So that's the current expectation. You know, I think your question really gets to, you know, does gross margin differ materially across our price points? I guess the message I would send there is, no, it really doesn't. You know, there's a little bit, as there is on all product categories in other industries. Ours is probably not an exception there, but, you know, we really build units.
Brian Hughes: A more consistent growth pattern between October 5th wheel. So.
Brian Hughes: That's the current expectation.
Your question really gets to.
Gross margin differ materially across our price points. It gets the message I would say there is.
Speaker Change #138: No it really doesn't.
Speaker Change #138: There's a little bit as there is in all product categories. In other industries are probably not an exception there, but we really build units.
a bill of materials perspective and price them to deliver a pretty consistent margin from the lower price to the higher price. I'd say we're always striving for innovation and differentiation and in products where we think that we have a you know a better position in our competition we might realize them some higher margins than the average you know some more differentiation or innovation driven versus price point driven.
Speaker Change #138: Bill of materials perspective, and price them to deliver a pretty consistent margin.
Speaker Change #138: From the lower priced at a higher price I would say, we are always striving for innovation and differentiation and in products, where we think that we have a <unk>.
Speaker Change #138: <unk> position than our competition, we might realize them some higher margins than the average for more differentiation and innovation driven versus price point driven.
But that's how we approach things and that's what you should assume in the model.
Speaker Change #138: But that's that's how we approach things and Thats.
Speaker Change #138: What you should assume in the modeling.
Okay, that's helpful. And maybe on motorhomes, you called out some operational issues in the press release. Is this the same issue or issues that you saw last quarter or are they new issues?
Speaker Change #139: Okay. That's helpful and maybe on on motor homes, you called out some operational issues.
In the press release is this the same issue or issues that you saw last quarter or are they new issues.
Yes.
Speaker Change #140: I'm, sorry, I'll start Mike and then you can add.
You know, a lot of similar things. We did have in Q1, though, we had some rework that was associated with some recall activity that was necessary. We did see some lower productivity on some of the newer products that we have going down the line right now. So that was occurring. There was some flexed workforce or some.
Speaker Change #140: A lot of similar things we did have in Q1, though we had some rework that was associated with some recall activity that was necessary.
Speaker Change #140: We did see some lower productivity on some of the newer products that we have going down the line right now so that was occurring there was some flex workforce.
Speaker Change #140: Or some.
additional workforce in certain verticals, that might have had a bit of an impact as well. And I'm speaking really to the motorhome margins specifically here, okay. And then just generally higher, some higher warranty costs.
Speaker Change #140: Additional work for some certain verticals.
Speaker Change #140: <unk> had a bit of an impact as well and I'm speaking really to the motor home.
Speaker Change #140: Margins, specifically here okay.
Speaker Change #140: And then just generally higher some higher warranty costs.
associated with some specific recall activity. So those are probably the call-outs.
Speaker Change #140: Associated with some specific recall activity. So those are probably the the callout.
Altogether, an EBITDA margin impact of one to one and a half points in that range.
Speaker Change #140: Altogether.
Speaker Change #140: EBITDA margin impact of one to one five points in that range.
So certainly not as big as the deleveraging impact and the, you know, allowances and discounts that we've called out as the primary drivers, but it was still, I thought, worth calling out as an EBITDA margin impact in the quarter.
Speaker Change #140: So certainly not as big as the deleveraging impact in the <unk>.
Speaker Change #140: Ounces in discounts that we've called out as the primary drivers, but it was still I thought worth calling out.
Speaker Change #140: And EBITDA margin impact in the quarter.
Speaker Change #141: Okay, great. Thank you guys.
Thank you, and one moment as we move on to our next question.
Speaker Change #142: Thank you and one moment as we move on to our next question.
And our next question comes from the line of Scott Stimber with Ross MKM. Your line is open. Please go ahead. Good morning, and thanks for taking my.
Speaker Change #142: And our next question comes from the line of Scott <unk> with Ross your.
Scott: Your line is open. Please go ahead.
Scott: Good morning, and thanks for taking my questions guys.
Speaker Change #143: Good morning, Scott Scott.
Mike, can you maybe just talk a bigger picture? I know it's hard to tell right now what's going to happen, but obviously a lot has changed in the dynamics for the dealers, the cost of carrying product. Are you hearing through any discussions that maybe the order patterns...
Speaker Change #143: Mike can you maybe just talk bigger picture I know, it's hard to tell right now what's going to happen.
Speaker Change #143: Obviously, a lot has changed in the dynamics for the dealers the cost of carrying products.
Speaker Change #143: Are you hearing any discussions that may be.
Speaker Change #143: <unk>.
Speaker Change #143: The order patterns.
will change materially going forward, meaning more of a just-in-time batch kind of scenario versus the prior, you know, big chunks of orders that you would see? And if so, do you have to adjust your cost structure at all to handle?
Speaker Change #143: We will change materially going forward, meaning more of a just in time batch kind of scenario.
Speaker Change #143: Versus the prior.
Speaker Change #143: Big chunks of orders that you would see and if so.
Speaker Change #143: Do you have to adjust your cost structure.
Speaker Change #143: At all to handle that.
Thanks, Scott, for the question. So, yeah, a couple elements there.
Speaker Change #144: Thanks, Scott for the question so a couple of elements there.
You know, I mean, dealer ordering patterns have certainly changed in recent months, you know, and and I think your observation that.
Speaker Change #144: Yes, I mean dealer ordering patterns have certainly changed in recent months.
And I think your.
Observation that dealers.
you know, to have a higher sense of confidence that they can get new product more quickly that they don't have on their lots at the present time, or if they have a retail customer who orders something that's not on their lots, that they can secure that. I think that's generally correct in terms of, you know, dealer anticipation that the lead time for new product from OEMs, you know, is going to be shorter.
Speaker Change #144: To have a higher sense of confidence that they can get new product more quickly that they don't have on their lots at the present time or if they have a retail customer.
Speaker Change #144: Order something that's not on their lots that they can secure that I think thats generally correct in terms of.
Speaker Change #144: Dealer.
Speaker Change #144: Anticipation that the lead time for new product from Oems.
Speaker Change #144: Is going to be shorter.
I think we all have to be careful in the industry about how aggressive we get to that end. Because on certain products, particularly motorized, but even a few of the towables, and certainly some of the boats as well, there are elements of the supply chain which are still just have longer lead times as well. So I think there will be some natural friction that will put that pendulum in a good place going forward.
