Hello, everyone, and welcome to the LCI First Quarter Earnings Call. My name is Emily, and I'll be moderating your call today. [Operator Instructions] I will now turn the call over to our host, Lillian Etzkorn to begin.

Good morning, everyone, and welcome to the LCI Industries First Quarter 2024 Conference Call. I am joined on the call today with Jason Lippert, President and CEO; along with Kip Emenhiser, VP of Finance and Treasurer. We will discuss the results for the quarter in just a moment, but first, I would like to inform you that certain statements made in today's conference call regarding LCI Industries and its operations may be considered forward-looking statements under the security laws and involve a number of risks and uncertainties. As a result, the company cautions you that there are a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in the forward-looking statements. These factors are discussed in our earnings release and in our Form 10-K and in other filings with the SEC. The company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. With that, I would like to turn the call over to Jason.

Thanks, Lillian, and good morning. I'd like to welcome everyone to our First Quarter 2024 Earnings Call. We have started off the year exceeding expectations with strong profits and margin expansion in the first quarter, driven almost entirely by the continued strength in our diversified businesses and our disciplined operational execution. It is important to emphasize that Lippert is fundamentally much more than just a supplier to RV OEMs, thanks to our strategic execution around diversification over the last decade. The global expansion of Lippert brand into growing markets like transportation, building products, automotive, marine and RV aftermarkets, manufactured housing, Europe and other adjacencies has been a key boost to performance in recent years, helping mitigate the cyclical impact that the RV industry can have. For Q1 2024, we delivered $968 million in revenue, up 16% sequentially. Our aftermarket segment led the way with solid operating margins of 11.8%, along with other parts of our adjacent markets, while our RV OEM business is improving from prior quarters. To date, we are tracking to the $200 million of organic growth increase across our business that we announced last quarter. In the first quarter of 2024, 57% of our total sales were derived from our businesses outside of North American RV OEM. Even with the significant growth we have already achieved in these markets, we still have an extensive runway with over $11 billion in combined total addressable growth opportunities ahead of us. Of our addressable growth opportunities, we estimate over $5 billion of potential in aftermarket and over $4 billion in combined international and adjacent markets. Given this runway and backed by a solid balance sheet, we plan to continue to seek out and invest in more organic growth, as well as strategic opportunities to further diversify our business. Additionally, we…

Thank you, Jason. Our consolidated net sales for the first quarter were $968 million, a decrease of 1% from first quarter 2023. This was primarily driven by lower North American marine production levels and decreased selling prices which are indexed to select commodities, mostly offset by increased North American RV wholesale shipments. On a sequential basis, we were up 16% from Q4 of 2023, delivering strong growth across most of our markets. OEM net sales for the first quarter of 2024 were $758 million, roughly flat with the same period of 2023. RV OEM sales for the first quarter of 2024 were $460 million, up 15% compared to the prior year period, driven by a 9% increase in North American RV wholesale shipments, partially offset by decreased selling prices, which are indexed to select commodities. Content per towable RV unit was $5,097, while content per motorized unit was $3,656. Both were down compared to the prior year period, primarily attributed to the index pricing pass-throughs. We had sequential growth of $39 for Towable and $150 for motorhome content over Q4 of 2023. We have continued to increase our organic content and market share through our focus on innovation. In Q1 of 2024, our organic growth contributed approximately 1.6% year-over-year in LTM content per unit. Adjacent industries OEM net sales for the first quarter of 2024 were $299 million, down 17% year-over-year primarily due to lower sales to North American marine OEMs. North American Marine OEM net sales in the first quarter of 2024 were $65 million, down 45% year-over-year, driven by inflation and rising interest rates impacting retail consumers. As Jason mentioned, we anticipate the softness to continue throughout the year. However, we anticipate that pressure on marine sales will start decreasing towards the end of the year as we…

[Operator Instructions] Our first question comes from the line of Dan Moore with CJS Securities.

