LCI Industries

Good day and thank you for standing by. Welcome to the LCI Industries Q3 earnings conference call. At this time, our participants are in a listen-only mode. After the speaker 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. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Please go ahead.

Good morning, everyone, and welcome to the LCI Industries Third Quarter 2021 Conference Call. I am joined on the call today by Jason Leppert, 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 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 Lippert.

Jason? Morning, everyone. We delivered another quarter of strong results, driving both substantial top-line and market share growth as consumers continue to gravitate toward the outdoor lifestyle in record numbers. Despite operating in an environment riddled with supply chain challenges, material and labor shortages, and rising input costs, our teams powered through these headwinds to meet our customer commitments and fulfill record demand for the recreational markets we serve. During the quarter, we achieved $1.2 billion in sales, up 41% year-over-year, or up 99% compared to the third quarter of 2019. This great achievement by our teams has been supported by great organic growth and success of our recent acquisitions of Viata, Challenger, Polyplastic, and CURT, which underscores the strength of our diversification strategy. In addition, we continue to increase our RV content for vehicle growth, further solidifying our position as a global leader in the recreational space. Before getting into segment results, I'd like to address our recent acquisition of Furion, which we announced at the beginning of August. Furion is a premier distributor of a range of appliances and other electronic products for RVs and the wider transportation market. The addition of Furion with $230 million in forecasted sales for 2021 will help us tap into a $1.5 billion addressable market in North America alone. Through its robust catalog of innovative products, complementing our OEM product lineups with kitchen appliances, AV appliances, and observation camera systems, just to name a few. Because of the team's products and innovative mindset, we believe that we have a real opportunity to double this business in the next few years. Beyond North America, we plan to utilize Furion in broadening our offerings in the international markets by leveraging our existing global customer relationships. This will enable our company to unlock further market share, especially in the European and Australian caravan industries. Additionally, Furion brings a strong aftermarket business with both an online and brick-and-mortar presence, further accelerating our company's aftermarket division, which is one of our fastest-growing segments. Investment and growth in our aftermarket help accelerate our proven diversification strategy to support the long-term growth of LCI. The Lippert teams have been working closely with the Furion teams for several years through our distribution partnership and have longstanding ties with its strong management and R&D teams. Since the acquisition closed, we've already kicked off a few exciting projects, which we'll be able to discuss in further detail in the coming quarters. We're incredibly excited to welcome Furion to the Lippert family, and I look forward to them helping us turbocharge innovation to further transform the industries we serve. Turning to our performance by segment, beginning with RV OEM, sales increased 44% year-over-year to approximately $667 million for the third quarter, driven by strong demand across both North American and international markets. Our preliminary results showed record sales for October, indicating continued industry strength carrying over into the fourth quarter, and demand remained strong, while dealer inventories are still at an all-time low, and not to mention campgrounds remaining fully booked nationwide. To mitigate the margin pressure we've seen all year, stemming from a combination of historically high steel and aluminum prices, skyrocketing freight costs, and widespread labor shortages, our teams have focused on driving continuous improvement in automation initiatives across the company. these efforts will also help us to create capacity without the need to put up many new buildings and we've allocated a record amount of capital towards these automation and continuous improvement projects with over 15 larger automation projects set to go live in 2022 and the first part of 2023 long term we will continue to implement more projects like these to support margins while also positioning our production to be agile repeatable and scalable in any environment rv content per unit ramped significantly during the quarter, driven by our continued strong organic growth as our teams continue to bring new products to market and take market share while some of our competitors couldn't supply well during this last 12 months. Content for total RV increased 10% year-over-year to $3,786, while content for motorhome RV increased 14% year-over-year to $2,732. Our teams are focused on continuing to take advantage of content growth through innovation and continued new and existing product developments. Innovation remains one of the cornerstones of our success, and we are committed to meeting the demand for our technically sophisticated products to create a best-in-class experience for consumers, as well as to meet the demands of the new tech-savvy customer. In line with recent consumer trends, we're also focusing more on developing our safety suite of products to bring safety-related components to the RV space that have already existed in automobiles for years. Our ABS brakes are a prime example of one of our newest safety innovations for RVs. we're already seeing substantial demand for the product as it comes to the market. To add, our safety products are designed to be compatible with one control, further extending the capabilities of our platform and ecosystem while providing more flexibility and technology for the customer's recreational experience. Turning to our aftermarket segment, total revenue grew to $219 million in the third quarter, up 18% year over year. The Lippert aftermarket teams in automotive, RV, and marine continue to work through very extensive backlogs. Demand for our aftermarket products is significant as units being serviced are at an all-time high because used RVs continue to enter the repair and refurbishment cycle in record numbers. With a record number of RVs currently on the road and a million coming into the repair and replacement cycle every two years, the trend should be nothing short of fantastic for our aftermarket products and service