Happe: Winnebago Q4 Reflects Sluggish Demand, Headwinds – RVBusiness – Breaking RV Industry News
EDEN PRAIRIE, Minn. – Winnebago Industries Inc. (NYSE: WGO), a leading outdoor lifestyle product manufacturer, today reported financial results for the company’s fourth quarter and full year fiscal 2024.
Fourth Quarter Fiscal 2024 Financial Summary
- Revenues of $720.9 million
- Gross profit of $94.2 million, representing 13.1% gross margin
- Net loss per diluted share of $1.01 (includes goodwill impairment)
- Adjusted net earnings per diluted share of $0.28(1)
- Net cash from operations of $40.7 million
Full Year Fiscal 2024 Financial Summary
- Revenues of $2,973.5 million
- Gross profit of $433.5 million, representing 14.6% gross margin
- Net earnings per diluted share of $0.44 (includes goodwill impairment and loss on note repurchase)
- Adjusted net earnings per diluted share of $3.40(1)
- Net cash from operations of $143.9 million
CEO Commentary
“Winnebago Industries’ fourth quarter performance fell short of our expectations, primarily reflecting the sluggish retail demand environment and operating inefficiencies within our Winnebago branded businesses,” said Michael Happe, the company’s president and chief executive officer. “The RV industry continues to face various headwinds, including uncertain retail conditions, higher inventory carrying costs and slightly elevated inventories in the motorhome segment, leading to continued dealer hesitancy and increased promotional efforts. Despite the challenging operating conditions, in the fourth quarter we continued to focus on the variables within our control. We prioritized profitability and cash generation, aggressively managed inventory, and invested in new products and technologies to drive future growth.
“As evidenced by the recent launch of the Lineage Series M, Grand Design’s first motorized RV, product innovation remains a centerpiece of our long-term strategy,” Happe said. “We are continuously evolving our offerings to strike the right balance between cutting-edge features and the growing consumer preference for affordability, highlighted by products such as the Grand Design Reflection 100 Series, the Grand Design Influence and the Winnebago Access. As we begin Fiscal 2025, our RV and marine brands are intensifying their efforts to deliver exceptional value to consumers across a range of price points.
“In recent weeks, we have implemented leadership changes to enhance our Winnebago Motorhome and Winnebago Towables businesses, both of which have underperformed in recent quarters,” Happe said. “Chris West, who previously served as Senior Vice President of Enterprise Operations and Barletta Boats, has been named President of the Winnebago branded Motorhome and Specialty Vehicles business. Don Clark, President of Grand Design and a proven leader with an unmatched track record of success and understanding of the RV industry over the last 40 years, has been promoted to Group President and will augment his responsibilities by providing executive oversight for the Winnebago Towables business. The extensive industry knowledge and leadership skills Chris and Don bring to their new roles will be invaluable in further enhancing Winnebago brand’s influence, impact, and market share through new products and technology innovations.”
Fourth Quarter Fiscal 2024 Results
Revenues were $720.9 million, a decrease of 6.5% compared to $771.0 million in the fourth quarter of last year, driven primarily by product mix, partially offset by higher unit volume.
Gross profit was $94.2 million, a decrease of 26.1% compared to $127.5 million in the fourth quarter of last year. Gross profit margin decreased 340 basis points in the quarter to 13.1%, reflecting higher warranty expense, operational challenges, and deleverage.
Operating expenses were $112.0 million, an increase of 60.4% compared to $70.0 million in the fourth quarter of last year. This increase was primarily driven by a $30.3 million impairment charge associated with the Chris-Craft reporting unit, start-up costs associated with the launch of the Grand Design motorized business, and strategic investments in engineering, digital technology development and increased data and information technology capabilities. The decline in fair value of the Chris-Craft reporting unit was driven primarily by softening in the marine industry as a result of sustained macroeconomic challenges impacting consumer demand, such as inflationary pressures and elevated interest rates, and the current uncertainty regarding the timing and degree of an economic recovery.
Operating loss was $17.8 million compared to operating income of $57.5 million in the fourth quarter of last year.
Net loss was $29.1 million, compared to net income of $43.8 million in the fourth quarter of last year. Reported net loss per diluted share was $1.01, compared to reported net earnings per diluted share of $1.28 in the fourth quarter of last year. Adjusted earnings per diluted share was $0.28(1), a decrease of 80.1% compared to adjusted earnings per diluted share of $1.41(1) in the fourth quarter of last year.
Consolidated Adjusted EBITDA was $28.7 million, a decrease of 60.6%, compared to $72.9 million last year.
Full Year Fiscal 2024 Results
Revenues were $3.0 billion, a decrease of 14.8% compared to $3.5 billion in Fiscal 2023, driven primarily by product mix and lower unit sales related to market conditions.