This is Justin on for Dan. Can you give us an update on what you're hearing from OEMs and dealers regarding retail demand? And then you made some comments about the spring selling season. so are you able to give us an indication on where that demand is trending on a year-over-year basis?

Yes. So obviously, with the retail sales just coming out, Justin, we saw that those were down again here for the month of March that was reported. But we still feel comfortable that the retail, and this kind of corresponds to what I think some of the other industry players have said recently, but 325 to 350 on retail as well. We don't see any reason that we're not going to get there. Obviously, if interest rates lower sooner I think we'd get there quicker. But I think we feel comfortable with the 325 to 350 number. And retail is happening out there, but there's probably some people sitting on the sidelines because they're just waiting for interest rates to drop.

Okay. That's helpful. And then on RV and Marine, I know you mentioned some marine softness and you expect that to abate kind of in the back half of the year or get a little easier as the comps get easier. So beyond 2024, when do you think we can get back to your more typical 3% to 5% annual content growth specifically?

Yes. Again, I think it depends on when retail starts kicking wholesale into gear again. And I talked to a couple of the key boat CEOs just yesterday and dealer inventories are down pretty good compared to where they have been in the past. So I think it's just a matter of retail kicking up and pushing things forward. But like we said in our comments, prepared comments, that sequentially, we start getting better in the back half of the year or comps could get better in the back half of the year, starting in June when things really started to fall off last year at the beginning of the summer.

The next question comes from Fred Wightman with Wolfe Research.

Jason, you gave some color on how you see towable shipment cadence in the back half of the year. I think you talked about a pickup in July and then maybe some moderation beyond that. I assume that's just the model year changeover, but can you give a little bit more detail on how you see that trending?

Yes. I mean we're obviously seeing some wholesale pick up in the spring here. Dealers need inventory to sell through, but they just appear to be bringing on just what they need and don't see that picking up until their rate situation gets better and the rate situation gets better for the retail consumer. So again, we feel -- we came out last quarter 4 and stated that in October that we felt 325 to 350 was the number and that appears to continue to be right where things are headed. So yes, it's about what I can say on that.

Okay. And you mentioned the March retail data that just came out. If we look at just reported results for the industry and then comp trends or unit trends for some dealers that are emphasizing lower-cost value units, I mean, it seems to be a pretty big delta. So I'm wondering if you could just touch on how you guys think content per unit and sort of overall trends at Lippert shake out if we do see a prolonged shift towards lower cost product?

Yes. I mean I don't think there's a long-term shift toward lower cost. I think it's the time that we're in right now. And we've been seeing a steady movement toward a lot of these entry-level trailers. Camping World talks about the 11,999 trailers that they sell a lot of. We've seen gravitation towards single-axle trailers, these cheaper units. Over the last couple of years to the tune of -- used to be closer to 15% of our chassis production now it's closer to 20%. But the other thing that's dragging content is just some of the bigger toy haulers, those are way down. And those -- for us, content can get up to 15,000 a trailer. So the toy hauler space is kind of dead right now. And then we're going to continue to innovate on content as we've talked about. We're going to find ways to either bring new products to market, like we talked about with the window products and our suspension products, but also we're going to continue to evolve our existing content and add bells and whistles and features to drive content up there.

The next question comes from Scott Stember with ROTH MKM.

Lillian, maybe on the margin side, 23%, very impressive. You said that the second quarter would be sequentially higher, I guess. Just trying to get a sense of how much stickiness is here, given all the puts and takes and particularly with content and also on the operating margin line. Do you have some visibility of where you think the range could be for the full year?

