Winnebago Industries, Inc. (WGO) Q3 2022 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Third Quarter Fiscal 2022 Winnebago Industries Financial Results 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 Steve Stuber, Vice President of Investor Relations. Please go ahead.

Good morning, everyone. And thank you for joining us today to discuss fiscal 2022 third quarter earnings results. I am 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. This news release with our third quarter results was issued and posted to our website along with the earnings supplement 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. We appreciate the time you are investing today to hear about our record breaking third quarter results. I will start the call by summarizing our performance during the quarter. Then pass it to Bryan Hughes to cover our financial results in more detail. I will wrap up with a few closing remarks before we open the line for your questions. We have spent the last six years at Winnebago Industries transforming our enterprise portfolio. Today we have five premium outdoor brands and seven different businesses operating in two large outdoor recreation industries and in multiple market segments, which we believe have long-term increasing secular growth potential. As a more diversified organization, we are driving higher levels of operational excellence internally, which is leading to sustained stronger gross margins and we continue to deliver tremendous value externally to end customer centered around our golden threads of quality, innovation and service. Our strategic financial and cultural foundation at Winnebago Industries has continued to elevate and improve each of the last six years. We are committed to running a high quality, disciplined and resilient organization, regardless of the market conditions, which present themselves. Throughout this specific fiscal year 2022, our team at Winnebago Industries has executed extremely well, delivering consistently strong operating results and gaining market share in several key large segments, including Towable RVs and pontoon boats. Our team is focused on doing well by our customers and doing good for our communities. I am incredibly proud and grateful of all our team members. We sustained our fiscal year 2022 momentum during the third quarter, driving record results by taking full advantage of fulfilling on our RV order backlog and continued strong consumer demand in our growing Marine segment. We delivered record third quarter net revenues of $1.5 billion, which represents growth of 52% over last year and a growth rate of 41% on an organic basis. Our RV unit sales were up approximately 7% compared to last year, which is particularly notable since the third quarter of fiscal 2021 was during the height of the pandemic-driven demand spike. Our retail results also continue to outpace the industry, gaining share across both of our RV segments and pontoon boats and growing our overall pipeline of loyal customers. More specifically, on a fiscal year-to-date basis, our RV retail market share is 13.2% or plus 70 basis points versus last year. In the Marine segment, Barletta recorded another strong quarter, growing its retail market share in pontoon boats to 6.6%, which is 1.6 percentage points ahead of last year on a trailing three-month basis through April 2022. We are incredibly pleased with the performance and integration of the Barletta business since the close nine months ago. It has exceeded expectations. This overall affinity for our brands also enabled us to continue taking well considered pricing actions to offset inflation during the quarter, which was a significant contributor to our record topline performance. Our business unit teams remain focused on partnering with our key suppliers to creatively manage continued cost pressure, and we frequently use the full scale and collaboration of our enterprise via our strategic sourcing function to further manage supply chain constraints. Smart pricing actions may remain an important lever in the future for us to offset higher materials and component costs, and manage our margins going forward. But we are equally focused on managing input costs and discretionary SG&A. While we remain confident in the resiliency of our brands, we are being extremely mindful of any impact those actions have on our ability to continue gaining market share. In terms of profitability in our fiscal third quarter, we also saw year-over-year improvements across our segments. This came in the face of previously mentioned supply chain-related cost pressures and disruptions we are still experiencing in various degrees across our portfolio, which I will talk about more in a moment. The broad-based improvements are entirely due to the incredible execution by the entire Winnebago Industries team. Their execution kept our operations running efficiently without sacrificing quality in service. As always, operational excellence will continue to be a primary focus of ours moving forward. As I have discussed in previous quarters, in this constantly evolving macro environment, the supply chains for each of our segments are experiencing varying degrees of disruption, and in turn impacting dealer inventory levels in diverse ways. Inventories in our Towables RV segment have returned to normalized levels, as parts supply stabilized and our second quarter and third quarter production output meaningfully addressed our backlogs, while Motorhome RV and Marine field inventories continue to remain below our targeted levels. The supply chain for our Marine and Motorized segments are most acutely impacted by disruptions currently, and dealer inventories are the most constrained in these businesses. While we will absolutely demonstrate production discipline in our Towables RV businesses and look to match output with dealer turn targets and retail demand, both of our Motorized RV businesses and our two Marine businesses have further runway to carefully drive increased shipment revenue in the short-term. Responsibly producing and maintaining appropriate field inventory levels remains a high priority for us and for the health of our channel partners and we are collaborating closely with our dealer partners to ensure they have the mix that they desire. I have confidence that the world-class Winnebago Industries team will rise to the challenge as they always have. Overall, we are incredibly proud of our performance this quarter, we delivered responsibly for our dealer partners and end consumers, our record results and share gains show that our business strategy is still relevant and working, while our team continues to navigate in the face of a continuously difficult secular and macro-economic environment. With that, I will turn the call over to our Chief Financial Officer, Bryan Hughes, to review our fiscal 2022 third quarter financials in more detail. Bryan?

