Winnebago(WGO) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This part contains the company's unaudited consolidated financial statements and management's analysis of financial performance and condition Item 1. Consolidated Financial Statements The company's unaudited consolidated financial statements detail income, financial position, cash flows, and changes in shareholders' equity Consolidated Statements of Income Consolidated Statements of Income (Three Months Ended) | Metric (in millions) | March 1, 2025 | February 24, 2024 | | :------------------- | :------------ | :---------------- | | Net revenues | $620.2 | $703.6 | | Gross profit | $83.1 | $105.3 | | Operating income | $7.8 | $35.4 | | Net (loss) income | $(0.4) | $(12.7) | | Basic EPS | $(0.02) | $(0.43) | | Diluted EPS | $(0.02) | $(0.43) | Consolidated Statements of Income (Six Months Ended) | Metric (in millions) | March 1, 2025 | February 24, 2024 | | :------------------- | :------------ | :---------------- | | Net revenues | $1,245.8 | $1,466.6 | | Gross profit | $159.9 | $221.1 | | Operating income | $6.9 | $74.5 | | Net (loss) income | $(5.6) | $13.1 | | Basic EPS | $(0.20) | $0.45 | | Diluted EPS | $(0.20) | $0.44 | Consolidated Balance Sheets Consolidated Balance Sheets (as of) | Metric (in millions) | March 1, 2025 | August 31, 2024 | | :------------------- | :------------ | :-------------- | | Total current assets | $812.2 | $988.7 | | Total assets | $2,194.0 | $2,384.2 | | Total current liabilities | $373.8 | $404.7 | | Total liabilities | $977.7 | $1,110.9 | | Total shareholders' equity | $1,216.3 | $1,273.3 | - Cash and cash equivalents decreased significantly from $330.9 million at August 31, 2024, to $115.5 million at March 1, 2025[9] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (Six Months Ended) | Activity (in millions) | March 1, 2025 | February 24, 2024 | | :--------------------- | :------------ | :---------------- | | Operating activities | $(27.2) | $3.8 | | Investing activities | $(15.2) | $(25.5) | | Financing activities | $(173.0) | $(22.5) | | Net decrease in cash | $(215.4) | $(44.2) | | Cash at end of period | $115.5 | $265.7 | - Operating activities shifted from providing cash to using cash, primarily due to lower profitability and an increase in inventory[11][130] - Cash used in financing activities significantly increased, driven by debt repayments and share repurchases[11][132] Consolidated Statements of Changes in Shareholders' Equity - Total shareholders' equity decreased from $1,273.3 million at August 31, 2024, to $1,216.3 million at March 1, 2025[9][15] - Repurchase of common stock amounted to $53.6 million for the six months ended March 1, 2025[15] - Common stock dividends of $9.7 million were paid for the six months ended March 1, 2025[15] Notes to Consolidated Financial Statements - A new Grand Design motorhomes operating segment was established in the first quarter of Fiscal 2025 and is included in the Motorhome RV reportable segment[21] - The company's three reportable segments are Towable RV, Motorhome RV, and Marine, with financial performance evaluated based on Adjusted EBITDA[31] Key Financial Information by Reportable Segment (Six Months Ended March 1, 2025) | Segment | Net Revenues (in millions) | Adjusted EBITDA (in millions) | Assets (in millions) | | :-------- | :------------------------- | :---------------------------- | :------------------- | | Towable RV | $542.2 | $30.6 | $723.7 | | Motorhome RV | $507.3 | $7.9 | $851.3 | | Marine | $172.2 | $16.1 | $373.7 | | Corporate / All Other | $24.1 | $(17.4) | $245.3 | | Consolidated | $1,245.8 | $37.2 | $2,194.0 | - Total inventories, net, increased from $438.7 million at August 31, 2024, to $460.2 million at March 1, 2025[9][46] - Product warranty liability decreased from $78.9 million at the beginning of the six-month period to $66.7 million at March 1, 2025[52] Outstanding Debt Summary (in millions) | Debt Type | March 1, 2025 | August 31, 2024 | | :------------------ | :------------ | :-------------- | | Senior Secured Notes | $200.0 | $300.0 | | 2030 Convertible Notes | $350.0 | $350.0 | | 2025 Convertible Notes | $59.3 | $59.3 | | Total