Winnebago Industries, Inc.

Thank you for standing by and welcome to the second quarter 2021 Winnebago Industries earnings conference call. I will now hand the conference over to Steve Stupor, Vice President of Investor Relations.

Thank you, operator. Good morning, everyone, and thank you for joining us today to discuss Winnebago Industries fiscal 21 second quarter earnings results. I'm joined on the call today by Michael Happi, President and Chief Executive Officer, and Brian 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 second quarter results was issued and posted to our website earlier this morning. Additionally, we have posted our first-ever quarterly earnings supplement a compilation of slides that should serve as an efficient way to understand our second quarter results and provide context related to our company and industry trends. 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 in 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 Happi. Mike?

Thank you, Steve, and good morning to everyone on today's call. As always, we genuinely appreciate your interest in Winnebago Industries and for taking the time to join us. As we continue to navigate the pandemic, we very much wish great health for each of you. Now, we have stated it often, but these are interesting, dynamic, and exciting times for our company. I will start this morning's call with an overview of our very solid second quarter performance before turning it over to Brian Hughes, who will specifically discuss our financial results in more detail. Then I will offer some closing thoughts, and we will conclude with a Q&A session. We are very pleased to share that Winnebago Industries delivered another quarter of outstanding financial and operational results. On a year-over-year basis, we grew our top-line net sales by 34%, expanded gross margins 590 basis points, and increased operating income by 237%. These outcomes are especially a reflection of the extraordinary Winnebago Industries team who continue to deliver time after time while leading with our values in all they do. Our teammates are truly our greatest asset, and we are very focused together as one enterprise organization on creating tremendous value for our end customers, channel partners, communities, and shareholders. In addition to our employees and their impressive agility, Winnebago Industries' continued growth and successful execution is attributable to three other key drivers. Number one, our leading portfolio of premium outdoor brands, Winnebago, Grand Design, Numar, and Chris Craft. Second, Winnebago Industries' ongoing commitment to operate with excellence and deliver exceptional quality innovation and service in everything we do. And lastly, a win-win partnership mentality with our valued dealer network to create and sustain strong consumer demand for our leading portfolio of outdoor products. While we have undoubtedly been active via acquisitions in the last four plus years, Fiscal year 2021 quarter two represents a truly organic year-over-year comparison in total performance. The second quarter of fiscal year 2020 was the first full quarter in which Newmar's luxury motorhome line was included in our world-class portfolio. One year later, we continued to nurture the tremendous appeal of Newmar's growing product lineup and its relentless focus on craftsmanship quality, and customer care. Our collective enterprise results in the second quarter of fiscal year 2021 validate a strong, complete, full-line RV strategy is now in place here at our company, and the premium organic portfolio of RV brands are positioned to compete vigorously in the years ahead. Now, there is a distinct strategic cause-and-effect linkage between our premium brands and golden threads of quality innovation and service and the strong financial results that are being shared with all of you today differentiation and strong value can drive sustained market and financial performance that is and will always be our goal additionally our team's ability to navigate constantly challenging environments related to component cost and availability is on display through our numbers as well we took and and well-take actions to ensure our pricing reflects both the surging demand for our premium brands, but also the input cost inflation that is expected in the coming quarters. Our ability to sell products at attractive margins and continual levels of discounting seen across the RV industry contributed to our profitability performance in the quarter and continues to reinforce our brand strength with dealers and in consumers. And as importantly, our enterprise-wide commitment to operational excellence, productivity, continuous improvement, strategic sourcing, et cetera, was also a significant driver of our performance and resulted in strong second quarter profitability. As a result, our consolidated second quarter gross margin of 18.6% represents an increase of 590 basis points versus last year. We are passionate about driving operational leverage within the business and maximizing the return from our current assets. Our manufacturing processes are running daily at peak levels as the supply chain allows and executing against an increasingly robust order backlog to replenish as quickly as possible inventories for our dealer partners. The shift we made in the back half of fiscal year 2020 to fully build to confirm dealer order production in our Winnebago branded RV businesses continues to serve us well in terms of profitability and working capital management. While demand driven supply chain challenges regularly impact our production, particularly in Class A motorhomes, we will constantly work with our supply partners to manage any future disruptions as best we can. Our Q2 results demonstrate the supply network is assisting in incredible year-over-year production volume increases. And for that, we are appreciative, maintaining gratefulness and context. But we also continue to be restrained from hitting full manufacturing potential, given almost daily component availability challenges. Quarter to lost net sales due to sourcing constraints was easily eight figures across the portfolio. That revenue opportunity remains inherent in our potential as we transition into quarter three. The third major driver of our fiscal year 2021 second quarter performance was sustained strong consumer demand for our products, both as wholesale appetite from our dealers, but especially at retail within consumers. We are not seeing any significant decline in retail momentum and outdoor product demand as we turn into the spring 2021 selling season. SSI results are often a lagging, incomplete barometer of the retail health in the industry. And our company's retail numbers in the first two to three weeks of March have actually shown sustained strength and even an uptick in certain categories. The RV and marine industry have succeeded in comping effectively over a somewhat normal pre-pandemic period in early calendar 2020. And the next three months of 2021, March through May, which is our quarter three, we'll see strong retail and wholesale comparisons versus a period of intense marketplace disruption a year ago. Throughout the pandemic, we have proven our resilience and ability to execute during difficult macroeconomic and large-scale health crisis conditions, just as Winnebago Industries has continued to expand our reach during other challenging periods in our history. Currently, we are experiencing a flattening of seasonality at wholesale and at retail. Our calendar 2021 January and February retail sales were similar to our November and December performance, underscoring that even through the typically slower winter months, Consumers are excited about our brands and intent on securing the product they need to have extraordinary experiences with family and friends this summer. The strong demand undercurrent we are seeing presently has meaningful implications on our business now as well as over the long term. Welcoming new entrants to the outdoor lifestyle allows Winnebago Industries the opportunity to capture significant customer lifetime value that our portfolio provides. First-time buyers of both motorhomes and towables tend to gravitate towards value models. By delivering our golden threads of quality, innovation, and service, as well as the breadth of premium products for families to grow into over time, we are cultivating a broad growing pipeline of Winnebago Industries consumers as they upgrade on average every three to five euros when staying within the lifestyle. Before turning the call over to Brian, we want to acknowledge the fact that it has been just over one year since the COVID-19 pandemic changed just about everything in terms of how we live in the U.S. The past 12 months have been marked by heartbreak and grief caused by the deadly virus. There's been a call for unity in a deeply divided nation. and an overdue reckoning on widespread racial inequality. As we continue to persevere and grow our business, we have also made it a priority to enhance and advance our corporate responsibility efforts and ensure that our company has the resources, infrastructure, and commitment to be a valued partner to the communities in which Winnebago Industries stakeholders live, work, and play. With that initial overview, I will turn the call over to Winnebago Industries Chief Financial Officer, Brian Hughes.