Ladies and gentlemen, thank you for standing by and welcome to the First Quarter 2021 Winnebago Industries Earnings Conference Call. At this time, all participant lines are in a listen-only mode. [Operator Instructions] After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference may be recorded. I'd now like to hand the conference over to your host today, Mr. Steve Stuber, Vice President of Finance. Please, go ahead, sir.

Thank you, Liz. Good morning, everyone. And thank you for joining us today to discuss fiscal 2021 first quarter earnings results. I'm joined on the call today by Michael Happe, President and Chief Executive Officer; and Bryan Hughes, Vice President and Chief Financial Officer. This call is being broadcast live on our website at investor.wgo.net, and a replay of the call will be available on our website later today. The news release with our first quarter results was issued and posted to our website earlier this morning. Before we start, I'd like to remind you that certain statements made during today's conference call regarding Winnebago Industries and its operations may be considered forward-looking statements under securities laws. The company cautions you that forward-looking statements involve a number of risks and are inherently uncertain in a number of factors, many of which are beyond the company's control, could cause actual results to differ materially from these statements. These factors are identified in our SEC filings, which I encourage you to read. With that, I would now like to turn the call over to our President and CEO, Michael Happe. Mike?

Thank you, Steve, and good morning, everyone. I hope those joining us today are having a safe and healthy start to this holiday season. We know this is a busy time of year. And we greatly appreciate your interest in Winnebago Industries and for taking the time to join us. I will start off the call this morning with an overview of the key drivers of our first quarter performance, before turning it over to Bryan Hughes, who will discuss our financial results in more detail. Then, I will offer some closing thoughts, and we will conclude with a Q&A session. In short, Winnebago Industries had a fantastic first quarter, marking a very strong start to what we expect will be a remarkable fiscal 2021. We gained RV market share, grew our consolidated top line by approximately 35%, expanded gross margins 390 basis points and grew operating income 256%. None of this would have been possible without the exceptional work of our world-class Winnebago Industries team. And I and Brian want to thank them for their continued commitment and dedication. There were three key drivers of our performance in the first quarter that I will expand upon today. These include, number one, the continued strong in-consumer demand we are seeing for our outdoor lifestyle products. Number two, Winnebago Industries' unmatched portfolio of leading brands and new product innovation, and third, our commitment to driving operational excellence. On our fiscal 2020 fourth quarter call, we spoke about how the pandemic spurred consumers to combine the imperative of the safety of their families with their strong desire to be immersed in the experiences they could control. And consequently, they continue to flock to the outdoor recreation lifestyle our products offer. The expanding appeal of the outdoor lifestyle has contributed greatly to the momentum we have established in recent quarters and will be essential to our success in fiscal 2021. We continue to be very pleased with the strong retail growth we see across our portfolio. On a trailing three-month basis, as of October 2020, our consolidated RV market share is 12%, plus 120 basis points over the same period a year ago, of which 70 basis points represents organic growth. Drivers of this continued growth includes our Towable segment, driven by our Grand Design RV fifth wheel and travel trailer products, our extensive Class B Winnebago-branded Motorhome lineup and the Newmar Class A Motorhome products. I recently reviewed our RV retail comparisons for the first half of December 2020 versus a year ago and can assure you that our retail momentum is still strong and consumers continue to shop and buy RVs. A survey we commissioned in November, the Padilla Spotlight Survey, illustrated just how widespread the draw of the outdoors has been this year. In calendar 2020, 68% of American consumers under the age of 55 participated in an outdoor activity, such as camping, boating, hiking at a location away from their home or visiting a state or national park. Overall, 60% of the U.S. population pursued an outdoor activity in 2020. And for 31% of those consumers, it was their first time participating in an outdoor activity. We are excited about the thousands of new consumers, who have joined the RV and marine lifestyle over the last several months. In addition to helping drive the growth we have seen, these new entrants join a community of RV consumers who upgrade every three to five years, providing an important source of future growth. The second major driver of our performance in the first quarter was the strength of our unmatched portfolio of premium outdoor lifestyle brands. Over the past several years, Winnebago Industries has strategically expanded our offering beyond the iconic Winnebago brand, bringing on Grand Design, Chris-Craft, and most recently, Newmar, which celebrated its first anniversary as part of the Winnebago Industries family on November 8. Each of these unique brands, are tied together with the golden threads of quality, innovation and service. We have maintained our commitment to investing in each of our premium brands to ensure continued innovation that resonates within consumers. We are pleased that our brand's aspirational positioning and appeal have enabled us to capture Motorhomes and Towable market share gains once again. The many design changes and feature upgrades made in calendar 2020, in addition to key product launches continue to fuel our growth. Winnebago branded Motorhomes introduced the Class B Solis, the Class A Diesel Journey and the compact Class C EKKO. The many redesigns within the Grand Design RV lineup and the introduction of the Transcend Xplor Travel Trailer will drive further market share gains. Winnebago-branded Towables introduced the Hike and all-terrain travel trailer that features a patented exoskeleton. Newmar continues to gain share in the Class A Motorhome segment with new innovative products and features included in coaches, such as the popular Canyon Star introduced in spring of 2020. And lastly, Chris-Craft momentum continues as well, driven by the 35-foot Calypso introduced in summer of 2020 and the 24-foot Calypso recently introduced this fall. Looking forward, I am energized by the fact that we have a very active new product development pipeline. Extensive new product development is not only in the businesses mentioned above, but also in our specialty vehicles business unit, where we continue to sell our all-electric Class A product in the market today for many specialty applications. Our RV industry leading knowledge of these alternate power systems and the critical integration required with various subsystems is informing and benefiting in active product electrification roadmap that has been and continues to be in progress, across our RV platform. Finally, the third key driver of our first quarter performance was operational excellence, reflecting the incredible work of the Winnebago Industries team. I deeply believe that our people differentiate Winnebago Industries more than any other factor. Their resolve through historically difficult times, their flexibility and their determination to advance our business through strong operations is an enduring source of pride. Numerous cost saving and productivity initiatives taking place across Winnebago Industries enterprise are starting to positively impact our results, enabling higher levels of sales and profitability. In the Winnebago branded Motorhome business, we continue to drive manufacturing efficiencies through continuous improvement activities, relocated diesel operations from Oregon to Iowa. We also moved to a fully make-to-order business model and rationalized the portfolio to exit less profitable brands and revenue streams. Related to the Newmar acquisition, we are well on track to deliver the committed annual synergies that will be fully realized in fiscal 2022 and beyond. And finally, our enterprise operations organization and specifically, the corporate strategic sourcing team, continues to deliver value by leveraging our ever growing scale, and successfully navigating us through significant challenges, such as tariffs, and increased demand for -- our partners are feeding our manufacturing campuses, as effectively as this dynamic environment allows. Before I turn the call over to Bryan, I wanted to mention that earlier this month Winnebago Industries unveiled a refreshed corporate enterprise brand and a new tagline, Be Great, Outdoors. This reinforces that while our company is made up of many great brands, our core values and foundational strengths create a company stronger than the sum of its parts, much more than a new look. I believe our corporate enterprise brand identity will further inspire and unite our team around a common spirit of delivering extraordinary experiences to everyone we serve. With that, I will turn the call over now to Winnebago Industries' Chief Financial Officer, Bryan Hughes. Bryan?

