Q1 2025 Winnebago Industries Inc Earnings Call
These strategies complemented by our healthy balance sheet.
Capital spending and robust liquidity position us for an anticipated market recovery in the second half of fiscal 2025.
For the most part the RV industry has done a commendable job managing inventory levels in light of the soft consumer demand and more moderated dealer ordering patterns and.
And Winnebago industries is positioned well in terms of field inventory levels as we plan for a market recovery.
The bottom line is that we are running the business for the long term.
Despite challenges within the industry. The Winnebago industries teams balanced approach to capital allocation has two primary objectives.
The first is to sustain annual profitability and maintain a resilient balance sheet, while strengthening our competitive market positions and supporting both Lotte and retail share across our outdoor portfolio.
The second is to emphasize strategic investments that drive the long term growth and value of our brands and overall business.
On our year end call, Brian and I highlighted the strategic leadership changes to address the operational inefficiencies within our Winnebago branded Motorhomes and <unk> businesses.
As a reminder, Don Clark has been promoted to group President of total Rvs, leading the Winnebago brands total RV Division. In addition to the Grand design RV brand.
Chris West has been promoted to president of Winnebago, Motorhomes and specialty vehicles.
While it will take some time to effectively evaluate the operational changes within these winnebago branded businesses.
Speaker Change: Don and Chris have already begun to lay the groundwork for what we expect to be improved performance and growth for the Winnebago brand in the back half of calendar 2025.
Turning to recent RV trends on slide five.
Speaker Change: From a retail perspective industry wide RV shipments were up two 4% year over year in October.
Speaker Change: Although one month does not make a trend.
Speaker Change: Positive retail comps after 40 consecutive months of year over year declines are an encouraging sign as well.
Speaker Change: On the wholesale side RV shipments through October stood at approximately 287000 units.
Speaker Change: Up seven 7% year to date compared with the same period in 2023.
Speaker Change: We now expect calendar year 2024, RV wholesale shipments of approximately 330000 units.
For calendar year 2025, we continue to forecast wholesale RV shipments in the range of 320.
Speaker Change: To 350000 units.
Speaker Change: Our median of 335000 units is slightly more conservative than the current RV industry Association projection of 346100 units.
Speaker Change: The RV IAA expects wholesale shipments to remain relatively flat through mid 2025 before accelerating in the second half of the year.
We believe that gross field inventory levels and rvs are well positioned.
Both in terms of quantity and aging.
Speaker Change: While RV dealers remain cautious about committing to new orders. We are seeing early signs of optimism driven by the conclusion of the election. The anticipated further easing of interest rates, improving inventory levels and stabilizing consumer sentiment.
Turning to slide six for the trailing 12 months ended October 31.
Speaker Change: Our total market share declined 50 basis points to 10, 9% compared to the same period in the prior year.
Speaker Change: In the motor home RV segment, our class, a and class C offerings from Winnebago and Newmar are performing well.
Speaker Change: Grand designs lineage series M is just beginning to ramp.
Speaker Change: And with two additional models in development, we have high expectations for those products.
Speaker Change: We continue to maintain strong double digit market share in class B and we have specific actions underway there to drive further share growth through new products and marketing initiatives.
Speaker Change: In our total RV segment Grand design has done a great job winning in the majority of price points in which it plays.
Speaker Change: Across the segment and indeed throughout the business we.
We continue to be in the process of transforming our product portfolio to satisfy a wide range of price points, including lower price point models in many categories.
Speaker Change: Rather than D. Continental we are refining product features to focus on delivering what consumers truly value.
Without compromising quality.
Speaker Change: Our functionality.
Speaker Change: Slide seven details bar letters steady gains in the U S aluminum pontoon market.
Speaker Change: Over the 12 months ending October 31, 2024, our market share increased by 180 basis points to reach nine 1% compared to the same period in the prior year.
We continue to get high marks from our dealer network related to providing a great product that is truly resonating with our mutual end customers.
Speaker Change: Moving to recent highlights on slide eight.
Speaker Change: The overwhelmingly positive response to Grand designs award, winning new lineage series M confirms the demand for the brands innovative approach to motorized rvs.
Speaker Change: Earlier this month Grand design announced the addition of a class Super C Motor home to it's a claim lineage motorized product lineup.
Speaker Change: The New edition series F is scheduled to debut next month at the 2025, Florida RV Super show in Tampa.
Speaker Change: The new series F will be manufactured alongside series M at Grand designs cutting edge motorized facility in Indiana.
We are excited to introduce the next iteration of the lineage line to an RV class that continues to grow and to partner with dealers across the country to bring this product to a new customer base.
Speaker Change: In the total RV category, the Super show will feature products, including Grand designs, all new momentum 392 M. The.
Speaker Change: The latest addition to the top selling momentum toy hauler lineup.
Speaker Change: And the Winnebago access 18, DBA itch and 18 RK the.
Speaker Change: <unk> compact single XO floor plans and the functional and feature pack access series.
As we are entering boat show season.
Speaker Change: I also want to highlight two marine products.
Speaker Change: The barletta ARIA for fish, a new floor plan for the model year 2025 lineup.
Speaker Change: And the Chris Craft 28, Sportster Stern drive, which debuted recently at the Fort Lauderdale International boat show.
