Ladies and gentlemen, thank you for standing by and welcome to the Q2 Fiscal 2022 Winnebago Industries Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to your speaker for today, Steve Stuber, Vice President, Investor Relations. You may begin.

Thank you, Towanda [ph], and good morning, everyone and thank you for joining us today to discuss fiscal 2022 second 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. The news release with our second quarter results along with the second quarter earnings supplement were issued and posted to our website earlier this morning. Before we start, I'd like to remind you that certain statements made during today's conference call regarding Winnebago Industries and its operations may be considered forward-looking statements under securities laws. The company cautions you that forward-looking statements involve a number of risks and are inherently uncertain in a number of factors, many of which are beyond the company's control, could cause actual results to differ materially from these statements. These factors are identified in our SEC filings, which I encourage you to read. With that, I would now like to turn the call over to our President and CEO, Michael Happe. Mike?

Thanks, Steve. Good morning, everyone and thanks again for joining the call today. As always, we appreciate your interest in Winnebago Industries and taking the time to discuss our fiscal '22 second quarter results. I will start the call with an overview of our performance during the second quarter, and what factors are driving those results. Then I will pass it over to Bryan Hughes, who will walk through our financial results in more detail before I make some closing remarks and we turn to your questions. Winnebago Industries built on our strong momentum and delivered robust results in the second quarter of fiscal 2022, capitalizing on sustained and elevated demand for our portfolio of premium products. We grew revenues by 39% year-over-year to $1.2 billion, matching the previous sales record set last quarter. Overall, our results were shaped by two key dynamics. First, sustained and powerful consumer demand drove higher unit sales compared to the prior year; and second, Winnebago Industries successful execution of pricing actions to offset higher material and component costs. Also, the Barletta Pontoon Boat business, recently acquired this past August, contributed 9 percentage points of growth and continues to exceed our expectations and gain market share in the pontoon boat market. I want to spend a minute talking about these drivers in more detail. It all begins with the consumers continued strong affinity for the outdoor lifestyle, and in particular Winnebago Industries premium brands. Through our interactions with our consumers and feedback we receive from our dealers, consumers clearly recognize our products as being differentiated. This differentiation is a result of our relentless focus on our golden threads of quality, service and innovation. Robust consumer demand is a powerful undercurrent that we believe will continue to propel our company's growth through the current fiscal year…

Thanks, Mike, and good morning, everyone. As Mike mentioned, second quarter revenues, including results for Barletta were $1.2 billion, reflecting an increase of 39% compared to $839.9 million for the fiscal 2021 period. Excluding Barletta, our organic growth for second quarter was 29%. We were pleased to see that revenue growth was achieved in all three segments against a very robust 2021 comparison period. Growth in total was driven by a combination of pricing actions and unit shipments. We delivered another period of very strong profitability in the quarter, evidenced by meaningful growth despite a steep year-over-year comparison. Gross profit was $216.6 million, representing an increase of 38% compared to $156.6 million for the fiscal 2021 period. Gross profit margin of 18.6% was equal to last year, driven by operating leverage and pricing offset by higher material and component costs as well as some operating inefficiencies caused by supply chain constraints and the associated inconsistencies in the deliveries of parts and subcomponents. Operating income was $136.8 million for the quarter, an increase of 37% compared to $100 million for the second quarter of last year. Our second quarter operating income includes $0.5 million in acquisition-related costs and $4.6 million of incremental amortization of intangible assets related to the Barletta acquisition. Fiscal 2022 second quarter net income was $91.2 million, an increase of 32% compared to $69.1 million in the prior year quarter. Note that fiscal 2022 net income includes $6.5 million of contingent consideration fair value adjustment, which is included in non-operating income related to the earnout included in the deal structure associated with the Barletta acquisition. You will note that we are removing this deal consideration in the calculation of adjusted EPS. We are pleased to note that Barletta performance through the end of calendar 2021 as specified by…

