Good day, and thank you for standing by. Welcome to the Q3 Fiscal 2024 Winnebago Industries Financial Results Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ray Posadas, Vice President, Investor Relations and Market Intelligence.

Thank you, Josh. Good morning, everyone, and thank you for joining us to discuss our fiscal 2024 third quarter earnings results. This call is being broadcast live on our website at investor.wgo.net, and the replay of the call will be available on our website later today. The news release with our third quarter results was issued and posted to our website earlier this morning. Please note that the earnings slide deck that follows along with our prepared remarks is also available on the Investor Relations section of our website under Quarterly Results. Turning to Slide 2. Let me remind you that certain statements made during today's conference call regarding Winnebago Industries and its operations may be considered forward-looking statements under securities laws. The company cautions you that forward-looking statements involve a number of risks and are inherently uncertain and a number of factors, many of which are beyond the company's control, could cause actual results to differ materially from these statements. These factors are identified in our SEC filings, which we encourage you to read. In addition, on today's call, management will refer to GAAP and non-GAAP financial measures and the reconciliation of the non-GAAP measures to the comparable GAAP measures are available in our earnings press release. Please turn to Slide 3. Joining me on today's call are Michael Happe, the President and Chief Executive Officer of Winnebago Industries; and Bryan Hughes, Senior Vice President and Chief Financial Officer. Mike will begin with an overview of our Q3 performance and then Bryan will discuss our financial results at a strategic level. Mike will conclude our prepared remarks with the business outlook and management will be happy to take your questions. With that, please turn to Slide 4, as I hand the call over to Mike.

Thanks, Ray. Good morning, everyone, and thanks for joining us to discuss our third quarter fiscal '24 financial results. In the eight weeks since our Q2 earnings call, RV Industry retail demand has remained both inconsistent and sluggish, with limited evidence that economic conditions are improving for outdoor recreation consumers as we move into the fourth quarter of our fiscal year. While this environment necessitates near-term caution and discipline, the secular future growth of outdoor recreation engagement by consumers is undoubtedly a key driver for the health of our business long-term. With that in mind, I will emphasize three points to our investors early to frame this morning's discussion. First, over the long-term, challenging markets make strong companies even stronger. Our focus on maintaining durable margins and resilient profitability relative to competitors through production discipline and intentional sales support is unwavering. Our collaborative operating model across our brands and functional centers of excellence ensures the choices we make in the short-term are in our best long-term interest. Maintaining valued product differentiation, premium brand essence, total aftermarket support to our dealers and end customers and relevant share all matter greatly, but must be balanced with the commitment to sustainable profitability. Second, while we expect industry softness to continue in fiscal Q4 on a year-over-year basis in our Motorhome RV and Marine segments, the gradual improvement we are seeing in field inventory composition in these markets is an encouraging sign for calendar 2025 and beyond. Third, our healthy balance sheet and strong cash flows enable us to execute on our select growth priorities while maintaining a balanced capital allocation strategy that continues to return cash to our shareholders through dividends and share repurchases. Our cultural, strategic and financial strengths have us poised to successfully pursue the mid-cycle targets communicated in a prior…