Speaker Change: And outboard propulsion version of the 28 Sportster is scheduled to be unveiled at the Miami International boat show in February.
Speaker Change: Now let.
Brian: Let me turn the call over to Brian for the financial review.
Brian: Thanks, Mike and good morning, everyone. As a reminder, in my prepared remarks, I will focus on the key drivers of our performance.
Brian: Please refer to our earnings release and earnings supplement documents for a detailed overview of our key financial results.
Brian: Starting with our consolidated results on slide nine as Mike noted the RV retail demand environment remains soft in the first quarter.
Brian: Revenues were down 18% compared with the first quarter of fiscal 'twenty, four driven by lower unit volumes in the table and motorized RV segments and a reduction in asps due to a shift in product mix.
The resulting volume deleverage increased warranty spend and motor home related to a couple of recalls in the quarter.
Brian: And product mix.
<unk> year over year gross margin percent, but was partially offset by operational efficiencies.
Brian: Operating expenses increased one 3% from Q1 last year.
Brian: Merely reflecting increases in spending related to Grand design motor home.
Brian: Our letter and our lithium ion X businesses and other investments in digital capabilities. These were partially offset by cost containment efforts.
Brian: Our SG&A spend is down four 6% sequentially driven by sequential spending reductions across most of our business units.
Brian: As expected consolidated Q1, adjusted EBITDA margin was down from the prior year period.
Brian: Turning to our performance by segment, starting with total RV on slide 10.
Brian: The decrease in revenues from last year's first quarter was attributable to lower unit volume and a shift in our product mix towards lower price point model.
Brian: The lower unit volume was driven by challenging market conditions.
But also in part by tightly managing capacity and intentionally lowering field inventory during the quarter.
Brian: Segment, adjusted EBITDA was down versus last year, reflecting volume deleverage and product mix.
Brian: Partially offset by cost containment efforts.
Brian: Turning to slide 11.
Brian: Motor home RV segment revenues were down from the same period last year.
Brian: This year over year change was attributable to lower unit volume related to market conditions.
Brian: Segment adjusted EBITDA also decreased from last year, reflecting volume deleverage.
Brian: Higher discounts and allowances and increased warranty experience compared to the prior year.
Brian: This was partially offset by operational efficiencies.
Brian: Keep in mind that Q1 marks the first period in which Grand design motorized has been incorporated into our motor home RV segment results.
Brian: As anticipated it is exerting near term pressure on this segment's margins in advance of achieving meaningful revenue contributions.
Brian: Moving to our Marine segment on Slide 12 revenue increased year over year related to targeted price increases and higher unit volume, partially offset by a reduction in ASP per unit related to product mix.
Brian: Adjusted EBITDA margin improved 110 basis points from last year's first quarter to nine 3%.
Brian: <unk> targeted price increases, partially offset by product mix and higher warranty expense.
Brian: Moving now to the balance sheet on slide 13 at fiscal year end Winnebago industries had a net debt to EBITDA ratio of approximately three times above our targeted range of 0.9% to one five times.
Brian: In Q1, we reported negative free cash flow of $26 7 million.
As I have noted on prior calls historically, the first and second quarters of the year have not been cash generating quarters for us because of the seasonal nature of our business.
Brian: Next month, we will pay a quarterly cash dividend of 34 per share marking the 40 <unk> consecutive quarter that Winnebago industries has paid a dividend.
Brian: During the quarter, we repurchased approximately $30 million with Apache stock and as of November 30th had 200 million remaining on our repurchase program.
Brian: Turning to slide 14.
Brian: We are reaffirming our fiscal year 2025 expectation for consolidated revenues in the range of $2 nine to $3 2 billion.
Brian: We are also slightly revising the top and bottom of our adjusted EPS guidance range.
Brian: Leaving the previously communicated midpoint of $3 75 unchanged.
Brian: Based on our first quarter fiscal 2025 results and our outlook for the balance of the year. We now expect adjusted EPS of $3 10.
Brian: To $4 40 per diluted share.
Brian: With our prior range of $3 to $4 50.
Brian: Per diluted share.
Brian: Looking ahead, although the near term outlook remains challenging we are confident in our ability to capitalize on the anticipated rise in demand as the RV and marine markets enter the spring selling season.
Brian: For Q2, we are expecting sales to be in line with Q1 on a sequential basis with a modest improvement to profitability.
Brian: We will continue to manage the balance sheet with prudent being always mindful of our capital allocation priorities that we have communicated historically.
Brian: Now please turn to slide 15, as I turn the call over to Mike for his closing comments Mike.
Mike: Thank you Brian.
Mike: Looking ahead, our strategy is laser focused on positioning Winnebago industries for long term growth, while navigating the current challenges with discipline and agility.
Mike: We are introducing more affordable innovative products across our portfolio.
Mike: To meet evolving customer needs.
Mike: And entering new segments, such as the Newmar supersede and the expanding lineage family of motor home Rvs from Grand design.
Mike: At the same time, we're sharpening our focus on operational efficiency tightening our variable spend model managing SG&A more aggressively.
And aligning production rates to demand, including adjustments to our workforce.
To ensure sustained success, we are prioritizing critical investments consolidating plants to lower fixed operational costs and creating a step change to drive stronger performance.
While certain actions such as the recent consolidation of manufacturing operations in Iowa.
