To introduce our next presenter, Winnebago Industries. With us today, we have Mr. Bryan Hughes, Chief Financial Officer. Welcome, Bryan.
Thank you.
Winnebago is a leader in the outdoor recreation space across both RVs and powerboats, with a portfolio of brands that includes, obviously, Winnebago, as well as Grand Design, Newmar, Barletta, and Chris-Craft. I want to very quickly remind everyone that Winnebago will be reporting fiscal Q2 results in a couple of weeks. For that reason, we'll definitely try to keep our questions at a high level. With that in mind, I believe Bryan has a few introductory slides that he wanted to go over to give you a bit of a better flavor for the company, after which we'll jump into Q&A. With that, let me hand things over to Bryan.
Thank you, Joe. Good morning, everyone. Thanks for being here with us today to hear a little bit about our story. I'm gonna do a quick overview as Joe just said, to just familiarize, level set everybody in the room about who we are. This is a good depiction of our current status. We have locations. Our headquarters is in Minnesota. We've got our legacy Winnebago motorhome business that is in Iowa. We've got several of our businesses in Indiana, as depicted. We have Grand Design, Newmar, Winnebago towables there. We also have our Barletta brand of pontoons there. Then down in Florida, as shown, we have Chris-Craft, and we also have our Lithionics business, a battery business that we purchased. We're about $2.9 billion on a trailing twelve basis in revenues, 5,200 employees.
You can see the big transformation we've made in the middle bottom section of the slide, since our CEO joined us in 2016. We were a single-branded Winnebago motorhome business at that time, about $1 billion. We've grown to close to $3 billion today. We hit a peak of about $5 billion during COVID. Our market share has gone from about 3% to over 10%. A very diverse product line that fills the gamut of the RV and somewhat marine space. Our RV products range in price from about $20,000 to enter the lifestyle. In the Newmar brand, you're talking about units that can get almost up to $2 million. It's a wide range of products, and we hit a lot of the price points within that range I just described.
On the pontoon side, we can, with our new Sanza product, get to customers for about $49,900, and then the Chris-Craft brand would go up to close to a million and a half. That is the range of products we have. We only participate on the marine side, notably in the pontoon space, as well as the runabout business that Chris-Craft would participate in. These are our enterprise strategies. First, it's about talent, bringing the best talent to the business. We think that that is a big differentiator for us. Building a premium portfolio. Emphasize that we are a premium portfolio of brands. We don't participate in the value part of the equation.
Third there in the middle, elevating the total customer experience, providing them a differentiated experience through the buying process, the exploring, shopping process through the buying process, certainly post-sale as well. We very much emphasize that. We're focused on digital capabilities, expanding our connection with our customer through those digital means. Lastly, we're about driving excellence and synergy across the portfolio. Very collaborative operating model across our brands, we think that there is long-term potential there as well. We're much more diversified than we were in 2016, as I showed you earlier, from $1 billion to about $3 billion today, our makeup of our portfolio has changed dramatically. Pretty evenly split, 42, 43% or so on motor home totals each, our marine business now plays at about 15% of our revenue.
A lot of awards in both the RV side and the marine side. This is just to give you a high-level view of that. Seven awards for Grand Design, five awards for Newmar, with their new products, and then eight awards for the Winnebago brand, including the newly released Thrive product on the towable side. On the marine side, a lot of years of customer satisfaction in the Chris-Craft business. They just recently won the innovation award at the Miami Boat Show for their Launch 27. On the right side of the slide, Barletta has also won several awards with their innovation new products, most recently partnering with the Seakeeper capabilities and introducing that to their pontoons to provide more stability and comfort in the ride. Briefly on capital allocation, starting with organic growth.
We're going to continue to invest in organic growth. You can see we've done a good job of minimizing that in the current trough, in terms of capital expenditures to maximize our free cash flow. All of which have performed extremely well. We captured those brands on their journey from good to great, capturing market share and catching them on the upswing. In the lower left-hand corner, in terms of our leverage ratio, we target 0.9-1.5 on a net leverage basis. We're currently at about 2.7 our most recent quarter. I've stated publicly that it's our goal to get that down to about 2.0 by the end of our fiscal year here in 2026. We've got a good track record of returning cash to our shareholders as well.
