Winnebago Industries Inc Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joe Altobello - Raymond James - Analyst : Thank you. Hey guys, good morning. So a couple of high level questions on guidance, obviously breaking with tradition here in giving guidance. Can you give us a sense for why you decided to provide it now? And maybe your general philosophy around it? Should we view this as realistic or perhaps conservative?

Question: Joe Altobello - Raymond James - Analyst : Okay. That's helpful. Maybe just to follow up on that, the EPS range is fairly wide, which I can certainly understand and probably do the same thing if I was in your shoes, but maybe lay out for us the scenarios that would have to happen to get you to the high end and the low end of those ranges. Is it largely volume and revenue based or are there other factors impacting margin? And maybe what are you assuming in terms of market share in FY2025. Bryan Hughes - Winnebago Industries Inc - Chief Financial Officer, Senior Vice President - Finance, IT and Strategic Planning Joe, this is Bryan. Good morning. I'll take that the EPS range is largely just the flow through of the market at the 320,000 in the low end of the 350,000 on the high end. We run a number of different scenarios then somewhat to your point your question as it relates to market share as well as margin, a lot of the margin assumptions, we look at highs and lows based on the leverage equation as well as what we think the market will allow in the form of pricing. Inflation is certainly incorporated into some of those margin views. And then similarly on the market share, we look at things like the entry of Grand Design into the motorhome business, which we think should certainly be accretive but balanced with all the other forces going on in the market, including current trends on market share. And we factored all those things and weigh them appropriately to come up with a downside and an upside as well as the midpoint.

Question: Scott Stember - Roth MKM - Analyst : Good morning guys and thanks for taking my questions. Bryan Hughes - Winnebago Industries Inc - Chief Financial Officer, Senior Vice President - Finance, IT and Strategic Planning Hey, good morning Scott.

Question: Scott Stember - Roth MKM - Analyst : Got it. And then just the last question on motorized EBITDA margins. They had climbed up to double digits or low double digits before the recent, fall off in profits. But with Grand Design in the mix, can you maybe just give us a broader view of where you expect margins and motorized to come back to at some point when we have a more normalized market. And then once obviously, Grand Design is really hitting full steam with their new products. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2024 / 2:00PM, WGO.N - Q4 2024 Winnebago Industries Inc Earnings Call Bryan Hughes - Winnebago Industries Inc - Chief Financial Officer, Senior Vice President - Finance, IT and Strategic Planning Scott, good morning. This is Bryan. Our expectations for motorhome have not changed. I think we feel more bullish about them broadly in the long term with Grand Design in the market. And believe that longer term that we can return to that double digit range of EBITDA margin.

Question: Michael Swartz - Truist Securities - Analyst : Hey guys, good morning. Maybe just to start on guidance. I think there were some caveats in the press release just talking about, your assumption is there's no changes in current market conditions, macros, et cetra. But I'm just wondering, are you embedding any additional interest rate cuts in your current or your initial fiscal year '25 guidance?

Question: Michael Swartz - Truist Securities - Analyst : Okay. Fair enough. And then just on the Grand Design business and appreciate you sizing that out for us $100 million plus in revenue opportunity for fiscal '25. But trying to understand what exactly that is based on is that just some kind of base stocking level at the dealers that will be stocking. This is that based on initial orders you've received from consumers. I just any clarity that you can provide there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2024 / 2:00PM, WGO.N - Q4 2024 Winnebago Industries Inc Earnings Call

Question: Michael Swartz - Truist Securities - Analyst : Okay, great. Thank you.

Question: Craig Kennison - Robert W. Baird & Co., Inc. - Analyst : Okay. Hopefully you can hear me. Bryan Hughes - Winnebago Industries Inc - Chief Financial Officer, Senior Vice President - Finance, IT and Strategic Planning Yeah, we can this time, Craig.

Question: Craig Kennison - Robert W. Baird & Co., Inc. - Analyst : Thanks Mike.

Question: Tristan Thomas-Martin - BMO Capital Markets - Analyst : Hey, good morning. Just according to my math, at a retail level you outperformed the broader industry in the quarter. Can you maybe talk to what drove that performance on a relative basis.