Mike: <unk> had some financial implications this quarter they.
Mike: They reflect our commitment to building a leaner and even more cost effective operation.
Mike: Additionally, we are doubling down our improvements to our product quality processes, ensuring that every product we bring to market delivers on customer expectations.
Mike: These initiatives underscore our confidence in the future.
Mike: And our determination to emerge from this period as a stronger more competitive company.
Mike: Now, Brian and I will be happy to take your questions. Operator, Please open the line for Q&A.
Mike: 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.
Mike: In the interest of time, we ask that you. Please limit yourself to one question and one related follow up.
Mike: Please standby, while we compile the Q&A roster.
Mike: Our first question comes from Craig Kennison with Baird. Your line is open.
Hey, good morning, Thanks for taking my question.
Mike: Really relates to dealer health, there's been a lot of stress on your dealer networks in RV and.
Mike: Marine industries.
Mike: A lot of dealers have been hit hard there, including some large and prominent dealers I'm just wondering if you could frame the health of your.
Mike: RV and marine dealer networks, and where you see.
Mike: Risk to Winnebago as a result of any.
Mike: Any pressure there.
Mike: Good morning, Craig This is Mike I'll speak at a more strategic level around dealer health concerning our businesses and then have Brian comment.
Mike: On any financial insights that he might have.
Speaker Change: Broadly I believe a high high majority of our dealers.
Speaker Change: Financially managing through what has been a difficult couple of years on both the RV.
In the marine industry.
Speaker Change: We are in regular contact not only with the dealers.
Speaker Change: About their health and their.
Speaker Change: View on the future but.
Speaker Change: But we also are in contact with other sources, including inventory floor plan lenders that might have a perspective as well on key financial trends around overall.
Speaker Change: <unk> health.
Speaker Change: In quarter, one specifically, we really had a very low level of any financial implications related to dealer health in this last quarter, but.
Speaker Change: But we do continue to monitor the situation carefully.
Speaker Change: Knowing as you stated.
Speaker Change: There have been some reports of some dealers expressing some financial turbulence, Brian any other thoughts Craig the only thing I would add there is.
Craig Kennison: The financial impact is pretty muted because if there are dealer.
Craig Kennison: Body or a location for example that is struggling or needs to shut their doors or brands are in and really high demand and so it's it's relatively.
Craig Kennison: Easy for us to repurpose or relocate any units we have on a troubled dealer's lot over to a competing dealer.
Craig Kennison: It's an efficient process so.
Craig Kennison: Because of our strong position in the marketplace.
Craig Kennison: The financial impact of that transaction is it's really pretty.
Craig Kennison: Pretty muted.
Speaker Change: Thanks, and as a follow up Brian have you seen an elevation in your need to move inventory around based on the conditions you described.
Craig Kennison: No not at this stage Greg.
Craig Kennison: Thank you.
Craig Kennison: Thank you.
Our next question comes from Michael Swartz with true Securities. Your line is open.
Michael Swartz: Hey, guys good morning.
Michael Swartz: Maybe just to start I mean in the quarter you under shipped the RV industry pretty.
Michael Swartz: Pretty significantly I am wondering maybe just the strategy there.
Michael Swartz: Do you think that's having any implications on retail market share for your brands.
Speaker Change: Good morning, Mike.
Speaker Change: We have been very focused on making sure that both the quantity and the quality of inventory levels in both the RV and marine segments are appropriate given current market conditions, but also how we view the foreseeable future. The next six to 12 months.
Really each of our brands is focused on reaching the appropriate level of turns in the field that they think is right. We are certainly always cognizant of share pressure, whether it's ship share pressure competitively or it's the product needed in the field as you stated to be competitive at retail.
Speaker Change: We are we are not.
Speaker Change: Not correlating any retail results at this time.
Speaker Change: Two any shipment share trends within our business. We believe we have enough inventory in the field in macro to compete for retail market share.
Speaker Change: But we are very focused on making sure that the level of inventory in the field continues to trend in the right direction versus what the dealers want.
Speaker Change: And the quality of that inventory, particularly the aging is in good shape as well, while our aged inventory is not completely back to what it was pre COVID-19.
Speaker Change: It has taken a major step forward from this time, a year ago, and we continue to improve that on a monthly and quarterly basis. So no. We do not link at this time any retail share performance trends to our shipment share.
Speaker Change: I think we're just trying to do the best we can to balance the inventory levels in the best interest of ourselves and our dealers.
Speaker Change: Okay. That's helpful. Thank you, Mike and then maybe.
Speaker Change: Brian just I think you gave some commentary just directionally second quarter in line with the first quarter from a revenue perspective, a little better profitability could you maybe dig down a little deeper into that maybe what some of the puts and takes are for us to think about <unk> versus <unk> production mix.
Speaker Change: Costs things of that nature.
Speaker Change: Yes, I think sequentially it'll be a couple of.
Speaker Change: Impacts that we would expect on margin first we did have some warranty costs associated with recall specifically.
Speaker Change: In the first quarter I expect warranty.
Speaker Change: We will improve slightly sequentially and then I think just some some ongoing productivity improvements that we've seen.
Speaker Change: <unk> continued to take hold in Q2, and then finally, it's a very competitive discounting Pratt.
Practice out there in the marketplace right now.
Some of that should start to ease as we get into the.