Thanks very much, Bryan. In addition to delivering strong financial results and market share growth, Winnebago Industries continued our deep commitment to our corporate responsibility in our communities and for our shareholders. At the January RV Consumer Show in Tampa, we revealed the ERV, the first all-electric zero-emission motor home concept from a major RV manufacturing. The ERV concept vehicle is an entirely new all-electric zero emission RV that incorporates an advanced drivetrain and battery package that also powers all the living area systems of the coach. Designed by our advanced technology group for a new generation of RVers who want to preserve the natural world as much as they want to enjoy it, the ERV combines all electric operation with sustainable and innovative materials. We look forward to talking more about the ERV as we move closer to commercialization. Our go-to-market version is sure to bring significantly enhanced features and capabilities than the concept model shown. In addition to the exciting ERV, our Advanced Technology Group is also actively engaged on electrification relevant to marine and RV towable products as we continue our legacy of innovation and explore new frontiers and outdoor lifestyle products for the benefit of our customers, investors and communities. Now turning to our outlook for the remainder of 2022. I want to reiterate my confidence that the demand for outdoor lifestyle products and particularly Winnebago Industries brands will continue to be very robust. Looking at the RV industry at a macro level, we believe wholesale shipments for the calendar year could be down low to mid single digits percentage-wise as compared to the record 600,000 units shipped in calendar 2021. Backlogs remain elevated as supply chain constraints persist, which we expect to be an ongoing reality throughout 2022. We will continue to work closely with…

Thank you. [Operator Instructions] Our first question comes from the line of Gerrick Johnson with BMO Capital Markets. Your line is open.

Hey, good morning. Thank you. I have two questions. First, on the ASP growth. Can you talk about that a little bit? Where you're driving the highest level of price increases say, different classes or models? Where would you be having less pricing power? And what gives you confidence going forward on having pricing power in this environment?

Good morning, Gerrick. This is Bryan. We are seeing it pretty balanced and consistent across the brands. We are doing our best to match the pricing towards the inflation that we’ve already seen come through on our products as well as the inflation that we're anticipating, of course. And I think that’s how we’ve characterized it historically as trying to get ahead of inflationary pressures. If you look at it by brand, it varies quite significantly. And so, I had to take to give you any kind of specific numbers. But suffice it to say, it is material, the inflationary pressures that is. It is certainly in the double-digit range and in some cases, higher. And to date, as we've stated, we are keeping pace with our pricing. As it relates to a go-forward view, we will continue to monitor the inflationary pressure. Certainly, the current environment and our expectations going forward is for continued inflation. That is a change from our historical position where we have thought that in the back half of the year, we would see some easing of inflationary pressures. I think as everybody understands what the current situation and the geopolitical unrest in the Ukraine that we will now see some sustained inflationary pressures into the back half of 2022. So, we will continue to monitor that. We believe that we do have pricing power in the marketplace. We will seek first to offset inflationary pressures with cost savings initiatives or cost avoidance initiatives, and we will continue to price to the extent that we need to with the goal to maintain margin, not just the dollar per unit, but the margin per unit. That has been our stance historically and it will continue to be.

Okay. Thanks. And can I ask you, you mentioned record sales results at RV and Marine shows. How are you measuring those results? Are those deposits, orders placed or actually units going out the door changing [ph] hands? Thank you.

Yes, Gerrick, this is Mike. Each of our brands tracks retail sales at the various retail shows throughout the spring. Usually, product is not shipped off of the lots at those retail shows. So, product is usually not transacted physically, but there is a deposit physically taken in most cases and a financing agreement often consummated as well. So, this is something we've been doing for years. And we've been pleased to see decent foot traffic at the retail shows. But more importantly, the close rates at the retail shows this spring for our brands have been very positive. And again, setting records versus especially in the last 2 or 3 years

Okay, great. Thank you, Mike. Thanks.

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

Good morning, guys. Thanks for taking my questions.

Good morning, Scott.

Can we just go back to the pricing environment? I guess, before we had this recent skyrocketing of fuel costs and some other commodities. I guess there was a belief that, at some point, pricing would start to moderate. The dealers were on the front end of that, and they would have to absorb that. But has that narrative changed in the last months since we’ve seen fuel prices and everything else sorry to skyrocket?

Yes, Scott, good morning. This is Mike. We had the opportunity last week to host a national dealer sales meeting for one of our brands, the flagship Winnebago brand in Georgia. And we had the opportunity of that meeting to talk to hundreds of dealers in attendance about the dynamics that they're seeing in their business. A couple of notable things. One is, as I mentioned in our prepared comments, most dealers are very determined to run their business at higher turn levels and at higher levels of profitability in 2022 and beyond versus what they were doing pre-COVID. They are beginning to see a retail environment where maximum pricing power at retail is probably not able to be sustained in the way that it was throughout the last 9 to 12 months. And so, you are seeing retail pricing become a little bit sharper in the market and the dealers have margin room versus what they deem as acceptable to be able to react to the consumers' pricing preferences. Our pricing power is really specific to the brands that we have and the appeal those brands have with consumers and particularly our ability to innovate around new products. When we can get new products to market efficiently and effectively, that’s where we can work with the dealer to find that optimal pricing position in the market. If those new products are delayed to the market as they were to some degree in our motorhome business this quarter, that pricing power is a little bit delayed until we get that stream of new products going.

