Winnebago Industries, Inc. (WGO) Q4 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to the Q4 2020 Winnebago Earnings Industries Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference to your speaker for today, Steve Stuber, Director, Financial Planner -- Planning and Analyst and Investor Relations. Thank you. Please go ahead, sir.

Thank you, Justin. Good morning, everyone. And thank you for joining us today to discuss our fourth quarter and full year earnings results. I am joined on the call today by Michael Happe, President and Chief Executive Officer; and Bryan Hughes, Vice President and Chief Financial Officer. This call is being broadcast live on our website at investor.wgo.net and a replay of the call will be available on our website later today. The news release with our fourth quarter results was issued and posted to our website earlier this morning. Before we start, I’d like to remind you that certain statements made during today’s conference call regarding Winnebago Industries and its operations may be considered forward-looking statements under securities laws. The company cautions you that forward-looking statements involve a number of risks and are inherently uncertain 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 I encourage you to read. With that, I would now like to turn the call over to our President and CEO, Michael Happe. Mike?

Thank you, Steve, and good morning to everyone on today’s call. We express our hope that each of you and your families are safe and healthy currently and into the future. We greatly appreciate your interest in Winnebago Industries and taking the time to join us this morning. I would like to begin with an overview of the progress made by our team in continuing to transform our company during an unprecedented fiscal year 2020. We will specifically highlight the macro results of our strong fiscal 2020 fourth quarter and review the strategic drivers critical to that success. I will then turn the call over to our Chief Financial Officer, Bryan Hughes, who will provide more detail on the related fourth quarter and full year financial results. Our final segment will offer some closing thoughts on the state of the outdoor industry, early trends we are seeing in our fiscal 2021 first quarter, which we are already more than halfway through and our core enterprise strategies for the future. We will conclude the call as always with a question-and-answer session. Now it is difficult to overstate just how unique the back half of our fiscal 2020 year was from March through August. We witnessed the incredible health, societal and economic consequences of the worst global pandemic in more than 100 years. Critical matters of social injustice rose to the forefront during the summer of 2020 and the depth of our country’s political discord seems as magnified as ever. 2020 also witnessed and continues to experience an engagement by Americans in the great outdoors at recently unseen levels. Our consumers combined the imperative of the safety of their families, with their strong desire to be immersed in the experiences they could control, and consequently, flocked to the outdoor recreation lifestyle like never before. The outdoor industry, the recreational vehicles industry, the marine industry and Winnebago Industries continue to see record interest in outdoor participation as calendar year 2020 progresses. Thanks to the grit and the incredible resolve of our Winnebago Industries team across our four premium brand platforms and enterprise functions. The disruption of normalcy caused by the COVID-19 pandemic was just part of the narrative of our fiscal 2020 year, but not the defining aspect. I strongly believe that the prevailing theme of fiscal 2020 was that, despite all of the chaos we experienced, our 5,500-plus strong Winnebago Industries employees were steadfast in their commitment to safely achieving our strategic goals and delivering on our golden threads of quality, innovation and service in all that we do. So I want to take a moment and acknowledge and thank each of those teammates for their continued perseverance to serve our customers and their dedication to our company, our dealers and each other. This team experienced some difficult days in industry [ph] as we navigated the worst of the pandemic’s impact on our business and they continue to adhere to the stringent safety protocols we utilize every day. It is our employees’ ongoing commitment to working collaboratively, safely and efficiently that drives our business forward. We also want to take this opportunity to continue to recognize and thank our medical providers, first responders and health professionals in each of the communities in which we have a physical presence as an enterprise. They too are true heroes as the pandemic drags on and their efforts remain a constant force against this unfortunate virus. In fiscal 2020 and especially in our fourth quarter, we made meaningful progress on delivering on our strategic growth initiatives and creating increased value for key stakeholders of our business. While the acute impact of this year’s third quarter impeded our ability to deliver full year financial performance reflective of the momentum we had generated in the first half of the year, the underlying fundamentals of the business remain strong, driven by ongoing and tremendous consumer and dealer demand, which has returned in full force, evidenced by our significant fourth quarter results. Throughout the fiscal year, we continue to expand our portfolio organically and inorganically, and gain market share behind our four premium outdoor brands. We successfully completed the acquisition of the Newmar Luxury RV business in November of 2019, which added yet another outstanding brand to our Winnebago Industries family and furthered our progress to restore leadership in the Motor Home RV segment through their ever increasing market share in the Class A motorized category. Winnebago Industries also drove organic market share in fiscal year 2020, led once again by the surging Grand Design RV brand and its expanding and highly desired travel trailer and fifth wheel lineups. Our leading offering of Winnebago branded Class B vans added almost 9 points of market share in fiscal 2020 and heralded new product launches by our Winnebago Towables team also enabled a significant increase in future orders in that business. As the pandemic hit our company with unforeseen speed in the middle of March, we ourselves took swift and appropriate actions to protect our employees and the key stakeholders, while strengthening our solid financial position, and ensuring liquidity and flexibility in the face of uncertainty. While much of our operations were suspended for six weeks in the spring of 2020, we wasted no time reimagining our daily operating processes to ensure a safe return to full operating status in May, which allowed us to react appropriately to begin meeting increased and soon to be record levels of consumer demand in the summer of 2020. We kept our foot on the accelerator in terms of new product development, worked to create strategic and mutually beneficial relationships with key suppliers and pivoted our entire portfolio to a committed and confirmed order production system. These actions and many more set us up to safely and profitably deliver for our end consumers and dealers in the fourth quarter, even as a record backlog of new orders accumulated across both our RV and Marine businesses. Throughout the fiscal year, Winnebago Industries continue to make progress in realizing our vision to be a leading provider of outdoor lifestyle solutions and in creating value for our shareholders and communities. In fiscal 2020, Winnebago Industries returned $15 million to shareholders through our increased and sustained dividends. As Bryan Hughes will touch on further, our capital allocation priorities, our focused on managing our flexibility and maintaining our solid financial position as we continue to invest in a disciplined manner in the face of an uncertain economic environment. We feel confident, but remain constantly diligent in the strength of our balance sheet and are pleased with our ability of having delivered positive operating cash flow throughout the fiscal year. We also maintained our commitment to publishing our first annual Corporate Social Responsibility Report for the 2019 calendar year, with the 2020 edition just around the corner later this fall. These reports highlight our efforts to address the environmental, social and governance issues that impact our employees, our customers and our world, and most directly affect the long-term success and sustainability of our business. It is also indicative of our commitment to developing goals and tracking our progress towards enhanced sustainability. Additionally, in light of the pandemic and the financial hardship it has put on so many in our communities, Winnebago Industries made a record seven-figure donation to the Winnebago Industries Foundation in fiscal 2020. Supporting national partners in its three impact areas outdoors, access and community, as well as local organizations in our Winnebago Industries hometowns, like those supporting the pandemic first responders and healthcare providers in the communities in which our employees live, work and play. Turning now to our consolidated financial results, our fiscal fourth quarter was a strong finish to the year, reflecting the appeal and the market position of our portfolio of leading outdoor lifestyle brands. The strides we have made in safety and operational excellence, and the value of our collaborative relationships with our supplier partners and our dealer network. Consolidated revenues for Winnebago Industries were $737.8 million for the fourth quarter of fiscal 2020, an increase of approximately 39% year-over-year and a robust 15.3% organic increase, excluding the impact of Newmar. We saw exceptional demand across our product portfolio as consumers invested in safe outdoor lifestyle solutions once the stay-at-home restriction is begin to lift, with standoff performance by Grand Design and our Towable segment, and Class B sales in our Motorhome segment. Behind the strength of our Winnebago Grand Design at Newmar brands, we saw our RV market share gains continue, achieving 11.3% market share on a trailing 12-month basis, which is a full 1.3 percentage points above last year, of which 0.8 percentage points or almost two-thirds is organic. Remember, this company had less than 3% total market share at the end of 2015. This continuation of market share gains is especially encouraging since first time RV buyers make up a larger portion of our purchases these days. First time buyers generally gravitate towards more entry level models where Winnebago Industries portfolio skews towards more premium offerings. Yet, our market share gains would reflect that we appear to be competing just fine for these new consumers. Full year operating cash flow was $270.4 million, an increase of approximately 102%, reflecting disciplined working capital management and our strong sales momentum throughout the year, despite the acute COVID impact in our fiscal third quarter. We have continued to be very measured with our cash and have maintained our focus on curtailing expenses and enhancing our liquidity. Our cash balance rose to $293 million at quarter end. While our outlook for continued strong consumer and dealer demand trends are positive, we are closely monitoring the evolution of the pandemic and its economic impacts. The successful cash management actions that we deployed in the third quarter underscores the high variability of our cost structure and our ability to manage through challenging periods should we face further macro level disruption. I am also very pleased that Winnebago Industries’ overall quarterly adjusted EBITDA margin expanded over 70 basis points in the fourth quarter, compared to the same period last year, as we have continued our focus on excellence in operations and delivered our profitable growth safely. We re-imagined our operating processes to support a safe return to running at high speed throughout the fourth quarter and continuing into fiscal year 2021. Now let us turn to the segments in more detail. In the Towable segment, fourth quarter revenues of $414 million were up approximately 35% from the prior year period, primarily driven by strong demand for safe outdoor lifestyle experiences and the strength of our premium Towable portfolio. The increasing appeal of Grand Designs products and their tireless focus on quality, innovation and service has allowed us to again outpace the industry. Adjusted EBITDA margin was 14.8% in the quarter for the Towable segment, up 110 basis points compared to the same period last year, as a result the fixed cost leverage and profitability initiatives. Backlog increased to a record $747.9 million, an increase of approximately 219% over the prior year period, as dealers at the end of August had largely depleted much of their inventories to meet high levels of consumer demand in the fourth quarter. Our multi-branded Towables portfolio has continued to be resilient and successful in gaining share, and we still see vast opportunities for growth as demand trends remain positive, overall market size expands and our dealers who look to restore lot inventory levels especially with our preferred brands. Our performance emphasizes that our Winnebago brand and Grand Design Towables lineups remained strong and reflects the continued appeal of both brands with consumers. Turning to the Motorhome segment. The addition of Newmar Luxury brand to our Motorhome platform is allowing Winnebago Industries’ overall to compete more effectively in the Class A and Super C categories, and more broadly, supporting our priority to restore our Motorhome business to a leadership position. As demand trends continue and new customers come into the RV lifestyle, our Motorhome segment is headed in the right direction to be more balanced and competitive than ever and well-positioned to capture value going forward. Fourth quarter Motorhome segment revenues of $301.8 million were up approximately 50% from the prior year period, driven by those same strong demand trends for safe outdoor family experiences. Excluding Newmar, organic revenues were $175.5 million, down 12.6% from the same period last year. You may recall that fourth quarter of fiscal year 2019 saw strong Class B and Class C unit sales as we benefited from more normal chassis availability a year ago. In fourth quarter of fiscal 2020, our strengthening Class B sales more than offset by the impact of COVID-19, our Class A and Class C sales that did not recover as quickly after the shutdown in Q3. Yet, Winnebago, our brand, increased its Class C diesel sales in August and throughout our fiscal year. Adjusted EBITDA margin for the Motorhome segment increased to 6.4% in the quarter, 100 basis points over the fourth quarter in 2019 because of lower input costs. Our Motorhome backlog increased to a record $1.1 billion at the end of August, an increase of approximately 536% from the prior year, due to depleted dealer inventory, strong consumer demand and the influx of Newmar orders inorganically. Our fourth quarter backlog included approximately 7000 units of Winnebago-branded Motorhome units alone, as dealers see increasing promise in the improving lineup of Motorhome products within that brand. We have and continue to work closely with our suppliers to ensure that we are supporting them and partnering with them in carefully managing the supply chain, with more advanced notice on lead times and overall closer communication. Likewise, we also continue to validate the incredible amount of orders from our dealer partners and prioritize what they need most to continue to sustain impressive retail momentum in the months ahead. In fiscal year 2021, we have continued to ensure that we are strategically sourcing from our supplier partners and sustainability -- sustainably replenishing dealer stocks as possible. Finally, I will touch on our Marine segment. Like our RV businesses, Chris-Craft’s strong premium brand and market position has propelled it to growth in the fourth quarter, as more consumers flock to experiencing the outdoors by boat as well. The planning process for a capacity expansion at the facility in Sarasota is being considered again, as we look to fuel this brand as an integral part of our broader outdoor lifestyle solutions platform. Summer of 2020 saw a record retail for the Chris-Craft brand, the introduction of further new models, a decline in field inventory with its dealer partners and a material increase in backlog orders, stretching deep into spring of calendar 2021. With that summary, I will now turn the call over to our Chief Financial Officer, Bryan Hughes to review our fiscal 2020 full year and fourth quarter financials in more detail. Bryan?