debt, gross | $609.3 | $709.3 | - The company recorded a $2.0 million loss on note repurchase for the three and six months ended March 1, 2025, related to the tender of $100.0 million of Senior Secured Notes[7][58] - Total contingent liability on repurchase agreements increased to approximately $1,750.1 million at March 1, 2025, from $1,673.7 million at August 31, 2024[83] - The effective tax rate was 8.1% for the three months ended March 1, 2025, and 21.0% for the six months ended March 1, 2025, significantly impacted by prior year's non-deductible loss on note repurchase and current period pre-tax loss[89] Earnings Per Share (Six Months Ended) | Metric | March 1, 2025 | February 24, 2024 | | :-------------------------------- | :------------ | :---------------- | | Net (loss) income | $(5.6) | $13.1 | | Basic (loss) earnings per common share | $(0.20) | $0.45 | | Diluted (loss) earnings per common share | $(0.20) | $0.44 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, liquidity, and capital resources, highlighting segment performance and strategic outlook Overview and Trends - Winnebago Industries is a leading North American manufacturer of outdoor lifestyle products (RVs, marine, battery solutions) under brands like Winnebago, Grand Design, Chris-Craft, Newmar, and Barletta Boat[96] - The business is challenged by macroeconomic conditions, including inflation and elevated interest rates, leading to lower consumer spending and reduced demand for discretionary products[97] - Decreased sales in the first six months of Fiscal 2025 were primarily due to declines in unit volume, with dealers exercising caution on stocking levels[97] - Management anticipates stabilization of consumer demand and dealer ordering patterns as the spring selling season approaches, maintaining a belief in the long-term health of the RV and marine markets[97][98] Non-GAAP Financial Measures - The company uses non-GAAP financial measures, such as EBITDA and Adjusted EBITDA, to provide supplemental information on operating performance and improve comparability across periods[100][101] - Adjusted EBITDA excludes items like acquisition-related costs, contingent consideration fair value adjustments, loss on note repurchase, and non-operating income/loss to present core operating results[103] - Management utilizes these non-GAAP measures for evaluating financial performance, measuring profitability, board presentations, acquisition assessments, and ensuring compliance with debt covenants[104] Results of Operations - Three Months Ended March 1, 2025 Compared to Three Months Ended February 24, 2024 Consolidated Performance Summary (Three Months Ended) | Metric (in millions) | March 1, 2025 | February 24, 2024 | $ Change | % Change | | :------------------- | :------------ | :---------------- | :------- | :------- | | Net revenues | $620.2 | $703.6 | $(83.3) | (11.8)% | | Gross profit | $83.1 | $105.3 | $(22.2) | (21.1)% | | Operating income | $7.8 | $35.4 | $(27.7) | (78.0)% | | Net loss | $(0.4) | $(12.7) | $12.3 | (96.7)% | | Diluted loss per share | $(0.02) | $(0.43) | $0.41 | (95.3)% | - Net revenues decreased primarily due to a reduction in average selling price per unit related to product mix, partially offset by targeted price increases[105] - Gross profit as a percentage of revenue decreased due to deleverage associated with product mix, while operating expenses increased due to incentive-based compensation and investments in growth[106] Adjusted EBITDA Reconciliation (Three Months Ended) | Metric (in millions) | March 1, 2025 | February 24, 2024 | | :------------------- | :------------ | :---------------- | | Net loss | $(0.4) | $(12.7) | | EBITDA | $21.4 | $13.9 | | Adjusted EBITDA | $22.8 | $49.8 | Towable RV Segment Performance (Three Months Ended) | Metric | March 1, 2025 | February 24, 2024 | $ Change | % Change | | :---------------- | :------------ | :---------------- | :------- | :------- | | Net revenues | $288.2M | $284.7M | $3.5M | 1.2% | | Adjusted EBITDA | $17.0M | $26.8M | $(9.8)M | (36.5)% | | Average Selling Price | $39,559 | $41,852 | $(2,293) | (5.5)% | | Unit deliveries | 7,225 | 6,747 | 478 | 7.1% | Motorhome RV Segment