Winnebago Industries, Inc. Aktie

Welcome to the Winnebago Industries Fourth Quarter and Full Year Fiscal 2026 Financial Results Conference Call.

[Operator Instructions]

Please be advised that today's conference is being recorded.

I would now like to hand the call over to Joan Ondala, Vice President, Treasury and Investor Relations. Ms. Ondala, please go ahead.

Thank you, operator. Good morning, everybody. And thank you for joining us to discuss our fiscal 2026 fourth quarter and full year results. This call is being broadcast live on our website at investor.wgo.net, and an audio replay of the call will be available on our website later today.

Our earnings release was issued and posted to our website earlier this morning. Please note that the earnings slide deck, which accompanies our prepared remarks, is also available in the Investors section of our website under Quarterly Results.

Turning to Slide 2. Certain statements made during today's conference call may be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The company cautions you that forward-looking statements involve a number of risks and uncertainties, many of which are beyond the company's control and could cause the actual results to differ materially from these statements. These risks and uncertainties are identified in our SEC filings, including our annual report on Form 10-K, which we encourage you to read. We undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances that may arise after today's call, except as required by law.

In addition, on today's call, we will refer to GAAP and non-GAAP financial measures. The reconciliation of the non-GAAP measures to the comparable GAAP measures are available in our earnings press release and in the appendix of today's presentation, both available on the Investors page of our website.

Please turn to Slide 3. Hosting today's call are Michael Happe, President and Chief Executive Officer of Winnebago Industries; and Bryan Hughes, Senior Vice President and Chief Financial Officer. Mike will begin with an overview of our fourth quarter performance and our perspective of the market outlook. Bryan will discuss the associated drivers of our financial results and our fiscal year 2027 guidance. Mike will conclude our prepared remarks, and then management will be happy to take your questions.

And with that, please turn to Slide 4 as I hand the call over to Mike.

Good morning, everyone. I want to begin by thanking our employees across Winnebago Industries. Fiscal 2026 was another challenging year for the RV and marine industries, requiring us to make difficult decisions about the structure and size of our organization in response to market conditions. Through it all, our teams demonstrated tremendous agility and discipline, while continuing to serve our customers and dealer partners at the highest levels possible. I am incredibly grateful for their commitment and hard work. Their dedication and ingenuity give me great confidence in our ability to drive stronger, more durable performance over time.

Starting on Slide 4. Consumer interest in the RV and boating lifestyle remains healthy with continued engagement across shows, digital channels, campgrounds, marinas, and the used market. At the same time, affordability pressures, elevated financing costs and broader macroeconomic uncertainty continue to weigh on consumers and delay the conversion of that interest into new product purchases. That caution is also reflected in dealer ordering with dealers continuing to manage inventory carefully. Against that backdrop, we remain focused on the areas within our control, bringing relevant new products to market, improving operational execution, and managing our product offerings, costs and cash with discipline.

As a result, our fourth quarter results were substantially in line with our expectations. We maintained disciplined production and wholesale shipment levels. And while there are pockets of softness, dealer inventory quality remained broadly within acceptable ranges. RV dealer inventory turns improved to 1.8x, reflecting our continued focus on aligning shipments with retail demand and supporting the health of our dealer network.

Moving to Slide 5. The latest SSI retail results provide encouraging evidence of our brand's competitiveness. At a time when affordability remains a significant consideration for consumers, our premium portfolio is holding its overall RV position, while gaining unit and dollar share in select categories. We believe this performance reflects the strengths of our brands, the appeal of our new products and strong dealer advocacy, reinforced by the steps we have taken to make our offerings accessible across a broader range of price points.

For the trailing 12 months ended August 31, Newmar expanded its leadership in Class A Diesel, helping drive enterprise retail unit share to 35.4% and dollar share to 41%. We also gained share in Class C, where Grand Design Motorized reached 3.6% retail unit share, up 170 basis points from the prior year period. In travel trailers, we gained share in the trailing 12-month period in both units and dollars, even as industry retail units declined approximately 13%. Within that category, Winnebago-branded travel trailers reached 1.7% retail unit share, up approximately 30 basis points from the prior year period. At Grand Design Towables, our largest business, dealer inventory turns improved to 2x exiting the fiscal year, up from 1.6x in the third quarter. This turns improvement reflects healthier channel inventory and provides a stronger foundation for the business in the future.

On Slide 6, Barletta increased its 12-month trailing market share of the U.S. Aluminum Pontoon segment to 9.7%, up approximately 70 basis points from the prior year. That share gain against both established competitors and a growing field of newer entrants reinforces our confidence in the strength of the Barletta brand and the appeal of its differentiated products. Across our portfolio, we are committed to driving profitable share growth. bringing new products to market and maintaining healthy dealer inventories. A financially strong dealer network is essential to delivering sustainable performance for our partners, and for Winnebago Industries.

Throughout fiscal 2026, we took deliberate actions across 4 strategic initiatives outlined here on Slide 7 to improve efficiency, strengthen financial flexibility and position the business for future growth. Our objective is a more resilient and higher-performing enterprise with a disciplined and efficient cost structure, stronger through-cycle margins and, over time, EPS growth that outpaces revenue growth. Some of these initiatives are already contributing to our competitive position, while others will take some time to implement, mature and then translate into improved financial performance. First, we took further steps to improve operational efficiency and align our manufacturing footprint with demand. During the fourth quarter, we announced plans to relocate Winnebago Towables production to Grand Design's Middlebury campus, consolidate select Grand Design manufacturing lines and also bring Winnebago B van production together with our core motorhome operations in Forest City.

These collective actions are designed to improve facility utilization, simplify operations and increase the efficiency and flexibility of our manufacturing network. Our focus now is on executing these transitions well with the financial benefits expected to build over time, as implementation progresses and operations stabilize. Second, we continue investing in innovation that matters to our owners. Grand Design's Omega Frame platform and the expanded use of the composite roof technology across that brand's portfolio are some examples of our focus on product quality and durability. These investments are intended to strengthen quality and the ownership experience, reinforcing the premium positioning of our brands and giving consumers additional reasons to choose them.

Third, we maintained a prudent approach to costs, working capital and liquidity. Throughout the year, our teams aligned spending and inventory levels with prevailing demand, while continuing to support key product and growth priorities. We ended the quarter with net leverage of 2.2x, down meaningfully from 3.1x in the prior year, strengthening our balance sheet and increasing our capacity to invest selectively in the business. We also successfully renewed our $350 million asset-based lending facility, preserving ample liquidity as we enter fiscal 2027. Fourth, we broadened our product portfolio and expanded access to our brands. The products introduced during fiscal 2026 expand our participation across customer segments, use cases and price points.

Taken together, these actions are designed to strengthen our ability to compete through the cycle. There is more work ahead, and our focus in fiscal 2027 is on disciplined execution in translating these initiatives into sustained financial improvement.

Slide 8 shows several of the products introduced during the year. These launches represent deliberate extensions of our portfolio, designed to reach new customer segments, enter additional categories and offer a broader range of price points. At multiple retail, trade and dealer meeting events in September, dealer feedback across our brands was encouraging and reinforced that the investments we have made to broaden our portfolio and reach more consumers are well aligned with evolving consumer preferences.

With that, I'll turn the call over to our CFO, Bryan Hughes, to review the quarter and our fiscal 2027 outlook in more detail. Bryan?

Thank you, Mike. Turning to our consolidated results on Slide 10. Fourth quarter net revenues were approximately $645.1 million, while adjusted EBITDA was approximately $32.6 million, representing a 5.1% margin. Adjusted earnings per diluted share was $0.49. For the full year, net revenues were approximately $2.7 billion and adjusted earnings per diluted share was $1.79. Consolidated revenue declined from the prior year quarter due to lower unit volume and an unfavorable product mix, partially offset by selective price adjustments. Retail demand remained subdued and dealers continued to order cautiously. We deliberately improved dealer inventory turns across our brands, which, along with retail trends, was a significant driver of volume decline. Profitability reflected the impact of lower volume, partially offset by lower SG&A expense, focused cost management and improving performance within the Motorhome RV segment.

Looking at our Towable RV segment on Slide 11. Fourth quarter revenue was approximately $220.3 million, down from the prior year quarter as lower unit volume and a greater mix of lower-priced models more than offset pricing realization. Dealer ordering patterns remained cautious and competitive intensity remained elevated across the category. Operating income was approximately $9.3 million, representing an operating margin of 4.2%. Throughout fiscal 2026, our teams remained focused on balancing affordability, dealer inventory health and profitability. While market conditions continue to be challenging, we believe the operational and manufacturing actions announced during the fourth quarter position us to improve execution and efficiency over time.

Turning now to Motorhome RV on Slide 12. Segment revenue was approximately $323.6 million, while operating income was approximately $7.9 million, representing a 2.4% operating margin. Operating margin improved more than 250 basis points compared with the prior year quarter. The improvement demonstrates the early benefits of the transformation actions underway in Motorhome RV. While revenue declined as lower unit volume and a mix shift toward lower-priced models more than offset improved pricing realization, operating income margin expanded through operational efficiencies generated from transformation initiatives, reduced discounts and allowances and disciplined cost management. Newmar and Grand Design Motorized continued to perform well, while additional work remains at Winnebago Motorhome to improve product performance, cost structure efficiency and operating execution.

Turning to Marine on Slide 13. Fourth quarter revenue was approximately $92.3 million and operating income was approximately $6.6 million, representing a 7.1% operating margin. Barletta continued to perform well relative to the broader market and remained an important contributor to segment profitability. Chris-Craft also managed production and inventory thoughtfully and with discipline throughout the quarter.

Stepping back from the individual segments, I also want to highlight the actions we have taken to manage SG&A across the enterprise. SG&A was lower year-over-year, driven by a disciplined approach to spending and ongoing cost reduction efforts. In addition, we continue to pursue gross margin improvement through material cost management, manufacturing efficiencies and quality initiatives, including leveraging enterprise capabilities such as strategic sourcing. Importantly, our path to stronger margins is not primarily dependent on price increases. We are focused on lasting productivity and cost improvements that can support stronger margins through the cycle while continuing to invest in products that resonate with consumers.

Moving to our balance sheet and cash flow highlights on Slide 14. We delivered strong cash flow in the fourth quarter, reflecting disciplined working capital management and our ability to flex the business in response to market conditions. For the full fiscal year, free cash flow totaled $144.6 million compared with $89.5 million in fiscal 2025. While our cash flow can be seasonal, the fourth quarter performance reinforced the underlying cash-generating capability of the business and supported further leverage reduction. During the fourth quarter, we renewed and extended our $350 million revolving credit facility through 2031 and increased our quarterly dividend by 3%. Together, these actions strengthen our financial flexibility, preserving capacity to invest in our core businesses, pursue attractive growth opportunities and continue to return capital to shareholders.

Turning to our fiscal 2027 business outlook on Slide 16. Our guidance is based on the current market environment and our expectation for North American RV wholesale shipments of 265,000 to 295,000 units in calendar year 2027. We expect consolidated net revenues in the range of $2.65 billion to $2.8 billion, reported earnings per diluted share of $0.90 to $1.50 and adjusted earnings per diluted share of $1.65 to $2.25. The midpoint of our adjusted earnings per share range, $1.95, would represent an increase of 9% from fiscal year 2026. For the first quarter of fiscal 2027, we expect net sales to decrease at a mid- to high single-digit percentage rate compared with the prior year period, reflecting continued headwinds in RV industry retail trends with our Towable RV segment being the primary driver of the decline.

We expect deleverage from a competitive operating environment and sales mix to continue as headwinds with cost savings initiatives helping to offset these pressures. With these factors as the primary drivers to year-over-year performance, we expect adjusted EBITDA margin to be on par to slightly below the prior year first quarter level.

Our outlook takes into account prevailing trends in the RV sector, including competitive dynamics, consumer preferences, macroeconomic conditions and evolving trade policy positions. These factors remain dynamic, and we will continue to provide further updates to our expectations as we progress through the year.

Let me provide a few additional observations to help frame the business trajectory for fiscal 2027. Our outlook does not assume a broad recovery in RV or marine retail demand. We expect improvement in our financial performance to be driven primarily by actions within our control, including product and share initiatives, structural cost reductions and operating efficiencies. The timing of these benefits will vary with certain initiatives building through fiscal 2027 and into fiscal 2028. Together, our previously announced manufacturing footprint actions and broader structural cost initiatives are expected to generate as much as $70 million to $80 million in cumulative gross savings over fiscal years 2027 through 2029.

These savings will come from enterprise sourcing, SG&A cost reductions, manufacturing line and facility efficiency initiatives and consolidation and the rationalization of select legacy vertical operations. We expect a significant portion of the gross savings to offset inflation in materials, labor, health care and other operating costs, with the remaining benefit contributing to margin improvement as the initiatives mature.

Within RV, we expect Motorhome RV to remain the largest contributor to earnings improvement. New products across the Winnebago and Grand Design Motorized portfolios continue to expand dealer distribution and consumer awareness, while the operational actions announced during fiscal 2026 and anticipated in fiscal 2027 will provide additional opportunities to improve profitability. Within Towable RV, our focus remains on strengthening market share, supporting dealer inventory health and improving operating efficiency in what continues to be a highly competitive environment. In Marine, while retail demand remains below historical levels, we believe the strength of the Barletta and Chris-Craft brands, combined with continued product development and disciplined dealer support, positions the segment to benefit as market conditions improve.

From a capital allocation perspective, maintaining financial flexibility remains a priority. We will continue to focus on cash generation, working capital efficiency and leverage management while investing selectively in the business. At the same time, we remain committed to returning cash to our shareholders through our dividend and as cash generation and leverage levels allow future share repurchases.

Now please turn to Slide 18 as I hand the call back to Mike for his closing comments.

Thanks, Bryan. Before we move on to your questions, I want to spend a few minutes on how we see the longer-term growth opportunities for Winnebago Industries. Our strategic intent is centered on three pillars: Strengthening and growing our core RV and Marine businesses, building a more meaningful aftermarket business around the customer journey, and selectively expanding into strategic mobility markets, where our capabilities give us the right to win. Together, these pillars are designed to create more durable growth and a more resilient earnings profile over time.

Our first priority is the core, and that starts with selling more RVs and boats, predominantly in North America and doing so profitably. We are focused on optimizing our market share and earnings performance, whether industry demand remains near current levels or ultimately recovers towards more normalized conditions. We know our core business is significantly stronger today than it was at comparable industry volumes more than a decade ago. We have a stronger portfolio of brands and products, talented and experienced teams, broader participation across the RV market and a relevant marine platform that adds both growth potential and greater balance to our portfolio. All of this gives us substantial upside in a market recovery. But importantly, we are not waiting for a recovery. We are driving new products, attacking costs, improving quality and execution and working closely with our dealers to gain profitable share in the market we have today. Our expectation is that each of our organic businesses get stronger while preserving the significant earnings potential that exists when industry conditions ultimately improve.

Our second pillar is aftermarket. We want to be more present and impactful throughout the entire customer journey, including well beyond the initial purchase. That means building incremental revenue and profit opportunities across parts, accessories, service, solutions and experiences. Our existing factory service operations provide a foundation, but our ambition is broader. We are allocating real dollars and talent to this opportunity in fiscal 2027, with the expectation that the benefits will build in fiscal 2028 and beyond. Over time, we believe a larger aftermarket business can generate incremental and more recurring revenue, attractive margins and stronger customer loyalty, while also reducing some of our exposure to new unit cyclicality by serving the growing installed base of Winnebago Industries products already in use. Simone Silva's recent appointment to lead these efforts provides dedicated leadership as we build those capabilities.

The third pillar is strategic mobility, where we see two particularly attractive areas of opportunity. The first is strategic technology verticals around house electrification and mobile and portable power. Lithionics has been an important first step, and we intend to build on that foundation over time through additional power and energy solutions that can serve both our existing businesses and select adjacent applications.

The second is building a presence in select specialty vehicle markets, where our history, engineering and manufacturing capabilities can be relevant and differentiated. We already understand key elements of these markets through our past experience at Winnebago and Newmar, and we see the potential to participate selectively in areas that can offer less cyclical demand, attractive margins, greater B2B exposure and opportunities to develop and apply new technologies. Across all three of these pillars, we will be disciplined, but we will not sit still. We feel very good about the earnings potential embedded in our existing RV and boat portfolio when industry demand eventually recovers, but our strategy cannot depend on the timing or magnitude of that recovery. We are aggressively strengthening the core today, while investing in aftermarket and strategic mobility opportunities designed to create more durable growth, stronger margins and a more resilient earnings profile over time. We enter fiscal 2027 confident in the opportunity ahead and clear-eyed about the work required to capture it. Our focus now is on execution.

With that, Bryan and I would be happy to take your questions. Operator, please open the line for the Q&A session.

[Operator Instructions]

And our first question comes from James Hardiman of Citi.

I was hoping you could help us, sort of, bridge just at a high level. Obviously, the most recent retail numbers aren't very encouraging, right, call it, down mid-teens, and if anything, interest rates have gone up since we've seen those numbers. So I'm curious to hear sort of how you think that's trended even since the most recent data. But just maybe connect, where we are from a retail perspective to what you're modeling or guiding with respect to earnings growth up almost 10%. And obviously, there's a lot of steps along the way, right? The retail wholesale relationship, the improvement in retail, presumably based on easier comps, but help us bridge that in any way you can.

Good morning, James. This is Mike. Well, let me start with your comment on retail in the market currently, and we would agree that retail continues to be consistently challenged in the area that you referenced from a number standpoint. That being said, we have recently been gaining momentum on market share across several of our brands and businesses and feel optimistic that as we go into fiscal '27 regardless of what the market ultimately ends up doing that our businesses have a strong chance of continuing to sustain current market share position and in several places grow it.

The midpoint of our fiscal '27 guidance on the top line, I believe, is a 1% increase in sales over fiscal '26 actuals. And so we are acknowledging that top line growth will be challenged. And our ambition is to maintain the net sales at least at the fiscal '26 level, if not greater. Some of that top line growth will come from businesses like Grand Design Motorized, Winnebago Towables, we believe some of the work we've done on Grand Design Towables in terms of turns improvement helps us position ourselves well with the dealers in the coming year.

The profit contribution on the bottom line, where the midpoint of our guidance for fiscal '27 EPS, I believe, is a 9% increase over fiscal '26 full year actuals. That is a combination of what we believe will be margin improvement incrementally due to many activities, including material cost savings, stronger operational efficiency combined with, as Bryan described, a lot of work in the rest of the P&L on cost management, specifically around SG&A, but really almost all lines of the income statement.

So your question is a fair one. We don't anticipate much relief from the market being challenged, but we believe we have enough levers within our control to issue the guidance that we did. And if we execute, we feel that's realistic.

And the only thing I'd add to that, if I could, Mike, is pointing to fiscal '26 as some evidence that we can outperform what the market did. If you look at retail and wholesale, both were down significantly at the industry level in our fiscal '26. And what you saw us deliver was top line down 3% roughly and earnings that were up year-over-year. So we feel good about our performance in '26, and it certainly gives us confidence as we head into '27 to do so again.

Got it. And then maybe if you could help us with phasing a little bit. Obviously, you gave us an indication of how to think about the first quarter, maybe down modestly, when do you expect to sort of bend that curve back towards growth? And I know you gave us, sort of, how to think about the industry in terms of calendar '27, I guess, maybe part of the answer, your fiscal '27 is obviously different than your calendar '27 and with the first quarter being, sort of, the key delta between those two. But maybe connect a couple of those dots for us, that would be great.

Yes. Thanks, James. As you know, Q1 and Q2 are our seasonally lowest quarters. And so that's not going to be the key driver. We pointed out Q1 being modestly lower to on par from a margin perspective, but down in sales. So that is going to equate to an EPS that is down year-over-year. And then you've got Q2, which is a pretty immaterial quarter for us. So if you look at the first half, that's not likely where it is to occur. We think we feel better about the second half of our year being the seasonally strong part of the year as well.

And our next question comes from Joseph Altobello of Raymond James.

First question on the $70 million to $80 million of gross savings that you guys you talked about earlier. Can you break that down in terms of what sort of areas that's coming from? And maybe how much of that gets reinvested, do you think?

Good morning, Joe. Thanks for the question. I'll start and give you some better context around that. The timing of the initiatives is going to vary. The benefits are expected to build as implementation progresses and operations stabilize. Mike alluded to some of that in his comments. With certain initiatives contributing through fiscal '27 and others extending into fiscal '28 and even fiscal '29. We're not providing annual savings targets at this time. We gave you a cumulative $70 million to $80 million of what those initiatives that we're undertaking in '27 should produce.

A good portion, I'd say nearly half of the cost savings initiatives target is linked to structural cost reductions across our business. So in other words, nonmaterial-related in various stages of deployment. Our intent and expectation is that many of these benefits would represent incremental profitability improvements, structurally improving our profit profile over time. Some of the opportunity has already seen action. Some actions have a longer tail to them, and won't be completed until later even in fiscal '28 with benefits accruing in '29 as we stated. Vertical rationalization is a good example of the longer tail.

But we have already taken some actions that will contribute to profit improvement in fiscal '27, such as the projects to consolidate locations in the Winnebago Motorhome business and consolidating the Winnebago Towable campus onto the Grand Design campus, which we have already mentioned earlier today. You'll also note that our guidance included expected restructuring charges of approximately $6 million to occur in fiscal '27. And these charges will result in cost structure reductions that will help to achieve a portion of that $70 million to $80 million in fiscal '27. So you can expect us to have an aggressive approach to cost structure optimization and profitability enhancement during the fiscal '27.

