Winnebago Industries, Inc. (WGO) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a mixed picture with some positive developments, like product innovation and market share growth in certain segments. However, the Q&A section reveals significant concerns, such as declining profitability, lack of specific guidance, tariff-related risks, and a tempered market outlook. The reduction in EPS guidance and revenue forecast further contribute to a negative sentiment. Despite efforts to manage inventory and improve operational efficiency, the overall sentiment leans negative due to these uncertainties and challenges.
Key Financial Performance
Net Revenues Declined modestly in the quarter due to mix, as new lower ASP Grand Design Transcend series travel trailers outpaced the broader portfolio in terms of units sold. This mix shift was partially offset by targeted price increases.
Gross Margin Declined 130 basis points from Q3 last year, primarily due to higher warranty experience and product mix, partially offset by operational efficiencies compared to prior year.
Adjusted EBITDA Margin Declined 140 basis points year-over-year, primarily attributable to the lower gross margin.
Towable RV Segment Net Revenues Lower due to a shift in product mix with the addition of new Grand Design travel trailers, primarily the Transcend series. This drove a 2.5% increase in segment unit volume.
Towable RV Segment Adjusted EBITDA Margin Declined from the prior year, primarily due to higher warranty experience and deleverage, including that associated with product mix, partially offset by operational efficiencies.
Motorhome RV Segment Net Revenues Down from the prior year, primarily due to lower unit volume related to current market conditions, partially offset by product mix. Strong performance of Newmar and the successful launch of Grand Design Motorhome's new Lineage brand contributed positively to the product mix, but declines in Winnebago branded Motorhome shipments offset this.
Motorhome RV Segment Adjusted EBITDA Margin Decreased compared to the prior year, primarily reflecting higher discounts and allowances, deleverage, and operational inefficiencies associated with the Winnebago-branded Motorhome business.
Marine Segment Net Revenues Increased by 15%, driven primarily by higher unit volume and targeted price increases, partially offset by product mix. Unit volume was up more than 11% year-over-year in the quarter.
Marine Segment Adjusted EBITDA Margin Increased compared to the prior year, primarily driven by targeted price increases and leverage. This increase was partially offset by product mix and higher warranty expense.
Free Cash Flow Negative $81.7 million for the 9-month period, driven primarily by operational inefficiencies at Winnebago-branded Motorhome, including excess inventory, as well as strategic investments in the Grand Design motorhome business.
Net Debt-to-EBITDA Ratio At the end of Q3, it was 4.8x. The company aims to reduce this ratio to its historical target range of 0.9x to 1.5x as profitability recovers.
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Operating Highlights
Newmar Freedom Aire: Entered the Compact Class C market as part of the 2026 model year lineup. Dealer ordering begins mid-summer, with shipments expected by early fiscal Q1.
Grand Design Lineage VT Class B: Initial shipments began in Q3, built on the Ford Transit platform.
Winnebago Towables Thrive: Launched as a new travel trailer model with a starting MSRP below $50,000, offering features typically found in larger, more expensive trailers.
Chris-Craft Catalina 31: New center console powerboat launched, receiving positive dealer response.
Barletta 2026 Model Year Lineup: Includes helm redesigns for Lusso and Aria series, refined Cabrio, and new premium color options for the Reserve series.
RV Market Share: Winnebago gained share in Class A gas, Class A diesel, and Class C categories. Grand Design's Lineage series achieved a 1.6% retail share within 12 months, targeting $100M+ revenue in fiscal 2025.
Towable Market Share: Grand Design reversed a 20 basis point decline, achieving gains in Travel Trailer segment (up 60 basis points in April).
Marine Market Share: Barletta increased its U.S. aluminum pontoon market share from 8.8% to 9.2% over the trailing 12 months.
Operational Efficiency Initiatives: Comprehensive capacity utilization analysis, manufacturing footprint optimization, supply chain evolution, and organizational restructuring to streamline operations and reduce redundancies.
Winnebago Motorhome Business Transformation: Actions include lowering field inventory, aligning production schedules, reducing discretionary expenses, and refreshing product lines to improve margins and profitability by fiscal 2026.
Tariff Mitigation: Efforts to offset tariff-related costs through supplier collaboration, alternate sourcing, and modest price increases.
Debt Reduction: Reduced debt by $159M, including a $100M cash tender for senior secured notes and $59M for convertible debt extinguishment.
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Risk or Challenges
Macroeconomic Uncertainty: Growing macroeconomic uncertainty has led to a notable downshift in RV activity from consumers and dealers, contributing to lower RV margins and reduced demand.
Market Conditions: Soft market conditions have resulted in lower margins in both Towable and Motorhome segments, with disproportionate impacts on the Winnebago branded Motorhome business.