A very balanced approach here in the form of dividends and share repurchase in addition to the allocation towards M&A and CapEx. What differentiates Winnebago Industries? I'm not gonna go through these one and by one. You can read them. Again, we are a portfolio of premium brands with a long-term very positive reputation with our customer base. We have a lot of opportunities yet forward to capture synergies across that portfolio with leveraging of our centralized capabilities that we've built. Notably in our strategic sourcing group, a lot more opportunities we think longer term there, but also in talent management, in IT capabilities, finance capabilities and other functions, legal and otherwise. That's who we are.
We think we at this stage have proven ourselves to be a very capable management team, executing our strategy and our opportunities as well. With that, I'm going to invite Joe to come back and dive into some questions.
Thank you for that, Bryan. That was great. first question I wanted to start off, you know, we met back in January in Tampa at the Florida RV SuperShow, and as you know, there was a fair amount of optimism.
Mm-hmm
around the industry. I think, you know, your take on it, and correct me if I'm wrong, was, "That's great, but I'll believe it when I see it." Maybe is that still your view, and how are you thinking about calendar 2026 from a demand standpoint?
Yeah. I think the general tone coming out of the Tampa Show and the biggest RV show there is, was quite positive, both on the dealer side, good foot traffic in the show. As we said there, it was pretty mixed across the variety of shows that we participated in on the RV side. Same is true on the marine side. I think generally the Miami Show, there was a positive vibe, but the results have been mixed. There has not been a clear trend identified in the early shows to indicate that the marine industry is on its way up, on its way towards that recovery we've all been waiting for. Same on the RV side. It's just been too mixed.
The selling season is viewed, you know, mid, late March and forward, and I think that that continues to be what people are waiting to see in terms of the real traffic. We've seen some weaker retail on the RV side over the last couple months, November, December. That's the lowest part of the year, so it's hard to get a real strong read out of that SSI data. I think that that too causes the industry to wait for the selling season here. That's what we heard most recently from our dealer partner Camping World as well, I think publicly.
Got it. If we think about the last few years, you've had price increases in both boats and RVs. You've had interest rates obviously rising.
Yeah.
You know, affordability's become a, you know, a big buzzword in the industry. You saw a pretty big mix shift down market toward lower priced travel trailers, for example. It sounds like we're starting to see, which by the way doesn't help Winnebago since you're a little bit more of a premium, you know, obviously, business.
Yeah.
We're starting to see a little bit of a mix shift back toward fifth wheels, toward motor homes.
Yeah.
Is it too early to make a call there, or are you seeing that as well?
I think so. I think there's some evidence that the, you know, the K-shaped economy that we hear frequently talked about. On our higher end, and fifth wheel would probably be at that higher end of the towables marketplace. We're seeing that in our Newmar results, our Chris-Craft results at shows. We've seen it even more recently, this K-shaped economy where the upper end of the economic spectrum is performing well. That's, that's kind of our current view on that part of the market. As it relates to mix, I think we're starting to see some stability in terms of price deflation from mix. We saw that for much of last year.
Mm-hmm.
That was a recurring theme. There's more stability on that part of the equation right now with the mix. We did see as an industry some inflationary pressures from tariffs, of course, throughout the last, you know, since April. That has, you know, month to month started to show some stability as well. We'll see how the latest Supreme Court action on the IEEPA tariffs, with the reintroduction of tariffs in a new place on 22 and how that will shift, if anything, materially the cost equation.
Mm-hmm.
We're evaluating that right now. I don't have anything to share with you. I don't expect it to be material in terms of the impact that it has to the industry on further inflationary pressures. We're of course, as you would expect, watching that closely as well.
Got it. If we think about inventories as we head toward the spring season, can you talk about where we stand in terms of both towables, motor homes-
Yeah
...and marine at this point?