Got it. And then maybe just talking about inventory once again, lots of concerns in the investment community that the refilling of the pipeline will go well past equilibrium like what happened back in 2018. But it seems as if everybody is being a lot more judicious, obviously, you guys and your competitors in the dealer body. Can you maybe just talk about anything that you can share to allay any fears that people have that we could be seeing a repeat of 2018?

Yes, Scott, as you can imagine, we can't speak for our competitors. We can only reflect what's happening in the marketplace today. We are not hearing yet any significant signs of extreme discounting of open stock inventory by OEMs to the dealers. We are seeing dealers take a fresh look at their orders to OEMs. And review those orders and in some cases, refine those orders to OEMs within the industry to make sure that the manufacturers know exactly what products the dealer want and when they want them. So, we’ve been hearing of some order refreshing going on by many of the major dealers in the industry, but we are not hearing any irrational loading of inventory into the market at this time. We will take care of our own house and continue to make sure that every unit of production has either a retail customer's name on it or a dealer customers name on it and continue to only make to what we believe are confirmed orders in our system. But as of this time, we think the marketplace is rational, and we will continue to see the return to a new normal of inventory can land in an appropriate manner.

Got it. That’s all I have right now. Thank you.

Thank you.

Thank you. Our next question comes from the line of Craig Kennison with Baird. Your line is open.

Hey, good morning. Thanks for taking my questions as well. Mike, you mentioned the situation in Ukraine, and we also have a rising oil prices and potentially higher interest rates. So, lots of sort of economic concerns out there. How is Winnebago preparing for the next recession? And maybe how does this upcoming recession, if one happens, how might that be different than what we’ve seen in the past given the situation with your brand, with inventory in the channel and other dynamics?

Yes. Thanks, Craig and good morning. Specific to Winnebago Industries, our company has looked different probably in each of the past down cycles in the outdoor industry and any, I guess, what people may call recessionary environments. I want to be clear, we are not predicting a recession economically. And we are not in this call foreshadowing a significant collapse of retailer wholesale demand in the industry. But our company does look different in 2022 than we did in 2018 than we did in 2008 and 2009 based on the portfolio of products we have, based on the profitability of the lines of business we have, based on our knowledge and commitment and playbook to manage a highly variable cost structure within the company. With Bryan Hughes leadership, our balance sheet and access to liquidity is in a strong condition. And our business process is candidly, both because of systems and access to information, but also just higher levels of discipline, we think, are in an elevated position. So, a long answer to a short question, but we believe we have the wherewithal to right through any significant economic downturn or industry downturn and still have a healthy business in the midst of that. And one that candidly can be selective in continuing to invest in its future, whether that's new products or new systems as we go forward. As you know, most of the market downturns in the RV industry have ranged in severity. But generally, they have been relatively brief anywhere from 6 to 24 months in its tenure. And in almost all cases, the industry returns to a new record high coming out of that. So, we will be prepared to ride through any difficult times. And as importantly, we will be prepared to continue to invest in a disciplined way so that coming out of any future difficult times, our business should have some momentum going forward.

Thanks. And just as a follow-up to that, I think one of the changes was structural improvement in your Motorhome margin. Wondering whether you think those gains, which have been substantial are sustainable and whether they're volume dependent or if you think you've made significant change to that business even in a recessionary scenario, you can hang on to better margins.

Yes, Craig, our belief is that we’ve made some structural stair step changes in the profitability of our Motorhome business that should, to a large degree, be sustainable. Now I don't want to get into a hypothetical discussion on what -- a worst case scenario could look like and what our profitability would be, but the margins in our Motorhome business are roughly double today what they were 6 years ago, our gross profitability. And we believe a high majority of that is at a level now where it is sustainable based on the way we run our business, what we bring to market. Certainly, there can be factors that would test that if you got into certain worst-case scenarios, but we strongly believe that the profitability changes in the Motorhome business to now a double-digit plus adjusted EBITDA yield area is something that we have a good shot at sustaining in the future.