Got it. Very helpful, Bryan. Maybe just to pivot off of that in terms of your outlook for fiscal '27. You mentioned your wholesale outlook, your turns are at 1.8, and I know you guys have talked about getting above 2. So is it reasonable to assume that retail will outpace shipments next year?

Joe, this is Mike. Our guidance on calendar year '27 wholesale shipments would obviously suggest a flat to slightly down environment versus calendar year '26. We believe there is a possibility that there could be a little more destocking done by both the RV and marine dealer channels. The turns goal that we have for fiscal '27 remains at 2x for a consolidated number for each of our segments. Now we have some businesses like Winnebago Towables, where we continue to load the channel with new products, where we continue to upgrade dealers as partners in that particular initiative. In other businesses like Newmar, where inherent turns are just slightly -- historically lower than 2x, that we will not reach that level. But we still are targeting 2 turns. There's a seasonal element to that throughout our fiscal year, but we see no reason why we can't achieve that 2 turn level when we're having this conversation a year from now.

And our next question comes from Craig Kennison of Baird.

Mike, on the aftermarket side, what do you need to build a more meaningful business in that category? And maybe you could help us frame what success looks like at maturity.

Yes. Craig, thanks for the question. Obviously, this morning, you heard near the end of our opening comments that we are putting more emphasis on the aftermarket element of our business. We haven't talked about that enough in the past. We sell parts today. We have several factory service centers today with dozens of service bays. So we are already participating in the aftermarket journey with our customers in several ways. We need to do more of it. We believe we have permission and brand credibility with our consumers to be able to support them in their experience, complementing our dealers' capabilities along that journey.

And so Craig, we have active teams today around selling more parts and accessories. We have a team around selling more factory service. We've got a team around financial services. We are exploring a number of different avenues to potentially create larger, more profitable, less cyclical revenue streams in the future. But as my comments indicated, this will be a multiyear journey. We recently appointed a great teammate named Simone Silva to be our dedicated Vice President of the aftermarket business here at the company, and she will be working across our enterprise and across our brands to build the strategies and action plans and candidly, the tools that we need to do so.

So our aftermarket business today is buried within our segment results. It's not separated and lifted up, but we believe there's an opportunity to add some energy to those efforts that we already do today and potentially create some incremental pathways to aftermarket growth in the future. So teasing the market a bit, I understand. But I want the market to understand that this is a real strategy here at the company to make this a bigger part of our performance in the future.

Yes. And I guess a similar question on the, let's call it, the mobility strategy and some of the non-RV end markets. What is the potential there? And what assets do you have to execute there?

Yes. Craig, we talked about two elements to strategic mobility. One is what we internally call portable power. We invested in a company called Lithionics in 2023. We believe Lithionics is one of the leading mobile battery solutions and battery management systems companies candidly in the world for recreational and mobile portable power solutions. As consumers make a decision to get away from gas or diesel generators around their products, they are converting to essentially battery or portable power systems. Lithionics has been an excellent addition to our portfolio. We serve ourselves with their components and their product catalog for our brands, but we are also selling to other OEMs in the RV industry, and we are advancing on our progress to penetrate other adjacent markets, such as work trucks, service vehicles and other critical infrastructure in the U.S.

We intend to add more weight around that portable power offering in the future, both organically but possibly inorganically, should the right opportunity present itself. And we believe this is a higher margin, less cyclical adjacent opportunity for us that strengthens candidly our capabilities to electrify our own products in the future as that technology and the consumer merge together. So that's the first element.

The second element is specialty vehicles. Winnebago Industries has a long history in specialty vehicles. One of our largest competitive peers has a big presence in specialty vehicles. We believe that there are specific segments and specialty vehicles where we have the ability to be relevant and win, and we have the in-house capabilities, particularly in our Motorhome businesses, Winnebago and Newmar to be able to contribute to that path. And again, it allows us to get after adjacent markets with higher margin, less cyclical, more durable growth opportunities that leverage very closely our current capabilities, including our relationships with chassis manufacturers, engine manufacturers and the rest of the supply chain. So more work is being done on that. And again, that's an extension of what we have already done in the past, particularly around our Winnebago brand of specialty vehicles that some of you know we have been in for many, many years, if not decades.

And our next question comes from Patrick Scholes of Truist.

I know you touched on this more from a high level, but can you give a little bit more granularity on expectations for share gains and/or losses, particularly in Grand Design and Winnebago brands for fiscal '27?

Yes. Good morning, Patrick. This is Mike. We're not sharing market share targets for any of those businesses. I'll just try to efficiently quickly give you an update on the momentum. We did mention in the script that Winnebago Towables continues to advance its market share, I believe, up to 1.7% at the end of August. And we believe that progress has even continued in the last couple of months, primarily through a combination of great new products and the channel network that is increasingly supportive and even upgraded in terms of its quality.

Grand Design Motorized market share continues to advance. I believe we also shared a number in our materials this morning as well in the mid-3s, growing closer to 4% in terms of retail market share unit-wise. And that product line continues to expand, dealer support continues to grow. We're getting good feedback from consumers. And so we expect that business to grow as well. We're particularly pleased in the stabilization of Grand Design Towables market share. Grand Design travel trailers here recently has, in fact, grown market share again. And so a lot of the work that the Grand Design Towables team has been doing on their product line is a testimony to that. We're also introducing more innovation to the market. I mentioned some of that with the composite roof technology as well as increased quality in many places across the Grand Design Towables brand. All of that is combining for overall Grand Design share to stabilize the travel trailer share to begin to grow there.

Barletta is the other business that I'll mention. 9.7% market share at the end of fiscal '26, a 70 basis point increase over the end of fiscal '25 in a down market with intense legacy competitors and several new startups in the Pontoon space. I believe the model year '27 Barletta product line is as good as any model year lineup that we've ever introduced. We continue to have strong dealer support. And we believe that, that is a business, while solidly in the #3 aluminum pontoon slot in the industry can continue to grow share year-over-year as long as we execute our playbook.

So we believe there are a lot of opportunities to continue to grow share. It won't be easy. Our competitors won't give up that showroom space. We'll have to fight for every retail consumer in this challenged environment, but the businesses are pulling the right levers on innovation and affordability and the way we're partnering with our retailers.

And our next question comes from Tristan Thomas of BMO Capital Markets.

Bryan called out selective price adjustments. Maybe just, kind of, clarify or quantify what those are?

Yes, Tristan, we don't historically get specific in what exactly comprises the price increases. It's a dynamic environment, as you well know. I would say that across the Towables business, in particular, we had still heightened market support in one form or another during fourth quarter. So I think that, that is where it was most notable on the market support. The pricing itself was really elevated in previous quarters in the reaction to -- and I'm going back into Q1, Q2 of fiscal '26, where we are still reacting to marketplace passing through tariff impacts. I'd say it moderated in Q3 and Q4. and it's really specific business by business, but I don't care to break things down at that brand level.

Okay. And then just a question on the Motorized product lineup. How should we, kind of, think about that, like, evolving moving forward? And then how does kind of Class A fits into that in terms of mix.

Tristan, this is Mike. We really think about the Motorized segment strategy across all three brands. And what's fantastic in 2026 compared to where we were a decade ago is we have three brands that cover many, many different segments of Motorized product. Obviously, Class A Gas and Diesel, we're very pleased with our Super C progress, but we're also, as you know, very active in traditional Class Bs and Class Cs. So we have three brands across all of the Motorized segments in the market, and each of them has a series of swim lanes, which are complementary to the other brands. There are some cases, certainly primarily between our Winnebago and Grand Design brand, where their Class B and Class C offerings are a little bit more competitive with each other. But we don't think that's a bad thing. In an industry structure where there are multi-brand dealers. It's okay to have dealer distribution points, with multiple brands across a category like Motorize.

We don't believe the Motorized category is going to grow significantly in our fiscal '27. So any top line growth will really need to be the result of market share. We believe that market share will come from the Super C segment. It will come from the Class C segment, primarily around the Lineage line and some of the new products that Winnebago has introduced specifically here recently, the Elora and the Resa. But we believe that our innovation in several spots, the Arka from Winnebago is a good example of that, combined with price points that cover a broad range make us an attractive set of brands to look at. So today, with 3 brands in the Motorized segment, we believe we're well positioned, at least on a historical basis. But it's a very competitive and intense environment right now, and we'll need to compete very smartly going forward.

And our next question comes from Bret Jordan of Jefferies.

This is Patrick Buckley on for Bret. I think you called out that the dealer inventory quality remained within acceptable ranges. Could you give some more color there around broader dealer health heading into the seasonally slow winter months? Any notable changes in willingness to take incremental inventory or any signs of increased consolidation across the channel?

I'll comment on the health of the inventory and maybe Bryan can offer some comments on what we do to monitor the financial health of our dealer partners and other trends. We're pleased with the quantity of dealer inventory across both the RV and marine brands that we have in our portfolio. We are carefully monitoring the -- what I call, the quality of the inventory, which is really a proxy for aged -- the age of the inventory. There are usually 3 model years of inventory in the field at any one time, the current model year '27. Then there's model year '26 and model year '25 inventory. The model year '25 inventory is actually at a very low percentage of our total field inventory. In fact, model year '25 is lower today than a year ago where we were measuring model year '24 as that last bucket. What we are seeing in this particular time of year is a little more hesitation from dealers to take the latest model year product, partially because of their concern about retail conditions going forward, but also because they are comfortable with the model year '26 inventory that they have and that they are focused at working down.

So overall, the quantity is in a good place. The quality of the aged inventory is probably a little bit more weighted on model year '26 at that time, that middle bucket, but we think we'll see that transition happen from '26 to '27 here over the coming months, particularly in the southern part of the U.S. where retail conditions will still be conducive to moving units. Bryan?

On your question on dealer health, that's something that we continue to monitor very closely. We have procedures inside and partnerships with the floor plan lenders specifically to make sure that we're well informed of the status of where dealers are. Now we won't comment on specific dealers, of course. But what I can say is that no dealer represents more than 10% of our consolidated sales. And so we are appropriately diversified as it relates to any risk tied to the health of the channel. We have stated historically, and we'll reiterate here that we believe the industry has too many rooftops to support the current level of retail units across the industry around that 300,000. So we wouldn't be surprised to see a reduction in the number of rooftops with some of the lower volume locations being pared. And so that's the way we are currently thinking about dealer health.

Got it. That's helpful. And then as a follow-up on the pricing question, could you talk a bit more about maybe a ballpark range of what same-SKU inflation might look like in '27 based on where things are today?

Yes, this is Bryan again. We're expecting in the 2.5% to 3.5% range. We do estimates as part of our planning process here in the fall, and do deep studies, and that's what it currently looks like. There's a lot of dynamic sort of inputs as it relates to our cost environment, all of which we're monitoring closely. But that's what we're currently planning on. We're going to work hard, of course, to on some of the cost savings initiatives across our materials that we referenced earlier. We've got our strategic sourcing group that is working closely with all of our business units and the purchasing functions within those businesses to make sure that we are capturing appropriately the opportunities across our various product lines. So we're currently expecting that 2.5% to 3.5% range, though.

The only thing that I would add is there are spots in the business where inflation is running meaningfully higher than the range that Bryan provided, particularly around certain types of commodities. The metal space is a good example. We've seen significant cost escalation in the aluminum category as an example. And so that inflation range really varies by product line, by brand and even by material. And that all informs along with the retail marketplace our ability to manage margins and profitability through pricing going forward.

We'll take one more question, please.

Our next question comes from Scott Stember of ROTH MKM.

Just high level, looking at your expectations for a flattish market in calendar -- '27. Obviously, things are still trending down in that mid-teen range and inflation and interest rates and fuel costs. Is there anything that is giving you comfort that we could get or we see some kind of a bottoming or re-acceleration in demand, particularly as we get to the spring and summer selling season, which will be the back half of the year?

Yes. Good morning, Scott. Thanks for the question. Comfort is an interesting word, but I would tell you that we do believe that the consumer has been resilient in several parts of the economy, particularly around experiences and travel. Consumers continue to want to be outdoors. We mentioned in the call that engagement by RV-ers, campers, boaters continues to be very solid. And so we believe that there is a consumer engagement level and the resiliency as to what they'd like to spend their discretionary dollars on that remains in place for a stabilization and some day, a potential recovery of the outdoor recreation market. There's no doubt that we've certainly seen some factors rise significantly and unexpectedly over the last 9 months even. Gas prices would be the best example of that, in part due to some of the global challenges around energy and refining that everybody is aware of.

We are not anticipating at this time for our fiscal '27 that some of those elements that we saw rise in fiscal '26 would get meaningfully worse. So -- but you know as well as I do, Scott, that there continues to be a level of uncertainty around the marketplace that we have to manage. And as I said about 10 times, I think, in our prepared comments, we have to stay focused on levers within the business that we can control. And while we're offering what we believe to be fair sober assumptions about the future in terms of the industry and our own guidance. We believe that if those market assumptions hold that we have the ability to deliver stronger EPS on a relatively flat market in the next fiscal year, so we'll see. We're going to work very hard every day to, again, control what we can control.

This concludes our question-and-answer session. I'd like to hand it back to Joan Ondala for closing remarks.

Thank you all for joining us this morning and for your continued interest in Winnebago Industries.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Welcome to the Winnebago Industries Third Quarter Fiscal 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded.

I would now like to hand the call over to Joan Ondala, Vice President, Treasury and Investor Relations. Ms. Ondala, please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us to discuss our fiscal 2026 third quarter results. This call is being broadcast live on our website at investor.wgo.net, and an audio replay of the call will be available on our website later today. The news release with our third quarter results was issued and posted to our website earlier this morning. Please note that the earnings slide deck, which accompanies our prepared remarks, is also available in the Investors section of our website under quarterly results.

Turning to Slide 2. 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. A number of factors many of which are beyond the company's control, could cause the actual results to differ materially from these statements. These factors are identified in our SEC filings, which we encourage you to read. In addition, on today's call, management will refer to GAAP and non-GAAP financial measures. The reconciliation of the non-GAAP measures to the comparable GAAP measures are available in our earnings press release.

Please turn to Slide 3. Hosting today's call are Michael Happe, President and Chief Executive Officer of Winnebago Industries; and Bryan Hughes, Senior Vice President and Chief Financial Officer. Mike will begin with an overview of our third quarter performance as well as the forward view of the market. Bryan will discuss the associated drivers of our financial results and our fiscal year 2026 guidance. Mike will conclude our prepared remarks, and then management will be happy to take your questions.

And with that, please turn to Slide 4 as I hand the call over to Mike.

Thank you, Joan, and good morning, everyone. Our fiscal third quarter results reflect a demand environment that remains challenged with limited near-term visibility to stable conditions. Consumers who are drawn to the outdoor lifestyle remain engaged but continue to navigate affordability pressures from cumulative inflation, elevated interest rates and the uncertainty and related consequences around geopolitical events which is influencing the timing of discretionary purchases.

Macro demand worsened as our fiscal third quarter progressed, particularly from late March onwards. Reflecting a more cautious consumer than we had anticipated heading into the spring selling season. Despite this, underlying interest in our brands and products remains intact. We are focused on both responsibly managing the business through this sustained turbulence and positioning the portfolio to profitably capture that demand as conditions recover.

Before I get into details, let me highlight a few priorities that are shaping our actions across the business. First, we remain disciplined in how we allocate resources across the portfolio. Prioritizing investments that strengthen our brands, enhance product differentiation, maintain profitability and protect the balance sheet. Second, we continue to advance both innovation and price accessibility across our portfolio. Our new product pipeline remains active with recent offerings designed to strengthen our competitive position, while expanding participation across a broader range of consumers and price points. Third, we remain focused on cost and cash discipline. We are actively managing SG&A, improving working capital efficiency and maintaining a strong focus on cash generation.

And finally, we continue to pursue operational efficiencies across the enterprise, including material cost reduction initiatives, manufacturing footprint and capacity optimization and efforts to reduce complexity where appropriate. While the timing of an outdoor recreation market recovery remains uncertain, these are actions within our control that strengthen the business today, and position us to create value over the long term.

Turning to Slide 5. In Motorhome RV, our retail share has increased for the trailing 3-, 6- and 12-month periods through April. That momentum is being driven by Grand Design Motorized, a strong performance from Newmar and continued progress revitalizing the Winnebago Motorhome brand. The actions we have taken across product, quality and operational execution are gradually translating into improved share and profitability in the segment as volume, mix and operational execution move in the right direction.

Turning to Towables. The environment remains price-sensitive, and more promotional than what we are seeing in motorized. Volume trends in the quarter reflected both softer retail conditions and continued dealer caution around inventory levels. Grand Design anchors the category and continues to hold a strong competitive position. Winnebago Towables is getting to build traction with newer products such as thrive and access showing encouraging early retail signals and contributing to emerging share gains.

A key focus for us in this environment is expanding affordability. Including the recent launch of the Transcend Lite travel trailer from Grand Design and continued action to broaden our reach to a wider range of buyers while protecting acceptable profitability. While still early, this progress is an important proof point for our dual brand towable strategy and our ability to expand our reach into broader product segments of the market.

In Marine, retail conditions remained less volatile than RV with demand and ordering patterns continuing to be measured across the category. Within that environment, Barletta's performance stands out. The pontoon brand has continued to take retail share consistently in the aluminum pontoon segment, even as overall marine demand has been soft. This is a reflection of the strength of Barletta's dealer network, a product lineup that continues to resonate with pontoon buyers, supported by one of the strongest customer service reputations in the industry.

The Sanza is now shipping and retailing in the market, creating a more accessible entry point into the Barletta brand and serving as another example of how we are expanding participation across our portfolio without compromising brand positioning. Chris-Craft maintains its premium luxury positioning serving a buyer who has shown more resilience through the cycle.

Moving to key RV trends on Slide 6. The consumer demand picture through the spring reflected a buyer who is engaged but not yet ready to commit. That hesitancy is showing up in extended purchase time lines, more deliberate dealer ordering and retail trends that remain below where we would expect them to be at this point in the selling season. Consumer participation within Outdoor Lifestyle remains solid, but the environment for new RV and boat purchases remains more constrained.

Shipment patterns remain measured as both OEMs and dealers continue to manage the channel with discipline, keeping field inventory in check with true retail demand. We believe the quality of dealer inventory and the pace of retail sell-through matters more than incremental wholesale and that conviction shapes how we are running the business right now. Field inventory turns were stable quarter-over-quarter. The slower aggregate turn rate is driven in part by recent new product introduction stocking orders, including Grand designs, motorized ovens, Winnebago's Thrive and Access towable platforms and Barletta Sanza line. which are still building their retail velocity as dealer teams get up to speed and consumer awareness grows.

We view this as an expected and healthy part of the product introduction cycle. We remain focused on driving motorized and marine turns towards 2x over the coming quarters, while towables will require a more stable retail environment to reach that threshold particularly as we continue to build out the Winnebago Towable portfolio. As shown on Slide 7, I want to spend a moment on RV market share because it highlights both where we are performing well today and where we are focused on improving.

On the motorized side, we continue to grow enterprise Motorhome unit share with gains across key categories on a trailing 12 basis through April. Importantly, retail results in the quarter showed positive momentum across all three motorized brands. An encouraging signal that the investments we have made in product and complementary brand strategy are translating at the retail level. On the towable side, Grand Design continues to face targeted pressure, particularly in fifth wheels, where the competitive environment remains intense.

At the same time, the Winnebago Towables brand is delivering results with the Thrive and Access demonstrating encouraging positive early retail momentum. We believe this dual brand strategy can lift our towable retail share meaningfully over time. I also want to introduce a metric we are sharing for the first time this quarter, retail dollar share using the SSI data pool. While unit share remains the conventional industry measure, we believe retail dollar share provides additional context of where brands are competing and winning. By that measure, our industry profile is stronger than our unit share would suggest. This reflects the higher average selling prices across our RV portfolio, which results in our dollar share being recently more resilient than our unit share. We believe it is an important indicator of the competitive strength of our portfolio and one that demonstrates a resilience in our market position that unit share alone does not capture.

Turning to Slide 8. Barletta continues to perform very well. maintaining consistent and accelerating market share gains, reaching 9.3% on a trailing 12-month basis through April despite softer volumes in the quarter. This performance reflects continued consumer interest in its premium pontoons and an expanding product line, including the recent Sanza introduction.

Slide 9 reflects our new product highlights. We are excited about the recent introduction of the ARKA, an all-new off-grid adventure truck that joins Revel and Ekko in Winnebago brand’s Backcountry series. Built to extend our presence in the growing Adventure segment, ARKA brought of the appeal of the Winnebago Motorhome brand. with a product that combines purpose-built capability, premium comfort and off-grid functionality. ARKA is an important example of kind of innovation that can strengthen brand relevance and support future growth. With the 2027 model year Newmar lineup, we are bringing target a portfolio of coaches that reinforces that brand's leadership in the luxury segment.

These new offerings reflect Newmar's craftsmanship, premium design and ongoing focus on innovation and continue to support the premium positioning of our Motorized portfolio. On the technology innovation front, Grand Design recently expanded its worry-free roof to the momentum and momentum G-Class lineups building on its earlier introduction across solitude, influence and the foundation product lines. Engineered as a single seamless piece using marine-grade fiberglass and automotive-grade gaskets, the worry-free roof eliminates the scenes and exposed sealants that are common failure points in traditional roof designs. This helps reduce long-term maintenance and reinforces Grand Design's reputation for building products that enhance the ownership experience.

I'll now turn the call over to Bryan Hughes for the financial review. Bryan?