Speaker Change: New calendar year here in our second quarter. So those are probably sequentially.
Speaker Change: The main things I'd call out.
Speaker Change: And obviously a lot of the the leverage we are experiencing in both Q1 and Q2, we'll then start to ease as our seasonality improves in the back half of our fiscal year and we start to see.
Speaker Change: Greater sales flowing through.
Speaker Change: Thank you and our next question comes from.
Speaker Change: Tristan Thomas Martin with BMO capital markets. Your line is open.
Speaker Change: Hey, good morning.
Speaker Change: Yeah.
Speaker Change: Could you maybe provide us with maybe some metrics around lineage are we still expecting them.
Speaker Change: Sorry, Grant that motor is $100 million in annual sales contribution kind of what we expect that ramp will be and then maybe the timing of one series is going to start to ramp production wise.
Speaker Change: Good morning, Tristan This is Mike as you just referenced we recently announced the next <unk>.
Speaker Change: Product and the Grand design motorized lineup that being a super C called the Super F that.
Speaker Change: And that we will showcase at the.
Florida RV Super show in Tampa here in a few weeks.
Speaker Change: You will begin to see production of that.
Ramping up here in Q2.
Speaker Change: And shipments following.
Speaker Change: A few in the quarter.
Speaker Change: But most of that series F impact will be in the back couple of quarters of fiscal 'twenty five.
Speaker Change: I don't think we will share any more specific financial information on.
The opportunity around Grand design motorized other than what Brian shared on the last call which was a.
Speaker Change: $100 million plus in terms of a revenue opportunity in fiscal 'twenty five the only thing I will say is that we are very pleased with how the market has received.
Speaker Change: The first product the class C.
Speaker Change: Product that <unk> put in the market.
Speaker Change: The feedback on the series F. Supersede has also been very positive.
Retail has been very solid out of the gate and we are optimistic about other models in the Grand design motorized line that you all sit here about.
Speaker Change: Not too far in the distance here about how we will continue to expand that line. So all things are on track with Grand design motorized in fiscal 'twenty five at this point.
Speaker Change: Alright. Thank you just one quick clarification I'm assuming series App was included in Brian's initial guidance.
Last quarter.
Tristan: It was Tristan.
Tristan: Alright awesome. Thank you.
Speaker Change: Thank you. Our next question comes from Sean Wagner with Citi. Your line is open.
Sean Wagner: Hey, guys.
Sean Wagner: Kind of as you've touched on retail has been stronger in recent months is there anything tangible you can point to beyond behind that with regard to consumer dealer sentiment.
Sean Wagner: How do you see that translating into the second half recovery.
And have you seen an uptick in dealer appetite for new orders, yet or will they kind of need to see a more prolonged improvement in demand for that.
Speaker Change: Good morning, Sean.
Speaker Change: Many elements to your question there consumer sentiment retail deal dealer ordering let me may be wrapped the first part of my response of this way we are beginning to see what we would consider some important green shoots in multiple ways across the business.
Speaker Change: That give us remained optimism about what could be possible in fiscal and calendar year 'twenty five for our business. Let me list a few of those things first of all some of the things most of you already know.
Speaker Change: Kober RV industry retail turned positive.
Speaker Change: This was the first time that has happened in around 40 41 months within the RV industry, we view that as a very positive sign from a comp standpoint.
Speaker Change: RV overall RV industry inventory is holding at historically low levels, we may not be at that one to one ratio in all segments, particularly on the motorized side, but we are seeing a stabilization of macro inventory levels and in fact on the table side, we actually saw.
Speaker Change: In October wholesales, outpace retails, which signaled some appetite by dealers to begin a little bit of restocking on the total side consumer confidence.
Speaker Change: Through here I think believe in December.
Speaker Change: Improved for the third straight month reached.
Speaker Change: Reaching its highest point since I believe November of 2021 the.
Speaker Change: The elections behind us.
Speaker Change: The fed did lower their rate of the fed funds rate. Another 25 basis point this week and while they signaled some conservatism in 2025, there does remain the prospects for at least a couple more cuts in 2025.
Speaker Change: From our internal retail standpoint, our data in November and December is promising.
Speaker Change: Our internal November RV retail data actually was improved versus our internal RV retail data for October.
Speaker Change: And the first two months of December for RV retail.
Speaker Change: Our internal data showed further improvement from November so we are beginning to see at least in our internal data.
Speaker Change: Comp retail trends that are increasingly positive I will note. The December retail to date in the first two weeks has also been very solid for our two marine brands as well again, its a very low month from an overall seasonal volume standpoint, but the comp numbers have.
Speaker Change: <unk> to trend in the right place so.
As the financial community asked good questions about our guidance for the remainder of the year and why we are continuing to hold to a midpoint of $3 75.
Some of the things I just mentioned.
Would be.
Speaker Change: Some of the reasons why we continue to feel that there is a chance that 2025.
Speaker Change: Could could have a nice upward trend to it from where 2024 has been.
Speaker Change: That was very helpful and just to clarify the November and December improvement from October is on a year over year basis.
Speaker Change: It is on a year over year basis for each period for each month in November and then the first two weeks of December one.
Speaker Change: One other element to your question I failed to answer is around dealer ordering.
Speaker Change: We have not seen quite yet robust increases.