Thanks, Mike, and good morning, everyone. Fourth quarter consolidated revenues were $737.8 million. Revenues excluding Newmar were $611.5 million, reflecting an increase of 15.3% compared to the fiscal 2019 fourth quarter, driven by the strong rebound in consumer demand in the Towable segment and Class B motorized products. Gross profit was $122.5 million in the fourth quarter, an increase of approximately 47% year-over-year, reflecting strong growth in the Towable segment and the contribution from Newmar. Gross profit margin of 16.6% was up 90 basis points compared to the same period last year, due to lower Motorhome segment input cost and Towable segment fixed cost leverage, partially offset by segment mix as a result of the acquisition of Newmar. Operating income was $68.4 million for the quarter, an increase of approximately 53% compared to the fourth quarter last year. Fiscal 2020 fourth quarter net income was $42.5 million, an increase of approximately 33%, compared to $31.9 million in the fourth quarter of last year, driven by the growth in operating income partially offset by increased interest expense. The increase in interest expense is related to the convertible bond issued to finance the acquisition of Newmar, and separately, the write-off a certain debt issuance costs associated with the termination of the company’s Term Loan B, which as previously announced was refinanced by a bond issuance during the fourth quarter. Earnings per diluted share was $1.25. Adjusted earnings per diluted share was $1.45, representing an increase of 45%, compared to adjusted earnings per diluted share of $1 even in the same period last year. Consolidated adjusted EBITDA was $76.5 million for the quarter, compared to $50.8 million last year, an increase of approximately 51%. Now, turning to the full year fiscal 2020 results. As Mike mentioned earlier, the COVID-19 pandemic and the related shutdown of our operations in the third quarter, combined with the momentary disruption to consumer purchasing patterns had a significant impact on our results for fiscal 2020. Consolidated fiscal 2020 revenues of $2.4 billion increased approximately 19% from $2 billion in fiscal 2019, positively impacted by the acquisition of Newmar, which closed in Q1 of fiscal 2020, but negatively impacted by the COVID-19 pandemic and related suspension of manufacturing operations. Gross profit margin decreased 220 basis points, primarily due to the mixed impact of adding Newmar, as well as the related purchase accounting impacts, and further impacted by COVID-19 and associated deleverage during the fiscal third quarter. Operating income for the year was $113.8 million, compared to $155.3 million in fiscal 2019 and net income was $61.4 million. Full year earnings per diluted share were $1.84, a decrease of approximately 48% compared to fiscal 2019. Adjusted earnings per diluted share was $2.58 for fiscal 2020, compared to adjusted earnings per diluted share of $3.45 in the same period last year. Fiscal 2020 consolidated adjusted earnings per diluted share excludes costs totaling $25 million or $0.74 per diluted share after tax related to the non-cash portion of interest expense on the convertible bond, Newmar acquisition-related costs, debt issuance cost write-off due to termination of the Term Loan B and restructuring costs. Recall also that reported and adjusted earnings per diluted share was also impacted by the 2 million shares issued as consideration in the Newmar acquisition. Fiscal 2020 consolidated adjusted EBITDA was $168.1 million, a decrease of 6.4% from $179.7 million in fiscal 2019. Before turning to the individual segments, I wanted to mention that amortization of intangibles for the fourth quarter was $3.6 million. We currently expect amortization of approximately $3.6 million in each quarter of our fiscal 2021. Now, turning to the individual segment beginning with the Towable segment. Towable segment revenues for the fourth quarter were $414 million, up approximately 35% from $307 million in fiscal 2019, primarily driven by strong consumer demand for outdoor experiences. Notably, Grand Design’s resilience and popularity with consumers has again enabled the brand to gain market share. As of August, Grand Design’s market share was 8.7% for the Towables market on a trailing 12-month basis, representing an increase of 1.5 percentage points over the prior year. Segment adjusted EBITDA for the fourth quarter was $61.3 million, up approximately 46% year-over-year and adjusted EBITDA margin of 14.8% increased 110 basis points, primarily due to fixed cost leverage and profitability initiatives. For the full year fiscal 2020, revenues for the Towable segment were $1.2 billion, up 2.5% from fiscal 2019, reflecting strong results for three quarters of our fiscal year, partially offset by the severe impact of the suspension of manufacturing and consumer disruption due to the COVID-19 pandemic in the third quarter. Segment adjusted EBITDA for the full year was $148.3 million, down approximately 9% from fiscal 2019. Adjusted EBITDA margin was 12.1%, decreased 160 basis points for the full year, driven again by the COVID-related impacts during our fiscal third quarter. Next, let’s turn to our Motorhome segment. In the fourth quarter, revenues for the Motorhome, excuse me, for the Motorhome segment were $301.8 million, up approximately 50% from the prior year, driven by the addition of Newmar. Excluding Newmar, segment revenues decreased 12.6% compared to the prior year, as a result of strong Class B sales, offset by a decline in Class A and Class C sales due to a slower ramp-up of this business following the COVID-19 pandemic. Segment adjusted EBITDA was $19.5 million, up approximately 81% over the prior year, due to improved profitability in the Winnebago branded business and the addition of Newmar, partially offset by class mix. Adjusted EBITDA margin was 6.4%, an increase of 100 basis points over the prior year, primarily due to lower input costs, driven by an improvement in our LIFO reserve of $5 million that was recognized in the quarter. This reduction in the LIFO reserve was driven by our initiative that produced a dramatic reduction in inventory in the Winnebago Motorhome business largely recognized in Q3 and Q4. For the full year fiscal 2020, revenues for the Motorhome segment were $1.1 billion, up approximately 50% compared to fiscal 2019. Revenues excluding Newmar were $668.4 million, down 5.4% from fiscal 2019, as a result of manufacturing and distribution disruption due to COVID-19 pandemic. Segment adjusted EBITDA for the full year was $32.9 million, up 20% over fiscal 2019, driven by the addition of Newmar. Adjusted EBITDA margin of 3.1% was down 80 basis points for the full year due to the impact of COVID-19 during the fiscal 2020 third quarter, partially offset by the addition of Newmar. Turning to the balance sheet. As of the end of the fiscal year, the company had outstanding debt of $512.6 million, comprised of $600 million of gross debt, net of convertible note discount of $74.3 million and net of debt issuance cost of $13.1 million. Working capital was $413.2 million. Our current net debt-to-adjusted EBITDA ratio was 1.7 times. At the end of June, we took an opportunity to restructure the Term Loan B portion of our outstanding debt. This action took advantage of favorable financing rates in the debt markets to add further flexibility to our overall debt position by allowing us to extend maturity dates without any maintenance covenant restrictions. I will touch more on this a bit later. Annual fiscal year 2020 cash flow from operations was $270.4 million, an increase of $136.7 million from the same period of fiscal 2019. Our disciplined approach to preserving cash was critical in our ability to navigate the COVID-related temporary shutdown in Q3. We also made dramatic improvements during the year to the inventory position of the Motorhome business and this was the primary contributor to the extremely strong cash flow generated this year as compared to last year. And finally, we continue to maintain a very healthy liquidity position. As Mike mentioned earlier, our cash balance increased to approximately $293 million at the end of this fiscal year and we currently have nothing drawn on our $193 million ABL. The effective income tax rate for the full year was 20.5%, compared to 19.5% for fiscal 2019. On August 19, 2020, the company’s Board of Directors approved a quarterly cash dividend of $0.12 per share payable on September 30, 2020 to common stockholders of record at the close of business on September 16, 2020. This represents a 9% increase from the prior dividend of $0.11 per share. As Mike mentioned earlier, Winnebago Industries returned to a total of $15 million to shareholders during the fiscal year 2020. Before I turn the call back to Mike, I want to touch a bit more on our capital structure. The acquisition of Newmar in November introduced $300 million of convertible debt. In late June during our fiscal Q4, we refinanced our Term Loan B and issued senior secured notes also valued at $300 million. There are a couple of important considerations that are serving up some additional comments. The first is that the convertible debt instrument which matures in 2025 is not pre-payable. The secured notes mature in 2028 and prepaying during the first three years is cost prohibitive. Second, the convertible note will have a dilutive accounting impact on outstanding shares once the average share price during the reporting period exceeds the conversion price of $63.73. Since we structured this convertible instrument with a call spread overlay, economic delusion to our shareholders does not materialize until the share price exceeds $96.20, as such, if a reported EPS for a reporting period reflects the dilution required by the accounting rules, our adjusted. EPS will remove this dilution up until the average share price exceeds $96.20. And finally, as it relates to our capital allocation priorities, we continue to prioritize reaching our target leverage ratio of 0.9 to 1.5. Given the nature of our debt instruments, we will achieve this through the utilization of two levers, through the accumulation of cash and the resulting lower net debt, and increasing adjusted EBITDA over the coming quarters particularly once we lap fiscal ‘20 Q3 results. That concludes my review of our quarterly financials, and with that, I will not turn the call back to Mike to provide some closing comments. Mike, back to you.

