Ladies and gentlemen, thank you for standing by, and welcome to the Q3, 2021 Winnebago Industries Earnings Conference Call. At this time, all participants 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 over to your speaker for today, Steve Stuber, Vice President of Finance. You may begin.

Thank you, Samantha. Good morning, everyone, and thank you for joining us today to discuss Winnebago Industries' fiscal 2021 third quarter earnings results. I'm joined on the call today by Michael Happe, President and Chief Executive Officer; and Bryan Hughes, Senior 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 third quarter results and quarterly earnings supplement were issued and posted to our website earlier this morning. Before we start, I'd like to remind you that certain statements made during today's conference call regarding Winnebago Industries and its operations may be considered forward-looking statements under securities laws. The company cautions you that forward-looking statements involve a number of risks and are inherently uncertain in a number of factors, many of which are beyond the company's control, could cause actual results to differ materially from these statements. These factors are identified in our SEC filings, which I encourage you to read. With that, I would now like to turn the call over to our President and CEO, Michael Happe. Mike?

Thank you, Steve, and good morning, everyone and thank you for joining us today. As always, we deeply appreciate your interest in Winnebago Industries, and taking the time to discuss our fiscal 2021 third-quarter results. I will begin with an overview of our performance before turning it over to Bryan Hughes, who will discuss our financial results in more detail. Then, I will offer some closing thoughts and we will conclude the call by answering your questions. Before we dive into the drivers of our performance, I would like to take time to acknowledge the significance of the comparative period just one year ago, third quarter of fiscal year 2020, and how far we as a company, as an outdoor recreation industry, and as a country have come since those difficult days. In those challenging and uncertain early weeks of the pandemic in Spring of 2020, Winnebago Industries suspended our manufacturing operations while we worked with our team and suppliers to develop the safety protocols necessary to keep our people safe. Thanks to the incredible resolve of our now 6,300-plus strong Winnebago Industries team members. We eventually reopened our plants and offices and have worked as safely as possible ever since to meet the rising record demand of a consumer, whose priorities and preferences for the outdoors have changed in ways that will be felt for generations to come. It is also remarkable that as we sit here today, our scientists, healthcare professionals, public health officials, and the broader pharmaceutical industry collaborated to bring effective and safe vaccines to market in record-breaking time helping us to slow down the spread of the virus to levels with which we can live carefully through today. Our gratitude is immense to all those involved. We believe the pandemic not only accelerated some existing…

Thanks, Mike, and good morning, everyone. Before diving into the numbers, I thought it would be helpful to reference our press release in which we employ the use of sequential comparisons to our second quarter ended in February, in addition to the typical and customary comparisons to the prior year. We provided this as a means of disclosing additional context for the strong results we are reporting for our third quarter ended May 29, 2021. As a reminder, the prior year third quarter was significantly impacted by the roughly six week's shutdown period that we imposed on our operations in response to the COVID pandemic, and our imperative to keep our employees and other stakeholders safe. As a result, comparisons against this prior year are less meaningful in providing context for this year's performance. With this in mind, our third quarter consolidated revenues, gross margins, EBITDA margins, and EPS were up significantly ahead of the prior year results. Our strong sales generated substantial operating leverage and improved yield, and also reflected the strong demand driven by interest in our products. In short, we had record results in sales and EPS, and our team deserves a lot of credit for executing a terrific third quarter. I would ask you to refer to our earnings release and form 10-Q for a full review of the results of this year's third quarter, and the year-to-date results compared to the prior year. Due to significant disruption in Q3 of last year, I will discuss our performance compared to 2019, where helpful two years ago, and also sequentially meaning compared to our second quarter results released last quarter to provide additional context. Sales increased by 81.6% as compared to two years ago, or third quarter 2019, representing strong organic growth of our brand, and also…

