LCI Industries

All participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to turn the call over to your speaker today. Chief Financial Officer Brian Hall, please go ahead.

Good morning, everyone, and welcome to LTI Industries' first quarter 2021 conference call. I am joined on the call today by Jason Lippert, President, CEO, and Director. 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 securities 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 would 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 other filings with the FCC. 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 Lepper.

Jason? Thank you, Brian. Good morning, everyone, and welcome to LCI Industries' first quarter 2021 earnings call. We are happy to announce that we delivered our best quarter ever to kick off the year. The growing number of RV enthusiasts has continued at a breakneck pace, driving retail demand to all-time highs. As a result, we have the largest number of RVs on the road, which has set us up for the most robust replacement cycle in the history of the industry. Because we have been very intentional over the last eight years around setting up a separate infrastructure to deal with the aftermarket, Lippert has uniquely positioned itself to capture this growth from both lifelong enthusiasts and those just entering the market. Our proven operational expertise and best-in-class customer service will undoubtedly support continued success for many years to come. During the quarter, we achieved an astounding $1 billion in revenue, up 52% year-over-year, which was led by double-digit growth across our RV OEM, Europe, adjacent markets, and aftermarket segments. The strength of our non-RV OEM businesses underscores the success of the execution of our diversification strategy we set in motion just 11 years ago and has supported Lippert's continued outperformance. We also have achieved solid content for vehicle expansion, considering the current market demographics of record number of first-time buyers generally buying the entry-level products. Additionally, we have gained some meaningful market share for this year due to some suppliers' inability to execute during this challenging last 12 months, helping to solidify our position as a leading supplier to the RV and marine industries. RV OEM sales increased 64% year-over-year to $566 million for the first quarter, driven by unparalleled retail demand as new RVers flocked to the lifestyle. Further, based on preliminary results, April trends reflect a continuation of that explosive growth. While many in the industry have been faced with supply chain constraints, our team's ability to creatively navigate headwinds showcased our resiliency and strength of our operational leadership. Our supply chain and operations teams have been doing a fantastic job juggling one significant challenge after the next over the past several quarters. The RV industry remains poised for sustained growth as a new generation of RV enthusiasts have converted a novel passion into a way of life that allows them to experience the outdoors, family, and friends in an affordable and safe way, especially during the uncertainty of COVID. Underscoring our confidence in the industry, the RVA's most recent report on 2021 demand shows 533,000 units for wholesale, which surpasses historic levels and surpasses last year's wholesale by 100,000 units. With the largest survey population ever conducted by RVIA's recent report, data showed that RVing hasn't all of a sudden become popular due to the pandemic. In fact, the amount of RV-owning households is up 85% to 11.2 million households from the survey taken in 2001. It also shows that millennial and Gen Z owners control 22% of these 11.2 million RV-owning households. with over 75% of millennials and Gen Zers surveyed saying they intend to buy an RV in the next five years. In total, the survey showed that 9 million households intend on buying an RV in the next five years. Complementing these trends is the growing popularity and availability of peer-to-peer RV rental services that invite consumers to taste the RV lifestyle, further developing the foundational infrastructure for future growth. There are many new peer-to-peer digital rental platforms meeting record demand of potential RVers who aren't ready to buy but to try the RV lifestyle out. Many families aren't ready to travel through traditional ways, so we are very excited about peer-to-peer rental opportunity giving families a very easy way to get away in an RV. Despite the ongoing significant wholesale mix shift towards smaller entry-level products geared towards first-time buyers, we continue to deliver content growth in both total units and motorhomes. a testament to the strength of the Lippert brand. Content for total RV increased 4% year-over-year to $3,476, while content for motorhome RV increased 9% to $2,525 year-over-year. Going forward, our market share opportunity remains strong, which is likely to drive further content increases. Operationally, we have a strong foundation to build upon. Along with the six new facilities we announced in the last two quarters, we are committing to further expanding our production capacities by executing additional projects, resulting in over 2 million additional square feet of organic capacity altogether. Similarly, our efforts to jumpstart a record number of continuous improvement projects, including some great automation projects this year, continue to free up manufacturing space, enabling us to add capacity. Additionally, we expanded our chassis facilities during the quarter, welcoming team members from Wolfpack Chassis, which allowed us to immediately increase our chassis production to meet heightened industry demand and market share gains. We have been gaining market share in chassis in the last year and needed this capacity to quickly bolt on new customers. Turning to our aftermarket segment, total revenues grew to 184 million, another record for first quarter, up 45% year over year, supported by the strength in our CURT group. CURT, which is running at record levels, had strong organic growth across the business. The CURT teams powered through their growing backlog in the first quarter of 2021, which was more than triple what they started with the first quarter of 2020. To accompany CURT in the truck accessory segment of their operations, we successfully executed a bolt-on acquisition of Branch Hand, an automotive aftermarket supplier of custom bumpers, grill guards, and steps in the roughly $5 billion truck accessory market. We are excited to welcome Ranchien's team members to the Lippert family and are eager to begin integrating their business into our current aftermarket business. During the quarter, we saw an incredible number of used RVs enter the repair and refurbishment cycle. With a surge in popularity and growing number of RVs on the road today, consumers will invariably seek maintenance services, repairs, and upgrades at a much higher level than in years past. As there are a record number of RVs entering their first replacement cycle, coupled with the millions that are already in replacement cycles, makes for an incredible season coming for our aftermarket businesses. Lippert remains uniquely positioned to serve this growing community, not only through our aftermarket offerings, but by leveraging investments and enhancing the customer's experience. The insight and candid feedback that our customer experience initiatives have received through initiatives such as Lipper Scouts, social media, brand ambassadors, and our campground project have proven to be invaluable in broadening our competitive advantage in the industry. From letting these customers know we care