Craig, just the only thing I would add to that is a reminder of our variable cost structure. You asked the question in a way of, hey, what happens to your profitability with volume? We continue to maintain very intentionally a highly variable cost structure at 85% to 90% in that range, depending on which business you're talking about. And so that is still the right assumption and it's very intentional on our part to maintain that variable cost structure.

Great. Thank you.

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

Hey, guys. Just to continue along the lines of the pricing discussion. Maybe just in the quarter, I'm just trying to understand some of the puts and takes on the towable business, there was a step back sequentially in pricing, and we had seen pretty consistent increases there over the past couple of years. Obviously, with the price increases being put through, but can you maybe help us understand why we saw that quarter-over-quarter pullback in ASPs in Towable?

Yes -- Mike, thanks for the question. The 17% -- a little over 17% that we saw in the Towables segment in Q1 that I think you're referencing with certainly an outlier of sorts, was very high relative to the 14% to 15%. At that time, we acknowledged it as such and mentioned that in some cases, the timing of the pricing increases don’t necessarily match up perfectly with when the inflationary pressures are realized in the P&L. So, in other words, you price ahead of inflation in some cases. And so that was certainly part of the answer there. We also had in the second quarter some disruptions as well to the productivity. We had some weather events. We did have some acute supply chain challenges that affected our productivity a bit. So, it was a couple of things. But I think the big takeaway there is we still feel very good about the margins we realized in Q2 for the Towables business and for the Motorized business for that matter. But, yes, sequentially, we did see a little bit of a step down from the really strong Q1 margins we realized.

Okay. And maybe just a clarification. I’m sorry, I didn’t mean margins, I was talking about just the ASPs in the total business. Was there a mix change between the first quarter and the second quarter, that was significant?

Yes. I think it's more tilted towards the travel trailers. They are growing much faster than the fifth wheels. And so, you do see an ASP impact from that mix change.

Okay. Perfect. And then maybe switching over to Barletta, just trying to better understand maybe the share growth opportunity there. I know they've been constrained somewhat with dealer expansion, just given everything that’s been going on with trying to rebuild inventory at existing dealers. So maybe give us a sense of when we should see some of those future opportunities start to come to fruition?

Yes, Mike, Barletta continues to experience both organic growth through its existing dealer network and as you stated, have future opportunity to add new dealers to its network. And, by the way, additionally, their product line expansion ideas are multiple, and you'll see some of that in the future as well. So, we believe that, that business can grow candidly in three ways: market share with its existing product line and dealers, new dealer penetration and additional new products to the catalog. And I think you'll see that over the course of the next several years. The primary factor to not being able to expand the dealer channel in the Barletta business as quickly as that team would like has almost solely and exclusively been the supply chain constraints. We feel an obligation and a loyalty to the Barletta dealers that do carry the product today to make sure that we can deliver the orders that they’ve committed to us before we go and set up new dealers across the country. We are getting to a point with the production output at Barletta and some supply chain stability that I think the team can begin to entertain that as we turn the corner into our fiscal '23 year this fall and probably more so into calendar year 2023. We won't share any specific details yet, but we also have plans within that business for product line expansion as well. So, as I referenced in my comments, market share at Barletta is around 5% as we sit here today. And we’ve continued to maintain that their potential is as a top 3 pontoon brand in the North American industry with potentially market share that is in the double-digit percentage range someday. And we are still convicted around that and very pleased with the first 6 months of performance from the Barletta business to date.

Okay, great. Thanks for the color.

Thank you. our next question comes from the line of Brett Andress with KeyBanc. Your line is open.

Hey. Good morning, guys. I think, one thing investors are trying to maybe tease out today is comparing your results to your peer that had a January quarter end, and I’m not trying to compare the two in this question. I don't necessarily think that’s the right approach. But what I'm getting at is did anything change in February from either a margin supply chain or pricing power standpoint compared to maybe what you saw in the first 2 months of the quarter?

Brett, this is Mike. I would not say that February was demonstrably different than January within our business. Certainly, the marketplace is volatile enough today with external factors and noise, and we all could list a half dozen of them. But I would say in macro, the industry did not change dramatically overnight between January and February. I just -- again, I think it is important to stay clear at times of some direct comparisons between peer companies. Our complexion that portfolio-wise is different. Some companies are more or less vertically integrated. Some companies are more or less geographically diversified. Some companies candidly are more or less disciplined on shipment share versus market share and production systems. And so, we are pleased with our results. Share gains, market margin stability. And we have confidence in the back half of our year as we sit here this morning to continue to produce consistent healthy results.