Thanks very much, Bryan. We continue to meet the social challenges of the day with grit, determination, compassion, and an intense focus on the safety and well-being of all members of our team. I am incredibly happy to report that COVID-related impacts to our labor force are at their lowest level since the pandemic started. As we begin to take steps into a brighter, less socially distance future, we are proud to carry out our mission of providing families and friends with access to beautiful outdoor spaces. In doing so, we will continue to support our employees by serving them in communities, where they live, work and play and optimizing our ESG performance across our organization. To that end, we announced two exciting new community initiatives in the recent third quarter. First, is our participation in the United Nations Global Compact, a corporate sustainability initiative designed to advance universal principles on human rights, labor, environment and anticorruption. We've joined over 12,000 plus global signatories, including several others in the outdoor recreation industry, in supporting United Nations Global Compact’s 10 principles, and integrating these principles into our company's strategy. Additionally, the Winnebago Industries Foundation has partnered with Habitat for Humanity, a global housing nonprofit to support their community based neighborhood revitalization efforts. The partnership includes a significant financial donation in support of habitats RV Care-A-Vanner program. These organizations missions are clearly aligned with Winnebago Industries values, and enable more communities to enjoy the outdoors safely and equitably. Winnebago Industries remains committed to advancing our core values at our operations and our communities, executing on our strategy, capitalizing on opportunities created by favorable market dynamics and innovating to sustain the unique appeal of our products with consumers. You will continue to hear more about our corporate responsibility momentum within our enterprise in…

Thank you. [Operator Instructions] Our first question comes from the line of Craig Kennison with Baird. Your line is open.

Hi, good morning. Thanks for taking my questions. Mike, you just provided some guidance with respect to 2021 calendar, retail, and shipments. Could you just repeat what you said for retail growth and for wholesale growth in 2021?

Yeah, good morning, Craig. Thanks for the question. My projections, albeit noted as conservative by many on this call and past quarters have been updated. We believe, calendar year 2021 industry retail will be likely somewhere in the low-to-mid teens given the back-half 2020 comp pressure that we've alluded to in this call and in previous quarters. Certainly, we hope that could be higher, but that's our estimate as of today. And for shipments Craig, we are aligned with the RVIA industry forecast of approximately 34% more shipments for the full 2021 calendar year, and I think we certainly all agree that that number is probably influenced as much as anything by the supply chain constraints and the way that all of the OEMs in the industry navigate through that for the rest of the calendar year.

Thanks. So, it's dangerous to do math on a live conference call. But I mean, if I do that math, I think you're looking at retail units near 575,000 units and wholesale around the same number. So, implied in your guidance, are you saying that the industry will make zero progress almost on the inventory -- the need for inventory?

Craig, without commenting on the specific numbers you referenced, I will state that the industry is currently struggling to add more inventory to the dealer's field inventories. And by the end of the calendar year, we may not have made very much progress compared to where we were at the beginning of the year. That is mostly attributable to the retail demand that we continued to see in 2021, but we also have to give ourselves credit as an industry that we were able to keep up with that retail demand. And the industry has been producing at above 50 -- shipping at above 50,000 units monthly here in some of the recent past couple months, and we expect that trend to continue in the future. So, the end result is certainly not the news that certainly our dealer community would like to hear. But I think it's a function of great retail demand sustaining even past a period where there were some skeptics that doubted that RV retail demand could sustain itself given the onward positive march of vaccines. But again, the industry is also doing a great job of shipping as much product as we can to keep up with those record retail levels.

Thank you. And then just on the balance sheet, either Mike or Bryan, what's the Board's view on a share repurchase program given where your stock is trading relative to what looks like a fairly bright outlook?