Thanks Mike and good morning everyone. First quarter consolidated revenues were $793.1 million, an increase of 34.8% compared to $588.5 million for the fiscal 2020 period. Revenues excluding Newmar were $674.4 million, reflecting an increase of 22% compared to the fiscal 2020 period, driven by continued strong end consumer demand. Recall that our prior year Q1 included roughly three weeks of Newmar results, post the closing of that transaction. And so therefore, the 22% organic revenue we are disclosing, excludes Newmar sales in their entirety from both this year and last year. In future quarters, we will no longer be speaking to reported versus organic sales insofar as it relates to Newmar. As a reminder, 100% of Newmar is reported in the results of our Motorhome segment. We achieved very strong profitability in the first quarter of fiscal 2021. Gross profit margin increased 390 basis points to 17.3%, while adjusted EBITDA margin increased 420 basis points to 11.3% compared to 7.1% for the fiscal 2020 period. This significant margin expansion was driven by operating leverage, improved pricing, including lower discounts and allowances, and Motorhome segment productivity initiatives. Reported earnings per diluted share were $1.70 per share compared to reported earnings per diluted share of $0.44 in the same period last year. Adjusted earnings per diluted share were $1.69 in the first quarter or an increase of 131.5% compared to the same quarter in fiscal 2020. Consolidated adjusted EBITDA was $89.3 million for the quarter compared to $42 million last year, resulting in an increase of 112.4%. The increases in both adjusted earnings per diluted share and adjusted EBITDA were driven by strong unit growth across the RV portfolio, lower discounts and allowances, pricing actions and productivity initiatives in the Motorhome segment, and the addition of Newmar in the case of EBITDA. Note that adjusted EBITDA and adjusted EPS excludes the impact of a $3.6 million net gain from the sale of a portion of our Junction City, Oregon assets. And that this gain is adjusted for in the Motorhome segment as well as our consolidated results. Now, I'll turn to our segment performance, starting with Towables. Revenues for the Towables segment were $454.9 million for the first quarter, up 33.3% over the prior year, driven by strong end consumer demand for our Grand Design RV and Winnebago product line. Winnebago Industries' unit share of the North American total market in a trailing three month basis through October 2020 was 10.9% or an increase of 80 basis points over the same period last year. Segment adjusted EBITDA margin of 13.9% increased 340 basis points, primarily due to lower discounts and allowances and operating leverage during the quarter. Next, let's turn to our Motorhome segment. In the first quarter, revenues for the Motorhome segment were $322.4 million, up 42.7% from the prior year, driven by the addition of Newmar, and strong Winnebago Class B products, as evidenced by our Class B rolling 3 retail unit market share of 49.6% through October 2020. Excluding Newmar from this year's and last year's results, segment revenues were $203.6 million, representing an organic increase of 7% over the prior year. Adjusted EBITDA margin increased 530 basis points to 9.4%, driven by pricing actions, productivity initiatives, operating leverage and favorable mix. Motorhome productivity initiatives are driven by the savings associated with the closure of the Junction City, Oregon facility, the transition to a make-to-order business model in the Winnebago-branded Motorhome business, as well as several other operating improvements and lean activities, that our business has pursued in the past year, but also has been working to transform the operational environment of this business for the past three-plus years. While we are anticipating inflationary pressures and are always conscious of competitive pressures that may weigh on our net pricing equation, as well as some lingering supply chain inefficiencies, these benefits, as mentioned, should provide a level of sustained profitability that is notably above the 4% to 5% yield in EBITDA that this segment has generated over the past three years. We are pleased to see this meaningful improvement. Now, turning to the balance sheet. As expected, our leverage ratio, net debt to adjusted EBITDA continued to decline and is now 1.5 times at the top end of our targeted range of 0.9 times to 1.5 times, driven by strong EBITDA generation, and a cash balance of $272.9 million. Total liquidity, including our untapped ABL is now approximately $465 million. Cash flow from operations was an outflow of $2.7 million in the first quarter of fiscal 2021. While profitability was strong in the quarter, this was offset by increases in working capital, most notably in inventory as levels have increased as a result of some supply chain inconsistencies and also in response to the high-growth in sales we are seeing, related to very strong dealer orders and our heightened backlog position. We continued our disciplined approach to capital allocation during Q1, investing in our businesses to deliver new and innovative products that drive organic growth, accumulating and maintaining cash balances in a manner that allows us to return to our targeted net debt to EBITDA ratio, maintaining a healthy liquidity position and returning cash to shareholders. During the first quarter, we returned $10 million to shareholders in the form of share repurchases. We paid a dividend in September. And earlier this week on December 16, our Board of Directors approved a quarterly cash dividend of $0.12 per share payable on January 27, 2021. That concludes my review of our quarterly financials. And with that, I will now turn the call back to Mike to provide some closing comments. Mike, back to you.