Speaker Change #145: I think we all have to be careful in the industry about how aggressive we get to that end because on certain products, particularly motorized but even.
Speaker Change #145: Few of the totals.
Speaker Change #145: And certainly some of the boats as well.
Speaker Change #145: There are elements of the supply chain, which are still.
Speaker Change #145: Just.
Have longer lead times as well, so I think there'll be some natural friction that will put that pendulum.
Speaker Change #145: A good place going forward.
Obviously, our comments today around Q2, you know, should certainly be viewed as a confirmation that, you know, the order base that we see for, you know, that particular period of shipment month.
Obviously our.
Speaker Change #145: Comments today around Q2.
Speaker Change #145: Should certainly be viewed as a confirmation that the order base that we see for that particular period of shipment months.
You know, we believe we'll be, you know, more moderate and more constrained in the very short term. I think dealer ordering pattern change in the future will really depend on any spike of positivity.
We believe we will be.
Speaker Change #145: More moderate and more constrained in the very in the very short term.
Speaker Change #145: I think dealer ordering pattern change in the future will really depend on any.
Speaker Change #145: Spike of positivity.
you know, at retail and the dealers potentially, you know, gaining confidence at the same time and beginning to compete again for that OEM production capacity.
Speaker Change #145: At retail and the dealers potentially gaining confidence at the same time and beginning to compete again for that OEM production capacity.
Certainly, your second, the second part of your question around, you know, looking at the cost structure, we've been doing that.
Speaker Change #146: Certainly your second the second part of your question around looking at the cost structure, we have been doing that.
uh... all along uh... in and as we talked about the variable cost nature that is part of the dial that we use uh... unfortunately that has i've
Speaker Change #146: All along.
Speaker Change #146: And as we've talked about the variable cost nature that as part of the dial that we use unfortunately that has obviously.
you know, resulted in less manufacturing employees being needed within our businesses. You know, we had a peak of, you know, 7700 employees, you know, at one point, and we're running roughly at about 6100 employees.
Speaker Change #146: Resulted in.
Speaker Change #146: Less manufacturing employees are being needed within our businesses. We had a peak of 7700 employees at one point and we're running roughly at about 6100 employees at.
uh... at the end of uh... the first quarter uh... but we are also looking at uh... you know
Speaker Change #146: At the end of the first quarter, but.
Speaker Change #146: But we are also looking at.
cost structure from an infrastructure standpoint and a more systemic standpoint as well.
Speaker Change #146: Cost structure from a from an infrastructure standpoint.
Speaker Change #146: More systemic standpoint as well.
Should we have a sort of permanently low growth environment develop here over the next, you know, several years? So we have to be prepared for any of those scenarios, and we'll certainly update our investors appropriately with any news if we decide to change, you know, the cost structure of the business in a, you know, in a very material and meaningful way above and beyond, you know, the variable playbook that we've used through the years.
Speaker Change #146: Should we have a sort of permanently low growth environment develop here over the next several years.
Speaker Change #146: So we have to be prepared for any of those scenarios and we'll certainly update our investors appropriately with any news if we decided to change the cost structure of the business and Ah.
Speaker Change #146: In a very material and meaningful way above and beyond the variable playbook that we've used through the years.
Got it. Very helpful. And then last question, just on cash flow. I know you guys don't guide, but how should we look at 24 from a free cash flow perspective, higher, lower than the last couple of years? And, you know, the, again, the, the, the deployment of capital, how should we look at that? As far as preferences?
Speaker Change #147: Got it very helpful. And then last question just on cash flow I know you guys don't guide, but how should we look at 'twenty four from a free cash flow perspective, higher or lower than the last couple of years and.
Speaker Change #147: Again the.
Speaker Change #147: The deployment of capital how should we look at that as far as profits.
Yeah, I'll take a first stab at that Scott and Mike can add on, you know, historically speaking Q1 Q2 has, you know, they've not been cash generating quarters for
Speaker Change #148: Yes, I will take first stab at that Scott and Mike can add on.
Speaker Change #148: Historically speaking Q1, Q2 is they've not been cash generating quarters for us.
And the same is likely to be the case this year, particularly with the dealer ordering patterns that we were just talking about for QT.
Speaker Change #148: And the same is likely to be the case this year, particularly with.
Speaker Change #148: The dealer ordering patterns that we were just talking about for Q2.
One of the things that we have continuously been challenged by is the management of working capital in this Difficult environment, you know, you have production plans long lead times as Mike mentioned Earlier that certainly impact that in a negative way when you just don't see the top line Getting the traction and you have to curtail your production as a result. So that that's What we're fighting right now
Speaker Change #148: One of the things that we have continuously been challenged by is the management of working capital in this difficult environment. You have production plans long lead times as Mike mentioned.
Earlier that certainly impact that in a negative way when you just don't see the topline getting the traction and you have to curtail your production as a result, so that's.
Speaker Change #148: What we're fighting right now.
And we expect that as Q3, Q4, as we start to get into this season, as those volumes start to tick up, that we'll be in a position of managing working capital a little bit more aggressively. So it's working capital that we're really focusing on, Scott. I think your question might be getting a little bit into capital deployment.
Speaker Change #148: We expect that as Q3 Q4, as we start to get into the season.
Speaker Change #148: Those volumes start to tick up that.
Speaker Change #148: That will be in a position to managing working capital a little bit more aggressively. So it's working capital that we're really focusing on Scott I think your question might be getting a little bit into capital deployment.
more broadly speaking, and you know, we had some pretty aggressive share repurchase here in Q1.
Speaker Change #148: More broadly speaking and we had some pretty aggressive share repurchase here in Q1.
which we thought was the right thing to do, all things considered, and we'll continue to use that as a mechanism of returning cash to shareholders as well. So, those are the comments that I would add. Great.
Speaker Change #148: Which we thought was the right thing to do all things considered and will continue to use that as a.
Speaker Change #148: Our mechanism of returning cash to shareholders as well so.
Speaker Change #148: The comments that I would add.
Speaker Change #148: Great.
Speaker Change #149: That's all I have thanks, guys.
Speaker Change #149: Scott.
Thank you and one moment as we move on to our next question.
Speaker Change #149: Thank you and one moment as we move on to our next question.
Speaker Change #149: Okay.
Speaker Change #149: Okay.
And our next question is going to come from the line of Fred Whiteman with Wolf Research. Your line is open. Please go ahead.
Speaker Change #149: And our next question is going to come from the line of Fred Wightman with Wolfe Research. Your line is open. Please go ahead.