Operational Inefficiencies: Operational inefficiencies in the Winnebago-branded Motorhome business have led to excess inventory, higher warranty expenses, and lower profitability.
Inventory Management: The Motorhome segment requires further destocking to improve the quality and quantity of field inventory, which has been a drag on financial performance.
Tariff Cost Pressure: Expected tariff cost pressures are anticipated to impact profitability, with a potential net risk of $0.50 to $0.75 diluted EPS for fiscal 2026.
Economic Headwinds: Higher borrowing costs and economic headwinds are pressuring consumer demand, leading to a decline in North America RV retail sales.
Production Adjustments: Reduced production schedules to align with softening dealer demand are impacting revenue and profitability.
Debt and Leverage: High net debt-to-EBITDA ratio of 4.8x and the need for deleveraging are financial challenges.
Warranty Costs: Higher warranty expenses are negatively affecting gross margins and profitability.
Competitive Pressures: The need to refresh product lines and improve operational efficiency highlights competitive pressures in the market.
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Guidance & Outlook
RV Market Outlook: The RV Industry Association has reduced its wholesale shipment forecast for 2025, anticipating challenges to continue through the remainder of the calendar year. The company expects further destocking in the Motorhome segment to improve inventory quality and quantity. For calendar 2025, the company has lowered its industry forecast for wholesale RV shipments to a range of 315,000 to 335,000 units, with a midpoint of 325,000 units.
Operational Adjustments: The company is taking steps to lower field inventory, improve working capital, align production schedules to market demand, reduce discretionary expenses, and enhance product value. These actions are part of a margin recapture plan aimed at rebuilding profitability starting in fiscal 2026.
Fiscal 2025 Guidance: The company has reduced its full-year fiscal 2025 adjusted EPS guidance to a range of $1.20 to $1.70 per diluted share and consolidated revenue forecast to a range of $2.7 billion to $2.8 billion. Q4 Motorhome sales are expected to increase year-over-year due to the Grand Design RV Lineage lineup, but EBITDA will remain challenged due to the Winnebago brand turnaround. Towable sales are expected to be flat to slightly down, with improved profitability, and Marine will show growth momentum with modest profitability improvements.
Tariff Impact: The company anticipates modest price increases in the low to mid-single digits to offset tariff-related costs in fiscal 2025. For fiscal 2026, the potential net risk from tariffs is estimated to impact diluted EPS by $0.50 to $0.75, depending on mitigation actions and market dynamics.
Long-Term Market Trends: The company anticipates meaningful growth across its portfolio as market conditions normalize and the industry moves towards a stable, mid-cycle environment. The growing appeal of the outdoor lifestyle among younger and more diverse consumers supports this outlook.
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Shareholder Return Plan
Dividend Payment: Year-to-date, the company has returned $29.3 million in dividends to shareholders. The $0.34 per share cash dividend payable today represents the 44th consecutive quarterly dividend payment.
Share Repurchase: Year-to-date, the company has returned $50 million in share repurchases to shareholders. However, share repurchase activity has been paused for the second half of the fiscal year to allocate capital to debt reduction.
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Key Q&A
Q:What steps are being taken to address challenges in the Winnebago-branded Motorized business?
A:The company has significantly reduced production to avoid pushing units to the field with higher sales allowances or discounts. They are focusing on moving existing inventory profitably, lowering working capital, and improving cash flow. Additionally, they are working on enhancing the value proposition of legacy products, improving cost structure and operational efficiency, and developing new products. Strategic options for the business are being evaluated, but the company remains committed to the Winnebago brand.
Q:What factors contributed to the 500 basis points year-over-year decline in Motorized profitability?
A:The decline is attributed to deleverage and the discounting and allowances necessary to push products into the market.
Q:What is the outlook for the first half of fiscal year 2026?
A:The company refrained from providing specific guidance for fiscal year 2026 but noted that the RV industry has tempered its outlook for the remainder of calendar year 2025 due to a lack of recovery. They will provide more information during the October earnings call.
Q:What is the impact of tariffs on the company’s products and pricing?
A:The company is facing tariff-related risks, with less than 10% of their bill of materials volume coming from outside the country but a higher dollar exposure. Tariffs impact motorized chassis, steel, aluminum, electronics, and appliances. Model year 2026 pricing reflects some tariff costs, but there remains unmitigated tariff risk. The company is working with suppliers to mitigate these costs and will provide updates in October.
Q:What is the strategy for the Winnebago Motorhome segment regarding pricing and innovation?
A:The company is focusing on improving the value proposition of Winnebago-branded Motorhomes and introducing innovative products. They acknowledge the competitive discounting environment and aim to enhance the value of legacy and new products.
