WGO - Earnings call transcript Q2 2018 | Winnebago Industries, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Winnebago Second Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer-session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Steve Stuber. begin. may you Sir,

Steve Stuber

XXXX. good Executive be call website call available for results at today. release to Financial second posted Chief was Happe, February this broadcast fiscal and call on being Winnebago earlier by and today and the for us Bryan Industries' XXXX Michael XX, ended later which is conference review call our morning. issued website Officer. of and on This quarter, am will and website morning you A joined investor.wgo.net, with on joining the quarter President Chief a our and everyone President replay our earnings for the our I Officer; live news to second Thank the Vice Company's Hughes, results

Before cautions that identified read. statements of to I'd of today's CEO, be are our I call would which Happe. Company's control, are differ you factors, materially and Michael turn regarding to filings, could SEC statements operations a risks the of now certain securities Industries many With to under inherently involve like Mike? laws. the considered conference uncertain, and number from that these to that are you said, encourage President may These made and like and forward-looking Company factors its actual statements you during results which statements. over our Winnebago cause beyond a to in I number call forward-looking we start, remind The

Michael Happe

second results. as fiscal appreciate everyone. well. we your morning We this Steve, hope quarter morning XXXX you We Thank Industries' you, review year Winnebago all and time good are

the Officer, comments you'll agree. And financial usually go that results Financial ground into answer and offer sure outlining with be of performance. you much questions much thoughts by topics. strategy case, us will few I in our a progress, followed Bryan a will then few summary regarding key closing Q&A high And undoubtedly, as will initiatives, and Hughes, I'm have return I can on our have relevant Chief to today session. a provide detail our first we our for We quarterly as level the more other cover would who about

be as two and Gross but were second and driven they the on that Our both by part Much as Towable to Grand of and performance years. changed current at We're in continues year-over-year and the robust, and included increasingly a profitably in impressive margin Design build Consolidated first both Again Certainly quarters marked of highlight we gained profitable to segment. growth Industries a points the hallmarks this quarter basis generated Winnebago to reflect growth accomplishments, continue sales our have second overall we a those unfinished are Company margin a period we record the this quarter to and are the has also are last here our strong of quarter recent This another profit that fully solid primarily increased profitability overall grow reflection XX% by line do. continues the top numbers both results generator. the in growth are segment. journey revenue journey quarter. Winnebago on reflection Industries' they believe. RV Towable which changed balanced, Towable Overall rose pace. Industries, model. businesses in at organically business that the consolidated in Winnebago to more are meaningful with what's year improvement in pleased our portfolio comparable both results share. revenue accelerated work the second will for prior of year we highlighted quarter at and net the results. delivering And in XXX Both pleased strong positive

fixed cost year businesses cost retail grow as compared and against Design the continues which the increased to XX% Both starting constraints full quarter, Grand segment. segments backlog RV was future the initiatives included segment units, now savings growth a that improve and detail market side to meaningful has the capacity significantly the in the ago, leverage high continue the continued Industries a Towable our a and in quarter expectations at industry. ramp retail segment importantly backlog our year. Design profitability brands. of over outpace of X,XXX Imagine shipment growth the expanded revenues more which industry to remains capturing segment. is Grand Towable Winnebago dealer The the within healthy XX% across for we for series you up are been incrementally robust recall in this up particularly year-over-year, represents had in part share and to Margins company the this Reflection a Looking due both Design business. with Winnebago We from demand believe with net supports also combined performance which to entirely with the which contribute organic Towable this if Grand and over Towable both Backlog again

Travel that and presence before. launched just entree levels the Trailer Towable Design's beginning The the to now been and Transcend Grand material midway interest come January and has Initial Design the have production in running Indiana reach largest segment in capacity a the line recently efficiently segment we RV had within through has tremendous. of business Design have online quarter. officially second to the into Transcend Grand represents not plants current Grand become with are Our new market, been announce introductory

Transcend to generated, across We in shipments. reach flow terms of dealers of this half metering the and country more deliveries and back orders on still see the our throughout are we’ll the retail normal a year

early lot taken performance. and lots, to In addition, more rates reaching introduced Winnebago-branded fall season now good dealers is retail being the on last generating wheel mini-plus exhibiting and production fifth also normalized share

that our released, comparative and the doing community in margins. are aware been business most can quite of us digits with significant short the that financial against improved units the and at just own in of but financial previous has to what is market has Winnebago-branded Winnebago XX we an periods, fully be rapidly share also of mid are Towable X% of results segment the Towable made In when months. the entity an strategic favorable more to proud wonder well. eyes we of the progress in The single have share Towables segment effective plus our Design company’s are a XXXX industry often beginning from the We XX% industries are Grand importantly as less somewhere the where and than Towables, advanced presently, growing acquisition

the about for net of are in Towables the make Company businesses positive to market optimistic the We help our generate in results materially more ability progress and future. the

Towables choice competitive Our stronger quality, are And a of aligned brands on alternatives our becoming innovation, we principals for are their differentiation end long core and dealers service health customer viable for customers support. options. to looking and product

unexpected but sales positive light slowly we versus Motorized progress the overall both and year on working now and our in a numbers, what the those but the Winnebago a availability our quarter comp headwind challenges. are was versus Component showed in Turning making intently the we shipments quarter several provided mitigate Shipment were limitations second dollar own unit results. line versus assuredly top an ago. possible are numbers products availability on segment, industries to to new

industry our occasionally some year-over-year, those historical We down move this to are especially sales light support discounts intentions allowance of down sales desired other competitive also than activity incentives. reward working inventory. levels always doesn't less to while good our and immediately manage And in are

double-digit in growth time line Motorized retail reaching dealer than up new with pace market share backlog extremely interest levels by quarter-over-quarter improved point products overall confidence reflecting Motorized in with and time future increasing was The are thus retail percentage XX%, in the in more that for However, growth our several partners. our in we years. stability demonstrating the industry pleased in solid and that first are

the above to we traction the see in that Our beginning growing optimism slowly is and marketplace.