Thanks for the questions. So no, very pleased with the performance this quarter. As I mentioned, we achieved some of the margin expansion a little bit earlier in the year than we originally anticipated, and that was due to the lower material and freight costs and also some nice improvement on the warranty line as well. So when I think through the cadence of the year, in particular for second quarter, that does tend to be our seasonally high quarter, in large part because of our diversified businesses, specifically aftermarket that tends to be the high quarter for aftermarket. So specifically from a margin perspective, I would expect the margins to improve slightly as we move into the second quarter just from a drop-through of volume. And just to give a little bit more color on that from an overall revenue perspective, sequentially, I would see second quarter up about 10% in total, led by aftermarket at about a 20% sequential improvement. So where that would land us from a margin perspective in the quarter on the gross margin line is about 24% when I think through the drop-through incrementals. We previously shared in our prior call for the full year, overall operating income margins to be in the low single digits. There's nothing that I'm seeing from our estimates for the year to move from that. I still feel very comfortable with that from an overall full year perspective, but just again, trying to provide a little bit more color for the second quarter, if that's helpful.

And too, Scott, with respect to diversification, I think that the quality of our margins on the diversified parts of our business have continued to evolve and get better and better every year. So while we start diversification, the top line 11 or 12 years ago, the quality of our margins there are continuing to get better and continue to lift up the rest of the business.

Got it. And just shifting over to the aftermarket. Could you just give us some reads of POS or at the dealer level rate fix kind of demand? Just trying to get a sense of what's to come from the repair cycle, which will likely start this year.

Yes. So yes, we've done a lot of talking about the repair cycle, the last several calls as all these units that were built and during Covid start to come into repair replacement cycle. So that's going to be really healthy, and we anticipate a lot of good opportunity there. Again, part of the reason is because our content was bigger in those years than prior years. So as our content continues to grow, as we mentioned, 50% since growth in 2020, we ought to see more and more content replacement in the repair and replacement cycles in these next couple of years. So we're excited about that. I think at the dealer level right now, you're seeing the retailers and dealers be cautious about bringing in too much parts and pieces and upgrade content inventory, just like they are the full RVs, and, as you know, our aftermarket kind of divided in automotive aftermarket, marine and RV and the automotive is a side that's really doing well for us right now. CURT's expanded greatly since we bought them in late 2019. And I think we're up 40% there on the top line, and it was a $300 million plus business when we bought it back then. So that's helping lift the aftermarket pretty significantly.

Got it. And just last question on the balance sheet, the $460 million convert to in '26. Just trying to get your sense of what your plans will be for that if you were looking at it that far out.

Yes. I think it's still a little bit early, Scott, for us to have to look to do anything, obviously, continue to watch the market and look to see what opportunities there are. But I'd say we're still probably early overall for refinancing of the elements on the balance sheet.

The next question comes from Mike Swartz with Truist Securities.

Maybe just to start off, Lillian, just on the towable content year-over-year, I think it was down about 13% in the quarter. And I think you said organic volume, if I heard you correctly, it was up 1.5% or so. Could you just give us the breakout of price and M&A and organic as you usually do?

Yes, I'd say the biggest driver, again, as we've been talking in the past couple of quarters has been that index pricing adjustment. That was in the low double digits this quarter. Again, that's going to continue to abate, that gradually has been coming down in the prior quarters. When we move into Q2 on a trailing 12-month basis, that will be down into the, call it, the mid-single digits at that point. So really, the 2 biggest drivers there is it's the index pricing pass-through of about, call it, 10-ish, 11%, and then we have the goodness on the organic growth of 1.5%, 1.6%. And that also, as we continue to go through 2024 in the next few quarters, you'll see that continue to increase. If you recall, overall, our expectation is typically 3% to 5% of organic growth in any given year. And obviously, that varies in a year, but overall, that's kind of the expected organic growth that we would expect for the business in the year.

Okay. That's helpful. And then, Jason, maybe just on the $200 million in new business wins. Could you maybe just break that down a little bit for us? And I'm just trying to understand like how much of that is RV, how much of that is marine and others. Does that include the new Camping World furniture business? And then just any commentary around as far as the visibility you have right now, model year 25 versus model year '24 in RV.

