LCI Industries

Good day and thank you for standing by. Welcome to the fourth quarter 2021 LCI Industries earnings conference call. At this time, all participants are in a listen-only mode. 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. And if you require any further assistance, please press star 0. Thank you. I would now like to hand the conference over to your speaker today, Mr. Brian Hall. Please go ahead.

Good morning, everyone, and welcome to the LCI Industries fourth quarter 2021 conference call. I am joined on the call today by Jason Lippert, president, CEO, and a director. We will discuss the results of 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 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 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?

Good morning, everyone, and welcome to LCI's fourth quarter and full year 2021 earnings call. 2021 was a year of incredible progress and highlights for LCI as the larger outdoor recreation industry continued to grow at a very fast pace. Highlighted by a record 600,000 RV shift during 2021, we broke records of our own, delivering all-time high revenues along with record content and profitability, all while facing some incredible headwinds on labor, inflation, and supply chain fronts. I'm continually impressed and proud of our team's ability to achieve such amazing results in this challenging operating environment. We believe that our cultural strength has been the cornerstone of this continued success, supported by an experienced leadership team that's kept Lippert on track in executing on our culture, values, and strategic priorities. We ended 2021 with a $4.5 billion in revenues, up 60% year over year, largely driven by strong demand across all our markets. Our growth is also supported by six acquisitions, adding approximately $270 million in net sales. These acquisitions have helped us further expand our wide portfolio of innovative products while providing entry into new and meaningful markets, further establishing LCI as a global leader in the recreation space. Our VOEM sales increased 73% during the year compared to 2020, reaching nearly $2.6 billion this year. primarily driven by heightened demand for RVs throughout the year. Families are recognizing that the outdoor lifestyle is a far more attractive alternative to the hassle of airline travel and hotel lodging, as well as more affordable, considering the levels of recent inflation. With the freedom and convenience that come with RVs, it's no wonder families across the globe are turning to RVs as a go-to choice for a positive vacation experience. The increasing popularity of peer-to-peer rentals has also contributed to the accessibility of RVing, opening the door to many new customers looking to try the experience before they buy. Our growth in RV OEM segment was also supported by incredible operational execution on the part of our teams and minimizing many of the supply chain challenges that have impacted the industry. As we've explored new supply channels and have worked to source materials in the U.S. and elsewhere when possible to avoid issues associated with international freight, we see fewer component issues compared to that of our peers, which has enabled our continued outperformance. With a focus on scalable growth, we are targeting 15 automation projects costing up to $40 million planned for 2022 and early 2023. We expect these operational improvement projects to support our long-term margin expansion and help offset the impact of inflationary pressures while improving quality and helping us to mitigate labor constraints to maintain stable production and meet the new heightened consumer demand. We delivered substantial content increases for the year in both towable units and motorhomes, driven by strong organic growth. Content for towable RV for the full year 2021 increased 24% from the prior year to $4,198, while content for motorhome RV for the full year 2021 increased 15% from the prior year to $2,856, supported by several market share gains. As we head further into 2022, we expect the current strong pace of wholesale shipments to continue in the coming months as we execute during a dealer restocking period. That said, visibility toward the full year demand is limited due to uncertainties about the longer term impact of inflation on consumer spending. We'll have a better view of how demand is shaping up once the spring retail season ramps up. Our revenues in the aftermarket segment grew year over year, up 32% compared to 2020, supported by organic and inorganic growth drivers. The integration of Purion is progressing smoothly, and we expect this business to contribute substantially to our aftermarket sales going forward as we leverage its robust catalog of innovative appliances and electronics to tap into a $1.5 billion addressable market in North America alone. As I've said throughout the past year, with a record number of RVs on the road and over a million coming into the repair and replacement cycle every two years, we expect a long runway for growth for our aftermarket business as we meet significant demand for repair, replacement, and upgrade components. As our aftermarket business has grown, we've focused our attention and resources on enhancing the retail customer experience. The Lipper Scouts program, which has more than quadrupled in membership in the past year, serves to provide valuable insights on products and services, how customers use them, and most importantly, how we can drive improvements. Other experiments like product giveaways and the campground project have helped us meet, survey, and collect candid feedback from thousands of real campers and RVers nationwide. All this work culminated in the resounding success of our first Lippert Getaway RV Rally in Pigeon Forge, Tennessee, attended by over 200 families, where we were able to meet face-to-face with customers and talk about RVing. The engagement we drove through this event far exceeded expectations, and we are already hearing buzz amongst RVers for our 2022 getaway. The more we can creatively and effectively engage consumers, the better we can help them stay in the lifestyle over the long term and keep them connected to our team, our customers, and our product. We believe that establishing Lippert as a leading name in customer service will be yet another competitive differentiator to drive growth and strengthen our overall business for many years to come. As popularity for the outdoor lifestyle grows, our ability to innovate has proven to be critical in meeting