on previously and Class Ravel becoming Gas, more are of our including Initial Horizon competitive. been A sales A in in the Diesel lines components have look issues we availability to And B mentioned new the Class fiscal the new the announced half products We Class of these a the forward Motorized pace earlier. of retail product I from back XXXX. few continued notwithstanding XX revenue benefits

development the case with introducing product price appeal, just strong customer second outlook, worked C products, cycle. have shorter quarter, the unveiled early affordable Class track of record new like In targeted point, product a a category value also an younger broadens new have QX. beginning at our the of of we in much better especially is the with with in begin Class quarter. the Shipments was will done third moderate rental new The later lineup markets, which March of the coming share recent continues months. product C this in gas Class the new and look During the gas Class Motorized into brother portfolio the recently Class A platform, and C outlook value C erosion gas Intent on to see the and product Intent the we our on the to in

to the remake profitability stability in are business that our acceptable to also we driving City. improving the are manufacturing Forest impacted in be like but making encouraged investments Motorized Junction in both lines restart manufacturing one City, facilities by base we of market, While by the to continues Oregon,

and defend net market cost In addition, Motor we Home segment more mix product share. are we seeing from material as in shifts rising vigorously challenges some the some

business. our addressing profitability We on in model challenges There operational the long are continue select Motorized price that increases to certainly as XXXX our improvements year to and are units. are these will including disposal foundational focused make many business we term the of advent improving all that with happen and tools of

Rather not I I'm Bryan with this turn improve profitability, methodical we XXXX now to Hughes take right quarter an to performance. assent results the review second over path front continue process. that, fixed. the turnaround the our financial Bryan? very will call we but a on the but to be more a gradual this patient While approach fiscal detail. on to are won't And we stronger overnight in to certain personally overview, ultimately Motorized a believe

Bryan Hughes

morning Thanks, everyone. Mike, good and

year-over-year XX% in million, growth Second of driven $XXX Towable primarily increase an quarter revenues the organic strong consolidated segment. by were

quarter the last As Mike acquisition was Design mentioned, first fiscal Grand 'XX RV. of of quarter our second year the full following

Towable reported now the we've and transaction increase for points of expanded by business growth continued profit the an segment, was quarter, the mix $XX.X margins by quarter. in profit of in total fixed left second Towable fully fully profitable cost leverage driven basis XX% of So which XX% is year-over-year, from up the XX% of growth Gross million now XXX Gross by more segment. accounted the for revenues driven and organic.

operating Second last and quarter quarter million, over Earnings income was $X.XX EPS share share year. per was increase diluted the $X.XX of in net up income of million, over were an XX% increase per of XX% the $XX.X XX%. second an $XX

purposes XXXX benefit second the of You our quarter retirement the comparison to should that note plan. of termination $XX relating a million healthcare for included post

that included Finally, also deal. Design also year last Grand amortization tighten the recall associated with

result the enacted quarter. the the Cuts recorded share net a $X.XX Act, Tax Company As of or million benefit a and recently in per X.X Jobs second

adjusted EBITDA release the press and our The reconciliation our non-GAAP is release performance to press a measures accompanying have net comparable and schedule EBITDA. between provided in adjusted income We measure. EBITDA as

for EBITDA As an quarter adjusted these schedule of show increase year-over-year. was consolidated XX% the over XX.X%

Towable Towable Turning couple across for products. Segment units, XX%, to are that due the Design a lines. elevated Winnebago-branded strong Grand was revenues quarter XX% consolidated we revenues Retail and lines. of ramp million Mike, and up the driven million, quarter, basis were sales segment, In both from our was line by prior this Winnebago-branded up the year second at a segments. Design our growth. X.X% margins adjusted in momentum. levels X,XXX growing but continue backlog XXX increased top year. organic adjusted And were fixed remain seeing up at the nearly to strong XX.X key industry the RV strong XXX cost over prior to by the driven the to as the quarter, outpace up XXX number the EBITDA stability by individual RV retail growth EBITDA for compares XX% the points mentioned of year-over-year leverage and Grand in supported the year-over-year for by million Motorized for recent backlog

quarter, the material adjusted EBITDA XXX increased million products. by As Segment margin manufacturing points over mentioned XX% XXX EBITDA Mike investments nearly of for start-up recently costs. introducing the our backlog earlier, and and units, over increased adjusted down or driven X basis was decrease year-over-year reflecting strength XX%

margin product product. last that the Diesel business line-up. value fill new to mix We And products facing ramp headwinds assemble quarter, in quarter at existed second A previously production our diesel the Class and compared to of also our was part year-over-year price as are from the efforts up product the facility the due same that slow is the the in time, the gap the sales increase to of of our in we year

in leverage to to months Cash of track operations our Investor in the same and last debt XXX.X costs XXX.X from Company was net from million million, X.X growth capital is Working as by continued targeted the XX of Turning comprised million ’XX, of in line deleveraging ratio million, X.X increase capital. fiscal million X.X XXXX November expectations profitable quarter in our at X.X first current and as and working on to six fiscal of of of driven million. our net balance EBITDA flow our adjusted X.X changes the communicated our with an the with debt was outstanding range sheet end, ratio that’s Day. of debt period had issuance XXX.X

reduction we re-measurement for As related I the tax but assets, quarter Since in was the as reported this we XX% project the benefit blended Included we with $X.X deferred and tax that rate XXXX. more year, the million offset rate. from year a calendar or our in to tax was net is fiscal that $X.XX a the rate by the benefit recorded of than will charge in effective blended charge in million associated federal XX.X%. per of mentioned net are be tax result the recent a fiscal figure differs legislation X.X reform these tax our share earlier,

our lower benefit to benefit rate year estimate a XX%. the For the the to currently the fiscal $X.XX expect further share making Mike net fiscal per We of as be XXXX realizes speak reinvestments year, federal we we moment. $X.XX ongoing will a reduced tax will in reform statutory the are that contribute business in to rate of for further full the of

stockholders April of Mike? of business XX, Finally, of our I board Mike payable quarterly of as for XXXX concludes to directors of the cash approved record That our pass recently share XX, a quarterly of April final on XXXX. dividend $X.XX review will financials. comments. close the common per to my on now call back some