Yes, sure. No problem. So we figure over half of the number's RV. It does not include the camping world as fresh as that is. So there's a lot of innovation going on. We've got a lot of great products around the RV space. We've got customers like Brinkley, who is relatively new to the scene that we continue to grow content with as they continue in organic growth with, as they continue to grow their business. And then I'd say one of the other areas is the axle products and suspension products. We've got a lot of innovation going on there. And again, all over our business, we're innovating in every piece of our business. So part as other content, we've mentioned the bus products and things like that, where we've got chassis stretching and bus seats that are brand-new to organic growth pieces and new business coming in there as we grow those new markets. So that would be be some granularity to some of the things we're doing with respect to that $200 million.

Okay. That's helpful. And then maybe just one follow-up for Lillian. And I think you had just said in terms of or in response to Scott's question about -- I just want to make sure I heard it correctly -- around full year EBIT margin. I think you said around low single digits. Is that what I heard? And I think you had said mid-single digits back in October, but just correct me if I'm wrong in how I'm thinking about that.

Yes. It should be mid-single digits. Mike, so thank you for the clarifying question. That would be our expectation for the full year, consistent with our prior messaging of the mid-single digits for EBIT percent.

The next question comes from Thomas Martin with BMO Capital Markets.

I know in the past, you've talked about how there's open unit right there ability on the 20 that you're comping against. Can you quantify what that impact was relative to, like, the RV wholesale production?

You got the question? You want to repeat that again Tristan?

Yes. They're just asking the benefit from comping against the open units that were shipped relative to the reported RVIA numbers in the quarter.

Again, Tristan, just to make sure I'm understanding the question. So in terms of the content per unit, so when we're reporting that, it's on a trailing 12-month basis. So we actually, in that computation, it's still a headwind for us because of the wholesale exceeding production in 2023 calendar year. As we progress through 2024 calendar year, our expectation is that wholesale and production will be more closely aligned. So it won't be a tailwind -- or I'm sorry, a headwind as we move through the year. But it still is a headwind this quarter of a few percent points. Does that make sense?

I guess I was really asking you if you can quantify just the number, as in wholesale production was 10,000 more due to open -- so trying to get a number to quantify. I apologize, I'm at an airport so I might be hard to hear.

No, that's okay. From a wholesale versus production in 2024 calendar year, we're seeing that much more closely aligned. We didn't have the same situation that we had in 2023 calendar year.

Okay. Got it. And then I just kind of have to ask this question. There's been a ton of chatter about some of the [indiscernible] for Jason. I wanted to know if you had any thoughts or opinions you wanted to share.

I didn't hear the question, Tristan. What was the question?

Let me hop back in queue and see if I could find a better spot.

That sounds a little bit better if you want to try again.

Okay. I just have to add, a ton of chatter with some of these [indiscernible] headlines and issues. Just wanted to get your opinion and your kind of comments on it.

Yes. Thanks. Okay. I got you now. Yes, I mean contrary to the Davidson note that came out, I'll tell you that we don't have widespread frame issues. We don't have widespread warranty issues. So the long and short is that we design frames to flex and over the years we've seen a handful of units. The numbers, as they come out to from a unit standpoint, it's insignificant. It's 300% of our total frame warranties. And in terms of dollars, it's less than 100%. So it's hardly worth mentioning. What I can say is that with the issues related to the chat around Grand Design is they have issued a technical service bulletin to their dealers and the consumers. So as far as I know, they're fixing those. Everything that pops up with respect to a customer concern today, I'm 100% confident Grand Design is taking care of their customers. And again, we've seen these flex issues over the years. We've got -- especially on heavier units of 15,000 to 21,000 pounds, ou see they're just giant houses moving down the road and sometimes with overloading or road abuse or an excessive impact you can see some walls break-loose from the frames, and it happens from time to time. And when they do happen and there's an issue with a manufacturer, they're generally getting taken care of. So that's probably the short answer. Our frame warranties -- less than 0.75% of everything that we build has been for the last 10 years. 2024 is tracking the same. So hopefully that debunk some of the chatter out there. There was some big time social media stuff months ago, but I think it's quieting down. And like I said, with the issuance of the technical service bulletin and the dealers, those issues are getting taken care of.

