Winnebago(WGO) - 2024 Q2 - Quarterly Results

Financial and Operational Highlights Winnebago's Q2 FY2024 revenues decreased 18.8% to $703.6 million, reporting a $12.7 million net loss due to market softness and refinancing | Metric | Value | | :--- | :--- | | Revenues | $703.6 million | | Gross Profit | $105.3 million | | Gross Margin | 15.0% | | Net Loss | $12.7 million ($0.43 per share) | | Adjusted Diluted EPS | $0.93 | | Adjusted EBITDA | $49.8 million | | Adjusted EBITDA Margin | 7.1% | - The company's performance was in line with expectations, navigating market softness and constrained wholesale shipments as dealers managed inventory in a high interest rate environment[5] - Barletta, the company's pontoon boat brand, increased its U.S. aluminum pontoon market share to 7.9%, up 80 basis points year-over-year[3] - The company successfully completed a $350 million offering of convertible senior notes to refinance its 2025 maturities, enhancing financial flexibility[3][16] Consolidated Financial Results Q2 FY2024 consolidated revenues decreased 18.8% to $703.6 million, resulting in a $12.7 million net loss due to lower sales and a note repurchase charge | Metric | Q2 FY2024 | Q2 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $703.6M | $866.7M | -18.8% | | Gross Profit | $105.3M | $146.8M | -28.3% | | Gross Margin | 15.0% | 16.9% | -190 bps | | Operating Income | $35.4M | $76.8M | -53.8% | | Net (Loss) Income | ($12.7M) | $52.8M | N/A | | Adjusted Diluted EPS | $0.93 | $1.88 | -50.5% | | Adjusted EBITDA | $49.8M | $88.4M | -43.7% | - The decline in gross profit margin was attributed to deleverage and higher warranty experience compared to the prior year[6] - Selling, general, and administrative (SG&A) expenses decreased by 3.0% to $64.2 million, mainly due to lower incentive-based compensation[7] - The reported net loss of $12.7 million included a significant pre-tax charge of $32.7 million ($1.12 per share) related to the loss on repurchase of 2025 convertible senior notes[9] Segment Performance All segments experienced revenue declines and Adjusted EBITDA margin contraction, with Marine seeing the steepest drop amid challenging market conditions Towable RV Segment Towable RV revenue decreased 16.9% to $284.7 million due to lower volume and price reductions, with Adjusted EBITDA margin contracting to 9.4% | Metric | Q2 FY2024 | Q2 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $284.7M | $342.5M | -16.9% | | Adjusted EBITDA | $26.8M | $39.3M | -31.8% | | Adjusted EBITDA Margin | 9.4% | 11.5% | -210 bps | | Backlog | $222.3M | $278.2M | -20.1% | - The revenue decline was driven by lower unit volume due to market conditions and a reduction in average selling price (ASP) from product mix and price reductions[13] Motorhome RV Segment Motorhome RV revenue declined 16.2% to $338.4 million, with Adjusted EBITDA margin compressing to 7.7% due to volume, discounts, and operational challenges | Metric | Q2 FY2024 | Q2 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $338.4M | $403.8M | -16.2% | | Adjusted EBITDA | $26.0M | $42.5M | -38.9% | | Adjusted EBITDA Margin | 7.7% | 10.5% | -280 bps | | Backlog | $452.2M | $872.7M | -48.2% | - The decline in Adjusted EBITDA margin was primarily due to deleverage, higher warranty experience, increased discounts, and operational efficiency challenges[16] Marine Segment Marine segment revenue plummeted 38.2% to $69.8 million, with Adjusted EBITDA margin contracting to 6.3% due to sharp volume decline and higher discounts | Metric | Q2 FY2024 | Q2 FY2023 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $69.8M | $112.9M | -38.2% | | Adjusted EBITDA | $4.4M | $14.4M | -69.7% | | Adjusted EBITDA Margin | 6.3% | 12.8% | -650 bps | | Backlog | $102.9M | $238.5M | -56.9% | - The decrease in revenue was primarily driven by a decline in unit volume related to market conditions, unfavorable product mix, and higher discounts and allowances[17] Balance Sheet and Cash Flow Winnebago reported $694.8 million in total outstanding debt and $25.2 million in Q2 operating cash flow, successfully refinancing 2025 