As pandemic pressures forced travelers to consider different ways to enjoy their summer vacation, one industry saw a big boost. RVing benefited from the newfound love of the American road trip, and Winnebago Industries is reaping the rewards. Bryan Hughes, CFO of Winnebago Industries, spoke to Cheddar New about the company's big Q3 earnings report. The company specializing in recreational vehicles and marine products announced $1.5 billion in revenue along with a 50 percent increase in its dividend. "I think there's some stickiness to the outdoors when people experience that with family and friends, they want to go back and pursue it further," Hughes said about why the industry saw continued success despite reopenings and the trend of revenge travel.


Opening Bell

Winnebago Reports Record Earnings Despite Expected Impact of Revenge Travel

Welcome back to Cheddar is opening bell. Winnebago industries is a leading producer of recreational vehicles in the US, the motorhome and RV maker benefited greatly from the covid pandemic related lockdowns and it seems it's still benefiting amid the reopening and summer of revenge travel revenue for the fiscal third quarter rose 51%. This as Winnebago industries reports an increased ma market share and new new partnerships and vehicles here to discuss is brian Hughes CFO of Winnebago industries brian got to have you on this morning Winnebago industries additions to the revenue growth that you've seen over over the previous quarter. You've got, you know, gross profits up. I think over 60% margins at like 19% when you look at the cash flow reported or expect it's gonna be 100 and 47 .6% this year. That's compared to 44.8% usually generated over the past 3-5 years. All of that to say, I mean things look healthy internally, but even externally when you're looking at the demand picture again as we've, we've seen this reopening happening. I wonder if you can talk to us about that demand story, what you've seen over the last two years and particularly what you're seeing right now. Yeah, well thanks. Uh, first of all for having me Alicia great to be here. Uh, the cash comment you made is very true. You know, we've recently announced a 50% increase that's 50% increase in our dividend. Earlier this week, we announced that that was on top of the 50% increase that we announced last year. About this time. Our board also authorized earlier this week a new $350 million share repurchase program because we had just exhausted our prior Program here in fourth quarter. So cash generation has been very good. Um you know demand in the industry has been steady and strong. You look back over a long period of time, 40 years and it's continuously grown the last decade in particular has seen really strong growth. And then we saw the last couple of years supercharged as was just discussed with ed. So we've seen some very strong demand. Um the industry is uh doing a nice job of meeting that demand. We expect 2022 here to be the second best year on record. Um second only to last year. 2021. So we're seeing great demand across the industry and we believe that that long-term prospects for the industry is very solid. A lot of new demand from the millennial generation in particular as they seek the outdoors and enjoy time with family and friends um vacationing and recreating. I am curious why do you think demand has been so sustained, especially amid the kind of great reopening so to speak, where you have other areas of travel that have opened up and have seen that revenge travel. I think there was a thought process to some that something like the R. V. Industry would then suffer because during the pandemic, it really was the only option for a lot of people now that more options have opened up, you would have assumed there would be a major impact on the R. V. Industry, but it doesn't look like that's actually the case right now, to your point there a moment ago, you're still seeing the sustained levels of demand. Why is that? Well, I think there's some stickiness to the outdoors when people experience that with family and friends, they want to go back and and pursue it pursue it further. And Ed also referenced this when you talk to him and that is the flexibility created by the new work environment. And I think that flexibility allows for greater usage, longer weekends, three day, even four day weekends which lend themselves really well to an RV. Um It also lends itself well to working remotely, which we're seeing a lot more of as well. But I think generally, you know, people are are active, they're pursuing the outdoors and when they do so it tends to be a sticky lifestyle. So then what trends are you seeing this year? Is that the case kind of what you're talking about? They're painting the picture of the hybrid work model people utilizing, you know, Winnebagos and are being more broadly as it relates to that. Yeah, exactly, campgrounds are still extremely full. Um You know, the capacity is one of the challenges that the industry faces but we're seeing a lot of investment into campgrounds uh to accommodate that heightened interest in the lifestyle. Um and we are hearing great stories about people um working remotely from an RV and enjoying more time with family and friends over longer weekends. I am curious and I brought this up in every version of the travel special that we have done so far. Um if you think some of the chaos and the other sectors, I point specifically, you know, it's the airline industry um and the higher rates they're dealing with in terms of air fares as a result of energy and fuel costs as that being a bit of a tailwind for the RV industry. Yeah, we believe so. Um you know, as gas prices go up and ed referenced this, people tend to take shorter trips in their R. V. S. And so instead of taking across the country trip, they may stay a little closer to home. But I think that as consumers feel the pinch in their pocketbooks, they're looking for more reasonable ways to vacation with their family and friends. And what we've seen is that that um Air plus hotel trip is probably 50% more expensive than an RV trip. And even a car plus hotel trip Is a good 30, more costly than an RV trip. And so it's a very economical way to enjoy um you know, recreating with your family and friends and I think that that certainly has an impact on uh the interest people have in the RV lifestyle. Speaking of that pension in the pocketbook, you know, as the economy has already shown signs of slowing down and consumers, you know, feeling that pinch. Do you see inflationary pressures impacting campers and road trippers this season? Or do you see it as an opportunity to kind of bring in focus a bit of that value proposition that that you were talking about a moment ago there? Yeah. You know that's exactly how we think about it. Um It is an opportunity for us to continue to um bring that RV lifestyle to the average consumer. We're seeing a lot of new interest from the millennial generation in particular. And I think that they are seeking that alternative way to recreate at a more reasonable price. And so with the length of tenure of um financing that is available for RBS and ed referenced this to that, that monthly payment for an RV is something that's affordable and so we'll continue to um make sure that people understand that this lifestyle is is something that they can get into and that it's a great way to enjoy the outdoors In your latest quarterly earnings. Winnebago reported, you know retail market share 13.2% um continued growth for the company. I wonder if you can illuminate for us, you know, some of the company's strategy to continue to grow that market share, especially for its premium brands. Yeah we are a portfolio of premium brands in the RV lifestyle. We have the legacy Winnebago brand, we've got the newer brand called Grand Design, which has been the fastest growing brand for five years, six years now. And then we also have a premium brand called Newmar. So those three brands are what we go to market with. You know, you'll hear us talk often about quality, innovation and service and we know that those three attributes are something that the consumers are seeking um that quality that our brands produce um and the ability that that gives to our consumers to enjoy their R. B. And then we're also um innovating bringing new features, new benefits um into the um the R. V. And you can see some pictures there, these are you know, very modern um vehicles with a lot of different features, people can enjoy both on the inside. And then more recently we're focusing also on the outside of the RV bringing that kitchen experience outside the entertainment venues with the with the large screen TVs outside um you also see them in in tailgating situations, you know, great options to tailgate with. So there's a lot of different uses. We're trying to expand the use cases for rvs to also appeal to more audiences and I think that those are some things that are also going to drive the future demand for well so far it seems like you guys are continuing what has been a great, you know, two plus years and as a consumer kind of continues to evolve in this space of wanting to travel, you guys benefiting greatly from it brian really appreciate your time and your insight, brian Hughes CFO of Winnebago industries.