Winnebago Industries, Inc. (WGO) Earnings Call Transcript & Summary

Good day, and welcome to the Winnebago Industries, Inc. 2020 Annual Meeting. I would now like to turn the conference over to Stacy Bogart. Please go ahead.

Good afternoon, everyone. Before we get started, there are a few housekeeping items I would like to cover related to today's virtual shareholder meeting. If you have not voted and wish to vote or if you wish to revoke a previously submitted proxy, you may do so at this time by clicking the Vote Here button on the screen. You will need your control number provided on your proxy card or Notice of Internet Availability to vote your shares. In addition, logging in with your control number allows you to submit questions. We have reserved time after the formal meeting to address any questions related to today's agenda. If you would like to submit a question, please type it into the box at the bottom of your screen. For any general business questions about the company, please contact our Investor Relations department at (641) 585-3535 or by e-mailing ir.winnebagoind.com. I will now turn the meeting over to David Miles, Chair of the Board of Directors of Winnebago Industries.

Thank you, Stacy. Good afternoon, everyone, and welcome to Winnebago's 2020 Annual Meeting of Shareholders. On behalf of our directors, officers and employees, thank you for joining us. Present at today's meeting are my fellow directors, Sara Armbruster, Maria Blase, Chris Braun, Bob Chiusano, Bill Fisher, Mike Happe, Rick Moss and John Murabito. I'd also like to introduce Amanda Guanzini from Deloitte & Touche, our independent auditors for fiscal year 2020. Amanda is our new audit partner, and we welcome her and note that she is available for questions. I will now turn the meeting over to our CEO, Mike Happe, to provide an update on the company.

Thank you, Dave. Good afternoon, everyone, and thank you for joining us today. I'll take several minutes to discuss the year, our fiscal 2021 enterprise strategies, highlight our 2020 performance and make several remarks regarding our refreshed enterprise brand and progress made on corporate responsibility, and then turn the meeting back over to Stacy to proceed with the formal portion of the event. Fiscal year 2020 was unique for many of us, both personally and professionally, as we witnessed the incredible health, societal and economic consequences of the worst global pandemic in more than 100 years and engaged in robust dialogue on the topic of social justice and political division. In 2020, we also witnessed a renewed commitment to the great outdoors by North Americans at recently unseen levels. Our company's purpose to help our customers explore the outdoors, enabling extraordinary mobile experiences as they travel, live, work and play, became more relevant to our broader society as we all collectively searched for safe ways to have extraordinary experiences and access the physical and mental health benefits that spending time outdoors provides. The outdoor lifestyle and the outdoor lifestyle industry continued to see record interest and participation as calendar 2020 progresses. Thanks to the incredible resolve of our Winnebago Industries team across our 4 premium brand platforms and enterprise functions, the disruption of normalcy caused by the COVID-19 pandemic was just part of the narrative of our fiscal 2020 year, but not the defining aspect. Winnebago Industries' employees, now more than 5,700-plus strong, were steadfast in their commitment to safely achieving our strategic goals and delivering on our golden threads of quality, innovation and service in everything we do. Winnebago Industries is a collection of strong and forward-leaning outdoor lifestyle brands. As we continue to grow and diversify our portfolio with premium products and brands, it has become essential to have a single, unifying identity for the enterprise brand that is better able to identify the enterprise, Winnebago Industries, separately from the Winnebago flagship product brand, and inspire how the entire organization, inclusive of all our brands, works together. This enterprise brand and the story that unites us, one rooted in a collective purpose that offers clarity to our teams, customers, stakeholders and industry around our product brand stories and the company. The refreshed enterprise brand, Winnebago Industries, with its tagline, Be Great, Outdoors, is more than a new look and a few talking points. We believe it will inspire and unite us around a common spirit of delivering extraordinary experiences for everyone we serve. Now I mentioned at our Investor Day held in New York City last November that our 5 key enterprise strategic priorities, initially established back in 2017, generally continue to serve us well, and we remain committed to them. As we move forward, the foundational elements of those strategies still apply, but we have modified each of them slightly as we begin our fiscal 2021 year. They are as follows: Strengthen an inclusive high-performance culture; build exceptional outdoor lifestyle brands; create a lifetime of customer intimacy; drive operational excellence and portfolio synergy; utilize technology and information as business catalysts. By staying focused on executing against these key strategies, Winnebago Industries delivered approximately $2.4 billion in revenue in fiscal 2020, which represents a 4-year compound annual growth rate of 25%. Cash preservation was of the utmost importance during fiscal 2020, given the manufacturing shutdown during our fiscal third quarter. By implementing critical cash preservation measures and pivoting our entire portfolio to a confirmed order production system, our operating cash flow grew to $270 million, an impressive 4-year compound annual growth rate of 50%. Finally, despite the impact of COVID-19 during fiscal 2020, adjusted EBITDA and earnings per share continue to grow at a healthy pace, growing at a 4-year compound annual growth rate of 28% and 11%, respectively. Now while fiscal 2020 organic revenue of $2 billion was flat versus fiscal 2019, we continue to grow overall RV market share by an impressive 1.3 percentage points, which is now over 11%, primarily due to organic sales outpacing industry retail sales. Conversely, Winnebago Industries' retail sales grew 15%, or 14% organically during fiscal 2020. By executing on our strategies of growing our premium branded portfolio, we have increased our RV market share at Winnebago Industries from 3% in 2016 to over 11% in 2020. Additionally, order backlogs in each of our business units reached record levels at the end of fiscal 2020. We expect continued market share growth by leveraging what each of these premium brands stand for in the marketplace, quality, innovation and service. Lastly, I want to highlight progress we have made on corporate responsibility. Winnebago Industries lives our purpose: To help our customers explore the outdoors, enabling extraordinary mobile experiences as they travel, live, work and play, through our commitment to corporate responsibility. We have made progress on our corporate responsibility journey while navigating the unique complexity of 2020. And we continue to work collectively to support the environmental, social and governance pillars of corporate responsibility. This includes efforts to promote environmental sustainability; ensure the absolute health and safety of our employees, communities and customers; support a culture that embraces diversity, equity and inclusion in our industry and places of work; and conduct our business with an unwavering commitment to integrity at all times. These efforts are described in our second annual corporate responsibility report which was published earlier this month. And it represents our commitment to progress the environmental, social and governance issues that impact our world and most directly affect the long-term sustainability of our business. I encourage you to read the report if you have not already done so. In closing, we are pleased with our 2020 results and the many related accomplishments, but there is much work ahead of us in our pursuit of being the premier outdoor lifestyle company. I would like to personally thank our 5,700-plus employees for their commitment to our company every day. We know that customers, new and experienced, have flocked to the outdoors and are recreating in record numbers. We are broadly confident that many of these consumers will continue to do so for many years, and we do not see retail momentum for RVs and boats slowing down anytime soon. Looking ahead to 2021, we will continue to focus on the 5 enterprise strategies I outlined earlier. We believe that our talented employees, premium brands and our commitment to delivering exceptional quality, innovation and service will drive growth in the years ahead. I look forward to sharing our progress later this week on Friday, December 18, when Bryan Hughes and I communicate our fiscal 2021 first quarter results and as we deliver results throughout the course of fiscal 2021. Thank you for your time this afternoon. I will now turn the meeting back over to Stacy Bogart.