Thanks, Bryan. The environment we are operating under in our industry and our world more broadly is materially different than the one we imagined when new leadership first presented our enterprise strategies and transformation goals for Winnebago Industries in 2017. However, I am pleased to say that despite our annual fiscal 2020 financial results being significantly impacted by COVID-19, the relative performance of our diverse and balanced portfolio during these unprecedented times is a reflection of the progress we have made on our enterprise strategies. We remain a company moving forward positively, culturally, strategically, financially, and now also from a corporate responsibility perspective. Our transformation efforts have undoubtedly position Winnebago Industries to be more competitive in the future and the markets we serve, and weather potentially challenging times should they arise, leveraging our highly variable fixed cost structure and strengthen financial position. We foresee a continued operational rebound. Thanks to more efficient and safer internal operations, and we are committed to creating long-term value as demand for our expanded and upgraded portfolio of high quality, innovative and iconic brands continues to drive our growth. As we look ahead the fiscal 2021, we are encouraged by the ongoing demand trends that we are experiencing. People are rethinking their recreational priorities and turning to the outdoors as a primary venue for leisure and travel and a safer alternative for gathering with loved ones. The recent fall 2020 KOA Camping Report confirmed that, indeed, customers knew and experience have flocked to the outdoors and are recreating in record numbers. They are broadly confident that many of these consumers will continue to do so in calendar year 2021 as well. We do not see retail momentum for RVs and boats slowing anytime soon. And with dealer inventory levels exceedingly low, the need for wholesale shipments to restore a full line offering and selection on lots across America is and will remain high. Recently the Recreational Vehicle Industry Association issued their wholesale shipment forecast for calendar 2020 and calendar 2021. The 424,000 units forecast for calendar 2020 or roughly 4.5% overall growth is reasonable in our minds for that 2020 period. Further, the record number of 507,000 units forecasted for wholesale shipments in calendar 2021 also appears reasonable in our view, even considering well-documented and real ongoing supply chain challenges. Underpinning this shipment assumption is a belief that there remains enough consumer interest in the outdoor industry to drive low-to-mid single-digit percentage retail increases in calendar year 2021 as well. That is saying something considering the record retail in the summer and fall of 2020. And I can communicate that our September and October RV retail at Winnebago Industries continues to grow at rates similar to what we saw in our fiscal 2020 fourth quarter. With this backdrop, we look forward to growing our position and share in the market, as our customers and end consumers continue to view our brands as a trusted and safe way to have extraordinary experiences as they travel, live, work and play in the outdoors. Barring any unexpected setbacks related to COVID-19, macroeconomic strike or hangover from a contentious general election cycle later this fall, we are optimistic that our company’s current momentum will continue into our fiscal Q1 and beyond. Our expectation is that we will be working hard with our suppliers and dealers to efficiently work through our backlog in an intentional urgent, but disciplined manner and replenish a portion of the dealer pipeline with quality inventory to meet ongoing consumer demand. We are selectively investing in additional capacity, assembly and vertical integration capabilities in fiscal 2021 through our various businesses, and we will continue to invest and introduce new products and models to drive preference to our brands. Now as many on the call are aware supply chain issues do exist in both the RV and Marine industries. As evidenced by our fourth quarter performance, we are confident that this multifaceted supply chain challenge will continue to be managed in a fashion by our team that allows us to compete vigorously for retail and lot space in the market. The supply chain issues are real but our enterprise strategic sourcing team is working very closely with our purchasing resources within each business unit to chart a mutually agreeable path forward with our supplier partners. Candidly, we view this as a competitive and strategic differentiation opportunity versus solely a headwind. In recent meetings with our board of directors, we have achieved alignment on our enterprise strategies for Winnebago Industries for fiscal year 2021 and we have created an organic long-range strategic and financial plan for the next three fiscal years. This is a plan our senior leadership and their Board of Directors are excited about. Given the continued dynamic nature of the ongoing pandemic and possible further uncontrollable factors in fiscal year 2021, we will not be releasing our next generation of long-term goals publicly quite yet. Internally though, we are alive, but we will wait for a stronger sense of certainty externally before sharing any of our beheads [ph]. In light of our increasing cash flow, we also continue carefully any possible business development opportunities. These disciplined assessments are always carefully considered with other means of managing our capital assets and our commitment to drive our net leverage ratio to our desired range remains a priority. We have established five core enterprise strategies for fiscal year 2021 and beyond here at Winnebago Industries. Number one, we will strengthen an inclusive high-performance culture, number two, we will build exceptional outdoor lifestyle brands, number three, we will create a lifetime of customer intimacy, number four, we will drive operational excellence and portfolio synergy, number five, we will utilize technology and information as business catalyst. Going forward, we remain committed to managing our business in a disciplined fashion, so we are best positioned to build on our momentum, capture the numerous opportunities we believe lie ahead and deliver further value to the customers, communities and shareholders we serve. Thanks very much for your time today on these extended comments. I will now turn the line back over to the Operator to take questions.