Performance (Three Months Ended) | Metric | March 1, 2025 | February 24, 2024 | $ Change | % Change | | :---------------- | :------------ | :---------------- | :------- | :------- | | Net revenues | $235.6M | $338.4M | $(102.7)M| (30.4)% | | Adjusted EBITDA | $5.2M | $26.0M | $(20.7)M | (79.8)% | | Average Selling Price | $209,259 | $189,246 | $20,013 | 10.6% | | Unit deliveries | 1,144 | 1,811 | (667) | (36.8)% | Marine Segment Performance (Three Months Ended) | Metric | March 1, 2025 | February 24, 2024 | $ Change | % Change | | :---------------- | :------------ | :---------------- | :------- | :------- | | Net revenues | $81.7M | $69.8M | $11.9M | 17.1% | | Adjusted EBITDA | $7.7M | $4.4M | $3.3M | 75.7% | | Average Selling Price | $79,123 | $83,346 | $(4,223) | (5.1)% | | Unit deliveries | 1,046 | 862 | 184 | 21.3% | Results of Operations - Six Months Ended March 1, 2025 Compared to the Six Months Ended February 24, 2024 Consolidated Performance Summary (Six Months Ended) | Metric (in millions) | March 1, 2025 | February 24, 2024 | $ Change | % Change | | :------------------- | :------------ | :---------------- | :------- | :------- | | Net revenues | $1,245.8 | $1,466.6 | $(220.8) | (15.1)% | | Gross profit | $159.9 | $221.1 | $(61.2) | (27.7)% | | Operating income | $6.9 | $74.5 | $(67.6) | (90.7)% | | Net (loss) income | $(5.6) | $13.1 | $(18.7) | NM | | Diluted (loss) earnings per share | $(0.20) | $0.44 | $(0.64) | NM | - Net revenues decreased due to a reduction in average selling price per unit from product mix and lower unit volume[116] - Gross profit as a percentage of revenue decreased primarily due to volume deleverage, product mix, and higher warranty experience[117] - Interest expense, net, increased due to the issuance of the 2030 Convertible Notes in the second quarter of 2024[118] Adjusted EBITDA Reconciliation (Six Months Ended) | Metric (in millions) | March 1, 2025 | February 24, 2024 | | :------------------- | :------------ | :---------------- | | Net (loss) income | $(5.6) | $13.1 | | EBITDA | $35.8 | $66.1 | | Adjusted EBITDA | $37.2 | $103.9 | Towable RV Segment Performance (Six Months Ended) | Metric | March 1, 2025 | February 24, 2024 | $ Change | % Change | | :---------------- | :------------ | :---------------- | :------- | :------- | | Net revenues | $542.2M | $615.5M | $(73.2)M | (11.9)% | | Adjusted EBITDA | $30.6M | $59.9M | $(29.3)M | (49.0)% | | Average Selling Price | $38,887 | $41,970 | $(3,083) | (7.3)% | | Unit deliveries | 13,841 | 14,593 | (752) | (5.2)% | | Dealer Inventory | 17,406 units | 18,106 units | (700) | (3.9)% | Motorhome RV Segment Performance (Six Months Ended) | Metric | March 1, 2025 | February 24, 2024 | $ Change | % Change | | :---------------- | :------------ | :---------------- | :------- | :------- | | Net revenues | $507.3M | $672.8M | $(165.4)M| (24.6)% | | Adjusted EBITDA | $7.9M | $47.3M | $(39.4)M | (83.2)% | | Average Selling Price | $202,604 | $192,108 | $10,496 | 5.5% | | Unit deliveries | 2,566 | 3,532 | (966) | (27.3)% | | Dealer Inventory | 3,784 units | 4,844 units | (1,060) | (21.9)% | Marine Segment Performance (Six Months Ended) | Metric | March 1, 2025 | February 24, 2024 | $ Change | % Change | | :---------------- | :------------ | :---------------- | :------- | :------- | | Net revenues | $172.2M | $157.1M | $15.1M | 9.6% | | Adjusted EBITDA | $16.1M | $11.6M | $4.5M | 38.9% | | Average Selling Price | $79,090 | $82,085 | $(2,995) | (3.6)% | | Unit deliveries | 2,217 | 1,980 | 237 | 12.0% | | Dealer Inventory | 3,610 units | 4,095 units | (485) | (11.8)% | Analysis of Financial Condition, Liquidity, and Capital Resources Cash Flows Summary (Six Months Ended) | Activity (in millions) | March 1, 2025 | February 24, 2024 | | :--------------------- | :------------ | :---------------- | | Operating activities | $(27.2) | $3.8 | | Investing activities | $(15.2) | $(25.5) | | Financing activities | $(173.0) | $(22.5) | | Net decrease in cash | $(215.4) | $(44.2) | - Net cash used in operating activities was $27.2 million, a decrease from $3.8 million provided in the prior year, primarily due to lower profitability and increased inventory[130] - Cash