Yeah. Well, this is Bryan. Craig, good morning. I’ll first comment on management's view which is aligned with the Board's view. We'll continue to follow our capital allocation priorities, as I stated during my comments. Share repurchase is certainly one of the tools or dials really, I want to call it an on off switch, it's a dial. We'll continue to evaluate some of the other priorities we have, and in particular, the growth opportunities. And then within the context of also managing our leverage ratio, which as we’ve said during call is at 0.5 times, so we'll continue to collaborate with our board, inform them of our intentions on share repurchase when we think it makes sense to do so in light of those growth opportunities, but it's certainly one of those dials that we're keeping a close eye on.

Okay. Thank you.

Thank you. Our next question comes from the line of Scott Stember with CL King. Your line is open.

Good morning, guys, and congrats on a very, very strong quarter.

Thanks a lot, Scott.

Speaking to the sequential downtick from Q2, Q3 in gross margins, albeit it's still very, very high levels, but you talked about labor, supply chain, and things like that. Can you tell us what are you guys doing to potentially offset that whether it's through price increases, and also talk about what you're seeing on the discounting front and input costs?

So, Scott, good morning. On the discounting side, as it is relevant to shipping product into the market in both retailing product, we continue to see both consistently low levels of discounting in the field. The competition is certainly intense at retail, but given the limited field inventory, dealers are able to move the inventory that they have on their lots without historical levels of discounting, or really hardly much irrational levels of discounting present in the market. From a profitability mix standpoint, I'll make a few comments and then ask Bryan to weigh in as well. I think we're still in a period where we have to be careful to isolate any particular quarter, and say that that is the number or the trend for our future going forward. A couple of comments, one is, we've worked hard for several years here at the company to change the trajectory of profitability yield for this organization through continuous improvement, through the development of innovative products, and through the acquisition of accretive, profitable brands and companies into the portfolio. The supply chain environment particularly is so dynamic right now, that every individual quarter tends to in hindsight, have its own flavor on mix of products as dictated mostly by component constraints within the production planning process. And so you saw this, this quarter most apparently in our motorized segment, our motorized segment has almost twice the operating income yield today than it did back in 2016, yet it obviously was less profitable in Q3 than we had shown you in Q2, probably still one of the top two or three motorized quarters in terms of profitability in recent company history. But the impact in Q3 to that profitability was largely associated with lower volume and mix, almost solely related to component constraints in terms of building what we desire to build. And so to Bryan's comments in his script, we are confident that we have structurally changed the level of profitability at this company and particularly in the motorized segment, but we still have noise to manage through in future quarters so long as the supply chain inconsistencies remains something that we have to navigate.

Yeah. I’d just add a couple of comments for you, Scott. First, I'll point out that Q2 was an all-time record, and Q3 would have been an all-time record say for Q2, call it second place. I'll let Steve audit my history there, but I'm almost certain that Q2 would have been -- was in second place there. So still a very strong quarter. The inflation, we are seeing inflation as I think all industries are, the timing with which we offset that, with pricing some of the price protection that we afford our dealers, retail sold units delayed some of the pricing actions that we took to offset that inflation. But over time, it's our intention of using our playbook, I'll call it a cost savings initiatives, working with our vendors, and then pricing to make sure that we're offsetting inflation. And we still feel confident in our ability to do so. Historically, we've commented about the supply chain inconsistencies impacting our balance sheet, but not impacting our P&L. I think we saw a little bit more impact in Q3 as well from some of those supply chain inconsistencies, and the labor productivity impact that that has, and as Mike noted, particularly on the motorhome business. So little bit more P&L impact in Q3 versus what we saw in Q2, and Q1 from supply chain. So those are the additional comments I'd add there.

Alright. And then just one quick last follow-up just on the motorized segments, you guys have made tremendous progress there. If you were to strip out or assuming that the some of the supply chain issues kind of worked themselves out, just what's the next level, or the next approach for any meaningful improvements in profitability there? Or has everything mostly been attacked at this point?