Thank you, sir. [Operator Instructions] And our first question comes from Craig Kennison from Baird. Your line is now open.

Oh! Hey. Great. Thanks for taking my question. I think, Mike, you finished with 2021 retail expectations. Very much appreciate those comments and I think you are calling for a low-to-mid single-digit increase. I suspect a lot of people on the call are wondering how can the industry grow against what has been tremendous pandemic-related demand. So maybe just share your views on why you think next year could be an up year despite what was clearly an unusual year in 2020?

Yeah. Thank you, Craig, and good morning. Well, I think the answer to that question from my perspective is, we continue to see a high level of interest in consumer demand for recreational vehicles and boats candidly, and we do not anticipate that that consumer demand will wane in any significant fashion in calendar year 2021. We are all obviously hoping for some relief to the virus because of, hopefully, future vaccines that are headed our way in calendar 2021. But we anticipate that consumers will continue to desire experiences in the outdoors with family and friends, and that the number of consumers who will remain interested in joining especially the RV lifestyle will remain high. Now calendar year 2021, which I referenced specifically for that retail projection will really be an interesting year in the sense that it’s really will be made up of three different time periods from a comparative standpoint. January through March was relatively normal in calendar 2020 and so my anticipation is, is that we should see a decent retail comps against that period in the first three months. We then head into those difficult months in 2020 in April and May, when retail was pressured in the outdoor industries. And so, again, retail should comp favorably in April and May, probably, even more so in those months than January through March. And then we get into the back half of the year June through December, which we have all seen arguably record retail increases because of the consumers, especially first time buyers coming into the market. And so retail comps in the back half retail comps in the back half of the year may be challenged and subsequently you will see that net total for the year probably come backwards a little in the fact six months, but we still believe in calendar 2021 it should be able to settle in a positive net outcome from retail. We do believe, Craig that, we will continue to see further arrivals of first time buyers into the outdoor space as well. And again the KOA report that we referenced in our comments validated that interest remains high and first time buyers who did not participate yet in 2020 are looking still to participate in 2021.

