WINNEBAGO INDUSTRIES INC Q1 FY2025 earnings call

• The outdoor recreation space faces soft retail demand and cautious dealers, affecting Towable and Motorhome RV segments, but Marine segment was a standout. - Strategic leadership changes: Don Clark promoted to Group President of Towable RVs, Chris West to President of Winnebago Motorhomes and Specialty Vehicles. - RV industry trends: Industry-wide RV shipments had positive retail comps after 40 months of declines, wholesale shipments forecasted for 2025 in 320,000-350,000 units range. - Product portfolio transformation: Focus on refining features to meet consumer value without decontenting, including new models in Grand Design and Winnebago lines. - Operational efficiency efforts: Managing production capacity, costs, and SG&A spend, with investments in digital capabilities and brand growth.

Towable RV: Revenues decreased from the prior year's first quarter due to lower unit volume and a shift in product mix towards lower price point models. Segment adjusted EBITDA was down, reflecting volume deleverage and product mix, partially offset by cost containment efforts. Motorhome RV: Revenues were down year-over-year due to lower unit volume related to market conditions. Segment adjusted EBITDA decreased, impacted by volume deleverage, higher discounts/allowances, and increased warranty experience, partially offset by operational efficiencies. Grand Design Motorized's incorporation into this segment is exerting near-term margin pressure. Marine: Revenue increased year-over-year with targeted price increases and higher unit volume, though partially offset by product mix. Adjusted EBITDA margin improved 110 basis points to 9.3%.

• Reaffirmed fiscal 2025 consolidated revenues range at $2.9 billion. - Revised adjusted EPS guidance range to $3.10 to $4.40 per diluted share (previously $3.00 to $4.50), with midpoint unchanged at $3.75. - Q2 sales expected to be in line with Q1 sequentially with modest improvement to profitability. - Anticipate market recovery in second half of fiscal 2025 driven by improving inventory, easing interest rates, and stabilizing consumer sentiment.

• Market uncertainties including soft retail demand, cautious dealer network, and competitive pressures. - Warranty costs related to recalls in Motorhome segment. - Operational inefficiencies in Winnebago-branded motorhome and towable businesses initially impacting margins. - Dependence on external factors like interest rate movements and consumer confidence which are beyond control.

Q: How is the health of dealer networks and potential risks to Winnebago?

A: High majority of dealers are managing through tough times, regular contact with dealers and inventory floor plan lenders. Financial impact of dealer issues is muted due to ability to repurpose units to healthy dealers.

Q: Strategy behind undershipping the RV industry and impact on retail market share?

A: Focus on appropriate inventory levels given market conditions, not correlating retail share to shipment share, ensuring appropriate inventory turns and quality.

Q: Metrics on Grand Design Motorized ramp and Series F production?

A: Series F Super C to be showcased at Florida RV Super Show, production ramping in Q2 with shipments in later quarters, Grand Design Motorized expected to contribute over $100 million in fiscal 2025.

Q: Consumer and dealer sentiment and translation to second half recovery?

A: Positive signs like improving consumer confidence, Fed rate cuts, internal retail data showing improvement, but dealer ordering not yet robust except for towables.

Q: Motorhome margin drag and components?

A: Deleverage from lower sales, discounting impact, warranty recalls, operational improvements, and early stage Grand Design Motorhome impact, expecting motorhome segment to improve by end of fiscal 2025.

Q: Marine segment outperformance context?

A: Marine brands taking share, Barletta leading in aluminum pontoons, Chris-Craft gaining in luxury, internal data showing positive trends, but marine industry still challenging.