Scott, this is Mike. We believe that there continues to be profitability runway in our company in almost every business and brand. And we won't get into the strategic levers that were in the midst of or attempting to pull in order to produce that profitability. But the motorized segment, while as I mentioned, structurally, has improved materially, and we will not be complacent in wrestling, and that will guaranteed to happen. The number one factor I believe in sustaining and growing profitability in this company going forward is innovation, in the ability to deliver differentiated value products to the market, that our competitors cannot quickly replicate, or even with IP replicated all potentially in the future, and have the ability through those innovative products to get pricing and value in the market that produces higher levels of margin. So that to me is the number one driver. There will continue to be extraordinary efforts at our company on continuous improvement and lean the rationalizing of our product lines. Certainly, efficiencies will be pursued at every turn. But, I truly generatively believe great companies produce margin durable good, great companies produce margin most effectively through the development of innovative great products.

Got it. That was helpful. Thank you so much.

Thank you. Our next question comes from the line of Mike Swartz with Truist Securities. Your line is open.

Hey, guys, good morning. Maybe I just wanted to start off with some of the supply chain constraints that you've talked about. Maybe just give us a sense of where you're seeing some of the biggest constraints, maybe how they trended during the quarter? Has anything gotten better here into June? I guess, the question I'm trying to decipher trying to get down to is what would your revenue have looked like during the quarter in an environment where there was kind of unconstrained or no capacity constraints, no supply chain issues?

Well, Mike, good morning. This is Mike. Relative to your first question about the condition and health of the supply chain environment, this is a question as you know, we've been discussing for some time now, as you know, after we started to recover from the pandemic shutdown. My comment at this point is that the supply chain environment is stable in terms of its inconsistencies. I would not classify it as getting better, and I would not classify it as getting worse. It is consistently inconsistent, albeit I've been very intentional in complementing our supply chain partners that the industry would not be producing north of 50,000 units on a monthly basis without the tremendous efforts of those suppliers and their teams to get us components on a daily basis. But I cannot predict for you today when the supply chain will improve back to normal, but I'm not also predicting that it is getting worse. It just continues to be a daily, weekly, monthly quarterly challenge now present in our business. And we work with suppliers across the categories where those availability constraints come up. So that's the answer, ultimately to that. Your second question again was?

What would sales have been?

Yeah, I don't think we'll comment specifically on the amount of sales that we missed, in terms of sort of relative or theoretical maximum capacity production. I can tell you, it's at a minimum eight figures. But I don't think we will comment specifically on how much capacity was left on the table, based on missing supply chain constraints. That's been the case now for probably four consecutive quarters, and will remain the case probably for the next several quarters that we will not reach our max capacity, because the supply chain just does not allow us to do so.

Mike, one additional perspective I'll throw on really on your first question, which was kind of a mix of components. I think as everyone on the call here will appreciate, we saw some episodic, I'll call them disruptions related as a freeze across the south earlier in the year, and then also the Suez Canal episode, which caused the global logistics challenges. Those episodic issues produced acute challenges, I'll say, across certain components. And I think over time, those will start to alleviate from those episodic challenges, but we'll continue to have some other broader based constraints that we will continue to fight as Mike was just referring to. So some are episodic, some are more just supply not keeping up with a broad industrial demand.

Thank you. Our next question comes from the line of Fred Wightman with Wolfe Research. Your line is open.

Hey, guys, good morning. Mike, I was wondering if you could just dig in to the retail forecasts and commentary that you made. It looks like there's a pretty big deceleration on both the one and two year basis implied for the rest of the fiscal year. Is there anything that you're seeing in the marketplace that's actually making you more cautious? Or, is there just a general conservatism baked into those forecasts? And, I guess, just at a high level, you know, can you sort of put the retail performance over the past few months into context with how you thought that would trend when we started this year?

