On Thursday, June 20, Winnebago’s latest financial results were released. The company’s fiscal 3rd quarter report is a basic reflection of the RV industry in general. If you’re making motorhomes, you’re taking a bath. Building towables? Maybe you’re treading water.
“Market conditions remain challenged”
Winnebago’s President and CEO, Michael Happe, delivered what could at best be described as a mixed bag of news. “While outdoor industry market conditions remain challenged given inconsistent retail patterns and sustained dealer discipline relative to field inventory levels,” Happe said, “we are generally pleased with the resiliency of our portfolio, as our teams balance the pursuit of long-term share, profitability and customer satisfaction across our premium brands.”
Perhaps the most important statistic from the Winnebago financial report is that of EBITDA. That’s earnings before interest, taxes, depreciation, and amortization. The figure is an attempt to show the company’s generated cash profit. Buried several paragraphs into the report, Winnie revealed, “Consolidated Adjusted EBITDA was $58.0 million, a decrease of 39.8%, compared to $96.4 million last year.”
That’s a considerable whack to profits.
Winnebago’s latest financial results are reflected in these other statistics
- Revenues of $786.0 million
- Gross profit of $118.2 million, representing 15.0% gross margin
- Diluted earnings per share of $0.96; adjusted diluted earnings per share of $1.13
- Adjusted EBITDA of $58.0 million, representing 7.4% adjusted EBITDA margin
- Cash and cash equivalents of $318.1 million at quarter-end, up 2.6% from year-end fiscal 2023
Headwinds or hurricane?
Happe’s report included, “Driven by our Towable RV and Marine segments, we delivered sequential consolidated margin growth in the third quarter. Notwithstanding difficult retail headwinds in the Motorhome segment, our Towable RV business generated higher revenue versus the same period a year ago.” Indeed, for the RV segment, motorhomes didn’t just encounter “difficult retail headwinds,” they got hit with a hurricane.
Compared to last year’s 3rd quarter, net revenues from motorhomes were down 20%, while the company’s adjusted EBITA has dropped more than 50%.
CEO Happe was quick to find the company’s silver lining in the towable division. “Our Towable RV business generated higher revenue versus the same period a year ago,” he stated. That silver lining was pretty thin, showing a mere six-tenths of a percent increase in revenue. At the same time, adjusted EBITDA for the towable sales was still down, 22%. Much better than the motorhome market, but nothing to cheer about.
Beating away at those “difficult retail headwinds,” meant doing something—and quick. Happe acknowledges, “We have made strong progress during the fiscal year to reduce aging RV field inventory in a fiscally responsible manner; our teams continue to work closely with our dealer partners to monitor the complexion of their inventory and match production and shipments with retail demand,” Happe said.
Translated: Get rid of the backlog. In the motorhome division, Winnie weeded backlogs down by nearly 56%. In the towable division, backlogs were whittled down by a little more than 35%. Some might say there’s room to go. In terms of dollar values of backlog, Winnebago is showing backlogs of $354.9 million in motorhomes, and $153.1 million in towable units.
And the future?
How does the company see its future? Happe noted, “The combination of affordability and innovation remains a focal point of product development at Winnebago Industries – valued differentiation on respected brands our consumers can trust,” Happe said, and highlighted “recent introductions of economical travel trailers from our Grand Design and Winnebago brands.”
The company is also betting on the new line of motorhomes under the Grand Design brand. Industry watchers aren’t betting the farm on the future release of Lineage. One former Winnebago insider describes Lineage as, “Another Winnebago with a new name stuck on it.” Time will tell if consumers have the same sentiment.
Since Winnebago’s latest financial results are of greatest interest to investors, some should be happy with this Happe note. “We are also pleased to have returned more than $29 million to investors this quarter through share repurchases and dividends, while maintaining investments in future growth initiatives and managing a healthy balance sheet.”
##RVT1162b
Perhaps if ALL Manufacturers would build them better, they may sell more.
Exactly why we are still hanging on to our 2013 Newmar Mountain Aire. We would be in the market for new, but paying the grossly inflated prices and then dealing with all the issues – fighting and waiting for warranty reairs? Forget that!
Same here. We’re holding onto a 2015 fifth wheel because its more reliable than the new stuff they are putting out. It’s my hope the parks that enforce the 10 year rule recognize this movement and the reason behind it and begin to stretch 10 to 15.
Same here. 2017 Winnebago Travato Class B with 110K miles now. After 8 years of good times and extensive mods to make it perfect for us, I’ll buy a new engine and transmission if I have to before I buy a new rig!
I have totally rebuilt or replaced five engines and one transmission over the years because I liked the vehicle which included two camper vans. Much better than a new vehicle payment.
The hemorrhaging continues. It can be seen out here in the campgrounds and RV Parks too. Occupancy is down considerably compared to the last 2-3yrs. A silver lining could be finding a site is easier now.
We can only hope that is the case in this situation
It’s not just the RV and campground industry. Resort bookings for homes at popular beach locations are down too.
As inflation takes a bigger bite, things will get more difficult for the RV industry. Increased fueling costs and site prices climbing upward is putting a damper on RV traveling.. Midrange hotels and motels should see an increase on their bottom line.
Somehow, we in Colorado are not seeing either increased fueling costs or a drop in midrange hotel/motel rates. We now have gasoline, and even diesel, prices under $3.00/gallon at multiple stations. And I have personally experienced motel rates at Holiday Inn Express in tourist areas of $205-$300/night! Those are the lowest Colorado fuel costs in years and highest ever rates for chain motels.
Thank You for some facts rather than rants.
Prices have skyrocketed since COVID-19 and quality suffered as well maybe a significant reducttion in MSRP is in order.
You missed the Critical Audit Matter note on page 31 in Winnebago’s 10-K SEC filing for 2023 filed earlier this year. Their outside auditors flagged their warranty accruals, $98 million dollars, as a critical matter because the majority of that warranty reserve is for their Grand Design brand.
Not motorhomes, not boats, not motorhomes and boats, just their Grand Design trailers.
Grand Design RV, LLC (“Grand Design”) was founded in 2013 and acquired by the Company in November 2016 and makes up the majority of the Company’s $98 million product warranty accrual as of August 26, 2023.
I wonder what fault(s) that could be.
Warranties are soul crushing to management. Especially in corporate investor meetings like this one with a Q&A that is as staged as a Q&A at a Whitehouse presser with pre-arranged questions from pre-arranged journalists in a pre-arranged order.
Boy, they can sure put together a bunch of gobbledygook in their financial reports in an effort to make it sound good.
Yeah, there was so much “spinning” of the numbers in that report I had to sit down! He should be in politics!
Winnebago WAS a name that was respected for quality and service. Not anymore. Inferior quality, poor customer service & little regard for customer issues or concerns.
Thank you, Russ and Tina! 🙂 The game is managing financial expectations. It has an expensive entry fee and much can be made or lost, depending on how well one plays. Spinning information is standard practice in this game. 🤔😯🙁 Thanks again, have a great weekend, and safe travels! 🙂
The focus on quarter to quarter or worse yet, year over year profits is unproductive and unrealistic. A better measure would be to draw a straight line from the pre Covid years.
For now, “cash is king” and Winnebago is smart to focus on maintaining a healthy balance sheet. That their cash position is improving is indeed good news and an indication of their ability to stay in business as the industry weeds out the competition and those with no path to remaining viable businesses.
We have 2018 TMC Hurricane that we haven’t had any issues with (pre-COVID of course) and would like to trade up to a diesel but the troubles people are encountering on some of the RV YT channels (Liz Amazing) scares us to death! So we are now looking at diesel’s pre-Covid.