Got it. Understood. And then, Mike, I think you answered some of this in Scott's question, but historically, you're giving us, I think, some real-time retail insights. Is there anything that you're seeing in your dashboard? I think you like to call it the last week or two or however you want to frame it up as it relates to a lot of the things that have come up on this call, right, around gas rates, consumer sentiment what have you.

Well, we certainly are tracking all of those factors, several of which you just mentioned there. We don’t always believe that any single element, gas prices, interest rates, stock market volatility, we're not a believer that any single element can maybe in and of itself move the needle dramatically in the short-term. We do believe that a combination of factors when put together can result in a net positive or a net negative impact on consumer demand. We did notice, obviously, the recent drop in consumer confidence that was released recently. And that maybe an aggregate metric of how consumers are certainly feeling, probably a little bit more nervous today than they have been in the last year or 2, for sure. So, I will tell you our recent retail results have been in that sweet spot that we've been describing for some time now. Not quite as strong as a year ago, but much stronger than 2 years ago. So that's how I would describe recent retail results in early March of 2022. And as we stated, we believe that the retail environment for calendar year 2022 in the RV industry can be probably a top two result and probably worst-case top 3 if it were to fall a little lower. But selling more than 0.5 million RVs in a calendar year is still, in our opinion, a very healthy consumer demand environment.

Very helpful. I appreciate it.

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

Hey, guys. I just wanted to follow-up on your wholesale outlook. I think you said down low-single-digit to mid-single-digit for the year. That seems to be a little bit below where the RVIA is currently, even at the low end of the range. So, could you just sort of walk through how you see the next few months of wholesale trending? Do you think it will be sort of a step function down? Do you think it will be more gradual understanding that you're not in control of the entire industry, but at a high level?

Yes, that’s correct. I mean we aren't in control ultimately of that entire wholesale number. We contribute to the conversation within the industry around the projection that the RV Industry Association ultimately releases. The 590, I think, that’s sort of the midpoint of their forecast is certainly on the higher end of the range that we communicated this morning. So, you could infer that we believe there could be a little bit of downside to that. But this is all relative to the retail environment and our hope/anticipation that other OEMs will continue to be responsible as well. And that turns in the industry will probably start to normalize around what we hope is around 3 turns in the RV industry. So, I wouldn't say it's dramatically new thinking, but we probably have put a range that extends a wholesale environment downward just slightly today, but still a healthy environment in our opinion.

Makes sense. And then if we just look at your comments last quarter, Mike, you've sort of highlighted just how important February, March and April retail trends would be just for the inventory replenishment horizon. Just could you sort of summarize how that has shaken out to date versus what you would have hoped to see and how that sort of feeds into this towable inventory normalizing in the middle of '22?

Yes. I think replenishment of the Towable segment has gone faster than maybe some of us in the industry would have thought about 6 months ago. That’s probably a credit candidly to the supply chain and the key suppliers in the Towables category being able to get OEMs enough product to try to work down those backlogs. So, I would say that's probably the biggest development in the last 3 to 6 months has been the pace of recovery on the towable RV segment. We have not seen that type of pace of recovery on the motorized RV segment nor on boating field inventory. And so, we still believe that the motorized RV category and the two categories that we compete in, in the Marine segment, both have runway in 2022 into 2023 before field inventories will be normal. So, we'll wait to see how the March shipment numbers were in the RV industry to understand what the other OEMs are doing from a production standpoint. But as I said earlier, we are hearing positive things about our competitors and how they're managing their production schedules. And the dealers are not coming back to us with frequent chatter of unhealthy behavior from an overstocking standpoint. So, I think we will see in the next 3 months here, how the towables market sort of settles. And then I think the industry has to go to work continuously on making sure dealers have enough motorized product in the future.

Perfect. Thanks guys.

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

Hi, good morning. This is Ethan Huntley on for Bret. Thanks for taking our questions. Maybe can you just talk about cadence of supply chain and whether you've seen things improve, I guess, both on the marine front with engines? And then maybe secondly, with motorhomes chassis?