Speaker Change: Our backlogs across all of our businesses from a dealer ordering standpoint.
Speaker Change: For our <unk> business, which has seen an uptick in the backlog here.
Speaker Change: Recently that we view as a positive trend both from an industry standpoint, but also because of the really good work that the Grand design RV team is doing specifically on improving the presence of affordable price points and models and their line that the dealers are positively reacting to.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Fred Wightman with Wolfe Research Your line is open.
Speaker Change: Hey, guys. Good morning, I, just wanted to sort of contextualize the guidance. So if we think about the first quarter came in below street numbers. It sounds like two Q numbers need to come down based on Brian's commentary, but the full year is unchanged right. So did the street just half numbers wrong has the first half and a little bit weaker than you guys.
Speaker Change: Thought, but youre encouraged by some of those green shoots that.
Speaker Change: Mike just mentioned how could we sort of evaluate the setup of the year versus how you thought it would shape out at the start.
Speaker Change: Okay.
Speaker Change: Fred I won't.
Speaker Change: Comment on whether the street is right or wrong about your estimates time will tell on all of that.
Speaker Change: I can just tell you that the.
Speaker Change: The guidance range that we provided.
With this week's earnings release.
Speaker Change: Has been thoughtfully considered we did narrow it a little bit on the bottom and I want to note specifically.
Speaker Change: Which should be a signal to all of you.
Speaker Change: That we we do have confidence.
Speaker Change: That the bottom end of our guidance range does capture that scenario, which is quite not.
Not quite as optimistic.
Speaker Change: As we think things can be.
Speaker Change: And when we did trim a little bit off the top and particularly because the first quarter results.
Speaker Change: We're not what we expected as well.
Speaker Change: And we wanted to acknowledge that from a squeeze for the back half of the year, but the green shoots that I just walked through minutes ago.
Do reflect.
A good part of the optimism about.
Speaker Change: The next three quarters, particularly quarters, three and four and I can tell you Brian and his team go through.
Speaker Change: A very detailed process.
Speaker Change: Regularly in our specialty before we revised guidance with our businesses about their forecasts for the rest of the year. So.
We believe that the range adequately captures the scenarios that could happen, but that the midpoint of that range is a fair estimate for.
Speaker Change: For what you could be looking at.
Speaker Change: Okay understood and then on motorized.
To your point. This is the first quarter, that's kind of the Grand design startup inefficiencies youre shifting there. So could you help us think about what the drag was on that motorized margin in the quarter I think you've given some numbers previously but is it better worse unchanged versus that sort of corporate drag that we saw last quarter.
Speaker Change: Yes, I'll speak to kind of the holistic performance had EBIT margin for motor home is the biggest impact by far is the deleverage impact from the lower sales that forth.
Four five points there the discounting that we're seeing out in the marketplace.
Speaker Change: Is impacting this segment by three points to the negative.
Speaker Change: Called out some warranty impacts that we're seeing in motorized those are.
Speaker Change: Primarily driven by some recall activity that we had in the quarter that was call. It a point to a point and a half of margin impact.
We did have some operational improvements year over year. So those were welcomed and good to see from the team's effort and then we didn't call out specifically in the earnings release, the Grand design Motor home I did in my prepared remarks.
Speaker Change: With that let's think of that as less than a point.
Speaker Change: In the half to one point impact is it.
Speaker Change: Still in the early stages of.
Speaker Change: Of its output and sales recognition. So we expect that as we said in some earlier calls to be accretive to the motor homes segment as we.
Speaker Change: Wrap up fiscal year 'twenty five.
Speaker Change: Perfect. Thanks, a lot.
Speaker Change: Thank you.
Bret Jordan: Our next question comes from Bret Jordan with Jefferies. Your line is open.
Bret Jordan: Hey, good morning, guys.
Speaker Change: Good morning.
Bret Jordan: <unk> segment I guess.
Bret Jordan: Performance within the portfolio.
Bret Jordan: Thats something that Youre seeing underlying improvement there at a greater rate than what youre seeing in these green shoots in the RV space is that the that inflicting more dramatically in helping your outperformance or is it really just share gain in another wise still sluggish segment.
Bret Jordan: Two thoughts there one overall retail on our marine business for quarter, one was about where we expected for both brands the.
Bret Jordan: The brands have been subsequently been able to ship.
Bret Jordan: At a fair pace to the dealers on the backs of decent retail all things considered.
Bret Jordan: With current marine industry conditions as I mentioned on the last couple of weeks. The first two weeks of December we've been really pleased with some of the internal data on the on the Marine side, we are taking share with both brands barletta as much bigger from a volume standpoint, and Chris <unk>.
Bret Jordan: <unk>.
Bret Jordan: The last Ssi report.
Bret Jordan: For Marine retail share showed barletta, taking another step forward last month. It is now the third largest aluminum pontoon brand in the U S and continues to take share on a trailing three six and 12 month period, Chris craft the smaller of the businesses.
Bret Jordan: <unk>.
The higher end brands certainly lower volume also continues to take retail share as their team.
Bret Jordan: Continues to improve their product line, especially around more affordable price points within that luxury brand in the market. So I would not classified the marine industry as is turning any corners in the two segments that we compete in I think we're just hitting the expectations internally that we have.
Bret Jordan: <unk>.
Bret Jordan: Executing at a decent level within both of those businesses.