Michael Happe

Thanks, Bryan. would expand intensions. Bryan's I Industries' on first regarding comments Winnebago distribution reform to like tax

ensure committed adjustments roles. our XX% to with to are work have of gather financially specific tax donation select target targeted Foundation, form of we onetime opportunities future the making the each a market of will investments that communities give competitive to employees our we the a in will employee organization we the split we live work. purpose employees which portion of to back And bonus Company, in reform the stock specific in our the four, from a on and Three, seven-figure Winnebago to environments the certain in to and make capital One, wage benefit receive will are workplace distributions. in employees in. improving passing in identifying dedicated with in number XX% our and Two, areas savings cash award. We a forward key

employees Our this release. these about intentions with learning are morning's concurrent

We plan, of this by employee last an On shareholders stock which see benefit been with the we quarter with launched. a initial way that employee program board want the successes. has each program was was also that to hopes direct announced future great our connection the offering employee that teammates' recently approved as highlight front, enhance purchase our view and them for this employees personally to shares our avenue our the the to organization provide from and to

of you for future high-performance stronger, believe RV culture. ownership prospects what likely intense American for on industry. the the North looking about building are Many We we are

retail that As forecast shipments wholesale for the a up North U.S. the is projecting RVIA XXXX the see an X% and cautiously whole, magnitude of the recently released positive the America. on for in and we remain another shipments optimistic XXXX, year. will in increase updated year for calendar The

The of rates RV have the impact and this those in good believe in watch a unveil fact, its We not tariff economic We interest the macro street more the is that that’s And managing academic, and is certainly of steel no market. projection things equities from still fed noise popularity of starting industry very at return on the Each stable. a confidence. general. trends to the lifestyle possibility in in inflation other real or There volatility time reason on believe month all the may cost increasing media will its conditions terms and that accuracy. the and pressures increasing are to relatively of the real the point. driving secular are risk by consumer aluminum of and of ultimately

foot narrative country to in brand kind build us March, believe building dealer positive results company. a industry dealers event a consumer story decrease certain for the are our and X sales the stronger that retail summer. and meeting is its flagship stable in about to making early in very we has of been was Diego generally the positive. first a across It and remains opportunity a industries San and increasingly national Overall, RVs meeting tell or years. dealer completed We progress to Not in recently Winnebago-brand brands dealer and of RV stronger in interest However, what in at settlement we interest traffic RV this various in spring quite for confidence Winnebago in shadowing our the in material ongoing solid. buying a

done to We current serve in ago. and potentially is inventory present that production important also in the non-aging though use have fact capacity. at in of in and and of with of industry the better that the levels adding the industries is about OEMs suppliers and dealer last the our all competitors position more record ensure levels are to ahead our of is significantly the of future to pace a interest base retail retail customers production to of really the that Manufactures positive from were I and driving to dealer point will stocking the inventory fact many ahead. inventory opportunity regardless levels. the of visit manufacturing cases in output and year pace of and state continue is view than not. will the in good dealers consensus to level balances, the Winnebago in demand, spring especially manage be needs The year summer What and believe the job in dealers that we It months the or whether time they months new our best position are both a

in field pursuing are log the share momentum especially due our increased aggressively and inventory We aging are to we managing businesses. the Towables

Our are and Motorized turns up turns Towables in study. field are the are

expected capacity capacity expansion With Design this projects. to with Design ourselves. good keep sign production the eye business line of In came Grand close an we additional online in a are coming output announced Grand in those though inventory with are recently our simply that we carry capacity make portion and projects. will the own face the This online a We release as later levels expansion January. it’s we continuing Towables continuing progress comments, skepticism of practice. our is spring, on A on RV

land campus Towables are capacity recent to ready the now closing Middlebury, projects expansion to our at contiguous launch current in We with Winnebago Indiana. also our

that fiscal the of XX% Towables critical of we share goal will We benefits year. our plus market expect overall Towables RV to out end. particularly financial fiscal of Winnebago end year that half are XXXX, we in project the of are quarter the by expansion unit to expansion that XXXX, of the will see be reach these If front second

balance sheet. capital we we smartly to shareholders term interest our path shared priorities certainly overall in Lastly, transparent Last to like intentions could We weather sheet and we November, a downturn and use positive where the deliver happen our zone. be increasingly balance also levered been Hughes to long pleased with future. have would that of terms also have a are we about protect Bryan of in ensuring the increased the must and drive that can company's state profitable a communicated the our allocation growth But material to value.

time as end with employees Winnebago hard to further become on like thanks activity also would high their our our to commitment progress that but organic comfort I providing to our you front, for and investments spring. their great customers accelerate towards Thanks with for Winnebago this Industries quality morning. the here all quarters the in And of quarter we products ramping and profitability. enter also leveraged morning. of that, services. team our I genuine your in the are It formal the and intentions future work to to zone a have of as terms with all Industries' very statement identifying their will our much Winnebago during make tuned and we share for that always Stay business lower is Industries' start of end will and difference. can end, up high our at the of continue about We we for the wish more development continued and but efforts the both for up a we growth all do comments developments. wrap

over the to back of I'll those you turn session. the snow to operator in For the Q&A it Northeast start in hang forever. won't now there, the call

Operator

Instructions] [Operator of from Craig the Kennison question Baird. line Our first comes you. Thank of

open. is now Your line

Craig Kennison

beyond? Bryan, we effective rate what tax the and all should use On fiscal in XXXX the for as tax rate,

Bryan Hughes

assumption Craig state through of X% think X% XXXX rate. through unknown as For be But works although impact the every a and we company beyond, the That's I can that the have state guide still you would towards. now work rate. you I right statutory, would assume XX%

Craig Kennison

for prepared projects And from expect to foundation of and then reform. windfall employees potentially has proportion the remarks, in mentioned you would the windfall used Mike, to your What you some XXXX tax capital on described note, at does your the allocate plans, to of related in reinvest the the shareholders. margin impact in how kind company all? you if way And a decision