Thanks, Mike, and good morning, everyone. As a reminder, in my prepared remarks, starting on Slide 9, I will focus on the key drivers of our performance. Please refer to our earnings release and earnings supplement documents for a detailed overview of our key financial results. Winnebago Industries delivered a solid third quarter. The year-over-year decrease in consolidated net revenue reflected a shift in product mix with customers demonstrating a preference for lower priced units, primarily in the towable RV segment, as well as lower unit volumes in our motorhome RV and Marine segments, as we continue to aggressively manage production amid challenging retail market conditions. Gross margin for the third quarter was 15%, primarily reflecting the deleveraging effect of lower sales and competitive marketplace pricing with elevated discounts, as well as operational efficiency challenges. We are addressing those challenges through a range of cost containment initiatives, including flex production days, product line consolidation and the deferral of certain CapEx projects. Warranty expense, although, up year-over-year comparing against favorable expense in last year's third quarter, has returned to historical rates. Lastly and while not shown on this slide, but worthy of a call out, we continue to generate robust free cash flow, which totaled $88.4 million in fiscal Q3. During the quarter, we executed $20 million of share repurchases, bringing the year-to-date total to $60 million. Turning to our performance by segment, starting with Towable RV on Slide 10. Revenues were up 35.7% from the second quarter of 2024 or sequentially. Revenue was up 0.6% from Q3 of last year, reflecting an increase in unit volume, partially offset by a reduction in average selling price per unit related to product mix. Segment adjusted EBITDA was down 22% versus the prior year or 310 basis points of margin, partly reflecting operational…

Thanks, Bryan. Turning to Slide 14. As we think about the future of our business, we continue to believe that over the long term fortune will favor the companies with the best brands, who drive for mutual success with their dealer partners and a seamless joyful end-to-end experience with their customers. We have been making steady investments in engineering, data, digital asset development and IT capabilities to ensure we have the right product offerings and tools to appeal to various segments of the future market and stay close to our customers. When I say the best brands, I'm not talking only about a multitude of floor plans and comfortable sofas within those brands. It's also about making sure that our owners get outstanding service and support, have great technology at their fingertips and become customers for life. Some of that is certainly dependent on having great dealer relationships, and that is an area where Winnebago Industries continues to lean in. As demand trends settle back into a more normalized pattern, dealers are beginning to shed the smaller brands and focus instead on much deeper relationships with trustworthy OEMs. We are seeing more dealers seeking preferred and even exclusive relationships with Winnebago Industries family of brands because they know they can count on us through the peaks and valleys of outdoor recreation cycles. The dealer partnerships we have built over time provide our end customers with real advantage over the life of their ownership. To expand on Bryan's comments on Q4, we do not currently expect a notable improvement in the RV and marine industries through the end of the calendar year. Consumer sentiment impacted by delays to the lowering of interest rates and other difficult macroeconomic factors will continue to weigh on dealer willingness to order and carry inventory. With…

Thank you. [Operator Instructions] Our first question comes from Tristan Thomas-Martin with BMO Capital Markets. You may proceed.

Hey, good morning. Mike, the profitability headwinds in the fourth quarter is that tied to clearing kind of the remaining carryover inventory or just incentivizing dealers to order. And then while you're at it, where do you think carryover inventory is for you guys and then for the industry?

Yeah. Good morning, Tristan. I'd like to start with the back half of your question first in terms of carryover inventory. We are generally pleased with the composition of the inventory given the type of market conditions we're facing as we sit today. The total inventory levels for us in the towable space seem very appropriate for where we're at. We prefer for aging inventory in our towable field inventory base to be a little bit better, but we continue to work on that quite specifically. Our motorized RV inventory maybe slightly higher in the field than our dealers might like, but not by very much. And again, we actually think our aging inventory position on the motorized side is as competitive as any other OEM in the market. Lastly, on the Marine side, specific to Barletta and Pontoons, while we are gaining significant retail share in that particular market segment, we continue to partner in a very positive way with dealers to position their field inventory to a position that they feel comfortable and that will be -- that will continue to put a bit of pressure on shipments on that brand here over the next quarter at a minimum. But all-in-all, we generally feel okay about the field inventory levels and continue to work on obviously transitioning the composition of that inventory to more recently aged inventory. We have actually slightly delayed some of our model year 2025 introductions, so that we can continue to work as an example on some of the model year 2023 or 2024 product. Bryan, I might ask you to talk about the profitability drivers in Q4.