Yeah. I think the industry's feeling good about the absolute level of inventories and the quality of inventory, and by quality, I mean the age of the inventory, has also seen good improvements since last year. It's been a focus of the dealers through the lower parts of the month in anticipation of the selling season to improve the quality of the inventory on hand. We've seen that. So from a quality of inventory, I think we're in a good place. I would also say that the absolute levels of inventory on towables and motorized have gotten to a good place. There's some out there that would suggest marine has a little bit more work to do.
I think for our portfolio, just speaking of the narrow part that we play in, we're feeling very good about our inventory position here as we enter the selling season. That comment for us, across the board, I think we're in a good position. Saw our motorhome business, this last quarter end come down pretty significantly in the amount of inventory that we have out there. We made a lot of improvements on the motorized side in our inventory level, and we also feel good about our towable level.
Mm-hmm. As a related question, how are you thinking about the promotional environment this year?
It seems to be pretty consistent still, you know, that's what you'd read in the notes from the shows is, you know, all the analysts like to track level of promotional activity across the industry. I think generally speaking, it was pretty consistent from this year to last year. It's still a lot of pressure out there with the affordability-minded consumer, with consumer sentiment being where it is, which is still historically low. I think the industry is doing its best to approach the customer, looking for those, you know, that affordability-minded customer and looking to make deals.
Mm-hmm.
It's pretty consistent year-over-year.
Still a buyer's market, but no real change in trend at this point.
Right. Right.
Okay. If I look at your portfolio-
Yeah.
I think it's fair to say you have several different businesses that are currently, you know, in various degrees of health, right?
Yeah. Yeah.
To your credit, You've been very upfront about the fact that of your struggles at the Winnebago brand. There's been some leadership changes...
Yeah.
there, for example.
Yeah.
You know, for the benefit of the audience who may not know the story very well, can you elaborate a bit on, you know, what happened to the Winnebago brand and what do you need to do?
Yeah.
to fix that?
Yeah. I think the Winnebago brand just got a little misplaced with the market, all right? As we went through COVID and then coming off of the COVID peak, we did several moves that shifted us to more value, more content, I should say more content that comes with a higher price point. We jogged right when the market jogged left. There was some addressing that we needed to do in the product portfolio and the new leader is working hard at doing so. We recently came out with the Sunflyer as just an example of part of our product portfolio renovation. A lot of cost structure evaluation and more of that to come. We reduced our footprint from four locations down to two.
We had locations in four cities in northern Iowa.
Mm-hmm.
We have consolidated that in half to two. A lot of other process improvement, speed to market type of, business process improvement that Chris is focused on with the leadership team there as well. Several things that is being done to address that Winnebago motorhome business, and we feel good about the long term. It really hasn't materialized in the financials yet. We made that comment as part of our Q1 results.
Mm-hmm.
We think back half of 2026 and into 2027, we'll start to see more of that materialize in the financials.
Are the issues more acute on the towable side or on the motorhome side, do you think?
Motorhome.
Okay.
Yep. You know, we've talked about the Winnebago towables business too, which is under new leadership under Don Clark. There's some new product introductions that have occurred there.
Mm-hmm.
over the past year. The Thrive, the most notable, and a lot of awards that it has received and a lot of accolades from the dealer network. Starting to see some retail, you know, pull through on the Thrive as well. We're excited about the future of Winnebago towables. Clearly, it carries the cachet of the brand. It currently has about 1.1%-1.2% market share. We think that has a lot of opportunity in partnership with the Grand Design towables business. We think the 1% can become 3% in pretty short order here.
Mm-hmm.
We're excited about what that Winnebago opportunity represents. On the Grand Design side, a lot of product revitalization in the Grand Design business on the towables business. It's a competitive space there. There's some new entrants that have come into the towable space that have done a really good job. It's a bit of a street fight out there right now to win that customer over. The Grand Design has a lot of new product features and improvements this year that they came out with, and we think that we're poised well for that fight.
Mm-hmm.
Look forward to seeing what happens here in the selling season.
On the Grand Design brand, you recently launched your first motorhome in that segment. Not recently. It was a few months ago.
About a year ago now.
Yeah.
A little over a year.
I think you're on your third model there.
Yeah. We have the Series M, which is a Class C diesel, a Series F, which is a more of a Super C type product.
