Winnebago Industries, Inc.

Good morning, everyone, and thank you for joining us today to discuss our fiscal 2022 fourth quarter and full year earnings results. As you may know, I am new to Winnebago Industries and excited to be working with the team as we continue to partner with our analysts and investors and seek to deepen our relationships with the investment community. I look forward to connecting with more of you in the months ahead. I am joined on the call today by Mike Happy, President and Chief Executive Officer, and Brian Hughes, Vice President and Chief Financial Officer. This call is being broadcast live on our website at investor.wgo.net. And the replay of the call will be available on our website later today. The news release with the fourth quarter and full year results was issued and posted to our website earlier this morning, along with the fourth quarter earnings supplement. Before we start, I would 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 Happey. Mike?

Thanks, Ray. and let me officially welcome you to the team. We look forward to your contribution, certainly. Additionally, I would like to thank Steve Stuber for his efforts in the past several years as our investor relations leader, and wish him well as he transitions internally to the CFO position within our Grand Design RV subsidiary. We are truly grateful to have both Ray and Steve on our team here. Now, good morning, everyone. As always, we appreciate your interest in Winnebago Industries and taking the time to discuss our fiscal 2022 full year and fourth quarter results. I will start the call with an overview of our performance during the quarter and the full year, then pass it to Brian Hughes to cover our financial results in more detail. Subsequently, I will offer some closing thoughts before we turn to your questions. As those who follow Winnebago Industries know well, over the past seven fiscal years, we have been laser focused on enhancing and strengthening our enterprise portfolio. The success of those initiatives has created a more diversified, resilient, competitive, and profitable Winnebago Industries. This was never more evident than in fiscal year 2022 when our company achieved record revenue, profitability, and overall outdoor market share. Today, we have five premium outdoor brands spanning two large and secularly strong outdoor recreation industries, recreational vehicles and marine, both enabling us to connect with a broad range of outdoor consumers. We have also substantially grown our overall market penetration as more outdoor lifestyle consumers recognize and respond to the golden threads of quality, service, and innovation they see throughout the Winnebago Industries portfolio. It is no secret that demand for outdoor products exploded in the last two years, and that new consumer trends have emerged which will impact our industries forever. Thanks to the relentless focus commitment and heart of our world-class team here, we delivered on unprecedented levels of demand for our premium products as new and existing consumers embraced the outdoor lifestyle. While recognizing the inevitable normalization of short-term outdoor demand, we continue to believe that growing interest in the outdoors by an increasingly diverse range of consumers are lasting in the long term. and that we at Winnebago Industries are better positioned, more than ever, to serve a wide range of consumers with our diversified portfolio. The past year has ushered in a new landscape. Inflation and rising interest rates are reshaping the economy on a macro level. These trends are certainly impacting the strong retail demand environment that Winnebago Industries has been so successful at capitalizing on. However, we feel confident that our business is positioned to continue to perform well through economic cycles. I will touch on the multiple ways we are adjusting to ensure that we continue to deliver strong profitability and shareholder value. Our recent performance in fiscal year 2022 best demonstrates our flexibility and ability to deliver in a volatile environment. WINNEBEGO INDUSTRY'S FOURTH QUARTER RESULTS WERE A STRONG FINISH TO AN OUTSTANDING YEAR IN WHICH WE DELIVERED RECORD REVENUE AND PROFITABILITY. WE RECORDED FOURTH QUARTER NET REVENUES OF $1.2 BILLION, WHICH REPRESENT A 14% INCREASE OVER THE SAME PERIOD LAST YEAR. OUR PERFORMANCE WAS DRIVEN BY THE SAME KEY DYNAMICS THAT HAVE SHAPED THE LAST FEW QUARTERS. A SUSTAINED EXCITEMENT FOR THE OUTDOOR LIFESTYLE REMAINED A POWERFUL TAILWIN DRIVING DEMAND FOR WINNEBAGO INDUSTRY'S PREMIUM PRODUCTS. OUR LEADING BRANDS CONTINUED TO WIN WITH OUR INCREASINGLY DIVERSE CONSUMER BASE ALLOWING US TO MAINTAIN OUR STRONG MARKET SHARE POSITIONS WITHIN A CHALLENGING ECONOMIC ENVIRONMENT. SECOND, OUR TEAM'S RELENTLESS DEMONSTRATION OF OPERATIONAL EXCELLENCE ENABLED US TO DELIVER FOR CONSUMERS and our dealer partners efficiently and profitably. The team has delivered on the bottom line through the pricing power of our brands, the innovation of our products, the agility of our supply chain, the increasing efficiency of our operations, and disciplined investments in SG&A. As I have discussed in previous quarters, in this constantly evolving macro environment, the holistic supply chain for each of our segments are experiencing varying degrees of disruption, which in turn impacts dealer inventory levels in different ways. For example, we continue to manage total RV production levels to align with ongoing consumer and market demand. while our motorhome RV and marine businesses work to replenish dealer inventories carefully. Responsibly