Yeah. We talked about it sequentially, right? And I think the biggest driver, you kind of alluded to it, Tristan, is going to be continued marketplace pressures on discounting allowances, just a tougher environment than, what I think, the industry was anticipating as we get through the selling season and start to ease in the June, July, August period, our Q4 in terms of dealers’ willingness to take on product. Also, you have some seasonality of sorts on the marine side, for example, we have interest reimbursement programs that start to kick in, in our Q4 versus Q3. So I think broadly speaking, I would characterize that profit guidance we provided as a bit of a seasonal as well as expectation of continued very tough market conditions and dealer sentiment.

Okay. Thank you. I’ll hop back in the queue.

Thank you. Our next question comes from James Hardiman with Citi. You may proceed.

Hey, good morning. Thanks for taking my questions. So on the inventory front, maybe a little surprised to hear you say you're actually pushing back the introduction of some of the model year '25. Certainly, some of the commentary that we've heard from dealers is that they're actually waiting for the model year '25 to make orders because they don't want to further exacerbate the aging issue. Maybe speak to the thought process there, do you think it will be a catalyst once the '25 begin to make their way into the channel. And I think there's been some discussion at an industry level of moving up that model year changeover, any thoughts there?

Yeah. Good morning, James. This is Mike. Let me be more specific on my comment about model year '25. My comment does not apply to the entire portfolio in the same way. There are certain pockets of our portfolio where we are being very intentional in the timing and delivery of model year '25 product, for two reasons. One, we may still have a little bit of model year '24 carryover on our own lots. And number two, we with the dealers think it is best to continue to work on any of the aged inventory in the field. Our model year '22 inventory is virtually non-existent at the end of third quarter, very small number of units and we continue to put some of our select promotional support dollars on the age side against a number of the model year '23 products. So that is really our focus there on '25. In terms of timing, I would actually say the, it appears to me that the RV industry continues to probably move towards a more common model year -- future model year release window. And in my opinion, based on the activity that I'm seeing and hearing, I don't believe that, that window in future years will move up. I actually think it will stay in the mid-summer period. And hopefully, we will continue to see good discipline by other OEMs across the industry to make a reasonable model year transition in the time period it makes sense.

Got it.

There's been some outliers on the total side to that summertime model year introduction, just a couple of outliers. I think the big players for the most part are disciplined in that regard. The motorhome has been less disciplined. So if you were to look at it segment by segment, Motorhome has certainly had a history and continued this year to introduce the next model year earlier than the summer period here in July, when the industry largely shakes hands and agrees, is the model year turnover. Some of that driven by the OEM, the chassis providers on the motorized side having a different timing of model year changeover too.

Got it. And then, any quantification you could give us on the flex frame issue, both the extending of the warranty and the transferability of the warranty. It sounds like you don't think it's going to be a meaningful driver to increased warranty expense. But so maybe walk us through the major assumptions that lead you to that conclusion. Thanks.

James, this is Mike. Let me put this in perspective for everybody. Less than 1% of all Grand Design Fifth Wheels built in the entire history of its company have experienced any sort of excessive frame flex issue. This is an issue which is not as large in actuality from a unit impact standpoint nor in financial impact as several stakeholders perceive it to be. The impact of warranty to date in fiscal year '24 regarding excessive frame flex has been nominal. And as Bryan alluded, we are maintaining historical warranty levels now around most of our businesses, including Grand Design. In the announcement that the Grand Design business made candidly to signal to its consumers that we have maximum confidence in our products and that we will provide the utmost and complete support to customers in the future will come with very little financial impact in the rest of this fiscal year or future fiscal years given the current warranty rate we're seeing on this topic. So that's why I used the word misinformation in my prepared comments. This topic is not having a significant impact on our warranty expense line now, and we don't anticipate that to be the case in the future.

