Winnebago Industries, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2021 Winnebago Industries Earnings 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 the question during this session, you will need to press star then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your speaker for today, Steve Stuber, Vice President of Finance. You may begin.

Thank you, Tawanda. Good morning, everyone, and thank you for joining us today to discuss Winnebago Industries' fiscal 2021 third 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. 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 third quarter results and the quarterly earnings supplement were 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 Happy.

Mike? Thank you, Steve, and good morning, everyone, and thank you for joining us today. As always, we deeply appreciate your interest in Winnebago Industries in taking the time to discuss our fiscal 2021 third quarter results. I will begin with an overview of our performance before turning it over to Brian Hughes, who will discuss our financial results in more detail. Then I will offer some closing thoughts, and we will conclude the call by answering your questions. Before we dive into the drivers of our performance, I would like to take time to acknowledge the significance of the comparative period just one year ago, third quarter of fiscal year 2020, and how far we as a company, as an outdoor recreation industry, and as a country have come since those difficult days. In those challenging and uncertain early weeks of the pandemic in spring of 2020, Winnebago Industries suspended our manufacturing operations while we worked with our team and suppliers to develop the safety protocols necessary to keep our people safe. Thanks to the incredible resolve of our now 6,300 plus strong Winnebago Industries team members, we eventually reopened our plants and offices and have worked as safely as possible ever since to meet the rising record demand of a consumer whose priorities and preferences for the outdoors have changed in ways that will be felt for generations to come. It is also remarkable that as we sit here today, our scientists, healthcare professionals, public health officials, and the broader pharmaceutical industry collaborated to bring effective and safe vaccines to market in record-breaking time. helping us to slow down the spread of the virus to levels with which we can live carefully through today. Our gratitude is immense to all those involved. We believe the pandemic not only accelerated some existing purchase intent within the recreational vehicle and marine markets these last 15 months, but we are equally convinced there has been, is, and will be a meaningful expansion of interest and engagement in the outdoors that will benefit our business and industries for many years, even through unavoidable cyclical periods that have been and will be a part of the outdoor economy for decades. Today, more families than ever are seeking ways to enjoy the outdoor lifestyle. With 10.1 million households having camped for the very first time in 2020, and another estimated 4.3 million households undergoing their own rookie camping experience as well in 2021. Our team is helping to meet increased demand for our products and brands while delivering record financial performance. More new families, more first-time buyers, and more diverse customers getting their taste of what exploring this great country via the open roads and expansive waterways is all about. Now, some will look for signs of fallout of first-time buyers and challenging comparative periods in the short term to record retail demand a year ago. But others, like us, see a net positive new wave of engaged enthusiasts, especially millennials and younger generations who are actively now shifting their available time and income to invest in a lifestyle that is rewarding and accommodating to countless use cases personally and professionally when using our products. Today's fresh memories for youth, first-time explorers, and even veteran outdoor participants will be the foundation for our industry to grow from in the decades ahead. We are long and bullish on America's outdoor recreation economy. and the place in that ecosystem Winnebago Industries will hold in the future. So I want to take a moment and thank our employees for their continued perseverance and dedication to Winnebago Industries, our channel partners for their continued loyalty, and our end customers for their love and engagement with our tremendous brands. I'm incredibly proud of the progress we have made in the past year, and it is all due to our teams. which we serve as leaders here at the company. Our results for the third quarter of fiscal year 2021 continue to build on the momentum we have generated throughout the fiscal year. In the third quarter, Winnebago Industries grew net sales to a record $960.7 million, representing a 139% growth year over year and an organic ex-NUMAR growth of 53% over our pandemic fiscal third quarter in 2019. Our two-year performance demonstrates not only the exceptional growth in consumer demand for pursuing the outdoor lifestyle, but also that Winnebago Industries has continued to diligently execute to meet that demand while growing market share at the same time. As of April 2021, our RV fiscal year-to-date market share is now 12.5%. up 40 basis points from the same period last year. Winnebago Industries' top-line performance in the third quarter also represented 14% sequential growth over our fiscal 2021 second quarter. And while we do not talk about sequential growth typically for seasonal reasons, given the unique nature of our comparable periods because of the pandemic's impact on a year ago's Q3 results, It is helpful in demonstrating our sustained revenue growth throughout the year and speaks to the stickiness of consumer demand. Though catalyzed undoubtedly by the onset of the pandemic, demand for our products has remained strong as the vaccine rollout and gradual reopening across North America has picked up. Our team has stepped up production output as a result. The golden threads of quality, service, and innovation extend to everything we do, and we're a significant driver of our strong profitability in the third quarter. The craftsmanship and quality of our premium products at every price point and across each of our Winnebago, Grand Design, Numar, and Chris Craft brands enables us to continue to grow our market share even at historically low levels of discounting. Similarly, the superior service and support we provide our consumers through deep partnerships with our dealers affords us the ability to execute carefully considered pricing actions to reflect the surging demand for our products, but also offset the real input cost inflation that is present across our industries. Our enterprise-wide build-to-order production approach also continues to serve us well as we remain disciplined considering ongoing supply chain challenges, our consolidated working capital and overall profitability remain improved. At Winnebago Industries, we often talk about the importance of our dealer network relationships and the strength of those partnerships as a critical differentiator. Our dealers are committed to our premium brands, and they have not sacrificed their dedication to customer satisfaction at any time through this pandemic. The dealers have done an exceptional job of managing through lower inventory levels than desired and rising sales and service demand. They continue to express their confidence in both the future retail demand environment and in Winnebago Industries as an OEM through increased levels of backlog orders. We are also committed consequently to working closely with our supplier partners to meet that order appetite as quickly as possible, but as always safely and delivering high levels of product quality always. Our record sales in dollars and units in fiscal 2021 third quarter show that we are sequentially determined to invest in finding ways to increase output. We continue to experience demand-driven supply chain challenges that restrain our operations from reaching full production capacity and have been facing various waves of inflation pressure as well in the last six months. The impact of these supply-based inconsistencies is evident in some of the segment results. But our team is working closely with our supply chain partners to manage through these conditions with flexibility, nimbleness, and process discipline as much as possible. We are grateful for our supplier relationships and all they are doing to feed our assembly lines daily. With that opening, I will now turn the call over to Winnebago Industries Chief Financial Officer, Brian Hughes.