A Special Report from our friends at Winnebago Industries
- Diversified Outdoor Portfolio Continues to Demonstrate Resiliency and Strong Profitability
- Strong Cash Flow from Operations of $139.6 Million
- Completed Acquisition of Lithionics Battery, Accelerating Innovation Capabilities in Diverse Battery Solutions
EDEN PRAIRIE, MINNESOTA, June 21, 2023 — Winnebago Industries, Inc. (NYSE: WGO), a leading outdoor lifestyle product manufacturer, today reported financial results for the Company’s Fiscal 2023 third quarter.
Third Quarter Fiscal 2023 Results
Revenues for the Fiscal 2023 third quarter ended May 27, 2023, were $900.8 million, a decrease of 38.2% compared to $1.5 billion for the Fiscal 2022 period, driven by lower unit sales related to RV retail market conditions and higher discounts and allowances compared to prior year, partially offset by carryover price increases. Gross profit was $151.4 million, a decrease of 44.5% compared to $273.0 million for the Fiscal 2022 period. Gross profit margin decreased 190 basis points in the quarter to 16.8%, driven by deleverage and higher discounts and allowances compared to prior year. Operating income was $80.5 million for the quarter, a decrease of 54.5% compared to $176.7 million for the third quarter of last year. Fiscal 2023 third quarter net income was $59.1 million, a decrease of 49.6% compared to $117.2 million in the prior year quarter. Reported earnings per diluted share was $1.71, compared to reported earnings per diluted share of $3.57 in the same period last year. Adjusted earnings per diluted share was $2.13, a decrease of 48.4% compared to adjusted earnings per diluted share of $4.13 in the same period last year. Consolidated Adjusted EBITDA was $96.4 million for the quarter, a decrease of 49.7%, compared to $191.7 million last year.
President and Chief Executive Officer Michael Happe commented, “In the midst of challenging market conditions, our team continues to successfully navigate a dynamic environment with a dual focus on taking care of our customers and operating the business with discipline, resulting in ongoing value for our shareholders. Our diverse portfolio of premium brands across the outdoor recreation industry continues to drive resiliency in our consolidated results, as top-line declines in our RV segments were offset by robust profitability in Towable RVs and continued growth in our Marine businesses. The Barletta brand, in particular, remains a bright spot in our portfolio, delivering strong market share gains in aluminum pontoons. Overall, we benefited from our highly variable cost structure and managed SG&A spending proactively, delivering double digit adjusted EBITDA margin amid challenging RV market conditions. During the quarter we also announced and closed the strategic vertical technology acquisition of Lithionics Battery, which will accelerate our innovation capabilities in diverse battery solutions, advance our overall electrical supply ecosystem and create opportunities for our RV and marine customers to enjoy fully immersive, off-the-grid outdoor experiences. I want to personally thank all of our Winnebago Industries team members for their hard work and determination during the quarter, and for continuing to reinforce and project our golden threads of quality, innovation, and service.”
Towable RV
Revenues for the Towable RV segment were $384.1 million for the third quarter, down 52.3% compared to $805.6 million in the prior year, primarily driven by a decline in unit volume associated with retail market conditions and higher discounts and allowances compared to prior year. Segment Adjusted EBITDA was $53.8 million, down 54.3% compared to the prior year period. Adjusted EBITDA margin of 14.0% decreased 60 basis points compared to the prior year period, primarily from deleverage and higher discounts and allowances compared to prior year, partially offset by favorable warranty experience. Adjusted EBITDA margin was up 250 basis points sequentially, as Towable RV segment profitability continued to demonstrate resiliency during a period of sales declines and significant margin pressure from deleverage. Backlog decreased to $236.0 million, down 82.0% from the prior year when dealers were focused on replenishing their inventories.
Motorhome RV
Revenues for the Motorhome RV segment were $374.4 million for the third quarter, down 27.5% from the prior year. This was primarily driven by a decline in unit volume and higher discounts and allowances compared to prior year, partially offset by price increases related to higher chassis costs. Segment Adjusted EBITDA was $26.8 million, down 58.3% compared to the prior year. Adjusted EBITDA margin of 7.2% decreased 530 basis points compared to the prior year due to deleverage, higher discounts and allowances, and productivity and operational efficiency challenges that were primarily related to an ERP system implementation. Backlog decreased to $800.4 million, down 65.0% from the prior year, driven by normalizing levels of dealer inventories.
Marine
Revenues for the Marine segment were $129.0 million for the third quarter, up 1.9% due to carryover price increases. This was partially offset by a decline in unit volume. Segment Adjusted EBITDA was $17.3 million, down 12.5% compared to the prior year. Adjusted EBITDA margin was 13.4%, down 230 basis points compared to the prior year, primarily due to higher discounts and allowances compared to prior year. Backlog for the Marine segment decreased to $146.3 million, down 40.4% compared to the prior year period, primarily due to normalizing levels of dealer inventories.
