Winnebago Industries, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Winnebago Industries Q1 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Stuber, Director of Financial Planning and Analysis, and Investor Relations. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Thank you for joining us today to discuss our first quarter earnings results. I'm joined on the call today by Michael Happe, President and Chief Executive Officer, and Bryan Hughes, Vice President and Chief Financial Officer. This call is being broadcast live on our website at investor.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. 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. These factors are identified in our SEC filings, which I encourage you to read. With that, I would now like to turn the call over to our President and CEO, Michael Happe. Mike?

Thank you, Steve, and good morning to everyone on today's call. We know this is an incredibly busy time of year, and we appreciate your time and your interest in Winnebago Industries. On the investor relations front, we have been quite active ourselves. Many multiple roadshows, our Investor Day meeting in November in New York City, and the annual shareholders meeting earlier this week. We are telling the story of our company's transformation often. and thus I will work to be efficient in beginning this morning's discussion with an overview of our fiscal year 2020 first quarter results and our perspective on the balance of the fiscal year. I will then turn the call over to Bryan Hughes who will provide important details on the financials, especially considering the accounting implications of our recent NUMAR acquisition. I will then return to offer some closing comments before concluding the call with a Q&A session. In early September, as we kicked off the fiscal 2020 year, we entered the first quarter eager to build upon the tremendous progress made in previous fiscal years, strengthening our overall position in the North American RV market, initiating an intentional effort to diversify our overall portfolio, and setting the stage for achieving our future aspiration of becoming a leader in outdoor lifestyle solutions. As you may recall, in fiscal year 2019, Annual revenues were $2 billion for a second year in a row, particularly meaningful given the double-digit negative shipment environment of the RV industry. Net income in fiscal year 19 grew to a record $112 million, and we extended our recent track record of gaining cumulative share in the RV market. We also announced, in September, another transformational event in our company's journey, that being the acquisition of the Newmark Corporation. This bold move gives Winnebago Industries a more complete, premium, overall motorhome business with a more significant presence in all motorized subcategories, including increased market share in the North American luxury RV market and a more profitable motorized segment in the future. Our overall premium portfolio is now home to four of the most valued brands in the outdoor lifestyle arena. Winnebago, Grand Design, Newmar, and Chris Kraft. We expect to maintain this same level of high performance in fiscal year 2020, recognizing there will be important work associated with the NUMAR integration. Based on our first quarter results, we are off to a very good start, as consolidated net revenues were up approximately 19% for the period, including the three-plus weeks associated with NUMAR as part of the business. Consolidated top-line growth during the quarter was driven once again by strong performance from our towable segment, Class B motorhome performance, and as mentioned, a short period of sales contribution from Newmar. We are particularly encouraged that organic revenues at Winnebago Industries, without Newmar, continue to grow at a healthy pace, up over 12% versus the prior year. As a result of the steps we have taken to strengthen and improve the core RV business, we are also seeing more consistent operating results and cash flow. Operating cash flow in the quarter was $79 million, up 45.9% over last year, which allows us to continue to invest in our businesses appropriately. Now, let's turn to the segments in more detail. In the towable segment, revenues for the quarter were up 16.6% over the prior year period, primarily driven by the strength of the Grand Design brand. Grand Design's new product launches and recent interior redesigns of many of their models have supported their continued strong momentum and maintained the increasing appeal of Grand Design's products across a broad customer base. This impressive brand continues to outpace the industry In terms of both unit shipments and retail growth, as the GDRV reputation for quality, innovation, and service are accepted well by value channel partners and the end user buying community. Adjusted EBITDA margin of 10.5% for the towable segment was flat compared to the same period last year, largely reflecting pricing actions and a favorable mix of business offset by higher input costs. Towables backlog for the quarter decreased 22% in units versus the prior year, reflecting increased utilization of added capacity and the projected shift in dealer order patterns to smaller frequent orders. We remain confident in the forward-looking strength of our multi-branded RV towables lineup and the opportunities we have collectively executed to outperform the market, even when navigating challenging industry conditions. The overwhelmingly positive reception and excitement around redesigned models and new products at the open house in September and showcased at this fall's RV retail shows is validating in terms of our future momentum and potential for fiscal year 2020. Turning to the motorized segment, Reestablishing a premium leadership position in this business remains a key priority for us in fiscal year 2020. We've enhanced our lineup of high-quality, Winnebago-branded motorized RVs by launching innovative products and designs. Additionally, the acquisition of Newmar, completed on November 8th, has energized our company by adding a highly respected premium brand that allows us to compete in the high-end luxury motorhome markets. The integration process, which involves a primary cross-company team of select participants, is underway and off to a productive start. Matt Miller, now Vice President of Winnebago Industries and ongoing President of NUMAR, is now participating in my leadership team meetings and provided an excellent update to our Board of Directors just this week. We are very focused on ensuring the NUMAR team retained significant autonomy in operating the business facing the market, but very much benefits from the support and the synergy we can provide from the whole of Winnebago Industries behind the scenes. This is a very similar approach as to our two previous acquisitions and a strategy we believe will result in a one plus one equals three outcome in the future. When executed well, our employees, dealers, and customers and shareholders should all benefit from this transaction. First quarter revenues for the motorized segment were strong, up 24.6% over the prior year period, including 19.7 percentage points of growth due to the three weeks of Newmar's operating results. Organic revenue for the Winnebago branded motorhome business was up 4.9%, driven by strong Class B unit sales and previously executed pricing actions, partially offset by a decline in Class A unit sales. We remain focused on managing costs and improving the overall manufacturing efficiency in our Winnebago motorhome business. Last year, we took steps to position the motorhome segment for sustained profitability. This includes shifting our Winnebago-branded Class A diesel motorized manufacturing from our Junction City, Oregon plant to our manufacturing campus in Forest City, Iowa. The transition consolidates and centralizes product development, supply chain, and assembly operations for that brand's diesel business to a single location with the strong intent to see increased operating efficiency. Our motorhome backlog increased 34.2% in units from the prior year, which reflects the addition of Newmar. which provided 31.8% percentage points of growth. Year over year, new product innovation, primarily in our Class B lineup. We look forward to improving the financial profile of our motorhome segment and building on top line momentum throughout fiscal year 2020 while instilling learnings and best practices from our new colleagues at Newmar. Before turning the call over to Bryan, I would like to touch on our marine business. Chris Craft delivered another solid quarter of sales growth and the retail demand for Chris Craft products remains vibrant. Additionally, interest by quality marine dealers in representing and growing the Chris Craft brand is as high as anyone can recall. As those dealers see a stronger Chris Craft business developing, maintaining its unique place as one of the world's most beautifully designed brands, but also carefully expanding its lineup of inboard and outboard offerings. Through the first 18 months of ownership by Winnebago Industries, Chris Craft remains on track for our M&A models. Our planning process for capacity expansion in Sarasota remains active with the permitting stage ongoing. We will monitor the health of the marine market and the confidence of our channel partners when making a final timing decision on putting shovels in the ground. Chris Craft is a very important brand in our portfolio as it represents the type of premium manufacturer we look to be. And we continue to learn through the Chris Craft team about the marine market and the opportunities it holds in the future for our company. With that overview, I will now turn the call over to Bryan Hughes to review our fiscal 2020 first quarter financials in more detail.