On the Marine front, we predominantly use one of the leading brands of engines on both of our marine product brands. And I would say that our primary supplier of engines on the Marine side has been very good to work with and has been relatively consistent here in the last 3 to 4 months. And so that supply category is stable. We certainly have prospects for growth in both of our Marine business and we'll work with that supplier to earn the right to get more supply from them in the future, which we anticipate will happen. The Motorized chassis environment continues to be a bit inconsistent, is just the best word I'll continue to use there. There are certain months where one of the motorized chassis suppliers is giving us some challenges. And then the next month, it can be someone else. And so -- and I won't get into details on how the motorized chassis supply sometimes works. But it's not always a sort of constant daily just in supply flow as well with the -- especially due to the semiconductor chip challenges that those chassis manufacturers face. We can sometimes see periods of ample chassis inventory that they ask us to obviously take and buy into or you can see periods of drought where chassis become unavailable for a period of time. And so again, inconsistent is the best word there. Unfortunately, we don't anticipate motorized chassis supply chain stability for probably through the rest of 2022, I think we will continue to fight that inconsistency.

Got it. That’s helpful. And then maybe just lastly here, we’ve heard at the retail level, some significant emphasis is being placed on the use side of the business. Can you just sort of walk us through any puts and takes as to how that might affect your business?

Yes. We certainly are aware of with our dealer partners, their emphasis on used inventory within their business models, and it does vary a little bit from dealer to dealer. And certainly, some of the larger dealers in the industry have been very direct in their plans and intentions around used inventory as well. We believe that a healthy used inventory market is a good thing. It allows for turn a product with the consumers that we believe allows consumers who want to exit the lifestyle to do so efficiently, but also allows people who want to get into the lifestyle to be able to do so often in a more affordable way than buying something new. And as we continue to work on the secular growth and popularity of the outdoors, we think it's imperative that a healthy used market continue to reemerge here in terms of both supply and stable pricing. And as an OEM, we are not particularly activating against used product strategies within our business model at this time. And so, we just have to work closely with our dealer partners across our businesses to understand if there are any impact and what they'll take from us on new products. But we do see that market improving and dealers continuing to be creative on how to secure product prices are moderating a bit on the used product market, although they're still very elevated versus a year or two ago. So, we anticipate that along with new product field inventory that the used market will heal itself as well.

Great. I appreciate the color.

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

Thanks. Good morning. First on Motorized, the Class B units were up, while A and C [ph] fell. I'm just curious, is that more favorable demand for the B segment? Or is it a result of supply chain problems that are impacting A and C more than B?

Our Motorhome segment this past quarter was probably more challenged with supply chain issues in Q2 than we had seen in Q1. And so that will affect both the mix of products that you see shipped and that consequently will affect some of the ASP and the margin mix as well within that segment. The reasons for David, though, supply chain efficiencies very across our Newmar and Winnebago brands. I would say the only other factor for Winnebago branded motorized is we have a tremendous new product called the Echo that consumers are flocking to. We have a significant amount of orders on that. That’s a very hot viral product in the RV marketplace. There's really nothing else like it. And we continue to try to increase our output on that product, and we did run into some challenges around the Echo, which is a Class C product in this past quarter. And those are being resolved and we anticipate flow of echoes back to the market in Q3 and Q4 will be better than in Q2. So, the reasons vary, but almost all of it is related to supply chain constraints at this point as our motorized backlog continues to be very healthy and many months long.

And you -- it seems like you’ve definitely made it clear that the supply chain issues are impacting motorized more than other parts of the company. Is that mostly chassis? Is it chassis and like 1 or 2 other key areas?

Chassis are a part of it at times. I would say -- and I always -- I’m never going to name names on a phone call like this in terms of specific suppliers. But we continue to see challenges at times with portable power generation within our products. I mean that’s probably the key category in Q2 that has challenged us in terms of getting motorhomes out the door. Unfortunately, if you look at some of our inventory numbers, you will see some elevated inventory numbers, which means we have the parts. At times, we have an unfinished product still sitting on the grounds waiting for that final component before it is shipped to the market. So, we continue to battle the supply chain more so on motorized than we do towables these days.

And on working capital and cash flow statement, there's a big headwind in AR that was not present at this time through the first half of last year. What's driving that?