Balance Sheet and Cash Flow
As of May 27, 2023, the Company had total outstanding debt of $591.7 million ($600.0 million of debt, net of debt issuance costs of $8.3 million) and working capital of $574.7 million. Cash flow from operations was $139.6 million in the third quarter of Fiscal 2023.
Quarterly Cash Dividend and Share Repurchase
On May 17, 2023, the Company’s Board of Directors approved a quarterly cash dividend of $0.27 per share payable on June 28, 2023, to common stockholders of record at the close of business on June 14, 2023. Winnebago Industries executed share repurchases of $20 million during the third quarter.
Mr. Happe continued, “Looking ahead, we will continue to actively manage production levels across our business to match dealer appetite for our brands, ongoing seasonal retail conditions, and our market share aspirations. We are entering our fourth and final quarter of Fiscal 2023 with a strong balance sheet, having completed multiple inorganic and organic investments in support of future growth strategies and a sequentially improved inventory and working capital position. We are closely tracking and adjusting to market conditions, with a focus on maintaining solid profitability, market competitiveness, and a preferred lot position for our premium brands with our channel partners. Our $20 million of share repurchases in the third quarter and regular quarterly dividend payment of $0.27 (50% higher than prior year) underscores our confidence in the long-term strength and trajectory of our business. We are committed to investing in innovation, product differentiation over the long-term, ongoing operational efficiency enhancements, disciplined execution and strong cost management as we continue to drive sustainable value creation for all of our stakeholders.”
Reportable Segment Name Changes
In the third quarter of Fiscal 2023, Winnebago changed the name of their “Towable” segment to “Towable RV” and their “Motorhome” segment to “Motorhome RV”. These name changes had no impact on the composition of their segments, or previously reported results of operations, financial position, cash flows or segment results.
Conference Call
Winnebago Industries, Inc. discussed Fiscal 2023 third quarter earnings results during a conference call scheduled for 9:00 a.m. Central Time June 21, 2023. Members of the news media, investors and the general public were invited to access a live broadcast of the conference call via the Investor Relations page of the Company’s website at http://investor.wgo.net. The event will be archived and available for replay for the next 90 days.
About Winnebago Industries
Winnebago Industries, Inc. is a leading North American manufacturer of outdoor lifestyle products under the Winnebago, Grand Design, Chris-Craft, Newmar and Barletta brands, which are used primarily in leisure travel and outdoor recreation activities. The Company builds high-quality motorhomes, travel trailers, fifth-wheel products, outboard and sterndrive powerboats, pontoons, and commercial community outreach vehicles. Committed to advancing sustainable innovation and leveraging vertical integration in key component areas, Winnebago Industries has multiple facilities in Iowa, Indiana, Minnesota and Florida. The Company’s common stock is listed on the New York Stock Exchange and traded under the symbol WGO. For access to Winnebago Industries’ investor relations material or to add your name to an automatic email list for Company news releases, visit http://investor.wgo.net.
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. A number of factors could cause actual results to differ materially from these statements, including, but not limited to general economic uncertainty in key markets and a worsening of domestic and global economic conditions or low levels of economic growth; uncertainty surrounding the COVID-19 pandemic; availability of financing for RV and marine dealers; ability to innovate and commercialize new products; ability to manage our inventory to meet demand; competition and new product introductions by competitors; risk related to cyclicality and seasonality of our business; risk related to independent dealers; significant increase in repurchase obligations; business or production disruptions; inadequate inventory and distribution channel management; ability to retain relationships with our suppliers and obtain components; increased material and component costs, including availability and price of fuel and other raw materials; ability to integrate mergers and acquisitions; ability to attract and retain qualified personnel and changes in market compensation rates; exposure to warranty claims; ability to protect our information technology systems from data security, cyberattacks, and network disruption risks and the ability to successfully upgrade and evolve our information technology systems; ability to retain brand reputation and related exposure to product liability claims; governmental regulation, including for climate change; impairment of goodwill and trade names; and risks related to our Convertible and Senior Secured Notes including our ability to satisfy our obligations under these notes. Additional information concerning certain risks and uncertainties that could cause actual results to differ materially from that projected or suggested is contained in the Company’s filings with the Securities and Exchange Commission (“SEC”) over the last 12 months, copies of which are available from the SEC or from the Company upon request. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this release or to reflect any changes in the Company’s expectations after the date of this release or any change in events, conditions or circumstances on which any statement is based, except as required by law.