businesses that assist the RV consumer with repair, replacement, and upgrades. As we look to serve this growing group of existing users and those brand new to the lifestyle, customer experience initiatives like Lippert Scouts Program and the Campground Project remain top priorities. These innovative initiatives allow us to collect valuable feedback directly from the RV users themselves, which we can utilize to improve our current and future offerings and services to RVers everywhere. This quarter, we engaged over 200 families through our Lippert Getaway, which was our company's first RV rally, meeting with owners, groups, and hosting our first ever all-Lippert Influencer Summit at a wonderful campground in Pigeon Forge, Tennessee. For four days in Tennessee, we listened to the RVers loyal to our brand, and based on their comments and testimony, it's become abundantly clear that we are doing more for this group than just about anyone out there with respect to listening to these customers in order to more favorably impact the RV customer experience. Turning to our adjacent markets, revenue for the third quarter increased 55% year-over-year to $281 million, with marine and other related markets being driven by the same secular trends propelling the RV and aftermarket segments. Marine demand remains strong, but industry production has also been impacted by supply chain. That said, we are successfully growing market share, which we've delivered with the support of our Lexington, Viata, and TaylorMade marine businesses. As you may recall, we purchased an electric Bimini product about a year ago, and we are just now starting to transition much of the industry away from manual Biminis to electric power Biminis while creating an aftermarket option for this as well. We launched our seating division for Cracker Marine earlier this year in Missouri, and we believe it's been a great success with a lot of additional opportunity now that we are located near and supplying the largest pontoon and boat builder in the country. Other notable progress continues to be made in our utility and trailer axle businesses. It has now eclipsed sales in our RV axle suspensions and continues to outpace the industry growth significantly. We are winning new accounts in the space monthly due to our relationships and product offerings. Due to the success of similar programs in RV, we've also launched customer experience initiatives for boaters and other users in the marine space. We look forward to these findings to fix existing customer pain points and elevate the customer experience in the boating world while bringing more attention to the Lippert brand. Our international businesses showed strong performance with revenues increasing 47% year-over-year to $88 million. From what we've seen, it is clear to us that European consumers continue to turn toward the outdoor lifestyle. In fact, caravan and motor caravan retail was up 70% for the month of September. The European RV industry seems to be reacting a little slower and catching consumer demand than the U.S., so we believe that this could be a nice tail for us as Europe's run could extend longer than that of the U.S., We continue to see a rise in interest in European products in the U.S., and U.S. RV OEMs are increasingly adopting Lippert's European components, including our Euro pop-tops, steps, doors, windows, and bed lifts. Five years ago, none of these European products were even being sold in the U.S. This strategy further helps establish our brand reputation as a global innovator. At the moment, pop-tops for B-vans made in our Europe facilities provide a large opportunity for growth as we work toward building these in the U.S. like we have the other products of U.S. manufacturers that we've adopted from Europe. Our European products and R&D continue to be steady secret weapons for our sales teams as they allow us to offer products to our customers that would otherwise not be possible without our Europe businesses and creative product teams. Next, I'd like to highlight the recent progress we've been making with regards to sustainability reporting. Over the past year, we've taken a focused effort to understand the impact of our operations on the environment and the communities in which we operate, exploring sustainable business practices that can drive value creation over the long term. Through these efforts, we have made real operational improvements, including the establishment of an environmental management system to monitor and reduce waste, and updates to our safety training requirements. To highlight these and many other advancements, we'd like to announce that we'll be publishing our inaugural corporate sustainability report in late Q4. which we'll use to report on our ESG performance and track improvements into the future. Together with operating sustainability comes the support of our team members and communities, two key pillars of our cultural foundation that's built Lippert and the company that it is today. Just four weeks ago, I had the opportunity to chair, along with the support of a large group of Lippert volunteers, an auction for the Boys and Girls Club of Goshen, Indiana, through which we raised $2 million to benefit the local youth. I could not be prouder of volunteers who helped out of this benefit, illustrating our ability to give back to the communities that have supported Lippert since our earliest days. This event was one of almost 100 events our team members across the globe took part in in the month of October. Last week, we had over 2,000 team members participate in our company's annual volunteer week, during which our philanthropy team created serving events daily for our teams to take part in. Switching gears to capital allocation, we are focused on integrating our recent acquisitions that remain receptive to strategic M&A opportunities as we pay down debt. As I mentioned earlier, we are investing heavily in the automation of our manufacturing footprint to ensure we maintain the appropriate capacity and quality to meet the heightened demand for recreational products while identifying cost efficiencies where possible. In closing, I'd like to thank our dedicated team members that work so hard to overcome challenges while cultivating a culture that supports sustainable growth and continuous improvement. We could not consistently deliver these results without this dedication along with the strength and guidance of our dedicated leaders all over this company. We look forward to continuing our incredible momentum as we deliver value to our shareholders in 2022 and beyond. I will now turn the call over to Brian Hall, our CFO, to discuss in more detail our third quarter financial results. Thank you, Jason.