WINNEBAGO INDUSTRIES INC Q4 FY2024 earnings call

• Leadership changes: Chris West named President of Winnebago branded Motorhome and Specialty Vehicles business; Don Clark promoted to Group President of Towables business to oversee Winnebago Towables and Grand Design RV. - Product innovations: Showcased model year 2025 lineup with nearly 150 new models/floor plans; Grand Design's Lineage Series M motorhome introduced. - Marine segment: Barletta's market share increased 200 basis points year-over-year to 9.1% in trailing 12 months through August 2024. - Strong financials: Generated $30M free cash flow in Q4, returned $19M to shareholders via share repurchases and dividends.

Towable RV: Revenues down from last year's fourth quarter, impacted by average selling price per unit reduction due to product mix but partially offset by unit volume increase. Segment adjusted EBITDA margin down due to higher warranty expense, product mix-related average selling price reduction, and operational challenges in Winnebago branded towables. Motorhome RV: Revenues down year-over-year attributable to product mix, unit volume decline from market conditions, but partially offset by price increases from higher motorized chassis costs. Segment adjusted EBITDA down due to deleverage, operational challenges, and higher warranty expense. Marine: Revenue down in Q4 primarily due to product mix and unit volume decline from market conditions and dealer destocking, partially offset by targeted price increases. Segment adjusted EBITDA margin down due to volume deleverage and higher discounts and allowances.

• Fiscal 2025 RV industry wholesale shipments expected in range of 320,000 to 350,000 units. - Fiscal 2025 revenue projected $2.9 billion to $3.2 billion; adjusted EPS $3 to $4.50, with midpoint reflecting 10% growth from prior year. - Grand Design RV Motorhome expected fiscal 2025 sales of $100 million and could exceed that, though initially dilutive to Motorhome segment profit measures but expected to be accretive in fiscal 2026 and beyond. - Mid-cycle organic targets: Sales $4.5 to $5 billion, EBITDA margins 11% to 11.5%, free cash flow $325M to $375M.

• Retail environment remains challenging in short term. - Inventory management challenges, including destocking in Motorhome portion of industry. - Macro factors like interest rate fluctuations and economic uncertainty that could impact consumer spending and market conditions.

Q: Good day, and thank you for standing by. Welcome to the Q4 and Full Year 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 speakers’ presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Ray Posadas, Vice President, Investor Relations and Market Intelligence.

A: Thank you, operator. Good morning, everyone, and thank you for joining us to discuss our fiscal 2024 fourth quarter and full year 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 fourth 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. 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 Happe, the President and Chief Executive Officer of Winnebago Industries; and Bryan Hughes, Senior Vice President and Chief Financial Officer. Mike will begin with an overview of our Q4 and full year performance. Bryan will discuss our financial results at a strategic level, provide some further comments on our forward view of the market, and discuss our fiscal 2025 guidance. Mike will conclude our prepared remarks with the business outlook and management will be happy to take your questions with that. With that, please turn to slide four, as I hand the call over to Mike.

Q: Good day, and thank you for standing by. Welcome to the Q4 and Full Year 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 speakers’ presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Ray Posadas, Vice President, Investor Relations and Market Intelligence.

A: Thank you, operator. Good morning, everyone, and thank you for joining us to discuss our fiscal 2024 fourth quarter and full year 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 fourth 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. 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 Happe, the President and Chief Executive Officer of Winnebago Industries; and Bryan Hughes, Senior Vice President and Chief Financial Officer. Mike will begin with an overview of our Q4 and full year performance. Bryan will discuss our financial results at a strategic level, provide some further comments on our forward view of the market, and discuss our fiscal 2025 guidance. Mike will conclude our prepared remarks with the business outlook and management will be happy to take your questions with that. With that, please turn to slide four, as I hand the call over to Mike.

Q: Joe Altobello from Raymond James asks about why guidance was provided now and scenarios for EPS range.

A: Michael Happe says decision to provide guidance was thoughtful, Bryan Hughes explains EPS range is largely flow through of market at different shipment levels, with margin assumptions incorporating pricing and market share factors.

Q: Scott Stember from Roth asks about current retail conditions and impact of lower rates on dealers.

A: Michael Happe states retail continues to be challenging, no significant material impact from recent Fed rate move on retail or wholesale volume yet.

Q: Craig Kennison from Baird asks about mandates/KPIs for Chris West and Don Clark.

A: Michael Happe says Winnebago needs at least two strong Towables brands; Don Clark to grow Grand Design Towables share/profitability, Chris West to stabilize and grow Winnebago branded motorhomes share/profitability.

Q: Tristan Thomas-Martin from BMO Capital Markets asks about relative performance outperforming broader industry.

A: Michael Happe mentions progress on affordable products, Newmar gaining share, Winnebago branded Class C and Barletta gaining market share.

Q: James Hardiman from Citi asks about inventory turns, ASPs, market share assumptions.

A: Bryan Hughes talks about modest ASP increases/decreases by segment, inventory turn expectations, and market share assumptions including Grand Design Motorhome entry and Barletta's market share growth.

Q: Brandon Rolle from DA Davidson asks about trends in competitive environment and pricing strategies.

A: Michael Happe says retail marketplace is aggressive, focus on affordability, some larger OEMs and dealers have share momentum, discounts/allowances elevated across segments.

Q: Fred Wightman from Wolfe Research asks about state of dealer base health.

A: Bryan Hughes says monitoring dealer channel, cash flow focus for dealers due to higher interest rates, no notable change from prior quarter.

Q: Bret Jordan from Jefferies (Patrick Buckley on for Bret) asks about competitive environment trends.

A: Michael Happe says retail marketplace is aggressive, focus on affordability, some larger OEMs and dealers have share momentum, discounts/allowances elevated across segments.