Winnebago Industries, Inc.’s earnings surged in the second quarter ended February 26 as sales expanded 38.7 percent, including organic growth of 29 percent. Backlogs remain up well north of double-digits.
In the quarter, sales matched the record of $1.2 billion set in the first quarter of fiscal 2022, up from $839.9 million a year ago. Excluding the recently acquired Barletta business, sales rose 29.4 percent over the prior year and 73.3 percent over the same period in Fiscal 2020, driven by continued consumer demand and pricing increases.
“Overall, our results were shaped by two key dynamics: first, sustained and powerful consumer demand drove higher unit sales compared to the prior year; and second, Winnebago Industries’ successful execution of pricing actions to offset higher material and component costs,” said Mike Happe, president and CEO, on a call with analysts. “Also, the Barletta pontoon boat business recently acquired this past August, contributed nine percentage points of growth, and continues to exceed our expectations and gain market share in the pontoon boat market.”
Gross margins in the quarter reached 18.6 percent, equal to the prior-year quarter as pricing ahead of known and anticipated cost input inflation and operating leverage offset production inefficiencies related to supply constraints.
Operating income, which includes $5.1 million of amortization and acquisition-related costs associated with the acquisition of Barletta, was $136.8 million for the quarter, an increase of 36.8 percent year over year.
Net income, which includes $6.5 million of contingent consideration fair value adjustment related to the Barletta acquisition, was $91.2 million, or $2.69, a jump of 32.0 percent year over year. On an adjusted basis, earnings per share climbed 42.1 percent to $3.14 from $2.21 in the same period last year.
Consolidated adjusted EBITDA was $150.7 million for the quarter, compared to $108.0 million last year, an increase of 39.6 percent.
Elaborating on the strong demand, Happe said the growth continues to reflect strong demand for outdoor experience coming out of the pandemic.
He said, “It all begins with the consumers’ continued strong affinity for the outdoor lifestyle and in particular, Winnebago Industries premium brands. Through our interactions with our consumers and feedback we receive from our dealers, consumers clearly recognize our products as being differentiated. This differentiation is a result of our relentless focus on our golden threads of quality, service, and innovation.”
Happe said robust consumer demand is expected to continue for RVs through the fall. He pointed to a recent RV industry association study that confirmed that 51 percent of new RVers in the 2020 and 2021 time periods suggested that the reasons surrounding COVID were certainly the impetus for purchasing in RV.
“We are confident though that many of these interest trends have become ingrained and that consumers will continue to invest in products that enable them to pursue their love for the outdoors,” said Happe.
He pointed to data from the Campgrounds of America showing a 16 percent projected increase in households camping through November of 2021 versus the same period in 2020.
Finally, Happe pointed to a new RV owners survey conducted by the RVIA that showed that contrary to some theory speculating on possibly low retention of 2020 and 2021 first-time RV buyers, new purchasers were found to be most likely to keep and use their current RV into 2022 and beyond. Happe said, “With 50 percent already seeking an upgrade via new parts or a different RV altogether, six in 10 new millennial RVs, those who bought an RV for the first time in 2020 and 2021, already say they are likely to purchase another RV in the future. As it relates to the growing popularity of flexible work, among new RVers, 25 percent of millennials and 27 percent of Gen Xers stated that they used an RV for a place to stay while working as a reason for purchasing the RV.”
On a trailing three-month basis through January, our RV market share was 14.3 percent, up a full 100 basis points from 13.3 percent for the same period in 2021.
In the Towable segment in the second quarter, sales grew 47.2 percent to $646.6 million, primarily driven by pricing increases across the segment, in addition to unit growth of 13.2 percent as a result of continued consumer demand. Segment adjusted EBITDA was $100.6 million, up 61.3 percent over the prior-year period. Adjusted EBITDA margin of 15.6 percent increased 140 basis points over the prior year due to operating leverage and the timing of pricing actions relative to inflationary impacts this year and the prior year. Backlog increased to $1.9 billion, up 55.2 percent over the prior year and flat sequentially due to continued consumer demand and pricing actions.
Revenues for the Motorhome segment were $417.6 million for the quarter, up 9.1 percent, primarily driven by pricing increases across the segment. Segment adjusted EBITDA was $46.1 million, down 9.6 percent from the prior year, primarily driven by production inefficiencies caused by supply constraints, partially offset by pricing actions. Adjusted EBITDA margin of 11.0 percent decreased 230 basis points compared to the prior year and 90 basis points sequentially. Backlog increased to $2.2 billion, up 21.9 percent over the prior year and down $0.2 billion sequentially, as dealers continue to experience low levels of motorized inventory and strong consumer demand.
Revenues for the Marine segment were $97.3 million for the quarter. Segment adjusted EBITDA was $13.0 million, an increase of $11.9 million over the prior year and adjusted EBITDA margin was 13.3 percent. The backlog for the Marine segment was $277.9 million. Barletta’s achievement of performance milestones at the end of calendar 2021, as specified by the July 2021 purchase agreement, will result in the full dispensation of the $15 million maximum payout for the first earn-out period.
Happe said Barletta has now grown to be the fifth-largest pontoon boat company by market share at 4.6 percent on a trailing three-month basis through December, and recent retail results show them approaching and breaking the 5 percent barrier. ‘
“I am pleased to report that its differentiated pontoon portfolio has continued to perform above our expectations and exceeded the calendar 2021 performance targets we set when we announced the acquisition,” said Happe. “We see tremendous opportunity for Barletta in the pontoon market, which is one of the fastest-growing boating segments and we look forward to further leveraging their unique product innovation, acknowledging quality, strong dealer network, and focus on service to sustain retail market share growth.”
The CEO further said strong attendance at the recent Tampa RV show and the Miami Boat Show resulted in retail sales that exceeded expectations and most of Winnebego’s retail shows this spring is seeing record sales across its brands.
Said Happe, “This foreshadows a solid spring selling season that is historically reflected in our second-half results. The combined tailwinds of societal trends, Winnebago Industries proven portfolio brand strength, and sharp execution spell great opportunity in the future for our business. We remain confident that there remains strong engagement in the outdoors by consumers and Winnebago Industries is positioned to continue growing market share in both the RV and marine industries.”
Happe said the quarter’s performance came despite a continuing “volatile” supply chain environment. The motorhome business faced the most significant supply chain constraints, in the quarter
Said Happe, “Winnebago Industries robust backlogs have increased versus last year and are significantly higher than the second quarter 2020 period due to continued strong in consumer demand. Keeping dealer inventories in all of our segments at acceptable levels throughout the fiscal 2022 year for our dealer partners is a key focus area for all of our teams. And I am fully confident they will continue to rise to the challenge to meet the high retail and wholesale demand levels in a disciplined manner.”
