Winnebago Industries, Inc.

Good day and thank you for standing by. Welcome to the fiscal 2023 second quarter Winnebago Industries financial results 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 a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to turn the call over to Ray Posadas, Vice President of Investor Relations and Market Intelligence. You may begin.

Good morning, everyone, and thank you for joining us today to discuss our fiscal 2023 second quarter earnings results. I am joined on the call today by Michael Happe, 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 the 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. 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?

Thanks, Ray. Good morning. We appreciate your interest in Winnebago Industries and taking the time to discuss our fiscal 2023 second quarter earnings results. I will provide an overview of our performance during the quarter and then pass the call to Brian Hughes to cover our financial results in more detail. I will return and offer some closing thoughts before we turn to your questions. Winnebago Industries' second quarter results continue to demonstrate the resilience of our unique business model in the face of macroeconomic uncertainty and a dynamic outdoor industry environment. We have been focused for some time on a cultural, strategic, and financial transformation of the business with the ultimate objective of building one of the world's leading and most trusted premium branded outdoor recreation companies. a more balanced and a diversified organization that can hopefully navigate short-term volatility better than most of its peers and simultaneously continue to invest smartly in the drivers and engines of a more prosperous future, taking great care of its employees, customers, and ultimately investors. And while we have much work to do to realize our grander vision and potential, this quarter is a good example of being able to produce solid financial results in the face of adversity. As evidence of the benefits of a more diversified outdoor portfolio, another strong performance in our marine segment in the second quarter helped to offset a continued softening in consumer demand for recreational vehicles versus the recent cyclical highs. And despite a continuation of many of the same macro dynamics we experienced in the first quarter, including general pressure from moderate inflation, higher interest rates, and supply chain inconsistencies, as well as challenging comparisons to the year-ago period of tremendous growth. Continuous efforts to improve the efficiency of our operations, reinforced by our commitment to disciplined production and cost management, allowed us to sustain competitive double-digit margins across our towable motorhome and marine segments. Though we must continue to anticipate and actively manage these trends throughout the rest of our fiscal year, I am immensely proud of how our Winnebago Industries team members have risen to the challenge and delivered strong results. Each of our premium brands is engaged daily on the difficult decisions necessary to balance market share and profitability, along with customer and employee relationships. Doing so well allows us to simultaneously invest in industry-leading innovation and the digital business capabilities needed to compete effectively in the future. The value of our growing and diverse portfolio of premium brands is evident in our second quarter performance and validates that we are a stronger organization in 2023 than we were in 2019. Ultimately, in the second quarter, Winnebago Industries achieved $866.7 million in net revenues, consolidated gross margin of 16.9%. and adjusted earnings per diluted share of $1.88. While down compared to historic record levels last year, these outcomes remain solidly above pre-pandemic results and exceeded external market expectations, once again reflecting the strong underlying agility of our operations and appeal of our products. Our second quarter results were driven by a few key factors. First, the strength of our innovative premium product portfolio, which continues to resonate with an increasingly diverse population of outdoor lifestyle consumers. We have strong conviction in the ongoing appeal of our premium RV brands, which have maintained net stable market share even as overall RV market demand has softened. And on the marine side, the Barletta brand of aluminum pontoons has achieved Extraordinary market share growth, making the marine segment our fastest growing category with consumers currently. The complimentary and steady demand for the iconic Chris Craft brand in the fiberglass boat category also contributed to the growth of marine in the quarter. We are extremely proud of the suite of premium products we have in the market today, but we are not content to stand still. Continuously investing to develop industry-leading innovation remains a core pillar of our strategy. On the marine side, the recent launch of the Chris Craft Calypso 32 at the Miami International Boat Show in February is just the latest example. The Calypso 32 is the first Chris Craft to be fully connected to the owner through the My Chris Craft app. enabling real-time monitoring of GPS, engine, battery, and bilge data as we continue to expand and enhance our consumers' customer digital experience. Barletta's recent launches of the new entry-level brand Aria and its ultra-high-end offering Reserve are giving dealers more reasons to commit increased showroom space to this young, exciting pontoon brand. On the RV side, Grand Design's Imagine Aim Travel Trailer was named RV Pro's 2023 Best New Product of the Year. And its Mav extension of the popular Momentum toy hauler line offers increased affordability to customers when they need it most. Our Winnebago brand continues to expand floor plans of its Mini Travel Trailer product. add new paint options to the iconic Revel Class B 4x4 line, and launch a proprietary partnership with Adventure Wagon on a Mercedes Class B chassis, giving the hashtag van life consumer a modular interior platform for the ultimate flexibility in functionality. The Newmar New Air luxury diesel line has a fourth floor plan offering and now comes standard with a lithium-ion house battery system. Furthermore, the recent unveilings of the second-generation prototype Winnebago brand ERV2, an all-electric, zero-emission RV, and Chris Craft's first zero-emission, all-electric concept boat, the Launch 25 GTE, are the latest examples of electrification innovation we are developing across our brands. ensuring Winnebago Industries remains a leading innovator in the growing outdoor lifestyle recreational industry when emerging technology becomes accretive to the consumer experience. The next key factor contributing to our second quarter results is our continued commitment to operational excellence and maintaining our highly variable cost structure. Winnebago Industries is leveraging enterprise capabilities in strategic sourcing, and across the board made to order production planning philosophy and strengthen consumer insights to shape our operations and enhance our ability to respond quickly and appropriately to evolving market conditions in ways that allow our business to sustain strong profitability through economic and industry cycles. We will continue to work closely with our dealer partners to maintain appropriate and balanced overall inventory levels and product mix in an increasingly dynamic demand environment. We also continue to watch very closely any aging channel inventory and work precisely with our dealers to address in a mutually beneficial manner. All these efforts had a direct impact on our ability to produce competitive double-digit margins across all our segments in the second quarter. Lastly, We successfully navigated the resolution of the 2019 to 2022 model year Sprinter chassis recall by our supplier, Mercedes-Benz, as well as other supplier component constraints or quality challenges, resulting in a lower than anticipated impact to motorized revenue during the second quarter. We are fortunate that our outstanding Winnebago Industries team is adept at navigating these challenges to mitigate the impact of supply inefficiency on our top and bottom line, although we are fine having less practice on that going forward. Though the frequency and severity of supply constraints are decreasing, global supply chains continue to be very dynamic, presenting ongoing risk and must be monitored closely. Looking ahead, we will continue to actively manage and navigate a dynamic demand environment with a focus on profitability through discipline production and cost management, leveraging our highly variable cost structure, and by working closely with our dealer partners. We will also continue to capitalize on our strong balance sheet and cash flow generation to make strategic investments in our business and our future. reinforcing our golden threads of quality, innovation, and service, and ensuring our increasingly diverse portfolio of premium brands continues to resonate with consumers. Winnebago Industries remains well positioned to further strengthen our enterprise capabilities, capitalize on growth opportunities through the cycle, and achieve our long-term value creation goals. With that summary, I WILL NOW TURN THE CALL OVER TO OUR CHIEF FINANCIAL OFFICER, BRIAN HUGHES, TO REVIEW OUR FISCAL 2023 SECOND QUARTER FINANCIAL RESULTS IN MORE DETAIL. BRIAN?