Yeah. And just to add a little bit to that. As Mike said, the experience rate is so low on this. We do have some, of course, experience where we've seen it, as Mike said, less than 1%. Now on those instances where we have seen it, the cost per fix is likewise not meaningful. And then lastly, Grand Design has always taken care of the customers, okay? So call it, goodwill practices. I think most on the call know what that means from an industry perspective. Even in other words, outside of warranty, Grand Design has historically taken care of customers on these types of issues as well. So it's already effectively in the run rate, we feel this additional warranty that was just extended. So for all those reasons, hopefully, that gives you some perspective on why we think this is not any kind of financial event, call it, as we try to put our customers at ease through this extended warranty.

It does. That's good perspective. Thanks, guys.

Thank you. [Operator Instructions] Our next question comes from Bret Jordan with Jefferies. You may proceed.

Hey. Good morning, guys.

Good morning.

Could you talk a bit more about the general -- the relative health, I guess, of the dealer channel, Marine versus RV. Obviously, the Marine downturn started after the RV downturn, but might be a little deeper at the moment. Can maybe could you talk about are we going to see attrition or meaningful incremental attrition in either one of those channels given just inventory carrying costs and slow retail sales?

Bret, good morning. This is Mike. As we've stated before, we can discuss specifically the marine market segments that we're in, and so I'll focus my comments here on pontoons because that is where the -- obviously, where the majority of our marine volume lies. I am extremely pleased with our Barletta branded business and the way they've been managing both their support of increasing retail market share in a difficult environment, but also their prudence and discipline around field inventory. And this is a business, as an example, where at the end of our third quarter, we didn't have a single model year 2025 product in the channel yet. And I'm not even sure that's the case today. I don't think it is. So we continue to focus on running out our model year '24s and are working with the dealers to make sure that the turn rate that they desire in light of some of the pressures they're facing on inventory flooring costs, as an example, across all of their lines, not just Barletta that we're a good partner in making sure that their Barletta inventory levels are in a position to both drive double-digit market retail share, but also help them drive acceptable profitability on their retail transactions and manage any carrying costs that they have. And so we've actually brought down Barletta total inventory as of the end of the third quarter by probably somewhere in the range of 800 to 900 units. And we anticipate also driving that field inventory position a little bit lower here, particularly over the fourth quarter. And we think that is the best thing to do for our dealers without sacrificing our ability to go after double-digit market share, so that we can position ourselves for an even stronger model year '25 line release that will happen probably in the August time period. So our marine inventory position is in, I think, really, really decent shape to begin with, and we’re going to make it even stronger here over the next 90 to 120 days. And then hopefully, market conditions will be in a place where we can stabilize and get back to a 1:1 retail to shipment ratio in that particular business.

Hey, Bret. If you were asking about broader just dealer health in general, as both RV and Marine get through the selling season here, I think it’s the best time of the year for them, right? They’ll have decent cash flow and at least some profitability to get them through the selling season. I think there is some exposure, call it, remaining in marine, heightened above RV. But what I am certainly hearing and want to acknowledge is that the marine OEMs, broadly speaking, of which, again, we’re a very small piece, are doing a very good job at pulling back on production and making sure that the dealers only have what they need really to get through the selling season and trying to help them with carrying costs. So if that was your broader question, just wanted to throw that into.

Great. Thank you. Appreciate it.

Thank you. Our next question comes from Michael Swartz with Truist securities. You may proceed.

Hey, guys. Good morning. Maybe just drilling down a little bit into profitability and more specifically, the motorized business. I think EBITDA margins were in the 4%, 5% range this quarter and over the past year or so as productions come down, they've really been kind of sticking in that 7% range. So maybe help us understand, I guess, one, what changed during the third quarter to drive it down about 300 basis points. And then I guess, two, how should we think about that going forward?

Yeah, certainly – Mike, good morning. Certainly, deleverage continues to weigh heaviest. We talked about how the market wasn't seeing any improvement as we thought it might in retail in April and May. That affected us. It also caused, I'd say, the Winnebago brand to get a little bit ahead of the market in terms of its production and then be faced with higher discount pressures as a result of that. There was some certain, specific brands that we needed to be really aggressive on considering the market conditions and so that was a big impact. Productivity, as the market slowed down and as our product mix becomes one of those things that you have to juggle from a production perspective that drove our productivity below where we were expecting and wanting to see as well. So that in the form of both direct labor -- productivity and direct labor in getting the units out the door. So those were the biggest things that we fought here in our Q3.