consumer demand. Our tire pressure management systems, our continued development of one control and independent suspension systems, and the newly introduced safety suite of products have solidified our reputation as a company operating on the cutting edge of RV technology. Now that Furion has been brought into the fold, we have even more innovative projects slated for launch that we're excited to announce later in the year. We've also recently announced the launch of many new suspension products, including ABS brakes for axle systems and independent suspension system for the growing Gen Z and overland consumers. The global shift toward electric vehicles represents a monumental and innovative opportunity for Lipper. And we are already preparing for what the future of RVs might look like. Only a few weeks ago in January, we unveiled our prototype EV towable RV chassis that we have been developing at our advanced R&D center in northern Indiana. This concept vehicle consists of an array of lithium batteries specially housed in our chassis. The battery system is intended to power all the RV's electrical system for multiple days of boondocking. We also displayed a new aluminum chassis design along with regenerative braking and drive axles paired with remote control capabilities. While we plan to continue refining our concept prototype, we expect to begin rolling out parts of this technology in 2023. We believe this project will be a huge stride in reducing the environmental impact of RVs on the environment. We are also very excited for the continued progress of our suite of Class B products. With retail sales for Class B van RVs having doubled in the last several years, we've been working hard to develop a full line of products for these vehicles, including our pop tops. This option, which allows OEMs to install a bed on the roof of a B van, is being increasingly adopted by consumers. Turning to the adjacent markets, full year 2021 revenues rose 58%, again driven by heightened retail demand for marine and other related markets. Additionally, our market shares in housing and cargo trailers both increased dramatically in 2021. Content per unit in marine has increased over two times what we delivered in 2019. Whereas RV inventories are starting to build back, marine inventories remain very low, and accordingly, we anticipate a longer runway for growth in this business over the next two years. Our international businesses grew 58% for the year compared to 2020, supported by our introduction of innovative products into the European markets. Demand across Europe remains high, supported by the same secular drivers supporting heightened demand domestically. 2021 retail caravan registrations in Europe increased 8%, with the largest market, Germany, up over 4%. However, because Europe is largely motorhomes, the chip shortages are impacting industry production a little more than what we've seen in the U.S. That said, our European RV and marine divisions are continuing to provide solid innovations for use with customers domestically. We continue to see our Europe products being adopted by U.S. OEMs, further supporting our content gains. Looking ahead, we remain optimistic about our company's ability to drive growth in our international markets. while also realizing synergies and products to bring to our North American customers. Moving on to capital allocation, we are maintaining our focus on integrating our recent acquisitions and paying down debt. At the same time, we are continuing to invest more heavily in innovation and optimizing our manufacturing footprint to ensure we have capacity to meet heightened consumer demand while identifying cost efficiencies where possible. In 2021, we allocated over $40 million to growth and automation CapEx. and we anticipate allocating even more to these important projects in 2022. I'll now move on to some cultural highlights for the year. Here at Lippert, we work hard to maintain a culture that values all team members and enables each team member to see how his or her individual contributions help us meet our greater goals. Our culture focuses not only on how we can impact our team members, but also how we impact the world around us, starting with our communities that we work and live in. We started our cultural journey 10 years ago and we know it's having real impact. Not only are we hearing incredibly positive feedback from our team members, but our retention is also significantly higher than in past years, even in the face of some of the headwinds impacting the labor markets today. In alignment with our core values, we recently published our inaugural Corporate Sustainability Report, covering our progress across a wide range of ESG-related topics. This report includes initiatives such as our mission to replace conventional energy with solar power at seven facilities, our identification of a board committee focused on ESG, and our focus on reducing team member attrition rates by way of elevating a healthy and safe company culture. We believe our growth and recent innovations, along with our increasing focus on ESG, will mean our Lipper team members, their families, and our customers will be able to better enjoy the communities where we live, work, play long into the future. I'd also like to mention the amazing strides our team's made in keeping up with our commitment to serving and supporting local communities. Over 2021, LIPRC team members performed over 100,000 hours of community service through serving at various charitable organizations around the country. Over the last five years, our team members have collectively served 550,000 hours of community service. We could not be prouder of this accomplishment and our team's efforts to give back to those in need and look forward to our culture initiatives having even more impact in 2022. In closing, I'd like to thank all of our team members not only for their tremendous work and commitment to delivering quality products to our customers, but also for staying aligned to our culture that has made Lippert so successful. We could not have achieved such amazing results without this incredible dedication and record amounts of team members staying with the business over the longer term, coupled with the strength and guidance of our leadership teams. We look forward to continuing this tremendous progress in 2022 as we keep creating value for the team members, customers, and shareholders. I will now turn to Brian Hall, our CFO, to discuss in more detail our fourth quarter and full year financial results. Thank you, Jason.