Thanks very much, Bryan. I would like to provide a bit of color on current industry trends and our confidence looking to the remainder of the 2021 fiscal year. We ended the first fiscal quarter with exceptionally strong retail momentum and record backlogs in our Motorhome, Towables and Marine businesses. With the second fiscal quarter underway, we are seeing that the typical seasonality of our business is more muted than normal, as strong demand is continuing into the holiday season and dealer inventories remain extremely low. In our fiscal 2021, we believe industry retail will grow in the mid-single digits. And while industry wholesale shipments will grow approximately 30%. Note that, our fiscal industry wholesale shipment projection considers and aligns with the RVIA calendar year 2021 industry forecast of approximately 20-plus percent. We support the RV industry association forecast, and have a growing view that it could be increasingly conservative, as retail trends continue at elevated levels and the supply chain raises its output. Our performance in the first fiscal quarter demonstrates that Winnebago Industries is well-positioned to continue to execute on our enterprise strategy of building a premier outdoor lifestyle company, and maximizing value for our end customers, dealers, employees and shareholders. As I mentioned earlier, we are confident that the favorable dynamics in the market, as more Americans discover the wonder of the outdoor lifestyle, will persist and continue to drive share gains and strong performance throughout the fiscal year. In addition to the strategic and financial value creation, we constantly work towards. Winnebago Industries is also deeply committed to creating value in our communities. Earlier this month, we released our second annual 2020 Corporate Responsibility Report, outlining our environmental, social and government’s performance progress and the key elements of our COVID-19 response. The unprecedented events of 2020 shined an indelible light on significant challenges we face as a society and the requirements of corporations like Winnebago Industries, to show up for our people and communities. This includes prioritizing above all else, their health and safety, and ensuring we cultivate a diverse and equitable environment, in which all members of Winnebago Industries feel a sense of belonging. I encourage everyone on this call to spend some time with our detailed Corporate Responsibility Report. In addition to the continued progress we made in minimizing waste, exploring alternative energy sources and reducing our safety incident rate, what I'm most proud of is the way Winnebago Industries and our employees stepped into care for our communities, customers and each other during this very challenging year. Our deepest hope is that the 2021 calendar year brings greater certainty, unity, equity, health and safety. Our commitment to advancing these ideals will continue. In addition to a steadfast focus on ESG throughout the remainder of fiscal 2021, Winnebago Industries will be focused on maintaining our strong market and financial momentum. We are confident that the favorable market dynamics and the unique appeal of our products and brands will continue to drive market share gains and strong financial results. Along with all of you, Winnebago Industries is cheering for the science and the health care communities leading the charge to end this tragic pandemic and distribute vaccines as quickly and safely as possible. We are also deeply grateful to the frontline workers in our communities, who continue to fight this virus each day. That concludes our prepared remarks this morning. Thank you for your time. I will now turn the line back over to the operator to take questions.

[Operator Instructions] Our first question comes from Craig Kennison with Baird. Your line is now open.

Good morning. Thanks for taking my question. I wanted to ask about the Motorhome performance that EBIT margin is really astounding here, and it's going to be tough for us to model going forward, I think. But maybe you could just walk us through the puts and takes of that significant increase? And then shed any light you can on how sustainable it may be?

Yeah. Good morning, Craig. Thanks for your question. As you and probably others on the call know, we have been working extremely hard for several years to improve the market and financial performance in the Motorhome business. And while we think there is significant runway ahead of us in both the Winnebago and the Newmar brands, we are pleased with the performance of that business in recent periods and especially the bottom line performance, which we're able to share with all of you today. There's been a lot of work being done in terms of operational productivity, driving inefficiency out of the business, rationalizing and improving the product line, strengthening dealer relationships and innovating in emerging markets such as the Class B van segment. And I think this quarter's results in addition to obviously the inclusion of Newmar's results reflect momentum that we feel is starting to build in that segment. Craig, I'll turn it over to Bryan to give you some more color though, on some of the specific the margin accretion that you saw.

