Winnebago Industries, Inc. (NYSE:WGO) Q3 2019 Earnings Conference Call - Final Transcript

Jun 19, 2019 • 10:00 am ET


Winnebago Industries, Inc. (NYSE:WGO) Q3 2019 Earnings Conference Call - Final Transcript


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Michael J. Happe

strides towards our goal of transforming Winnebago Industries into a company that you, as investors, can begin to count on for stronger returns.

This quarter is a true example of how our new enterprise approach can provide strong consolidated results, even when we incur unexpected external challenges in one of our core businesses. While we are not immune from the North American RV industry headwinds that have persisted during our fiscal year, our consolidated competitive position and the strength of our diverse set of product lines have enabled us to, once again, outpace the industry.

Our continued strength in our Towable segment led by our Grand Design RV product line has once again grown revenues year-over-year and sustained share gains over 100 basis points.

More recently, our Motorhome segment has grown real retail market share, driven by impressive Class B momentum and signs of stability within our Class C gas category. On a consolidated level, third quarter revenues were down 5.9% for the quarter, driven by continued destocking efforts by dealers and a significant and unexpected chassis supply disruption related to our Class B van production. I will expand on this development in a moment.

Despite a slight decline in revenues, we made further positive progress expanding our margins. Consolidated gross profit margin increased 120 basis points in the quarter, driven by revenue mix and expanding margins in our Towable segment, driven by price increases and the continued success of our cost mitigation efforts to offset rising input costs.

Throughout the year, we have been working deliberately to maintain a disciplined approach to production levels. Staying focused on product quality and working to ensure our retail value propositions in the market are not inordinately stretched. As a result, not only are we expanding margins, but our year-to-date cash flow is up 36% over the prior year.

Now, turning to the segments in more detail. Unit shipments in our Towable segment were up 6.5% for the quarter. Despite efforts by dealers to lower inventories on most competitive Towables product lines leading to industry wholesale market declines of 24% calendar year-to-date, the strength of our company's dual-branded Towables products led to the continuation of gaining retail market share and dealer lots space.

For the quarter, Towable revenues increased 10.8% from the fiscal 2018 period. Adjusted EBITDA margins increased by 200 basis points, largely reflecting the timing of price increases and effectively managing input cost pressures. Towables backlog for the quarter did decrease 24.2% in dollars over the prior year, reflecting the positive impact of utilizing additional capacity added during calendar year 2018, and dealers shifting more of their order behavior to adjust a shorter order to delivery lead times available from OEMs including us.

Given our retail pace within the Towable segment, we are confident that our net dealer order activity, stocking and retail replenishment, and thus future shipment potential, is likely greater than most of our competitors relative to share.

Turning now to Motorized. Invigorating this business remains a key priority