Thanks, Mike, and good morning, everyone. Third quarter revenues were $1,458 million, reflecting an increase of 52%, compared to $960.7 million for the fiscal 2021 third quarter. Excluding Barletta, our organic growth for third quarter was 41%. As Mike mentioned, even compared to a very strong 2021 period, Winnebago delivered strong revenue growth in all three segments driven by a combination of pricing actions and increase in unit shipments. We also delivered another period of very strong profitability in the quarter driven by higher revenues and pricing actions that serve to offset an increase in material and component costs. Gross profit was $273 million, up 61%, compared to $169.6 million for the fiscal 2021 period. Gross profit margin of 18.7%, was 100 basis points stronger than last year, driven by operating leverage, price increases and favorable segment mix, partially offset by higher material and component costs. Operating income was $176.7 million for the quarter, increasing 73%, compared to $102.4 million for the third quarter of last year. Note that our third quarter operating income includes $0.7 million in acquisition-related costs and $4.6 million of incremental amortization of intangible assets related to the Barletta acquisition. Fiscal 2022 third quarter net income was $117.2 million, an increase of 64%, compared to $71.3 million in the prior year quarter. Note that fiscal 2022 third quarter net income includes an $11.8 million of contingent consideration fair value adjustment related to the earn-out associated with the Barletta acquisition, which is included in the non-operating loss line. As a reminder, we are removing this adjustment from the calculation of adjusted EPS. Recall also that we included multiple earn-out periods structured in such a manner that the multiple on this acquisition is further reduced as the earn-outs escalate, as such, recognizing an additional $11.8 million of contingent consideration fair value adjustment this quarter is a result of Barletta’s continued strong performance, a maximum of $50 million in earn-outs can be earned for performance achieved in calendar 2022 and 2023, and are tied to the business achieving certain gross profit objectives in each year and in the aggregate. Reported earnings per diluted share was $3.57, compared to reported earnings per diluted share of $2.05 in the same period last year. Adjusted earnings per diluted share was $4.13, which represents an increase of 84%, compared to adjusted earnings per diluted share of $2.24 in the same period last year. I will now turn to our segment performance, starting with our Towable segment. Revenues for the Towable segment were $805.6 million for the third quarter, up 45% from the prior year, primarily driven by pricing increases across the segment in addition to solid unit growth related to producing and shipping units to fulfill a robust dealer order backlog. Segment adjusted EBITDA was $117.8 million, up 47% from the prior year period. Adjusted EBITDA margin of 14.6% increased 20 basis points over the prior year, driven by operating leverage and pricing, partially offset by cost input inflation. Backlog decreased as expected to $1.3 billion, down 14% from the prior year and down 30% sequentially, as Winnebago Industries successfully replenished dealer inventories in the segment. It is our practice to cleanse our dealer backlog on a monthly basis and accordingly we also continue to emphasize our practice of building units to fulfill dealer orders. Next let’s turn to our Motorhome segment. In the third quarter, revenues for the Motorhome segment were $516.3 million, up 34% from the prior year, driven by continued strong unit sales and pricing increases across the segment. Segment adjusted EBITDA was $64.4 million, representing an increase of 72% from the prior year. Adjusted EBITDA margin was a strong 12.5%, up 280 basis points year-over-year, driven by pricing and operating leverage, partially offset by higher material and component costs. Our teams continue to do a great job, managing ongoing supply chain inconsistencies in the delivery of chassis and other components, as well as executing pricing actions that continue to offset inflationary impacts. Finally, let’s turn to our Marine segment. In the third quarter, revenues for the Marine segment were $126.5 million. Both Barletta and Chris-Craft continue to perform well. In particular, the Barletta brand continued to outperform our expectations and deliver growth and margins accretive to the Winnebago Industries portfolio. Marine segment adjusted EBITDA of $19.8 million was $18.2 million higher than the same period last year and adjusted EBITDA margin was 15.7%, 620 basis points higher than last year, reflecting the addition of the Barletta of business and improvements in the Chris-Craft business. Turning now to the balance sheet, we continue to maintain a healthy liquidity position of approximately $431 million, including an untapped ABL of $192.5 million. Our net leverage ratio is currently at 0.6 times. From a capital allocation perspective, we continue to prioritize investments in our business to fuel organic growth. On a fiscal year-to-date basis, our CapEx spending is $63 million, which is materially higher than last year’s year-to-date CapEx of $24 million. We continue to carry elevated inventory as a means of mitigating some of the supply inconsistencies that we encounter on a daily basis. We continue to view this as a prudent action to support our operations and believe that this cash investment will liquidate in the longer term and be available for other capital allocation priorities as the eventual drawdown in working capital occurs. As evidenced by our purchase of the Barletta business less than a year ago, we will also remain active in growing our portfolio strategically and we will continuously evaluate acquisition opportunities that we believe to be accretive and generate returns above our cost of capital. During the quarter, share buybacks totaled a record $70 million, and on a year-to-date basis, we have bought back $130 million of our shares, leaving $80 million remaining of the $200 million share repurchase authorization our Board approved in October 2021. Additionally, our dividend this year is running at a pace that is 50% higher than it was last year. Combining share buybacks with dividends, we have returned a robust $187 million to shareholders on a trailing 12-month basis through the third quarter of fiscal 2022. This is approximately 7.3 times the prior year’s fiscal third quarter trailing 12-month period. That concludes my review of our quarterly financials, and with that, I will now turn the call back to Mike to provide some closing comments. Mike, back to you.

Thanks very much, Bryan. With that review of the strongest quarterly results on our company’s history complete, we will turn to some specific thoughts on RV demand for the remainder of calendar year 2022. Recently the RV Industry Association published their view of wholesale demand for calendar 2022, with the midpoint being 550,000 units or negative 8% versus calendar 2021 shipments, with a range of 538,000 shipments on the low end and 562,000 on the high end. Given current retail trends in the unstable macro-economic environment, we subscribe to the lower end of the shipment range for approximately 530,000 units, which is negative 12% versus calendar 2021. This view reflects normalized Towable dealer inventory levels and a Motorized segment that is still witnessing supply chain constraints and dealer inventory levels that have not been fully normalized. As I mentioned earlier, we will continue to work closely with our suppliers to mitigate issues as much as possible and our dealer partners to keep their inventories at healthy levels. Turning to retail demand, I am confident that the appetite for our expanded portfolio of premier outdoor lifestyle brands will continue to outpace the market. Looking at the RV industry at a macro level, we continue to be optimistic about the long-term health of RV demand as record levels of U.S. households pursue outdoor activities. In the short-term, we are coming off a record level of demand in calendar 2021 and macroeconomic headwinds persist including fluctuations in interest rates, gas prices, inflation and declining consumer sentiment. With those considerations and a wholesale forecast of 530,000 units in 2022, we believe that retail sales for calendar 2022 will likely fall in the 475,000 unit range or negative 17% versus calendar 2021. We continue to follow those trends closely to ensure our production and shipments into the channel are aligned with retail sales. And to remind our audience this morning, five of our seven businesses at Winnebago Industries, our two Marine brands, our two Motorized brands and our Specialty Vehicles business continue to have real market growth potential ahead in the rest of calendar 2022 and into 2023. The modern complexion of our company provides increased stability and opportunity than most perceived. The unique strength of our brand’s position Winnebago Industries well to manage component and material cost inflation, and manage subsequent margin performance across our segments. We fully expect Winnebago Industries’ portfolio to continue gaining consolidated share behind our steadfast commitments to quality, innovation, and the customer experience. I am confident that our employees relentless hard work and dedication will allow us to further translate these gains into profitable market share, despite supply chain constraints and inflation, which we are constantly monitoring and taking actions to offset. We are also focused on being the innovation leader in the markets we compete in. Many of you may have seen the latest news that our concept all-electric Class B van completed a nearly 1300 mile road trip from Washington, D.C., to our headquarters in Eden Prairie, Minnesota, just a week ago. While we are moving toward a prototype stage in this products development pipeline, this recent accomplishment provided real world validation that future consumers will absolutely be able to choose alternative power solutions to experience the outdoors in someday. Each of our businesses is focused on driving valued product differentiation in the future to enhance the appeal of our brands. In summary this morning, these are uncertain times as macroeconomic trends weigh on consumers. Nothing we can say today will deliver any certainty relative to the possible risk of a formal economic recession. But we are prepared to manage our company through any turbulent times in the future just as we proved agility in managing the extremes of the recent pandemic. Our production schedules and spending patterns are being scrutinized daily by our teams to align with what we believe is in the best long-term interests of our company and our industries. Regardless of where the economy goes, we will remain relentlessly focused on the sound execution of our winning strategy to build on our strong momentum and outpace the markets in which we participate. As important, we believe we have built a more profitable, more resilient, high quality premium portfolio over the years, such that profit degradation or any risk of will be manageable and remain well above our historical profit margin levels. Finally, we continue to believe in the long-term health of our Consumer segments as more people continue to pursue outdoor lifestyle experiences. We look forward to touching on these topics and many others at our 2022 Investor Day being planned for later this fall. That concludes our prepared remarks this morning and I will now turn it back over to the operator for the Q&A session. Thank you all for your time.