Bret Jordan: Okay, Great and then could you give us any quick updates on what's going on in the motor home around the carb legislation and I guess.
Bret Jordan: Are there any signs that they they'll give you some kind of break on that.
Bret Jordan: On that restriction and I guess, how does that set up with the Grand design to supersede that.
Chassis supplier that you can sell in a carb state or is that a freightliner somebody else's restricting.
Bret Jordan: We have been very engaged on the carb regulations as it pertains to our business working hand in glove with the RV industry Association and really a consortium of other industry allies around this topic there had been very Frank honest respectful discussions.
Bret Jordan: With.
Bret Jordan: The California Air Resources Board personnel.
Bret Jordan: And we continue to get further clarity on how we can navigate the situation.
Bret Jordan: At this time, we don't anticipate many changes from carb as to the current regulations and there are really two aspects to this.
Bret Jordan: Advanced clean truck portion and the omnibus portion our teams are aware of the plane rules sort of speak on on what we have to manage now going forward.
Bret Jordan: And.
Bret Jordan: We are we are working with our chassis suppliers and engine manufacturers to navigate that.
The guidance that we have provided for fiscal 'twenty five does incorporate.
Bret Jordan: Any impact from carb on our business.
Bret Jordan: We believe we will be able to.
Bret Jordan: Managed through most of fiscal year 2025 in calendar 2025.
Bret Jordan: <unk> continued to serve our our motorized dealers.
Bret Jordan: And our customers.
Bret Jordan: Each OEM will have to find their own solution given their different mix of products.
Bret Jordan: But.
Bret Jordan: While it's a serious issue and we would prefer less regulation around the sale of our products. Our teams are working hard to mitigate any negative impact to the business in the next 12 months.
Bret Jordan: Specific to the Grand design Motor home supersede you referenced Bret.
Bret Jordan: Brett we do have a solution for that as well.
Bret Jordan: That complies with the carb requirements.
Great. Thank you.
Bret Jordan: Thank you art.
Bret Jordan: Our next question comes from <unk>.
Bret Jordan: Joe <unk> with Raymond James Your line is open.
Speaker Change: Thanks, Hey, guys good morning.
Speaker Change: Couple of questions on affordability, if I could you mentioned the recent fed rate cuts as offering some optimism for retail in the back half of the year, but I feel like with the 10 year. For example, the yield on the 10 year has moved higher since the fed started cutting rates. So I guess first question is what are you guys seeing in terms of the typical <unk>.
Speaker Change: Borrowing rate that buyers are paying in the market today.
Speaker Change: Yes, Youre exactly right, Joe and good morning, we're not seeing movement, yet in that 10 year, which is what most retail rates are are tied to I guess I would point out that the current retail environment and what we are seeing in terms of the green shoots that Mike talked about earlier.
Speaker Change: Those are all in the context of the current rate environment, I think perhaps it could be.
Speaker Change: Hypothesize that consumers have been waiting for improvements.
To the retail lending rates before buying but nonetheless, I guess, we're encouraged by some of those green shoots in retail activity in the year over year stabilization, which is much of what we are counting on flattish retail performance.
In 2025, which we're seeing some good trends towards that.
As Mike mentioned earlier. So there is many variables, we talk about impacting retail demand interest rates being one of them certainly consumer confidence and many other factors as well.
Speaker Change: Impact that and I think based on the current.
Speaker Change: Language deferred is using that's hinting at another couple of cuts in 2025, I think our expectations that we're building into our guidance capture that environment. Okay.
Speaker Change: It's very hard for us too.
Speaker Change: Uh huh.
Speaker Change: Correlate with accuracy the impact of two more rates versus two more rate cuts versus three more rate cuts.
As I said I think our guidance appropriately captures the current environment.
Speaker Change: That's very helpful. Brian. Thank you I guess, just a follow up on that.
Speaker Change: Are you still seeing a fair amount of buyers who may have bought a unit in let's say 2021 or 'twenty two that might be upside down on your loan and so that might discourage them from and trading up.
Speaker Change: We hear some instance of that there as you can imagine anecdotal and so it doesn't give us.
A lot of broad metrics, which we can then make conclusions on I think it's fair to say that there are certain trade in situations, where they are upside down in equity and I note that theres also situations anecdotally, where a dealer who is helping them overcome that situation with other form.
Speaker Change: <unk> of incentives to continue that that trade transaction. So.
Speaker Change: It's a bit of a.
A storyline that we continue to hear.
Speaker Change: But I think all things considered.
We're figuring out ways as an industry Oems and dealers combined two.
Speaker Change: Make some of those transactions happen, where indeed they are underwater.
Speaker Change: Got it okay. Thank you.
Speaker Change: Thank you. Our next question comes from Scott <unk> with Roth <unk>. Your line is open.
Scott: Good morning, guys and thanks for taking my questions as well.
Speaker Change: Good morning, Scott.
Yes.
Speaker Change: Going over to motorized you mentioned.
Speaker Change: I guess, the north valuable operations, having some.
Speaker Change: Some challenges can you maybe just walk us through some of the things that are being done you talked about some facility consolidations going to talk about that.
Speaker Change: Maybe talk about product development and anything else that we can expect it to help improve margins here going forward.
Mike: Scott This is Mike I'll take first crack at that and Brian can add some financial perspective as well.
