Winnebago projects modest growth amid industry challenges

Mike will provide an overview of our Q4 and full year performance, followed by Bryan discussing financial results and market outlook. Mike will then share fiscal 2025 guidance and business outlook. Please turn to slide four as we hand the call over to Mike. Thank you for joining us today to discuss our results. Despite a challenging year, we are optimistic about future growth. We have made leadership changes to address operational challenges and are excited about the response to our new Lineage Series M vehicle. We are cautiously optimistic about our annual financial guidance, with a focus on modest improvement and 10% adjusted EPS growth. We continue to focus on managing production and maintaining a strong balance sheet. Thank you for your support, and we look forward to your questions. Chris, an experienced veteran at Winnebago Industries, has successfully led the integration of Barletta and played a key role in the boat brand’s market share growth. To further enhance Winnebago’s brand influence and market share, his expertise will be invaluable. The Winnebago branded Towables business has not met expectations, and to address this, Don Clark has been promoted to oversee Winnebago Towables in addition to his current role as President of Grand Design RV. This change consolidates our Towables expertise in Indiana, with Don’s knowledge and operational skills making him the ideal choice to lead the team. Both Chris and Don will continue to report to me as we aim to strengthen our position in the outdoor recreation market and drive growth. Our recent product innovations showcased at the Hershey RV show demonstrate our commitment to technology, design, and comfort across our brands. The Class C Lineage Series M motorhome from Grand Design has been a highlight, meeting the high expectations of our customers. These innovations reflect our dedication to enhancing outdoor experiences for our customers. Bryan will provide a financial review, focusing on key drivers of our performance in the fourth quarter. Retail demand was sluggish, operating expenses increased due to various factors including an impairment charge related to Chris-Craft, and adjusted EBITDA margin was down. We maintained a strong balance sheet, paid dividends, and bought back shares. Important changes include no longer including an adjustment for the call spread overlay in our calculation of adjusted EPS and discontinuing segment backlog information in future reports. To provide analysts with more relevant insight, we are offering quantitative annual guidance on consolidated revenues and adjusted EPS. In the Towable RV segment, revenues were down, and adjusted EBITDA margin decreased due to various challenges in the Winnebago branded towable business. In the Motorhome RV segment, revenues were also down compared to the previous year. I am confident in the future growth potential of our company, as we have a strong portfolio of premium outdoor recreation brands that will drive profitability and margin expansion. Our established centers of excellence will create synergies that will accelerate growth and increase profitability. We are fueled by a technology engine that sets the pace for the markets we serve. Can you provide some insight into what drove that improvement and what’s causing the recent decline?

Craig Kennison: Okay. Hopefully you can hear me.

Michael Happe: Yeah. We can this time, Craig.

Craig Kennison: All right. Thank you. Mike, I was wondering if you could share any mandates or KPIs that you’ve discussed with Chris West or Don Clark? And what should investors expect in terms of a change in performance, and where are you focused?

Michael Happe: Good morning, Craig. Thanks for the question. I won’t get into any specific KPIs in the short term, but I can discuss our strategic focus. We believe it is crucial for Winnebago Industries to have at least two strong Towables brands to compete effectively in the North American Towables RV market segment. We are pleased with the performance of the Grand Design Towables business and see significant growth potential there. One of the key goals for Don Clark and his team at Grand Design is to continue to increase market share and profitability in the Towables segment.

On the Winnebago branded towable side, the business currently holds around 1.5% market share in the towable space, but the company believes it has the potential to double that size in the future and possibly reach 5% market share. The expectation internally is to build a business of significant size to complement the Grand Design Towables business. Chris West, who has been with the company for eight years, is expected to stabilize and improve the performance of the Winnebago branded motorhomes business. The company aims to achieve a 13% market share with its three motorized product brands – Winnebago, Newmar, and Grand Design.

In terms of retail performance, the company has seen progress with some of its more affordable products like the Reflection 100 Series, Grand Design Imagine, and Transcend models. Newmar’s motorized product categories are gaining market share, and Winnebago branded Class C product is also performing well. Barletta is also taking significant market share in the aluminum pontoon space.

Regarding towable margin headwinds, pricing and mix challenges have impacted the margins, with an overweight in the Winnebago brand in terms of net pricing achieved in the market. There was also an overweight of the Transcend model in the Grand Design lineup, which affected pricing and mix. Warranty year-over-year and operational challenges have also contributed to the margin pressures.

Looking ahead to fiscal ’25 guidance, the company is focused on continued destocking of motorized inventory, maintaining ASPs, and improving market share across its product lines. I was unsure if you had any assumptions about market share gains or losses in your guidance. Regarding ASPs, we anticipate modest increases in the Motorhome segment and modest declines in the Towables and Marine segments due to mix preferences. In terms of inventory turns, improvements are expected on the motorized side, while the Towables business is in good shape. Market share assumptions include modest gains from Grand Design Motorhome entry and Barletta brand improvement. We are committed to the marine business, despite the impairment taken on Chris-Craft, which we view as cyclical. We believe both Chris-Craft and Barletta are strong businesses. We have ambitions to increase the size and profitability of our non-RV business over time. We will not comment on specific supplier relationships or pricing benefits. We must continually earn the business of our channel partners, just as our suppliers must consistently earn our brand’s business. When it comes to specific brands like Transcend, our teams keep all options open in terms of supplier choices to hit targeted price ranges. As for the retail market, we expect gradual improvement over the next 12 to 15 months, with different subcategories seeing better retail conditions at varying paces. The state of our dealer base remains stable, with a focus on cash flow generation in the current environment. The competitive environment in the RV industry remains aggressive, with a focus on affordability and price points. Overall, we continue to monitor market trends and remain committed to delivering value to our customers and partners. Thank you for joining the call.