Okay. And on the, I guess, on the new Grand Design Lineage, I know this product hasn't officially launched yet, but any color or context you can give us around just the response from the dealer base? And any way to think about, maybe the initial distribution opportunity there, maybe the number of doors and then what maybe the initial stocking levels will look like on that business?

Good morning, Mike. This is Mike. As I mentioned in our comments, we will actually be unveiling more specifics about the product this Saturday in New York City. We will not share at this time the number of dealers that we have mutually committed to on the product line. But I can say that the quality of that dealer stocking list is every bit as impressive as what we have on our Grand Design Towables list. In fact, it includes several of the same, loyal and fantastic Grand Design dealers that carry towables but it also includes a few new dealers to the Grand Design brand for specifically the Motorized launch. As I said earlier, we will have a very light amount of shipments late in fourth quarter, probably in the month of August on this product. And then the majority of the stocking orders and deliveries will begin in fiscal ‘25. And so as we firm up those orders, here, we begin to reflect those to you all as well in the backlog. I don’t believe our current Motorized backlog includes any Grand Design orders at this time. But those conversations, obviously, on a stocking order commitment are very much happening. And so you will begin to see the impact of that probably when we announce our fourth quarter earnings in October. The other thing that I will mention, and we’re not providing specifics on this yet is the Class C lineage is the first of several Grand Design motorized products that are on the drawing board. And over the next probably six months, you will hear more from Winnebago Industries and Grand Design about our intentions on a couple of other products that we could be bringing to the market here in the next, I would say, probably nine to 15 months as well. So this is the beginning and more details to come as we’re comfortable.

Okay. Great. Thanks.

Thank you. Our next question comes from Noah Zatzkin with KeyBanc Capital Markets. You may proceed.

Hi. Thanks for taking my question. I guess just kind of related to the kind of affordability concerns in the industry. Just wondering if you could kind of provide any color on how you're thinking about ASPs across segments? And then somewhat relatedly, I think we had kind of picked up from some other industry participants that they're expecting motorized chassis price increases from the auto OEMs. So as it relates to the motorized side and model year 25, like is ASP an offset there? Kind of how are you thinking through those kind of cost increases? Thanks.

Hi, Noah. This is Bryan. I'll start with the second part of your question. Yeah. I did see your note on chassis costs. I think, frankly, the industry has seen most of those increases. It's in the rearview mirror. There's still some inflationary pressures remaining on motorized chassis that we're anticipating but nothing of the magnitude that you cited. We certainly, and I don't want to minimize the size of increases we've seen in motorized chassis over the last three years because they have been high. But the remaining increases I think, will be modest and will be digestible as it relates to our ability to price for those remaining increases in the coming years. So I guess I'd start with that. And then it kind of gets into the affordability question that you raised broadly. So I'll shift to that part of the question. And on the towable side, we're seeing very benign cost environment. So on an apples-to-apples basis, if we look at our bonds (ph) from model year '24 to '25, they're very neutral. And so pricing as a result will likewise be neutral on an apples-to-apples basis. What we're doing to address that customer preference for lower price points is introducing a lot of new product that allows us to do that without compromising our premium brand position. So products like the new Transcend One is an example, Reflection 100, the Influence all those on the Grand Design side, the Access, the stick-and-tin product for the Winnebago branded. These are examples of price point model introductions that we think will help maintain our premium position but also start to defend some of the market share more aggressively. So I'd say that's what we're doing on the towable side. On the motorized side, we don't expect, going back to my earlier comments, we don't expect significant apples-to-apples BOM increases, more in the modest 2%, 3%. And so we will address those accordingly with pricing where we think it's appropriate as well as some new product introductions that the teams are working on. Certainly, the Grand Design entry will help us on the motorized side in terms of positioning a product that we think will be really well received by the dealers and the end customers at price points that they find to be very competitive.