Michael Happe

meeting Good morning, distribution looking Craig. Bryan And go that potentially tax will a of few and I'll continues well, into the I have our reform steel be as that Certainly as the around economic a its headwind aluminum employee probably and of that's of benefit. something things development in the you not tax to objectives. would say details know this to all potential some there. market referenced the the the and where more happening XXXX percentage is around necessarily I other unfold savings at the and earlier we're pressures certainly certainly only reform not it's

from growth or everything of Investor referencing we not hedging another XXXX phrase, that exceeded. want in you’re we’ll some XX% factor the we towards away plus to announced just meet striving goal November to to intentionally we and speak that the we But the this is can certainly that use And we the… Bryan, our you believe do that. and at laid in specifically Day, we So, income that as out, last if certainly plus operating

Bryan Hughes

those I our inconsequential. this in appropriate XXXX at decisions be would future. make impacted that margins, we be margin OI Yes, say would discretionary the the relates time for stage, it impact will the would to Craig, the as

Craig Kennison

the winfall? groups guess going the to they is read not fact that anything into the that are benefit shareholders I among from question were the tax should mentioned

Bryan Hughes

There No, benefit the not that. that will should anything portion you will read flow shareholders. the of to certainly into

Craig Kennison

thank you. Great,

Bryan Hughes

to implied. meant was That be

Operator

comes of question Woolf next Research. Our from Seth the Northcoast line of

is open. Your line now

Seth Woolf

couple quick of from ones me. Just

with bit a helpful referenced you First seen Have you a color bit later seen you think tone. guess, you're really I the I more to the cautious perhaps, Mike seems anything the anything it thank for one, season? maybe start Have snow production to information. little storms cadence inventory, the cause on of retail that’s coming. little just,

Michael Happe

that the hit they're as way Good to a that. There out how shows across been little to the an OEM I that figure manage and in has piling more country a snow talk dealers. pragmatic bit is may certainly the the anytime country not That generally country good RV mentioned been strong lots where becoming The that morning, up, that’s we part very the whether that dealers has season favorable. country. on is seen the retail they few Seth. with trying news few of start more consistent retail for are traffic. for difficult that from my logistical as comments, around But I in particular part say, across country. show inventory of the I certainly of Northeasterns would have take to to the Northeast the whose maneuver in area RV are a and some impact is

we the at are both on please much seen about and certainly and Grand retail at been third and say, of start on March Design share whether industries and results shale. have times place But first year sales February actual would there look But when of in Winnebago that the I potentially the where January Now I side. here the quarter. we’re, calendar we’re two retail want Winnebago our the with haven’t results, mean, through at on I months own those what impact you

notice in the certain to places. seen think May in this might mean I and March, of out would anything we we’re But April out for or that the part demand customers the about that that are believe sun North for the the going country away come not all So or permanently. levels we’re If at they last don’t the still there June. they buy rooting

Seth Woolf

soon. Thank you. Yes, hopefully, spring Okay. arise

a then Grand Okay, quick Design. respect with question just to real

it. morning? the business product one, just the the think give the have a some to could company consolidation if bit be? out little How secondly, And the is generally reported of another another the included with for be So you we really parent when -- I'm does don't in reminder some space. Design. dealers base but And you just a favorable doesn't distribution that's need this a to there's of shape of to speaking Grand a would kind curious Design I Any if backlog as generally carry Because you backlog Grand at And I consolidators the in acquired? maybe and to market some does we've of deceleration, the Number two opportunities Grand include guess this parts what product? Transcend is us do look move heard in dealers, that for happens there point Design. Transcend you the that

Michael Happe

of the three of they're each Sure, Obviously, your pace. We're mark that'd to little as certainly material the that backlog to all And at industry. and question. have we've of our comfortable order a two in them new those backlog products and in They've or products comments, for of Design. grow very continues I'll the first pleased and bit business Grand the really then business. years generation this terms different around referenced the Design. for a introduced as in pace on And really with retail have be first address Grand impact very cadence last hit introduced the the shipment

your so was think Transcend. to And specific question I the

of orders in for taking showed been product November the and have since we in are Louisville We XXXX. the Transcend

ramp The the that orders continuing make over the production one Grand what with on and we on fill January up that of as However, can That line production to material Transcend working and months. in to began in facilities is built been has rates the coming of they early dealers are production we the new a new give really the the earnest us we course Transcend on the Campus. reasonable to in speak. sure Design are

if really on terms about have Because retail, in are the certainly And liked. dealers have so, it you the they're get and the to their on the they Design units learning and -- that are would survey they are were Transcends Grand of acting you yet they as they that they many customers really not would of asking haven't on lot. do as tell able to been dealers, many they

to we shipment the retail So as and well. see we -- more obviously the future results Transcend the will to in contribute backlog more contribute continue and

wasn't to in and a manufacturing in overly know company's Campus its the to Grand where added got elevated been footage to outpace will other too to the The is or we new square of point We addition we've while much you you products we demand but that certainly this capacity work those have guys backlog down, great ago, position to backlog Grand And more overtime. strong that order really the XX% capabilities. referenced that a Design Grand as a struggling And history. that good has react well remember of perhaps We comments, been future. about can That the fill, in our additions orders there start because hurt my manufacturing I emphatic know, backlog that back believe in thing certainly to Design add Design for if us such a production rates. thing couple believe continue its pipeline is were allow strong to quarters obviously to was bit. of was a you significantly

hard Grand the itself years. on bit a that backlog probably it's So, and Design will do still apples-to-apples to on coming over normalize

Seth Woolf

a taken if And what dealer that out… about you the have consolidation? And

Michael Happe

the Thank reminder. you for

has is well. or itself, that Design, that a Grand in we in other similar basis for and the what the is situation we to ownership build owner at process with look whether to very new what market. dealer group one-by-one determine the we present want candidly, new a a aligned that with Our Whenever acquired marketplace two businesses do very as is on

they new are Design, certain dealer franchise one potential pleased that that regulations, And dealers is Grand acquired that are whether for for folks good Design that it. have there that love dealers business dealers. different with Grand bit some or But based some which laws consolidated, others. as if we do reviewed there look make are and in the dealer basis that in carry markets, process are company states have we specific which is areas case-by-case certainly on Grand Now, and very a it But independent and that a is somebody they the of forward. Grand and we little Design have determine the not a those would the at Design that future, in going decision happens. fit are many RV feel we'll acquired as business that case-by-case we great And the model our again in