Yeah. Thanks, Mike. Craig, we've talked a lot about the variety of decisions that we've made over the years. We referenced on the call today, in fact, the closure of the West Coast diesel production and moving that back to Northern Iowa. But – and some of the product line rationalization and emphasis on innovation, the Revel, the Class B lineup more broadly speaking. It's not just the Revel. Its several products now, and I think the EKKO Compact Class C continues to reflect that innovative spirit and capability of the Winnebago Motorhome team. And it's also some of the lean philosophies that the team has brought to – the layout, the space utilization in Northern Iowa looks very different today than it did three years ago even. They've gone from three production lines down to two production lines and increased the throughput, changed the flow of materials pretty significantly just as a couple of examples. Just in fiscal year 2020, they had over 100 I'd call it, meaningful cost savings initiatives that drove some savings. Just as a couple of examples in our Class B facility which is in Lake Mills, Iowa. We used to outsource some recovering of seats from the chassis that came in. We figured out a way to reconfigure our line, make it more effective and efficient from a space utilization perspective, and we in-source that recovering. That project alone saved, we think $300,000, $350,000. We invested in a CNC machines, in Chris-Craft and in-sourced some additional work there that project too, probably $400,000 of savings. But over hundred of these projects that the team executed just in fiscal year 2020 and these activities are what we are starting to see now materializing the results. Okay, we saw an improvement, as you probably noted in Q4, in the margins with the EBITDA margins. And then we saw another nice increase in Q1 here. Now, not to say that we won't face some headwinds, of course, ahead we know that there is some moving inflationary pressures and just as an example, we think that the supply chain has done a nice job of serving the industry. It's been a challenging ramp-up. They're dealing with all the COVID impacts like every other company. But overall, they're doing a very nice job in our supply chain team internally that Mike referenced is likewise, doing a great job. So hopefully, that helps provide some color, Craig, to why we're seeing the improvements here in Q4 and now Q1 and why we are raising our expectations, I guess, going forward.

Yeah, that's terrific. Helps a lot. And then just one follow-up, just in terms of retail. To what extent are you shipping units today that are pre-sold by dealers, making it that much harder to restock the channel? Thank you.

Craig, I think the number one issue in preventing us from restocking the channel at levels that we prefer to is the retail activity in the market. And dealers continue to see strong traffic even as the fall has turned into early winter here. And as I mentioned in our prepared remarks, our retail results in early December here are quite positive. So we really can't tell specifically how many of the orders our dealers have placed with us are pre-sold in all of our businesses. Newmar and Chris-Craft have better visibility to some of that because of the customized nature of some of their products, which are configured specifically for certain end consumers. But we do believe that a number of dealers have retail orders in hand and they are simply waiting for delivery of those products when they hit their lots for those consumers. But above and beyond that, we believe that consumers in the outdoor spaces continue to shop for RVs and boats and then you will see elevated retail for probably some time here. And so I think that's our probably biggest headwind to building back the dealer inventory is ultimately trying to get that wholesale shipment number to keep exceeding retail at a consistent clip. Bryan mentioned and I mentioned in our comments that we feel much better about the supply chain and the ability of the supply chain to keep up with our future manufacturing forecast and production schedules. So yes, our field inventory is still low. We work on that every day with our dealers to try to prioritize and make sure the product is going to the right place. But we are -- we continue to increase output to try to address that for the rest of fiscal 2021.

Great. Thank you.

Our next question comes from Scott Stember with CL King. Your line is now open.

Good morning guys and congrats on a great start to the year.

Thank you, Scott. Good morning.

Going back to the supply issues, it sounds like, obviously, sequentially, things are improving. Is there one side of the business that's filling it a little bit more, whether it's Towables, Chris-Craft, or Motorized?

Yes. Good morning Scott. I would tell you there is only one business, in my opinion which saw a material impact due to the supply chain in our fiscal 2021 first quarter and that was Newmar. Newmar did have a particular challenge with a vendor on some critical components and that did not allow us to reach our shipment potential in that quarter. We have been working extremely diligently with this specific supplier on their challenges and their constraints. And we will most likely continue to work through this issue for our fiscal 2021 second quarter, but we see things normalizing there in the back half of our fiscal year. Listen, in all other businesses, day-to-day, we are always managing and navigating the timeliness of the delivery of the components. What I have been telling people here recently is that our supply chain challenges have been impacting process, but not results here in the last 90 to 100 days. It is definitely causing us to do some rework or some workarounds in our manufacturing process, but our teams are heroically doing wonderful work, ultimately, still to get the products completed in a high-quality fashion and out the door. So, by and large, we are navigating it pretty well.

Got it. That's great. And going back to Motorized, your backlog is up tremendously and obviously, some of that is Newmar. Can you maybe just talk about the organic backlog or non-Newmar backlog? Just trying to get a sense of how some of these newer products like Class C, EKKO and some of these other items, just trying to get a sense of what we could expect from a shipment perspective as we go forward?

Thank you, Scott. I appreciate the question. We -- obviously, we won't share specific numbers with you on any particular product, but we are seeing a strong backlog on the Winnebago-branded Motorhome business and to be fair, we're seeing strong backlog on the Newmar business as well. But the Winnebago Brand, as Bryan mentioned and I mentioned as well in our prepared comments, has introduced some really nice new products as of late. Further models and floor plans on the Solis and next-generation versions of the Revel, a new Class A diesel product called the Journey, and this compact Class C called the EKKO, which we are extremely excited about. And so we have seen dealer receptivity to those products and candidly, just the momentum that we have in the marketplace, continue to increase. So yes, we are pleased with the backlog on our Motorhome segment on both brands, but especially the Winnebago-branded Motorhome business, which as we've talked, we've been working on so diligently for the last number of years to restore some vitality to that business. And listen, we'll stay humble and paranoid, but we are optimistic about some of the momentum that is beginning to present itself in that business.

Got it. And just one quick last question on the stickiness of new customers coming into the outdoor market, as the COVID vaccine works its way into the population. Just talk about your expectations there?