Well, the retail performance year-to-date versus where we started our fiscal year and even this calendar year has been better than we thought. Back to the first question asked this morning about our inability to continue to improve field inventory levels. Part of that challenge has been the performance of retail at a higher level that I think most of us in the industry thought was possible. We've been stating very directly that we believe there will be some challenging comparative periods for retail in the summer and early fall months of 2021 versus 2020. And even though, consumer interest and engagement remains very strong, that the number comparisons from a percentage standpoint will be challenging to maintain in positive territory as we go through the summer and early fall months. Now that is yet to be seen. We certainly have access to information on a more timely basis than you all can get it from SSI. And that was baked in certainly to the retail forecast we gave you. We would rather be conservative with the retail forecast we gave you than pollyannaish or overly optimistic. And as I indicated in my earlier comments, I'm certainly hopeful that both retail and shipment levels can exceed the projections that we gave you today. But yes, we will be running into some comparative periods, which from an uptick standpoint will look like the industry is decelerating. I will tell you if you talk to 100 dealers, 98 to 99 of those dealers will not indicate to you today that retail interest and levels are slowing in any meaningful or material way. Certainly, from a historical basis, but we just saw unprecedented record foot traffic in retail last summer, and it will be difficult to comp positively against those. But we are as I said, extremely long and bullish on the impacts of elevated retail for the last 15, 16-months and forward for future years as well. There are significant upgrades by existing and first time buyers. There are record levels of camping reservations and rentals and peer to peer sharing activity going on. Our lead generation tools and websites continue to be very active with people looking for products. And we anticipate that we will have a robust retail environment on the RV and marine markets well into 2022.

Perfect. And just on the motorized supply chain, past few quarters, you've specifically called out Newmar as a big headache. Can you sort of touch on where the supply chain is for Newmar specifically, and where the sort of path forward for that?

Yeah. The Newmar team is working extremely diligently with the component availability, they have to get product out the door. I would suggest the Q3 was slightly improved for Newmar over Q2, from an availability and a product shipment flow standpoint. We probably saw more pressure on Winnebago branded motorhome product shipments in Q3 than we had previously in prior quarters, due to supply chain constraints there. So, relative to Newmar, we continue to work through some of the challenges there. They do impact that business a little bit more inordinately than some of the other businesses, but that situation is improving. We put some specific resources and foot soldiers on the ground there to attack that issue aggressively. But, we've also seen a rise in the inconsistency of availability for some critical components on the Winnebago motorhome side as well. Again, none of this we believe is structural. We believe it continues to just be a part of the challenge of getting raw material at the right time, dealing with shipments both inside the country, but on the seas with some of the container and shipping issues. And so, we will continue to battle and do everything possible to continue to hold our shipment and retail share in that segment.

Great. Thanks, guys.

Thank you. Our next question comes from the line of Bret Jordan with Jefferies. Your line is open.

Good morning, guys. On the retail commentary, are you seeing much I guess change from the long-term average as far as the buyer mix, I think seemed last year skewed a bit to new buyers to the RV space? Are we seeing more of a trade up year this year in what you see?

Anecdotally, Bret, I would suggest that this year's mix is a little lighter on first time buyers in family buyers than it was last year. And we are seeing a little bit higher mix of existing customer upgrades and maybe a broader mix of more diverse users coming into the market as well. The very positive news is that the most significant activity we are seeing on retail is relative to the millennial segment and the Gen X segment. And so that bodes well for a generational turn that we need to make anyway, as an industry in transitioning the buying power for RVs from the baby boomers, ultimately to the millennials, and someday to Gen X. And we are beginning to see that transition. So yes, as I indicated with some of my camping comments earlier, the number of new families engaging in the outdoors is probably a little less this year than it was last year. Interest is very strong. And first time buyer percentage historically is still very high. But we probably have a little bit more balanced mix this year with upgrades. Again, the challenge becomes, is the product that that person is looking for either a new buyer or an existing upgrade buyer, is that product available at the time and price that they're looking for. And that continues to probably be a constraint to what retail could be if we had a full pipeline in the field.