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

Good morning. Hey. Thanks for taking my questions and congratulations on the quarter. I am trying to put into context for myself and others listening, what your stock price, I guess, is saying about the environment today, I mean, it’s basically trading at 12 times a quarter’s results here, just a spectacular quarter. And clearly, it’s really the outlook, and so you were super helpful in terms of providing calendar 2022 expectations, happens to line up with our expectations as well. But as you look into next year, I know you don’t have a crystal ball, you can’t predict any better than the rest of us I suppose but in terms of preparation, do you have a sense for your earnings power and a scenario where, let’s say, shipments dropped to 400,000 units? Just trying to understand how you are preparing for a downturn and how your business may be different today than, let’s say, 2019 and the last time we were pre-pandemic?

Yeah. Good morning, Craig. This is Mike. Thanks for your questions. I will probably address maybe how our company is different than where we were maybe in past difficult economic times and I will probably hand the earnings potential question over to Bryan Hughes to answer. Tried to address this certainly in the script this morning, but over the last six years, we have really moved from a company that had one primary business that being Winnebago branded Motorized RVs to a company that really is much more diversified and balanced, that participates in the full recreational vehicle industry of products as well now as the Marine industry in a couple of different segments. And we really run the business on a day-to-day level with seven different business units at the company, and as I mentioned in my comments, five of those business units we believe still continue to have near-term growth potential in terms of both retail being decent especially on the Marine side currently, but also our ability to grow wholesale shipments probably even faster than the retail velocity on those businesses. And we won’t have been able to do that four, five, six, seven years ago. With now five brands and seven businesses, and being able to attack different market segments and different industries. And so that new complexion gives us the ability to arguably manage some of the headwinds by executing businesses that still have a few tailwinds. From a discipline standpoint, we certainly are not sticking our head in the sand and ignoring any of the macroeconomic geopolitical supply chain, inflation, interest rate concerns that exist in the marketplace. Rather, I think, our teams are doubling down on the sort of playbook that we pull off the shelf to make sure that we manage expenses, that we scrutinize dealer demand, that we monitor what’s happening with the consumer and then we use all of those inputs to subsequently make good business decisions on a daily basis in terms of what we produce and where we spend our dollars on to drive value going forward. So we are pleased with the leadership team we have and the leadership teams around the businesses and in our enterprise functions and we believe the maturity of those teams, the resiliency, the experience of those teams helps us have honest transparent good conversation. So Bryan, can you speak a little bit to the earnings resiliency as we face potentially even deeper economic headwinds in the future.

Yeah. And we have talked about this somewhat in the past as well. We have got a strong focus on maintaining a variable cost structure and have proven that out to ourselves and continue to make decisions on an incremental basis that help secure that variable cost structure. So we continue to maintain that our cost structure is 85% variable, 15% fixed across our P&L, which in a downturn certainly helps to insulate us from the deleverage that would otherwise occur will be more fixed in our structure. So that continues to be the case Craig and I think that that is probably the best guidance that we could give in terms of how you would think through, what a decline in the environment or in the market, rather would mean to us from an earnings per share perspective.

And thank you. Just to follow up on the Motorhome piece that EBIT down margin has improved a lot on a structural basis since, let’s say, pre-pandemic. How much of that is structural, how much of that is just a really good environment?

Well, I would like to think, Craig, that most of the profitability generation or improvement on the Motorized business is a result of the hard work of our teams and the good decisions they are making. We certainly recognize that we have got some momentum of post early COVID times with the record interest in the outdoors and consumers looking to get into new RVs. But our profitability improvement initiatives were well underway before them. We have rationalized our Winnebago branded product line. We have closed facilities that we are producing unprofitable product. We have walked away from unprofitable business in the market. We have invested in more profitable categories of products and introduced some significant product differentiation and innovation. We have improved our operational capabilities in our existing plans. We have improved our purchasing power and agility with our supply base and then when we bought Newmar in late 2019, we improved the profitability of our Class A business by making that acquisition. And so in addition to certainly some volume leverage that we were able to positively get in late 2020 and most of 2021, I would say, a high majority of the profit improvement on the Motorized business was generated by internal hard work. So that’s why we are probably confident that a good deal of that will remain sustainable into the future should the Motorized category have its own sustained period of challenge in the retail market.

Great. Okay. Thank you.

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

Good morning. Thank you. I have two questions and Mike I am going to pick on two words you mentioned in your remarks and maybe you can expand upon them. The first is about sustained gross margin performance, you answered a lot of the how just before. But I am wondering if you could share with us some long-term targets for the sustainable gross margins -- gross sustainable operating margins too for that matter?