Mike: In quarter, one from my view the elements that we're under particular pressure.
Mike: Around the Winnebago motorized business in particular.
Mike: We're very competitive disk.
Mike: Discounts in the marketplace.
Mike: Newmar doesn't see quite as much of this as the Winnebago brand does the Winnebago branded motorized covers.
Mike: More segments within motorized at more price points, we saw very fierce.
Mike: Market sales discounts.
Mike: In quarter, one from competition that at times, our team felt that we had to match to sustain some presence of shipment share in the market. So that's number one number two we.
Mike: We saw an increased level of warranty expense in quarter, one specific to our motorized segment.
Mike: And particularly in the Winnebago branded.
Mike: Motor home business.
There have been some quality issues.
That we have been working through and have unfortunately been more expensive than we had initially anticipated and you saw some financial impact of that in quarter. One lastly from an operational efficiency standpoint, we continue to make very strong strides within the north Iowa campus, particularly under the leadership of.
Mike: Of a new operations leader in the last year productivity is improving.
Mike: Yes.
Mike: Throughput is improving.
Mike: However, there remains significant opportunity to drive inefficiency out of those operations in waste and we will continue.
Mike: To review and rationalize fixed costs around the north highway business as well.
Mike: Did make the change in Charles City, Iowa.
A few quarters ago, when we officially closed on one of the facilities there and quarter one had a few financial remnants of that.
Mike: Transaction as well.
So those are the main themes around some of the pressure around the the motorized business, particularly on the Winnebago side I will say, the newmar business, albeit facing topline pressure because of the the class a segment.
Mike: Being difficult right now.
The Newmar business performed at our expectations, if not a little above candidly in quarter one.
Mike: Yes got it both the Newmar Winnebago businesses have manage their fixed cost as we would call it fixed cost structure accordingly, given the trough that we are going through.
Mike: Got it and then last question on the balance sheet, we're at three times Levered now.
Mike: Expecting I guess free cash flow in the next few quarters to pick up.
Mike: Your commentary about the second quarter.
Mike: Ladies want to believe that we might go a little bit higher than the three times in the next quarter.
A quarter or so before things go back down are there any covenant restrictions or anything that we need to consider.
Mike: No there really arent, we have in current based covenants, but we don't anticipate any.
Issues with maintenance type of covenants.
Mike: I think your assessments correct, there that maybe it will nudge up a little bit higher with the year over year erosion and EBITDA or the denominator in that equation.
Mike: But we still see a path of nice recovery.
Mike: As we get from Q2 through Q4.
Mike: Got it.
Mike: That's all I have thank you.
Mike: Thank you.
Mike: Our next question comes from.
No that's fine.
Mike: With Keybanc capital markets. Your line is open.
Speaker Change: Alright, Thanks for taking my questions I guess first just in terms of Asps.
Speaker Change: When we look out across the rest of the year is <unk> kind of.
Speaker Change: A good marker for how to think about asps shaping up by segment.
Speaker Change: And then second you guys gave good color on how youre kind of thinking about.
Speaker Change: The state of the RV industry shaping up any thoughts around.
Speaker Change: Marine dynamics looking out through the rest of the year.
Any anecdotes or kind of green shoots from an industry perspective in marine that you could share would be helpful as well. Thanks.
Speaker Change: I'll take the first part on.
Speaker Change: <unk> now and then.
Speaker Change: And then Mike can comment on the marine market.
Asps are most notably impacted in <unk>.
Speaker Change: They continue to have.
Speaker Change: Our preference by the end customer towards affordability and so we continue to ship.
Speaker Change: And over weighted.
Speaker Change: Part of our affordable lineup as a result of that most notably the transcend and Grand design is having some very strong success.
Speaker Change: And that tilts, the ASP towards that decline I think that will.
Speaker Change: Continue likely through Q2, and then start to ease a bit as we get into the selling season and start to see a pickup in some of the broader market, which should ease the ASP decline I don't expect a whole lot of.
Speaker Change: ASP decline in the marine side or in the motor home side, not anything of note or a meaningful decline there.
Speaker Change: Mike on the Marine side do you want to know from a marine standpoint.
I'm really not probably going to be offer any signs of meaningful change here recently in sort of marine conditions.
Speaker Change: It continues to be very challenging.
Speaker Change: From a retail environment across most segments.
Speaker Change: And in customer now is a really good time.
Speaker Change: To go in and look for a boat dealers.
Speaker Change: Dealers are working through multiple model years of inventory.
Speaker Change: And in many cases are willing to work with that customer on the right product and price to get them into the boating lifestyle.
Speaker Change: Got it.
Speaker Change: I do anticipate there will be some noise in the marine industry in the next couple of quarters.
Speaker Change: But what I mean by that is noise related to dealers are working through aging inventory.
Speaker Change: Especially during some of these softer months of the year, particularly for northern state freshwater dealers.
They will likely be aggressive in moving through some of that inventory at some pretty hot price points.
Speaker Change: But we are focused on making sure that our two brands have a product lineup that the dealers think is right for this environment.
Speaker Change: And again working to make sure that their field inventory is in the best shape. It possibly can be as we go into the spring selling season as you all know the RV and Marine boat show season is about to launch here in January in in a significant way and I think we'll be able to.