Okay. And then a quick question on marine, we didn't talk much about Chris-Craft. But sort of how does that supply chain challenge stack up versus RV? And, I guess you just say recreational marine interest is equal, greater or less than the RV buyer incentive.

I would use the word similar from a macro perspective in terms of consumer interest on marine versus RV. As you're well aware, we play in a certain high segment sector with the Chris-Craft brand. I will tell you that the challenges are different in terms of categories, i.e. outboard engines has probably been one of the larger constraints that the marine industry has been battling here in recent months. And, all OEMs are working with suppliers like Mercury and Yamaha to garner as many engines as they possibly can. But there are similar constraints on materials in different kinds of components as you're seeing on the RV side. I'm sure it varies by type of boat and by OEM. Our Chris-Craft backlog is very healthy. Our domestic retail is as high as it's ever been a Chris-Craft. That business has been impacted negatively due to the retaliatory tariffs for geographies, like Mexico, Canada and Europe. And we are hopeful that at some point the current administration will work with those countries and regions to try to reduce or eliminate the retaliatory tariffs that have negatively impacted the marine export market for U.S.-based manufacturers. But as I indicated in my closing comments on capital investment, we are putting capital into the Chris-Craft business for a capacity increase. And we should see that benefit within the next probably 12 to 15-months within that business. So, we are that optimistic about that brands future that we are adding more space down in Sarasota for that brand.

Right. Thank you.

Thank you. Our next question comes from the line of David Whiston with Morningstar. Your line is open.

Thanks. Good morning. First, on the dealer front, I've seen a lot of headlines recently about camping world making a lot of acquisitions and growing. I'm just curious how -- what kind of impact is for Winnebago? Is that really favorable or not an issue? Or, is there a point where a dealer could get too big?

Good morning, David. This is Mike. We're seeing an increase in dealer consolidation overall, not just with a camping world's significant activity in recent months, including an announcement in the last 24 hours on their expansion in Ohio, but we are seeing other larger dealer groups expanding pretty aggressively across the country. I guess, the net positive or negative of dealer consolidation for an OEM like us is and it depends answer, it really depends on who they acquire, the health of the business they acquire and the general health of the relationship between ourselves and that dealer group. We tend to take the philosophy that our brands are unique, they're highly valued premium brands that people look to step up into and stay with. And that if we continue to serve all of the dealers with great product, great service, good support, that no matter which dealer body grows, or which dealer owns a particular location, that our brands are in good standing, in most cases to be considered by all of the dealer groups that are growing. So, I guess, we view consolidation more as a reality and not a negative. And we've seen our market share across our brands continue to increase in an upward direction, despite significant consolidation activity over the last five years. So our teams are certainly not viewing it as a headwind to their growth in the future.

Okay. Thank you. And on mix, particularly specific to Newmar with the stock market having done so well from the past year is that – other favorable macro variables, in some cases. Is that causing maybe some customers who are buying Newmar who perhaps pre-pandemic would not have bought an RV at all, they did -- they would have bought either Winnebago brand or perhaps from Forest River or Thor.

That's an interesting question. And I'm not sure we have anything factual to substantiate a great answer to that question other than Newmar’s retail activity, despite very low field inventory, because in part of some of the production constraints we've talked to in this call, their retail activity has been strong on a longer range basis, three, six months look. And so, we are not seeing any decline in interest in the Newmar brand, certainly. And it's quite possible because of the wealth effect or the relative health of the equity market that Newmar stands to be favored in terms of people considering a second home in the form of an RV. But I can't tell you specifically, how many consumers that have bought a Newmar in the last six to nine months, or have a retail deposit for one that they're waiting for, have come in solely based on the health of their stock portfolio. But we certainly have long stated that the wealth effect and the health of the equity market overall, we believe is a tailwind in a positive sense for a consumer discretionary segment like ours, especially where the average price in the case of Newmar is well into the $200,000 $300,000 plus range for most of their coaches.