Thank you, Mike, and good morning, everyone. Starting with our consolidated results on Slide 11. Our third quarter performance reflects a continued focus on disciplined execution across RV and Marine. As Mike described, a consumer who is engaged but cautious, dealer discipline on both the quantity and quality of inventory and demand that softened as the quarter progressed, are key factors that shaped our financial results this quarter.

Consolidated net revenues were $698.7 million, representing a decrease of 9.9% compared to $775.1 million in the third quarter of last year, driven by lower unit volume, partially offset by selective price adjustments and product mix. As in prior quarters, segment mix mattered with improved performance in Motorhome RV, helping to moderate continued pressure in towable RV and Marine. Gross profit was $94.9 million, a decrease of 10.5% compared to $106 million in the prior year period, with gross margin of 13.6% reflecting higher input costs and deleverage, partially offset by selective price adjustments.

Maintaining relative gross margin in this environment is a meaningful accomplishment reflecting disciplined pricing, mix management and cost control. We are deliberately prioritizing profitable market share to position the business to scale as the cycle improves. Selling, general and administrative expenses were $66.5 million, a decrease of 5.4% compared to $70.3 million last year. This reflects continued SG&A efficiency and cost discipline even as we absorb incremental investment to support the growing Grand Design Motorhome business.

In addition, we are advancing broader operational efficiency actions, including vertical rationalization and footprint consolidation within Motorhome RV this year, and we are finalizing plans to further reduce excess capacity across both RV segments heading into fiscal 2027. Operating income was $23 million, a decrease of 22.9% compared to $30.2 million in the third quarter of fiscal 2025. Net income was $14.5 million compared to $17.6 million in the prior year period. Reported earnings per diluted share were $0.51 compared to $0.62 and adjusted earnings per diluted share were $0.66, a decrease of 18.5% compared to $0.81 last year. Consolidated adjusted EBITDA was $37.8 million, a decrease of 18.7% compared to $46.5 million in the third quarter of fiscal 2025.

Turning to our Towable RV segment on Slide 12. Net revenues were $274.7 million compared to $371.7 million in the third quarter of last year, reflecting lower unit volume and a shift in product mix toward lower price point models, partially offset by selective price actions. Operating income was $16 million compared to $29.7 million in the prior year with operating income margin of 5.8% compared to 8% last year. Towable segment performance was driven by higher input costs volume deleverage and product mix, partially offset by selective price actions and cost containment initiatives.

As shown on Slide 13, Motorhome RV net revenues were $320.7 million compared to $291.2 million in the third quarter of last year driven primarily by higher unit volume and selective price adjustments. Operating income was $9.6 million compared to negative $3.2 million in the prior year with operating income margin of 3% compared to negative 1.1% last year. Motorhome segment performance reflects higher unit volume, driven by mix from new products, and selective adjustments partially offset by higher input costs.

On Slide 14, Marine segment net revenues were $92.4 million compared to $100.7 million in the third quarter of last year, driven by lower unit volume and product mix, partially offset by selective price actions. Marine operating income was $5.3 million compared to $9.4 million last year with operating income margin of 5.8% compared to 9.3% in the prior year period. Performance in the segment primarily reflects higher input costs and volume deleverage, partially offset by selective price adjustments.

Turning to the balance sheet and cash flow on Slide 15. At quarter end, cash and cash equivalents totaled $57.1 million. Total outstanding debt was $450 million or $442.9 million net of issuance costs and working capital was $411.6 million. Cash flow provided by operations was $25.6 million during the quarter. Net leverage increased modestly from 2.9x in the second quarter to 3x this quarter end, primarily reflecting lower EBITDA and temporary working capital investments. We remain focused on preserving financial flexibility, managing working capital responsibly and continuing to strengthen the balance sheet as market conditions evolve.

Turning to our outlook on Slide 17. Based on current market conditions and performance through the first 9 months of the fiscal year, we are updating our full year guidance ranges as follows: consolidated net revenues of $2.65 billion to $2.75 billion. Reported earnings per diluted share of $1.05 to $1.40, adjusted earnings per diluted share of $1.65 to $2. Our updated outlook reflects a more cautious demand environment than we had anticipated. Shaped by ongoing affordability pressures, elevated competitive intensity and increased promotional activity in towables, measured dealer ordering patterns and broader macroeconomic and geopolitical uncertainty.

With that, please turn to Slide 19, as I hand the call back to Mike for closing remarks. Mike, back to you.

Thanks, Bryan. As we currently move through the fourth quarter of fiscal 2026, the external environment remains challenging. Macro volatility, affordability pressure and consumer hesitancy of real headwinds. Yet our ability to navigate them with operational agility is what continues to differentiate us.

What gives us confidence is our ability to execute on factors within our control. We are protecting margins, building share in key areas and continuing to strengthen our brand positioning even in a challenging demand environment. Our new product pipeline is active in gaining traction in the market. Our retail dollar share profile reflects the premium positioning of our brands and demonstrates a resilience in our competitive standard and the discipline we have maintained through this cycle has kept the foundation of this company strong.

We have a number of cost and operational efficiency projects in flight to continue rightsizing our model to this current landscape. As external conditions become more constructive, we are ready to scale. We remain focused on the controllables and confident in the long health and vitality of Winnebago Industries.

Now Bryan and I are happy to answer your questions at this time. Operator, please open the line for the Q&A session.

[Operator Instructions] The first question is coming from the line of Craig Kennison of Baird.

Bryan, I think in your comments, you mentioned some upcoming adjustments to your footprint to address excess capacity. Could you shed more light on that? And maybe just comment on industry capacity and whether there's too much given the level of production we anticipate?

To be clear, we're looking at both Motorhome and Towable RV segments and making sure that we have the appropriate capacity given where the industry is, while keeping a mind on the long-term expectations as well. But we are executing some projects here in the near term that will address that. That's currently what's underway. It's both segments.

Got it. Maybe just to follow up, Bryan, with you, looking at your guidance, could you give us a feel for free cash flow expectations for the year? I know you've tried to managed working capital tightly this year. But based on the revised guidance, what would your free cash flow look like for fiscal '26?

Yes, we should have some further improvements to working capital here in Q4 that will drive some of the favorability that we're expecting. And I think I'll provide just a little bit more context to Q4 as well expecting Q4 sales to be down from Q3 or sequentially and also down double digits from the prior year as we work with our dealer partners to improve dealer turns in the soft retail environment, most notably to benefit or improve in the Towable RV segment.

Gross margins, EBITDA margins, they are expected to be down slightly on a sequential basis due largely to the deleveraging impact of our sales, but gross margins and EBITDA margins are expected to be flattish to last year with several of the cost savings initiatives, some of which we just talked about and that we have implemented over the past 12 months to serve to offset that deleverage, including the improvements to the Motorhome RV segment that we've already demonstrated throughout this year.

So a lot going on throughout the year to defend and lift our gross margins in the face of declining top line. So we feel good about the progress in that regard. We had more work to do on working capital specifically in the fourth quarter, closing Q3 at slightly elevated levels versus our longer-term opportunity. So a lot of work going on, on cash generation, both on the earnings side but then also on the working capital front.

The next question is coming from the line of Tristan Thomas-Martin of BMO Capital Markets.

You call out a couple of times selective price adjustments. What were those tied to or what kind of caused them?

Tristan, this is Mike. Q3 is usually the period where we begin to take some early pricing actions related to the next model here. And so in several of the businesses, we began to take several of those actions, particularly in the month of May. So those comments specifically relate to that.

Okay. And then just maybe sticking with kind of model year '27. How are you thinking about like-for-like pricing given kind of some of the general cost inflation we're seeing?

It really varies by brand, particularly the cost input pressure that may be present in that particular business and the competitive position that we have in that particular brand as well. So the price adjustments for model year '27 will vary pretty meaningfully across our portfolio in -- in some cases, they will be in the low single digits, partly because we're managing cost inputs effectively in that area and/or we believe we have to remain competitive in the retail environment with sharp pricing.

However, there are a couple of businesses where cost input pressures, particularly around raw material costs are significantly higher. And we've had to take some more aggressive price actions here around the model year '27 period. So it really does vary across all three segments and each of the brands. And we've talked before, we are working very hard to balance the profitability of our portfolio, the retail market share that we compete for every day with the consumers, but also partnering with our dealers on appropriate field inventory turns in this environment. And so that's a constant balance pricing is just one of several levers that we have to calculate and act on to try to maintain a balance between those three elements.

The next question is coming from the line of Bret Jordan of Jefferies.

Could you talk about the dealer channel, I guess, sort of the health and enthusiasm for incremental inventory in this environment? Are you seeing any either consolidation or any areas of particular strength or weakness?

Well, health and enthusiasm are probably two different terms. I'll try to speak to both of them. The dealers are working hard, whether they're a large consolidated regional or national dealer or single-store location independent dealer, all the dealers are working very hard to drive revenue through diversified sourcing within their business, including used products and service and in some cases, storage or parts and accessories.

They're also very focused, obviously, on their own working capital and any costs related to their inventory, whether it's carrying costs or whether it's the ultimate discounting of product in the market. By and large, the financial health of the dealer communities within the RV and Marine segments we play in appears to be stable. That does not mean it isn't a tough environment for the dealers. It is. They are very conscious about their own cash flow.

And that is then spilling into the other part of your question, which is really their appetite for new product. Dealers are being very disciplined, very intentional with their ordering of new product from the OEMs and I would suggest that this particular model year '27 has been one of the slower uptakes of model year '27 or current model year product that we've seen in the last couple of years. primarily because the dealers are very focused on making sure that model year '26, the prior model year product is being focused on in retail during this -- especially now this summer retail season.

So the dealers are fighting. We're trying to be a good OEM partner. And that is why we are trying to be very disciplined and responsible on the wholesale shipment side. We want to chase retail opportunities where that's certainly possible. But we also want to work with our dealers to stabilize and best case improve turns as we point towards the calendar year '27 cycle as well.

Okay. Great. And then I guess sort of more of an economic question. But looking at Chris-Craft, obviously, probably the highest socioeconomic customer in your base. Are you seeing any change in behavior in the super rich buying that product? Or I mean, you talked about Barletta, but is there any either -- are they stable? Or are they stepping back also in this environment?

Yes. We're fortunate to obviously have two premium brands in the Marine space. But as you mentioned, Chris-Craft is certainly targeted at a more affluent customer even than probably any other brand and portfolio. Maybe the Newmar brand on the RV side also targets a highly affluent customer as well. We're seeing Chris-Craft retail be quite stable this year, year-over-year. Their retail results have been stable to even at times slightly higher.

It's not dramatically different from the Barletta business in terms of retail comps year-over-year. So we probably are seeing both sides of that K-shaped economy that is often referenced. Chris-Craft retail being solid and stable and healthy. But our Barletta business, which is while it's premium in the pontoon space, certainly targets a different household income sector within the marine industry. And Barletta, as we've said many times, is continuing to outperform the pontoon market and doing quite well. So it's probably candidly the middle of our lineups where we see the most pressure within our retail results currently.

And our next question will be coming from the line of Scott Stember of ROTH.

Question on '27 pricing. Just trying to get a sense of -- you talked about some -- I don't know if I say the word is sizable, but some materials and inputs, which will drive pricing higher. Can you maybe kind of give us an indication of size up the price increases that we're looking at for '27 versus '26? And I ask because '26, I know there's been some issues and difficulties passing through some of the tariff costs. What's the ability to offset that in '27 to keep affordability in mind?

Yes. Thank you, Scott. The first step that our teams take is doing everything they possibly can to mitigate the cost input pressure that we're seeing every day. I think PCE came out this morning. And really, the general inflation that we're seeing in our business is quite similar to some of the macro inflation numbers that have been released in the last couple of weeks.

And so our teams are working hard in each business to do what they can to work with their supply chains, to work on the design side, to work on the manufacturing and assembly side to really drive those cost input pressure is lower. It's then -- when we understand the results of those efforts that we obviously make a pricing decision that factors in both retail competitiveness and the profit targets that we have in each business. And as I mentioned in an earlier answer to Tristan, those pricing adjustments really vary by business for model year '27. In some cases, it's literally 0% to low single digits. And in other businesses, it can be high single digits to even touching low double digits.

So it really varies quite dramatically by business, by brand and we won't release this morning what that number specifically is for each segment. But it is carefully obviously considered and decided as we again try to balance profitability, retail market share and work with the dealers on increasing field inventory turns in the market.

Now let me just comment. We are working aggressively on improving the accessibility and affordability of our product lineups in each of our businesses. The latest example of that is the Transcend Lite just announced and introduced in early June by the Grand Design Towables business. This is a single axle lightweight travel trailer with an MSRP in the low $20,000 range with a street retail that will be closer to the $15,000 to $16,000 range in the market. [ Sleeps 2 ], it is a fantastic small travel trailer, and it provides an excellent opportunity for RV owners to transition candidly from a tent into a much more comfortable recreational vehicle.

Each of our brands and businesses, as examples, Barletta introducing the Sanza which is quickly becoming a hit in the roughly $50,000, $49.9 point in the pontoon market. So yes, we are taking some price increases and adjustments, but I also want to make sure that the investment community understands that the average selling price from a mix standpoint is being influenced in the right direction in many ways by a lot of good product work that our teams are doing to advance the affordability and accessibility of our product lineup as well. So we really have to think about both factors.

Got it. And then last question on dealers. They have a new mindset seemingly of improved turns and cash flow, and we're seeing that in the order patterns. Do you have an idea of how what we should be looking for, how low or how high their turns, they're looking for them to be? And how much of this weakness in orders will continue into '27?

Yes, Scott, I think our dealers share many of the same turns ambitions that we do. They'd like to see turns in the 2-plus range. I would argue that your healthier dealers, those dealers that are incredibly efficient with their business really even target a number that's meaningfully higher than that at times, 3x or in some cases, even higher.

So it varies greatly by the thousands of dealers that we work with, but as we indicated in the call this morning, we're targeting two turns on motorized and marine products here over the next several quarters. We think the towables market is going to take some retail stabilization and some healthier retail conditions for probably the entire industry and especially our line to move towards that two turn range. But I think we're generally in line with our dealers. They'd like higher turns. We'd like higher turns. We understand that the environment we're in, and we're adjusting our product plans, production plans accordingly to serve the market with discipline.

Our next question is coming from the line of Noah Zatzkin of KeyBanc Capital Markets.

I guess this is kind of a high-level one kind of dovetailing off of some of Brett's questions, but when you think about kind of the divergence that we've seen in RV retail versus marine trends this year, I guess, both from your perspective and from an industry perspective, what do you think is driving that dynamic? Is it kind of purely the K-shaped economy effect? And then as we look into next year, how do you think about the factors that could get retail moving in the right direction for each end market?

Thanks for the questions. We've contemplated, given our foot in both the RV and Marine markets, some of the differences -- it's hard to speculate exactly why. We're in two very specific segments of the Marine market, the pontoon space and the high-end luxury runabout space. And I would probably focus my comments on the pontoon side, I do think there is a case shaped element happening in the marine space that is a little bit more present, meaning that you continue to see some of your premium brands and your premium products move in the market.

But in the marine space, you also see some of the affordable products moving as well. I think the RV market, and here's another thesis, I think the RV market has potentially a more robust used equipment market as well. And a lot of you on the sell side have written about this in the recent past that the dealers are very engaged as are many of our consumers candidly on the used market during these difficult times. And I think the used market is definitely keeping consumer engagement in the recreational vehicle industry is strong and solid, but it is potentially borrowing from some of the new unit sales, particularly for those consumers who are looking for the most affordable solutions to get into or remain in the RV lifestyle.

I'll ask Bryan to comment on some of the conditions we think would need to be present for calendar year '27 to be an inflection point potentially certainly. But I certainly welcome the recent tempering of the geopolitical conflicts in the Middle East and hopefully, oil and subsequently gasoline prices going the right direction.

At the end of the day, we need a number of macro elements to settle down quite a bit. More certainty for the consumer, more certainty for businesses and less noise in the market that would cause all of us to be hesitant in our plans going forward. But Bryan, any thoughts you might have on conditions that would be favorable for our industries in the future?

Well, I think you hit on the primary ones, like the first and foremost, consumer confidence, consumer sentiment to see some leveling of that and sort of see some increases as a result of lower fuel prices, and it's nice to see WTI and Brent back near that $70 range, right about at pre-conflicts pre-Iran levels. And so I think everybody welcomes that and I think the consumer as well. And then you've got interest rates.

I think the expectation now, broadly speaking, is we're not going to see reductions to the Fed rates during the calendar year. We'll look for those hopefully in the future. And I think just depending on how fuel comes through on the future CPI, PPI and PCE readings will certainly have an impact there. So it's again to see the WTI and Brent prices back near 70. We all welcome that. So I think you hit the primary ones, Mike, that we'll be keeping a close eye on here over the coming months.

Really helpful. And then maybe just one on cost containment initiatives on the towable side during the quarter. If you could kind of maybe expand upon kind of what those were and how much runway there is there? It sounds like maybe capacity is some of that looking forward. But then also on the Motorhome side, if you could maybe give an update on some of the margin kind of recapture initiatives there and how those are going?

Let me speak to the towable side. I'll ask Bryan to speak to the motorized. On the towable side, it's across all elements of the value chain. Bryan mentioned some of the capacity reduction work that we're doing here currently, and we'll have more to announce on that in the future. But we are very focused on making sure that the manufacturing environment is rightsized not just to the current cycle, but our expectations for where we might head in a future mid-cycle.

We work very closely with our suppliers on mitigating as much of the cost input pressure that they're receiving as well. Our engineers and product managers are doing an excellent job in the towable space of reformulating the value proposition regularly to make sure that the bill of materials, the feature set and ultimately, the wholesale and retail price offerings in the market are competitive. And so we're constantly juggling those particular products to make sure that they're relevant and maintain a strong profit margin in that way.

And then one thing we haven't talked a lot about this morning, it doesn't necessarily show up in gross margin, but it certainly shows up in EBITDA is SG&A management. It is hard when the top line is challenged from an SG&A percentage standpoint to battle that element. But our teams are really focusing on prudent responsible spending on the SG&A side, we are becoming more efficient from a productivity and a workforce standpoint, but we're also just continuing to find ways to spend our SG&A dollars and still support the business in the right way. Bryan, do you want to speak to some of the motorized activities that you're working on?

Yes, sure. Motorhome profit continued to improve versus the prior year, in line with the expectations we conveyed at the start of this fiscal year. So good work by the team so far. We expect more improvements in the coming quarters. As our initiatives, particularly in Winnebago Motorhome continue to take hold. These include, most importantly, a refreshed product lineup with a good proof point being the recently introduced ARKA that we mentioned earlier, more new product is forthcoming, and that's true from all brands.

We're also improving -- driving improvements, I should say, in a more efficient footprint, improvements in the cost structure, evaluation of overhead related costs and further make or buy decisions related to our verticals, which will reduce our fixed cost structure in the Winnebago Motorhome business in particular. Grand Design, Motorhome continues to expand the product lineup and drive growth in both the top line and bottom line. So a great job by that team in bringing well-received products with both the dealers and the end customers.

And then Newmar continues to execute very well from a margin perspective. So Motorhome is progressing. It's progressing in line with our expectations at the beginning of the year. And we think that there's more opportunity going forward.

And our next question is coming from the line of Brandon Rollé of Loop Capital.

Just on the affordability topic. I think in prior years, you had diversified your supplier base a little bit. to get prices lower or create product lineups that were more affordable for customers. Have you entertained doing that recently, just given that it seems like just retail isn't responding well to the price increases coming through?

The answer to your question is yes. We are constantly on the hunt for strategic supply chain partners that match the environment we're operating in and what we foresee in the future. We have a number of very strong, reliable partners that we've done business with for a long time, and we work with them not just on innovation and quality, but certainly on the affordability of their components as well.

And one of the efforts that we've really turned up the dial on here recently is a material cost savings initiative within the company, where we are expecting our teams business by business to work throughout their business models, but particularly with strategic sourcing here at the center of the enterprise to find improved buying conditions with our suppliers. And so many of you know that the enterprise organizational model that we've undertaken since I've been at the company is really a hybrid model where the brands and the businesses are empowered facing the market, but we have centers of excellence here in the enterprise that support the businesses.

And our strategic sourcing function, I would argue as one of the best in the outdoor recreation industry, and they work closely with the businesses to leverage the collective scale of the volume of our businesses to work on even such things as component SKU harmonization. We approach suppliers that we work with across brands and businesses in the portfolio to have a common master supply agreements and favorable terms and pricing arrangements. And so our strategic sourcing function, I think, continues to be one of the most effective ways that we use to mitigate some of the material cost input pressures.

So it's a strong focus. Every business has a goal, the enterprise has a goal. And we're not afraid to look at new parts of the supply chain if we need to make a change to get a higher level of cost -- excuse me, a lower level of cost, a higher level of quality or some more differentiation or innovation. Everyone on the call knows that there will be continued evolution in the supplier side of both the RV and marine industries. And we are very active right now in trying to cast our own destiny in terms of what our supply chain strategy looks like in the future both in the present, but also in the years to come. So lots of active work there to address the affordability but candidly, also address the agility and resiliency of the business as well.

Our next question is coming from the line of Gerrick Johnson of Seaport Research Partners.

You guys mentioned that Grand Design Towables is facing targeted competition. Can you talk about that? I thought the use of the word targeted was interesting?

Grand Design has in the marketplace competitively really wanted -- went from being viewed as the hunter to, in some cases, being viewed as the hunted. Its success over the last 14 years of its existence has earned a strong base in the towables market. I mean this is a business that still holds the mantle of the fastest-growing towables business in the history of the RV industry. And you have seen some very good competition come out in the last number of years, particularly start-ups with a very similar business model to Grand Design.