Scott, we certainly understand why people would ask that question. And we want to be clear that we're rooting for a vaccine as hard as any other company in the world, and we want to see the vaccinations happen effectively and quickly, so that many things can return to normal, including some of our own physical operations as well. That being said, I personally believe that 2020 was only the first wave of new customer interest in the outdoors that you'll see, and you'll see another wave in 2021. Families certainly flocked to the outdoors in 2020 because of the safety that they desired because of the lack of other activities that they could invest in. But we are seeing increases in interest before the pandemic and in multiple customer segments, younger buyers, more diverse buyers, people using our products for different work or use cases. We've talked about work from anywhere. We simply believe that there is enough net positive interest in RVs and candidly boating that even as vaccinations unfold across the country that there will continue to be retail momentum in the market for some time to come. And oftentimes, I ask people that ask that question, not to you this morning, Scott, but to others, well, have you RV'd lately and have you been in the campgrounds talking to people about why they RV. And they're not our RV'ing because there's not a vaccine. There are RV'ing being because they love it. The other thing that we're obviously optimistic about is that the wholesale environment for our business for, we believe fiscal 2021 and fiscal 2022, for sure, should be positive as well. We believe it will take literally until the end of fiscal 2022 in order for inventory levels at the dealers to return – to turn rates that they desire. And so we will be working obviously hard to fulfill that demand as much as we can.

Got it. That was very helpful. Thanks, guys.

Thank you, Scott.

Thanks, Scott.

Our next question comes from Gerrick Johnson with BMO Capital Markets. Your line is now open.

Great. Thank you. Good morning. I have two questions and related to expenses and sustainability. First of all, on gross margin, can you quantify or try to quantify the basis point impact from lower discounts, because I think investors out there assume at some point things will normalize, will get back to a normal sort of situation and those allowances and discounts will come back. So, first of all, what is the impact on gross margin year-over-year from lower discounts and allowances?

Yes, Gerrick, I don't think we're going to give a quantified answer to that. I would say that it was certainly a material contributor to the improvement. But you can't just point at the market, in my opinion, as it relates to that. And that it will dissipate or go away, as you said, markets normalize. I think some of that’s certainly also driven by innovation, by product mix, the quality of the product and kind of the underlying improvements that we're seeing there. So, I hesitate to provide a quantification of that for several reasons, but it's really more for that latter part of my answer, which is, I don't want people to assume that it's just going to dissipate or go away, when the market normalizes beyond this recent push.

Okay. Those are all fair points. Appreciate that, Bryan. Then on SG&A, there's got to be some SG&A that's disappeared in this quarter. It shows open house, travel, things like that. How much have you benefited from that? And then, how much of that should come back at some point in the future? Because, I think, we will probably have an open house next year, hopefully.

Yes. I'll start out with just a couple of reminders first. Last year's Q1, as you might remember, had transaction costs in it and so -- of $10 million. That certainly influenced last year's number, be mindful of that. Also, this year includes in SG&A that gain on sale. And so, be mindful of that as well as you analyze SG&A. I agree with your comment though, that our company, as well as, I'm sure, most companies are seeing some different spending patterns in the area of more discretionary spending, whether that be travel, open entertainment, other events that we are all doing virtually instead of in-person and that contributes to a savings as well. And so, how much of that returns when we get back to, call it, a normal, I think will depend, company-by-company. And what that new normal does look like. I think we'll expect to hang on to some of the synergies or the savings that we've realized. But hopefully, that color helps you think about the numbers.

Okay, okay. Thank you, Bryan. Thank you, Mike.

You bet.

Our next question comes from Mike Swartz with Truist. Your line is now open.

Hey, Good morning, guys. Just question on gross margin in a quarter, 17%, I think that might have been a record for the company, going back and looking at my numbers back a decade plus. So, I guess, how do we think about that number going forward? And, I think, Mike, you even made reference to seasonality has changed. There's not as much this year. So just in terms of overhead and some of the things you've laid out, is 17% a good number to use, going forward?

Well, good morning, Mike. We are extremely pleased with the number that you referenced. And we recognize, though, that each quarter is a little bit different, certainly because of seasonality and because of the rhythm of the business. But I'll probably answer this in a different way than Bryan would. I have high expectations that our teams will continue to search and drive for improved profitability in each of their businesses, while continuing to compete effectively for market share. We have still not probably ever shipped the perfect unit nor have we probably ever created the perfect business environment in order to optimize our efficiencies. And so, we are extremely pleased especially with the Motorhome market segment, margin -- segment and its margin. But that being said, I can look into that business and see countless opportunities to continue to improve that in the future. So there are things we can control. And then there are factors, obviously, that we can't control, whether it's inflation or competitive activities or the like. So we believe we are raising the ceiling on profitability within our business because of the investments we've made in the past with high profitability businesses like Grand Design, certainly Newmar. At the time that we acquired, it was accretive to the Winnebago-branded Motorhome business and we will continue to work across the portfolio to increase margins. So, obviously, we're not going to probably foreshadow what second or third quarter will, or tend to be for overall margin. But I can tell you most of what we saw in the Motorhome segment, specifically this quarter, we believe can and should be sustainable in the future, but our teams will have to go execute that and work hard to make sure that, that happens.

Okay. That's helpful. And then just a second question in speaking of the Motorized business. I think when you announced the closure of Junction City, you had anticipated about $4 million in savings, I think by fiscal year 2021. We're now there. Maybe give us a sense of -- is that $4 million number still good? And then just in context of the general productivity initiatives that you put through in that business. What are we talking about there in total savings or efficiencies, including the Junction City piece of that?

Well, Mike, we've certainly met and maybe even exceeded a little bit of the productivity benefits of bringing the Junction City operations back to North Iowa. And we're still not completely out of the Junction City campus. The sale that Bryan referenced in his comments is really only a portion of the campus out there. So we have some work to do to get rid of the next half of that and completely be out of that region. But that, combined with the continuous improvement opportunities in the Motorhome business that we're seeing, candidly, is probably producing now on an annualized basis well into eight figures of productivity benefits for the Motorhome business versus the way it ran two, three years ago. So listen, there's a lot going into this Motorhome profitability, pricing, mix, again, lack of discounts and allowances certainly leveraged SG&A by that team. But operational excellence and productivity has been a big part of the journey as well. And we also intend to see a sustained working capital benefit to this business now as we pivoted our business to a make-to-dealer order model, earlier in fiscal 2020. And we've already seen a significant decrease before the first quarter of fiscal 2021 in working capital on Winnebago Motorhomes. And once we kind of clear through this some of the supply chain inconsistencies, I think you'll see the company be effective in managing its working capital via its operations as well in the future.