Question: Tristan Thomas-Martin - BMO Capital Markets - Analyst : Okay. Got it. And then just quickly on the towable margin. maybe break out how much of that was Winnebago towables? How much of that was Grand Design and kind of what is the transitory nature? Bryan Hughes - Winnebago Industries Inc - Chief Financial Officer, Senior Vice President - Finance, IT and Strategic Planning Yeah. Tristan, there's a lot of moving pieces here in the towable margin. I'm not going to necessarily break out or quantify the business unit pieces. I'd say that you've probably got just to give a little bit more substance, a point to a point and a half of the leverage to 2.5 points of pricing and mix. I'd say that that is overweighted to the Winnebego brand as it relates to the net pricing that we're able to achieve in the market right now in that brand and the discounts and the allowances that are necessary. I would also state though that there was an overweight of transcend in the Grand Design line up in the quarter, as a mix that was shipped into the market, some of this is just the success Mike was just talking about on the retail expectations as well as some channel fill. So we had overweighted transcend, which drove some of that pricing/mix in the quarter. There's about a point and a half of warranty year over year. Remember we cited that we had favorable warranty in the prior year. So it's really a tough comp that we're facing, that's causing that. And then probably another point of just call it overall productivity and operational challenges we cited the Winnebago brand specifically as it relates to some of the profit challenges from an operational standpoint, the consolidation under one roof, some of the inventory write downs or write off that we took in that business and just some inefficiencies that we're experiencing there that we expect to turn around under Don's leadership. So a lot of things in play there that impacted total margins. It was a disappointing quarter from our vantage point on that profitability, and we're taking steps to address it.

Question: James Hardiman - Citi - Analyst : Hey, good morning. So on the fiscal '25 guidance, I don't know which of these you'll sort of get into, but I'm curious about how you see inventory turns finishing the year. You talked about continued destock of motorized. I'm curious about that. ASPs for the year and then I think there was a question about market share. I didn't know if you had any, if we assume that sort of the midpoint of your guidance, if that assumes any share gains or share losses. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2024 / 2:00PM, WGO.N - Q4 2024 Winnebago Industries Inc Earnings Call Bryan Hughes - Winnebago Industries Inc - Chief Financial Officer, Senior Vice President - Finance, IT and Strategic Planning Yeah, several points. I'll touch on the ASPs first. James, I'd say ASPs we're expecting, modest increases in ASPs on an apples to apples basis within the motor home segment. I think towable will continue to see some headwinds as it relates to myths and the affordability preferences that we had. In this past year, I think some of those will persist into the coming year and you'll see some modest ASP declines from a mixed perspective on the towable business. And then similarly, you're probably not too differently, modest headwinds on the marine side of the business as it relates to ASPs. Can you repeat for me that last question? You have James release to the guidance.

Question: James Hardiman - Citi - Analyst : Got it. And if I could sneak one more in the marine business it seems like you're telling us how great Chris-Craft is doing, but there was a big write down there. And then I guess more broadly, one of your peers is getting rid of their marine business. So I guess, what's your commitment to the marine business at this point? And if it is a sort of core competency for you guys going forward, would you potentially be interested in those assets? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2024 / 2:00PM, WGO.N - Q4 2024 Winnebago Industries Inc Earnings Call

Question: Brandon Rolle - D. A. Davidson - Analyst : Good morning. Thank you for taking my question and a couple of questions ago you had mentioned increased transcend shipments and we have picked up one change in the chassis provider for those units and also transcend, changing to BAL products or Norco. Could you talk about the pricing benefits that you might have received from changing the provider there or maybe any other diversification efforts that you might be looking into? Maybe given the success of your market share during the recent quarter. Thank you.

Question: Brandon Rolle - D. A. Davidson - Analyst : Great. Thank you.

Question: Fred Whiteman - Wolfe Research - Analyst : Hey guys, good morning, Mike. You made a comment about expecting a gradual improvement in retail over the next 12 to 15 months. And I'm wondering if that's an RV only comment if it includes marine and maybe if you could just help us think about when each of the different subcategories or sectors would start to see better the retail.

Question: Noah Zatzkin - KeyBanc Capital Markets Inc - Analyst : Hi, thanks for taking my question. Most have been asked and answered but just hoping you could provide kind of an update on kind of the state of your dealer base health, both in RV and marine. Just kind of any thoughts on sentiment as well. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 23, 2024 / 2:00PM, WGO.N - Q4 2024 Winnebago Industries Inc Earnings Call Bryan Hughes - Winnebago Industries Inc - Chief Financial Officer, Senior Vice President - Finance, IT and Strategic Planning Noah, this is Bryan. No big news on that front. We continue to monitor our dealer channel. I think broadly speaking there's been some specific dealers public, most notably that that people are keeping an eye on their cash flow generation, which is clearly the focus right now versus, just the P&L focus. It's very much a cash flow environment right now for dealers as they manage through the higher interest rate environment and the impact that that has on floor plan financing. But I'd say no notable change from the prior quarter as it relates to the dealer network.

Question: Patrick Buckley - Jefferies - Analyst : Hey, good morning guys. This is Patrick Buckley on for Bret. Thanks for taking our questions. Are there any notable recent trends to call out in the competitive environment within RV? Are you guys seeing more aggressive strategy, pricing strategies from anyone looking to take share of things been relatively rational despite the challenging backdrop.

Question: Patrick Buckley - Jefferies - Analyst : Great. I'll keep it at one as we hit the end here. Thanks guys.