It's really an iron sharpens iron competitive environment. And a lot of the towable and particularly the fifth wheel competitors have looked at Grand Design's success over the past number of years and really tried to both match and if not, try to exceed that as well. And so the Grand Design team is continuing to stay paranoid in a healthy way. They want to maintain the hunter mentality, and they continue to try to make sure that their channel relationships, their product strategies, their customer service support, their marketing efforts continue to be collectively strong enough.

So we very much acknowledge the competitive intensity, particularly around fifth wheels. But we're also very pleased with how the Grand Design team is fighting the fight. And I think a number of the things that we've done with quality, with channel, with innovation, with affordability. We'll continue to position the Grand Design Towables business for success in the future. The Grand Design overall business is even healthier when you include the motorized launch of Grand Design product in the last 18 months as well.

We haven't talked about that a lot this morning, but Bryan and I continue to be very pleased with the launch of Grand Design Motorized. It is another point of leverage for us in terms of healthy relationships with the dealer channel and the consumers. It expands the brand presence in power within the RV industry. And so the collective Grand Design business really is, in many ways, as strong as ever, given that it's now a full line business. So targeted is probably in some ways a complement, but it's also a reality that the teams have to wake up and battle every day, and we're doing so.

Okay. Understood. And one more question, more of a higher-level question about the Winnebago brand. Can you talk about that brand positioning and what it means? And the reason why I ask is when I first started covering Winnebago a long time ago back in the pots days, the phrase was Winnebago is no one's first RV, but a lot of people second and third. Now it seems to be the more affordable brand reaching new customers. So is there any confusion there?

Well, thanks, Gary, for that question as well. Obviously, the Winnebago brand continues to be the flagship brand within Winnebago Industries, the parent company that shares that same name, you really kind of break the Winnebago RV story down into two pieces. The Winnebago Towables element, we've talked about that a lot recently. We are putting a lot of investment, a lot of effort and capital and resources into that business as we pursue a 3% to 5% towables market share position in the future. We've seen fantastic success on Winnebago Towables retail here in the recent past.

I mean we advanced retail share in trailing 3 months, I believe, somewhere in the 30 to 40 basis point range here recently. And this is a business that's just really only begun to revolutionize its dealer network, but also introduce better product. That is really the part of the Winnebago brand that's going to hit the affordability part of the towables in the RV market.

On the Winnebago Motorized side, we still consider that to be a differentiation business. Yes, we want price points that are accessible, but we are really trying to maintain our focus on quality, on innovation, on reliability and really attacking some segments of the market that are both high volume but also growing Bryan talked about the ARKA here in some of his comments. And that back country series products that we have really is a growing segment for RV consumers.

And so the Winnebago brand is both candidly. It's more affordability and accessibility on the towable side. And it continues to be innovation and differentiation and adventure and great experiences on the motorized side. So it is a nice blend as you work through. We are really pleased with the progression that we're making on the Winnebago Motorhome business in this fiscal year '26. We've acknowledged in the past that, that was a business that became challenged and we had a lot of work to do to improve it both internally and externally. It's not where we want it to be yet, but it is making very solid progress and great new products will fuel that turnaround and the time line of that turnaround and the profitability of that turnaround, and we are beginning to see some of those great new products and better operational efficiency coming out of that business.

So we're -- I'm bullish on the future of the Winnebago brand in our portfolio because the work is there, and we're seeing this -- the fruit of some of the hard work that the teams are doing are beginning to show itself.

The only thing I'd add to that, Gerrick, is we're early in the process of reinvigorating that Winnebago Towables line. So obviously, the thrive has been a big hit. That's towards the lower price points, but don't be too full by that, too. I know that there is a broader product lineup that Don and the team have in mind there, and there's a lot of excitement yet to come. So that's the only add I'd have.

Thank you. And this does conclude today's Q&A session. I would like to turn the call back over to Ms. Ondala for closing remarks. Please go ahead.

Thank you all for joining us this morning. We look forward to keeping you all updated on our progress. Enjoy the summer.

This concludes today's program. Thank you all for joining. You may now disconnect.

Welcome to the Winnebago Industries Second Quarter Fiscal 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded.

I would now like to hand the call over to Joan Ondala, Vice President, Treasury and Investor Relations. Ms. Ondala, please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us to discuss our fiscal 2026 second quarter results. 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 second quarter results was issued and posted to our website earlier this morning. Please note that the earnings slide deck that follows along with our prepared remarks is also available on the Investors section of our website under quarterly results. .

Turning to Slide 2. Certain statements made during today's call -- rep 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, and a number of factors, many of which are beyond the company's control, could cause the actual results to differ materially from these statements. These factors are identified in our SEC filings, which we encourage you to read.

In addition, on today's call, management will refer to GAAP and non-GAAP financial measures. The reconciliation of the non-GAAP measures to the comparable GAAP measures are available in our earnings press release.

Please turn to Slide 3. Hosting today's call are Michael Happe, President and Chief Executive Officer of Winnebago Industries; and Bryan Hughes, Senior Vice President and Chief Financial Officer. Mike will begin with an overview of our second quarter performance as well as a forward view of the market. Bryan will discuss the associated drivers of our financial results and our fiscal year 2026 guidance. Mike will conclude our prepared remarks, and then management will be happy to take your questions.

And with that, please turn to Slide 4 as I hand the call over to Mike.

Thank you, Joan, and good morning, everyone. Winnebago Industries delivered a solid second quarter, reflecting focused execution on our overarching enterprise strategies and our fiscal year 2026 first half objectives. Despite a challenging market environment, our teams performed with discipline, protecting profitability, managing controllable costs and advancing the product and operational priorities that matter most to our long-term competitive positions in the RV and marine industries. Across our portfolio of premium differentiated brands, we have built a broad and durable outdoor recreation platform that spans multiple customer segments, price points and lifestyle use cases. That breadth is increasingly valuable in a more selective demand environment and positions us well to compete for profitable share as demand conditions improve in the future.

We are introducing meaningful new products across our business lineups, especially recently in the Motorhome RV segment within the traditional C category with technological differentiation and targeted focus on affordability and value accessibility to our premium brands. We are also being deliberate about where we invest and grow. Our emphasis on driving share in higher-value segments such as Class A diesel, Class C diesel and the growing super C category reflects our strategic focus on retail dollar and profit reach through resilient premium categories. That discipline is evident in our results, even as unit share has fluctuated in certain industry segments, our RV retail dollar share has remained resilient. On the Winnebago-branded Motorhome business, we have made considerable progress in the restoration of this flagship line through the first half of fiscal 2026.

The team is on its plan through the first 6 months with much more traction planned in the back half of the year. While several initiatives are still in initial stages, and are expected to build and become more apparent over coming quarters. The prospects for this business in the future are definitely improving. The progress there really reflects the same Winnebago Industries enterprise strategies. We are applying every day across our portfolio, empowering best talent, building relevant premium brands and winning products, elevating the total customer experience, expanding digital capabilities and connections and driving portfolio synergy and excellence.

On the Towable RV side, our wholesale share reflects deliberate efforts to reinvigorate our Winnebago Towables business with recent new products and revitalized several critical grand design products attacking the meat of the market. We have leaned into models like access within the Winnebago brand and Grand Design's Transcend line, gaining important shelf space in supportive dealer showrooms while also moderating some highly promotional product segments to support inventory health and overall channel stability.

We will discuss our marine businesses in a few minutes, but I would like to highlight a brand that does not receive enough attention at times and that is Lithionics, our mobile portable power line. This 2023 acquired platform continues to be an increasingly vital part of what differentiates our enterprise profile focused on delivering professional-grade safe, portable, reliable battery power solutions. Lithionics strengthens our competitive differentiation today and supports future profitable growth as we expand the technology beyond RV into marine and work vehicle applications. Our overall financial performance through the first half of fiscal 2026 reflects the strides we have made to deleverage our balance sheet, strengthen cash flow and reduce controllable costs.

We have urgency in these areas to position ourselves as soon as possible to accelerate our capital allocation priorities for the future benefit of this company. Our teams have done an excellent job since last April of 2025, managing tariff headwinds and intentionally improving SG&A leverage. Bryan Hughes will walk through those numbers in more detail shortly.

Turning to Slide 5. Retail activity across the second quarter remained aligned with a seasonally slower retail period of the year, but also reflected a challenged near-term consumer sentiment environment with comps lower than the same period a year ago. Additionally, retail both at the dealers, but also at certain consumer retail shows through the January, February months were impacted by adverse weather events in key regions. Dealers continue to manage inventory cautiously, keeping ordering and stocking closely aligned with retail conditions. Wholesale activity has remained disciplined with shipments also moderating throughout the seasonally slower period. The RV Industry Association's spring road signs outlook calls for modest industry shipment growth in calendar 2026, with total volumes forecast to increase by approximately 2% year-over-year.

That outlook continues to assume a first half of calendar year 2026 weighted towards seasonal softness with improvement expected in the back half of the year as retail demand stabilizes. It also assumes mix performance across segments, including resilience in fifth wheels and a more gradual recovery in certain motorized categories. Our own internal RV wholesale planning remains intentionally more cautious than this outlook. With a focus on retail-driven ordering patterns and disciplined production pacing as conditions evolve. As we move into the critical spring and summer selling seasons, we expect retail activity to build and we are well positioned to respond with product as dealers desire. Inventory management remains a priority. During the second quarter, RV inventory turns reached approximately 1.5x, exhibiting normal seasonal shipping patterns as well as increased dealer demand tied to recent Winnebago Towables and Grand Design Motorized product introductions.

Dealers are supporting these new business strategies and building inventory positions where they believe in future retail share attainment opportunities. While overall inventory turns at the end of Q2 versus backward retail, we're slightly lower than what we would like to see at this time of year. We are very much focused on continuing to be a good partner to our dealers going forward in pursuing a 2x inventory turn goal at some point in calendar 2026 as seasonal retail accelerates.

Turning to Slide 6. At the Florida RV Super Show in January, we showcased how our product portfolio is evolving around changing RV ownership and travel behaviors. Across Winnebago, Grand Design RV and Newmar, the products we featured from Winnebago Sunflyer Class C to Grand Design's Solitude fifth wheel and lineage Motorhome platforms to our Newmar Freedom Air luxury C introduction. All these emphasize livability ease of ownership and differentiated features, serving both first-time buyers and experienced owners. Strategically, the unveiling of new products just mentioned reinforce the direction of our product road map, a deliberate focus on products that remain relevant across market conditions support dealer inventory discipline and contribute to brand strength over time. Our approach to innovation is intentional, emphasizing mix, execution and returns.

On Slide 7, our Barletta Boats business continues to hold the #3 position in U.S. aluminum pontoons, with a 9.1% retail unit market share over the trailing 12 months through January. The 3-month SSI unit retail market share is running even higher in the lower double digits range. Barletta's brand positioning and product mix remains consistent, supporting even higher retail dollar share versus the #1 and #2 competitors. However, to serve an even wider audience across the recreational boating space, we have expanded the Barletta lineup with the introduction of the Sansa series of products. Starting at $49,995 for a Triton model well equipped with 150-horsepower engine, a cover and in floor storage. The Sansa extends the Barletta experience to new buyers looking for affordable access to premium brands, while maintaining the trusted craftsmanship comfort in industry-leading customer service support that define Barletta rate.

Moving to Slide 8. Barletta also captured its fourth consecutive Discover Boating Minneapolis Boat Show Innovation Award, recognizing our leadership in bringing industry-first ride stabilization technology to the pontoon segment through our partnership with Seakeeper Ride. This recognition underscores the team's sustained focus on meaningful innovation that elevates the on-water experience for our owners. That same commitment on customer-centered innovation is evident within our Chris-Craft brand as well, where we recently introduced the all-new launch 27. The Launch 27 is a reimagined premium Debo that blends the brand's timeless design and unparalleled fit and finish with modern technology, enhanced comfort in standard C keeper ride stabilization. In January, the Launch 27 earned a 2026 Innovation Award at the Discover Boating Miami Boat Show, highlighting its sleek hull design and advanced technology.

Importantly, this award reinforces Chris-Craft's leadership in thoughtful, honor focused innovation. Product quality and innovation remain core to our strategy. And these marine awards validate that conviction. Both Barletta and Chris-Craft have also been recognized with the National Marine Manufacturers Associations Customer Satisfaction Index awards, reflecting consistently high owner satisfaction across our marine portfolio.

Moving to Slide 9. In January, we released our seventh annual corporate responsibility report, outlining how we continue to integrate sustainability, safety and governance into the way we run the business. Two highlights from our most recent report. One, we have made meaningful improvements in workplace safety in the last decade and again in fiscal 2025. And two, we have now reduced our absolute Scope 1 and Scope 2 emissions by about 15% versus our 2020 baseline. Both are clear indicators of disciplined execution embedded in our day-to-day operations across the organization.

Now let me turn the call over to Bryan Hughes for the financial review. Bryan?

Thank you, Mike, and good morning, everyone. Starting with our consolidated results on Slide 11. As Mike noted, our results continue to demonstrate disciplined execution across a diversified portfolio. even as retail demand across RV and marine remains uneven. Consolidated net revenues increased 6% year-over-year as a strong performance in the Motorhome RV segment more than offset decreases in towable RV and marine. Growth in the Motorhome RV segment was driven by Grand Design RVs continued expansion with strong growth in Winnebago and Newmar brands contributing as well. .

Gross profit increased due to growth in the top line and when combined with SG&A reductions due to our cost savings initiatives, Operating income improved 51% from the second quarter of fiscal 2025, resulting in adjusted EPS of $0.27, 42% higher than last year.

Turning to our segment results, beginning with towable RV on Slide 12. Net revenues declined by 9% and primarily attributable to a shift in product mix toward lower price point models and lower unit volume, partially offset by selective price adjustments. Segment operating income margin of 4.2% for the second quarter of fiscal 2026 was down 20 basis points from prior year, primarily due to volume deleverage and product mix largely offset by selective price adjustments and cost containment initiatives. Through the first half of fiscal 2026, segment operating income is up 3% and versus the same period last year on a roughly comparable 3% increase in net revenues. Our dealer inventory increase in the towable RV segment is related to the new Thrive in the Winnebago brand and the continued success of the Transcend in the Grand Design lineup. When combined, these 2 lines explain the entire increase in the towable RV segment's dealer inventory when compared to the prior year.

Moving to Slide 13. Our Motorhome RV segment reflected a net revenue increase of 29%, with volume momentum across our Newmar, Winnebago and Grand Design Motorized brands. Net revenues are running 21% ahead of fiscal 2025 through the first half of the year. Operating income performance in this segment primarily reflects improved volume leverage, with additional support from targeted cost and operating efficiency initiatives. Segment operating income margin improved 270 basis points year-over-year to 2.4% in Q2. The same step change in profitability is evident in our first half segment performance, resulting in an operating income margin of 2.6% and compared with negative 0.8% in the first half of fiscal 2025.

Turning to Slide 14. Our Marine segment results reflect the industry operating environment we anticipated with retail demand remaining muted and dealers maintaining a cautious approach to inventory and wholesale activity. Segment net revenues decreased by 3%, primarily due to lower unit volume and product mix, partially offset by selective price adjustments. Operating income margin of 3.7% was down 300 basis points from last year's fiscal second quarter due to higher warranty expense and volume deleverage. Through the first half of fiscal 2026, Marine segment operating income margin was 5.3% versus 6.7% in the same period last year. Revenue was flat year-over-year.

Turning to Slide 15. We continue to make tangible progress on deleveraging actions consistent with the priorities we've outlined over the past several quarters. A key proof point with our February redemption of $100 million of 6.25% senior secured notes due 2028, funded through cash generation over the past several quarters. This action demonstrates our confidence in the durability of our cash flow even as market conditions remaining consistent. The redemption meaningfully reduces gross debt and contributes to reduced interest expense, reinforcing the discipline underlying our capital allocation framework. Importantly, it also preserves financial flexibility as we enter the seasonally stronger back half of the fiscal year. We continue to maintain healthy cash balances, and cash flow from operations improved year-over-year through the first half of 2026 driven primarily by improved earnings with working capital performance providing additional favorability.

Turning to guidance on Slide 17. For fiscal 2026, we are maintaining our full year revenue and adjusted EPS outlook while updating reported EPS with the details as follows: consolidated net revenues in the range of $2.8 billion to $3.0 billion. Reported earnings per diluted share in the range of $1.50 to $2.20 compared with $1.40 to $2.10 previously. The increase versus the prior range reflects updated assumptions related to items excluded from adjusted EPS. And finally, we continue to expect adjusted earnings per diluted share in the range of $2.10 to $2.80. Segment performance continues to reflect a mixed demand environment. In towable RVs, we expect revenue to be softer than fiscal 2025, while remaining focused on maintaining operating margins.

In Motorhome RV, we expect both revenue growth and improved operating margins compared to the prior year. In Marine, retail demand remains soft and as a result, we expect full year net revenues to be below fiscal '25 levels. Looking to the third quarter, we expect continued strength in Motorhome RV to be offset by softer conditions in towable RV and marine, resulting in consolidated revenue that is flat to down versus prior year levels. On that revenue base, we expect adjusted EBITDA and adjusted earnings per diluted share to be roughly in line with the prior year. Our outlook remains subject to macroeconomic conditions including the direction and severity of recent geopolitical developments and their potential impact on commodity prices. With that context in mind, our fiscal 2026 outlook remains grounded in actions within our control. We continue to focus on disciplined execution and advancing our strategic initiatives which we believe position us well to deliver on our financial objectives.

Now please turn to Slide 19 as I hand the call back to Mike for closing comments. Mike?

Thank you, Bryan. Winnebago injuries begins the second half of fiscal 2026 on solid footing to drive sustained earnings improvement, a view that holds even if the industry recovery continues to be stubborn. Over the last several quarters, going back to the second half of fiscal 2025, we have been quite intentional about the business improvement changes we are making. We have broadened our portfolio to key segments and price points. We have strengthened the balance sheet and improved financial flexibility. We have made deliberate decisions to better align our fixed cost base and variable expenses, especially within our RV segments to reflect the reality of today's demand environment.

Our teams have proactively navigated tariff headwinds and unexpected cost pressures with agility and diligence. And I am especially pleased in our ability to continue executing the controllables and mitigating risk effectively as conditions evolve. We are, again, doing what we said we would do. As we move through fiscal 2026, our focus is clear: execute what we can control, protect profitability of balancing retail share in our target segments, strengthen our financial flexibility and protect and bolster our ability to invest in our people, brands, products and operational excellence initiatives that we believe will drive sustainable and superior returns in better days ahead. It is worth stepping back and recognizing the broader context.

Outdoor recreation remains a large, resilient and economically meaningful sector, contributing more than $1 trillion in direct and indirect economic output and supporting millions of jobs here in the United States, according to the newly released data from the Department of Commerce. Participation in outdoor recreation remains strong. and is an integral part of our customers' physical and mental wellness. While our specific industries are operating in a more measured demand environment, amid a dynamic macroeconomic and geopolitical backdrop. The long-term fundamentals of the category in candidly Winnebago Industries continue to support sustained engagement and investment over time. Our lifestyle is strong and Winnebago Industries is strong as well. We are mindful of the evolving situation in the Middle East. And while it is too early to assess any direct impact on our businesses, we are monitoring developments closely and their potential impact on consumer demand and input costs.

Notwithstanding that backdrop, our confidence for the future comes from the progress we have already demonstrated and from our team's continued focus on our 5 core enterprise strategies that define how we operate and compete. Now Bryan and I are happy to answer your questions this morning. Operator, please open the line for the Q&A session.

[Operator Instructions] Our first question comes from Joseph Altobello with Raymond James.

First question on inventory. Obviously, you ended this quarter at 1.5 turns. The target is 2 turns by the end of the calendar year. So how much of that is coming from you guys undershipping demand over the balance of the year? And how much of that is what you believe will be improved retail?

Joe, this is Mike. It will be a combination of several factors. Certainly, we anticipate seasonal retail momentum to take place as it does every spring and summer. From an industry wholesale estimate standpoint as you probably are aware from our comments. We are a little bit on the conservative side. And so our assumptions on both industry wholesale shipments for the remainder of our fiscal year and the calendar year and embedded in our guidance is in line with us improving turns to the level that you just cited.

Bryan Hughes in his prepared comments also mentioned in the Towables RV segment that the significant majority, if not the entire driver behind towable RV turns at the present time, is the support of the Winnebago-branded Towable line that we're revamping, primarily the Thrive and access product that is shipping into dealers, many of whom are new to that brand. as well as support for Grand Design's consent model. And so we anticipate that, that pre-prime retail season load-in will diminish a bit. from a shipment standpoint and the natural course of rebuild and unit replenishment will take over. So we do anticipate our inventory turns on the RV side to improve in both quarter 3 and quarter 4 and throughout the rest of calendar '26.

Got it. Very helpful. And then to follow up on that, you mentioned obviously the geopolitical events. And I know it is early, but any sort of discernible impact on consumer demand here in March from the conflict with Iran?

Joe, we could not draw a straight line to any short-term market performance factors or even input operational costs into our business quite yet from the conflict overseas. We are monitoring that situation very carefully. We certainly understand that, that is weighing on the minds of consumers and dealers as they contemplate obviously, investments in the lifestyle for consumers and in inventory from a dealer standpoint but we have not seen any adverse effects quite yet from the conflict.

Our next question comes from Alice Wycklendt with Baird.

Maybe I want to dig in a little bit more and see if you can share on the impact of whether the cadence of trends over the course of the quarter and maybe what you've seen since quarter ended some of those weather impacts of the east?