Thanks a lot Mike. That's all for me.

Thank you, Mike.

Our next question comes from Fred Wightman with Wolfe Research. Your line is now open.

Hey, guys. Good morning. Mike, you and Bryan have both alluded to inflationary costs, a few different times on the call. Could you just touch specifically on the raw material outlook for steel and aluminum just given what those have done and what that could do to margins going forward?

Yeah. I won't comment on steel and aluminum specifically. As we look forward at our -- across our raw materials and our components, we expect some inflationary pressures, as I think you would all expect as well. I don't expect that it will be significant beyond inflationary pressures. We continue to work with our supply base on cost savings initiatives, certainly with them directly and then internally. And so I think inflationary pressures across the board of 1.5%, maybe as high as 2% are what we're currently addressing. Our goal is to I'd say, cap it at that and then work it back down through our cost savings protocols and initiatives. So hopefully, that helps you at least think about the magnitude of what we view the risk to be.

Okay. That's fair. And if we just look at the working capital impact from inventories in the quarter, I know that there's some seasonality going on there, but I'm a bit surprised that it's still like an $80 million drag just given backlogs and dealer inventories. So is some of that due to the Newmar disruption that you guys touched on? Are you stocking more components given some of the supply chain issues? How should we think about that, and will there be an unwind on the inventory line going forward?

Yeah. To answer that last question, I do think that there will be some improvement throughout the rest of 2021. There's certainly some higher inventory as a result of, I'll call it, the less consistent flow of goods coming out of our vendors. There tends to be more spikes and then droughts of certain component parts that raises the level of work in process or units that aren't fully completed. And it also has caused us to want to take stock up on certain items that we know that might be at risk. And then, of course, as you might anticipate, because of the -- and we mentioned this in our commentary because of that much higher orders, because of the anticipated growth, that certainly is going to take up our inventory levels as well. Hopefully, that's helpful color for you.

Perfect. Thank you.

Our next question comes from Steve O'Hara with Sidoti. Your line is now open. Steve O'Hara: Hi. Thanks for taking the question.

Good morning, Steve. Steve O'Hara: Good morning. Just maybe you touched on dealer relationships. Can you just talk about maybe where you think that process is, I guess, maybe specifically related to the Winnebago Motorized brand or even the Towable side? Is there more upside maybe down the road from getting those back to historical levels?

Yeah. Good morning, Steve. The fall of 2020 has been somewhat unique in terms of continuing to develop dealer relationships because as I think an earlier participant mentioned the lack of trade shows, retail shows and traditional dealer engagement events have went away, but we have been very active in all of our brands and engaging dealers, especially about the new products that our teams have been introducing. And specifically, the brand that you referenced, the Winnebago brand of RVs, has been very active as well. In fact, just yesterday in North Iowa, we hosted one of our larger dealers and -- so, we continue to be very engaged, very focused on finding mutually beneficial opportunities to expand our presence on their lots. We simply just don't want more of their business. We'd like to earn more of their business in a way that makes the dealer more profitable and successful as well. And so, our teams have been working quite hard on the Winnebago Towable side, to both upgrade the dealer network, but also expand into some of the open markets that that business had not yet filled with high quality dealers. On the Winnebago Motorhome side, it's been less about market coverage. We've mostly had a presence in every major market in that business. It's really been about strengthening the relationship with the dealers in those markets. And at times -- and these are sometimes difficult decisions, but at times, upgrading the relationships as well. But as you all know, this is not a franchise channel environment. Our teams have to come to work every day with the mindset to earn our dealers business. And again, they haven't been mutually beneficial for both parties and I think our teams have been very focused on that. I will note that Newmar has been gaining market share as well since the acquisition by Winnebago Industries. We are extremely pleased with the market share progress on Class A Motorhomes by that brand. And part of the journey there ahead is that we have worked with the Newmar team with their lead to partner with some of our dealers to fill some major markets around the country with that luxury premium brand. And we believe that will have a material benefit going forward in the future. So, by and large, we believe our dealer relationships are healthy across their businesses. We can always improve. They will always give us a list of things we can work on, and our teams are very, very focused on making sure that those relationships are mutually beneficial. Steve O'Hara: Okay. Thank you. And then maybe just on Class C. I know you noted that supplier issues were kind of acute in that lineup with Newmar. But Class C shipments, I think, were down year-over-year and I'm just wondering -- I mean, I know that the shipments, certainly for Class C haven't been as strong as other segments of the market in general. But I'm just kind of curious maybe what's happening there? Is it supplier issues? Is it -- are you guys still kind of losing ground in that business or, how is that shaping up. Thank you.

Yes. Thanks Steve. Let me clarify, if I could, one thing. The supply chain impact in Newmar, as I referenced earlier, was across the whole of the Newmar line. It was not specific to just their Super C line, which continues to be introduced to the market. Our Class C performance for the Winnebago brand in the first quarter of fiscal 2021 was certainly not as good as we would have liked it to be. That being said, the team has been rationalizing the lineup there. And as I mentioned in the call, we have introduced a new Class C unit called the EKKO, and there will be other product enhancements to come on the Class C line, underneath the Winnebago brand in the months to come. So we are far away from what we believe a rightful fair position in the market should be with our team's work. So we view that as an upside opportunity over the next several years to rebound there and that is our ambition and our focus to do so. And we think the introduction of the EKKO is a good step in the right direction there.