producing and maintaining appropriate field inventory levels remains a priority, and we are working closely with each of our dealer partners to sustainably ensure they have the supply they need. I have confidence that the world-class Winnebago Industries team will rise to the challenges they always have. OUR PERFORMANCE THROUGHOUT FISCAL 2022 IS A TESTAMENT TO THE POWER OF OUR PEOPLE, THE STRENGTH OF OUR OPERATIONS, AND THE EXTRAORDINARY QUALITY OF OUR PRODUCTS. EARLY IN THE YEAR, WE DELIVERED ON VERACIOUS DEMAND, RUNNING OUR PRODUCTION AT FULL CAPACITY TO ACHIEVE TREMENDOUS GROWTH. EVEN THEN, WE LIKELY LOST SHIPMENT SHARE IN SELECT RV CATEGORIES AS WE MAINTAINED AN ONGOING SENSE OF DISCIPLINE IN SHIPMENTS VERSUS OTHER INDUSTRY PLAYERS' APPETITES. As market conditions have recently downshifted, we have exercised further rigor and a focus on sustainable long-term value by constantly adjusting production in certain business segments to calibrate to the needs of our dealers and the end consumer demand levels. Additionally, our team executed and managed the businesses through supply shortages and pricing actions to cover significant cost inflation through the year. delivering annual record net revenues of $5 billion, record annual RV market share of 12.7%, and a record gross margin of 18.7%. And finally, we returned record levels of cash to our shareholders, which Brian will touch on during his commentary. Most importantly, we continue to innovate here and add strategic investments and talent, Earlier this year, we introduced the ERV, the first all-electric, zero-emission motorhome concept from a major RV manufacturer. And we even drove the product more than 1,300 miles on a single road trip. We are moving closer to commercialization, with multiple prototypes being tested by actual end customers as we approach calendar year end. At the recent Open House RV event in late September, Each of our RV business units introduced multiple new products, many of which won category awards and were received very positively by our dealer base. We also added new senior leadership to our team this year, including Casey Tubman as Newmar's president, Jeff Haradine as Barletta's president, and Amber Holm as Winnebago Industries' first ever chief marketing officer. significantly enhancing our team with experience and exciting new capabilities. Overall, I am incredibly proud of our performance in fiscal 2022. Our record results show that our strategy is working while our team continues to deliver outstanding results in the face of a future volatile macro environment. I look forward to continuing that focus with our team and continuing to create value as we move into fiscal 2023. With that summary, I will now turn the call over to our Chief Financial Officer, Brian Hughes, to review our fiscal 2022 fourth quarter and full annual financial results in more detail. Brian?

Thanks, Mike, and good morning, everyone. As Mike noted, Winnebago Industries' fourth quarter results represented a strong finish to a record year. Fourth quarter revenues were $1.2 billion, reflecting an increase of 14% compared to $1 billion for the year-ago period. Excluding Barletta, our organic growth for fourth quarter was 4%, driven by pricing actions and increased motorized unit shipments. which was partially offset by a decline in unit shipments on the towable RV segment as we pulled back on production and shipments during the quarter in response to the level of inventory in the channel. As a reminder, this is the last quarter that we will be reporting organic results excluding Barletta, given we closed the transaction very early in the first quarter of fiscal 2022. Gross profit for the quarter increased 12.4% to $210.4 million, compared to $187.2 million for the fourth quarter of fiscal 2021. Gross profit margin of 17.8%, with 30 basis points lower than last year, as a result of higher material and component costs, including higher logistics costs, and lower volume in the towable segment and associated deleverage, partially offset by pricing actions and the timing of those actions as compared to the realization of increases to our input costs. Operating income, therefore, increased 3% to $123.6 million for the quarter, compared to $120 million for the fourth quarter of last year. Fourth quarter reported diluted earnings per share was $2.61, compared to $2.45 in the same period last year. Adjusted earnings per diluted share increased 14% to $3.02 compared to $2.65 in the same period last year. Consolidated adjusted EBITDA increased 7.9% to $139.2 million for the quarter compared to $129 million last year. Turning now to the fiscal 2022 annual results. Capitalizing on strong consumer demand and the need to replenish dealer inventories, Winnebago Industries delivered record annual consolidated fiscal 2022 results, including record revenues of $5 billion, a record gross profit margin of 18.7%, and record reported earnings per diluted share of $11.84. and adjusted earnings per diluted share of $13.81. Sales growth of 36.6% was driven by the recently acquired Barletta business, pricing actions, and strong volume growth in every business, supported by sustained demand and the particularly low field inventories we had in our dealer network as we entered the year. Our annual gross profit margin increased 80 basis points over the prior year as a result of operating leverage and the well-timed price increases that served to offset inflationary pressures. Our team also worked extremely hard throughout the year battling constant supply constraints, which were a steady disruption to