Yes. Well, let me talk about the second quarter retail environment that we witnessed. We did have some good retail shows both on the RV and marine side. In fact, our largest retail shows happen to be some of our best shows. But apart from those large shows, the rest of the retail show season was candidly in line with general industry retail conditions throughout that particular period for us, the months of December, January and February. We did see some weather events in the months of January and February did have an impact on specifically some of the retail shows, but in some cases, good portions geographically of the U.S. that hampered retail for a week at a time.

These are generally our lowest retail selling months of the calendar year. So we don't anticipate that weather will continue to be a theme for the remainder of our fiscal year or calendar year '26. We'll see how that goes. Concerning retail in the month of March, I would say we are generally seeing a retail environment in March that is healthier than what we saw in the months of January and February. Internally, we have 3 weeks of Rio collected already from this particular month. And I would say 2 of those 3 weeks were certainly better. And the third week of those 3 weeks was similar. So net positive in terms of the general direction of retail in March versus what we had seen in January and February. But we're obviously monitoring that every day, every week and hope we continue to see that mini trend continue here in the near future.

Great. And then obviously, a lot to unpack with the Iran conflict, but maybe we can just isolate gas prices and talk about how the RV market has typically reacted to higher prices, at least in the past and maybe what you'd expect here?

Yes. I think you would want to break that topic or question down in 2 ways. One, how does it impact people who are already in the lifestyle and own RVs. And generally, the manner in which we see an impact there is that people don't necessarily take less trips. They just travel less distance to experience the RV lifestyle. And so we believe that the lifestyle itself is healthy from an engagement standpoint and we do not anticipate people doing less camping, but they may go less far to do that camping. Certainly, from a new product purchase standpoint for customers that are in the marketplace. The concern there is that the perceived affordability of the lifestyle is elevated because it costs more to fill up that fuel tank on either your towing vehicle, if you're buying the Towable or that Motorhome coach.

But we generally don't see as big of an impact on new purchases as you might expect when gas prices are elevated at the pump. These are generally planned purchases, often associated with life-changing events like retirements or kids getting older bucket list that need to be checked off. So we're not yet factoring in a significant decline on new product purchases yet. We'll want to see how long gas prices are elevated directly related to the Middle East conflict and discern whether the impact to consumers last. The last topic I do want to mention is that there are some positives when some of these geopolitical events happen historically. There are times when Americans choose to travel differently. They may take less trips to Europe. They may take less cruises across international waters. And instead, they turn to domestic road trips, which actually turns out to be a tailwind for us at times historically. So again, it's too early to come to a conclusion on any of the comments I just made. We are monitoring the situation carefully, but those are some of the opinions we have on possible dynamics and impact.

Our next question comes from James Hardiman with Citigroup.

This is Sean Wagner on for James. I guess, just following up on the inventory. If you're targeting 2x turns at some point in calendar year '26. Is there any color you can give on where you expect towable and Motorhome turns to finish the fiscal year? Will you get close to 2x this fiscal year?

Sean, thank you for the question. We won't share specifically the future projected breakdown by category. I can just tell you, our business leaders have the same goals in mind. The turns performance of our portfolio varies by brand and business. And it also varies at times, as I mentioned earlier, by the introduction of new products or new strategies. But in macro, our intention and plan for the rest of the year, again, as included in our guidance assumptions, is to drive those field inventory turns back very close to 2.0 by the end of our fiscal year and certainly by the end of our calendar year. There can be things that aid or disrupt that, but that is certainly our intentions at the time.

I will take this opportunity to mention the quality of the inventory in the field as well. We track very carefully how much of our inventory is current model year prior model year and prior 2 model years. And I can tell you from a positive standpoint that we have seen a significant improvement in aged inventory across our RV and Marine portfolio at the end of quarter 2 fiscal '26 versus the end of quarter 2 fiscal '25. The number of units on prior model year and prior 2 model years are meaningfully down as we sit here today. And the number of current model year units as a percentage of the whole is increased which is a good thing because we want consumers looking at the very latest.

And often, our sales allowance or sales support dollars for dealers are very targeted at aging inventory. And so the less aging inventory we have, we think we're in a better competitive position in the market, but we're also spending less dollars from an inefficiency standpoint to clear out that old inventory. So our teams are focused on it, and that will be part of the story as we talk about the quantity and the quality of field inventory going forward.

Okay. And I guess on the topic of your unchanged guidance. Have your -- I know you said it's too early to sort of draw any conclusions from the geopolitical events, but have your underlying interest rate assumptions within your guide changed at all based on the current macro environment? And can you remind us what those were?

Yes, this is Bryan. I think as we all know, some of the interest rate expectations, including the reductions that we're pricing in the market previously are easing and are turning the other direction. A lot of it -- it's too early to tell what the impact of the geopolitical events right now will be on oil prices, interest rates labor market and things of that nature. So I would not say that we made a significant adjustment in any kind underneath our guidance that is anticipating an extremely different interest rate environment right now. It's just too early to tell on what direction things will go.

Okay. But I guess if interest rates aren't cut this year or are even raised, let's say, does that drastically change your thinking for the industry and for the year?

No, I mean that's one of the factors we would consider as we come forward with our range on the industry. And so that would impact ultimately the outcome in all likelihood. But that's why we have the range that we do from 315,000 to 345,000 units of wholesale shipments. .

Our next question comes from Patrick Scholes with Truth.

With elevated gas and oil prices in the news, could you just give us an update on where you stand with progress with your ERV 2 electric prototype?

Patrick, thank you for the question. We do not have a commercial strategy in place currently for an all-electric Motorhome vehicle. As you recall, by your question, several years ago, we were active with first pilot of all-electric Ford platform. And we did, in fact, produce a very small number of those and engage a few dealers on consumer engagement around those. We have made the decision more than a year ago now to not proceed forward in the present environment with an all-electric Motorhome platform at this time. And that was a combination of candidly, chassis partner feasibility on the right platform, combined with learnings from consumers about what was acceptable from a functional standpoint, but also a value standpoint in the market.

So at this time, we are not competing with any alternate power technologies from a propulsion standpoint, but as you know, we are very focused through our Lithionics brand on doing everything we can to play our part in the electrification of house power that is oftentimes the removal of the generators from the house platforms on an RV or a boat and substitute that with the lithium battery power package. So that really is our electrification strategy right now, the House power platform that we have through in Lithionics.

Our next question comes from Tristan Thomas with BMO Capital Markets.

Mike, just a clarification question. When you said 2 or 3 weeks so far in March were better. Is that relative to year-over-year or better than January and February?

From our perception standpoint, the months of January and February were actually quite similar from a retail standpoint. I know the industry has not released February retail yet for RVs. But we anticipate that when that information is released, that you'll see retail be very similar at the industry level to January. My comments around our internal Winnebago Industries RV and marine retail for the month of March is that we have seen a net positive 3-week trend as compared to the months of January and February, meaning March is better, not quite where we'd like it to be ultimately, but certainly a better start to the early spring period than what we were seeing earlier. And I will tell you there are some bright spots in some of those early results, including our Winnebago Towables brand, which we're very energized about.

We've seen very strong early results on Winnebago Towables in March that validates some of the dealer support we're getting and some of the new products that we've launched. So very early signs. Things can change from a volatility standpoint week-to-week based on our reporting processes and the way that we capture retail. But I think what I'm mentioning this morning is in line with a few of the RV dealer surveys that have happened by some of the sell side here within the last couple of weeks. So let's cross our fingers and hope that trend continues.

Tristan, just I'll add to that. This is Bryan. I think you're inquiring not about the absolute so much as the growth rates year-over-year. And that's what Mike is referring to in March that the year-over-year comps are showing some stability for those first 3 weeks. .

Okay. But not up year-over-year. Is that accurate based on your comments?

We won't share specific numbers, Tristan. They are improved versus January and February.

Okay. And then just a question around Grand Design share trends in the quarter, a little bit under some pressure. What's driving that? And then kind of how do you reverse that, specifically the Towable side?

Yes. We have seen some Grand Design unit retail share pressure in the last year a good chunk of that comes from the intense competition we're seeing on fit wheels in the market with several good competitors, both from a legacy standpoint, but also some of the newer competitors in the last for or 5 years. The team at Grand Design is very engaged in the fifth wheel segment. We've introduced the Omega frame, which we believe is one of the most durable, strongest frames now in the market. We recently came out with a composite leakproof roof that is beginning to be rolled out across the Grand Design line but beginning with, I believe, the solitude line on the fifth wheel side.

We have partnered closely with many of our dealers on rightsizing the programmatic and promotional support around those fifth wheel models in the retail environment. We have seen less degradation of share on the travel trailer side. And in fact, Grand Design over the last 5 years has generally been gaining share on travel trailers over an extended period of time but we've seen a little bit of share dilution there as well, primarily due to the emphasis on affordability and some of our competitors who have much higher capability in high-volume, load differentiation mix products. So we're probably battling affordability primarily on travel trailers we're battling some competitive intensity on fifth wheels. And so the team is working on brand strength, product strength, dealer improvements in terms of support just across the line.

I will tell you that we do have plans in the future to expand the Winnebago Towables line into fifth wheel products at some point. We have not announced what that first product would be nor the timing of that, but that is on the road map. So we'll compete even differently in the future with 2 towable brands in some of these spaces, not just 1 primary large one. So thanks for the question.

Our next question comes from Bret Jordan with Jefferies.

On the fifth wheel category, and obviously, it's a tough market from a share competition standpoint, is that -- is the -- the broader category under similar pressure in the sense that you're talking about people looking for a lower price point access [indiscernible]?

Well, I think that theme, Bret, exists candidly probably across the whole of the RV industry, value affordability people certainly are still shopping for premium brands, but looking for a sharper accessibility from a value standpoint to those brands. We are seeing some activity on fifth wheels around private labels with some of the larger retailers in the RV space. That is a strategy that is a little less mature than you see on the travel trailer side, but that is ramping up a bit. So it's a combination of factors. I believe consumers looking for value, really good competition dealers thinking about the category in the evolving way as well. And our teams will have to continue to adapt.

I want to make this point, though. Winnebago Industries is not the Grand Design fifth wheel company. And our share and opportunities to drive our business forward come from 9 different revenue streams within the company. And fifth wheels right now is just 1 of those 9. And so I am very pleased with the diversification and the breadth of Winnebago Industries and our ability to use certain parts of our portfolio that do have momentum like near like Barletta, lately here like Winnebago Towables to offset some of the softness we see from time to time in different parts of the portfolio. We've also been doing some work recently on unit share versus retail dollar share at our quarter 3 earnings call in June, we will unveil some of the data from some of that analysis.

But our retail dollar share at an enterprise level, particularly for the industry is very competitive, and in fact, is much more resilient than our recent unit share. And that comes from some of the great work that's happening in the Motorhome segment, specifically with new business launches like Grand Design Motorhome racing to 4% plus share here recently after 2 years of being in the market. So we're going to be very focused. Don't get me wrong. We're going to be very focused on addressing some of the share pressure that we're seeing on fifth wheels, but I can also assure our investors that we are going to be very focused on driving good news and positive momentum across the other 8 revenue streams that we have in our portfolio as well. And that is, I think, part of the secret sauce as to why we are maintaining our guidance for the back half of the year because we believe that the whole is healthy enough to maintain a statement of confidence here this morning.

Okay. And then in Marine, I think you called out warranty and volume deleverage as impacting margin. Could you sort of parse those 2 out? Is there anything that's extraordinary going on the warranty side of [indiscernible]?

No, nothing extraordinary, but not like a larger single event that caused us to do a recall or anything. It was just a few that aggregated into a higher current quarter warranty expense recognition. So that's really the driver there. .

Our next question comes from Noah Zatzkin with KeyBanc Capital Markets.

I guess, first, could you kind of comment on the margin improvement initiatives in motor homes and provide an update there?

We've talked about this in the past, Noah, that there are several things underway. And brand by brand, we are undertaking those initiatives. I'd say, as we've said in past quarters, the Winnebago Motorhome transition to profitability is probably longer in nature and did not have a significant impact in the current quarter, but we expect it to have improving impacts in the several quarters ahead of us. We are still enjoying the ramp-up of the Grand Design Motorhome entry, and that entry has gone very well. And then similarly, on the Newmar side, the margin enhancement in that business over the past several years and in the more recent quarters have continued to bear fruit.

So we're very pleased with that. I would say, in general, that's the storyline. We have further improvements we're expecting in the Winnebago Motorhome business as it relates to margins, specifically. Some actions have already been taken. Others are underway. Certainly, important in that evolution on margins in the Winnebago brand is continued product introductions that demonstrate innovation, differentiation in the marketplace, and we look forward to those in coming quarters.

And then just maybe any updated thoughts on tariffs and maybe the expected impact versus prior? I know everything is still fluid.

Yes, pretty fluid environment, as you suggested there. I think the teams have done a very good job, I'll say, specific to the margin conversation. The teams have done a very good job of assessing the impact of tariffs monitoring them very closely quarter by quarter, month by month, mitigating the impacts with vendors as partners, and doing a very good job of minimizing the impact of tariffs and then where necessary pricing for those tariffs and making sure that the pricing matches the overall inflationary impacts. So that is ongoing work. I'd say the recent decision by the Supreme Court on IEA to be offset in many respects by new tariffs in the 122 category. Our still being evaluated. I do not expect that transition from IPA to 122 to have a material impact on our margin story or on pricing. I think that they will largely offset each other if not even be a little bit favorable, but that too is something that we're monitoring very closely. .

And our final question comes from Mike Albanis with StoneX.

I know it can be difficult to discern amongst various macro factors, but any implications you're seeing from expected tax refunds within dealer traffic or lead generation essentially setting the table for higher conversion. Into Q3, particularly in regions where the salt cap was increased or really, is that just too difficult to parse out from typical seasonality?

Yes. Good question, Mike, and thanks for that question. We do track through various sources, some of the tax refund trends that are happening in that particular sort of season. And it does appear that the size of tax refunds are in a positive way elevated for citizens and possible consumers versus a year ago. It is probably too early as those checks or deposits are arriving from a refund standpoint to understand if that will impact us materially. It certainly can't hurt as consumers claw back a few more dollars and decide what to do with that. So there's -- as you know, there's a lot of noise in the environment in terms of elements weighing on consumers' mind from a sentiment standpoint, but also some of the inflationary pressures some of which were mentioned on the call with possible gas price elevation.

So we'll see how that goes. We'll have a better idea here probably in the next 60 to 90 days. There have been times, though in -- with past policy legislation that is tax friendly to consumers where dealers have cited that consumers do have a little bit more breathing room to be able to throw at a down payment on a new RV or boat. But a little early to tell, but early signs in the tax season are positive from a refund size standpoint. So we'll continue to monitor.

That's good context. And then hopefully, a good one to end it on here, but since you decided to highlight Lithionics this morning, can you just provide more color on it as a competitive differentiator? What's out there? What it better, I guess? And then are you seeing that translate or can you attribute any share gains directly to that, whether that be a lot wins with dealers or resonating with the consumer, et cetera?

Yes. Thank you for the question, and it's a good topic to end on. We acquired Lithionics in the middle of 2023. And the reason we acquired look like there were multiple reasons, but one of which was that they were really and are really the gold standard in lithium battery packs, battery management systems. Since 2023, their penetration into the RV market has expanded. We have picked up new customers, including several of our OEM competitors, and we have very good work relationships between Lithionics and several RV OEM. We've expanded our product line significantly from primarily battery pack systems and BMS to include other types of mobile power products. battery starter generators, alternators, inverters and the like.

We have also begun to certify some of our product catalog for use in the marine industry. There are similar applications for these types of products in the marine industry, and we've begun to accelerate expansion of Lithionics business element into other categories, including work trucks and other specialty applications. There's also an aftermarket element to the Lithionics business. If you either have a different battery system or no battery system at all, you can work through a qualified installer to install a Lithionic system. They are safe. They are reliable, they are durable. They are constructed like very few other battery packs in the market are, and the team just does business the right way.

The last thing I'll mention that should be of note to the investor community is the profitability on this small business from a yield standpoint is significantly higher than our finished goods business. It is a strategic technology vertical. Certainly, some of the business we do is captive to our own brands. But the business we do on the outside comes at a fair healthy margin that allows us to contribute back to enterprise profitability but also reinvest in the Lithionics business. So we view the blue ocean for Lithionics products as significant in the future. And we'll stay very focused on being the quality supplier in that space and not the low-cost supplier. Reliability and safety are very valued consumers around battery products. So thank you for the question.

Thank you. This concludes the question-and-answer session. I would now like to turn it back to Joan Ondala for closing remarks.

Thank you all for joining us this morning. We look forward to keeping you all updated on our progress.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Welcome to the Winnebago Industries First Quarter Fiscal 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded.

I would now like to hand the call over to Joan Ondala, Vice President, Treasury and Investor Relations. Ms. Ondala, please go ahead.

Thank you, operator. Good morning, everyone, and thank you for joining us to discuss our fiscal 2026 first quarter results. 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. Please note that the earnings slide deck that follows along our prepared remarks is also available on the Investors section of our website under quarterly results.

Turning to Slide 2. 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 and a number of factors, many of which are beyond the company's control, could cause the actual results to differ materially from these statements. These factors are identified in our SEC filings, which we encourage you to read.

In addition, on today's call, management will refer to GAAP and non-GAAP financial measures. The reconciliation of the non-GAAP measures to the comparable GAAP measures are available in our earnings press release.

Please turn to Slide 3. Hosting today's call are Michael Happe, President and Chief Executive Officer of Winnebago Industries; and Bryan Hughes, Senior Vice President and Chief Financial Officer. Mike will begin with an overview of our first quarter performance as well as a forward view of the market. Bryan will discuss the associated drivers of our financial results and our updated fiscal year 2026 guidance. Mike will conclude our prepared remarks, and then management will be happy to take your questions.

With that, please turn to Slide 4 as I hand the call over to Mike.

Thank you, Joan, and good morning, everyone. Winnebago Industries posted strong top and bottom line results in the first quarter, performing ahead of our expectations and advancing meaningfully on our priorities. Revenue increased in all 3 segments, with operating profitability higher in both our Motorhome and Towable RV businesses. Marine segment results in Q1 were just slightly below prior year which we view favorably given the continued softness in the industry.

We entered fiscal 2026 with a disciplined plan and a pragmatic view of industry demand conditions. Our Q1 performance reflected steady execution against our controllables, product innovation, operational efficiency and brand expansions while navigating a macroeconomic backdrop that remains mixed. Although the recent rate relief from the Fed may be a positive development for consumers, as outlined during our year-end earnings call, our financial outlook remains firmly anchored in the strategic levers within our business and is not solely reliant on industry growth.

In our Towable RV segment, affordability continues to shape buying power. We are aggressively leaning into the shift towards lower-priced products with models including the Transcend series, Imagine and Reflection 100 from Grand Design, which enable families to enjoy the outdoors in a great travel trailer that combines quality and value.

Winnebago's new Thrive is proving to be an exceptionally popular entry-level travel trailer among consumers whose RV journey is just getting started. While our recent share position in Towables has room for growth, we are appropriately prioritizing profitability, stronger product value and our dual-branded strategy. The transformation underway at Winnebago Towables is designed to give us a second strong brand and access to a higher quality and quantity of dealers in that category, an initiative we believe will lead to meaningful share growth over time.

On the Motorhome RV side, we've grown our share in Class A Gas, Class A Diesel and Class C over the most recent multi-month periods ended October 31. For many Motorhome RV buyers, the priorities versus other RV types are greater convenience, premium amenities, reliable power and more than ever integrated technology.

Our luxury Newmar brand and Grand Design Motorhomes rapidly growing lineage series are hitting those sweet spots. The business refresh initiatives taking shape at our flagship Winnebago Motorhomes business further strengthened that brand as a third pillar of our Motorized RV strategy. When you consider that over the trailing 12 months as a premium branded OEM, we have achieved 33.9% share in Class A Diesel, 21.4% share in Class B, 13.7% share in Class C and 12.3% share in Class A Gas. We are a formidable and well diversified player in a dollar-weighted segment, we believe will gain momentum as market conditions improve.

The right side of Slide 4 highlights several products that contributed to our Q1 performance, including the Cabrio from Barletta, which had strong retail in the first quarter. Barletta continues to grow its position in the U.S. aluminum pontoon space, ranking as the #3 brand by market share in the segment.

From a financial perspective, we've made outstanding progress over the past 2 quarters, strengthening our balance sheet, reducing our net leverage ratio and driving positive operating cash flow. Q1 is a seasonally tougher cash generation period historically, and I am very pleased with our balance sheet standing going into calendar 2026. Bryan will provide more details on that shortly.

Looking at key RV retail trends on Slide 5. Based on preliminary SSI data, industry RV retail registrations declined 7.6% year-over-year in October, before final adjustments following a 2.2% net increase in the prior month. Keep in mind, gross monthly numbers are frequently adjusted upward as additional states report.

On the wholesale side, North American RV unit shipments totaled just over 30,000 units in October. This is down about 1% from prior year, although on a calendar year-to-date basis, shipments are up about 4% higher. Specifically, towable unit shipments were down about 3% for the month and 4% higher for the calendar year-to-date period. Motorhome unit shipments grew nearly 13% in October and posted a growth rate of 3.5% calendar year-to-date.

Based on RVIA's wholesale industry shipment data through October for calendar year 2025, we are revising our industry forecast upward to a range of 335,000 to 345,000 units, or a midpoint of 340,000 units, compared to our prior midpoint of 330,000 units. Our updated forecast essentially aligns with RVIA's current midpoint projection of 339,700 units for calendar year 2025.