Speaker Change: Have some better evidence of how the marine market might be shaping up for 2005. After we get to some boat shows in January and February.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Michael <unk> with the Benchmark Company. Your line is open.
Michael Swartz: Yeah, Hey, good morning, guys and thanks for taking my questions here, just two quick ones first as it relates to consumer affordability, obviously, we talked about rates and borrowing costs what are you seeing.
In terms of insurance and insurance premiums.
Michael Swartz: Larry pressures stabilizing decelerating really any color you can provide around that would be helpful.
Speaker Change: Michael This the one note I might make is that we are hearing a little bit of chatter around boat insurance in parts of Florida that have been hit with some of the storms recently, particularly on the west coast of Florida.
Speaker Change: There is a stretch that has been hit in multiple years in a row now.
The insurance industry is working through its appetite candidly.
Speaker Change: Two to ensure new boats that are sold.
As as they've seen some losses in past years I can't tell you on the RV side that Brian and I, probably can think of any notable changes your question, probably spurs us to look.
Look into that a little bit but for this call. This morning, I can't think of any new developments there from.
Speaker Change: And affordability pressure standpoint, certainly not a material impact to our portfolio. As you can appreciate the bar, let a brand which is by far our biggest marine brand that Mike referenced.
Speaker Change: <unk> challenges on the on the Marine side, along the Gulf Coast of Florida that is it's just not a material part of our business and so certainly not worth calling out in our financial performance.
Speaker Change: And like Mike said, we're not seeing or hearing about incidence of having challenges ensuring rvs.
Speaker Change: Got it that's helpful. Thank you and then just a clarifying question on Marine obviously Bartlett and Chris craft.
Speaker Change: <unk> taking share.
Speaker Change: Our unit and sorry, if I missed this but our unit volume is positive across both brands or is one.
Speaker Change: A bigger driver than the other obviously part of that is the bigger piece of the business but.
Speaker Change: Unit deliveries if you look at the earnings release unit deliveries in quarter. One in total so combining both premiums were slightly positive in quarter, one of fiscal 'twenty five than quarter one of <unk>.
Speaker Change: Fiscal 'twenty four.
Speaker Change: I would just suggest that it's pretty steady right now.
Speaker Change: And yes, we're led US obviously, the bigger piece of that.
Speaker Change: We.
Speaker Change: I don't know that were bid.
Speaker Change: Building, our marine financial projections for 2025.
Speaker Change: As Brian said around any significant retail increases.
Speaker Change: It is it is share gains.
Speaker Change: And trying to get the dealers back to that one to one replenishment ratio.
Speaker Change: In the next two to three quarters there.
Speaker Change: So the overall volumes pretty pretty steady and part of that four 7% increase in units certainly driven by a comparison to the prior year that was in Destocking mode as well, so you've got that impact that that might influence the year over year comparison.
Speaker Change: Got it yeah. That's helpful. I mean really what I was trying to parse out what.
Speaker Change: Within recreational boating right.
Speaker Change: A few different stories, depending on how you break down into the data whether you are looking at pontoon and ski wake saltwater et cetera. So.
Speaker Change: So I'm just trying to get a sense around that.
Speaker Change: Thank you.
Speaker Change: Youre welcome.
Thank you art.
David Whiston: Our next question comes from David Whiston with Morningstar. Your line is open.
Speaker Change: Thanks, Good morning.
Mike you made a comment earlier about how youre, not <unk> content and you're focusing on what consumers value.
Speaker Change: I'm just curious what features do they value most right now and then how is that different from not the content.
Speaker Change: Yes, good morning, David.
The content ing.
Speaker Change: Our opinion from a definition standpoint is really.
Speaker Change: Taking an existing unit in.
The leading features from it in a meaningful way.
Speaker Change: We really ask our businesses and our leaders are doing this is we really ask our businesses to redefine value within our product as opposed to cut value.
Speaker Change: So you may end up seeing some features deemphasize, but what we what we try to do within that same coach for example, or trailer on the RV side is find a way to to add some value.
Speaker Change: As well so.
Speaker Change: Candidly price remains.
Speaker Change: Number one.
Speaker Change: And then the comfort creatures inside the coach <unk>.
Speaker Change: Aimed to be most important right now a few years ago, you saw a lot of emphasis around outdoor kitchens outdoor porches.
Speaker Change: And.
Speaker Change: Emphasis on lighting outdoors and entertainment outdoors and while all of that is still present in the high end of the RV sort of the better best elements of the RV industry.
Speaker Change: Our teams have been focusing a lot on making sure that the fit and finish comfort inside the coaches.
Speaker Change: <unk> functionally.
Speaker Change: Is really on point.
Here so.
Speaker Change: How I would.
Speaker Change: Ask you to.
Speaker Change: About that but the teams are very focused on making sure that.
Speaker Change: The price points in our lineup that need to be addressed in this environment are being met and delivered on.
Speaker Change: Operator, I'll just interject here, we are at the top of the hour and in our commitment to our audience of limiting this to an hour let's close this call.
Speaker Change: If you would please.
This concludes the Q&A portion of today's conference I'd like to turn the call back over to Mr. Prasad.
Speaker Change: That's the end of our first quarter earnings call. Thank you for joining us.
Speaker Change: A wonderful holiday season. Thank you.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Speaker Change: Okay.
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