Winnebago Industries, Inc.

Good day and thank you for standing by. Welcome to the Q1 Fiscal 2024 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 this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you 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 hand the conference over to your speaker, 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 2024 first 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 a replay of the call will be available on our website later today. The news release with our first 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. And as always, thank you for your interest in Winnebago Industries and for taking the time to discuss our fiscal 2024 first quarter results. I will provide an overview of performance during the quarter, 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. As we entered our fiscal 2024 year this past September, the outdoor recreation market in North America continued to face numerous short-term challenges. Consumer confidence was unsteady given macroeconomic factors. Affordability of the RV and boating lifestyle, while still competitive with other forms of leisure travel, had become difficult for potential new customers. And dealers were aggressively managing inventory by constraining inbound wholesale shipments. We stated during the October earnings call that our first two fiscal quarters in 2024 would face formidable headwinds, especially as it related to dealer appetite for new RV and marine products. and that we were hopeful our last two quarters in fiscal year 2024 would show real improvement relative to an anticipated future one-to-one retail ratio to wholesale replenishment rate developing within the channels. The projection for fiscal year 2024 has proven true three months into this first half period. Retail demand is generally in line with our projections. if not a little better than anticipated in Barletta boats and Grand Design towables. While dealers were very selective in Q1 with what they brought in from our premium brands and have done an excellent job in driving their inventories lower. We believe continued strong wholesale constraints during a seasonally lighter retail period of the year in December through February and subsequent further reduced production by our businesses over the holidays will also have a similar impact on Q2 financial results as well. Brian Hughes will discuss this Q2 outlook in more detail later in the call. Despite these challenges, the Winnebago Industries team remains focused on two core objectives. A, the preservation of solid profitability. and a strong balance sheet in the short term, balanced with the reinforcement of robust market positions, lot and retail share, across our outdoor portfolio. And B, our commitment to amplifying investments that nurture the long-term health, vitality, and value proposition for our brands and the enterprise, as we prepare for what we believe will be a strong, rebounding outdoor economy in the back half of calendar year 2024 and especially into 2025. Our fiscal year 2024 Q1 SG&A numbers include elevated investments in engineering, digital asset development, and increased data and IT capabilities. These initiatives are incremental to historical spending and intentional. Overall, we maintain our bullish position on the future of the RV and marine industries, and our brands will be well situated to participate strongly in this cyclical upswing when it occurs. Our fiscal year 2024 Q1 results demonstrate the resilience of our diversified portfolio and variable cost structure, as well as our production discipline and pursuit of operational excellence improvements. We are also focused within the total RV and marine segments in addressing vital considerations surrounding affordability with multiple new product releases while maintaining our commitment to customer satisfaction via outstanding product quality and aftermarket service. Overall, for our fiscal first quarter, We achieved $763 million in net revenues as we navigated softness in motorhome RV and marine unit sales. Our consolidated gross margin of 15.2% was driven by strong margin performance in our towable RV segment. Overall, we delivered adjusted earnings per diluted share of $1.06. Within the RV industry, gross unit inventories across the motorhome and towable segments are at historically low levels, in some cases not seen for more than a decade. And Winnebago Industries field inventory turn rates have returned to pre-COVID status. The RV industry added unit inventory for the first time in many months during October of 2023. and we do not anticipate significant further destocking industry-wide as we turn towards spring. Dealers continue to work through model year 2023 inventory during this quieter period of the year and mitigate the cost implications of higher inventory financing rates on their business. We continue to proactively manage our own capacity, output, and costs in a targeted manner given dynamic marketplace conditions. Importantly, our consolidated RV retail market share is showing signs of stabilization, following an anticipated pullback last year in connection with broader market focus on lower price points and further rationalization of second and third tier brand inventory. Grand Design specifically is seeing solid retail performance as we speak and has added retail share in recent SSI reports. Last quarter, we highlighted several new RV models across our organic brands, providing customers with terrific value at attractive price points for premium products. The Grand Design Serenova and Reflection 100, as well as the new Winnebago-branded Access, are examples of these introductions. The new Winnebago M-Series trailer and Grand Design's modestly priced luxury fifth wheel Influence are also strong additions to the model year 2024 lineups. In Q2, the Winnebago brand of motorhomes will officially launch the next generation of the popular Rebel and Eco motorhomes. The new Winnebago Revel 44E is the next generation of the industry's first all-wheel drive Class B motorhome, built on the Mercedes-Benz Sprinter chassis. The new Revel 44E boasts extended season capabilities, a Winnebago power package featuring our own Lithionics GTO battery, and upgraded interior and exterior features. The new Winnebago Echo 23B2 A Class C motorhome is also built on a Mercedes-Benz all-wheel drive Sprinter chassis, both advanced all-season features, a multi-use living space, and an advanced solar-lithium battery combination. Both the Revel and the Eco models begin shipping in January of 2024. Coming off a banner year for our marine segment in fiscal year 2023, our marine dealers are as anticipated, began to pull back on orders in the first quarter of fiscal 2024 due to elevated inventory levels and costs. This meaningfully impacted quarter one shipments and will continue to do so even more strongly in quarter two. However, we are encouraged by the retail trends we are seeing specifically in the pontoon segment. Our Barletta business has run positive comps to date in fiscal year 2024 and continues to gain share in the aluminum pontoon segment, reaching now above eight plus points of share in recent SSI reports. However, we are working closely with Barletta dealers, especially in the northern freshwater markets, to optimize their inventory positions as the winter months go so that they feel more comfortable with reorder capabilities as the spring season approaches. Similar to our RV brands, our marine businesses continue to innovate with new releases for model year 2024. During the Fort Lauderdale Boat Show this past October, the Chris Craft brand introduced the highly anticipated Catalina 28. offering customers a center console with versatile seating configurations and boasting groundbreaking Seakeeper ride technology. Barletta has unveiled the industry's first pontoon boat with twin engines mounted in the center of the boat's transom, a patent-pending feature. In addition, the new Reserve Lazera is a simplified, decontented offering of the ultra-high-end Reserve. and has released a refreshed year two version of the entry-level ARIA model line as well. Affordability with a premium look and feel. As I have often mentioned, Winnebago Industries will continue to responsibly invest, innovate, and position our businesses for long-term success through the entirety of the economic cycle. We will prioritize profitability through discipline production and cost management, leveraging our highly variable cost structure, and collaborate closely with dealers to align on win-win inventory approaches to the market. Winnebago Industries remains well-positioned to further strengthen our enterprise capabilities, capitalize on future growth opportunities, and achieve long-term shareholder value creation goals. With that, I will now hand this over to Brian Hughes.