Hey, guys, just one quick one. If we think about the back half improvement that you guys are talking about for calendar 24, are you assuming rate cuts? And then how quickly do you think if we do see cuts that could impact retail and potentially wholesale?
Fred Wightman: Hey, guys. Just one quick one if we think about the back half improvement that you guys are talking about for calendar 'twenty. Four are you assuming rate cuts and then how quickly do you think if we do see cuts that could impact <unk>.
Fred Wightman: Retail and potentially wholesale.
Fred Wightman: Okay.
Good morning, Fred. You know, we put our management plan together for our fiscal year, you know, back in the, you know, the July , August time period. And we felt at that time that the back half of fiscal year 2024 had an improved chance, you know, of, you know, an upward swing, especially on shipments than
Speaker Change #150: Hey, good morning, Fred.
Speaker Change #150: We put our management plan together for our fiscal year back in the.
Speaker Change #150: July August time period, and we felt at that time that the back half of fiscal year 2024 had an improved chance.
Speaker Change #150: All of the upward swing, especially on shipments.
Speaker Change #150: Then the first half.
And as we've indicated, I don't think that stance has changed.
Speaker Change #150: And as we've indicated I don't think that stance has changed although I would say.
Although I would say, you know, a couple of things probably are working to maybe balance themselves out. One is, you know, dealers appear to be.
Speaker Change #150: Couple of things probably are working to maybe balance themselves out one as dealers appear to be probably even more discipline than we anticipated.
probably even more disciplined than we anticipated, you know, on bringing inventory in, in advance of the spring retail selling season. And, you know, particularly, you know, we haven't talked about it much yet in the Q&A, but, you know, the pontoon dealers are being, you know, very disciplined as well, even though we have probably the most preferred brand of choice right now, you know, in that category, the dealers are still, you know, taking care of their businesses.
Speaker Change #150: On bringing inventory in advance of the spring retail.
Speaker Change #150: Selling season.
Speaker Change #150: And particularly we haven't talked about it much yet in the Q&A, but the pontoon dealers are being very disciplined as well, even though we have probably the most preferred brand of choice right now in that category of the dealers are still.
Speaker Change #150: Taking care of their businesses.
you know, by managing inventory. So that that has been a little bit bigger of a headwind versus, you know, our management plan expectations.
Speaker Change #150: By managing inventory, so that that has been a little bit bigger of a headwind versus our management plan expectations.
To your point, though, we did not factor in any rate cuts specifically, you know, into our fiscal 24 planning. And so the.
Speaker Change #151: To your point, though we did not factor in any rate cuts specifically into our fiscal 2000 and for planning and so.
Speaker Change #151: <unk>.
uh... the comments obviously that the fed delivered you know a week or so ago about probably an increase
Speaker Change #151: The comments, obviously that the fed delivered a week or so ago about probably an increased.
a chance of rate cuts in calendar 24, you know, certainly is a positive sign. I think the relation of a rate cut to retail will depend on the degree of the cut and the frequency of cuts, you know, quantity-wise, and just the general, you know, economic...
Speaker Change #151: Chance of cuts in calendar 'twenty four certainly is a positive sign.
Speaker Change #151: Think the relation of a rate cut to retail will depend on.
Speaker Change #151: The degree of the cut and.
Speaker Change #151: The frequency of cuts quantity wise.
Speaker Change #151: And just the general <unk>.
Speaker Change #151: Economic.
you know, view by consumers going forward. You know, certainly the equity market bouncing back helps with, you know, certain, you know, consumers in terms of spending power in the future. But, you know, as of this point, I think we're still generally holding, you know, to what, you know, we believe our management plan is in the third and fourth quarter, but watching carefully, giving that Q2 is going to be more pressured, you know, than we had hoped. Thank you.
View by consumers going forward certainly the equity market bouncing back helps with certain consumers in terms of spending power in the future.
Speaker Change #151: But as of this point I think we're we're still generally holding to what we believe our management plan is in the in the third and fourth quarter, but watching carefully given that Q2 is going to be more pressured.
Speaker Change #151: Than we had hoped.
Speaker Change #152: Makes sense. Thank you.
Thank you, and one moment as we move on to our next question.
Okay.
Speaker Change #152: Thank you and one moment as we move on to our next question.
Our next question is going to come from the line of James Hardyman with Citi. Your line is open. Please go ahead.
Speaker Change #152: Our next question is going to come from the line of James Hardiman with Citi. Your line is open. Please go ahead.
Hey, good morning. Thanks for taking my questions. So, I just wanted to clarify.
James Hardiman: Hey, good morning, Thanks for taking my questions. So I just wanted to clarify.
A previous line of of questioning Brian last quarter when we talked about sort of the changes. I think we were saying that all in tools we're going to be down mid to high single digits motorized. We're going to be up. Modestly, in terms of where do those numbers stand today? If I'm, if I'm factoring in both. The apples to apples changes, and then the.
Speaker Change #153: Our previous line of questioning Brian.
Speaker Change #153: Last quarter, when we talked about sort of the.
Speaker Change #153: P changes.
Speaker Change #153: I think we were saying that all in <unk>. So we're going to be down mid to high single digits motorized we're going to be up modestly in terms of afg's, where do those numbers stand today, if I'm if I'm factoring in both the apples to apples changes and then the mix shift.
Yeah, the like for like, you know, one product.
Speaker Change #153: Yes.
Speaker Change #153: The like for like.
Speaker Change #153: One product.
Speaker Change #153: Price today versus what it was a year ago on the <unk> business.
what it was a year ago, on the toll bills business, I'm saying like for like of down low to mid single digits right now. All in, we had a, I think, a 13% decline in ASP for toll bills. So the large portion of that reduction in ASP driven by mid.
Speaker Change #153: Like for like of down low to mid single digits right now all in we had a I think a 13% decline in ASP for <unk>.
Speaker Change #153: So the large portion of that reduction in ESP driven by mix.
I think that that's probably the right go forward assumption sitting here today knowing what we know as I mentioned we're seeing some stability quarter to quarter in our bill of material or our cost.
I think that Thats, probably the right go forward assumption sitting here today, knowing what we know as I mentioned, we're seeing some stability.
Speaker Change #153: Quarter to quarter in our bill of material or a cough.
And so we'll see what the consumer shift might be as it relates to impacting that mix.
Speaker Change #153: And so we'll see what the consumer shift might be as it relates to impacting that mix.
