Winnebago Industries, Inc.

Good day and thank you for standing by. Welcome to the Q3 fiscal 2024 Winnebago Industries Financial Results Conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. I would now like to hand the conference over to your speaker today, Ray Posadas, Vice President, Investor Relations and Market Intelligence.

Thank you, Josh. Good morning, everyone, and thank you for joining us to discuss our fiscal 2024 third quarter earnings results. 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 third quarter results was issued and posted to our website earlier this morning. Please note that the earnings slide deck that follows along with our prepared remarks is also available 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, and 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, Senior Vice President and Chief Financial Officer. Mike will begin with an overview of our Q3 performance, and then Brian will discuss our financial results at a strategic level. Mike will conclude our prepared remarks with the business outlook, and management will be happy to take your questions. With that, please turn to slide four as I hand the call over to Mike.

Thanks, Ray. Good morning, everyone. and thanks for joining us to discuss our third quarter fiscal 24 financial results. In the eight weeks since our Q2 earnings call, RV industry retail demand has remained both inconsistent and sluggish, with limited evidence that economic conditions are improving for outdoor recreation consumers as we move into the fourth quarter of our fiscal year. While this environment necessitates near-term caution and discipline, The secular future growth of outdoor recreation engagement by consumers is undoubtedly a key driver for the health of our business long term. With that in mind, I will emphasize three points to our investors early to frame this morning's discussion. First, over the long term, challenging markets make strong companies even stronger. Our focus on maintaining durable margins and resilient profitability relative to competitors through production discipline and intentional sales support is unwavering. Our collaborative operating model across our brands and functional centers of excellence ensures the choices we make in the short term are in our best long-term interests. Maintaining valued product differentiation, premium brand essence, total aftermarket support to our dealers and end customers, and relevant share all matter greatly, but must be balanced with a commitment to sustainable profitability. Second, while we expect industry softness to continue in fiscal Q4 on a year-over-year basis in our motorhome RV and marine segments, the gradual improvement we are seeing in field inventory composition in these markets is an encouraging sign for calendar 2025 and beyond. Third, our healthy balance sheet and strong cash flows enable us to execute on our select growth priorities while maintaining a balanced capital allocation strategy that continues to return cash to our shareholders through dividends and share repurchases. Our cultural, strategic, and financial strengths have us poised to successfully pursue the mid-cycle targets communicated in a prior earnings call in the years ahead. Turning now to our results. In the third quarter, we continue to experience the effects of macroeconomic softness caused by elevated interest rates and pockets of persistent inflation. Our highly variable cost business model remains a strategic advantage in this market environment as we continue to focus on ensuring that capacity, output, and costs are aligned with retail, and wholesale order patterns and inventory levels. Third quarter consolidated net revenue was $786 million, down 12.7% from the same period in 2023, but up 11.7% sequentially from Q2, supported by our towable RV and marine segments. Adjusted earnings per share for the quarter were $1.13, with adjusted EBITDA of $58 million. While not a financial contributor to our third quarter performance, we did officially announce the introduction of Grand Design's new Lineage Class C product, marking that brand's inaugural entrance into the motorized RV segment. Meanwhile, in our marine business, we are exceptionally pleased with the powerful performance of our Barletta brand, which increased its trailing 12-month share of U.S. aluminum pontoons to 8.6% for the period ending in April. More importantly, trailing three- and six-month performance has Barletta running in the low double-digit percentage share zone, signaling increased momentum for that brand at retail. Turning to recent RV industry trends on slide five, as anticipated, dealers remain cautious with respect to orders in the third quarter, resulting in a higher level of promotional activity on some products compared to the same period last year. The recent RV Industry Association data supports our view that towable RV inventories have been largely right-sized from a quantity standpoint as we head into the summer selling season. We also believe that more time and work is needed, though, to further reduce prior model year inventory across the industry. April wholesale shipments in towable RVs were up 14.2% year over year, and 15.4% year-to-date from the first four months of calendar 23. By contrast, wholesale industry shipments in the motorhome RV category were down 19.4% in April and 21.5% on a year-to-date basis from 2023. The motorhome portion of the RV industry still has a little work to do in terms of bringing down total industry inventory levels. 2024 RV shipments through April total more than 120,000 units, 9.4% ahead of last year's pace. But while the growth in shipments is encouraging, the industry's retail recovery is not occurring as rapidly as industry stakeholders anticipated. Based on industry results to date, ongoing economic softness, and reduced order backlogs across the industry, we expect additional destocking by dealers for the remainder of the calendar year. As a result, we have revised our industry RV wholesale shipment forecast for calendar year 2024 to a range of 330,000 to 335,000 units, slightly below the midpoint of the RV Industry Association's most recent estimate. Our latest retail estimate for this same calendar 2024 period is around 340,000 units. Moving to slide six and our recent RV market share performance. For the trailing 12 months ended April 30th, it totaled 11.2%, which is down 70 basis points from the same period in 2023. Well, not what we would ideally like to see. This share loss is due in part to our commitment to hold integrity in wholesale and retail pricing models that we see is important to healthy channel relationships in the future. While we have worked intently to increase the strength of our opening price point SKUs in our RV lineups, seeing slight share loss in an environment where affordability is being so strongly emphasized is not to be unexpected for a premium portfolio such as ours. We are confident this trend will reverse in future years with new innovative products in our pipeline and an upward cyclical move to more stable market pricing. Looking at the marine segment on slide seven, our Barletta products continue to deliver superior results for its dealer network and an exceptional experience for their customers. The Barletta team is passionately focused on serving our end customers, cultivating lasting relationships with our channel partners as well, and building the best premium pontoons in the market. The path to our 13% mid-cycle share target is about Barletta remaining innovative and focused on customer needs to reach a top two or three position over time. Turning to recent highlights on slide eight, In April, Grand Design introduced its first motorized RV in its history, the Lineage Series M. The name reflects the brand quality and service excellence Grand Design has embodied since its inception in 2012. What is particularly exciting to us is the opportunity for Grand Design to partner with the leading dealers across the country to market this new Class C product to a new customer base. To celebrate the launch of the lineage, we are hosting an ultimate glamping pop-up this Saturday, the 22nd of June in New York City's Bryant Park from 1130 a.m. to 5 p.m. Eastern. The new lineage will be on display at the event, and we invite those of you in the area to come down and see Grand Design's terrific new motorized RV in person. As I noted on our Q2 call, Initial limited shipments of lineage are on track to begin late this quarter. Most of the stocking deliveries for the lineage product, however, will take place in the fiscal 2025 year. Before turning it over to Brian for the financial review, I want to directly address the misinformation that has been disseminated on social media regarding excessive frame flex across the industry. including a small percentage of our large solitude of momentum fifth wheel products. In each reported case, the Grand Design team and or its network of dealers have performed a thorough product review and are collaborating directly with impacted customers to resolve any concerns. The team has also been working directly with our frame supplier, a third-party structural engineering firm, and industry experts to continue to ensure that our products and processes meet and exceed industry standards. Our commitment to customers is absolute, and we continue to stand behind every product we build. To reinforce that commitment, we recently extended our frame warranty to five years on all Grand Design products. Our one year base warranty, three year structural warranty, and new five year frame warranty are also transferable to subsequent owners during the warranty period based on the original purchase date. These warranties will continue to be honored retroactively from the date of original purchase beginning with model year 2020. Importantly, across Winnebago Industries, three core values guide how we operate every day. Do the right thing, put people first, and be the best. These values support our vision to be the trusted leader in premium outdoor recreation and guide interactions with all stakeholders. With that, I'll now hand the call over to Brian Hughes.