Thank you.

Thank you. Our next question comes from Craig Kennison with Baird. You may proceed.

Hey, good morning. Thanks for taking my question. You've addressed most of them already, but I wanted to follow up on Mike's question earlier. Regarding Grand Design in motorhomes and scaling that opportunity, what's the philosophy around the margin profile of that brand within motorhomes. Would you expect it to be accretive to margin in motorhomes over time in the way that it is in towables?

Good morning, Craig. I appreciate the question. The answer is yes. We do anticipate that we will have motorized profitability that is, first of all, probably accretive to our overall portfolio profitability yield. But we expect that Grand Design Motorized profitability will be very comparable candidly to the profitability of their towables business. Certainly, that will vary by product type. But our team is very committed at Grand Design to have differentiated, highly valued and sought after premium profitable Motorized product in the market. Grand Design has often stated their intent to major in the majors. And so their motorized product will be pointed at some of the higher volume subsegments of that category. And we anticipate, based on what we've seen so far with the Lineage work but also some of the projections on future products that the profitability on that line should be quite acceptable. So time will tell, the team will need to execute to what I just stated. And certainly, competition isn't going to hand Grand Design market share very freely. So we anticipate an intense battle, but we have a very strong and focused team on that product line.

In the initial months, of course, Craig, initial quarters will require some scale up. So it's not expected immediately to be accretive, but it certainly will very soon.

That's great. And then maybe to follow up, you made some comments about Q4 revenue and margin profile, profitability profile. I'm wondering if you could just help us think through like segment EBITDA assumptions in that? And in particular, I'm guessing motorhomes could stick around that 4.5% range. Is that what you're suggesting?

I think, Craig, we're going to refrain from getting into the segment-level conversations that we've been providing the last couple of quarters. We'll come back in the fall in our -- as part of our 2024 wrap-up and looking forward into 2025 and provide some, we think, better guidance, forward-looking guidance was that the industry and more specifically Winnebago related. But we're going to refrain from getting into a segment-level forward discussion at this time.

Sounds good. Thanks.

Thank you. Our next question comes from Scott Stember with ROTH. You may proceed.

Good morning, guys. Thanks for taking my questions. Mike, you made a comment about how dealers -- it sounds like they're starting to go back to some of their prior pre-COVID ordering patterns, which would help your share. But then you also mentioned that at least, I guess, on the Towable's Grand Design that you expect some near-term pressure on market share. Can you maybe just talk about those two opposing comments or just some of that have to do with -- there's a couple of new players in the market that may be giving a couple of headwinds. Just trying to parse that out.

Good morning, Scott. I appreciate the question. We do believe that dealers have been actively trimming and focusing their brand assortments here really over the better part of the last year as market conditions have gotten more challenging, and they have tried to narrow their focus on profitable products that turn, we do believe that in a high majority of the cases that our brands are not just survivors but winners on those lots as dealers make those trimming decisions. That does not mean, however, that there is not still intense competition across all of the segments, but particularly towables with several of the new entrants that you mentioned in your question as well. Grand Design is very familiar with the competition from new entrants, particularly on the Fifth Wheel side, with a couple of the newer companies in Elkhart County, and they continue to do what they think is necessary at Grand Design to combat those new competitive challenges. But some of the share results specific to that brand probably do reflect some of the success of the new start-up brands. But this is a battle that will be ongoing, and the Grand Design team is very focused on being one of, if not the top Fifth Wheel manufacturers in the towable industry. we believe on the towables side, there is significant runway on towable -- excuse me, travel trailer market share for both our Winnebago and Grand Design brands. And you're seeing quite a bit of work from Grand Design, as Bryan alluded to earlier, on their transcend line to make headway on the travel trailer segment going forward. Competition in macro has been relatively rational. We have seen, though, recently some spots from some of our bigger OEM competitors with some quite aggressive incentives for especially volume buys into the industry. And this is where we just have to weigh the benefits of a short-term response versus long-term pricing integrity for our brands. So competition, Scott, remains intense.