Perfect. Hey. Thank you.

Thank you. And our next question comes from Scott Stember from CL King. Your line is now open.

Good morning and thank you for taking my questions as well.

Good morning, Scott.

Can you maybe touch on the supply issues just a little bit more, a lot has been made about certain components, keeping units from being shipped and delivered. Could you talk about how much that might have impacted -- negatively impacted your sales by not being able to get these units out and from a profitability standpoint?

Yeah. Thank you, Scott. Specific to fourth quarter performance, I would say, that the impact on our topline was mild. That’s probably the word that comes to mind there. Our team did a good job in the months of June, July and August in ultimately acquiring the components that we needed to get most of our production out the door by the end of our fiscal year. So I think the impact on fourth quarter results was mild and I think the profitability impacts in the fourth quarter due to the supply chain were probably pretty mild as well. We won’t put a dollar range on that. But it is possible that mild may turn into a slightly higher degree of mild in quarter one of fiscal 2021, arguably because that quarter for us, September through November is now more of a normal operating period. We are not ramping up any more like we were in the first part of the fourth quarter. We are now trying to operate at relatively full speed across each of our businesses and the potential impact of supply chain challenges subsequently has a chance to be more impactful. But we won’t put a number on that this morning. You heard me comment in my prepared notes that the teams are working hard on that. There arguably are some headwinds in terms of profitability or working capital. Due to some of the supply chain challenges, we are spending more overtime and more hours finishing units. And we are in many cases finishing some of those units off the line at the end of the process to put final components on in a high quality way. We will never sacrifice that. But that does mean from a working capital standpoint that we may have a little bit more inventory on average on a daily basis than we otherwise would. So, again, I think, Q4 was really mildly impacted, Scott, Q1 could possibly be more impacted just because the supply chain challenges are going to be with us from really day one through day 90 in that quarter. But we view it as a competitive differentiation opportunity if we can work our suppliers effectively and get our products to market at a slightly higher rate than our competition and time will tell.

Hey. Scott, I will add on -- it’s Bryan. I will add on just a little bit to that. To go one level deeper, while it was mild overall, I think, that’s -- obviously, that’s exactly how we feel about it. At the Motorhome level, it was probably impacted a little bit more than the Towable. Just considering the complexity of that motorized chassis and the efforts it took by those particular suppliers on the motorized side to get back up and running and just a high level of complexity of that business. Probably a little bit more disruption on the motor high -- motorized side than on the Towable side, on balance, as Mike said, pretty mild impact overall. But if you look down in the financials of the motorized versus Towables, I would say, I see a little bit more of an impact both in the topline, as well as a little bit of profitability impact on the motorized side.

Got it. And Mike, you talked about the backlog having I think 7,000 units of core legacy Winnebago branded product in there. It sounds -- can you maybe just talk about what’s fueling that? Is it just the general market picking up? It seems like Class C, you guys are doing a little bit better, just talk about that and how you expect that to play out? Thanks.

Yeah. Well, our backlogs are certainly meaningfully higher and I would imagine they are similar at our competitors as well. But dealers have inventory levels right now in the field. As we probably stand here today, our inventory levels are probably somewhere down in the range of still 35% to 40% lower than a year ago at this point in October and so dealers still have a high desire to replenish their lots with a larger selection of models and floor plans than they have been able to have this summer. We are many months out in most of our businesses. I referenced that Chris-Craft’s production system is booked out to spring of 2021. That is similar in other parts of our RV business on different assembly lines throughout those brands. We are very pleased with the backlog on the Winnebago branded Motorhome business. The number that I reference at the end of August has continued to grow in the last 45 days here in Q1 of fiscal ‘21 and we believe that’s a reflection, Scott, of a very strong Class B lineup, a very well-considered Class C diesel lineup. We have some new offerings that are coming to the market on the Class A side, particularly in diesel here in the future, and so we are seeing dealers not just wanting to replenish inventory, but responding well to the Winnebago brand Motorhome team’s lineup that they are presenting here for the next year or so. So, yes, we are pleased specifically there. But just to be sure, the backlog is equally strong really across all of our brands. Newmar is very strong right now, Winnebago Towables, and certainly, Grand Design, which often has the longest backlog in terms of time to delivery. And as I mentioned, we continue to invest in additional capacity, additional assembly lines and the related vertical integration capabilities that are required to produce more units in the future. So, all hands on deck right now to try to build as many high quality units as possible and get them to the market.

Got it. Thanks again for taking my questions.

Thank you.

And thank you. And our next question comes from Steve O'Hara from Sidoti & Company. Your line is now open.

Yeah. Hi. Hi. Good morning.

Good morning.

Good morning, Steve.

Yeah. So just, I mean, going back to the Craig’s comment or question on growth and kind of a strong year and how you can go from here? I mean, looking at the -- your backlog, looking at where inventory levels are? I mean, it wouldn’t seem like you would need that much retail growth to kind of grow in terms of your fiscal year fairly substantially. I mean, is that the right way to think about it? I mean, and maybe continued retail growth kind of augments that a little more positively?

Yeah. Steve, as you know, we don’t generally comment on future guidance related to our wholesale shipments as a company. But you can glean some insight from how we are thinking when we commented that the RVIA shipment forecast for calendar year 2021 of 507,000 units is reasonable in our perspective and I believe the math on that is roughly a 20% increase roughly, maybe 19% or 20% increase in what they are projecting in shipments for calendar 2020. So it is highly likely that for the next couple of years, and when I say that, I mean, next couple of years, fiscal ‘21 for us and fiscal ‘22, we will see a wholesale shipment environment that is materially more robust than even the retail environment, which we think will continue to be healthy, primarily because of the field inventory situation that we have ongoing. We believe it will take the better part of the next two fiscal years for our companies to replenish dealer inventory levels to the terms that they were experiencing going into the pandemic and that’s us running at significant high levels of production every day. The higher retail is in the future. The longer it will take to replenish field inventory. The more mild retail is. The OEMs will have a chance to catch up a little bit more quickly. And so we are -- I think, Steve, you know us, we tended to remain pretty disciplined in the way we think about the market. We are relatively bullish on hope the wholesale shipment environment in the next year or two sense any uncontrollable disruptions to the outdoors or the lifestyle.

Okay. No. That’s helpful. And then, I guess, I was looking at your inventory, I mean, it looks like motorized is the lowest since 4Q ‘13 and Towables since 4Q ‘17. So, I mean, it seems, like, I guess, pretty good -- to me a pretty good demand indicator. And then maybe just on the -- maybe the margins -- gross margin was 16.6% in the quarter I think and then, obviously, it seemed like the Towable revenue was a little more bigger percentage of the whole maybe then maybe going forward. Can you talk about as motorized maybe catches up with Towable, does that likely pressure the margin kind of from 4Q ‘20?