Yes, this is Bryan, David. Some of that is it's all the same. It's the timing of deliveries. And to the extent that the supply chain issues might be resolved later in the quarter, which we are seeing happen. So, vendors understand the pressure we have at the end of the quarter to get our units shipped. And oftentimes, we will come through with that end of quarter help for us, and that results in the timing of the shipments to be tilted more towards the end of the quarter and therefore, accounts receivable elevated. So, it shifts. In some respects, the inventory problem into an accounts receivable problem at quarter end just from the timing of some of those mitigating efforts.

Okay. And finally, on the ERV, if someone was just casually interested in the emerging electric RV space, and they saw your release with 125 miles and then with 300 miles in an integrated fuel cell, someone might be tempted to think, well, it's must be ahead of Winnebago and battery development and that’s probably not fair or an oversimplification. Just curious what would your response be?

David, we're very focused on having a high-quality electric RV product in the marketplace that has acceptable features and capabilities for consumers that are interested in that product. Our concept vehicle has been driven extensively with the existing technology that’s in the product. We are communicating exactly what we know is real at this time with a product that’s been a concept model that’s been driven extensively. Our number does not include any range extension technology that may or may not be commercially or financially feasible. And we will continue to stick to feature descriptors that have been proven in our test environment through our engineering teams and with our motorized chassis partners and our electric motor and technology partners. So, we are not worried in the long-term about not having competitive products around electric RVs in the market in the future. And we will let our competition whoever it is, describe and sell their products in the way that they choose. But what we’ve communicated is what we know today through extensive testing. And what we will release in the future as an actual product for the market to consume. We have stated several times in the last 2 months that we anticipate the range to be higher when the product goes to market than what we are communicating today. So, I would just ask everybody to be patient as we work through the engineering and product development stages of that project.

That makes sense. Thank you.

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

Hey, guys. Good morning. Just two quick ones for you. I guess, first, more of a point of clarification, you mentioned order refreshing on the part of your dealers. When you say backlog, that represents a firm dealer order, but doesn't necessarily mean that the customer's name on it. So, do you know what percentage of your backlog today is retail sold at this point?

Joe, good morning. That number varies by brand. It's probably highest on our luxury brands Chris-Craft and Newmar and in some cases, on those brands could be approaching even as high as 50%. The percentage of retail sold is probably lowest on our higher volume travel trailer categories where that number is probably somewhere in the low double digits. It does vary as dealers and our sales team continue to collectively revisit the order positions. And we've been very clear that -- in how we define our back orders and the integrity of the process we use and certainly that they can be canceled by dealers as they deem. We are not seeing a high rate of cancellation of dealer orders at this time. Rather, we are seeing some of our dealers go in and just continue to refresh the timing and the mix of product, especially stocking inventory. We do anticipate that as the retail environment heats up seasonally in March through July, that the retail sold orders will probably increase just based on inconsistency of field inventory mix in the channel. But that -- the answer to your question, unfortunately, varies widely between category and brand.

Okay. That’s helpful. And maybe secondly, it does sound like you expect dealers to swallow most of your price increases. I guess why wouldn't you expect to see some pushback on that since inventories are almost back to new normal on the towable side and retail is expected to be down this year. Obviously, their margins were elevated, but at the same time, your margin is elevated as well versus historical. So, I'm just trying to get a sense for how those discussions are going.

Joe, I can assure you that our business unit presidents and their teams are having very robust pricing discussions with our dealers about what everyone feels the market can accept. And unfortunately, there are times where our hands are tied by our suppliers in terms of the frequency or the degree of the cost increase we face from them. And again, those inflationary pressures have not subsided significantly in Q2 versus Q1. But I would tell you that the conversations with the dealers are very direct about what we believe the market can handle. And so, we recognize that we’ve been in an inflationary price increase environment here for probably going on now roughly a year. And whether you call that sort of late cycle or not in terms of sort of a price increase time period. It probably wouldn't be surprising that our ability to raise price in the future will be more challenged than it was on day 1. But if we continue to come out with high-quality new products, refresh floor plans, we believe that in partnership with our dealers, we can continue to have margin stability for both parties for some time longer. But I would just say again, the conversations about pricing are very, very healthy between us and our dealers.

Okay, great. Thanks guys.

Thank you. We have a follow-up from the line of Scott Stember with C.L. King. Your line is open.

My question has already been answered. Thank you.

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

Great. Thank you, Towanda, and thank you, everyone, for joining our call today. With the official start of spring this past Sunday, we certainly hope everyone is enjoying our plans to enjoy more time in the outdoors. With that, have a great day, and thanks again for joining us.

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