Now for calendar year 2026, we continue to expect North American RV wholesale shipments in the range of 315,000 to 345,000 units. Our midpoint of 330,000 units for 2026 is 5.5% lower than RVIA's current midpoint estimate but more optimistic than some industry peers. We do expect the RV retail market to stabilize in the back half of our fiscal year.

Inventory turns were 1.8x in the first quarter, reflecting the seasonal shipment dynamics and dealer demand for our new products. Specifically, we are seeing dealer stocking orders on Grand Design Motorhome and Winnebago Towables as the channel embraces these new lineups. As noted on our year-end call, we are targeting 2 turns across all of our businesses generally as a yardstick to measure consistent growth and operational efficiency. This number will be dictated largely by dealer behavior and the rhythm of key business initiatives.

Moving to the Marine segment on Slide 6. Sales improved modestly in the first quarter. Amid ongoing headwinds for the industry are Barletta and Chris-Craft brands continued to demonstrate disciplined inventory management and strong dealer relationships. Both brands saw positive retail momentum coming out of the 2025 Fort Lauderdale International Boat Show and received solid dealer orders from their fall dealer meetings.

The customer reception to Chris-Craft's Sportster series and the new Catalina 31 has been fantastic. Barletta has received accolades for its model year 2026 offerings, including its industry-exclusive TEC cover, which has been well received as a practical solution that simplifies the ownership experience. Dealer feedback has reinforced that this innovation addresses a real customer need and reflects our focus on thoughtful owner-centric design. For the trailing 12 months ended October 31, Barletta expanded its share of the aluminum pontoon segment in the U.S. by 30 basis points to 9.1% and has seen even stronger recent retail share results on monthly stand-alone basis.

Turning to Slide 7. Our Winnebago, Newmar and Grand Design brands earned multiple top honors for the 2026 model year from leading RV industry publications. These include RV of the Year awards across several categories, top debut recognition for standout models like Freedom Air and Sunflyer, best new models for Thrive and Foundation, editors pick for Supreme Air and Innovation of the Year for Grand Design's lineage shower system. These accolades and many more reflect our relentless focus on innovation, quality and delivering exceptional experiences for every traveler.

In addition, our Grand Design and Newmar businesses both received dealer satisfaction index awards this past November. Chris-Craft and Barletta received industry Customer Satisfaction Index awards in 2025 as well.

On Slide 8, I also want to highlight our recent recognition by Newsweek as one of America's Most Responsible Companies. This was the fourth consecutive year we have received this award, reflecting our ongoing commitment to sustainability and social impact. In fiscal 2025, we contributed all in over $3.9 million, volunteered 13,600 employee hours, supported Habitat for Humanity restores and grew our employee resource group memberships by 38%.

We also advanced inclusion initiatives and began a comprehensive sustainability assessment with our annual and best ever corporate responsibility report coming next month. Together, these achievements demonstrate how we're driving innovation forward, while staying true to our values.

I will now turn the call over to Bryan Hughes for the financial review. Bryan?

Thank you, Mike. Good morning, everyone. Starting on Slide 9. In the first quarter, our net revenue growth exceeded 12%, primarily reflecting higher unit volume and selective price increases. Our Towable RV and Motorhome RV segments each posted double-digit percentage growth in the quarter, with our Marine segment up low single digits on the top line compared to prior year.

On a consolidated basis, warranty expense was 3.6% of net revenues, up 40 basis points from Q4, primarily reflecting our ongoing commitment to ensuring product quality and customer service. Operating expenses declined 3.2% compared to prior year, primarily related to the cost reduction initiatives implemented in the second half of fiscal 2025, and partially offset by investments to support the growth of our Grand Design Motorhome business. On the bottom line, we reported adjusted earnings per diluted share of $0.38 compared with an adjusted net loss per share of $0.03 in the first quarter of last year.

Turning to our segment results, beginning with Towable RV on Slide 10. Net revenues grew 15.5%. This increase was driven by higher volume from products like the Grand Design Imagine, Grand Design Reflection, Winnebago's new Thrive and Winnebago Access, all of which are resonating strongly with our dealer partners, along with selective price increases, partially offset by a mix shift toward lower price point products. Operating income margin of 3.8% improved 30 basis points from prior year, primarily due to volume leverage. This increase was partially offset by higher warranty expense.

Turning to our Motorhome segment performance on Slide 11. First quarter net revenues grew 13.5% year-over-year. This was driven primarily by favorable product mix and selective price increases partially offset by lower unit volume. Motorhome RV segment operating income margin improved 390 basis points from the prior year due to targeted price increases lower discounts and allowances and lower warranty expense.

As shown on Slide 12, net revenues in the Marine segment for the first quarter grew 2.2% from prior year due to selective price increases partially offset by lower unit volume. As we noted on our year-end call, both Chris-Craft and Barletta have demonstrated strong discipline in managing production, adapting effectively to the cautious retail environment.

Dealer inventory for the quarter remained essentially flat versus the comparable period of fiscal 2025. Marine segment operating income decreased less than 1%, primarily due to lower unit volume.

Turning to Slide 13. We continued to strengthen our balance sheet in the first quarter, while further reducing our net leverage ratio. Cash and cash equivalents were $181.7 million at quarter end, driven by $25.4 million in net cash from operating activities. While inventories increased just over 4% in the quarter, accounts receivables decreased by more than 22% from year-end, which contributed to improved working capital.

We continue to manage working capital prudently, balancing inventory discipline with the flexibility to support retail demand. Adjusted EBITDA more than doubled year-over-year to $30.2 million and combined with our cash from operations, reduced our net leverage ratio to 2.7x at the end of the quarter. We continue to target a net leverage ratio approximating 2x by the end of fiscal 2026.

Turning to guidance on Slide 14. We are raising our fiscal 2026 full year guidance as follows: consolidated net revenues in the range of $2.8 billion to $3.0 billion versus a prior expectation of $2.75 billion to $2.95 billion, reported earnings per diluted share in the range of $1.40 to $2.10 compared with $1.25 to $1.95 previously and adjusted earnings per diluted share in the range of $2.10 to $2.80 versus the prior range of $2 to $2.70.

From a segment perspective, we continue to expect flat to modest, low single-digit growth in the Towable RV segment. In the Motorhome RV segment, we remain on track for operating income margin improvement in the low single digits for the fiscal year. Even with some outperformance in the Marine segment in the first quarter, industry retail trends remain soft. And as a result, we expect full year net revenues to be down in fiscal 2026 compared to the prior year.

Our revenue and earnings expectations for the fiscal year reflect the strength of our performance rather than reliance on industry-level unit growth. This approach underscores confidence in our ability to deliver results through disciplined execution and strategic initiatives regardless of external market fluctuations. For Q2, we expect a modest increase versus the prior year's Q2 sales, driven by growth in the Motorhome segment. We expect Q2 sales to be down sequentially or from Q1 due to the normal seasonal flow of our business, further influenced by dealers' preference for low inventories.

Similar to sales, we expect EPS to be down sequentially in Q2. Compared to the prior year, we expect EPS to be flat to up modestly, taking into consideration the relatively strong sequential recovery we witnessed in Q2 EPS last year. I want to reiterate that our financial guidance reflects current trade policy positions and prevailing tariff rates, which remain under a broader legal challenge before the U.S. Supreme Court concerning presidential tariff authority.

Now let me take a moment to formally introduce Joan Ondala, who has recently expanded her role to lead Investor Relations here at Winnebago Industries. Since joining the organization more than 4 years ago, Joan has been a critical leader on our enterprise team and building the foundation for our strategic planning, risk management and business development initiatives and most recently, has led our treasury function. Joan brings a strong background in strategy, corporate development and finance, including senior roles at Tennant Company and Ecolab. We are excited to leverage Joan's broad skill set in this new capacity.

Joan, I'll hand things over to you for some brief comments.

Thank you, Bryan. I'm thrilled to lead the Investor Relations function at Winnebago Industries. During my time at the company, I've deeply valued my work with our commercial and investment banking partners, and I'm eager to bring that same level of engagement to our analysts and shareholders. I look forward to working with all of you as we execute on our long-term growth strategy.

Now please turn to Slide 15 as I hand the call back to Mike for his closing comments.

Thanks, Joan. In closing, Winnebago Industries continues to demonstrate disciplined execution and resilience across our diversified portfolio. We are expanding margins, strengthening our balance sheet and advancing a focused product road map that positions us for sustainable growth. The process we outlined last quarter: delivering better products, deepening dealer partnerships and driving operational performance are gaining meaningful traction and generating tangible results.

On Slide 15, which we discussed on our year-end call, this shows what we believe are the key drivers for our success in fiscal 2026. While we continue to navigate a dynamic market environment, we do so with a realistic and disciplined optimism. Our approach is rooted in intentional risk management and targeted investment, ensuring we deploy resources where returns are clear and sustainable. Above all, we are committed to supporting our dealer partners and consumers with innovative, high-quality products that deliver on our purpose, elevating every moment outdoors.

Now Bryan and I are happy to take your questions this morning. Operator, please open the line for the Q&A session.

[Operator Instructions] Our first question comes from Craig Kennison with Baird.

Mike, a lot of optimism building around the 2026 retail consumer driven by lower rates and tax policy. What signals are you looking for to ascertain whether your end markets might grow for the first time since the pandemic?

Yes, the retail environment, as Bryan Hughes indicated in his comments, continues to be soft and tempered here in the fall, early winter, the last few months of 2025. But as you well know, we are hitting into our retail show season really in the January and February, even early March periods where we hit the retail shows hard with our RV and Marine brands. And so certainly, one sign we'll be looking for here in the next 30 to 90 days is the foot traffic, but more importantly, the retail appetite from consumers at these shows.

The other note that I would probably include would be reception to the new products that our teams are bringing to the market. We have a slate of new products across many of our brands, and we'll be monitoring carefully the consumer and dealer reception candidly to those new products in the near future. So as you well know, the early parts of the calendar year are important barometers for the industries that we compete in, and by the time we show up on our next call in March, we'll certainly obviously have a good understanding as to retail prospects in calendar '26.

Craig, I'll just add. We continue to monitor, as you would expect, a basket of macro indicators, certainly helpful to have interest rates reduced but lower gas prices, housing starts, we had a good inflation reading and then certainly and probably most importantly, consumer sentiment. We'll keep a close eye on that as well. All these things will certainly weigh-in and contribute to an improved retail environment, as you would expect.

And if I could, on a follow-up. I know you've got some affordable units in the market now that chase a new price point in a new consumer. But I'm wondering if you can look at your portfolio of customers today and wonder -- I guess I'm wondering when we might see an upgrade cycle. It feels like that has been deferred much like the housing market, but you should be pretty well positioned as consumers look for higher quality. And I'm wondering if you're seeing any of that in your checks or data.

Craig, we agree with your sentiments about the deferral of an upgrade cycle that seems to have taken place over the last couple of years. I think many of our industry peers are also thinking the same thing. We are not seeing probably yet any signs of that upgrade cycle, taking off with any significant momentum. Again, we'll see if that happens in the early to first half of '26. As you said, I mean, our brands are positioned better from an accessibility standpoint for a first time or younger or more cost-conscious buyers. But we are absolutely well positioned for those consumers that are looking for a step up in product to especially products that offer innovation quality and a great aftermarket customer experience as well. So optimistic that as the cycle eventually turns upward that our product lineups and brands are well positioned.

Our next question comes from Joe Altobello with Raymond James.

First question on the Towable business. It looks like incremental margins we're pretty light this quarter. I think revenue was up almost $40 million. Year-over-year, operating income was up about $2 million. I know you guys called out higher warranty expense, but what were the big driver or drivers of that?

Yes. Joe, this is Bryan. Warranty was certainly one of the drivers. We continue to have some mix that we are seeing as headwinds as well. I'd say those are the primary drivers. Down at this level of volume, a lot of the equation is leverage. We did have growth, as you pointed out, which contributed favorably. But overall, I think those are the drivers. It's mix, and it is that higher warranty expense.

Got it. Okay. And just in terms of the guidance for this year, if I look at your industry shipment outlook, it's call it, at least at the midpoint, a little bit of decline in calendar '26. What sort of market share trends on the RV side are you guys baking into that guidance?

Craig, we are -- or excuse me, Joe, this is Mike. We are absolutely looking to drive a little bit of market share in fiscal '26. It will be in areas like Super Cs from Newmar and Grand Design. The Winnebago Towables brands should see some share lift as well. We anticipate obviously share increases with some of our Grand Design travel trailers, Transcend brand specifically.

And then when you get to the Marine side, Barletta continues to show very strong market share growth even in recent individual months that haven't been reported, I'm quite confident that you'll see Barletta stand-alone monthly market share continue to be at very impressive levels.

I do want to emphasize, Joe, that we have been very consistent since the call in October and including the call this morning that much of our increase in earnings from fiscal '25 to fiscal '26 is within our control. And while we are somewhat conservative on our industry wholesale shipment assumptions that we're sharing, we view any upside to the number that we're sharing as something that could flow through to our financials in the future.

We are executing the controllables here at Winnebago Industries, operational discipline. We have significant cost improvement, margin improvement initiatives that are happening, new products that are being launched that we believe will both drive share, but also potentially add some profitability as well. So our plan is really based this fiscal year on what we can control, and we'll certainly be agile should the market grow or even decline versus our current assumption.

Our next question comes from Scott Stember with ROTH MKM.

Clearly, some very nice progress here on the operational front. But just trying to get a sense of the price increases that you guys talked about on a select basis on RV. Just trying to get a sense of the size and the scale and basically to see if you've seen any pushback at retail at any point, just given those increases?

Scott, I think the word that we used was selective related to the price increases, and that is an important word. The market is not conducive or supportive of broad, significant price increases even with some of the cost input pressure that we're seeing from still ongoing tariffs for the time being. So our teams are really focusing their pricing around new products, around some of the feature enhancements we made in the latest model year transition.

Certainly, as we transform some of our brands, like particularly the Winnebago brand of RVs, we are actively pruning both the Motorized and Towable lines under the Winnebago brand by discontinuing some products that were not performing at retail and candidly, we're pressuring our margin and replacing those with healthier products, in some cases, even with probably an ASP lift as well. So the pricing is intentional, but it's also disciplined and selective. And we'll monitor the cost input environment, obviously, here as we go forward.

We have seen a few shifts in some commodities like aluminum lately as an example that we'll have to react to in the future if those trends continue. But to your point, we have to price to market and not necessarily to profit because we do want to maintain and, in fact, grow market share over time as well.

Got it. And then just touching on the comment you made about what's in your control within guidance. I guess, given your commentary about where you expect 2Q to come in on the bottom line, obviously, the back half of the year is virtually everything. So just trying to get a sense of self-help items versus the market? Just trying to get a sense of how much will be based on what you have in your control?

Yes, Scott. Our business model, as you well know, is always back-half loaded from an EPS standpoint. Q1 and Q2 from our fiscal year timing are always softer from an EPS contribution standpoint. So the back half loading isn't abnormal from my standpoint, from a historical perspective. That being said, when I talk about controllables, I talk about several of the cost management and profit improvement initiatives we have underway here at the company in different parts of the business across supply chain. I talk about a lot of the new products that we're bringing out some of which the market doesn't know about yet, that we'll be bringing to some of the retail shows later in the spring for the first time.

We have brand extension going on, and we're candidly still seeing stock-ins on business revenue streams like Grand Design Motorized and Winnebago Towables. The new Class C Freedom Air from Newmar has not hit the market yet in any material way. So the back half of the year is certainly a reflection of a market assumption that we've been transparent about.

But to your point, it's a collection of the commercial and the operational initiatives that we're driving. And so while we still have a relatively broad range on the guidance, I can -- I think you can take our moderate guidance increase this quarter to reflect our confidence in executing in Q1 well and looking at the following 3 quarters, Q2 and Q4 and saying, listen, most of those results are within our control.

Our next question comes from Tristan Thomas with BMO Capital Markets.

You guys shift in the above retail during the quarter tied to new products. How should we think about that retail wholesale relationship in the rest of the year?

Well, we've been very clear that every business is expected to try to drive their trailing 12-month turns level in the field to around 2x. Now there's some seasonality related to that. There will be businesses that will be slightly above that at times, there will be businesses that are slightly below that. As an example, our Motorized RV businesses at times tend to run below 2x, particularly in the high-end Newmar type product.

But I would say we're really trying to stay disciplined. And with the exception of new products and some of these, let's call it, sort of brand reinvigoration efforts or new revenue streams like Grand Design Motorized, we're really trying to stay disciplined and keep dealer inventory in good shape.

If you look at our aging inventory, Tristan, year-over-year in macro on both the RV and Marine side, the percentage of aged inventory in our businesses is on a consolidated basis, less than it was a year ago. And so we not only feel good about the quantity of inventory in the business, but we are particularly pleased with the quality of the inventory at this time. The next 3, 4 months are going to be critical, obviously, to seeing what retail -- how that will shape up in the '26 selling season and how some of the current model of your inventory moves going forward.

Okay. And this isn't necessarily a directly related follow-up. But just -- you mentioned a couple of times some of the operational margin improvement initiatives you've done. My understanding is a lot of that's on the Motorized side. So could you maybe just give an update on everything you've done and how much more there is to come and kind of what you're doing?

Yes. We probably used the word operational from a broad definition standpoint, but we have been more transparent about the operational initiatives, particularly around our Winnebago Motorhome business where we have been consolidating the footprint where we are undergoing rationalization of vertical discussions and even actions here at the company. We have been consolidating assembly lines across much of the RV portfolio candidly. There are lines that are not running today that we're running 2 years ago. But there are also lines and/or buildings in the company that are running multiple models today that weren't doing that a couple of years ago as well.

I also use the word operational when talking about supply chain efforts. As Bryan indicated, our tariff exposure for fiscal year '26 is embedded in the guidance that he provided. But there's a significant amount of work being done to obviously mitigate the tariff pressures. But also more importantly, we are really putting our foot on the pedal on what we'll call coordinated or centralized strategic sourcing initiatives to try to be smarter about how we buy working with our valued supply partners but also leveraging candidly some of the volume that we do have and even working on things like engineering efficiency to harmonize specs on key components across brands that allows us to buy a little smarter.

So over time, I think we'll probably figure out a way how to be more articulate about some of these operational initiatives and how they'll improve or contribute to improving gross margin in the future. But there's a lot of things going on across the whole of the portfolio.

Our next question comes from Mike Albanese with Benchmark StoneX.

Nice to see some momentum in the business here. Just quickly on Grand Design Motor, could you just comment on where you're tracking relative to your expectations as it relates to kind of that initial $100 million dealer stock?

Yes. We had mentioned in our fiscal '25 year that Grand Design Motorized would exceed $100 million in net revenue. And in fact, for the year that ended in August, we did reach that goal. The great news about the Grand Design Motorized strategy is that it's multiyear in its formation. We have a -- candidly, a 3- to 5-year plan on making Grand Design Motorized one of the most exciting brands in the Motorized segment. We've already reached more than 4 points of market share, 15 months into this journey. And many of the products that are on the wish list at Grand Design from a Motorized perspective have not seen the light of day yet in the market.

So we are really pleased with the products that have been released even some things that, candidly, I personally wasn't sure how the market would react to like the Series F lineage Super C, that's been fantastic. The market has reacted very strongly. And as you all know, the Super C category has been one of those sort of hot trendy categories in Motorized RVs in the last several years.

So we're on track, if not ahead of our plan. We just gave our Board an update on this here recently as well. So we anticipate fiscal '26 to benefit, but from the continued progression, not just at wholesale, but in the market and with our dealer relationships, from the retail success that we're beginning to see across their lines. So very excited about that particular business initiative.

Yes. And the Series M -- for the Grand Design Motorhome, Series M is already #2, #3 in its class for retail share. So just a phenomenal entry point by that particular model and floor plan. And then similarly, as Mike was just talking about the Class F, Super C has already achieved a top 3 rating as well in retail. So the 2 models that they've come forward with have both hit the market extremely well, both from a retail and wholesale perspective.

That's great context. Just a quick follow-up, that initial stock, if you will, for some of these new models. I mean, how would you frame the opportunity size relative to the original linage that came out? I'm just trying to think about growth here as new models are implemented.

Yes, Michael, we're not sharing a specific target number for Grand Design Motorized for fiscal '26 as it becomes a more meaningful part of the portfolio. We tend to obviously share disclosure by segment. But you can expect it to grow. We won't provide a sales target this morning. Some of the back half wholesale volume will certainly be dependent on retail replenishment of current models in the field in addition to any new products that you'll see Grand Design Motorized bring to the market as well.

Fair enough. And then just another quick one, if I may. I just want to follow up on mix shift. Obviously, you have some selective price increases. You come out with new models across the board to kind of meet consumers where they're at from an affordability standpoint. Just taking a step back here and thinking about the overall mix shift from the consumer, they've obviously, over the last couple of years, have gravitated towards those value products. I mean, are we still moving in that direction? Or has that kind of stabilized? And again, that's a little more industry-specific than company-specific because you have some initiatives that are obviously affecting mix shift within your portfolio but...

Yes. I don't think the consumer has stabilized quite yet from an affordability perspective. I mean, as you guys are well aware, there's a lot of chatter in the financial media and many industries about consumer affordability, particularly of discretionary higher-priced items. I'll tell you this, we're kind of playing the game at both ends. We have absolutely improved our lower price point products almost in every brand that we carry. And so while we sometimes don't get that first-time buyer, we have a better chance through some of the products that we've introduced here recently with Access in the Winnebago Towables line, Transcend One in the Grand Design line. The Aria from Barletta continues to do fantastic.