I'm not intending to provide any commentary sitting here today that we expect a mixed shift.
Speaker Change #153: Intending to provide any commentary sitting here today that we expect a mix shift.
I'll let Mike comment on on his expectations for mix, but that's kind of what I'm saying on the total side For motor home and marine. I think we'll continue to see you know some increases related to specifically motorized chassis cost increases that we continue to need to price for And likewise some inflationary pressure still on on motors within marine
Speaker Change #154: I'll, let Mike comment on.
Speaker Change #155: His expectations for mix, but thats kind of what I'm, saying on the total side.
Speaker Change #155: For motor home and Marine I think we'll continue to see.
Speaker Change #155: Some increases related to specifically motorized chassis cost increases that we continue to need to price for.
Speaker Change #155: And likewise, some inflationary pressure still on.
Motors within marine.
So I guess those are the clarifying comments I'd make. Mike, anything to add on? Yeah, James, I would say our business has not yet seen the full impact at retail or certainly at shipments.
Speaker Change #156: I guess, the clarifying comments I'd make Mike anything to add on yes, James I would say our business is not yet seen the full impact at retail or certainly at shipments of the new products that are <unk> businesses are introducing and so the winnebago brand with the access to contend trailer.
of the new products that our toll-able businesses are introducing. And so the Winnebago brand with the Access Stick and Tin trailer, with the M-Series travel trailer, Grand Design with the Reflection 100, the Influence.
James Hardiman: With the M series travel trailer.
James Hardiman: Grand design with the reflection 100.
The influence.
uh... uh... fifth wheel with the uh... serranova trailer all of those are really in the very early stages of being produced and shipped to the market
James Hardiman: Fifth wheel with the Sarah Nova trailer all of those are really in the very early stages of being produced and shipped to the market.
And so, from a mixed standpoint, we will be putting into the market products we've never had before in our line at ASPs and price points, and ultimately a retail that are more competitive than some of our, you know, historical products. And so, you know, I think, you know, we'll have to watch that trend over future, you know, future quarters. And that, you know, that's why we're.
And so from a mix standpoint, we will be putting into the market products, we've never had before and our line at.
James Hardiman: Asps and price points that ultimately a retail that are more competitive.
James Hardiman: Some of our historical products and so I think we'll have to watch that trend over future future quarters and.
you know, reasonably optimistic about our ability to continue to hold and fight for market share in the future, our new product launches like that on the 12 holes.
James Hardiman: Thats why we are.
James Hardiman: Reasonably optimistic about our ability to continue to hold and fight for market share.
James Hardiman: In the future, our new product launches like that on the <unk> side.
Got it. But just to clarify the clarification here, I apologize. Brian , when you say that all-in totals down 13% ASPs, that's the right go-forward assumption. Are we saying that for the full year, we should expect something down double digits in terms of ASPs, or should I think about that as call it a $42,000 ASP is a decent assumption for the rest of the year? Just making sure we're on the same page.
Speaker Change #157: Got it but just to clarify.
Speaker Change #158: I apologize, Brian when you say all.
Brian Hughes: All in total was down 13% AFP you've got the right go forward assumption are we saying that for the full year, we should expect something down double digits in terms of Isps or should I think about that as well.
Brian Hughes: Call it a $42000 ASP.
As a decent assumption for the rest of the year, just making sure. We're on the same page.
Yeah, I think a double-digit decline in ASP is a reasonable assumption going forward for the totals business at this stage, considering the mixed shifts as well as the like-for-like prices.
Speaker Change #159: Yes, I think a double digit decline in Asps is a reasonable assumption going forward for the total business at this stage, considering kind of mix shifts as well as the like for like pricing.
Got it. Very helpful.
Speaker Change #160: Got it.
Speaker Change #161: Very helpful and then.
Mike, you've mentioned that when you looked at the street models, we were not modeling SGNA correctly. That's certainly helpful. Then obviously, with a lot of your commentary, where you're directing us for Q2 is substantially beneath where the street was. I guess as we look to the second half, and I don't expect guidance here per se, but the street is.
Speaker Change #162: Mike you've mentioned that that when you look at the Street models, we were not modeling SG&A correctly.
Speaker Change #163: Certainly helpful.
Speaker Change #163: And then obviously with a lot of your commentary where you are directing us for Q2.
Speaker Change #163: Substantially beneath where the street was.
Speaker Change #164: I guess as we look to the second half and I don't expect guidance here per se, but the street is.
You know, after, you know, what sounds like it's going to be about 2 dollars of earnings or less in the 1st, half the street is modeling 4 dollars roughly of earnings in the.
After what sounds like it's going to be about $2 of earnings or less in the first half the street is modeling.
Speaker Change #164: $4 roughly of earnings in the second half or.
Is there anything that jumps out at you in terms of where the street is positioned? Do you think that's too high, too low, just right? Any help with how the street is currently positioned for the second half?
Or anything that jumps out at you.
Speaker Change #164: In terms of where the street is position do you think thats too high too low right.
Speaker Change #164: Any help with how the street is currently positioned for the second half.
Yeah, James, you know, we appreciate the question, you know, at this time, you know, we're not going to offer, you know, commentary on the full year, you know, at this point.
Speaker Change #165: Yes, James we appreciate the question at this time, we're not going to offer commentary on the full year.
Speaker Change #165: At this point.
We may choose to change our position in the future on, you know, annual guidance, you know, commentary, but, you know, at this time, we're going to focus our, you know, our comments.
Speaker Change #165: <unk>.
Speaker Change #165: We may choose to change our position in the future on.
On the annual guidance.
Speaker Change #165: Inventory, but at this time.
Speaker Change #165: Focus are our.
Speaker Change #165: Our comments.
to you all on Q2. There's a bit more certainty, certainly considering timing around that period.
Speaker Change #165: To you all on Q2, Theres a bit more certainty certainly considering timing around that period.
And so I just won't offer any additional comments at this time about the back half of the year and subsequently what that full year would be.
Speaker Change #165: And so.
Speaker Change #165: Won't offer any additional comments at this time about the back half of the year and subsequently what that full year with them.
Fair enough. Let me let me ask the question this way then.
Speaker Change #166: Fair enough, let me let me ask the question. This way then.
You made the comment about and some of this.
Speaker Change #166: You made the comment about.
Sort of overlaying the calendar year and the fiscal year, right? But ultimately, when things stabilize and ultimately improve.
Speaker Change #166: And some of this.
Speaker Change #166: Sort of overlaying the calendar year in the fiscal year, right, where ultimately when things stabilize and ultimately improve.