Mm-hmm.
in the Class C. Then they have two Class Bs, the Transit and the ProMaster that they refer to as the VT and the VP for Transit and ProMaster respectively. Their market share has already achieved 4%, you know, on the retail side. It's going very well for them, as we knew it would under Don's leadership, more to come, more growth to come, more floor plans to come out there. We think that we'll continue to penetrate that retail market share.
How much more runway do you think? I mean, in terms of like a baseball game, what inning are we in, would you say?
I'd say we're early mid.
Okay.
More to come on that Grand Design business, certainly.
Mm-hmm.
Newmar likewise continues to expand where they play. Over the past few years, they've become more meaningful in the Super C business. The Class A market, the large Class A diesel market continues to shrink a bit. That's where they have historically been very strong. They continue to take market share in that space, recognizing that there's this shift towards a preference for less large, we'll say.
Mm-hmm.
Not small, but just less large. They've recently introduced a new Class C called the Freedom Air. You've got those Class A diesel historical Newmar customers who have stated, "Hey, we want something smaller, but we don't wanna compromise the quality we've come to expect with Newmar.
Mm-hmm.
That's kind of where that Class C comes from, is meeting that customer need and having something available to them that's a little bit smaller, but still of great quality.
Mm-hmm.
We think there's an opportunity there.
You acquired Grand Design, so far been a very good acquisition for you. Acquired Barletta. I think so far that's been a very good acquisition for you as well in terms of taking market share. I guess before we get to Barletta itself, we also met at the Miami Boat Show. How would you compare where we are on the marine side versus where we are on the RV side in terms of, you know?
Yeah.
making that turn?
Yeah. I mean, I think marine is known for being, you know, behind the RV cycle typically.
Mm-hmm.
I think that that has played out in this cycle as well. you know, it's a different Every cycle's a little bit unique in its shape. COVID certainly caused an unusual peak to both markets. Now post-COVID, we're seeing similarly an unusual trough, a little bit more elongated than I think we would typically see. marine has been behind RV through that cycle, and I think they still are a little bit, maybe a couple quarters behind RV in terms of the stability, as well as the inventory cheering or getting to a good place.
Mm-hmm.
Hopefully what we see here is a selling season on the RV side that starts to show some growth, and that's what a lot of people are projecting. Our call is still, "Hey, we're not gonna count on that." Our projection was flattish to down slightly, and we're going to execute within the market that we're provided-
Mm-hmm.
Do a good job executing. That's still our view. On the marine side, I think it will be a little bit delayed still in its recovery in the retail side, from the RV industry. That's speaking broadly. You know, we participate with Chris-Craft at the very high end of price points. Then on the Barletta, it's just in the pontoon segment obviously.
Mm-hmm.
Kind of a narrower exposure to the marine market. That's how we're seeing it.
On Barletta, if I think about, you know, the growth trajectory there, I guess along two dynamics really. One is expanding the product portfolio, and two is expanding the dealer network.
Yep.
Right? Of those two, how do you see each of them progressing over the next few years?
Yeah. We've expanded the product portfolio most recently to include a new product called the Sanza. We were aiming to get under $50,000 entry point there to bring that new customer into the Barletta brand. We've achieved that with the new brand. again, some of that is to serve the preference for affordability in the current customer. A good new product there just launched. I think that will serve us well also. What was the first part of your question again?
Oh, in terms of, expanding the dealer network as well.
Yeah. On the dealer side, Barletta's done a great job with their full product lineup, and that's why I brought up Sanza. They can meet every pontoon customer now, and they've had very successful conversations with dealers about becoming the exclusive pontoon brand. They've got really strong geographic presence now. Maybe a little bit of expansion to do yet. Their focus has been more on establishing that long-term relationship with the dealer-
Mm-hmm.
creating exclusive relationships with them to better serve that dealer and that customer base in the market.
Can you remind us what Barletta's market share is?
Right around 10% now.
Okay.
Already. Number three in the aluminum pontoon market space, and closing in quickly on number two. That's our next hurdle.
For ref-
achieve.
For reference, Who's number two and number one?
