Winnebago Industries, Inc.

Good day and welcome to the Q4 fiscal 2023 Winnebago Industries Financial Results Conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session and instructions will be given at that time. As a reminder, this call is being recorded. I would like to turn the call over to Ray Posado, 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 fourth quarter earnings results. I am 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 the replay of the call will be available on our website later today. The news release with our fourth 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 Happ. Mike?

Thanks, Ray. Good morning. And as always, thanks for your interest in Winnebago Industries and for taking the time to discuss our fiscal 2023 full year and fourth quarter results. I will provide an overview of performance during the quarter and the full year then pass the call to Brian Hughes to cover our financial results in more detail. Following Brian's comments, I will return and offer some closing thoughts before the Q&A portion of the call. The tumultuous consumer outdoor market, which characterized fiscal year 2023 for our company, continued as expected into the fourth quarter. as lower dealer deliveries and modest retail demand persisted across the RV and marine industries. Our dealer networks continue to demonstrate discipline as it relates to inventory levels given the current demand environment and an industry-wide focus on selling down prior year model product. Despite these challenges, our teams have remained intently focused on rationalizing our own and channel inventory levels, optimizing our supply chain network, and appropriately managing capacity, output, and cost in a strategic manner, sometimes at the expense of short-term market share. Those efforts combined with a disciplined approach to capital allocation have enabled us to drive meaningful profitability in our consolidated results. particularly in our total and marine segments, supported by our diverse portfolio of premium brands, and have allowed us to continue investing in our growth initiatives while creating meaningful value for our shareholders. Overall, for our fiscal fourth quarter, we achieved $771 million in net revenues, consolidated gross margin of 16.5%, and adjusted earnings per diluted share of $1.59. Our results reflect the resilient profitability of our diversified business model in a challenging demand environment. Despite a softening in unit sales, the towable RV and marine segments in particular continued their track record of profitability and margin performance. Furthermore, As inventories across most categories within the RV segments continue to normalize and marine inventories find their own equilibrium, we will remain focused in future quarters on managing our production output accordingly while maintaining our preparedness and ability to respond quickly and appropriately to evolving market demand conditions, for better or worse. RV retail market share performance declined slightly in our fourth quarter, given OEM and dealer focus on reducing prior year model product, where Winnebago Industries brands have been consistently more favorably positioned relative to the industry. This trend has been anticipated, and we were recently pleased to see August RV market share results from SSI be much steadier than in past months. a good sign of things to come. Grand Design, Winnebago Towables, and Newmar all gained share in the standalone August month. We are being increasingly mindful of providing improved value and affordability within our RV brands with the intent to appeal to consumers who are seeking premium value without sacrificing quality and access to service when needed. Dealers continue to be very disciplined with the wholesale product they are bringing onto their lots and are intentional with their order positions, as reflected in our fiscal year-end 2023 backlogs. As we enter and proceed through fiscal 2024, we anticipate gradual easing of pressure on these fronts and expect dealer orders to improve as they prepare for the spring 2024 retail season. we are already seeing a monthly sequential increase in order backlog by our dealers in the towables RV segment from June through September. For the marine market, dealers similarly started to pull back on orders to OEMs as they began to work more earnestly on right-sizing the age and mix of their current inventory with retail support. At the same time, The strength of our Barletta brand continues to show through as it continues to garner excitement amongst dealers and demonstrate market share stability and even further growth in some months. Among Barletta's latest releases for model year 2024 is the industry's first pontoon boat with twin engines mounted in the center of the boat's transom, available on the L25 Ultra Lounge and Meridian floor plans. and the new reserve Lazera, a simplified decontented offering of the ultra high-end reserve. Both offerings will begin shipments in December of this calendar 2023 year. We are incredibly proud of the portfolio of premium businesses and the family of products we have in the market today and innovation remains a core pillar of our strategy as we continue to invest in new products, including Grand Design's new Serenova, an upscale modern single-axle travel trailer designed for towing by SUVs and available in three differentiated floor plans with distinct and unique attributes. Along with the new Reflection 100, affordably priced below our current Reflection fifth-wheel model line, while maintaining the key attributes, quality, and eye appeal of the existing lineup. The new Winnebago Access Stick and Tin product marks Winnebago Tollable's entrance into the conventional travel trailer market with an MSRP starting below $30,000. The Access emphasizes premium features such as an enclosed and heated underbelly with a 12-volt take pad heater, power stabilization and factory-supplied solar and prep for Wi-Fi. As we have shared in the past, a core tenant to our business is expanding our capabilities and innovation drivers. In Q3 of this year, we announced the acquisition of Lithionics Battery, a leading provider of lithium ion battery solutions with best-in-class performance, quality, and safety. The acquisition of Lithionics Battery has bolstered our house battery solutions differentiation, energized our electrical supply ecosystem, and positioned Winnebago Industries as a future leader in electrification. The integration of Lithionics into the Winnebago Industries family is proceeding as planned. and we are continuing to develop exciting new power generation solutions and winning business with organic and new customers within the outdoor mobility space. Our Lithionics team recently showcased several of its capabilities and new products at the IBEX Marine Show earlier this month in Tampa, signaling a strong intent to offer its innovation to the rest of the marine industry. Complementing this acquisition, the Winnebago brand recently announced the release of the Winnebago SOLUS Pocket 36B Van, which features our exclusive Winnebago Plus EcoFlow Power Kit Pro. This power management controller optimizes energy efficiency, reduces weight, and simplifies vehicle operations by replacing five essential power components, the inverter, shore power converter, battery energy converter, solar energy converter, and alternator energy optimizer, all into a single lightweight system. Even further, this groundbreaking integrated 48-volt solution reduces charging time, improves battery recovery, and introduces a simplified and more intuitive user interface. The new sustainability-focused Solus Pocket 36B packs more into a compact-sized product than any other RV, providing customers with many of the features and conveniences of a full-size RV. Now, turning to the full year. Overall, for our fiscal 2023 full year, we achieved $3.5 billion in net revenues. consolidated gross margin of 16.8%, and adjusted earnings per diluted share of $7.67. While our results are down from the historic year-ago period, we maintain strong profitability due to the strength of our evolving and diversified portfolio of premium outdoor recreation brands. I am incredibly pleased that the foundation of the transformed company we have built over the last seven years can produce the results we just completed in a difficult market environment. We remain committed to the continuous improvement of our bottom line with a focus on operational excellence, further work on productivity, cost containment, and fixed overhead rationalization. along with collaboration with our dealer partners to maintain an appropriate and balanced product mix in the field. We are also continuing to look ahead to further developments and investments in innovation to ensure our diverse portfolio of premium brands continues to resonate with consumers and grow our market share. Our new Advanced Technology Center opens this fall. All of these efforts and investments will be greatly beneficial to scaling the business successfully when headwinds turn back around to tailwinds in the future. I will now turn the call over to our Chief Financial Officer, Brian Hughes, to review our fiscal 2023 full year and fourth quarter financial results in more detail.