Winnebago Industries’ Q1 Revenues Fall 18 Percent

Winnebago Industries, Inc. reported sales slid 17.6 percent in the first quarter ended November 26 as a steep decline in the Towable segment offset growth in Motorhome and Marine segments. Results were still easily ahead of analyst expectations.

First Quarter Fiscal 2023 Results
Revenues for the Fiscal 2023 first quarter ended November 26, 2022, were $952.2 million, a decrease of 17.6 percent compared to $1.2 billion for the Fiscal 2022 period, driven by unit volume decreases versus record year-ago comparisons, partially offset by Marine segment unit growth and price increases in all segments related to higher material and component costs. Gross profit was $160.4 million, a decrease of 30.1 percent compared to $229.4 million for the Fiscal 2022 period, driven by the timing of inflationary pressures relative to pricing, operating deleverage and productivity loss from supply disruptions. Gross profit margin decreased 300 basis points in the quarter to 16.8 percent. Operating income was $85.9 million for the quarter, a decrease of 41.3 percent compared to $146.4 million for the first quarter of last year. Fiscal 2023 first-quarter net income was $60.2 million, a decrease of 39.6 percent compared to $99.6 million in the prior year quarter. Reported earnings per diluted share were $1.73, compared to reported earnings per diluted share of $2.90 in the same period last year. Adjusted earnings per diluted share were $2.07, a decrease of 41.0 percent compared to adjusted earnings per diluted share of $3.51 in the same period last year. Consolidated Adjusted EBITDA was $97.0 million for the quarter, a decrease of 42.0 percent, compared to $167.2 million last year.

President and CEO Michael Happe commented, “Winnebago Industries’ first quarter results are a testament to the strength, diversification and resiliency of our brand portfolio amid a dynamic macroeconomic environment. Growth in our Motorhome and Marine segments helped to mitigate challenging market conditions in our Towables business, demonstrating the ongoing benefits of a more balanced array of outdoor recreation businesses. We are also proud of the investments our team continues to make in strengthening our golden threads of quality, innovation and experience. This was evidenced recently with our Winnebago-branded Hike 100 FLX travel trailer, shown lead photo, being named RV of the Year by RVBusiness trade magazine, and all three of our RV brands, Winnebago, Grand Design and Newmar, receiving the 2022 Dealer Satisfaction Index awards from the RV Dealer Association. I want to thank all of our Winnebago Industries employees for their hard work during the quarter and their perseverance as we continue to face various challenges, including ongoing supply chain disruption at times. While we expect uncertain market conditions to continue to persist into calendar year 2023, we will remain disciplined on our business operations while still making smart investments in profitable differentiation for our future.”

Towable
Revenues for the Towable segment were $347.3 million for the first quarter, down 46.7 percent compared to record results in the prior year, primarily driven by a decline in unit volume. Segment Adjusted EBITDA was $36.3 million, down 67.6 percent compared to the prior year period. Adjusted EBITDA margin of 10.5 percent decreased 670 basis points, primarily due to deleverage, a normalization back to seasonal trends after a solid performance during the prior year period when dealer inventories were at all-time lows and the timing of inflationary pressures relative to previous pricing actions. Backlog decreased to $434.0 million, a decrease of 76.9 percent compared to the prior year period driven by higher dealer inventory levels.

Motorhome
Revenues for the Motorhome segment were $464.2 million for the first quarter, up 10.1 percent from the prior year, driven by price increases related to higher material and component costs, partially offset by unit volume decline. As previously disclosed, Mercedes-Benz AG has issued a global recall related to an electronic parking brake defect affecting model years 2019 through 2022 Sprinter chassis. Winnebago Industries, its dealers and other upfitters using the Sprinter chassis are not able to sell the affected products pending the implementation of a fix. For the first quarter of Fiscal 2023, Winnebago estimated the recall had a negative impact of approximately $50 million in net sales as well as corresponding impacts on profitability and cash flow. Segment Adjusted EBITDA was $50.3 million, essentially flat to the prior year. Adjusted EBITDA margin of 10.8 percent decreased 110 basis points compared to the prior year due to deleverage, productivity and supply chain challenges including the chassis recall, partially offset by price increases related to higher material and component costs. Backlog decreased to $1.6 billion, down 33.8 percent from the prior year, driven by normalizing levels of dealer inventories.

Marine
Revenues for the Marine segment were $131.4 million for the first quarter, up 65.7 percent from unit volume growth and price increases related to higher material and component costs. Marine is Winnebago Industries’ fastest-growing segment, led by strong market share growth of the Barletta brand in the fast-growing pontoon category, complemented by demand for its Chris-Craft brand in the fiberglass category. Barletta continues to outperform the pontoon category and gain market share, according to October 2022 reports from Statistical Surveys, Inc. Segment Adjusted EBITDA was $18.5 million, and Adjusted EBITDA margin was 14.1 percent, up 80 basis points compared to the prior year, primarily due to increased revenue and operating leverage as the company continues to optimize manufacturing processes and leverages the enterprise capabilities of the broader organization. Backlog for the Marine segment was up 23.8 percent compared to the prior year period from continued re-stocking of dealer inventories and signing of new dealers.

Balance Sheet and Cash Flow
As of November 26, 2022, the company had a total outstanding debt of $590.4 million ($600.0 million of debt, net of debt issuance costs of $9.6 million) and working capital of $617.7 million. Cash flow from operations was $29.9 million in the first quarter of Fiscal 2023.

Happe continued, “At our recent Investor Day, Winnebago Industries shared strategic priorities and business targets through our Fiscal 2025 year. This was a well-considered, positive representation of our plans and ambitions for the future to create an even stronger company and drive success for our many stakeholders. Winnebago Industries is committed to being the trusted leader in outdoor lifestyle solutions and, to that end, we will continue to invest strategically in long-term initiatives that create a profitable growth foundation. However, navigating the near term during the rest of Fiscal 2023 is critically important in maintaining momentum and financial health. We expect some supply chain issues and the normalization of outdoor retail demand to continue through the rest of this period, yet we are focused on maintaining solid profitability by leveraging our highly variable cost structure, strong relationships with dealers and suppliers and the appeal of our increasingly diverse portfolio of premium brands.”

Photo courtesy Winnebago