Yeah, Gerrick. Good morning. Thanks for being with us. We are going to have an Investor Day later this fall in 2022, and Steve Stuber, on our Investor Relations side will communicate those dates to the relevant stakeholders for that event. And I think we will be more specific about long-range goals and targets at that time as it pertains to, let’s say, the period through 2025. So we understand that there will be some factors that could challenge profitability at the levels that we just announced for third quarter fiscal 2022 in the near-term. Our ability to pass pricing on to the market as an example because of inflation continues to be more challenged obviously with consumer demand softening significantly today versus a year ago. And inflation is not stopping. It is decelerating on our business, but it is still meaningful in terms of its quarterly rhythm of inflation increasing every quarter. And so we recognized in the near-term that our profitability will be pressured a bit, but we are confident that the profitability that we can sustain here, the rest of our fiscal 2022 and into fiscal 2023 will likely be at levels that are meaningfully higher than you saw back in the 2018 and 2019 pre-COVID days. We have also added some businesses, not the least of which here recently is Barletta Boats, which is growing significantly, executing very well in the market, but is also generating accretive profitability for our portfolio. So as businesses like that grow, while some of our other businesses may be go on pause from a growth standpoint or slow down is probably maybe the right term, we think the mix will also be conducive as well. So I know I am not giving you a specific number Gerrick on this call. We will probably be a little bit more bold in that fashion later this fall as we get into early fiscal 2023, but we are confident that we can see post-COVID profitability even during difficult economic times be stronger than it was pre-COVID period.

Okay. Great. And my other question was, you talked about scrutinizing dealer demand, I am wondering what that securitization has been telling you in terms of maybe shifts, cancellations, trade-ins, new versus prior customer, stuff like that?

Yeah. We do scrutinize retail, dealer demand, production schedules and even obviously, as I said, our spending on a very regular basis. As it pertains to dealer demand, you will probably have noticed in this quarter’s results that our unit backlog on the RV side has decreased from the previous period. And we believe that that is a healthy indicator of demand coming in line with the reality of the retail marketplace and our ability especially in Towables to work through any supply chain issues and deliver product that the dealers did want to the market. So we cleanse our RV backlogs monthly. That’s what we ask our businesses to do and they go through a process in terms of new orders, closed orders and what we call adjustments or cancellations and that produces the backlog that you saw at the end of quarter three. So we work closely with the dealers to try to understand the desired turn levels that they would like to run their business at based on the retail projected for it. The one comment I do want to offer here at this time is the freshness of field inventory is significant in the market. Now that may not mean a ton to the retail consumer if they are pressured by inflation at the gas pump or the grocery store, but it is significant to understand for those who are wondering about pressures that the OEMs will face going forward. Almost 90% of the inventory in our RV businesses in the field is less than six months old, a 0.5% of the inventory, 0.5% is more than one year old. So we feel good that the units that are in the marketplace are relevant, they are fresh, they are what the dealers want in and we will certainly work with them in the future to try to make sure that those are obviously retailed as the market allows. But we do not have a significant aging inventory situation staring us in the face on June 22nd. We will do everything we can to prevent that from being the case in the next probably four to six quarters. So, Gerrick, I hope that answers a little bit of your question there. But on the towable side, you will see production be very similar to the demand that the dealer’s desire. And on our other businesses, the two Marine businesses, our two Motorized business and our Specialty Vehicles business, we have the ability to continue producing at a level wholesale wise that is probably a little bit higher than the retail environment.

Great. Thank you, Mike. Appreciate it.

Thank you. Our next question comes from the line of Scott Stember with MKM Partners. Your line is now open.

Great. Thanks guys for taking my questions as well.

Good morning, Scott.

Mike, could you maybe talk about a snapshot of what you are seeing at retail right now, just in general what you are hearing from consumers and how -- and maybe by type whether it’s grand design versus the legacy Motorized and Newmar and some of the other things?

Yeah. Thanks, Scott, for the question and for being with us. In anticipation of this call, I have in front of me the retail reports for the end of April, at the end of May and for the first couple of weeks of June, and I will share with you at a high-level sort of the trends we are seeing across the businesses. I will start with Marine. We are seeing Marine retail actually strengthen for our businesses from the end of April, through the end of May and through the first couple of weeks of June. The percentage comps and the units from a Marine standpoint continue to move in a positive direction for our two businesses Barletta and Chris-Craft from a consolidated standpoint. From an RV standpoint, we actually are seeing consolidated retail comps, so the year-over-year percentage stayed relatively the same between each of those three periods. So from the end of April, to the end of May, to the first week of June, we are not seeing a significant change in the comp percent in year-over-year, which means that the retail market on our brands, from RV brands from a consolidated standpoint seems to kind of have stabilized at a certain percentage down versus a year ago. In most of our RV businesses, we are still comping positively versus 2019. We are seeing a little bit of a mix change in terms of recent retail. Towable retail in the last probably two weeks to three weeks has actually gotten slightly better from a year-over-year comp standpoint and Motorized retail in the last two weeks to three weeks seems to have gotten a little worse on a year-over-year basis. So, Scott, I hope that helps with our businesses, but that’s what we have been seeing. Recently, obviously, I can’t comment on the industry until we see the SSI data for May, which will come out here in a couple weeks.

No. That was very, very helpful. So from a production standpoint, if you could maybe just point us, obviously, production, it sounds like there will be some more downtime or just some downtime in general going forward, maybe just talk about how we should look at it for the next couple of quarters production versus what we saw on a year ago basis?

So, thanks, Scott, for the question. Again, I will break it down into the three different categories, Marine, Motorized and Towables and I will start with Marine. We continue to experience meaningful supply chain challenges that affect Marine production, but we will be keeping our Marine production at pretty steady and consistent levels going forward here in the near future. As I mentioned, the retail environment is pretty decent and as long as we can get the parts, we have confirmed orders from dealers that they would like to take from us. And candidly, we are still filling retail orders as well, especially with the late spring on the pontoon side in that Barletta business. The Motorized RV business is also continuing to see meaningful supply chain challenges in various different categories, but again not the least of which are Motorized chassis. And our business there, well, as I mentioned, we are keeping an eye on retail, Motorized retail had been running a little healthier than Towables retail for most of the front half of calendar 2022, that seems to be coming a little bit down as I said a few minutes ago, but we still believe that there is field inventory runway in several of the Motorized RV segments such to the degree that we will continue to sustain Motorized RV production at levels that you probably have seen here this fiscal year so long as we can get parts. On Towable RVs, we are demonstrating discipline in managing our production output to match the dealer demand that they are signaling, which is obviously tied into the retail demand. One of the ways that I can see how we are doing on that versus our competition is shipment share when the RV shipment numbers come out on a monthly basis. And just to give you a sense for how disciplined I think we are being is, our shipment share numbers in April on Towable RVs actually went down a little, which means that we -- in the month of April, we shipped less to the market than our competitors did on Towable RVs. So we have been managing production for some time now on the Towable RV side, even though we showed very strong output here in our fiscal third quarter and that will continue for the rest of calendar 2022. We have identified certain days or weeks that we will be taking off or down through especially the summer months and we will continue to evaluate that as we get into the September through December period as well. But our -- the leaders of our Grand Design and Winnebago Towables businesses are working closely together to make sure that again we are managing output to demand there and doing it in a way that we can be a good employer to the employees that work in both of those businesses.