Operator

question line the Our of with comes from Sidoti. O'Hara next Steve

open. now is line Your

Steve O'Hara

it of your time. Design, guess Grand for short been I looks has your mean, I kind of mean backlog in I like production some So of the terms

Grand I wholly-owned total So with coming the to the potentially and business. is production assume Design at increase

Does could currently than produce You sense? more at the quarter. end you in of potential the the have that make backlog to have

Michael Happe

on more campus. growing, as as to that obviously healthy of Well, the and backlog production Design remain the new increasing utilize a online. And certainly, we’ll our market more are capacity the hopefully conditions have and we Grand capabilities long continue we and bring stable

product. get we of in percentage backlog this The So for the place have the list. fill in with specifics out Grand And with is first make much literally to team and high intention quickly of I quality to they Dealers receiving backlog. orders as can can those don’t want first obviously feverishly about, orders working the sort how X Design is as of those.

output yes, and market environment. and meet as a And work demand. is that But, to to continue try increasing to to employees productive conditions in that capacity that increasing pace is our manufacturing that business, with so, manufacturing sure long we so hope stay backlog and stay them process warranted, there make to we our our again our

Steve O'Hara

with revenue? Design did for you terms then say in And growth the Okay. year-over-year of Grand was

Michael Happe

segment anymore, specifically XX%. Design Grand out but calling not the We’re Towable was

Steve O'Hara

Okay.

would you number. of, terms the I due higher Winnebago due this I it’s rate Towables? that talk about mean Does assume In terms the in to fact to up of sense? can maybe been the -- below make have there just would growth

Michael Happe

businesses in much is, smaller very together but both nicely Design combined Grand It’s Towable segment contributing rate. pieces than Yes. to the growth

Stephen O'Hara

lastly, on motorhomes adjusted just then And again. okay. EBITDA mean obviously the, I for EBITDA, Okay, down

year, you're expected you You talk you this that navigate that longer based still type step that I but maybe sometimes basis? margins than that maybe just Could the to path it confident goal maybe could is the straight feel you at the think margins certainly term, know was your business? back or prior that it's goal the I what what business not you still said. you forward take I to on last you return not a just guess Could comps or if for track. quarter. about right But past? of on EBITDA two what steps feel confident in can do was the levels back. And an

Bryan Hughes

Yes.

our two and believe Steve, this turnaround break a, focus previous quarters. Motorized that from morning a into comments but can overly to that's the be hate I So you I as certainly tell we'll more in products simplistic end we're offering. pieces. dealers One, in can that branded that facing the the appropriate Winnebago and the marketplace becoming customers motorhomes we're And market with margin dealers like. and competitive make on

Motorized progress facing on the good We market business. the making are

don’t even products We new elements effectively. sort feature get hard then regularly also we ahead over But but is dealers' the can earn market. we're business. products. Our of efficient combination the in working design ourselves, we see and with exterior. to getting product we future customers' and more get to facing good We're products the the believe starting right some the confidence. traction. the of to market, to but are viewed Those both And being end while as to do the better turning and introducing line interior believe the the can more want ultimately certainly rebuild And we do, we're

And something company expected has would certainly me the the a as a having profitability for The more been of been mentioned you than headwind be proven second now, the bit have half have has business. would which XX certainly I is months of at Motorized to turnaround that of liked. little the and

Now and and on investments manufacturing order some of facilities revamp in the those are capacity our side. Motorized upgrade to intentional very our

that of those previously Class margin in narrowed And cost expectations 'XX, of early that increase weren't will QX slower third that in. the gap between 'XX bit gross future gross low a share. we And C quarter attack in this materials business competitive what unveiling intentional are Class portion of very QX labor including the here hopefully been which quarters. wider eroding little gas products been meaning quarter what And potentially mid-double gap in market versus gap have it is profitability products overall has into consistently intently than we versus now of clear, QX, your team is potential 'XX digit on than of A between to terms is look the that is question year-over-year the the a first to we been potential that some have position. have 'XX meant the working the new the and for stronger and margin would We structure we in business. business? The introduced overtime, margin, QX progress our about liked. driving what the now We've and with the market But defending of are is to margin

being to all So has recognized lots we of to into three flywheels spinning. model of business work that have put hard and that our happen

Operator

comes CL question Scott next Our of King. from line Stember of the

now line Your open. is

Scott Stember

Just looking speaking just, Designs at Towable in retail, And in business, the at mid-XX% is isn’t the at know look an that again science, growth I organic been you generally but at this range. was growth your all exact growth this quarter. Grand which if

have now that right wholesale? back do pull-through you stand the other inventories things where So the obviously we’re have said build having backlog some mostly assumes, it’s you’re into there you that that your pretty is at that really where that. what good near your to with dealer believe, and product, and some but position on versus just are, of retail know, I half year, of side in of the still much seeing been With up

Bryan Hughes

late the mentioned presenting us not our steady, businesses, the and Grand It’s Design are headwinds inventory very are particular and retailed I Grand that Design best field really business has in all the in on as As comments, the been in things shape. of the at wonderful replenished turns three which brand. in be on any at means aging that prepared our inventory honestly, is, to

it starts lot the put a Travel bit bigger we the in to Grand as introductory bit a percentage But kick prospects larger lot in be continue little segment in The in or begins Transcend, on can numbers. Design Stick-and-Tin. the of insiders get or into as little to Trailer in So that a the business optimistic will the growth industry on about number terms future. as that call comps example very entrance early you our an again, we’re to

segment. segment any in our the have Grand so, that and entree Stick-and-Tin And barely first Designs into really share all now at we

and And of addition they’ve been so some products adding underlying, other the to the wrinkles in there. additions and

and for they’re inventory, us and We continue increasing long Grand people good to at to good as can do business I for be And or they that’s we backlog stay as turns and or they start what look tremendously. a Design, shape, the look turns whether sign. decreasing in know terms at staying in it’s like look intently optimistic about at of continue stable grow very our

market. their managing in the their We’re performance and business pleased with we’re, how they’re