You know, you're talking about retail and wholesale getting better mid to late calendar 24.
Speaker Change #166: Youre talking about retail and wholesale getting better mid to late calendar 'twenty four.
which is really fiscal 25 for you guys, effectively. But then there was a comment in the prepared remarks where you said that you thought the second half of your fiscal year would realize at least a pro-rata portion of this expected increase, right? The industry is, you know, the shipment assumptions from RVIA do assume a meaningful increase in shipments. Can you just clarify all of that? It sounds like you're still saying you think wholesale is going to be up materially during the second half of the year, but I just.
Speaker Change #166: Which is really fiscal 'twenty five for you guys effectively but then there was a comment in the prepared remarks, where you said that you thought the second half of your fiscal year would realize at least the pro rata portion of this expected increase rate the industry.
Speaker Change #166: The shipment assumptions from RBI.
Speaker Change #166: RV IAA do assume meaning.
Speaker Change #166: A meaningful increase.
Speaker Change #167: Shipments can you just clarify all of that it sounds like Youre still saying you think wholesale is going to be up materially during the second half of the year, but I just want to make sure.
Uh, at this time, you know, we have stated for calendar year 24, uh, a retail to wholesale, uh, you know, uh, equity number of, of.
Speaker Change #167: At this time, we have stated for calendar year 'twenty four.
Speaker Change #167: Retail to wholesale.
Equity number of 350000 units as I mentioned in a question that was asked earlier I think it's about the timing of when dealers begin to move more aggressively towards that one to one ratio.
350,000 units. As I mentioned in a question that was asked earlier, I think it's about the timing of when dealers begin to move more aggressively towards that one-to-one ratio.
I think dealers are waiting on both the RV and marine side.
Speaker Change #167: I think dealers are waiting on both the RV and marine side for some of these early spring.
for some of these early spring retail shows to happen across the country. We have Tampa coming up in a few weeks, which is obviously one of the bellwether RV shows. We have some large marine shows, including the Minneapolis Boat Show, you know, coming up here in about a month, a month and a half.
Speaker Change #167: Retail shows two to happen across the country, we have Tampa coming up in a few weeks, which is obviously one of the bellwether RV shows we have some large marine shows, including the Minneapolis boat show coming up here in about a month month and a half I think some of the dealers are waiting to see.
Some of the dealers are waiting to see some green shoots of retail stability, you know, as we're going into the year. But if you do the math on, you know, historical turns, and even if the dealers want to run their business at slightly elevated turns.
Speaker Change #167: Green shoots of retail stability.
Speaker Change #167: We're going into the year, but if you do the math on.
Speaker Change #167: Historical turns and even if the dealers want to run their business at slightly elevated turns they would need to begin to.
they would need to begin to, you know, managing their inventory, you know, to a, you know, a little bit higher level going into, you know, the meat of the retail season, you know, in that March through July period. So we do anticipate that some of our fiscal year 24 will see the benefit of this movement back towards a one-to-one. And as Brian said, in calendar 24, I think a 17% increase projected in wholesale shipment.
Speaker Change #167: Managing their inventory to a little bit higher level going into the meat of the retail season.
Speaker Change #167: That March through July period, So we do anticipate that some of our fiscal year 'twenty four we will see the benefit of this movement back towards a one to one and as Brian said in calendar 'twenty four I think a 17% increase projected in wholesale shipments timing will be the wildcard as to how much of our <unk>.
Timing will be the wild card as to how much of our fiscal year gets the benefit of that.
Speaker Change #167: Full year gets the benefit of that.
But you know, we we do anticipate seeing a lift in shipment
Speaker Change #167: But we do anticipate seeing a lift in shipments in.
in quarter three and quarter four you know that that is Material obviously if that doesn't develop, you know, we'll we'll manage our business accordingly To continue to be disciplined and patient to that end But that is you know, that is what we're planning for is a you know, is a rebound here this next late spring and summer Got it
Speaker Change #167: In quarter, three and quarter four.
Speaker Change #167: That is a must.
Speaker Change #167: <unk>, obviously, if that doesn't develop.
Speaker Change #167: We will manage our business accordingly to continue to be disciplined and patient.
Speaker Change #167: To that end, but that is.
Speaker Change #167: That is what we're planning for is a is a rebound here. This next late spring and summer.
Speaker Change #168: Got it and understood. Thanks, guys.
Speaker Change #169: Thanks, Dan.
Thank you. And one moment as we move on to our next question.
Speaker Change #170: And one moment as we move on to our next question.
Our next question is going to come from the line of Noah Zaskin with KeyBank Capital Markets. Your line is open. Please go ahead.
Speaker Change #170: Our next question comes from the line of Noah was asking with Keybanc capital markets. Your line is open. Please go ahead.
Hi, thanks for taking my question. Most of my questions have been asked and answered, but given the move in steel prices in recent months, just wondering if there's any way to think about the margin implications, maybe the size of the impact as you see it in the second quarter or the back half.
Noah: Hi, Thanks for taking my question most of my questions have been asked and answered but yes.
Noah: Given the move in steel prices in recent months just wondering if there's any way to think about the margin implications.
Speaker Change #171: Maybe that may be the size of the impact as you see it in the second quarter or the back half. Thanks.
Yeah, we've seen easing in a lot of our key commodities, steel being one of them, certainly aluminum, lumber as well. You know, typically what we're going to do in this environment.
Speaker Change #172: Yes, we've seen easing and a lot of our key commodities steel being one of them certainly at aluminum lumber as well.
Speaker Change #172: Typically what were going to do in this environment.
you know, Noah, as we experience some, some easing of.
Speaker Change #172: As we experienced some some easing of of some cost inputs that might have ties back to commodities, we're going to manage our margin very carefully obviously as we've talked about earlier in the call. We're doing all that we can to pass along any kind of price reductions that we can really.
of some cost inputs that might have ties back to commodities, we're going to manage our margin very carefully. Obviously, as we've talked about earlier in the call, we're doing all that we can to pass along any kind of price reductions that we can realize to the end customer as well as to the dealer network so that they're able to price more aggressively to the end customer. I think that's the best way of thinking about some of those commodities.
Speaker Change #172: <unk> to the end customer as well as to the dealer network. So that they are able to price more aggressively to the end customer I think that's the best way of thinking about.
Speaker Change #172: Some of those commodities easing.
You know, we talked about like-for-like ASP reductions, for example, in the towable space.