used in financing activities increased significantly due to partial settlement of high-yield notes and higher share repurchases[132] - As of March 1, 2025, the company had $115.5 million in cash and cash equivalents and an undrawn $350.0 million ABL Credit Facility[133] - Working capital decreased from $584.0 million at August 31, 2024, to $438.4 million at March 1, 2025[139] - The company repurchased approximately 951,000 shares of common stock for $50.0 million during the six months ended March 1, 2025, with $180.0 million remaining on the authorization[141] - A quarterly cash dividend of $0.34 per share was approved, payable on April 30, 2025[142] Critical Accounting Estimates and Recently Issued Accounting Pronouncements - No material changes to critical accounting policies or estimates have occurred since the end of Fiscal 2024[144] - The company is evaluating the impact of recently issued FASB ASUs (2024-04, 2024-03, 2023-09, 2023-07) and the SEC's climate-related disclosure rule (33-11275, currently stayed) on its financial statements[24][25][26][28][29][145] Safe Harbor Statement Under the Private Securities Litigation Reform Act - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from projections[146] - Key risk factors include general economic uncertainty, financing availability for dealers and purchasers, competition, inventory management, cyclicality, supplier relationships, and governmental regulation[146][148] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's exposure to market risks is primarily related to interest rate fluctuations and deferred compensation plan assets - The ABL Credit Facility is the company's only floating rate debt instrument and remains undrawn as of March 1, 2025[150] - Market risk for assets funding deferred compensation is borne by the participants in the deferred compensation program[149] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 1, 2025[151] - There were no material changes in internal control over financial reporting during the second quarter of Fiscal 2025[152] PART II. OTHER INFORMATION This part covers legal proceedings, risk factors, stock repurchases, and other required disclosures Item 1. Legal Proceedings The company is involved in routine litigation not expected to have a material financial impact - The company is involved in various legal proceedings considered ordinary and routine, with no expectation of a material adverse effect on its financial position, results of operations, or liquidity[86][153] Item 1A. Risk Factors No material changes to previously disclosed risk factors have occurred since the last annual report - No material changes have occurred from the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended August 31, 2024[154] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company details its common stock repurchase activities for the second quarter of Fiscal 2025 Common Stock Repurchases (Q2 Fiscal 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--------------- | :------------------------------- | :--------------------------- | | 12/1/24 - 1/4/25 | 418,500 | $47.79 | | 1/5/25 - 2/1/25 | — | — | | 2/2/25 - 3/1/25 | 249 | $46.31 | | Total | 418,749 | $47.79 | - As of March 1, 2025, $180.0 million remained authorized under the $350.0 million share repurchase program approved on August 17, 2022[141][155] Item 5. Other Information No Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during the quarter - No director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended March 1, 2025[156] Item 6. Exhibits A list of all exhibits filed with the report, including corporate documents, debt instruments, and certifications, is provided - Exhibits include Articles of Incorporation, Bylaws, Indentures for the 2025, 2028, and 2030 Convertible/Senior Secured Notes, Section 302 and 906 certifications, and various XBRL documents[157] SIGNATURES The report is certified by the official signatures of the company's principal executive and financial officers - The report was signed on March 27, 2025, by Michael J. Happe (Chief Executive Officer, President) and Bryan L. Hughes (Chief Financial Officer and Senior Vice President)[161]