Scott Stember

comments So with the release you your you’re Design comfortable where what echoing right basically, Grand and it stands? now, said the inventory press in

Bryan Hughes

inventory. We with are comfortable our Grand Design

aging The are We dealers shifting dealer percentage is Design. that to low and products. more are new taking very and more introducing business more lot we’re share, Grand inventory of

mid-single-digit again, Design share segment. the is has Grand of so, Towable And

a of gross numbers should means the overtime is there which so And take grow we lot runway wise, there, raw as inventory share.

sure the hope or those is And make inventory increase. to long again, So steady we stay as healthy. turns watch that

Scott Stember

have to you're basis, back full couple going new capability for year. year, much year-over-year it. and you as want taking this last sounds really it you not can't you’re products you don't production for the but guess, could units as backlog that because you have I of again, just deliver, have, just if orders the probably to orders taking to the said And you

So, a lot look could to out are orders there? the have if you the been other of if to -- fulfill all you at higher, the Transcend way, good really way were backlog that

Michael Happe

the Imagine. And we'll Transcend. level. a see to -- backlog We orders the our believe foot probably but dealers it's we continue two production capabilities. probably little increase on the the it's say I the just Grand today, in again believe the And what managing strong with And Transcend been conversations about had dealers retail early. are Design been bit been would I with those output -- placing to the Transcend that had on very introduced and as the a in the more I that the continues product they is? as pedal what so still knock very are of reflection increases think sort and been production much accordance And at of output year were prior. on the it that recently production year materially early the It's orders Yes, with team product has a think the ago, putting on on has

terms So acceptance introduction, Design but again Transcend lifetime. not of different any the timing against signs the in of Grand of other terms the Transcend seen little we're as market products in in has its obviously introduced is concerning a bit compared

Scott Stember

talked earlier this about side, you've to And just how C month. the going Class on the outlook

course you Motorized when received I that not well been backlog the at revealed just was this end mean correct? of like maybe sounds So been about it's your February, it's and talk of

Michael Happe

March early the that unveiled Meeting in we in as No, National Diego. Dealer San

of showed. was did some we to with products that both the also in I and new were of this lithium pack, those addition kind those Travato took primary on by not comments motorized the offerings. my mention say our products unveiled very other new which received But orders product favorably also we battery We dealers. in And two

up in on the outlook would the and not orders backlog. our so and C our have we take And the continuing to we're that took Travato QX both Class shown end

just on narrative conversation that So be with really both those of products. getting is the and dealers

Scott Stember

us a it for whether tariffs, initial early I talk handle you on your but figure And just for that last about don't on maybe you just give handy of talk just cost-to-good one, take price me. again. it. if but about, aluminum, how one sold? if would you material of all that's And how know and Got that, know I this maybe have its quick way to steel will piece Thanks be your increases? And

Bryan Hughes

Bryan. that still this how of is will tariffs flow unknown. the domestic and Scott, into the through Yes, The big here is marketplace impact

Okay, so, are that purchases analyzing purchases have domestic. which we our gone through is process a direct of aluminum entirely direct are which and of domestic, steel a

through parts. what of we parts our component component exposed likewise the have cost-to-goods Our analyzed percentage are

now settles now And bit and to it's administration think is I seen our to loosening it course, the the exemption. and analysis of market also policy. clearly with And to a aluminum initial here. And the no exemption be Canada early little that work so I with Europe assumed on receiving tell. steel remains stick we've think And that would done all now

the jointly pressures lot handle will from how pursue So remains And inflationary through yet would steel could the we also to play initiatives from aluminum a with pursue. it would we would to in and How then to out in we certainly potential any increases offset marketplace. necessary reduction any we marketplace costs the vendors we marketplace. first that offset understand work pricing our

the it, it’s still approaching but seems play in how out we terms are that’s early So how seeing in of it market. will this

Operator

line from of of Stifel. Baudendistel next the Our Mike question comes

Your line open. is now

Mike Baudendistel

some in projects the how capacity, unit ask Or frame the for terms is of much to you potential to other expansion increasing expand wanted revenue? that there manufacturing the and for Towable I could capacity Winnebago-branded us of Just projects output? your mean, you the about

Michael Happe

Yes.

is and morning good the for thanks Mike Mike. So This question.

even plans. we announcement manufacturing space when reference XX% several impact quarters the We’re Design expansion or Grand maybe adding business. Design, that sharing potential capacity units we to But we specific Grand revenue above not from the with ago were

to prepared a working that officials be needed that look future. at Towables approved and closed land at that of been to other for was expansion nearing project. preparing intend our project The on relative ground all not then, ago. the storage assembly, couple lamination breaking some by that recently has there and/or kick-off with we’ve and made some that’s point of that room were was partners the for we site and material local the increase we’ll and announcement expansion that that Board, certainly state added construction We was minimum Now we’re for Winnebago to with capacity been like. where our in to be firm quarters

the in were in they’re And go the industry. one you And size versus to so, small campus campus a today, Towables it the two Winnebago if in manufacturing has of it’s to it. relatively literally product buildings

by We a will adding the begin building. expansion third project

exactly probably two will some it we’ve that idea need the have the we buildings to from of, of is to the more the relative side increase output, to. gives even happening our with land on but in so terms And proportion you it of and there, acquired or add an buildings isn’t map three capability that

a smaller, product Its albeit So volumes, to a we much Winnebago in business. line, that it very concept a growing compact lot as on Winnebago business more the focused smaller have are Design many very different we has product growing similar of product work growing there. we focus line at ways. Towables in Grand is at to our as Grand very rate focused, sort much the business equally a of But do and on out Design, Towables it’s

light Winnebago very as branded segment We’ve not We’re and entered example, haulers. toy wheels the an Stick-and-Tin very on light on with ship the Towables.

be only segments. into current the line, not so manufacturing to adding that but potentially these allows us expansion other And space the product grow will consider