Number two is probably right around 11. Number one, Sun Tracker , it's a value brand, very low price. Market a little differently.
I've looked at this a few times, but Winnebago's been a rather acquisitive company in the last few years. Grand Design, Newmar, obviously Chris-Craft and Barletta, and Lithionics.
Yeah.
in batteries. That said, you know, while your balance sheet's improving, I think it's fair to say it's a bit more levered than you'd like.
It comes a bit through the trough.
Yeah. For sure.
Yes. Just to be clear on the driver there.
In terms of debt reduction, you know, where does that rank in terms of your capital allocation priorities?
Yeah.
How do you see that net leverage ratio shifting over time? You mentioned getting below two times by the end of next year. What's your target?
Yeah. Our target has always been 0.9 to 1.5 net leverage. Okay. That remains our target. If we have any changes to that will be clearly announced going forward. Our strategy's been very consistent in the nine years now that I've been here in terms of our capital allocation. We continue to be an acquisitive company. That is part of our strategy, growing organically, probably the first priority, and then acquisitive to bring to life our strategy of continuing to grow in marine and in any kind of tangential industries that we would come forward with. It's gotta be synergistic. The net leverage ratio, 0.9 to 1.5.
We are focused on that, evidenced by a recent paydown of debt of another $100 million of our high-yield note to improve our gross leverage, but effectively to put our money where our mouth has been.
Mm-hmm.
in terms of improving our leverage position. Then also offering a dividend. You know, Our yield is a little elevated courtesy of the stock price erosion that we've seen in the trough here. We'll continue to focus on all of those elements of our capital allocation to produce returns for our shareholders.
Given the focus on net leverage, is M&A on the back burner at this point, or are you still entertaining opportunities?
We are committed to getting our balance sheet in better position before we execute M&A. That is what Mike and I have been stating publicly for some time now. We'll continue to evaluate our share repurchase opportunities as well. That's obviously a lever that we have pulled historically, and we'll continue to keep a very close eye on that, but also in light of that leverage goal that we have stated.
Mm-hmm
we're aiming for.
Once you do come back to the M&A environment, is there a focus there? You mentioned marine, but your focus area that you're really...
I think marine is clearly the more fragmented marketplace between marine and RV, you know. That's an opportunity for us, we believe, long term to participate in more of the marine segments. There's the geographic equation too that is. On the RV side, we are a North American RV company. You know, there is a geographic play in RV that we would always keep our eye on. I think marine is the more fragmented industry.
Mm-hmm
As a lot of the people in the room probably are aware. That will certainly get our attention. Other industries, third leg of the stool, call it, parts, service type of opportunities, in addition to other tangential industries that we think would be synergistic with RV and marine. We'll continue to evaluate those as well.
Is powersports in that, in that discussion?
We've typically stated publicly that powersports does not fit us as well. It's just a different marketplace, a very competitive marketplace with Bombardier and Polaris, most notably. I don't sitting here today, identify or see any synergies that we could bring to that space to make us compete with those very mature companies. Okay?
Mm-hmm.
I would shy away from powersports given who we are today.
Okay. We've got a breakout right after this. We've got a few minutes left here if anybody has a question or two in the audience. Yeah.
In terms of volume, you talked about the K-shape, right? Your top level customers. What are you seeing in terms of behavior in that kind of, you know, strata, right? Are you seeing anything different from like a couple years ago?
At the high end?
Yeah.
We're seeing some growth in that part of the segment, in the current early part of the season. You know, I think that that's what, generally speaking, the industry has witnessed at that high end. Decent stability there. Yeah.
What about like leasing lengths or, you know, cash purchases, anything like that?
Did you say leasing?
Leasing lengths, cash purchases, financing behavior, anything like that.
I'm not seeing a big change in that part. I think that high end, that's usually a balance sheet type buyer, not a cash flow buyer. You know, they're liquidating some balance sheet and writing a check, right, for the product.
That's what I thought.
Yeah. Yeah. Other questions?
All right. I guess we'll wrap it up there.
Very good.
Thank you, Bryan.
Wrap things early. Thanks a lot. Appreciate it, guys.
Thank you, everybody. Appreciate it.