But when I say we're playing both ends, we're also introducing products with higher price points that are being successful as well. The Super C products from Newmar and Grand Design are a good example of that. Some of Barletta's best-performing brands continue to be in the higher side of their line, the Lusso which -- I own a Lusso myself, that continues to be a really strong performer in the in the Barletta line, and that's probably their -- one of their top 2 or 3 brands in the whole catalog.

And so we're going to try to have a broad full lineup within better-best within our segments and not only attract more affordable consumers, but those consumers who also have a little higher level of discernment and will trade up buy up and expect the best as well. So we don't talk a lot about retail dollar share on the call, candidly, because we don't have the greatest data here in Winnebago Industries. But I'm really confident that if you look at the combination of our unit retail volume and our ASP trends versus the rest of the market, that we're actually gaining retail market share in both the RV and Marine industry. And I think that's just as important as unit volume. You take dollars to the bank, and those retail dollars ultimately are really, really valuable to us.

The only other thing I'd add as it relates to mix is that we welcome the more recent strength in both retail and wholesale growth in the Motorhome business. As I think everyone on the call understands motorhome for a long time had been seeing declines. And more recently, we're finally starting to see that show year-over-year improvement. So we welcome that trend as well, particularly as it relates to our portfolio business.

Our next question comes from Bret Jordan with Jefferies.

Pretty much everything has been asked. But I guess one macro question. When you think about your forecast for 26, what is the assumption on sort of a rate backdrop? And what kind of Fed move would make you either more positive or negative on that outlook?

Yes. Bret, this is Bryan. We hesitate to draw too much correlation to Fed action. We are anticipating from a macro perspective, another 2 to 3 25-point cuts over the next year. I think that that's the prevailing expectation and how the bond market is priced out right now. What happens to the 10-year, as I think you know, Bret, is probably more important for our industry as it relates to floor plan financing costs as well as retail financing. So we'll keep a close eye on that.

There's different points of view, I think, as to what will happen with the 10-year rate as it relates to the correlation between that and the Fed funds rate. But that's kind of how we're thinking about it right now.

Our next question comes from Noah Zatzkin with KeyBanc Capital Markets.

I guess first, just on the margin recapture initiatives at Winnebago Motorhomes. You touched on this a bit, but any way to like quantify kind of the magnitude of those initiatives on the improvement in Motorized margins in the quarter? And then just kind of thinking through like where you are maybe like in terms of innings or opportunity that's kind of left from a margin perspective structurally moving forward? Any thoughts would be helpful.

Noah, thanks for the questions. Let me comment first on the Winnebago Motorhome side and then Bryan, obviously can give you some further perspectives on margin, trends and opportunities for the business. I'll be very transparent that the Winnebago Motorhome margin improvement contribution to Q1 was not as significant as some of the other Motorized contributors in that segment which means from a positive standpoint that the contributions of a stronger Winnebago Motorhome business are still ahead of us, not just in fiscal '26 but fiscal '27. That particular business is obviously our flagship legacy business.

We're very busy there under Chris West leadership and his team to improve that business. But I would not tell you that the financial benefits of that business are being quite felt yet within the Q1 financials. But the expectation is that those do grow sequentially in the future. So we're not providing specific dollar references there, but that journey should become a bigger contributor in the future.

Yes. I guess what I'd add on that one, Noah, is we gave guidance that the Motorhome segment would reach OI yield in the low single digits. We stand by that guidance. That compares to a negative 0.6% so slightly negative OI yield in '25. So that continues to be our target. Hey, I think we saw a good proof point in Q1, some good improvement there, a lot of the improvements longer term, including the back half of this fiscal year are tied to the product and the new introductions, the refreshes that the team is working very hard on, and as Mike alluded to, some of those are yet to really impact the yield. So we look for continued improvement there long term, but we like what we saw in Q1 here as it relates to an initial proof point.

That's really helpful. And maybe just one more. Thinking about this from an industry perspective, I think Motorized shipments have been kind of stronger at least year-over-year overall for the industry of late. When you think about kind of inventory levels there for the industry as well as drivers of that, is that more that, that levels kind of got lower than ideal? Or what's kind of driven that pop? I know for you guys, part of that obviously is the new product, but more broadly?

Well, I think the trends, Noah, within that segment vary by class. And so the Class A consumer has been soft for really a few years now. Recently, we've seen the Class B van category, not have the same vigor that it used to have in prior years. The segment -- the 2 segments that have been very strong, have been Class C -- traditional Class Cs both Diesel and Gas but also Super Cs. And so that's where you've seen a lot of dealers, I believe, shift their recent inventory management practices to making sure that they have the products that they want to have in the Class C space.

We're watching that Class C category carefully. It's pretty crowded. There's a lot of competition. And I would say the turns in that Class C category probably need to be a little bit higher in the future. And hopefully, we'll see some retail momentum in calendar '26 to help the whole industry get the inventory in that particular segment, maybe even in a little bit better shape. But I don't think we're overly concerned. The dealers are putting their bets there. And obviously, the OEMs are working closely with them. I don't know, Bryan, if you...

Just one small add. We feel really good about our dealer inventory position. We saw a pretty sizable decline year-over-year, 19% in inventories out in the field. And that is even with the launch of the Grand Design Motorhome and the stocking up in the [indiscernible] of that business, the Series M and S. So we feel really good about our position there, and I think that, that will serve us well throughout fiscal '26.

Our next question comes from John Healy with Northcoast Research.

I wanted to ask one about the kind of the margin outlook in the business and how it ties into environment we're in. Mike, I know you've mentioned numerous times on the call that you guys are working on sourcing, working with your suppliers, you're doing all the things that we would expect it to. But I was curious if there's been any development in terms of tying cost and input costs to the actual tariff environment? Have you been able to develop any sort of linkage?

So theoretically, if we do get some relief on tariffs and maybe certain ones kind of go to the wayside in calendar '26, is there any sort of kind of automatic kind of indexed type relief that you would get? Or is this going to be a situation where you have to go back and try to price some dollars out of things?

And hypothetically, is there a view with your suppliers that, hey, we need to maybe share more of this or work with more of this than there was 6 months ago just to impact and solve this affordability issue? Because when I listened to calls of your industry, everyone talks about affordability and interest rates, but it seems like there could be more give back with the suppliers and the sourcing community. So I was hoping to hear your thoughts on that.

Thank you, John, for the question. So multiple dimensions to what you talked about, let me try to break it down efficiently here. We have a very robust tariff exposure risk management process in the company. It extends from our centralized strategic sourcing function as the air traffic control tower on that to deep within the businesses in terms of their day-to-day relationships with suppliers. I think we feel good that there's a high level of transparency by our Tier 1 suppliers as to the tariff pressures that they have been experiencing. They're not always the importer of record. They have either Tier 2 or Tier 3 supply relationships that pass those costs up to them. And in many cases, our suppliers have agreed to defer and/or share the increased tariff costs that we've seen since April of 2025.

But that's on a case-by-case basis. And it's one of those cases where if you don't ask, you may not get that as an initial response, but our supply chain partnerships have been good there. We've also done a lot of other things in terms of engineering design, build material management, working through some of our own raw materials and component inventory to try to be creative and mitigate that. And so while that's been a Herculean exercise, for really the last 8, 9 months, we feel good about managing the exposure. And as I said earlier, the Bryan's guidance here this morning embeds that into our earnings outlook for fiscal '26.

Now overall, should the Supreme Court make the decision that the IEEPA tariff powers are no longer and there is some sort of refund process, we'll have to digest that very quickly and obviously work with our supply chain to see what that means from a possible recovery standpoint going forward. Just in general, though, we are maturing in our muscle building on just, again, as I said earlier, trying to manage our material costs within the company.

And there -- each of our businesses and brands has a significant target for fiscal '26 to secure some savings. And that doesn't always necessarily mean that's a bad thing for our supply chain. That just may mean that we're going about our purchasing just a little bit differently as well. And there could be some consolidation of how many suppliers will use on a certain part.

So all of that is kind of baked into this, I think, 40% plus increase in EPS year-over-year. It's one of the "controllables" that we believe that we can execute in the year. But tariffs continue to be very top of mind and we'll manage those for as long as that pressure is upon us. But you're absolutely right that any input pressure cost-wise in this industry is nonconstructive versus dealing with consumer affordability right now. We all need to try to find a way to make the products more affordable ultimately.

One last question, operator.

And as we have time for one last question, our final question comes from David Whiston with Morningstar.

Just one question for me. It's on the success drivers slide. You talked about Newmar having competitive in some lower-priced segments. Are we talking just a new product there? Or are you actually talking about the price reductions because that's a luxury brand, you don't have a lot of leeway to cut pricing there?

Yes, David, good to hear from you. It's really about new products in the Newmar business. Not price reductions. I would tell you that Casey Tubman, who leads that business, has been very disciplined with again, managing their floor plan and their model mix to make sure that we have the right floor plans that are moving in the market. So you may see a little ASP shift because of that.

Newmar is one of our most coveted brand assets. Just a tremendous consumer experience, great dealer partnerships and the product is second to none in the marketplace. So everything we do at Newmar is about, I think, maintaining that brand promise that is luxury that is second to none. So when we talk about affordability there, it's really coming up with new products that maybe fill out the little lower side of that luxury lineup on the pricing side.

So the Freedom Air in the Class C space is premium versus the other Class Cs in the market but it is affordable for people to get into the Newmar brand in a whole different way. So it depends on how you kind of define affordability. But a lot of people want to get into that brand and we're trying to provide a catalog there that gives them access across multiple segments. But no, we're going to -- we're not looking to raise price dramatically on that brand by any means, but we're certainly we're certainly trying to keep that consumer experience just best-in-class.

Thank you. This concludes the question-and-answer session. I would now like to turn it back to Joan Ondala for closing remarks.

Thank you all for joining us. For those of you planning to attend the upcoming Florida RV Supershow in Tampa, we look forward to meeting with you. Have a wonderful holiday season.

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

Welcome to Winnebago Industries Q4 and fiscal 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Raymond Posadas, Vice President of Investor Relations and Market Intelligence. Please go ahead, sir.

Thank you, Towanda. Good morning, everyone, and thank you for joining us to discuss our fiscal 2025 fourth quarter and full year earnings results. This call is being broadcast live on our website at investor.wgo.net, and the replay of the call will be available on our website later today. The news release with our fourth quarter and fiscal 2025 results was issued and posted to our website earlier this morning. Please note that the earnings slide deck that follows along with our prepared remarks, is also available on the Investors section of our website under quarterly results.

Turning to Slide 2. 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, and a number of factors, many of which are beyond the company's control, could cause the actual results to differ materially from these statements. These factors are identified in our SEC filings, which we encourage you to read.

In addition, on today's call, management will refer to GAAP and non-GAAP financial measures. The reconciliation of the non-GAAP measures to the comparable GAAP measures are available in our earnings press release.

One additional housekeeping item. Beginning with our Q4 and full year 2025 results, we are transitioning our segment profitability measure from adjusted EBITDA to operating income. To assist with modeling, our investor supplement provides a table detailing segment quarterly operating income along with depreciation and amortization for fiscal 2025 and 2024. It should be noted that operating income at the segment level excludes both interest expense and tax expense, which is held at the corporate level.

Please turn to Slide 3. Joining me on today's call are Michael Happe, President and Chief Executive Officer of Winnebago Industries; and Bryan Hughes, Senior Vice President and Chief Financial Officer. Mike will begin with an overview of our Q4 performance, Bryan will then discuss the associated drivers of our financial results in addition to sharing our forward view of the market and our fiscal year 2026 guidance. Mike will conclude our prepared remarks, and then management will be happy to take your questions.

With that, please turn to Slide 4, as I hand the call over to Mike.

Thanks, Ray, and good morning, everyone. On our Q3 call in June, I spoke with you about the importance of staying focused on the areas of the business within our control. As I reflect on our fourth quarter performance, the entire Winnebago Industries team has reasons to be proud. We ended a challenging fiscal year with a strong fourth quarter that reflects the resilience of our team and the strength of our diversified portfolio.

Our results also demonstrate the progress of the strategic actions we've taken to begin transforming our Winnebago-branded RV businesses, complementing our healthy stable of industry-leading brands. These initiatives and others across the enterprise enabled us to return to positive operating cash flow in the quarter, improve working capital and meaningfully reduce our net leverage ratio. We generated adjusted diluted earnings per share of $0.71 on net revenues of $777.3 million.

Momentum across brands and product lines more than offset operating margin pressure from the ongoing turnaround at our Winnebago-branded businesses. Our improved Q4 performance enabled us to achieve the high end of our revised 2025 financial guidance. Driving our growth in Q4 were standout motorized RV products like Newmar's Class A Summit Aire, and Grand Design's Lineage Series M, which is rapidly gaining momentum in the Class C diesel category. On the Towables side, the affordable Grand Design Transcend series is resonating with new consumers to the RV lifestyle.

We also continued to see a strong performance in our Marine segment from multiple Barletta products, including the Aria, which have become the definition of affordable luxury in the aluminum pontoon segment.

Turning to key RV trends on Slide 5. Following a brief uptick earlier in the summer, RV retail registrations declined in August. On a trailing 3-month basis, retail demand remained stable and dealer inventories continue to improve. This environment is contributing to a healthier channel, even as monthly results remain variable.

From a wholesale perspective, total RV shipments declined low single digits in August. The industry continues to demonstrate discipline, with manufacturers closely aligning shipments with retail demand. As we move through the remainder of calendar 2025, we expect dealers to remain selective in restocking, supporting channel stability in the off-season.

We now expect wholesale RV shipments in the range of 320,000 to 340,000 units for calendar 2025, or a median of 330,000 units. For calendar 2026, we are estimating wholesale RV shipments of 315,000 to 345,000 units. Our production strategy centers on disciplined planning and execution, enabling us to align output with market conditions. Our inventory turn rate of 1.9x at the end of Q4 reflects seasonal dynamics and dealer demand. While we're targeting a higher turns over time to support operational efficiency and steady growth, we recognize that dealer behavior and market conditions ultimately drive those terms.

Our strategy remains focused on maintaining a prudent, demand-driven approach. On Slide 6, our continued momentum in our core RV market segments underscores our strategic focus, product innovation and deep customer engagement. Shown on this slide are some of our current success stories that our team here has every right to be very proud of.

Newmar's Dutch Star continues to be the #1 brand in the Class A diesel category, a position it has held since 2021. In Class B, 3 Winnebago brands: Solis, Travato and Revel have led all models in that category for the past 5 consecutive years. We also continue to win in Class C diesel. The Winnebago EKKO is currently the #1 selling brand in this class. And while not shown on the slide, the Winnebago View is the second selling brand in that class.

Additionally, in just its first full year on the market, the Lineage Series M has become the #3 brand in the Class C diesel market for the August trailing 3- and trailing 6-month periods. And a recent add is the emerging Grand Design Transcend, which advanced 3 spots versus last year to the #8 position of the highly competitive travel trailer category, joining the Grand Design Imagine in the top 10. And finally, the Grand Design momentum holds the #1 position in both the fifth wheel and travel trailer toy hauler segments.

Moving to the Marine segment on Slide 7. Barletta and Chris-Craft have done an exceptional job managing inventory, building dealer relationships and creating an outstanding boating experience for consumers. This discipline and customer-centric approach has enabled both brands to maintain strong performance despite significant industry headwinds. For the trailing 12 months ended August 31, Barletta increased its market share 20 basis points to 9%. The brand's dealer network called model year '26, the best top-to-bottom product launch in Barletta's history, including new features, design elements and technology updates.

Now turning to Slide 8. In order to deliver a successful fiscal year 2026, we are focused on executional drivers that directly contribute volume, share and profitability. We expect our Winnebago-branded motorhomes business to benefit from new product introductions like the recently launched Class C Sunflyer, alongside stronger dealer partnerships and improved operational efficiency. We are positioning the Winnebago-branded travel trailer business for growth as well through innovative products, a revitalized dealer channel and operational leverage. In addition, we expect to see the Grand Design motorhomes business continue to capture share as a result of new products, continued dealer momentum and strong growing brand loyalty.

Grand Design towables will drive share gains and profitability through continued quality enhancements and product innovations like its new foundation, the brand's first destination trailer. Newmar and Barletta will contribute selective share gains and profit stability through sharper price points and competitive new offerings. We are also focused on a multitude of operational initiatives across manufacturing optimization, vertical integration, capacity utilization, sourcing coordination, quality improvement and working capital management, all of which will further strengthen profitability and cash flow in fiscal year '26.

I'll now turn the call over to Bryan Hughes for the financial review. Bryan?

Thank you, Mike. Good morning, everyone. Starting on Slide 9, higher consolidated net revenues were primarily driven by favorable product mix and targeted price increases, partially offset by higher discounts and allowances. In aggregate, volumes across our portfolio were roughly flat versus the prior year's fourth quarter.

Consolidated gross profit increased on the higher revenues, although gross margin declined primarily due to costs associated with the ongoing transformation of the Winnebago-branded businesses, partially offset by targeted price increases.

Consolidated adjusted EBITDA increased 33.1% year-over-year. Consolidated operating income also improved significantly from the fourth quarter of fiscal 2024, which was impacted by an impairment charge we took against the Chris-Craft goodwill. Adjusted EPS of $0.71 was up 2.5x from the prior year fourth quarter.

Turning to our Towable RV segment results on Slide 10. Revenue, as anticipated, was down slightly year-over-year, reflecting a mix shift toward a more value-oriented consumer and driving higher volumes in products such as our Grand Design Transcend series. Targeted price increases and improved operating efficiencies within our Winnebago Towables business drove a 210-basis-point increase in operating income margin, outweighing higher warranty experience and slight deleverage on the lower sales.

As shown on Slide 11, double-digit top line growth in the Motorhome RV segment was powered by higher unit volume and favorable mix, driven by the continued ramp-up of Grand Design RVs Motorized Lineage lineup as well as a stronger quarter from Newmar. This growth was partially offset by higher discounts and allowances versus last year in the Winnebago-branded Motorhome business.

On the margin side, improved volume leverage and lower warranty expense partly offset costs associated with the ongoing transformation of the Winnebago-branded Motorhome business and higher discounts and allowances. As part of this ongoing transformation, we took decisive action in Q4 to dramatically reduce production schedules and consolidate the brand's manufacturing footprint by closing 2 of our 4 Winnebago Motorhome manufacturing locations in Northern Iowa. While this had a meaningful negative impact to our operating income and our yield, on the positive side, it drove significant cash conversion in the quarter.

As shown on Slide 12, our Marine segment continues to perform well. Net revenues were up double digits from a year earlier on higher unit volume and targeted price increases. Both Chris-Craft and Barletta have done an outstanding job managing production in a cautious retail environment.

From a profitability standpoint, the year-over-year margin improvement largely reflects the prior year goodwill impairment as well as volume leverage and price increases on model year '26 products. While we are pleased with our performance, unit sales across the marine industry continued to show soft trends.

Turning to balance sheet highlights on Slide 13. We sharply reduced accounts receivable and inventories to improve working capital between the end of the third quarter and year-end. This resulted in $181.4 million in cash from operations in Q4. And when combined with a 33% year-over-year improvement in adjusted EBITDA, contributed to a net leverage ratio of 3.1 at the end of the year, a substantial improvement from our 4.8 net leverage ratio at the end of third quarter.

For fiscal 2025, we returned $88.9 million to our shareholders, consisting of $50 million in share repurchases and $38.9 million in dividends. Our $0.35 per share cash dividend paid on September 24, marked our 45th consecutive quarterly dividend payment. This underscores our commitment to creating shareholder value and our confidence in the future of the business.

Importantly, while not highlighted on this page, we also repaid $159 million of debt during the past year. We remain committed to our targeted range for net leverage, and we will continue to prioritize improvements to growth and net leverage in the near term.

On Slide 14, let me update you on our tariff mitigation initiatives in fiscal '26. As we enter fiscal '26, our proactive strategies to address ongoing tariff challenges remain front and center. Over the past year, we've strengthened supplier engagement, tracking policy shifts, reassessing sourcing and prioritizing high-duty materials. Our sourcing and engineering teams have diversified supply routes, identified alternate vendors and redesigned bills of materials to enhance supply chain agility. Looking ahead, we are assessing the tariff structure and the rates and their impacts on us going forward. We remain vigilant and adaptable and will continue to provide timely insights as market and trade conditions evolve.

Turning to our fiscal 2026 outlook on Slide 15. Based on the current market environment and our expectations for North American RV wholesale shipments of 315,000 to 345,000 units in calendar year 2026, we expect consolidated net revenues in the range of $2.75 billion to $2.95 billion, reported earnings per diluted share of $1.25 to $1.95, and adjusted earnings per diluted share of $2 to $2.70. The midpoint of $2.35 represents an increase of 41% from our fiscal year 2025 results. Our outlook takes into account prevailing trends in the RV sector, including competitive dynamics, shifts in consumer preferences, key macroeconomic factors that may influence overall demand and current trade policy positions and tariff rates, with the exception being the most recent 100% additional tariffs that were the administration's reaction to rare earth mineral restrictions threatened by China. We have held that risk aside for now pending the upcoming scheduled talks between the U.S. and China. All of these factors remain dynamic, and we will continue to provide further updates to our expectations as we progress through the year.

Let me share a couple of additional data points to help frame the business trajectory for fiscal 2026. First, as it relates to our sales growth, we are not building in or counting on an improvement to retail units sold in the industry, as mentioned earlier. Instead, we expect growth in our portfolio to be driven in part by healthy growth in the Motorhome RV segment due to the success of the Grand Design RV Motorhomes expanded Lineage lineup. Lineage has seen exceptionally strong dealer and end consumer demand to date, which gives us tremendous confidence in the success of this portfolio. We look for flat to modest low single-digit growth in the Towable RV segment. The Marine segment is expected to produce a decline in sales due to continuing soft retail trends in that part of the market.