Got it. That was very helpful. That’s all I had. Thank you.

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

Hey, guys. Good morning. Just wanted to touch on the Marine business and more from a margin standpoint, if we look at the margins in the quarter, obviously, a big jump year-over-year, a lot of that was Barletta, but even sequentially there was a pretty material step up and if we go back and look at some of the commentary the time that you acquired either Chris-Craft or Barletta, your margins are running well ahead of that. So, I guess, the question is, what you saw volume driven, is it pricing driven, are you starting to see some real operating efficiencies or enhancements since taking over those businesses?

Yeah, Mike. Good morning. This is Bryan. I will take that one. It’s very much all of the things that you just mentioned. As Barletta continues to ramp up production and refine their operations, they opened a new plant not long ago and so it takes some time to find the operational efficiencies when you do that. We have also had inflation in the business and they have done a great job at pricing ahead of that inflation. You don’t always get the timing just right, but I think in general, the team has done a great job of doing that pricing. The retail price protection is part of that equation. So as they catch up with retail sold orders, that are in the backlog, we often do some price protection of those for a period of time and I know that that was a drag on margins in the past. I think we are starting to catch up with that and that is producing some incremental sequential margins and so I think it’s all that the equation of those factors. Clearly the Barletta team has done a superb job of introducing differentiated products that the market is valuing and that is, as we have talked about in the past, the most important part of that margin equation is having that differentiation. So all that about Barletta. I’d be remiss to not also mention the progress that Chris-Craft is making in some of their margin initiative, their pricing actions, their differentiation with the new models that they are introducing, as well as the operational improvements that they have made. So both Chris-Craft and Barletta are part of that sequential improvement.

Okay. Great. That’s helpful. And then just switching back to the RV side, I mean, just in terms of the dealer’s ability or appetite to restock. I mean, are you talking to dealers that are finding maybe floorplan capacities limit or maybe they are saving some of their floorplan firepower for restocking a Motorized, which could impact how much Towable would carry, just maybe give us some color on how dealers are planning with the floorplan?

Yeah. Mike, I think, that is a topic that is being mentioned more frequently by the dealers. I will offer a perspective that we hear from the inventory finance companies as well. But the dealers are certainly because of inflation primarily, less the units, more because of the cost or the price of the products being elevated versus a year or two ago are definitely citing credit lines is something that they are monitoring more carefully. I would argue though that we are not hearing that as a primary reason for the level of new orders that we get from dealers. They don’t say, listen, I can only give you an order for X units because that’s all I have left on my credit line. I don’t think that’s at the top of the list. Although, I think they are very much now paying attention to that. The inventory finance providers have signaled to us that they are not yet overly concerned about dealer credit lines or the utilization of being at elevated levels in 2022 versus 2021 or 2020. They do pay attention to the units and how the unit velocity is moving. And in some cases, the inventory finance companies are waiting for or engaging the dealers in a conversation about whether those credit lines can be appropriately adjusted in light of inflation as well. And so I think that’s an ongoing discussion between dealers and their inventory finance providers and while that’s becoming a more notable topic of discussion, we do not believe it is at the top of the list in influencing any near-term new orders that we receive.

Mike, I will just add a little bit on to that which is to the spirit of your question. I think it is fair to say that dealers will be paring back on their lower tier providers or the lower OEMs. We obviously are one of the more premier brands. Our brands are viewed as such by the marketplace and the dealers. If they are faced with an allocation of the floorplan, it will start to impact the lesser players in the industry…

Okay.

…with they have been us long-term in terms of market share.

Okay. Great. Thanks a lot.

Thank you.

Thank you, Mike.

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

Hey, guys. Good morning. Thanks for the question. If we just sort of take a hypothetical approach and your retail and wholesale estimates that you outlined on the call, which are very much appreciated windup being correct. Could you sort of touch on what you think that means for the promotional environment at retail and then also wholesale? Do you think that those both sort of get closer to normalized levels, do you think that they are still favorable for us as what we saw pre-COVID? What do you sort of think that those industry numbers get us from a promo perspective?

Yeah. Thanks for the question this morning and again for being with us. I think primarily the answer to your question right now resides in the hands and control of the dealers. And I know the dealers are obviously with elevated field inventory in the Towable segment are certainly adjusting their competitive and pricing strategies to that environment. And we certainly have had discussions with dealers who have mentioned because of slowing consumer retail demand across the RV industry that they are now operating their business on lower gross margins than they were during obviously the COVID or peak of COVID demand period. In many cases what we are hearing is that the margins that they are operating the business at today, particularly on Towable RVs are similar to their historical margins or in some cases slightly elevated. We are not hearing a lot of dealers on Towable RVs talk about having to take yet lower than historical gross margins on new products. I think part of that factor is there are two reasons for that. One is they have managed their inventory to that normal level and tried to keep it from being an excessive level. They also are being more successful in procuring used inventory, which gives them a lower priced option in some cases to offer to a consumer who is very, very price sensitive. I think those are the two primary reasons why the -- and probably the third, the freshness of the inventory that I mentioned earlier in this call. We are not seeing yet at our level any discounting sales allowance or promotional support that is affecting our businesses from a financial standpoint. We certainly have experience with helping dealers as needed on especially aged product as it exists in the market. But that discounting as it affects OEM profitability is not happening with our brands at this time. You have to remember our business model strategy is to only produce units, which have confirmed dealer orders or even a retail sold order against it. And when that order is done with production, it is then shipped to the dealer or invoiced to the dealer, and ultimately, makes its way to the retail environment. We do not create open production inventory that we then have to discount or rebate to the dealer and that is a change we made in a couple of our businesses when COVID began. It has always been a tenant of several of our other businesses and now it’s a consistent principle across our entire portfolio. So we really don’t rebate or dramatically discount any of our production other than what was already communicated to as the agreed upon price to the dealer when that order was confirmed.