convertible notes | Metric | As of Feb 24, 2024 | | :--- | :--- | | Total Outstanding Debt | $694.8M (net) | | Working Capital | $649.0M | | Q2 Cash Flow from Operations | $25.2M | - The company successfully refinanced its 2025 convertible senior notes with a new $350 million offering, underscoring its strong operating performance and credit profile[16] Business Outlook Winnebago introduced mid-cycle organic growth targets, projecting long-term growth and market share gains based on normalizing RV inventory and consumer interest | Mid-Cycle Organic Growth Target | Value | | :--- | :--- | | Net Revenues | $4.5B - $5.0B | | Gross Margin | 18.0% - 18.5% | | Adjusted EBITDA Margin | 11.0% - 11.5% | | Free Cash Flow | $325M - $375M | | North American RV Market Share | > 13% | | U.S. Aluminum Pontoon Market Share | 13% | | Organic Non-RV Revenue Mix | 15% - 20% | - The financial targets are based on market assumptions of North American RV retail volume between 425,000-450,000 units and U.S. aluminum pontoon retail volume between 60,000-63,000 units[18] - Management is encouraged by data indicating that RV inventory levels are returning to an equilibrium stage entering the second half of fiscal 2024[19] Financial Statements Detailed financial statements show a Q2 net loss from lower revenues and a note repurchase charge, with stable assets and a net cash decrease from operations and financing Condensed Consolidated Statements of Income Q2 FY2024 reported a net loss of $12.7 million on $703.6 million revenue, primarily due to a $32.7 million loss on note repurchase | (in millions) | Three Months Ended Feb 24, 2024 | Three Months Ended Feb 25, 2023 | | :--- | :--- | :--- | | Net Revenues | $703.6 | $866.7 | | Gross Profit | $105.3 | $146.8 | | Operating Income | $35.4 | $76.8 | | Loss on note repurchase | $32.7 | $0.0 | | Net (Loss) Income | $(12.7) | $52.8 | | Diluted (Loss) EPS | $(0.43) | $1.52 | Condensed Consolidated Balance Sheets As of Feb 24, 2024, total assets were $2.43 billion, with cash at $265.7 million and long-term debt, net, increasing to $694.8 million from refinancing | (in millions) | Feb 24, 2024 | Aug 26, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $265.7 | $309.9 | | Total current assets | $1,002.2 | $996.7 | | Total assets | $2,433.9 | $2,432.4 | | Liabilities & Equity | | | | Total current liabilities | $353.2 | $396.0 | | Long-term debt, net | $694.8 | $592.4 | | Total liabilities | $1,109.3 | $1,064.3 | | Total shareholders' equity | $1,324.6 | $1,368.1 | Condensed Consolidated Statements of Cash Flows Six-month operating cash flow was $3.8 million, with $25.5 million used in investing and $22.5 million in financing, resulting in a $44.2 million net cash decrease | (in millions) | Six Months Ended Feb 24, 2024 | Six Months Ended Feb 25, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3.8 | $16.8 | | Net cash used in investing activities | $(25.5) | $(48.6) | | Net cash used in financing activities | $(22.5) | $(21.1) | | Net decrease in cash and cash equivalents | $(44.2) | $(52.9) | | Cash and cash equivalents at end of period | $265.7 | $229.3 | Non-GAAP Reconciliation Non-GAAP measures, including Adjusted Diluted EPS of $0.93 and Adjusted EBITDA of $49.8 million, reflect core operating performance by excluding non-recurring items Reconciliation (in millions) | Reconciliation (in millions) | Three Months Ended Feb 24, 2024 | | :--- | :--- | | Net (loss) income | $(12.7) | | Interest, Taxes, D&A | $26.6 | | EBITDA | $13.9 | | Loss on note repurchase | $32.7 | | Other adjustments | $3.2 | | Adjusted EBITDA | $49.8 | Reconciliation (per share) | Reconciliation (per share) | Three Months Ended Feb 24, 2024 | | :--- | :--- | | Diluted (loss) earnings per share | $(0.43) | | Loss on note repurchase | $1.12 | | Amortization | $0.19 | | Other adjustments | $0.12 | | Tax impact of adjustments | $(0.07) | | Adjusted diluted earnings per share | $0.93 | - Management uses non-GAAP measures like Adjusted EBITDA to evaluate financial performance, measure operational profitability, and assess performance relative to competitors[48][49]