Mike Baudendistel

as interpreting that? the your actions than there input those And that I on cost. dealers I when pass cost the Also right? follow-up just fit want so in the fall from years pricing the sort model of pass comments I mean would main am comment on to are like sounds that costs to to a to And ask on, input you this capture new opportunities rollout. comment interim sooner the those it

Michael Happe

tends between a industry kind change cycle. part in more spring model of and The year to year. early fiscal So, business the actually model year is in difference of the there happen RV the is

so the midst across actually I say from of some price when XXXX increases XXXX And in changes. our year time tend model to changes we're of many at changes, the to our model year we And model year right businesses. have

can profitability. our we mentioned, in impacting Towables out and have autonomy good lot use come that pricing year businesses driving allow may potential see price cost market that we in why so adjustments seen that's you're of got to that they're other to empowerment by the driving Motorized We three costs year. the year-to-date, embedded do the the the a market. productivity the quality is to of the or of job we're and price XXXX board. introduced the we some price And price the straight in of respectful I leader But pressures line or without three the do cost of part the journey inflationary to a is as And on there in job us some a businesses performance the really as business the the products our improvements the list in price that just on And varying of better some effectiveness pressure changes on just better And but that's Towables' across continue to unit more products certainly demonstrate impart the were of commodity supplier But that side, comment make out offset. future. lot to are the And not model business each today. that pressures our businesses help seen of improvements future and that out. do is a learning curve and offset have I'll degrees strategy business cost

Mike Baudendistel

on your competitors in I'm the been on thoughts that? in lots dealer on any I capture and inventory sneak you one Is can you good anything just Do thoughts of stuff industry one. inventories. any like detail your levels? last some channels order to the have there by overall share get know

Michael Happe

of inventory to industry variety sources. visibility comes from Our a levels

inventory financing better have inside the Some of partners into that.

analyst can number this of even sometimes size insight that. that some Sometimes three give get very of you bit we would again well. the insight industry. of into at candidly just a reports are of tell little in as the to bigger I terms some us that some suppliers we at And read

inventory our actually as the today, And you're we're say positions us in comfortable the field businesses. so hearing with on three

eyes in dealers. the And so, Winnebago of coming it's if in not there Industries pressure is the inventory field levels on the from any

that ways we manufacturing I some sure. related is. with growth this the to watch with are us visibility And remarks lines as have OEM my on do about what we certainly my we other the the just to be just coming need all And then dealers pace online to capacity comments of pace think with in that so industry that And prepared lots your we work no an question. matter continually mindful all and

very doing, having the get our mindful several we've So, so it's that got if ahead and that's market that similar in to not slowdown, company, need does years we're the or to and very the -- past a fact what it let’s we market. much conversation manufactured to of just

smartly. business the run Let’s

Let’s share, we’re to in optimizer going take not our to order everything not that’s can. driver retail out strategy. But we turns

Operator

next of Swartz Our Mike comes SunTrust. from the question of line

Your is open. line now

Mike Swartz

you input these versus in on you’re of costs? year-over-year, the know Motorized how around of guess and you much that. of down questions last a year-over-year the investments. you right were the profitability Just a I us is I points side. going about From investments of versus making XXX that be sense quarter, standpoint, think margins said basis ramp Can costs some over XX% give mix up I decline said to some

in like maybe the what So sense a look quarter? that give us could second of

Bryan Hughes

to. is percentage they’ve we'll in Yes. West point I would increase of Mike of over I terms. specific don’t the Michael. to City starts in impact Bryan, and of tell, with rank can breakdown morning. in capacity, investments the Good Coast I’ll had. provide the that give say think terms I a that I the alluded how facility, Forest the you. on-boarding This change lines would

material a and second characterize as I I characterize would third. business the mix pressures, would the think I

Mike Swartz

Okay. just understand And to then just help, better. little I a

that investment in start see about and impact should thought it. the changeover, that capacity On line we ease? guess to I the When you talked

Bryan Hughes

it Is see that When start to ease? what you said?

Mike Swartz

Yes.

Bryan Hughes

Michael. Yes, we’re timeframe committing not to specific

journey that this right Mike transformational As is term working QX. I towards. would alluded we’re to, We in doing XQ that a believe all we’re the as longer well. things during say that’s

is right the all path. a around turn so transformation on commitment committing what to long-term we And doing to that in believe, we’re are commitment the we’re we not or things right near-term business making that and to we’re the this is at the it, journey a long-term

Mike Swartz

the think out? Could Motorized, of the second going perspective, off quarters through chain said you or model ’XX. a then clear when maybe us product those the introduced challenges a And from sense new on the give mix issues in I fall some you you some of sourcing actually some of of had you sourcing

Michael Happe

run that a problem. an probably I follow the example has just a in first there and little bit. within you Yes, speak We the Revel just a enthusiasts this of excitement that’s this sort off is outdoor world customers market. will It I’ll sort explorers give especially is road home Mike. huge and younger RV. around, is been introduced our B and about RV of Class customers vane X-by-X just And it sense hit, product. in to of

has turns and forecast. and of their van actually, themselves in by Ravel B house on of it’s media Revel the our now just the to generated it hits some were questions working excitement product trying and That open customers subsequently dealers fact, In Class of introduce the what used XXXX, from own and to try base tremendously the and and when own with dealer of essentially And on we're their they that is we build the themselves within where We’ve outfit initial to to customers. market exceeded our garage. millions social up. fall demand seen across suppliers keep

products generated from together. where getting we our example manner And that's we times falling few is so and down it's of with the component products working few like. a we've in an have some timely anticipated. And suppliers the from where time a availability same a we'd which, Winnebago, inhibited demand stronger At had the of than in

sense we just the better, And battle in accurate, it's it not to continue as most of epidemic, have better mature forecast it's I delivery. our that of So suppliers point business. But and is get something get our sort and the we that we'll even and will really with spot-by-spot. just timely it relationships to more more in Motorized

Operator

you. Thank

Morningstar. question the comes Our next David Whiston from of of line

Your now open. line is

David Whiston

two for Just questions me.