Hey, Fred. We do hear noise of any kind of discounting of that lowest price point. We are hearing some at the stick and tin level. It doesn’t affect our product line as much. But I think if we start to see it as an industry it’s going to be done at those lowest price points.

Makes sense. And the backdrop that you guys just described, do you think that sort of carries over into calendar 2023 if we do wind up doing 475 retail, and call it, 538 wholesale.

I really -- I don’t know the answer to that yet unfortunately is and that’s why we are hesitant to provide any formal forecast on calendar 2023 at this time. I think it will be a little braver later this fall as we see how the rest of the summer selling season plays itself out. But I will tell you we are certainly preparing our fiscal 2023 and calendar 2023 budgets under a variety of scenarios, including a scenario that is meaningfully worse from a retail environment than we have today. And that’s just I think good planning and preparation to make sure that we are prepared for a worse environment. But the numbers we shared with you for calendar 2022 on a shipment and a retail side are what we believe is the case today, but as we will unfortunately acknowledge, the numbers that we have stated in the past have now proven to be too optimistic. And so we just have to continue to keep an eye on obviously consumer side of it and the retail environment and if those numbers worsen and 2023 looks worse, we will obviously have to continue to adjust our plans accordingly.

Fair enough. Thanks, guys.

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

Hey. Good morning.

Good morning, Bret.

A quick question just being asked, but could you talk about the Marine supply chain and the cadence of product availability there, and I guess, as it relates to the seasonality in that space, at what point would you need, I guess, engines inventory to be able to manufacture for this season. And if they are not there, would those orders likely get extended or will those customers take them sort of into the fall/winter months?

Yeah. Thanks, Bret, for the question. And certainly engines have been not unlike Motorized RV chassis, engines on the Marine side have been probably one of the most discussed supply chain constraints. I will tell you that over the last probably six months to 12 months, we have adjusted our engine procurement strategy to match the -- both the availability of engines in the marketplace from a brand standpoint, but also potentially even the power placement on our products has been adjusted as well in terms of a production schedule. And I will just -- I will be very honest and say that many of the boats that we make on the Chris-Craft and Barletta brands use Mercury engines. And the Mercury engine team has been fantastic to our two businesses in terms of working with us on availability to engines as much as they can. And we obviously know they do a significant amount of business with other boat brands in the Marine industry. But we have been able to continue to keep our plants running at pretty decent levels and continue to grow both Chris-Craft and Barletta from a sales standpoint, because of the good work that the Mercury team specifically has been doing and we will continue to work closely with them to see what they can provide. We also know dealers in the Marine business who are also trying to procure their own engines in the event that they receive boats from OEMs without engines. We try not to do that very often. I won’t say that we have never shipped the boat without an engine, but I would say, a high majority of the time we are going to ship the boat with the engine, but the Marine dealers have also been very active trying to procure their own engines in the event they need to match it up with the boat that comes in without one. So this is something that is a weekly, monthly challenge, but it is a good relationship we have with primarily that engine supplier and we will work with them closely to try to keep a good production rhythm in our business.

Great. And then a quick follow up, I guess, on your retail outlook of maybe 17% year-over-year decline, does that assume we do not have a recession in 2022, is that sort of just a slowing, but not dramatically slowing economic outlook?

Well, it’s a fair question. Obviously, with the retail numbers we have seen recently from a year-over-year comp standpoint on the RV side. I am not sure yet we can differentiate in terms of RV retail in a non-formal recession versus RV retail in a formerly called recession. So I really don’t want to be in the business of predicting when the U.S. economy will formally be in a recession or not. All we can kind of deal with is, what the outdoor consumer is willing to invest in today. And as you know with outdoor recreation products in general, we probably tend to lead the economy into a downturn. And hopefully we are one of the earliest businesses to lead the economy out of a downturn. And so I think directionally, we have been signaling where the U.S. economy has been headed for some time now. So, unfortunately, I won’t make a prediction on the -- when a recession will occur, but we are seeing -- in a Specialty Towable RVs and now Motorized RVs, we are seeing meaningful retail pressure as we speak and we are having to run our business accordingly to navigate through them.

Right. Appreciate it. Thank you.

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

Thanks. Good morning. I guess earlier you said it’s been tougher to pass on inflation lately. You did get pretty strong pricing in the quarter. You called out in the release, so just trying to reconcile that. And perhaps related, our dealers -- at least for units already in backlog, our dealers locked into the price that they ordered from a few months ago or do you -- can you raise prices on orders already in place due to supply chain issues?

Yeah. David, thanks for the question and good morning. The answer to that question generally resides by business. And this is why it’s good to have the backlogs be shorter and smaller in nature. The longer it takes for us to receive a dealer order and ultimately produce it and have it available for them to retail, the risk of inflation in that time period has really challenged us in the last year or so. And so it has been the case that at times the price that a dealer ordered the product at is different from the price that they get delivered, the product delivered at. And that was because we were seeing extraordinarily long lead times because of supply chain constraints in the time it took to fulfill that order. With those retracting and the supply chain continuing to be better in some cases, the risk of that price changing for a dealer is probably lower. And candidly I think we are very well aware that with consumer demand retracting in the RV industry specifically that our ability to balance price increases, and obviously, competitive market share advances is more challenged today than it ever has been. So if I were to guess Q3 would probably be the potentially the current peak of the pricing power that we were able to demonstrate in the last year or two, and it will be more difficult and we will need to be smarter and more selective when passing price on in the future. And then the comments that we made in the script, we certainly mentioned that smart pricing will continue to be a lever, but again with slowing retail, we need to be much more careful about when and if and how to do that. And so that that will play into some of the pressure on profitability probably facing us in the future as well.