Speaker Change #172: We talked about like for like ASP reductions for example in the.
Speaker Change #172: And the total space.
that would be one example of how we intend to handle any kind of commodities easing and our cost inputs easing as a result. But I think that's my guidance to you would be that we're going to manage margins to the extent we can, but try to pass along to end customers any cost favorability.
Speaker Change #172: That would be one example of how we intend to handle any kind of commodities easing in our cost inputs easing as a result, but I think thats my guidance to you would be that we're going to manage.
Speaker Change #172: Margins to the extent, we can but try to pass along to end customers any cost favorability.
Helpful. Maybe, you know, not to put too fine of a point on the second quarter, but I think you kind of mentioned to expect quarter over quarter decline in profit. Is it quarter over quarter decline in EBITDA the right way to think about it?
Speaker Change #172: Helpful, maybe not to put too fine of a point on the second quarter.
But I think you kind of mentioned to expect quarter over quarter decline in profit is it quarter over quarter decline in EBITDA, the right way to think about it.
Certainly, we've been clear that we expect a top line that's a little softer in Q2 relative to Q1, so sequential decline. I also mentioned that there's going to be the usual deleverage associated with that and pretty consistent allowances or discounts.
Speaker Change #173: Yes, certainly we've been clear that we expect a topline that's little softer.
Speaker Change #173: In Q2 relative to Q1 sequential decline.
Speaker Change #173: I also mentioned that there's going to be the usual deleverage associated with that and pretty consistent allowances or discounts.
from Q1 to Q2. So net-net, through those comments, I guess I'd be guiding you towards a slightly lower EBITDA margin in Q2.
Q1 to Q2, so net net.
Speaker Change #173: No.
With those comments I guess that'd be.
Speaker Change #173: Guiding you.
Speaker Change #173: Towards a slightly lower EBIT margin.
Speaker Change #173: In Q2 versus Q1.
Speaker Change #174: Thank you.
Thank you and one moment as we move on to our next question.
Thank you and one moment as we move on to our next question.
Our next question is going to come from the line of Brandon Roll with DA Davidson. Your line is open. Please go ahead.
Speaker Change #174: Our next question is going to come from the line of Brandon Rolle with D. A Davidson. Your line is open. Please go ahead.
Good morning. Thank you for taking my questions here. Just first, on the inventory destocking you're seeing in the environment right now, could you comment on what you're seeing in the tollable space versus motorhomes and kind of the timeline for those two segments?
Brandon Rolle: Good morning. Thank you for taking my questions here just first on the inventory Destocking you are seeing in the environment right now could.
Could you comment on what Youre seeing in the <unk> space versus motor homes, and kind of the timeline for those two segments.
Yeah, good morning, Brandon, and thanks for the question.
Speaker Change #176: Yes, good morning, Brandon and thanks for the question.
Speaker Change #176: <unk>.
Yeah, they're definitely they're definitely moving a little bit differently. I think the motorhome category still has potentially a little bit of destocking left to do in some in some places. And and some of that certainly will depend as we've talked on on retail.
Speaker Change #177: Yes, they are definitely definitely moving a little bit differently I think more of the motor home category still has potentially a little bit of Destocking left to do in some in some places and some of that certainly will depend as we've talked on on retail.
But if I were to pick, you know, a couple of places where we could see further.
But if I were to pick a couple of places where we could see further inventory destocking on the motorized side it would probably be class a.
Inventory destocking on the motorized side, it would probably be, you know, Class A, you know, you know, some parts of that, you know, particularly potentially Class A diesel.
Speaker Change #177: <unk>.
Speaker Change #177: Some parts of that.
Speaker Change #177: Particularly potentially class a diesel and then.
and then some parts of the Class B category as well.
Speaker Change #177: And then some parts of the class B category as well.
You know, as all of you know, the Class B category has been very frenetic from a competitive intensity standpoint.
Speaker Change #177: As all of you know the class B category has been very frenetic from a competitive intensity standpoint.
A lot of new brands and players getting into the game. A lot of motorized chassis have become available.
Speaker Change #177: A lot of new brands and players getting into the game a lot of motorized chassis have become available.
you know, as as the overall demand for van chassis around the world has been reduced.
Speaker Change #177: As is the overall demand for van chassis around the world has been reduced.
So I think there could be a little bit more de-stocking on the motorized side in certain sub-segments. The tollable side, our hope is that the de-stocking...
Speaker Change #177: So I think there could be a little bit more destocking on the motorized side in certain sub segments, the total side or.
Speaker Change #177: Our hope is that the Destocking is largely finished and if you look at October.
And if you look at October , you know, RVIA shipments and the SSI results.
Speaker Change #177: RV shipments in the Ssi results, we actually feel as if some total inventory was added back into the channel during that month.
We actually feel as if some global inventory was added back into the channel during that month. But, you know, we'll see how quarter two fiscally for us plays out. You know, I think dealers are going to try to, you know, kind of hold in place through the end of the calendar year here these last couple of weeks.
Speaker Change #177: Months, but yes.
Speaker Change #177: We'll see how quarter two fiscal leave for US plays out I think dealers are going to try to kind of hold in place through the end of the calendar year here. These last couple of weeks.
And then we'll see how January and February play out. But we don't anticipate, as our comment said, you know, meaningfully, you know, material destocking continuing on tollables here, you know, as we begin calendar 2024. But we'll watch that.
Speaker Change #177: And then we will see how January and February play out, but we don't anticipate as our comments said.
Speaker Change #177: Meaningfully.
Speaker Change #177: Material Destocking continuing on <unk> here.
Speaker Change #177: As we begin calendar 2024, but we'll watch that carefully.
Great. And just one last quick question. You had talked about addressing affordability through different tactics. Could you touch on, if you're able to, your conversations with your suppliers and maybe any additional price confessions that you might feel are coming down the pipeline as you negotiate pricing? Thank you.
Speaker Change #178: Great and just one last quick question, you had talked about addressing affordability through different tactics.
Speaker Change #178: You touch on if you are able to your conversations with your suppliers.
Speaker Change #178: And maybe any additional price concessions that you might feel are coming down the pipeline as you negotiate pricing. Thank you.
Yeah, our purchasing teams on a daily basis within the businesses and our strategic sourcing team here at the enterprise level that really works, you know, to leverage our scale and, and realize synergy across the portfolio. We've been very honest with our suppliers about
Speaker Change #178: Yes.
Speaker Change #178: Purchasing teams on a daily basis within the businesses and our strategic sourcing team here at the enterprise level that really works to leverage our scale and.