any way? on an did light and ended up shopping product vehicle end at off-road RV summer Have What perhaps they a not seen data an on Did the say Winnebago not either doing? or pickup market buying an RV different or in end they who buying an buying like RV, or for RV is all up truck? buying the ended perhaps you up buying either were jeep ever customers First behavior. not up

Michael Happe

and RV would I more say then buy into Winnebago else. visibility customers that have we something with search start their

In search and online motorhomes. most Class closed that. the in RVDA for actually are Class and rates was here C for Winnebago Class fact the the in for And is about literally data being term publication use published most We motorhomes. by over week and at looking in just A brand the C fact Class the we some brand when searched that A that

Lastly check, to is in we either of we have be. as did share strong leading our which rate as market would not segments, those like means it close not

consumer something and that the a outdoors. an ATV, experience in be else be the buys could might else could want and automobile, to process shopping they anything in it boat, goes It could it the it analysis an those do into their our track then the we that do So do, those dealerships around Winnebago dealerships that It dive compared leaves lines? harder is what's that. customer to some to other And have much and in share discretionary we market. be obviously

been discretionary harder. And dollars consumer so effectively that is RVs competing for past We over very several have years. the believe

RV stable. choice at if very compete think to you of a customer that very market, fact able the average selling has And been the RVs marine there. the effectively look to has in compared of I industry price the If then subsequently

in its we track no, the RV customers necessarily leave but sales who So, entirety. don't process

David Whiston

the Mike and personally effort now? very not also the then patient you're And on you said return you pace most of right what's frustrating

Michael Happe

the we Well, things the can worry things and about we can't. control I David

we're end the listen business have of effort that so the as as The one can removing But we're care at said very around few high-performance better. in of before, inefficient cases in here We my my different majority control be I can employees certainly that culture that a we business in is customers. cares is for to that barriers and or in think our a constraints of so roles. comments, frustration our build headwinds. they leaders we of superlative. things do motorized for And we in and a the the the leader continue or own creating good And to we our ownership

to culture And a of bit you announcement reform going where, a both but tell trying a convinces yes, is the thanks be that frustrated. terms even as really to and that build a a ultimately turning our we’re want little of owners to each employees also with of would and this our even XX-year I I today’s to morning of. the team larger the announcement signal question, part cash we’re the But well. But that’s part say can’t benefit, distribution in that culture all pace tax committed also something be were And respectful. which for making the do all employees yes. way, in our is But so that it probably to

We’re working on it.

Operator

from comes the Citi. of Greg question line next of Badishkanian Our

open. now line Your is

Fred Wightman

Fred Wightman on for Greg.

prepared I you remarks, go support the in in think you are to future? were Can think levels just where down needs the and channel. in that of the working the highlighted today sort you you about talk those where versus in that sales industry peers

Michael Happe

sales Thanks the support through allowance I for need the think the question. business, It’s to term to of sales and you support terms of moving we in health important pipeline. an signify times, product at a used the our the topic

certainly incentivize industries lot product take pull Motorized brand as offer means need that we’re make better actually which a less their and And our times durable other customers occasion to the profitability within more needs this lots. on and into on goods we has some business unlike healthier The a space in six is to sales times First OEM argue be or would have line, percentage months discounts good or the customers less dealers dealers which and order news it product do motorhomes, not business hands. will industry that in our dollars, the dealer inventory sales, at ordering move. with sales potential where allowance more in the the becomes compete genuinely. And and that a Motorized the of for I Winnebago supporting getting to with to is the in habits, dealers year-to-date

you support not increase with product? balance looking As want that the and something healthy of dealers have in that way just it to. can moving to to in a But continue see we’re we XX% we the backlog

become, we’re get the progress are and end dealer we’re is will don’t time. that. the take and ask it not dealers demanded on potentially particular And that, We’re we product to to by customer and they looking mitigate product temptation to at the some itself that more but -- always that incentivize to for making the starting because better

Fred Wightman

interest forward perspective, of for if rest by we going just big how about rising an year? look you forces If you two there end consumer sort tax And sort is think benefit the are fiscal offset talk some this at factors then year maybe the about two bill some of rates. of the

Michael Happe

future. Well, think is weekly starting they’re twice through from more a the pay legislation. tax be And regulatory, file tax the month at in checks. the checks there trickle the end be will the certainly, a to that of benefit future slowly wallet in it returns think customers I they receive reform And there same end or to those positive will as we folks the from time,

will that think we positive a certainly. So be

and the ascension offered year don't sound could rates happen that very today, news demand believe and are affordable still because we companies some interest by financing rates yet the financing believe next interest certainly of that are payments affordable. maybe there much here that while interest we are terms sometimes combined in RV understand that that interest the the rates In historically those lower with rate on the monthly still tremendously I deals

when but hearing could business up So go not that not our believe again while we we're what we see very it's at other rates anticipating is probably happen interest significant for going prefer we're to country. been a that good Shows has tailwinds. negative are We traffic I secular effect. as enough that RV And there the Retail to mostly have believe across mentioned,

people believe And still are so we interested lifestyle. very the in

Operator

Thank you.

O'Hara Our Sidoti. of line next Steph question with is from the

is Your now open. line

Stephen O'Hara

you guess XXXX I 'XX Yes, and the for be sorry in just just CapEx can follow-up the remind But fiscal call. directional maybe? late your to

Bryan Hughes

XXXX the we're Winnebago down big initial should business. in we're million of the XXXX. in following taking expansions then expecting that capacity ramping around have design come in we also CapEx And be brand both would off XXXX that and Steph, Yes brand $XX from the the Towables right and ERP down steps

Operator

would conference for turn remarks. showing at to to further this no time, Stuber you back like over and Mr. I'm the Thank questions I closing

Steve Stuber

the you look everyone a thanks your with appreciate Thank you today. and have many good quarter. forward certainly time day. for of We and speaking throughout call Great, joining to our

Operator

Ladies participation your thank gentlemen, conference. program. today's you for in concludes today's This and

now day. may Everyone a great You disconnect. have

Winnebago Industries (WGO) 21 Mar 182018 Q2 Earnings call transcript