to making more customer service programs available to listening and getting new product ideas, product feedback, and suggestions for enhancing our products, this initiative has certainly helped us to become a more reliable source for our viewers everywhere. We firmly believe helping to play a role in the change of the customer experience will be pivotal to our future success as we support all consumers engaged in the RV lifestyle and become one of the most well-known brands for customer care in the business. Turning to our adjacent markets, revenue for the first quarter increased 34% to $251 million, driven by strong performance in marine, which continues to benefit from similar secular tailwinds driving growth across the RV and the aftermarket. Marine remains a primary focus for our diversification strategy and has demonstrated in our recent acquisition of Viata Industries, one of the country's largest boat seat manufacturers. Additionally, we have strengthened our presence in the marine space by supporting the largest boat builder in the country, Tracker Marine, as we just launched our Missouri Marine Division not too far from the Tracker campuses. We are encouraged by the marine industry's scorching growth trends in 2020 and are excited to be expanding our position in the space given the rapid influx of new boaters. Outside of Marine, we are heavily focused on trailer axles and suspension systems and achieving great market share here along with other products we sell to trailer manufacturers. We are also focused on continuing to build a residential and housing window and door businesses along with the glass solutions and other components for commercial vehicles, power sports vehicles, and buses. Lippert is focused on driving content growth in all these areas as we further expand into additional markets. Our international business has maintained its momentum with revenues increasing 50% year-over-year to $91 million. We are encouraged by the significant growth opportunity in our international RV OEM segment as our European pop-top and other new products hit the fastest-growing RV vehicle type in North America and Europe, the Class B van market. The various European countries in which we operate, including Germany, Italy, the Netherlands, and the U.K., continue to fall closely behind the trailblazing recovery we saw in the U.S. RV and marine markets, indicating a bright outlook for 2021. Europe's ongoing heightened retail demand is strong as European customers turn toward the outdoor lifestyle. First quarter retail caravan registrations in Europe increased almost 20%. Our international excitement continues as we see consistent positive trends of U.S. RV OEMs adopting our European designed and manufactured components. This helps solidify Lippert's reputation with OEMs as an innovator with the ability to bring these products to the U.S. market on a regular basis. We remain confident in the ability of our leadership teams to continue to capture demand and drive new growth across the international businesses thanks to the strong market leaders we have there. In addition to the success of our RV business, we have seen great progress in our marine and rail components businesses in Europe. Both our marine and rail segments businesses there continue to gain momentum through market share and efficiency gains and look forward to the growth in these two segments in Europe. All in all, we continue to reap the benefits of our diversification strategy. As we mentioned, we reached a significant milestone in 2020, surpassing more than 50% of our total sales from our adjacent markets, aftermarket and international business. and we are not stopping there. We expect organic and inorganic growth to continue in all these important areas outside of our RV business in the future. We would be remiss not to state that the 10-year journey we have undergone with respect to our culture and leadership transformation is one of the main reasons we are enjoying the success we are having today. As a result of this transformation in our values and the way we live and lead at work, our team members have made a more conscious decision to stay at Lippert for the long haul. And as a result of that, attrition has slowed, recruiting and retention have improved, and in general, when people get more content and excited about their work, home, and family, they naturally bring more energy, passion, and innovation to the workplace. Having this basic team commitment has never been more important than when you go through big challenges or a crisis like we've gone through in the last 12 months. Today, there is so much available work in our industry that many people who aren't happy with our company are leaving quickly because of higher compensation available to them. This is disruptive for companies as they end up losing large chunks of their workforce and ultimately create efficiency, safety, and quality-related issues. Our culture and leadership movements have created significant stability in our workforce as our team members and divisions have been able to take on record demand and even significant market share gains in big product categories like windows, chassis, awnings, and where some of our peers were shaken up with workforce-related problems. Our success is often underpinned by our focus on innovation. We remain committed to providing the best experience for the consumers using our products, which includes leading the industry in the advancement of RV and marine component solutions. One great example of this is our TireLink tire pressure and temperature management systems, helping to promote safety within the RV business. We are on track to be prepping thousands of RVs annually to provide for our aftermarket team the ability to offer this in the aftermarket easily. We are prepping more and more RVs for all sorts of products, and it's easier for the RV OEMs to accept a prep than a full-price product. And then from there, our aftermarket teams can figure out a way to sell that component in the aftermarket world. Safety products also will be a core focus for us over the next several years as we believe consumers will ultimately search for RVs that have the best safety story like they do automobiles. Switching gears to capital allocation, we continue to remain receptive to strategic M&A opportunities while remaining laser focused on integrating our recent acquisitions and paying down debt. At the same time, we are investing in innovation and optimizing our manufacturing footprint to ensure we maintain the appropriate capacity to meet heightened demand for recreational products. At current pace, we look to be close to a 1.5 times leveraged position at the end of the year considering forecasts and no other acquisitions. We are happy about the way we manage our balance sheet and cash in such a challenging time, and we will continue to be diligent like we have in years past. In closing, I'd like to thank the nearly 14,000 dependable and dedicated team members across the entire company that contributed to helping power Lippert through the first quarter of 2021 and all of 2020 for that matter, while at the same time cultivating a culture that supports individual team member growth and continuous improvement in all areas of the business. There is no doubt that RVs are a popular way to vacation, even more popular in an era where social distancing and maintaining more control over your environment is important with so many during these times. We look forward to continuing our incredible momentum through 2021 and beyond as we further deliver value for all of our stakeholders. I will now turn to Brian, our CFO, to discuss in more detail our first quarter financial results.