Thank you, Mike. Let me begin with a few procedural matters. The agenda and rules of conduct for this virtual annual meeting have been made available on your screen, and we ask that you comply with the rules of conduct while we proceed. I encourage any shareholder who has not voted or wishes to revoke a previously submitted proxy to do so at this time. As I mentioned earlier, please use the Vote Here button now if you wish to vote at this time. The Notice of the Annual Meeting was mailed beginning on November 2, 2020, to shareholders of record on October 20, 2020. As a result, the meeting is being held pursuant to proper notice. A quorum is present in person and by proxy, so we will proceed with the business of the meeting. Proxy ballots will be tabulated and the preliminary announcement of results will be made at the end of the formal portion of the meeting. Mike Happe and I are the designated proxies and will vote the shares for which proxies are received in accordance with the authority granted. Tony Carideo is serving as Inspector of Election. We have 4 proposals on the meeting agenda today. Details for these proposals were provided in your proxy materials. The first item under consideration is the election of 3 Class 3 directors, consisting of Sara Armbruster, William Fisher and Michael Happe for a 3-year term ending at the annual meeting in 2023. The second item is the advisory vote to approve the compensation of the company's named executive officers. The third item is the ratification of the selection of Deloitte & Touche as the company's independent registered public accounting firm for fiscal 2021. The fourth item is the amendment to the company's articles of incorporation to increase the company's authorized common stock. I now declare the polls closed and ask the election inspector to prepare a preliminary tabulation of the vote. Tony, will you please report the preliminary tabulation of the votes?

The preliminary tabulation shows that a majority of the shares represented at this meeting have approved the election of each of the director nominees. A majority of the shares represented at this meeting have approved, on an advisory basis, the company's executive compensation. A majority of the shares represented at this meeting have approved the ratification of the selection of Deloitte & Touche as the company's independent registered public accounting firm for fiscal 2021. And finally, a majority of the shares represented at this meeting have approved the amendment, the company's articles of incorporation to increase the company's authorized common stock.

Thank you, Tony. The formal portion of this meeting is now concluded, and the formal meeting is adjourned. We have received no questions. This concludes the 2020 Annual Meeting of Shareholders. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.