Speaker Change #178: <unk> realized synergy across the portfolio, we've been very honest with our suppliers about.
uh... you know the uh... the fairness needed in in dealing with any deflation that's happening uh... in the marketplace from that uh... you know we need to realize some of that we do have some contracts that are commodity-based enough for the index based
Speaker Change #178: The fairness needed in dealing with any deflation thats happening in the marketplace in that.
Speaker Change #178: We need to realize some of that we do have some contracts that are commodity based and thus sort of index based in terms of where those lower costs and how they go and where they are distributed.
in terms of you know where those lower costs and how they're just go and where they're distributed.
And then in some other relationships, you know, that's more of a negotiation based on the transparency of the supplier. I will say we remain consistent that one source...
Speaker Change #178: And then in some other relationships that's more of a negotiation based on the transparency of the supplier I will say, we remain consistent that one source of bill of material pressure will continue to be motorized chassis.
of bill of material pressure will continue to be motorized chassis.
Uh, you know, that, uh, that category is not seeing the deflation, uh, that, um, some of the other categories are across our RV, uh, and marine, uh, you know, uh, businesses. And, uh, we are working carefully while all the major, you know, automotive chassis, uh, suppliers on, uh, how they can.
Speaker Change #178: That that category is not seen the deflation.
Speaker Change #178: That some of the other categories are across our RV and marine.
Speaker Change #178: Businesses, and we are working carefully with all the major automotive chassis suppliers on how they can.
you know, manage their costs to make sure that we can work with our dealers.
Speaker Change #178: Manage their costs to make sure that we can work with our dealers and then consumers on affordability there as well we're a premium manufacturer our strategy is not to strip or.
and then consumers on affordability there as well. We're a premium manufacturer.
You know, our strategy is not to strip or decontent our motorhome products to the bare minimum in order to, you know, keep the business flowing. So we need some help from our suppliers on the motorized chassis side to continue to navigate some of the pressures that they are seeing.
Speaker Change #178: Or the content, our motor home products to the bare minimum in order to.
Speaker Change #178: No.
Speaker Change #178: Keep the business flowing.
Speaker Change #178: So we need we need some help from our suppliers on the motorized chassis side to continue to navigate some of the pressures that they are seeing.
Speaker Change #179: Great. Thank you.
Thank you, and one moment as we move on to our next question.
Speaker Change #180: Thank you and one moment as we move on to our next question.
And our next question is going to come from the line of John Healy with North Coast Research. Your line is open. Please go ahead.
Speaker Change #181: And our next question is going to come from the line of John Healy with Northcoast Research. Your line is open. Please go ahead.
Thank you. Just one kind of off the trail kind of question here. Mike, I think you mentioned in the prepared remarks that on 2Q that you guys would give kind of an update to the longer term view of the business or financial profile of it. You know, given that you guys laid that out maybe 18, 24 months ago, just kind of curious what's prompting the update on that and if there's anything you might kind of steer us to to thinking about that you guys might be evaluating as it relates to those items.
Hi, Thank you just one kind of off the trail.
Speaker Change #181: Trail kind of question here.
Speaker Change #182: Mike I think you mentioned in the prepared remarks that on <unk> that you guys would give kind of an update to the longer term view of the business are.
Speaker Change #182: The financial profile of it.
Speaker Change #183: Given that you guys laid that out maybe.
Speaker Change #183: 18 to 24 months ago, just kind of curious, what's prompting the update on that and if there's anything you might kind of steer as to thinking about you.
You guys might be evaluating as it relates to those items.
Yeah, thanks, John , for the question. In November of 2022, we communicated financial and operational targets relative to the end of our fiscal year 2025.
Speaker Change #184: Yes, Thanks, John for the question in November of 2022, we communicated financial and operational targets relative to the end of our fiscal year 2025. So it was a three year long range set of targets and given that the marketplace has changed dramatically. Since we were together were investors in November of <unk>.
So it was a three-year long-range set of targets.
And given that the marketplace has changed dramatically since we were together, we're investors in November of 2022, we felt it was time to formally update those and we'll work to do so during our March 2024 earnings call. And I think what you'll see during that call will probably have a little bit longer time range. We probably won't talk about fiscal 25 in terms of long-range targets. We'll probably be a little further out from that.
Speaker Change #184: 22.
Speaker Change #184: We felt it was time to formally update those and we'll work to do so during our March 2024 earnings call I think what youll see during that call, we'll probably have a little bit longer time range, we probably won't talk about fiscal 'twenty five in terms of long range targets, we will will probably be a little further.
And you'll see an updated and refreshed set of financial and operational targets based on our best assessment.
Speaker Change #184: From that.
Speaker Change #184: And Youll see an updated and refreshed set of financial and operational targets based on our best assumptions candidly, we're just trying to be helpful.
Candidly, we're just trying to be helpful to our investors and to especially you, the analysts.
Speaker Change #184: To our investors in two especially.
Speaker Change #184: You the analysts.
with some some longer range guidance, you know, for purposes of modeling and where we think you know Especially the organic business can head in the future. So stay tuned. We'll give you an update in March
Speaker Change #184: With some some longer range guidance.
Speaker Change #184: For purposes of modeling, where we think.
Speaker Change #184: Especially the organic business can head in the future. So stay tuned we'll give you an update in March.
Speaker Change #185: Alright, Thank you guys.
Thank you, and one moment as we move on to our next question.
Speaker Change #186: Thank you one moment as we move on to our next question.
Our next question is going to come from the line of David Wiston with Morningstar. Your line is open, please go ahead.
Speaker Change #186: Our next question is going to come from the line of David Whiston with Morningstar. Your line is open. Please go ahead.
Thanks. Good morning. I wanted to go back to the SG&A buckets you laid out, Mike, in terms of just the incremental spending. Basically, some of that is very customer focused and product focused, and some of that is more your internal systems. And I'm just curious if you could talk a little bit more about how much, at a very high level, how much is more of a going to the product side or just the internal side? And you mentioned ERP. I mean, you guys have been doing ERP upgrades, I think, for years. Is this a new upgrade or the ongoing one that was a multi-year one in the past?
David Whiston: Thanks, Good morning, I wanted to go back to the SG&A buckets, you laid out Mike in terms of just the incremental spending.
David Whiston: Basically.