And David adding on to that -- this is Bryan. You asked the question from the perspective of the dealer. Historically, we have price protected as an industry, both Marine and RV the retail buyer. So when they sign a contract, we would honor a price protection. Given the severity of inflationary pressures, that practice has fallen by the wayside…

In RV…

… in RVs. Yeah, for the most part, price protection for the retail customer has had to be put on the sideline. So I think just with the pervasive inflationary pressures, we have seen that historical practice across the industry has had to change just to make sure that the OEMs were protected from those inflationary pressures.

Okay. That’s helpful. Thank you. And on, I guess, staying with that topic, what about the dealers in terms of asking for inventory versus three months ago, four months ago, are they much less enthusiastic about it or about the same or just a little bit off?

Yeah. And again I think we will answer that by segment. In the Marine segment, dealers are still looking for inventory. There are probably less prospective buyers for each new boat, but there are probably still multiple prospective buyers for each new boat that’s delivered. But and so they are still asking for and taking the orders and the product that obviously we are producing. The Motorized RV side, it will depend a bit on which category, but generally field inventories are still meaningfully lower than most dealers would like them on Motorized and so they will continue to take Motorized inventory per their discussions with their respective OEM. Towables is now where with the field being full on Towable RV inventory. Those discussions are happening between the dealers and OEMs like us in terms of what they now need and that -- those orders going forward will almost certainly be reflective of retail trends and any new products that an OEM would deliver to the market. Those are probably the things that are now going to impact new orders on Towable RV. So that activity is certainly lower because the field inventory is ample at this time.

And Towable backlog you have got $1.3 billion, are you worried at all by cancellations accelerating going forward in Towables, I mean?

It is -- there is potential for that backlog to continue to come down as dealers revisit and if retail is different than what they are projecting in their businesses. So there’s probably is some risk of that. We also though have a much improved ability on Towable RVs to produce when we need to as well. The supply chain of all of our businesses, the supply chain is probably in the best shape on Towable RVs. And so the combination of us being able to produce to the demand that they want combined with them being probably much more careful on the orders that they want to be active in the future, we will probably continue to reflect a declining backlog on Towables. Again, I don’t think that’s a bad thing. It just means now that the business is adjusting to match the rhythm of retail going forward as opposed to this frenetic two-year run we were on where dealers just placed a ton of orders with probably multiple OEMs to make sure that they were in line to get whatever product they could.

And then just one last one is kind of on that theme normal whatever that is these days. There’s been a lot more uptick in demand for air travel, Europe’s been opening up, I am just curious at the consumer level are you seeing any kind of substitute away from the outdoor lifestyle for these other leisure options?

We are seeing no decrease in consumer participation in the outdoors. Camp grounds are full. Reservations into the future are full. Marinas are full. It’s tough to get a boat slip these days almost anywhere in the country. It’s just -- rentals are still strong. We are seeing what they are calling near occasions on the rental side. Consumers are traveling less or less miles, excuse me, less distance because of gas prices, but they are still participating. So, if anything we have seen in an adjustment because of probably gas and food inflation to how people are traveling in terms of RV and boating, but we are not seeing a decline in any interest. And I will just remind everybody that the cost of an RV for a trip still compares very favorably to the cost of a trip where you have to jump on a plane and staying in a hotel and reserve a rental car. We continue to still be a pretty economically viable option for people that want to spend time in the outdoors, especially from a renting standpoint and existing ownership standpoint. So we understand those other choices are coming back and that may have some influence on discretionary spending without a doubt, but we are not seeing consumer interest and engagement in the outdoors decline.

I appreciate all the detail. Thank you.

Thank you.

Thank you, David.

Our next question comes from the line of Joe Altobello with Raymond James. Your line is now open.

Thanks. Hey, guys. Thanks for squeezing me in. I just had one question. Most of my question has been asked and answered already, but I wanted to go back to something you said earlier Mike about the shipping shared numbers for Winnebago being down in April, which obviously is a good thing from a rationality standpoint. And I certainly don’t want to put words in your mouth, but it does seem like the industry may not be acting as rationally as you would have like from a production standpoint. One, is that fair to say? And I guess, secondly, any sense anecdotally that it’s gotten better here in May and June, so it would have to get to that 530,000 unit number that you guys are looking for from a shipment standpoint this year? Thanks.

Yeah. Thanks, Joe, for the questions. I will speak to the shipment share first. And again, I just want to make sure I specific here so as to not over generalize. Our shipment share on the Marine side probably is increasing. Our shipment share on the Motorized RV side has been stable to, in some cases, increasing. Our shipment share on the Towable RV side based on the latest industry month of shipments we have showed a small decline in part mostly almost exclusively because we have been trying to make sure that our production schedules are again being adjusted to the demand of the market. And I will suggest that the industry in 2022 has been more rational in macro with adjusting to now a more difficult retail environment then probably in some periods in the past, especially in the 2018, 2019 period and all signs of competitive production activity that we are seeing in the summer months on Towable RVs suggest to us that OEMs are adjusting their production schedules to try to prevent excessive inventory in the market as we head into the fall of 2022. But again, all of that is dependent ultimately on where retail goes as well. So, Bryan, you have any comments on Joe’s second question.

No. Nothing further to add from what we stated previously. I think, Joe, if you want to narrow in on something specifically, let me know, but I don’t have anything further to add.

Okay. No. That’s perfect. I was going to ask you about your outlook for 2023 retail, but it sounds like you are not ready to touch that one at this point. So I appreciate it. Thanks.

Thank you.

Thank you. Our next question comes from James Hardiman with Citi. Your line is now open.

Hey. Good morning. Really appreciate all the color and the detail. I wanted to connect a couple of dots here. So with 475,000 unit retail estimate for the year, that’s down 17% year-over-year. Just try to figure out why that the right number. I think if I am doing the math right through April the industry was down 22% year-to-date, and obviously, April was the most concerning of those month down 30% plus. And then in -- from the commentary that you gave us, Mike, it didn’t seem like there was a meaningful movement from a comp perspective in May and early June, and I understand that that was your numbers as opposed to the industry. But help me understand if and when we will see the year-over-year numbers improve and I am sure part of the answer has to do with comparisons you think, but maybe walk us through some of that?