As we continue executing on our margin improvement initiatives, we expect to deliver meaningful annualized cost savings. These savings are driven by targeted operational actions, including footprint optimization, supply chain enhancements and strategic workforce alignment that are already underway and will continue to generate meaningful efficiencies. Specifically, we expect operating income margin in the Motorhome RV segment to improve to low single digits for fiscal 2026 from negative 0.6% in fiscal 2025. This expectation reflects both the impact of our enterprise-wide margin improvement initiatives and the focused margin recapture efforts within our Winnebago-branded Motorhomes business, including a targeted and refreshed product line, cost structure optimization, most of which has already been executed during the fourth quarter of our fiscal 2025, the footprint consolidation that has also already been accomplished, focused mix improvements and other cost efficiencies.

From a capital allocation perspective, we are aiming for a net leverage ratio approximating 2x by the end of fiscal 2026. This remains a strategic priority in the coming year.

Now please turn to Slide 16 as I hand the call back to Mike for his closing comments.

Thanks, Bryan. In closing, we ended the year with a strong fourth quarter, delivering solid results across revenue, profitability and cash flow, a testament to the strength of our diversified portfolio and disciplined execution. We're energized by the momentum building across our enterprise. The strategic actions we're taking to revitalize the Winnebago Motorhome and Towables lineup, align operations with market demand and streamline our cost structure are beginning to generate a meaningful improvement to results. We're seeing the early stages of what we believe will become a powerful flywheel effect, great products attracting top-tier dealers, stronger retail performance, reinforcing brand strength and renewed energy across our distribution network. After all, Winnebago remains the most recognized brand in the entire RV industry.

Across our outdoor portfolio, the trends are encouraging. Grand Design Motorized is off to an outstanding start in its first full year, Newmar continues to lead in core motorized Class A segments and Grand Design Towables is expanding with new offerings that balance quality and affordability. Our Marine brands, Chris-Craft and Barletta remain pillars of innovation and premium customer experiences.

As we look ahead to fiscal 2026, our optimism is grounded in execution, not assumptions about market recovery. With a strong foundation in place, we expect the cadence of improvement to accelerate through the year as we continue to execute on our strategic initiatives.

Now Bryan and I are happy to take your questions this morning. Operator, please open the line for the Q&A session.

[Operator Instructions] Our first question comes from the line of Scott Stember with ROTH.

Maybe we could dig into tariffs a little. Last quarter, you guys had talked about some unmitigated expense in that $0.50 to $0.75 worth of EPS range. And it sounds like there's still a lot of variability, at least within your guidance. Can you talk about how much or where the unmitigated portion is? Is it at the lower end of your guidance? Or maybe just frame out what that number is?

Scott, thanks for the question. The -- as we had indicated at our Open House Investor event, this morning's guidance does include what we currently anticipate to be the full impact of tariffs on our business performance in the next 12 months. As Bryan highlighted in his comments, the tariff subject continues to be very dynamic, and there certainly could be changes in the tariff environment in the future. And as those happen, we will certainly continue to keep the investor community updated as to the relevance and the impact on our business.

But we chose for this morning's purpose of providing fiscal '26 guidance to include the full impact in the guidance. So we won't be calling out this morning a specific number for tariffs in terms of the net impact to the business, but our teams continue to do an outstanding job of finding avenues to mitigate the tariff exposure. And as we also indicated in our Q4 commentary, we have made difficult decisions to do some disciplined pricing actions as well to cover some of those costs where we believe the market can take that.

But the tariff environment continues to be very dynamic, and we imagine it will remain that way throughout the year, but we think we've built muscles and processes to mitigate that subject as effectively as most of our competitors are doing.

Got it. And last question on the cadence of guidance. I know you touched on it briefly. A lot of stuff going on in retail back and forth, and we're coming out of the -- some of the actions at Winnebago Motorized. But can you just maybe help us for modeling purposes, maybe a little bit more granular what we should be looking at near term in the quarters ahead versus maybe the first half versus the back half of the year?

Scott, I'll comment and then ask Bryan to provide certainly more substance. Many of our fiscal years tend to be a bit back half loaded in terms of profit generation in Q3 and Q4 especially. Fiscal '26 will be similar in that regard. We do believe that we'll be able to get off to a better start in the first half of the year than we had a year ago. But a majority of the upside will likely happen in the back 6 months of the year.

I do want to reiterate, and we stated it on the call that our assumptions for fiscal '26 are based on a relatively flattish retail and wholesale shipment environment. And so we believe most of the opportunity to drive stronger results in fiscal '26 is really a result of actions that we can control. And some of the very difficult decisions we made in fiscal '25, we believe that we are in a better position in fiscal '26 to drive the business forward, especially on the bottom line. Bryan, what would you add?

Not much more than that, Mike. I guess the only other add that I would have is that we do expect each quarter to show improvement year-over-year at this stage. That's the additional color I would provide.

Our next question comes from the line of James Hardiman with Citi.

So I wanted to dig into the guidance a little bit, let's start with the industry numbers. I'm having a tough time getting the sort of full year shipment numbers to foot. I guess what are your assumptions for retail for '25 and '26? I think you said flattish for '26, but where do you expect that to finish in 2025? It seems like, based on your wholesale assumption, that we're still going to be looking at a pretty meaningful inventory reduction at the industry level in '25. Is that -- is that right?

James, I think that assumption is right. When we started both fiscal, but also calendar year '25, I think there was certainly stronger optimism amongst the industry participants that we had finished most of the destocking from the prior 2 or 3 years, 2022 through '24, but that, in fact, was not the case. And retail, in calendar '25, did not show itself to the degree that I think, again, everybody in the industry would have liked. And dealers continue to be disciplined in how they managed obviously, their inventory, both in terms of quality and quantity.

For our fiscal '26 year, and calendar '26 year as well, we really aren't anticipating a significant increase in dealer inventory. We think in many of our categories that we are near a situation where the industry can shift at a 1:1 level. I would say that there are pockets of the Motorhome category where that may not be the case. And we are watching the pontoon segment very carefully from the Marine side.

So I think your characterization of '25 is correct is that there's potentially a little bit more destocking than we had anticipated. We are not necessarily building in significant destocking into our assumptions in '26. But as Bryan noted, the category we're probably watching the closest is some weakness in the Marine space as dealers continue to probably have slightly elevated inventory on pontoons that they're managing downward.

That makes sense. But then I guess, if -- putting Marine aside for the second -- for a second, if I just think about 2025 in which there was significant destock and then a 2026 where if we assume sort of 1:1 wholesale to retail, that would seem to suggest material growth in wholesale if retail is in fact flat. And so help me sort of understand like RVIA, for example, has a meaningfully higher shipment number at their midpoint. I just want to make sure I'm not missing something.

And maybe one way to talk about it is in the context of your business. I think you finished at 1.9x for the fiscal year. Do you expect that number to go higher next year? Or how should I think about that?

I would tell you that we're striving for 2x in all of our businesses and brands. We've got some of our businesses in product segments were a little further away from that than we'd like. But in a couple of other segments, I think we're almost right on top of that number. So there may be places, James, where we undership the market a bit in -- with the ambition of pursuing that turns goal, but there'll be other parts of our business that just have natural momentum in terms of the strategies we're executing, Grand Design Motorized, Winnebago Towables are two that come to mind.

Again, I would tell you that I think for calendar year 2026, we anticipate that both for the RV business, that industry retail and industry wholesale can potentially be around that 330,000 unit mark. That's roughly the midpoint of our 315, 000 to 345, 000 forecast. And that being said, over the course of those 12 months, you would not see significant dealer destocking in the RV industry. So we've got that modeled in a detailed fashion within our business for planning purposes. But at the end of the day, we think 330,000 units for calendar year '26 is a reasonable assumption for us to use for planning purposes. If the market's healthier, fantastic. If it's a little softer, we still believe we have the levers within the business to be able to generate profitability in the guidance range that we offered this morning.

Okay. And just -- sorry, just to put a finer point on it, if 330,000 is the expectation for wholesale and retail next year, what do you have penciled in for retail this year? Because at least based on my numbers, that would suggest a much bigger decline than where we've been year-to-date. Do you expect the last, I don't know, 4 or 5 months of the year to be down significantly in terms of retail? Or is my math off here somewhere?

Well, we don't know what retail will be, obviously, for sure, in the last several months. Obviously, the gross number for August was a little bit higher than the industry had, had hoped it would be, but we think that net number will settle in a little bit more healthy place. It would not surprise us to see retail in the remaining months of the, the calendar year be down slightly in that low to mid-single-digit range. But the variability of the industry is difficult to forecast right now. So I'm not trying to evade an answer, James, here. It's just really, really hard to forecast either over an extended period of time, but also to know what month-to-month the industry is going to give us.

And so we are focused on our business, trying to drive our turns to as close to 2.0 as we can. We believe we have share gain opportunities in multiple spots within our portfolio, Grand Design Motorized, Winnebago Towables, Barletta pontoons, travel trailers on the Grand Design side. And so regardless of what the market gives us, we believe we can deliver within the numbers for fiscal '26 that were offered today.

Our next question comes from the line of Craig Kennison with Baird.

I had a question around market share. You've had a really good story in the last 5 years with respect to market share in RVs and in Marine, but at least in RVs that appeared to take a step back in fiscal 2025, and that's probably due to a mix shift favoring some low-end units where you just don't play aggressively. I guess I'm wondering what's your view on market share trends for your brand, especially if this trend towards low-end RV units persist?

Yes. Craig, the most significant areas of pressure in the RV industry for us from a market share perspective have been the Class B category in motorhomes and some fifth-wheel retail share pressure we've also seen on the towable side. And I think those are due to similar, but different reasons. The Winnebago brand of Vans has long been the industry leader, both in terms of volume, but also in terms of innovation. And in our comments this morning, we did mention that we continue to have the top 3 performing singular product brands in the Class B segment.

But the reality is that, that segment has gotten incredibly crowded over the last 3 or 4 years. I mean, literally, there has been an explosion of brands and floor plans in that space and candidly, dealer distribution points. And almost by the default of math with us only having 1 brand in Class B vans until recently with Grand Design's launch, and us having primarily one distribution network under that one brand, the explosion of competition there really mathematically has pressured our share. But we continue to make the best product in that segment without a doubt.

On the fifth wheel side, that has been a combination of new competition that we've seen over the last 3 or 4 years and some very competitive offerings from those competitors, along with some shifts in price point attractiveness from some of our higher-volume competitors in the industry.

Our fiscal '26 plans have us stabilizing volume in the RV market and slightly growing it for that particular fiscal year. And again, the two primary drivers are going to be Grand Design Motorized and the second year of their launch, and some of the significant retail momentum continuing that we're seeing. And we intend to make meaningful strides on Winnebago Towables as well in fiscal year '26. We had the strongest dealer ordering open house for that particular business that we've ever had in September. And we feel well positioned to grow share in that space. We'll also see some share gains, we believe, continue in Class A diesel with Newmar and Grand Design Towables as we continue to work on the Imagine and Transcend lines within that particular brand.

So we're well aware, Craig, certainly, as you stated, of some of the, the dilution in share here recently, but we believe we have plans in place to stabilize that and even in spots to strengthen our share in certain areas.

And I wondered if you would also just compare the RV consumer versus the Marine consumer today? And then how those dealer bodies view the market differently?

Well, the RV consumer candidly is probably younger and more diversified in terms of a consumer base, and we think that has been helpful, even though, obviously, the RV industry has seen a significant volume pullback here in the last couple of years. I think the industry, as a whole, has done a good job attracting consumers from all walks of life and keeping the products as affordable as possible given some of the cost pressures we've seen to make sure that younger consumers are still participating in the lifestyle. The marine industry has some work to do candidly in that area. As an industry, we need to work within boating to bring the average age of the consumer down and get younger generations, not only in the lifestyle, but candidly owning more boats. And the diversity has been moving in the right direction.

We continue to believe that the marine industry is a little bit further behind the RV industry in terms of the cycle. Craig, I think even your recent report cited that many of the marine dealers feel they still have too much inventory, and we agree with that, and we're working closely with our dealers to try to right size our particular inventory positions. We think we're in pretty good shape. But by and large, we think the marine consumer is a little bit more hesitant than the RV consumer right now. And the dealers are also probably more focused on destocking in many of those categories even more so than the RV dealers have been lately.

But we believe our brands are positioned well. I'm optimistic that our Barletta pontoon business especially will continue to unveil new strategies in the future to remain very competitive and continue to take share. And again, I think you can tell from us this morning that the theme of fiscal year '26 for us is control what we can control. And we believe we have a number of actions and strategies in place to, again, deliver the results that we foreshadowed this morning.

Our next question comes from the line of Joe Altobello with Raymond James.

Mike, that was actually a good segue into my question. But if we think about the guidance for '26, and I think at the midpoint, it implies about $0.70 of earnings improvement, call it. Based on my math, the improvement in motorhome margins is all of that and then some. So I guess my first question there is how much visibility or line of sight do you have into those cost improvements for this year?

Bryan, I'll have you take that one.

Yes, sure. I made some of the comments, Joe, in the script as it relates to the Winnebago Motorhome business in particular, lot of the cost actions have already been taken in Q4 as it relates to some of our cost structure, both in cost of goods and in our SG&A. And then it is likewise related to product, as I mentioned. And having a product line and as well as a finished goods position that doesn't require the same level of incentives that were required here in 2025 fiscal. So those are the two biggest areas of improvement that we're expecting, some of which, as I mentioned, have already been executed.

So we've got good visibility into it. We'll be tracking it very closely. Most importantly, I think, Joe, we've got the right team in place there, the right leadership. They're highly engaged. We sense a great improvement in culture and motivation of the team, and so we think we've got the right team in place to execute.

Got it. Very helpful. Is there pricing involved here, too, particularly with tariffs?

Yes. Pricing is some of the story, but that really is an offset to the increased cost as you referenced, as it pertains to tariffs. So I wouldn't call that out as a margin improvement in terms of pricing through tariffs. I think it's more the better position product lineup and the reduction in the incentives that are required.

Got it. Got it. And maybe one quick one for Mike, if I could. I mean if we think about sort of a big picture view of the industry, the assumption of mid-cycle, I think, on the RV side has always been around, call it, 425,000, 450,000 units. Given where we've been in the last 3 or 4 years, do you still think that's a good mid-cycle estimate?

Joe, we're working on that model as we speak, and it's likely here in the relative near future that we'll find an opportunity to share an updated mid-cycle model for Winnebago Industries with you. Specific to your question, I think you'll see in our next version of that mid-cycle model that we believe that the RV mid-cycle volume estimates specifically will be lower than what we offered last. It will probably be somewhere in that 400,000 to 425,000 range. We may choose to be even more specific when we release that. And that's just a byproduct, I think, of the, the reality that this trough in this particular down cycle has lasted longer than most of us have experienced in our careers in this industry, but also, we believe the next peak may be a little lower than what we had been previously modeling.

I do want to say this, though, the Winnebago Industries' portfolio in its entirety has really not seen a mid-cycle environment yet. The acquisition of Newmar in 2019, the acquisition of Barletta in 2021 and then the acquisition of acquisition of Lithionics in 2023, plus new strategies at Grand Design Motorized and now even Winnebago Towables, as an example, being renovated, we believe we have a portfolio that really hasn't seen its full potential realized in a mid-cycle environment.

And we hope that day comes someday. We can't predict the exact year when that will happen. But we're really excited about getting some tailwinds from a market stability standpoint because we believe these 5 OEM brands and then our Lithionics business from a strategic technology vertical can really start to show some significant performance upside in the future. But stay tuned, Joe, we'll come back to you all shortly with an update on that topic.

Our next question comes from the line of Bret Jordan with Jefferies.

This is Patrick Buckley on for Bret. Could you talk a bit more about any takeaways from the RV open house? Anything notable as far as recent retail demand or year-over-year sales trends? And I guess, how did that general sentiment from the open house factor into the '26 outlook?

Patrick, thanks for being with us. We thought the September open house in Elkhart was a good event as it normally is. Attendance from the dealer community was very strong. I thought the engagement from the OEM and supply side was also fantastic. We have to answer that question almost brand by brand and given the state of our different businesses. But we were really pleased with dealer engagement on each of our 3 RV brands. It's not a huge order writing show for our Newmar business, just the rhythm of how we take orders in that business and work with the dealers, that's a show at Newmar that is more about showing some of the latest products, some of the beds or in the cab on some of the Super Cs were exciting there, but not a huge order writing show. However, on the Grand Design and Winnebago brands, it is a meaningful order writing show, and we were pleased with the orders that we took on both Grand Design and Winnebago.

And as I've already mentioned this morning on the call, Winnebago Callables was a record-setting order-taking event at Open House. And obviously, Grand Design Motorized being a new business still going into its second full year we saw good activity and reception there. So Grand Design Towables continues to be a large business for us, our largest single revenue stream. We were pleased with the reception to especially the travel trailer segment there, the work we've done on Imagine and Transcend, the unveiling of the Foundation destination trailer.

And then as Bryan just recently mentioned, our Winnebago Motorhome team really has a lot of cultural momentum right now. We unveiled our Sunflyer affordable Class C product in Elkhart that month to very strong reviews, took a number of good orders on that. And really just more importantly, validated with the dealers around the Winnebago Motorhome brand that we're coming, that this business is headed in a stronger direction and that now is the time for many of them to get on board and support that business.

So all in all, a really good show. Recent retail trends have been very similar to what you guys have public access to [indiscernible]. We're 7 or 8 weeks into our fiscal year already. So we've got a decent amount of retail underneath us for Q1. Retail trends are similar to what you've seen in the July, August months, some weeks are good and some weeks are a little weaker. And collectively, I wouldn't say that there's been a significant change in retail momentum up or down in the first 1.5 months of our fiscal '26 year. So again, it goes back to the theme of we're assuming the market will be flat, and we believe we have the strategies in place to have a good fiscal '26 years as we showed today with our guidance.

Got it. That's helpful. And then just following up on the tariff questions. Are you expecting any specific or maybe incremental chassis impact from the most recent tariffs on medium-duty trucks?

We are not at this point. The whole tariff subject for us has many puts and takes. And as you all know, there will be some pretty significant decisions made here in the future, both in terms of any additional tariffs that the administration places on China if they do so. And also, obviously, the entire subject of tariffs and the justification for tariffs is before the Supreme Court. So that whole topic continues to be very dynamic. Every day, there seems to be a new wrinkle or curveball and our teams continue to do both. Both at the centralized sourcing level at the enterprise, but also within the businesses at a procurement level, we continue to be able to mitigate a good majority of those tariff costs before we have to face a decision as to whether to price or not.

So again, we're never comfortable with tariffs, but unfortunately, we've gotten better at managing it, and we just have to do that every day now as part of our business model.

Our next question comes from the line of Patrick Scholes with Truist Securities.

Any color on ASP expectations for the upcoming year by segment category that you might be able to provide?

Yes, I'll take that one, Mike. Generally speaking, we'll have some favorability in the Motorhome business just from a perspective of declining incentives that are required to move that product. I mentioned that earlier. For the most part, that's the story in motorized. In Towables, I think we'll have a couple of different stories. I think we'll have pricing that will be a natural lift to ASPs in the coming year. That will be offset in many respects by continued mix shift towards affordability-minded consumers.

And then on the Marine side, we expect, again, some negative mix. We've got growth that's occurring at the lower end of Barletta's offering. And then we also have, within the Chris-Craft business, the Sportster which is showing high receptivity and that drives an unfavorable mix, those being offset by some modest pricing activity. So not as much volatility downward, I'd say, as what we've experienced in the past, call it, 18 months, more stability, still some negative mix impacts offset by some pricing.

Next question comes from the line of Noah Zatzkin with KeyBanc.

I guess most of my questions have been kind of asked and answered, but maybe just one on warranty expense. Any way we should be thinking about warranty expenses in FY '26 relative to '25? And just anything to be aware of there?

Bryan, I'll have you comment on maybe the direction that you're willing to share there? Noah, thanks for the question. I want to reiterate that the warranty expense that is shared at times includes both real warranty expense that are often driven by quality issues that we can continue to address and do a better job of, but it also includes significant goodwill and other ways of us taking care of the customer. I'll give you an example. Our Barletta pontoon business, Barletta makes, I believe, potentially some of the highest quality pontoons in the entire industry. Yes, we continue to run our warranty spending there at a level that incorporates a significant amount of customer goodwill to provide support coverage to our dealers and their consumers at a level higher than anybody else in the industry. There's no other pontoon manufacturer that I'm aware of that has a significant holiday consumer hotline on 4th of July or Memorial Day or Labor Day when consumers are out on the water and something goes wrong, and we're there to support them and cover them.

So warranty for us is not just a barometer of sort of the cost of quality, but it's also an investment at times and how we take care of our customers. But Bryan, any thoughts on Noah's question in terms of the trend line on that particular item.

Yes. We've cited improved warranty from a year-over-year perspective in the Motorhome segment, and then slightly elevated warranty experience in the Towable segment and Marine segment. We don't see any significant changes or drivers to changing of warranty experience in 2026, expecting, call it, consistent types of rates, but no major drivers to OI yield in 2026 as we sit here today.

Ladies and gentlemen, we have reached the end of the call. I would now like to turn the call back over to Raymond for closing remarks.

Thank you, Towanda. That is the end of our fourth quarter earnings call. Thank you to everyone for joining us. We look forward to further updating you on future calls. Enjoy the rest of your day.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.