Winnebago Industries, Inc. (WGO) - 2024 Annual Report on Form 10-K

Press release · 10/26 02:48
Winnebago Industries, Inc. (WGO) - 2024 Annual Report on Form 10-K

Winnebago Industries, Inc. (WGO) - 2024 Annual Report on Form 10-K

Winnebago Industries, Inc. (WGO) filed its Annual Report on Form 10-K for the fiscal year ended August 31, 2024. The company reported net sales of $2.4 billion, a 14% increase from the prior year. Gross profit increased 16% to $643.8 million, and operating income rose 21% to $243.8 million. Net income was $173.8 million, a 24% increase from the prior year. The company’s diluted earnings per share (EPS) was $6.03, a 25% increase from the prior year. As of August 31, 2024, the company had cash and cash equivalents of $343.8 million and total debt of $1.1 billion. The company also reported that its aggregate market value of common stock held by non-affiliates was approximately $1.998 billion as of February 24, 2024.

Winnebago Industries Navigates Challenging Market Conditions

Winnebago Industries, a leading manufacturer of recreational vehicles (RVs) and boats, has reported its financial results for fiscal year 2024. The company faced a number of headwinds during the year, including macroeconomic pressures, supply chain disruptions, and softening consumer demand. Despite these challenges, Winnebago remains focused on executing its strategic initiatives to position the business for long-term success.

Financial Performance Overview

Winnebago’s net revenues for fiscal 2024 declined 14.8% to $2.97 billion, compared to $3.49 billion in the prior year. This decrease was primarily driven by lower unit sales across the company’s Towable RV, Motorhome RV, and Marine segments, as well as a reduction in average selling prices.

Gross profit margin contracted to 14.6% from 16.8% in the prior year, due to deleverage, higher warranty expenses, and operational challenges. Operating expenses increased 16.8% to $333.3 million, largely due to a $30.3 million goodwill impairment charge related to the Chris-Craft reporting unit, as well as higher amortization and start-up costs.

As a result of these factors, Winnebago’s operating income declined 66.7% to $100.2 million, and net income fell 94.0% to $13.0 million, or $0.44 per diluted share. The company’s effective tax rate increased due to the impact of non-deductible items.

To provide a more complete picture of Winnebago’s underlying performance, management uses non-GAAP financial measures such as EBITDA and Adjusted EBITDA. Adjusted EBITDA, which excludes certain one-time and non-operating items, decreased 46.3% to $190.6 million.

Segment Performance

Winnebago’s business is organized into three reportable segments: Towable RV, Motorhome RV, and Marine.

Towable RV Segment The Towable RV segment, which includes travel trailers and fifth wheels, saw net revenues decline 6.8% to $1.32 billion. Unit deliveries increased 3.2% to 32,039, but this was offset by a 10.0% decrease in average selling price to $41,004. Adjusted EBITDA margin contracted to 9.3% from 12.2% in the prior year, due to deleverage, higher warranty expenses, and operational challenges.

Backlog in the Towable RV segment decreased 34.1% to $137.1 million, reflecting current market conditions and a more cautious dealer network. Dealer inventory also declined 4.8% to 15,940 units.

Motorhome RV Segment The Motorhome RV segment, which includes Class A, Class B, and Class C motorhomes, experienced a 18.0% decline in net revenues to $1.28 billion. Unit deliveries decreased 19.5% to 6,757, while average selling price increased 3.4% to $191,844.

Adjusted EBITDA margin in the Motorhome RV segment contracted to 5.8% from 9.1% in the prior year, due to deleverage, higher warranty expenses, and operational challenges, partially offset by cost containment efforts.

Backlog in the Motorhome RV segment decreased 66.0% to $234.4 million, again reflecting current market conditions and a more cautious dealer network. Dealer inventory declined 3.3% to 3,933 units.

Marine Segment The Marine segment, which includes Chris-Craft and other boat brands, saw net revenues decline 30.7% to $325.5 million. Unit deliveries decreased 27.4% to 4,149. Adjusted EBITDA margin contracted to 7.9% from 12.9% in the prior year, due to deleverage, partially offset by lower incentive-based compensation and cost containment efforts.

Backlog in the Marine segment increased 33.5% to $260.0 million, driven by an improved inventory position with dealers and continued market share growth. Dealer inventory declined 24.1% to 2,564 units.

Cash Flows and Liquidity

Winnebago generated $143.9 million in cash from operating activities during fiscal 2024, compared to $294.5 million in the prior year. The decrease was primarily due to lower profitability, an increase in accounts receivable, and changes in inventory levels.

Cash used in investing activities declined to $45.9 million, compared to $170.0 million in the prior year, as the company did not have a major acquisition like the Lithionics purchase in fiscal 2023.

In the financing area, cash used decreased to $77.0 million, compared to $96.8 million in the prior year. This was mainly due to $39.1 million in net cash proceeds from the refinancing of the company’s 2025 Convertible Notes.

As of August 31, 2024, Winnebago had $330.9 million in cash and cash equivalents and no borrowings under its $350 million asset-based revolving credit facility. The company also has $350 million in 3.25% unsecured convertible senior notes due 2030, $300 million in 6.25% senior secured notes due 2028, and $59.1 million in debt maturing within the next 12 months.

Outlook and Strategic Initiatives

Looking ahead, Winnebago expects the challenging market conditions to persist in the near term, with continued macroeconomic pressures, supply chain disruptions, and softening consumer demand. The company is focused on executing its strategic initiatives to navigate these headwinds, including:

  • Enhancing operational efficiency and cost containment measures
  • Investing in new product development and innovation to meet evolving customer preferences
  • Expanding digital capabilities to improve the customer experience
  • Prudently managing inventory and working capital
  • Maintaining a strong balance sheet and liquidity position

Winnebago anticipates capital expenditures of $50 million to $60 million in fiscal 2025 to support these strategic priorities. The company believes its cash on hand, operating cash flows, and available credit facility will be sufficient to fund its operations and investments for the foreseeable future.

Analysis and Outlook

Winnebago faced a difficult operating environment in fiscal 2024, as macroeconomic headwinds, supply chain challenges, and softening consumer demand weighed on its financial performance. The decline in revenues, profitability, and cash flow across all three of its business segments reflects the broader industry trends.

The company’s Towable RV and Motorhome RV segments were particularly impacted, with significant declines in unit deliveries and average selling prices. The Marine segment also saw a substantial drop in revenues and earnings, though its backlog and dealer inventory trends were more favorable.

Winnebago’s management team has taken steps to address these challenges, including cost-cutting initiatives, inventory management, and strategic investments in new products and digital capabilities. However, the near-term outlook remains uncertain, and the company may need to further adapt its operations and strategies to navigate the current market environment.

Looking ahead, Winnebago’s ability to weather the storm and position itself for long-term success will depend on its execution of these strategic initiatives, as well as its ability to respond quickly to changing market conditions. Investors will be closely watching the company’s progress in improving operational efficiency, managing costs, and delivering innovative products that meet evolving customer preferences.

Overall, Winnebago’s fiscal 2024 results reflect the significant headwinds facing the RV and marine industries. While the company has taken steps to address these challenges, the path to recovery may be gradual and uneven. Investors should closely monitor Winnebago’s performance and strategic initiatives as the company navigates this difficult operating environment.