Yes, Steve, I'll just… Steve O'Hara: Okay.

…add one more thing on that, which is on the retail side. We're starting to see some stabilization of Class C on the retail side, which we welcome. And so I think some of this might just be timing in the quarter too, in terms of shipments this year versus last year. On the retail side, I think we're seeing some signs of stabilization. And with the EKKO coming out now, I would hope that, that compact Class C would help take some market share. Steve O'Hara: Okay. All right. Thank you very much for the time.

Our next question comes from Bret Jordan with Jefferies. Your line is now open.

Hey. Good morning, guys.

Good morning.

Good morning.

I guess the second mention this week of electrification. I guess, as you think about the potential to have a battery electric RV, I mean, how realistic is that? And maybe a time frame, if you think about range and cost and charging infrastructure? Is that something that you are sort of seeing in the intermediate or longer term?

Yes. Good morning, Bret. Thanks for the question. The only comment I'll make there is that we have been active on electrification for several years now. Our teams have been leaders and innovators in the industry around lithium-ion battery systems, around the use of solar panels. And we are the company with an all-electric Class A specialty vehicle in the market today. We have an active electrification road map. I met with a part of our team yesterday to review that. And we are quickly and intentionally working on that to make sure that we're competitive in the market in the future. So we are certainly aware of some of the other news or the intentions of some other players in the industry. But we are confident that our teams will be competitive in that space. You know, one thing to note, it's -- an all-electric product is not simply about the drivetrain and the power system, it is about the integration of the whole experience for the consumer, and the integration of the subsystems inside the driver experience and those alternative power systems as well. And so we're not just focused on the technology that drives the product. We're focused on the integration and the experience with all of the different functionality within the product. So stay tuned. We're active. We'll keep you all updated as news requires. But we are keeping a close tabs on the end consumer and have significant relationships with many technology partners in this space today that we think will be a benefit in the future.

Okay. Thank you. And I guess one question, sort of, a big picture around Class B, obviously, a super-hot category, and it sounds like a number of new entrants on the supplier side. How do you see, I guess, maybe – do have a number as far as how many incremental SKUs are coming into the market for 2021 from both your catalog as well as other manufacturers, or is that something that's moderating after a real big increase in 2020?

We have long foreshadowed that there would be a level of increased competition on Class B vans as this market segment emerges. And certainly, we have been one of the more successful first movers in that segment, and have seen our market share approach levels in the 45% to 50% range here within the last year. We welcome competition, obviously, in the spirit of innovation and serving the customer well. And so, you are seeing continuously new models introduced to the market by other players. And it will be a challenge for us over time to keep share at the level that we have, of a growing now more mainstream market segment. But we will work like heck to try to keep every point of share that we possibly can. And we will do that, because we make high quality, innovative, differentiated products that we think people ultimately aspired. But I am actually quite pleased that the Class B category is growing in whole, because it is helping to bring our vein into the mainstream. It is expanding the number of consumers that view our business as something of potential value in their lives. It is allowing different use cases. And so, for us, this is a net positive, but we intend to compete very vigorously in that space for years to come. We believe our volume will continue to grow, because the market segment will grow. But lots of future evolution, certainly, will happen there. It's an exciting time in the RV industry for that particular category.

Yes. Thank you.

Thanks, Bret.

Our next question comes from David Whiston with Morningstar. Your line is now open.

Thanks. Good morning. First, on the share buybacks, you bought back $11.6 million in the quarter. Can you talk about what are your buyback spending plans for full year fiscal 2021?

Yes. We quantified it at $10 million. The additional $1.6 million is really related to employee equity comp plans. And so, just to align on the numbers, that's why we might be talking about $10 million versus your higher number. And as it relates to look forward, it goes back to our capital allocation priorities, really, David, that we laid out in the call. We'll certainly continue to invest first and foremost in growth. We'll accumulate cash to the extent that we're managing towards that targeted capital or that targeted leverage ratio rather. And then, we'll make sure that we have the right liquidity and then return cash to shareholders and the dividends and the share repurchases. So we'll continue to proceed in that priority. And there's no indication we're going to provide today as to what our intentions are in the future on share repurchase, but it will certainly be considered in the sequence of the priorities I just laid out.

Okay. And on the asset sales, the $0.11 gain, what did you guys sell to get that?

We had a campus on the West Coast in Junction City, Oregon. It was one campus in total divided by a thorough fare or a street really. On one side, we had the bulk of our production assembly operations and the other we had -- the bulk of that other property was a customer service facility, largely. And so we sold the portion of that property that was associated with our assembly operations. And so that's -- the remaining property then being on the other side of the street and primarily historically, a customer service operation. None of those operations have -- are now staffed with people or are operating, they're dormant.

Okay. And on the off-road niche, I watched your whole product presentation. It was great. And the off-road part is just -- can you talk a bit about what kind of customer wants that experience? Is it an older customer? Is it a younger customer? And is it a customer that wants to spend a lot of money?

David, can you be more specific to the specific product you were talking about?

The EKKO. I think EKKO and is not in the business model. It was a new offering.