Gross profit was $433.5 million, a decrease of 26.0% compared to $586.1 million in Fiscal 2023. Gross profit margin decreased 220 basis points year-over-year to 14.6% as a result of deleverage, higher warranty expense, and operational challenges.
Operating expenses were $333.3 million, an increase of 16.8% compared to $285.4 million in Fiscal 2023. The increase was primarily due to the goodwill impairment charge associated with the Chris-Craft reporting unit, a full year of Lithionics operations and increased intangible amortization, start-up costs associated with the launch of the Grand Design motorized business, and strategic investments in engineering, digital technology development, and increased data and information technology capabilities, partially offset by lower incentive-based compensation.
Operating income was $100.2 million, a decrease of 66.7% compared to $300.7 million in Fiscal 2023.
Net income was $13.0 million, compared to net income of $215.9 million in Fiscal 2023. Reported earnings per diluted share was $0.44, compared to reported earnings per diluted share of $6.23 in the same period last year. Adjusted earnings per diluted share was $3.40(1), a decrease of 49.8% compared to adjusted earnings per diluted share of $6.77(1) in Fiscal 2023.
Consolidated Adjusted EBITDA was $190.6 million, a decrease of 46.3%, compared to $354.7 million last year.
Fourth Quarter and Fiscal 2024 Segments Summary
- Revenues for the Towable RV segment were down compared to the prior year, primarily driven by a reduction in average selling price per unit related to product mix and targeted price reductions, partially offset by an increase in unit volume.
- Segment Adjusted EBITDA margin decreased compared to the prior year, primarily driven by deleverage, higher warranty expense due to a favorable prior year trend, and operational challenges at our Winnebago branded towable business.
- Backlog decreased due to current market conditions and a cautious dealer network as well as reduced order lead times due to production capacity.
Balance Sheet and Cash Flow
As of August 31, 2024, cash and cash equivalents were $330.9 million, compared with $309.9 million as of the end of Fiscal 2023. Total outstanding debt was $696.2 million ($709.3 million of debt, net of debt issuance costs of $13.1 million) with working capital of $584.0 million. Cash flow provided by operations was $40.7 million in the Fiscal 2024 fourth quarter. With a cash balance of $330.9 million and an undrawn asset-backed revolving credit facility of $350.0 million, the Company maintains meaningful financial flexibility, supported by its strong balance sheet and robust liquidity.
Quarterly Cash Dividend and Share Repurchases
On August 15, 2024, the Company’s Board of Directors approved a 10% increase in the quarterly cash dividend of $0.34 per share. The dividend was paid on September 25, 2024, to common stockholders of record at the close of business on September 11, 2024. In addition, Winnebago Industries executed share repurchases of $10.0 million during the Fiscal 2024 fourth quarter, bringing its total share repurchases for the Fiscal year to $70.0 million.
Business Outlook and Financial Guidance
For calendar year 2025, Winnebago Industries anticipates total North American RV wholesale shipments in the range of 320,000 to 350,000 units. Based on this outlook and the current business environment, the Company expects Fiscal 2025 consolidated revenues in the range of $2.9 billion to $3.2 billion, reported earnings per diluted share of $2.40 to $3.90(2) and adjusted earnings per diluted share of $3.00 to $4.50(2). The Company’s outlook takes into account prevailing trends in the RV sector, including competitive dynamics, shifts in consumer preferences, and key macroeconomic factors that may influence overall demand.
“We enter Fiscal 2025 confident in the long-term prospects of our business, optimism that is grounded in the strong market potential of our latest product innovations,” Happe said. “Although the recent easing of interest rates is expected to bolster consumer demand as we move into the second half of the 2025 calendar year, near-term visibility remains limited due to the potential for further economic instability and the likelihood of continued industry-wide destocking within the motorhome RV category.
“Amid this complex and dynamic market environment, we are managing capacity, output, and cost in a highly disciplined manner,” said Bryan Hughes, the Company’s Senior Vice President and Chief Financial Officer. “We are focused on leveraging our strengths, optimizing our product mix, and maintaining operational flexibility to capitalize on opportunities that position our portfolio of premium brands to gain share as market conditions improve. We are committed to investing in our core competencies and enhancing the customer experience through new products and technologies, while maintaining a balanced approach to capital allocation that we believe will enable us to create value for our shareholders over the long term.”
Q4 FY 2024 Conference Call
Winnebago Industries, Inc. will discuss fourth quarter and full year Fiscal 2024 earnings results during a conference call scheduled for 9:00 a.m. Central Time today. Members of the news media, investors and the general public are invited to access a live broadcast of the conference call and view the accompanying presentation slides 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.