Got it. And then just last question. You made a comment that there's really no '22s left and '23s and '24s out in the field on the RV side. Could you -- I don't know if you gave the information of how much of it is '23s versus '24s in a percentage standpoint?

Scott, I can share a little bit more detail with you here this morning. On the RV -- in the RV business, model year '23s at the end of our third quarter, so the end of May, probably we're in the low teens percentage in the field. That is probably a little bit better than actually where we were a year ago on RV two year ago model inventory at that same time. It is historically on the higher side when you look at pre-COVID. But again, I would say that at the end of May, in the RV segment, we were probably in that 12% to 14% range for model year '23 inventory in the field. And certainly, that's now one of our focuses as we work with the dealers to reduce that as the model year '25 product comes in. Again, we don't think it's in a position, which is existentially dangerous for OEMs or dealers, but it is historically too high, and we need to continue to focus on it. And our teams will do so to that end. So it's trending in the right direction. By the way, our June retail to date is trending better than our May retail performance across the RV brands. And so we are hopeful that, that retail trend in June is helping to bring that inventory down from prior model years as well.

Got you. That’s all I had. Thank you.

Thank you. Our next question comes from Joe Altobello with Raymond James. You may proceed.

Thanks. Hey, guys. Good morning. Mike, I just wanted to pick up on that last comment you made about June being a little bit better than May. I guess, first, was that an industry comment as well or was it just Winnebago specific?

No, Joe. Good morning, by the way.

Good morning.

My comment was specific to Winnebago Industries RV brands. We have about three weeks of retail. It's a five week month the way we kind of count it fiscally, but we have about three weeks of retail under our belts in June. And the total retail performance from a comp standpoint versus last June is running at a more favorable rate than our May comp rate actuals. It is still inconsistent. This is a bit of a maddening environment. You can see one week where you think blue skies are emerging. And then the next week, you'll see a more difficult retail week. The dealers that we speak to are echoing that. The foot traffic remains steady, but retail is inconsistent. But in macro, we're seeing a little bit better retail in June sequentially than we were in May. And again, that's for Winnebago Industries. We don't yet have insight into the industry. Yeah.

Okay. Helpful. And just a follow-up on that. I mean, obviously, you mentioned cautious dealer network several times this call and other calls. What do you think your dealers need to see to start ordering at a more normal rate. I mean, obviously, one or two good months probably is going to do it. But what are you hearing from dealers in terms of what would cause them or push them to start ordering at a more normalized order pattern?

That is the ultimate question, Joe, I think. And obviously, our dealers would be best positioned to answer that. When you ask that question, where IND is the following. Number one, they'd like to see their prior model year inventory from, in this case, both '24 and '23 in a little bit better position than it is today, especially the '23 inventory. Number two, they'd like to have a higher level of confidence that retail in the future is, what I'll call, stabilized and that there is a shot of flat-to-positive retail for an extended period going forward. Third, I think they want to make sure that they understand that OEM pricing on model year '25 product that is rolling out is competitive and that the support is there. And then lastly, probably number four, is some sort of signal of relief on some of those macroeconomic pressures that end up being real cost to them, i.e., the cost of carrying inventory or the retail cost of financing for a consumer that at times they buy down either directly or through negotiations on the trade ends. So I think it's a combination of those factors. And we believe that the world is getting a little bit more stable across the board on that. Brian referenced inflation is really nominal in our bill of materials these days. We're able to see price stability with our future lineups. OEMs are working hard on more competitive and affordable price points. So I think the pieces are coming together. June retail is a little bit better than May. So listen, nobody's been able to call accurately the sort of the pivot here to an upside cycle beginning, and we indicated in our prepared comments that the rest of calendar 2024 could remain sluggish, but we think conditions are slightly improving in terms of the timing of that to come around.