Yeah. Thanks, James. I think you answered the question a bit with your last comment there. It is probably more mathematically some of the easier comps than we start to see in the back half of the year mathematically. But there is no doubt that the projection that we offer today on retail, which I think is in line with what many other companies have also said is dependent on what we see through the heavy retail selling months that we have here this summer May through August specifically. So that’s our best guess at the present time. The math is such that in the fall, early winter months of calendar 2022 the retail comparisons do get a little bit easier and so you may not see a steeper percentage decline. But if we don’t see retail stability in terms of sort of a lower sustained level throughout the summer months, certainly there could be risk to that number. And as my comments indicated this morning, we are seeing a level of retail stability in terms of comp percentage currently. The units still vary by month because of the seasonality of the business, but we have not, for example, seen a negative 25% number go to a negative 50% and I am just making up those two numbers. But just we are not seen retail take a dramatic turn for worse as of late. It has seemed to sort of level off comp wise. So I guess we view that as an okay sign that the environment is sort of stabilized a bit. It’s still not as healthy as we would like it to be, but we will just take every week at a time.

Makes sense. And then one more for me, I think as people are trying to maybe think through what comes next, the pricing component is a big part of that, right? And when I run through the numbers, your ASP is up more than 50% all-in versus the same quarter in 2019? Now I know some of that is acquisition related, right, Newmar, I guess most notably bumped up those ASP. So given the fact that you already pointed out that this might be the high watermark in terms of what you are able to get in pricing. Is there any way to think about a like-for-like sort of if I am a consumer, what is the net price increase today versus 2019 and sort of any way to think about how much of that you think you might be able to keep?

Well, I mean, certainly I don’t see us at the present time, having the ability to roll prices back, first and foremost. Well, so in terms of pricing that consumer will see that will be dependent probably more on dealer pricing strategies than OEM pricing strategies, I will say, in the rest of 2022. Retail prices went to some pretty high levels in the market in -- because the demand/supply imbalance was significant. And you saw dealer profitability on new units increased significantly for a period of time. As I mentioned earlier, their profitability is now relaxing to more historical levels or slightly better and believe me, we root for dealers to be financially healthy, because they are representatives to the consumer year round. But I think you will see retail price fluctuation happened first because of the dealer strategies and at an OEM level we just continue to see inflation quarter-after-quarter escalate or I shouldn’t say escalate, just continues to happen, it seems to be decelerating in terms of the degree of inflation, but it is still present with us. And so we have to be extraordinarily determined and creative to try to manage those input costs with operational efficiency work with our supplier partners, so that we limit the inflation to the degree that we have to now then consider pricing action. And so, it is inevitable most likely in the remainder of 2022 and probably into 2023, unless inflation completely stops that we will continue to have to look at price of smart pricing and selective pricing action because of inflation. It’s not what we want to do and it doesn’t even mean that we will be able to hold the gross profitability that we just reported in this quarter, but we will have to continue to use that as a lever if inflation persists. And the consumer nor the dealer is not going to be a big fan of that and we recognize that, and so we will have to use very good judgment in terms of our ability to pass that on and again still hold or increase market share in our businesses.

Makes sense. Thanks, Mike.

Thank you. Our next question comes from John Healy with Northcoast Research. Your line is now open.

Thank you guys for taking the question. One is, I try to dive in a little bit more on your efforts to align the production with the right state of retail in the comparison to previous years might not be the right one. So I was wondering if you could give us a little bit of a history lesson in terms of this time of year, through the end of the summer, into the new model years, how do you typically manage labor, how many weeks did the plants kind of shut down, I know typically around 4th of July there is some activity. What was it like pre-COVID, what was it like last year and might -- what might we expect this year, kind of what exactly are your plans and how many weeks do you kind of feel like you need to trim off the production schedule to kind of aligned to these updated thoughts of that the low end of the shipment guidance for the industry for the year. And I think you mentioned it previously, but it does sound like you are seeing positive indicators that it’s not just you that is aligning production, your peers are as well, so just wanted to get confirmation of that?

Yeah. John, thanks for the question. Unfortunately, I probably won’t be able to offer a specific an answer as you would like for multiple reasons. But it -- again it does vary based on the segments. I don’t anticipate Marine production to be demonstrably different at all in 2022 and into 2023 than what we did in 2020 and 2021. On Motorized RVs, I don’t anticipate Motorized RV production to be significantly different in 2020 and into 2023 than the last couple of years. On both of those segments it will more be a function of near-term the supply base being able to serve our production requirements, and then secondarily, obviously, ultimately, the trend of retail in the market. On Towable RVs, our businesses will be running less weeks of production the remainder of calendar 2022, as retail obviously is lower than we had anticipated at the beginning of calendar 2022 and the dealer, again field inventory is in a healthy full state. So the specific weeks and days varies by business and without getting too deep into the weeds there are even sort of cultural legacy or history or reasons as to when and how you take time off in some of…

[Operator Instructions]

So that is ultimately where we are across…

[Operator Instructions]

Operator, can you help.

[Operator Instructions] One moment please. Okay. You may resume. Sorry.

Thank you. John I think that’s probably completes my answer, if you are still with us.

Yeah. I am here. Thank you, guys. Appreciate it.

Yeah.

Thank you. I have a follow-up with Scott Stember with MKM Partners. Your line is now open.

Yeah. Just a follow-up, I think, in past calls, you have talked about the backlog being six months out, is that still same right now?

So, Scott, what we do represent in our quarterly earnings every month is the backlog of units that dealers would like us to deliver within a six-month period. Sometimes we do get forecast or even orders from dealers for a longer period of time, they usually happens when we have dealer meetings and we have sort of new model year booking events. They give us maybe even more than a half years look of orders, but we generally only include orders in our quarterly earnings release on product that dealers want to receive within a six-month period. That does not mean that every unit in that backlog can wait for six months, in some cases the dealer is still need it today, because they may be out of that particular SKU or model in the near-term. So, again, as the retail environment, especially on the RV segment continues to be challenging. We will continue monthly with our dealers to try to make sure that the numbers that they give to us are reflective of what they really think that they can take from us and -- because -- once we turn that into a confirmed order we start the production process on that unit and once it’s in the production process, we expect the dealers to honor taking that product.

Got it. Thanks again.

Thanks, Scott.

Thank you. And I am currently showing no further questions at this time. I’d like to hand the conference back over to our host.

Thank you, Operator, and thank you everyone for joining our call today. We really do appreciate you taking time out of your busy schedules to be with us this morning. Have a great day.

Ladies and gentlemen, thank you for your participation. You may now disconnect. Everyone have a wonderful day.