The next question comes from Alice Wycklendt with Baird.

On for Craig today. Most of my questions have been answered, but maybe I just wanted to dig in on the M&A landscape. I mean, I think you said you're in more talks today than you were a year ago. What areas are you focused on? And what are you seeing out in the market today?

Yes. So I mean we're focused just as much on adjacencies and aftermarket probably as we RV. There's -- as we've acquired in the RV space over the last 20 years, there's probably less to buy there. So I would say most of our M&A is focusing on some of our adjacencies in aftermarket. But we feel like we can get a couple of these deals over the finish line in the next 12 months. I mean we're making good progress, and we're having -- we didn't have any -- hardly any conversations last year because we were just paying attention to our use of capital and our cash flow given the environment. But things are obviously improving and results are improving, and we feel pretty solid about where adjacent markets and our aftermarkets are sitting as well as our RV market and our performance there. So I'd say we're making good progress with some targets to that.

The next question comes from Brandon Rollé with D.A. Davidson. Brandon Rollé: First, on the frame flex topic, we just talked with Winnebago on Monday, and they indicated they weren't the only OEM that was having frame flex issues. So I guess, I think Grand Design has got a lot of publicity obviously. You guys had to quiet some of the influencers, but what other OEMs are seeing these frame flex issues? And I know you said it's not widespread, but are there issues with each of the 3 main OEMs? Or is it just concentrated to a couple?

Yes. I mean, there's none that I'm aware of. I mean, again, frame flex I'd say every brand of fifth-wheel because of some of the overloading and trauma that some of these units, these bigger units -- again, we're talking -- this is only happening typically on 15,000 to 21,000 pound units, which are largely the luxury high-profile fifth-wheels and heavy toy hauler fifth-wheels. You don't see this issue on travel trailers and low-profile fifth-wheels, you just don't see it. But there's maybe -- every brand has had, since I've been in the business, 3 or 4 a year to just pop in. So yes, as Mike said, it's not a new issue, but it's certainly not widespread and it's certainly not happening everywhere. I'd say to put it in numbers it's probably 5 to 10 a year for each brand, but that's not news. Brandon Rollé: Okay. Great. And who would be on the hook for any of these issues that are going on or people having some warranty claims or whatever the case may be is, were you guys just producing really good frames and it's on the customer or the OEM? Or are you guys potentially liable for any of these issues?

Yes, I'd say that technical service bulletin calls out specifically to the dealers that they're checking for some of those screws from the walls of the frames and things like that. So like I said, our warranty on this will be less than 300% on our businesses, on our frame business. So Grand Design is handling this with their dealers and they're taking care of every single one that pops up. I don't have really any more I can comment there probably. Brandon Rollé: Okay. And then kind of circling back to Tristan's question earlier. In 1Q 23 last year production was less than shipments. Are you saying in the first quarter of this year, production and shipments were more or less aligned? I guess we're trying to just trying to understand what the headwind was last year, so we can better understand where your content is shaking out.

Yes. Sure. That win last year was largely around the fact that there just was no production in January. And there was not a whole lot in February either. But the OEMs were shipping. All their yards were fairly full, and they were shipping units. So wholesale numbers were being -- were happening to the dealers, and there just wasn't any production. And this year, you're seeing yards that are normalized and wholesale happening and production kind of equaling what we're wholesaling this year. We just had a big gap last year in January.

We have no further questions, so I'll hand the call over to Jason for closing remarks.

Yes. So we're really proud of our results this quarter and things are looking a lot brighter in the last 20 months. So, really proud of the teams for making it through this last cycle and really happy with the diversified bottom line results we had from our diversification efforts this past quarter. Look forward to talking to you all next quarter. See you. Bye.

Thank you, everyone for joining us today. This concludes our call and you may now disconnect your lines.