Q:What are the current demand trends in the RV market?
A:The first three weeks of June showed a negative retail comp compared to the previous year, but slightly better than May. The market remains stable to slightly better, but there is no significant positive turnaround yet.
Q:What is the company’s perspective on tax proposals related to interest rate deductibility?
A:The company is monitoring tax proposals, including floor plan interest deduction for dealers and auto loan interest deductibility. They believe these changes could benefit dealers and consumers, making RV purchases more affordable.
Q:What has been the consumer reaction to price increases related to tariffs?
A:The company has not yet observed meaningful volume impacts from tariff-related price increases. Dealers have sufficient inventory to continue selling without fully reflecting these price increases.
Q:What is driving the success of the Marine segment, particularly Barletta and Chris-Craft?
A:Chris-Craft has introduced lower-priced models like the Sportster series and maintained dealer inventory discipline. Barletta has gained market share with its Aria lineup and continues to innovate. Both brands are operationally strong and focused on delivering value to dealers and customers.
Q:What is the company’s approach to managing dealer inventory and achieving inventory turns?
A:The company aims for 2 inventory turns as a long-term goal and is focused on disciplined inventory management. They are sacrificing some shipment share to maintain healthy dealer inventory levels and avoid excessive discounting.
Q:What is the outlook for wholesale and retail RV shipments?
A:The company expects wholesale shipments to align closely with retail, with a slight potential for inventory destocking. They are targeting a midpoint of 325,000 units for wholesale shipments.
Q:What is contributing to the success of the Newmar brand in the Motorized segment?
A:Newmar has strong leadership, a healthy product line, and disciplined dealer inventory management. They have expanded their product lineup with new models like the Freedom Aire and continue to gain market share in the Class A diesel and Super C categories.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance for fiscal year 2026, citing the need to wait until the October earnings call. They also refrained from detailing the exact impact of tariff-related price increases on consumer demand and did not provide a clear breakdown of the $0.50 to $0.75 tariff cost impact by product category.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ASP Grand
Altobello Raymond
America company
America sale
America strength
Chris Craft
Inc Research
Lineage lineup
Lineage series
Motorhome shipment
Newsweek
Research Division
Thrive
aluminum pontoon
capacity utilization
dedication
improvement profitability
increase product
increase segment
inefficiency Winnebago
inventory calendar
investment
market demand
mix efficiency
model lineup
month Grand
point month
product value
production schedule
resilience
resource
result month
revenue unit
trailing month
transformation Winnebago
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volume price
WGO Transcript
Winnebago Industries, Inc. (WGO) Q1 2026 Earnings Call Transcript
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The earnings call summary indicates strong financial metrics, particularly in the Motorhome RV segment, with optimistic guidance and operational improvements. The Q&A section further supports this with management's focus on market share growth, disciplined pricing, and margin improvement initiatives. While there are some challenges, such as soft Marine sales and tariff risks, the overall sentiment is positive, driven by strategic growth areas and cost management. The market cap suggests moderate volatility, leading to a predicted positive stock price movement of 2% to 8%.
Winnebago Industries, Inc. (WGO) Q4 2025 Earnings Call Transcript
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The earnings call summary and Q&A indicate mixed signals: strong operational performance and improved leverage, but reduced fiscal 2025 guidance and tariff challenges. Positive factors include margin improvement and shareholder returns, but market share pressures and flat retail expectations limit growth optimism. The market cap suggests moderate sensitivity, leading to a neutral stock price prediction.
Winnebago Industries, Inc. (WGO) Q3 2025 Earnings Call Transcript
Unknown6-25
The earnings call summary presents a mixed picture with some positive developments, like product innovation and market share growth in certain segments. However, the Q&A section reveals significant concerns, such as declining profitability, lack of specific guidance, tariff-related risks, and a tempered market outlook. The reduction in EPS guidance and revenue forecast further contribute to a negative sentiment. Despite efforts to manage inventory and improve operational efficiency, the overall sentiment leans negative due to these uncertainties and challenges.
Earnings call transcript: Winnebago Q2 2025 sees stock surge on EPS beat
Unknown3-27
The earnings call shows mixed results: modest revenue growth in the Towable RV segment but a decline in Motorhome RV revenues. Gross margin declined YoY but improved sequentially. The company is actively repurchasing shares and maintaining dividends, which is positive for shareholder returns. However, the net debt to EBITDA ratio is high, and warranty expenses are increasing. Q&A reveals management's reluctance to provide specifics on tariffs and inventory, indicating uncertainty. The market cap suggests less volatility, leading to a neutral stock price prediction.
WGO Slides
WGO Report
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