Steve, I will make a general comment on Motorhome profitability and then I will turn it over to Bryan to more fully answer your question. We are very pleased with the step forward that the Winnebago branded Motorhome business took in terms of profitability in the fourth quarter and we are optimistic about the progress that we can make in our fiscal 2021 year on profitability for that business as well. When you add the Newmar business, that was already operating at a slightly higher level of profitability than the Winnebago brand of Motorhomes. So specific to the Motorhome category, we believe that we are on track to drive profitability in the right direction in the future. I will ask Bryan to weigh in with any more details.

Yeah. Steve, I think, within your question, there was a mix part of your question as well and the contribution of mix and the impact that Newmar has. Because of the addition of Newmar, that caused the Motorhome segment to grow faster than the Towable segment in total during Q4, right, and throughout most of 2020 as well. So that creates a negative mix impact and I think that, that’s what you were asking about is, what is that impact from mix? I think going forward the underlying organic trends will lap the Newmar acquisition here at the end of Q1. And so we will still have some impact from the acquisition as it relates to annualization in our coming Q1. And so you will still see Newmar causing the mix to be a negative impact with motorized growing faster than Towable. Following that, once we get annualized on that acquisition, our currently -- our current organic trends or organic growth favors the Towables business. So Towables continues to grow faster than motorized on an organic basis and that will create a positive mix impact because the Towables business is more profitable both at gross margin and at EBITDA margin than the motorized business. So that’s how I’d encourage you to think about it is you have got this mixed impact from Newmar coming on that’s dilutive to the overall. But once we annualized, our current momentum in the Towables business should create a favorable tailwind impact from a mix perspective.

Okay. No. That’s helpful. Thank you very much.

You are welcome.

And thank you. And our next question comes from Gerrick Johnson from BMO Capital Markets. Your line is now open.

All right. Great. Thank you. Hey. I have two questions here kind of fluffy I guess. The first, I think, most of us on the call know Huw Bower and I am sure admire and respect what he has accomplished. So explain to us what he’s going to be doing at your organization and also what talents he brings that makes him the right person for that position? And then number two is, do you think your business is election agnostic or is there an outcome or a set of outcomes that would be better or worse for your business? Thank you.

Yeah. Good morning, Gerrick. This is Mike. Thank you for your questions. And especially for the first one, we are very pleased that we were able to announce the arrival several weeks ago of Huw Bower joining Winnebago Industries. As many of you on the call know, Huw has an outstanding reputation in the outdoor industry as a successful executive with another leading company and we are pleased to welcome him to our executive leadership team. We have been very focused through the years in trying to build the quality and depth of leadership talent within the enterprise. You have seen us do that with acquisitions and then you have seen us do that with individual hires as well. Certainly, Bryan Hughes on this call and Steve Stuber are examples of that as well coming in from the outside and Huw is just another addition. Huw will be our President of what we are calling Winnebago Outdoors. Winnebago Industries consists of four brands. The Winnebago Flagship brand is one of them. We will be giving essentially the keys to the Winnebago brand to Huw, the product brand. And he will oversee three primary areas, one, he will partner with Brian Hazelton who is now leading our entire lineup of Winnebago branded RVs, both Motorhome and Towables. So Bryan and he will be great partners there, but Huw will have ultimate oversight and accountability for Winnebago branded RVs. Winnebago specialty vehicles, which many of you know, is an interest of ours in terms of both incubating technology, but also trying to drive to higher levels of scale there that we believe will come with higher levels of profitability as well. So he will also lead specialty vehicles. And then we have charged Huw when he gets to this in the future to investigate the opportunity to use the Winnebago Flagship brand on other potential profitable revenue opportunities in the Outdoors. We are very fortunate to have one of the most well-known iconic Outdoor brands in all of the world candidly and we think there are some other opportunities to use that brand going forward to build additional revenue stream. So, Huw has joined us here this month and we are very excited about him. The second question was around election cycle and we will certainly try to stay pretty agnostic here in terms of political leanings. But we are prepared to be successful regardless. That’s probably a relatively political answer. But we certainly recognize that there may be some implications in terms of tax based on which administration holds the White House in the future. But we generally do not believe that a different party in power on Capitol Hill will slow down the demand for outdoor experiences by American consumers. I literally believe strongly that we are seeing a pivot to the way people want to spend their leisurely time and that, for the foreseeable future, that the outdoors is going to win in terms of time and dollars spent. And I truly don’t believe that a D or an R party is going to change that significantly here especially in the next couple of years. So we will run our business well regardless hopefully. We will be prepared to deal with any policy changes that come from whatever party is in power. So, Gerrick, I don’t think we will see a huge impact long-term. Certainly, we could see some financial impact of any tax policies, as an example, are changed.

Great. Thank you, Mike.

Thank you, Gerrick.

And thank you. And our next question comes from Mike Swartz from Truist. Your line is now open.

Hey, guys. Good morning.

Good morning, Mike.

Good morning, Mike.

Hey. Just wanted to touch on some of the supply chain commentary. Thanks for the color you have provided. I guess, it’s one of the more pressing questions is maybe how disruptive is this in the near-term and it sounds like, from what you have said, it’s fairly manageable, but maybe asking in another way, have you had to take any kind of production downtime or do you plan to in the next month or two just given what we are seeing out there?

Yeah. Mike thanks for your question and good morning. Yeah. The supply chain challenges are present across all of our businesses right now and they aren’t just specific to one supplier or one product component category. And they do fluctuate to be fair from supplier-to-supplier and from category-to-category as the suppliers work hard to meet the demand of the OEMs in these industries. Specific to your question about assembly downtime, we are constantly flexing our assembly schedules based on the supply chain and we have for years. The less disruption mean certainly more uptime for assembly at the OEM level and the higher the disruption means, we at times either have to throttle back the main assembly for certain periods. It could be a day, it could be a week or as I indicated, there are times when we go ahead and finish 98% of the units and then the remaining components are installed in another final process usually off the line in a rework area in a very high quality manner. So we have not had any extended significant shutdowns within our businesses in mass. There certainly have been lines where we have had to throttle back for a little while because of component availability. That’s not completely abnormal versus just running the business any year. But I would say the frequency of that discussion is probably a little higher. So we recognize this is probably topic number one for especially the investor base and even the analyst community. Yes, these issues will be present with us throughout probably the first half of fiscal 2021. But, again, I am really confident in our team at Winnebago Industries to navigate through these, to treat our suppliers very fairly and partner with them to try to get our fair share of what they are making based on our growth rates. And I think if we do that, we will be in a really good position to continue to hold and hopefully grow market share versus our competition. So, yeah, like I said, the challenges are real, but I think there are times when the external community is putting a little bit more weight on it than we are here at the company.

