Winnebago Industries, Inc.

Good day and thank you for standing by. Welcome to the second quarter 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. 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 to discuss our fiscal 2024 second quarter earnings results. 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 second quarter results was issued and posted to our website earlier this morning. Please note that beginning this quarter, we will be using an earnings slide deck that follows along with our prepared remarks. You may access the deck on the investor relations section of our website under quarterly results. Turning to slide two, let me 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 we encourage you to read. In addition, on today's call, management will refer to GAAP and non-GAAP financial measures. The reconciliation of the non-GAAP measures to the comparable GAAP measures are available in our earnings press release. Please turn to slide three. Joining me on today's call are Michael Happi, the President and Chief Executive Officer of Winnebago Industries, and Brian Hughes, our Senior Vice President and Chief Financial Officer. Mike will begin with an overview of our performance during the quarter. Brian will discuss our financial results and the primary drivers. Mike will share our future mid-cycle organic growth targets and underlying assumptions. Then management will be happy to take your questions. Now please turn to slide four as I turn the call over to Mike.

Thank you, Ray. Good morning, everyone, and thank you for joining us to discuss our second quarter fiscal 2024 financial results. I want to start by thanking the teams across our business, Winnebago, Grand Design RV, Numar, Chris Craft, Barletta, and Lithionics. I am incredibly proud of your dedication and commitment to executing on our growth strategy and delivering exceptional outdoor experiences for our RV and marine customers every day. Before diving deeper into our results, I would like to emphasize the three main points that we want you to take away from our call today. First, we performed in line with our expectations during the second quarter of fiscal 2024 and demonstrated resilient profitability. Second, we anticipate industry softness in fiscal Q3, particularly on the motorhome RV and marine side, amid continued dealer caution. And third, as we move beyond the near-term market dynamics, we remain confident in our ability to grow our business, capture market share, and substantially increase our profitability and free cash flow. this optimism is reflected in our new future mid-cycle financial targets. Now let me expand on our fiscal Q2 results. The December through February period is typically a seasonally lighter retail quarter ahead of what historically has been a sequentially stronger spring selling season. As anticipated, dealers continued to closely manage inventory levels in Q2 in the face of a higher interest rate environment and seasonal demand trends. Despite the macroeconomic challenges, we continued to demonstrate resilient profitability and an unwavering commitment to operational discipline. Net revenues for the second quarter were $703.6 million, reflecting the anticipated sequential and year-over-year softness in the towable RV, motorized RV, and marine businesses that Brian and I referenced in our first quarter earnings call. Our consolidated adjusted EBITDA margin of 7.1% was flat on a sequential basis, even with a $59 million decrease in revenue. Overall, we delivered adjusted earnings per diluted share of 93 cents. Brian will review our financial results in more detail shortly. Our performance speaks to our diversified portfolio of premium brands, as well as our investments in new products and technologies. Over the past seven and a half years, we have added four premium OEM brands to our portfolio. and significantly strengthened our mobile power management offerings with the acquisition of Lithionics. Our enterprise approach remains one of collaboration across our brands rather than competition. We are driving growth and profitability through our centers of excellence that further enhance what makes each of our brands great and enables powerful portfolio synergy. In this way, we provide our diverse and passionate customer base with the quality, innovation, and service they have come to expect from us. Turning to slide five, I will comment briefly on inventories and shipment trends. As we enter the back half of 2024, the most recent data suggests that the RV industry is moving in a positive direction from an inventory standpoint particularly on the towable side. The RV Industry Association's January wholesale data showed an 11% increase in total RV shipments compared with the prior year period. Towable RV shipments were higher by 21% year-over-year in January, while motorhome RVs were down 27%. Historically, the third and fourth quarters of our fiscal year are the stocking quarters for our RV dealers, as retail accelerates through the spring and summer selling season. However, given the current macroeconomic environment, it remains to be seen whether this year's dealer behavior follows normal seasonal patterns. At the industry level, RV shipments ended calendar year 2023 at 313,174 units, down 36.5% from the prior year. For calendar 2024, the RVIA continues to expect RV shipments to increase to a mid-range estimate of 350,000 units. While we remain mindful of continued uncertainty around the timing and or quantity