Okay. And on the tax, likely tax changes coming in the U.S. under the Biden Administration. Can you give any preliminary thoughts on what the sensitivity in your tax rate would be for say every 100 bps increase in the federal statutory rate?

Yeah. I think, David, I would just translate it into any kind of legislation that was passed at the federal level would translate into a one for one increase in the tax rate. We're at 21% today. And the overall effective rate is in that 23% to 24% range. I wouldn't see it being much different than a one for one, they got to 25%, for example, that would represent a four point increase.

Okay. That's really helpful. Appreciate it. Thank you.

Thank you. Our next question comes from the line of Tristan Thomas-Martin with BMO Capital Markets. Your line is open.

Good morning. Two questions. RV industry has seen a lot of supplier component recalls in June, so what are you doing to kind of deal with that? And then just an overall question on the build quality you're seeing from yourself and just maybe some of your competitors? And then one more question, how do you protect market share moving forward? Towables, I think is seeing a lot more entrance and then Class B is obviously a very hot space. So what's your plan there?

Good morning, Tristan. This is Mike, I'll start with product quality first. We feel confident that our operational processes remain disciplined enough, even with our process work because of supply chain availability challenges at the times that we are delivering, and continue to deliver high quality components to our dealers. We are very committed to not shipping our dealers' incomplete product and asking them to finish assembly on site, that's a philosophy that we are not a fan of. We will ship them complete high quality units as soon as we are able to. And even though we are completing some of those units offline with processes that are abnormal, we still believe that the general quality of our products is in very good shape. And even though there's a tail on this topic, in terms of warranty claims, we are not seeing any significant signs from a warranty standpoint, that our overall product quality has decreased in any significant way across our portfolio in the last year. In terms of monitoring supplier quality, we have business processes, in both in terms of working with the suppliers, so that their operations are as strongest and effective as possible. And we also have some processes inside to make sure that the components we do get from our suppliers are generally built to spec and performing functionally to the degree that we need. As you are well aware, there are 1000s of components in the products that we make. And unfortunately, it is not uncommon at times for a quality issue to slip into our products based on a component that we buy externally. And we work expeditiously and diligently with our engineering and manufacturing and product safety teams to make sure that when we do have an issue that we're addressing…

Got it. Thank you.

Thank you. Our next question comes from the line of Sean Collins with Citigroup. Your line is open.

Great. Hi, Mike, Bryan and Steve. Good morning. My question is on your backlog. Did this quarter's backlog number surprise you given it's staggering in size? I think it came in at $3.7 billion versus clearly sub $1 billion range in 2019 and before? And can you talk about how firm the backlog commitment is and impossibly describe the arrangement between you in the dealer community? Thanks.

Yeah. Thanks, Sean. The first thing we should note is that backlogs are most likely defined or measured differently by some of the OEMs that you engage. There's probably no common definition of what a backlog is. We try to take a pretty strict conservative view that it is a committed confirmed order from the dealer that we put into our production schedule, and essentially base the ordering of components and supply chain elements to that schedule. We tend to like to see the backlog be mostly focused on the next six months, albeit obviously, mathematically right now we have a backlog that is arguably almost a year's worth of demand stated from our dealers. We have a process where we ask the sales members of each of our teams to work with our dealers to cleanse the backlog, to walk through the orders that they have given us and to identify which of those orders is no longer needed. And if they're no longer needed, or the dealer has less commitment to that, then we want to remove those orders from the backlog, and that is a process that we try to do regularly in terms of cleansing the backlog. As we've talked before, there's also a percentage of the backlog that has a retail sold element to it, where the dealer has taken a deposit on that. So, were we surprised with the backlog increasing? The answer to that is no, because the retail environment has been very robust. Our dealers have not seen as much inventory come in as they would have liked to. And their confidence in the future remains strong. Is there the risk that there is some percentage of that backlog that as time evolves and market conditions evolve, could ultimately not be delivered?…

Great. That sounds very helpful. Thank you, Mike. I appreciate it.