Okay. Great. That’s great color. Thanks for that Mike. And shifting to another question just on the motorized segment, I think in your prepared comments, you said, one of the margin positives for the quarter was input cost. So, I guess, I am wondering why that wasn’t also true, I guess, for Towables and is what you are talking about maybe some early synergies from Newmar or is it some of the supply chain initiatives that you have taken across the Motorhome enterprise over the past year or two?

Yeah. Mike. I can take that one. Yeah. There’s a lot going on underneath that comment to be frank or candid, Mike. We have cited most notably the improvement to our LIFO reserve. That was $5 million in the quarter and so it’s, as you know, a little bit of a difficult calculation to talk people through. But it’s the result of the really strong improvement to the Motorhome inventory levels that we drove during the year. So it’s a direct outcome or a result of some of those initiatives to reduce those inventory levels and when that happens, you had the opportunity to take that reserve down and that generates the P&L upside. So, that’s certainly one of the inputs. We also had some things last year, some ups and some downs last year in Q4. So from a year-over-year perspective and that was part of the commentary as well was a year-over-year comment that we had lower input cost. We cited an inventory correction in last year’s Q4 as you might recall. We also, on the other hand, had last year very favorable product mix in Q4 and those two items largely offset each other last year. So we have got some year-over-year comparisons that are -- add some complexity to them and then, certainly, we had as I cited, this LIFO reserve that helped us in the fourth quarter of 2020.

Okay.

I’d say…

Thanks a lot, Bryan.

Yeah. And overall, let me just say, the EBITDA margins we saw in Q4 mid-6 percentages. We are pleased with that as it relates to an improvement versus some of our history, certainly not satisfied with that yet. You take out that LIFO favorable item that we had in the quarter and that 6.5-ish fell to more of around 5%. Our aspiration as we have talked about in the past is certainly above that 5% and so we will look to drive that forward in the coming year, as well as in the years ahead and feel that we have the opportunity and the things in place to do that.

Great. Thank you.

And thank you. And our next question comes from Brett Andress from KeyBanc Capital Markets. Your line is now open.

Hey. Good morning. So just in our conversations with dealers, it sounds like consumer deposits and consumer orders are increasing here just with where the inventory is at. Is there any color on your backlog, how many of your units are presold or already have a retail sold name on them, just any way to quantify that?

Yeah. Brett, good morning. This is Mike. I don’t have a good answer for that. We also hear really are qualitatively and anecdotally from our dealers that that practice is happening that with their lower inventories and maybe the exact floor plan are not available at the present time that they are taking those deposits. But we don’t have a great way with our systems to identify exactly which of those units especially probably on our Towable segments are arguably what we call retail sold. We do have a little bit better feeling on the Newmar business and the Chris-Craft business as an example, because those are luxury items, they are generally composed of what we call specials or customizations to the product by the end consumer, and so therefore, we have a better understanding in those businesses as to when a unit goes down the line is it for a dealer for them to retail in the future or does it have an end customer name on it. So I think the number is definitely higher than it was a year ago at this time, both in terms of raw units that are retail sold but also in terms of the orders, but also the percentage of the mix. I just don’t, Brett, have a good number to give you to answer your question quantitatively.

Got it. No. Okay. And then just a last one, hoping you can elaborate on some of the capacity expansion comments you made. I guess what is the size and timing of those investments and what brands are you focusing on there. I guess I would assume Grand Design is probably one of those?

Yeah. We -- at this time, we are not ready to provide much more specifics than the mention that we made this morning in our prepared comments that we are -- we do have plans and we are investing really in almost all of our businesses. We are working on expanding capacity. Some of that is organic in some businesses with continuous improvement and productivity initiatives that unleash capacity on the same line. But in several parts around the company, we are in the midst of a process of either creating a new line on an existing campus or going through an RFP process with even construction companies to build new buildings in the future as well. So I think you and the others have a good idea as to where our growth is happening. Certainly, Grand Design is one part of that. We have always had a commitment with that leadership team and we will continue to support their profitable growth and as their business grows, we will make sure that they have the capacity to continue to raise their market share and give dealers more products. But we are also active, as I said, in the Chris-Craft business resurrecting that discussion and with our Class B business, Brett, and the Winnebago branded Motorhome side and our share rising significantly in the last year were hard at work there as well. So it’s really across the Board, but again, some of it is organic in terms of the investments and some of it is inorganic in terms of adding more square feet. And I would imagine probably on our next earnings call in December, we will have a little bit more information for you guys as to where some of that specifically is and how much we are potentially adding. But we are not prepared quite yet to give you all the details on that, because we are still working through some of those plans ourselves.

All right. Thank you.

And thank you. And our next question comes from Fred Wightman from Wolfe Research. Your line is now open.

Hey, guys. Good morning. Great. Thanks. Hey, guys. Good morning. Just wondering if given some of the supply chain tightness that you have touched on and the fact that you are finishing some units offline or off the traditional production line. How should we think about the cadence of reported RVIA wholesale numbers over the next few months?

Well, the RVIA shipments are self reported RVIA by the members, and so I can only speak for our company, Fred. But when we ship a unit, ultimately we provide a report to the RVIA on units that were shipped in that period and of what type. The retail is a different answer. SSI is the primary external source for capturing retail as you all know and that process is less precise from a timing standpoint. As you know, there are reconciliations that are and adjustments that are made post fact on that. But the shipping numbers are in my opinion pretty accurate of the behavior of the respective OEMs. And listen, we -- I think most of us use similar revenue recognition rules and processes. And I think -- so I think the integrity of the RVIA shipment data both in total and on a monthly basis, in my opinion is still pretty high right now. But again I can only speak about how our company is reporting our data to the Trade Association.

Okay. That’s fair. Maybe just to follow up on your comments about the retail data that’s out there. You did mention you were seeing similar momentum in September and October versus what you saw on the fiscal fourth quarter. Could you just put a finer point on that and talk about what exactly you are seeing and what you think that means for a broader industry read through?

Yeah. I am extremely pleased with the retail performance in our Q1 to-date. There are concerns current, present tense, that some of the lower inventory in the field will ultimately wear down on the comparative percentage results year-over-year just because as we talked earlier in the Q&A, the dealers sometimes don’t have the exact model and they are taking deposits and not able to consummate a retail sale currently because of lack of inventory. But generally our businesses through the first six weeks, seven weeks of our Q1 have performed very well at retail. And like I said, in a similar comp level versus what we were seeing to end Q4 in August. Again, I can’t speak for our competitors. And again, my comments on retail going forward were specific to calendar year 2021, but -- yeah, we continue to be pleased and that type of retail performance continues to put further pressure on dealer inventory levels in the field. We are probably collectively as an industry not making a lot of headway yet in restocking dealer inventory levels in macro. So again I think it’s a positive sign that consumers are still engaged. They are shopping. They are looking for products. They are renting. They are doing the peer-to-peer sharing on a couple of the different platforms that are out there. And our dealers are reporting no real slowdown -- outside of obviously relative seasonality, but no real slowdown year-over-year wise in consumer interest and that’s a very good sign as we head into the winter months and towards calendar 2021.

Perfect. Thank you.

And thank you. And our next question comes from Brett Jordan from Jefferies. Your line is now open.