of Fed rate cuts this year, Based on recent trends, we believe that for the full calendar year, the RV industry will return to a one-to-one retail to wholesale replenishment ratio. On slide six, Winnebago Industries saw a modest decline in RV market share. On a trailing 12-month basis through the end of January, our total market share stood at 11.4%. More recently, we've seen improvement in motorhome RV, particularly Class A and Class C, which are up in the most recent three- and six-month periods. Given consumer emphasis on affordability, we believe our premium brands are holding up well. Turning to slide seven, as we expected, Marine orders were soft in the second quarter as dealers continued to work through elevated industry inventory levels and address the effects of higher interest costs on inventory floor plan expenses, while also being mindful of inconsistent retail performance. The bright spot remains the pontoon segment, and within that, our Barletta brand, which continues to gain market share. increasing to 7.9% on a trailing 12-month basis through the end of January. On slide eight, in looking across the outdoor recreation markets that we serve, one of our true competitive advantages here at Winnebago Industries is what we call purposeful innovation, delivering customer-centric design and thoughtful and affordable technology to delight customers as they travel, live, work, and play. Whether it is our highly differentiated house power solutions from Lithionics or Winnebago Connect, our game-changing intelligent RV platform, these and other technology investments provide us with significant runway for future profitable growth. Turning to recent highlights at the Florida RV Super Show in January, consumers got a firsthand look at the innovative new models from Winnebago, Grand Design RV, and Newmar. Our flagship Winnebago brand launched five all-new RVs, including the newest generation of the popular Echo and Revel motorhomes, both of which began shipping in Q2. Built on Mercedes Sprinter chassis, the Class C Echo Sprinter 23B and the new Class B Revel are designed with enhanced extended season capabilities for adventure-ready outdoor enthusiasts. We also showcase the all-new Winnebago View and Navion motorhomes equipped with Winnebago Connect. With the system's easy-to-navigate touchscreen, consumers can monitor and control all major RV systems, from lighting, climate and energy management, to refrigeration, water systems, slide-outs, and door locks. We also offer a subscription service that gives consumers access to a host of other benefits, such as automatic temperature control for pet monitoring and remote diagnostics. The rollout of Winnebago Connect is in its early stages, but we are excited about the long-term potential of this technology. In the towable category, Grand Design debuted its exciting new Influence fifth wheel line. Influence offers spaciousness and amenities comparable to Grand Design's industry-leading Solitude fifth wheel. yet packaged at a more affordable price point. We're also leaning into our commitment to a more sustainable outdoors through new partnerships such as our recent alliance with XOS, a leading manufacturer of electric commercial vehicles. Our Winnebago Specialty Vehicles Division is partnering with XOS to develop a fully electric chassis that will use XOS battery and electronics technology customized for Winnebago's unique commercial applications, such as medical and dental clinics, mobile child advocacy centers, and mobile command vehicles. This agreement underscores the mission of Winnebago Industries Advanced Technology Group in creating new solutions that anticipate the evolving needs of our customers. At Winnebago Industries, our commitment to corporate responsibility is also the cornerstone for sustainable business growth and long-term profitability. So in January, we were especially honored to be named one of America's most responsible companies by Newsweek for the second consecutive year. This recognition underscores the work we have done as an organization to advance our corporate responsibility initiatives. On the marine side, at last month's Miami International Boat Show, Chris Craft unveiled a special 150th anniversary edition of its iconic Launch 27, one of two new Chris Craft products that will be introduced this year. Meanwhile, our Barletta brand is expanding its reach as the industry's fastest growing pontoon business. The recent SSI data shows that Barletta continues to take market share. The brand also continues to capture the attention of the industry. The National Marine Manufacturers Association and Boating Writers International recently recognized Barletta with the 2024 Discover Boating Minneapolis Boat Show Innovation Award for its unique center-mounted twin-engine pontoon boat. This unique design shifts the engine mounts from the outer tubes to the transom, allowing an exponentially higher level of performance and functionality. Looking ahead, demand for the RV and boating lifestyles remains strong, creating a tailwind in the future that supports the growth of our portfolio of exceptional brands and aligns with our vision to be the trusted leader in premium outdoor recreation. We continue to focus on those areas within our control, relying on our diversified business model, flexible cost structure, and balanced capital allocation strategy to continue to deliver value for our stakeholders. With that, I will now hand the call over to Brian Hughes.