David Whiston: Some of that is very customer focused and product focus and some of that is more your internal systems and I'm. Just curious if you could talk a little bit more about how much <unk> got a very high level. How much is more of a go into the product side or just the internal side and you mentioned ERP. I mean, you guys have been doing ERP upgrade. So I think for years is this a new upgrade or the ongoing one that was a multiyear one in the <unk>.
David Whiston: First place.
Yeah, thank you and good morning David. I'll talk about ERP here real quickly. We continue to finish.
Speaker Change #187: Yes, Thank you and good morning, David I'll talk about ERP here real quickly we continue to finish.
The long project we've had around our Winnebago-branded businesses and some of our enterprise functions are relative to an ERP system there, and there is a light at the end of the tunnel here over probably the next...
Speaker Change #187: The long project we've had.
Speaker Change #187: Around our Winnebago branded businesses in some of our enterprise functions relative to an ERP system there.
Speaker Change #187: And there is a light at the end of the tunnel here over probably the next.
probably the next 18 to 24 months in terms of that project.
Speaker Change #187: Probably the next 18 to 24 months in terms of that project.
But we have now other ERP systems that we've obviously inherited through acquisitions of the other brands.
Speaker Change #187: But we have now other ERP systems that we've obviously inherited through acquisitions of the other brands.
And, you know, we have to do some moderate upgrades to those from time to time. And there's one, you know, particularly here in the short term, and I won't get into the specifics that, you know, we will, you know, we are working on. I would say, you know, the, you know, probably.
Speaker Change #187: We have to do some.
Speaker Change #187: Moderate upgrades to.
Speaker Change #187: To those from time to time and there is one particularly here in the short term and I won't get into the specifics of that.
Speaker Change #187: We will we are working on I would say.
Speaker Change #187: Probably.
The balance of the SG&A investments we're making around those 3 areas, engineering, digital asset investment, and IT systems is probably relatively evenly balanced.
Speaker Change #187: The balance of the SG&A investments, we're making are about around those three areas engineering digital asset investment and it systems is probably relatively evenly balanced.
Um, you know, we, you know, the, the SG&A impact on an annual basis is definitely, you know, eight figures, um, you know, uh, uh,
Speaker Change #187: The SG&A impact on an annual basis is definitely.
Speaker Change #187: Eight figures.
incremental to what we have historically planned. But, you know, we think we think it's the right thing to do to be competitive and prepare the business for, you know, you know, the future. And so we're obviously being as disciplined as we can. And we're spreading those out across obviously each of the quarters.
Speaker Change #187: Incremental to what we have historically planned.
<unk>.
Speaker Change #187: We think we think it's the right thing to do to be competitive and prepare the business for.
Speaker Change #187: The future and so we're obviously being as disciplined as we can and we're spreading those out across obviously each of the quarters.
But, you know, it's eight figures of incremental spending on an annualized basis that we're adding here. Now, if the business...
Speaker Change #187: But it's eight eight figures of incremental spending on an annualized basis that we're.
Speaker Change #187: We're adding here now if the business.
faces tougher market conditions, we will turn the dial as we can on those as well. So just so everybody knows, we are going to be very prudent and reasonable as we make investments in those areas.
Speaker Change #187: Faces tougher market conditions.
We will turn the dial as we can on those as well so just so everybody knows.
Speaker Change #187: We are we are going to be very prudent and reasonable as we make investments in those areas.
Thanks. And just going back to capital allocation discussed earlier, can you say if buybacks or M&A would be a priority between those two in fiscal 24? I guess, Brian .
Speaker Change #188: Thanks, and just going back to capital allocation discussed earlier can you say, if buybacks or M&A would be a priority.
Speaker Change #188: Between those two in fiscal 'twenty four.
Speaker Change #188: I guess broadly speaking.
Speaker Change #188: The M&A environment.
I guess, continues to cure off the dislocation that we've seen over the past couple of years, as you can appreciate at the peak.
I guess continues to cure off the dislocation that we've seen over the past couple of years as you can appreciate at the peak.
companies in our space wanted to sell, you know, off that peak with very high prices, and then you hit a trough and then companies want to sell on a forward view, it's just really hard to find that, that
Speaker Change #188: Companies in our space wanted to sell.
Speaker Change #188: Off that peak with very high prices and then.
Speaker Change #188: You hit a trough and then companies want to sell on a forward view, it's just really hard to find that.
price that both buyers and sellers can agree to. I think as we start to see some normalization on retail and get a clearer view of the year ahead and what the right multiple would be to pay, we'll see some better M&A environments, I'd say, to allow us to weigh certain.
Speaker Change #188: <unk>.
Speaker Change #188: Price that both buyers and sellers can agreed to I think as we start to see some normalization on retail.
Speaker Change #188: Get a clearer view of the year ahead, and what the right multiple would be to pay we'll see some.
Better M&A environment, I'd say to allow us to.
Speaker Change #188: Way certain certain targets.
hopefully make some additional investments in that area. So share repurchase is clearly a function of our
Speaker Change #188: And hopefully some additional investments in that area. So.
Speaker Change #188: Share repurchases clearly a function of our success on the M&A front.
Speaker Change #188: Without some bigger targets that we can execute on we've had some elevated share repurchases over the past two to three years.
over the past two, three years. Our goal is to continue to prioritize growth.
Speaker Change #188: Our goal is to continue to prioritize growth.
We have stated that historically, that's still the case. We're going to prioritize growth in the form of both organic investments, Mike just talked about some of those, as well as inorganic.
Speaker Change #188: We have stated that historically that that's still the case, we're going to prioritize growth in the form of both organic investments, Mike just talked about some of those.
Speaker Change #188: As well as inorganic investments.
So that will be our priority. We'll continue to use.
Speaker Change #188: That will be our priority will continue to use.
Cash share repurchase is a great mechanism of returning the cash to shareholders in the absence of M&A.
Speaker Change #188: Share repurchase is a great mechanism of returning to cash to shareholders in the absence of M&A.
Speaker Change #189: Alright, thanks very much.
Thank you, and I would now like to turn the conference back over to Ray Prasadas for closing remarks.
Speaker Change #190: Thank you and I would now like to turn the conference back over debates.
Speaker Change #190: Closing remarks.
That is the end of our first quarter earnings call. Thank you everyone for joining us. We hope you all have a safe and happy holiday season. Enjoy the rest of your day.
Speaker Change #190: That at the end of our first quarter earnings call. Thank you everyone for joining US. We hope you all have a safe and happy holiday season, and joining the rest of your day. Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change #191: This concludes today's conference call. Thank you for participating you may now disconnect.