Okay. Yes. We continue to see consumers in the RV industry that are interested in a couple of different experiences. And the terms are intended to be different, but sometimes they're used interchangeably. We have consumers who are interested in an overlanding experience, which is essentially, they want to camp in a more year-round basis and get off the grid in a physical way. They want to be off-road, off the traditional campground and you are seeing traditional OEMs like Winnebago Industries introduced products like the Revel, now the EKKO, and other products, which are -- the Hike, which allow the RV user to get off the beaten path and take their products carefully into a more natural environment. There's also this phenomenon called boondocking, which is using your product off the grid from a power standpoint. And you will run days away from an electric hookup to your RV and you will use a combination of the generator or the lithium-ion battery pack or the solar power panels. And again, it's an opportunity for RV users to be more isolated and candidly closer to nature. And so these are trends you're seeing from not just us, but some of our peers and candidly, some fresh, young, new companies in the market. And it's something that, again, we believe is expanding the appeal of RVs. It gives us confidence that even post-pandemic, you're going to continue to see different types of consumers seeking out these experiences. So some of the new products you're seeing from us, David are a reflection of trying to meet consumer demand for RVs year-round off the grid and in untraditional ways from a travel standpoint.

Great, very helpful. Thank you.

Thank you.

Our next question comes from Sean Collins with Citigroup. Your line is now open.

Great. I appreciate it. Good morning, Michael, Bryan and Steve. Hope you guys are well.

Thank you. Good morning, Sean.

So obviously, great results. Retail trends continue to be strong in both RVs and boating. I just wanted to ask if you could compare and contrast kind of RVs versus boating. Both are running at robust levels, but is one running stronger than the other? And if you can provide any color, context and kind of -- with a focus on the boating market in general? Thank you.

Yes. Thank you, Sean. We will always be careful in our comments around the whole of the boating industry, because, while we're extremely proud of the Chris-Craft brand that is in our portfolio. Our seat at the table in that industry is not quite as large as some of the other OEMs in that space. But we believe both markets are healthy. My sense is, is the RV market is probably a little hotter than the marine market, but both performed extremely well in calendar year 2020. And there are definitely segments of the marine market that have been performing quite well, even here in recent months. Dealer inventories are low on the marine side as well, maybe not quite as low as on the RV space, but not too far apart. And again, retail activity continues to appear to be positive in a relatively consistent basis for both segments. So a very, very similar in many ways, I'd say, there are less differences than there are similarities. Our Chris-Craft brand had a good calendar year 2020. And its fiscal year 2021 prospects look very promising because of the backlog that it has. We have a full production calendar for the fiscal year. And backlogs and orders are committed until late spring of 2021, even into potentially now the early summer months. And so, we are intent -- we've acknowledged this in the past on working with our Chris-Craft team on possible capacity expansion in order to serve the market with those beautiful luxury boats in a more timely manner. So stay tuned for that.

That's great. Thank you, Michael. That was helpful. That's good for me. Thanks for the time and the insight.

Thank you.

Thanks, Sean.

Our next question comes from James Hardiman with Wedbush Securities. Your line is now open.

Hey good morning. Thanks for fitting me in here. A couple of questions from me, and I think you -- in a roundabout way you may have already answered this one. But, obviously, the last couple of weeks, there's been a lot of vaccine news that's been encouraging. We've heard from some travel companies that they've seen an uptick in bookings. I guess, I'm curious if you're seeing the flip side of that. Have you seen any weakness as the vaccine has begun to roll out? I think you commented on continued strength, but obviously, there's a difference between strength and 40% growth, which is where you've been trending. So, I guess the question is, is there any indication that excitement about the vaccine is impacting demand in any way?

Yeah. Thank you, James, and welcome to the call by the way. We are not seeing any deterioration of demand or interest at this point. Obviously, the rollout of the vaccine is in its very early stages here late this month. And so we will be monitoring the market both at retail and with our dealers, but also in other ways, whether it's through some of the rental or sharing platforms. We have good relationships with many of the campgrounds around the country and their industry association. And so, we will be monitoring those forward indicators that foreshadow demand in the future. But from a retail standpoint, from a consumer interest standpoint, in terms of what they plan to do in 2021, we are not seeing any deterioration. And I guess, listen, I would remind everybody that the RV industry was growing in popularity before the pandemic. And we think this surge of interest will be net positive going forward. We certainly recognize 2020 was a unique year in the choices that our American consumers have. But we anticipate that there will be net positive demand benefits from the challenging experiences we all went through in 2020. So, no deterioration or signs of at this point, James.

Got it. That's really helpful. And then maybe a modeling question. Now that we've lapped the Newmar acquisition, how should we be thinking about overall ASP? Obviously, that line is going to benefit from the limited promotions, at least here in the near-term. But I would think, just given the outperformance of Towables for the foreseeable future that there would at least be some negative mix impacting ASP in the near term. And so I guess ultimately, the question is, can ASPs continue to stay above water now that not getting that Newmar benefit?

Yeah. I guess, I'll take the first stab and let Mike pile on. I think of it, not just from an ASP standpoint, but also from a margin standpoint, just to supplement your question a little bit with that perspective.

Please. Yes.

Margins as the Towables business continues to grow faster organically than the Motorhome business, that will be a tailwind to margins because the EBITDA margins of Towables has always been higher than the Motorhome. On the ASP, I think I would encourage you to look at that not for the consolidated results, but by segment, the Motorhome segment versus the Towable segment, which is in line with our disclosure to you as well, James. And so what you saw in Q1 here on the Motorhome segment, we talked about how Newmar's shipments were suppressed because of the acute supply chain issues. So, I think as some of the supply chain issues are remedied and Newmar can get back to shipping in line with retail, you'll see the accretive or the tailwind on the Motorhome ASP as a result of that, because the average selling price of Newmar is above the legacy Winnebago-branded Motorhome business.

Okay, that's perfect. Makes a lot of sense. Thanks guys.

Thanks James.

That concludes today's question-and-answer session. I'd like to turn the call back to Mr. Stuber for closing remarks.

Thank you, Liz, and thank you, everyone, for joining our call today. On behalf of everyone here at Winnebago Industries, we wish you and your families, happy holidays and all the best in the New Year.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.