Got it. Very helpful. Thank you.

Thank you. Our next question comes from David Whiston with Morningstar. You may proceed.

Thanks. Good morning. In the press release, you called out inefficiencies on towables and motorhomes. Just curious, is the motorhome inefficiency, is that chassis related or is it more of the other variables you were talking about earlier, like direct labor?

It's more direct labor, David. And then on the towable side, as I mentioned, we had some plant consolidation in the Winnebago line, we had some new product launches that didn't go as we would have liked them to in terms of the productivity. Those things that I mentioned are really the drivers.

Okay. And in Marine, revenue was down 32% there, but you also talked about rising Barletta share. So I'm just curious, is there more headwind maybe on the Chris-Craft side where that customers may be on the sidelines a bit too much right now?

No, I don't think that, that's the case, David. Chris-Craft is a niche segment. It's too small to really impact our story there on the Marine segment. It's really the result of a broad sense of the dealer network having too much inventory. Pontoon, not just the Barlett brand, but all the other brands on dealers' lots are certainly impacting the willingness by dealers to take additional product. Even when we've got terrific momentum on the Barletta side and conversations with dealers about expanding on their lots in terms of our presence versus some of the competitor presence, some expansion of the dealer network itself, expansion of the product line, as I mentioned, with the Aria earlier. So it's more related to dealer appetite to carry inventory in the marine side right now, coming off some really high levels of inventory over the past six to nine months in particular.

David, I'll specifically mention on Chris-Craft that we've actually seen positive comp year-over-year retail each of the last four months on that brand. So that's really promising. Dealer inventory, to Bryan's point, is probably a little higher on that brand than we would like it to be currently. And if you look at Slide 17 of the supplemental slides that we provide as well during this day, you'll see a new product from Chris-Craft called the Sportster 25 (ph), which is a premium sort of water sports enthusiast product under the Chris-Craft brand that we think, with an MSRP starting at $150,000, which is quite attractive for a Chris-Craft brand that could make some waves, no pun intended, in a positive way in the future for that business. So as Bryan said, it's a brand cherry on top of the Sunday for us. It's 150 years old, but we're also very serious about remaining competitive on that brand as well, and the team is working hard to that end.

All right. Thank you. And just one last question on the direct labor issue we talked about earlier. Is that quality-related issue or something else?

Yeah. In certain instances, there's some quality things that we've been dealing with on the portfolio. I wouldn't say that it's at the top side of that, but it's not the main driver. The main driver is just the level of shipments, the deleverage that occurs and the product mix shifts that need to be done in an environment like this. So I would characterize it more related to that. We have had some new product introductions that have caused some initial productivity challenges as well, but that's not terribly unusual relative to our past.

You're not furloughing anybody, are you?

David, we worked responsibly over the last several years to react to the market downturn. We employ around 6,000 employees today. We were at a peak of almost 7,700 employees back in probably fiscal ‘21, fiscal ‘22. And so we’ve been very carefully and hopefully respectfully rightsizing our workforce to the size of the market and the size and the health of our business. And so we make adjustments in the workforce, both from a manufacturing and/or office standpoint very carefully. And we’ve been doing that diligently over the past couple of years as we manage this down market. So no new news on that front, but just a constant management of having the right quantity and certainly great quality of teammates here at our businesses.

Okay. Thank you. Appreciate it.

Thank you. I would now like to turn the call back over to Ray Posadas for any closing remarks.

Thank you for joining us this morning. We have a number of investor conferences and non-deal roadshows planned throughout the summer, and we look forward to meeting with you throughout the summer. This concludes our Q3 earnings call. Please enjoy the rest of your day.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.