our production environment and caused operational inefficiencies. Now, turning to performance by segment, total revenues were $494.2 million for the fourth quarter fiscal 2022, down 11.8% compared to the fourth quarter of fiscal 2021. As Mike mentioned, we adjusted our production schedule in the fourth quarter in response to fully replenished dealer inventories, resulting in a 33% decline in unit shipments. Adjusted EBITDA for the tollable segment was $53.2 million down 36.2% from the prior year period. Adjusted EBITDA margin of 10.8% decreased 410 basis points compared to the prior year due to higher material and component costs and deleverage partially offset by pricing actions. This lower margin in the quarter was anticipated as earlier in the year we priced ahead of inflation with the expectation that inflation would have an impact over time. Given the market dynamics, THE STATE OF INVENTORY IN THE CHANNEL, AND IN ANTICIPATION OF OUR DEALER EVENTS IN SEPTEMBER, WE ELECTED TO FORGO FOR THE PRICE INCREASES IN OUR FOURTH QUARTER. BACKLOGS DECREASED TO 576.5 MILLION, DOWN 66.2% FROM THE PRIOR YEAR, DUE TO NORMALIZED DEALER INVENTORY LEVELS AND THE EXTENSIVE ORDER FULFILLMENT THROUGHOUT OUR FISCAL YEAR. FOR THE FULL YEAR, Revenues for the total segment were $2.6 billion, up 29.2% over fiscal 2021, driven by strong consumer demand and pricing actions that were taken to offset higher material and component costs. Segment adjusted EBITDA was $383.6 million for fiscal 2022, up 32.7% year-over-year. Adjusted EBITDA margin of 14.8% increased 40 basis points over fiscal 2021. The motorhome segment continued to perform well with fourth quarter revenues of $555.8 million up 23.8% from the prior year due to continued strong unit sales and pricing actions related to higher material and component costs. Adjusted EBITDA of $77.4 million increased 53.4% compared to the fourth quarter of last year. Adjusted EBITDA margin for the quarter was 13.9%, representing an increase of 270 basis points over the prior year due to pricing actions and production efficiencies partially offset by higher material and component costs. Backlog decreased to $1.7 billion, down 26.7% from the prior year. On an annual basis, motorhome revenues increased 24.2% year-over-year to $1.9 billion due to pricing actions related to higher material and component costs and increased unit sales. Segment adjusted EBITDA was $238 million, up 40.7% from fiscal 2021. Adjusted EBITDA margin of 12.5% grew 150 basis points compared to fiscal 2021. Total marine revenues for the fourth quarter were 122.1 million, driven by the continued strength of Barletta and good performance from Chris Craft. Excluding Barletta, revenues were 23.7 million, representing 41.8% organic growth compared to the same period last year. Segment adjusted EBITDA for the quarter was 17.5 million, a 15.8 million increase over last year. Adjusted EBITDA margin was 14.3%. Backlog for the marine segment was 314.7 million, and remains elevated as low dealer inventories persist in this segment. Consolidated marine results for fiscal 2022 include revenues of $425.3 million, up $365.1 million from fiscal 2021, driven primarily by the addition of the Barletta business. Segment adjusted EBITDA was $60.8 million. up $55.7 million over fiscal 2021. Turning to Winnebago Industries' balance sheet, as of the end of the fiscal year, we had $545.8 million in total outstanding debt, composed of $600 million in debt, net of convertible note discount of $45.3 million, and net of debt issuance costs of $8.9 million. We also had working capital, of $571.7 million. Winnebago Industries continues to hold a very healthy liquidity position and recently added to it by securing an increased asset-based lending credit facility of $350 million. This upgrade was fully driven by the need to right-size our ABL facility to the current size of our business from our previous $192.5 million facility. Our current net debt to adjusted EBITDA ratio is 0.5 times, which remains below our targeted range of 0.9 to 1.5 times, allowing us to execute on our balanced capital allocation strategy to make strategic investments serving the growth in our business while also returning cash to shareholders. As evidence of our commitment to these priorities, Winnebago Industries recently increased the dividend by 50% to 27 cents per share for this most recent quarterly dividend payment. This increase reflects our continued confidence in Winnebago Industries' ability to remain resilient through the volatile market conditions that we are currently facing and maintain strong profitability. In addition, we bought back $80 million of shares during the fourth quarter, a new record, fully depleting our previous share repurchase authorization and resulting in our Board of Directors approving a new $350 million authorization. We executed approximately $210 million of share repurchases, around 11% of shares outstanding at fiscal year-end 2021 during the course of fiscal 2022. We are pleased to have exercised all levers of our capital allocation priorities during fiscal 2022. In addition to investing in organic and inorganic growth to capture the strategic opportunities within reach, Winnebago Industries returned a record $233 million to shareholders in the form of share buybacks and dividends. And all of this while maintaining a healthy balance sheet that allows us to continue to invest for outsized returns on behalf of our shareholders. That concludes my review of our financials for the quarter and full year. I'll now turn the call back to Mike to provide some closing comments.