Good morning. This is Mark Jordan on for Brett. Just thinking about the mix of first time buyers, I think, we have heard a wide range of what they might represent at retail. Do you have a read of what they might represent?

Yeah. Our read, Mark, good morning, by the way, is solely anecdotal as well. We do not have a great system quantitatively of always being able to understand if that buyer is a first time participant in the lifestyle or not. We have generally been agreeable with some of the estimates that first time buyers are representing in some cases as much as half of the retail in the summer months of 2020. I am not quite sure how that will change seasonality wise as we go into the fall and winter months here over the next three or four calendar months. But we generally believe that it remains high, probably, 40% to 50%. And as my comments indicated in the script, the -- our market share increases on a trailing three-month, trailing six-month would show that we are competing for some of those first time buyers as well. I know there’s been some question as to whether our premium brands are positioned well for those first time buyers. And to be fair and honest in some cases, they are not. We are not an opening price point company. We don’t compete for the lowest cost travel trailers, as an example, which a lot of first time buyers will consider. But I believe our dealers are advocates of our brands and with first time buyers they are representing our brands as a legitimate option for those consumers as well. So, yeah, I am very interested in how that trend continues. But I don’t believe you are going to see that number diminish much as we head into the spring of 2021. I genuinely believe that there are many, many more consumers out there who did not get to the RV or boating lifestyle in 2020 that will look at it seriously in 2021.

Okay. Great. And I guess just kind of further thinking about that, is there may be a thought that some of these first time buyers could be completely new to the industry and wouldn’t have participated otherwise. But maybe the pandemic drove them to consider RVs and the outdoor lifestyle or is there perhaps a concern that this may have pulled forward some future demand from perhaps first time buyers that would have transpired over the next few years?

Well, I think, candidly, it’s probably sum of both. I mean there’s no doubt, I think, you are seeing interest from consumers, probably, honestly, would have never considered a recreational vehicle unless the stay-at-home orders and really the pandemic itself had not presented itself. But I do believe that there probably are some of those consumers who would have been in the market in the next year or three and decided to act on it sooner as well. So I am not sure we will ever really know the answer to those questions and we fully recognize that we will not keep 100% of the first time buyers in the lifestyle. There will be a percentage of them who for various reasons as they always do, and say, this isn’t for me. And then you will see some used equipment coming on the market in the next couple of years. But candidly we think we will be healthy as well, especially with dealer inventories that will be lighter in the next couple of years. I think some of the used inventory will be welcome to those dealers, and be healthy and keeping more affordable units in play for the whole of the industry. So, we -- again, we view this as a very net positive trend regardless of timing, regardless of retention, because we strongly believe that a majority of first time buyers will have a positive experience and will become advocates for the outdoor lifestyle in total going forward. So, again, we think it’s still a good outcome.

Hey, Mark. One more angle on that I will add to make sure that you are thinking about is, there’s a large percentage of campers who use tents historically and one of the things that I have read in some industry literature is that there is a desire to avoid public restrooms considering what’s going on. And so you have got this conversion of historical tenters, very dedicated campers, but albeit they use a tent, that are now interested in the RV lifestyle as well. So these aren’t all necessarily -- these first time buyers aren’t all necessarily new to the outdoor lifestyle or new to the camping lifestyle. There are new entrants into the RV purchases as they seek to get a different accommodation to help alleviate some of those concerns on using the public restrooms of campgrounds. So hopefully that helps you also understand from yet another angle where these first time buyers are coming from.

Great. That’s very good. Thank you very much.

And thank you. And our next question comes from Sean Collins from Citigroup. Your line is now open.

Great. Great. Hi, Mike, Bryan and Steve. Good morning. It’s nice speaking with you.

Good morning.

Hey. My question is on specialty RVs and specifically motorized electric vehicles. Electric vehicle is certainly a place that has concerned significant investor interest and perhaps imagination. Can you just talk about what you are doing in the electric vehicle segment and how you think about that opportunity please?

Yes. Thank you for the question. Good morning. We are active in the electric vehicle space and we do believe that we will be part of the motorized RV world in the future and not just for specialty vehicles, but even mainstream RVs at some point in the future. And we also recognize that the vehicles that will probably be towing more travel trailers and fifth wheels will be electric as well. And that will present some integration opportunities between the truck or the SUV and the Towable unit as well. So our teams are working on many fronts, either inside the businesses or potentially we have an advanced technology group here at the company as well that works on things at an enterprise level that maybe the businesses aren’t prioritizing here in the next couple of years. Specific to specialty vehicles, we have a relationship with an organization called Motive, which is one of the preeminent companies out there that essentially takes specialized chassis and transforms them into an electric -- all electric platform. And we have had several electric vehicles that are in real world use right now in specialty applications. One of the ones we talk about often is a unit that I believe was sold to the UCLA Medical Center. And these vehicles are in the field today. They are being used by real customers. We are trying to learn from those experiences and understand what’s happening. But we work very closely with the chassis suppliers and some of the conversion companies in the industry to stay on top of the technology trends. But also candidly do our own work ourselves from an R&D standpoint to be prepared to take advantage of that technology convergence in the future. So, I don’t want to get into too many more specifics for competitive reasons, but we are active. We do believe the world will be much more electrified in the future and our company will work very hard to be positioned to try to take advantage of that with our brands. So stay tuned.

That’s great. Thanks, Mike. That’s very interesting. I appreciate it. I just ask a quick second question on RV seasonality. We are certainly in a new and different COVID environment world. Last earnings call, I know you stated that you thought seasonality maybe pushed off and the season for camping and outdoor activities might be [Technical Difficulty]. Given that we are now in mid and late October, for what it’s worth here in the Northeast, we certainly have very positive and gentle autumn weather. I am just wondering if you are seeing this apply to your business trends also. Thanks.

Yeah. I think time will tell in terms of that question, what happened seasonality wise. I mean certainly, we are seeing elevated retail as we head into here to the fall months that is at a higher level as a percentage of the total year than what we have seen in years past. My sense is we will need to go through a full cycle or two here over the next year or two to see if any of these seasonality trends are transitional or more sticky in terms of more structural timing change. My sense is they are probably transitional over the next year or two and you will probably see retail trends be more seasonally progressive and your wholesale trends, again, given some of the limitations capacity wise in the industry will probably remain closer to traditional numbers in terms of what percentage of mix each month is of the year. So -- but as I said before, consumer interest in recreational vehicles and boats is not diminishing very much as we head into the colder months and we will have to keep track of how that interest turns into retail here in the future. But we are optimistic that the low seasonality wise here are going to be a little less low than they have in the past couple of years and that will be a really good thing especially for our dealer base.

Got you. It’s great to hear. It makes a lot of sense. I appreciate the time and the insight.

Thank you, Sean.

And thank you. And I am showing no further questions. I would now like to turn the call back over to the Steve Stuber for further remarks.

Great. Thanks, Justin. And thank you all -- thank you everyone for joining us this morning and your continued interest in Winnebago Industries. We certainly do appreciate your time. This concludes our fiscal 2020 fourth quarter and full year conference call. We hope you and your family stay safe and well.

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