Have a good one, Sean.

Thank you. Our next question comes from the line of James Hardiman with Wedbush Securities. Your line is open.

Good morning. Thanks for fitting me in here. So, just a quick clarification and I hate to harp on the retail question and the outlook. I think we all get that the math makes it difficult to comp positively versus the record levels from last summer. We can all see the math, what we can't see is sort of what's going on right now. And Mike, I think you've made a comment that that has yet to be seen. So I guess, I don't know if you want to answer this. But let me just ask the question directly. Where do you think June is trending versus a year ago for you or the industry from a retail perspective?

I appreciate the question. We won't comment on retail, as it's happening sort of live and in person. But I can tell you that the latest retail from April SSI had an extremely high comp number based on the comp versus the prior period. We expect that number to gradually decrease beginning with May SSI retail into June and July and August, just naturally based on the strong retail that we saw a year ago. And remember, a year ago we had more field inventory in the field to sell off of during the summer, certainly less than we would have liked because of some of the manufacturing shutdowns. And that field inventory level is potentially similar or even worse in some locations than it was a year ago. So that's going to have a negative impact on retail. But, again, historically, that 575,000 unit retail estimate that Craig Kennison talked about in his first question during the session, whatever that number is, it's very healthy historically. And we believe that retail conditions will continue to be robust into calendar year 2022. The challenge we recognize is that the year-over-year optics will become cloudy here at some point, but that does not mean that consumers are not engaged in shopping. It's just going -- we're just in a couple year crazy period that is difficult at times to describe with any historical sanity. But, we would not be investing significant capital into capacity expansion, if we did not believe retail and wholesale shipments weren’t sustainable for the long-term.

Got it. And then, you made a comment in the prepared remarks about lead times and price increases, and whether that they may or may not be affecting consumer demand. I guess, has there been an uptick in consumers walking away based on those leads? Obviously, some people are going to walk away and that's been the case, I think all along. But has there been an uptick? And how do you generally gauge the elasticity of demand and consumers’ willingness to absorb pricing here?

The elasticity of the demand is measured primarily by listening to our dealers very closely, and hand in hand understanding what they're seeing on a daily business in their dealerships. And yes, we have heard some cases as pricing increases have become more frequent and at a higher level here in the last six months, that some consumers have stated that, the pricing is getting a little rich for them. That is a significantly low percentage of the retail interest, or even the retail sold deposits. We just celebrated a dealer relationship with our company last Friday. I had the privilege and pleasure of sitting down with a Hall of Fame dealer principal over lunch for more than an hour. And, he said, listen, for every one customer that says the price has become a little too rich or the time is too long, he says I have another 50 customers that are standing right behind that gentleman or lady to take that order if they decline it. So, the net positive environment is still very healthy. But we are watching carefully the potential impact of pricing due to cost inflation and the moves we’re taking. So that if we do start to see a step down in consumer interest because of pricing, that we manage that effectively. We tend to try to cost to market first, but cognizant -- our price to market, but cognizant also of the costs, obviously, that we're seeing in our business to maintain appropriate margins. We're also seeing a dealer environment as I described earlier, that is what I would still call full margin environment. You are seeing some dealers at times getting close to MSRP for retail units fill. And I think the other indicator of when pricing will potentially turn into a consumer headline will when we start to see discounting come back into the retail arena, on an individual dealer basis or a dealer versus dealer basis. And we're just not seeing a tremendous amount of discounting quite yet.

That’s really helpful color. Thanks.

Thank you. I'm showing no further questions in the queue. I would now like to turn the call back over to Mr. Steve Stuber for closing remarks.

Great. Thanks Samantha. As Mike mentioned, we appreciate your time and interest in Winnebago Industries. Thank you for joining us today. We hope everyone is enjoying their summer in the outdoors, of course. Have a great day.

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