LCI Industries

Hello everyone and welcome to today's first quarter 2022 LCI Industries earnings conference call. My name's Emma and I'll be coordinating your call today. If you'd like to ask a question during the presentation, you may do so by pressing star followed by the number one on your telephone keypad. If you wish to withdraw your question, please press star followed by the number two. Whether paying to ask your question, please ensure that your line is unmuted locally. I'll now pass the call over to Brian Hall to begin Please go ahead, Brian.

Good morning, everyone, and welcome to the LCI Industries first quarter 2022 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 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? Thanks, Brian, and good morning, everyone, and welcome to LCI's first quarter 2022 earnings call. On the heels of an amazing 2021, we carried forward our momentum to deliver record top line in earnings performance. Our wide range of innovative offerings, coupled with our ongoing focus of providing best-in-class customer service and experience, continue to be key competitive differentiators accelerating growth in our aftermarket, marine, and adjacent businesses alongside RVs. As these other businesses continue to flourish, we are reinforcing our ability to drive counter-cyclical growth, helping position us to deliver strong profitability over the long term. We ended the quarter with a record $1.6 billion in revenues, up 64% year-over-year with strong demand across the markets we serve, supporting double-digit revenue growth in each of our core markets. Our recent acquisitions added approximately $79 million in net sales for the quarter, helping expand our market share. RV OEM sales increased 84% during the first quarter of 2022 compared to 2021, reaching nearly $1 billion, primarily driven by strong demand for RVs. Secular megatrends driving the popularity of the outdoor lifestyle are now well established as KOA's camping survey has recently shown that 57 million households camped in 2021. RVs have quickly become an even more attractive alternative to the skyrocketing cost of air travel and hotel lodging. The industry continues to innovate And with the explosion in popularity of peer-to-peer rentals, many new opportunities have opened up which didn't exist prior. According to a recent RVA survey, 46% of new RV buyers plan to list their vehicle on rental sites like Outdoorsy, which gives RV owners an effective way to help offset the cost of ownership. This significant new trend should help further support the long-term growth of the industry creating a new lane for RVers to come into the lifestyle along with new revenue streams in our well-established aftermarket business. We delivered strong content growth across the board as our teams continue to bring new features on existing products and altogether new technologically sophisticated products to market. In the first quarter, content for total RV increased 40% to a record $4,854, while content for motorhome RV for the first quarter of 2022 increased 25% to $3,144. As I mentioned in prior calls, because we had more access to inventory over the last 12 months, we gained significant market share in several of our core product categories as some supplier peers in the industry struggled. The industry remains on track for another strong year despite some recent slowness that will likely continue through the back half of the year. Retail demand is solid, and as the industry inventory levels stabilize, we are keeping in constant communication with our OEM and dealer partners to maintain appropriate levels of production. We've invested heavily in automation and continuous improvement projects over the past 12 months throughout our business, which has driven our great efficiency gains. And it's important to note that over the last two years, we didn't add much building capacity as volume skyrocketed in 2020 and 2021. We only really invested in second and third shifts to increase our output in our core product lines. This has allowed us to have a much more flexible cost structure that enables us to quickly adapt to any upward or downward swings in volume while helping us maintain solid levels of profitability. All this, combined with our guidance of our veteran leadership team, should help us successfully navigate through any future operational headwinds while maintaining high standards of quality and service that our customers have come to expect from Lippert. Moving to aftermarket, revenues grew 35% year over year, supported by a combination of organic and inorganic growth. We are making great headway with the integration of Furion. We are finding amazing ways to utilize the advanced appliance lineup to bring bold new programs to our existing customer base. Our aftermarket business has benefited remarkably from the growth of the RV industry. According to the RVIA study I referenced earlier, 89% of all RV owners purchase aftermarket parts or accessories after buying an RV, with over half of those customers buying multiple aftermarket products at once. This trend will be very favorable for us in our business as approximately 500,000 RVs currently on the road enter the repair and replacement cycle every year, creating an incredible growth trajectory for the aftermarket business over the long term. In addition to millions of RVs entering their repair and replacement cycle, we should see a higher use case due to significant running that is now taking place that will drive more wear and tear and ultimately a higher frequency of repair and replacement parts. We have made significant preparations in our aftermarket business to be ready for this additional growth. As the aftermarket grows, our goal to create the best possible customer experience will become more critical. With the summer season right ahead of us, we are excited to continue expanding our customer experience programs, leveraging them to interact with customers and collect feedback to enhance our products and services. To that end, we are holding our second Lippert Getaway Rally later this year in Pine Mountain, Georgia, to follow up on the resounding success of our inaugural rally held last year. Finding ways to creatively engage the RV consumer has led to a great return on investment for our business, helping us build real trust and real relationships with the people who keep coming back to the Lippert brand. Our OneControl system has created 1 million RV health reports for consumers this year. Our care center and call center has eclipsed 1 million communications last year, and our social media platforms accumulated over 850 million impressions last year alone. Our first quarter adjacent market revenues rose 42%, again driven by heightened demand in our RV business, along with strong content growth. The rollout of electric biminis and new furniture product lines over the past year has been an incredible success, bringing a new level of convenience to boaters. With the boat inventories remaining low all over the country, Marine shows ample runway for growth as we continue to expand market share to our industry-leading brands like Lumar and TaylorMade. Just like in RV, we are working to expand our marine customer experience programs as we head into the summer boating season. And our captains group now boasts over 1,000 members. As we continue to broaden our offerings across the recreation space, we will aim to build similar customer experience support groups to help serve as many consumers as possible. Our international business grew 15% for the first quarter of 2022 compared to 2021. As RV production in European markets is softening from the impact of the semiconductor shortage, Caravan registrations decreased 13%, with registration in Germany, the largest market, down 8% for the quarter. Ship shortages will continue to challenge our European RV business into early next year, but will likely extend the demand tail over the longer term. I'll now move on to our innovation highlights. With younger tech-savvy consumers continuing to stream into the outdoor lifestyle, our focus on innovation has become critical to our success. To complement the additional capabilities we've been rolling out to our OneControl platform, which has seen a 400% increase in usage in this past year, we just launched a complete redesign of the OneControl app. This redesign features a range of updates we are developing using customer feedback collected through our Lipper Scouts RV Consumers Group. The new design enhances the functionality of the system, providing critical notifications quickly and efficiently through the new interface, and it's also seamlessly integrated with our wider suite of safety products. In addition, our users are now getting regular vehicle health reports that report on the status of features and service opportunities for their RV. With our 100 talented engineers in Detroit Technologies operation, we are continuing to work on extending the capabilities of the platform and overall ecosystem to support evolving customer preferences, ultimately improving the entire user experience. On top of our innovation, our focus on culture has proven to be a major differentiator for Lipper. In order to increase production to meet heightened demand across our businesses over the last two years, we've worked tirelessly to onboard about 3,000 new team members. This is where our culture initiatives and leadership development programs have come into play. These programs have made Lippert into a place where people are grown and developed intentionally. As we do this, people choose more often to stay over the long term, and when we retain team members over the long term, key metrics in the business improve greatly, including safety, efficiency, quality, and innovations. As a result of the meaningful resources we have put toward culture and leadership development, our retention rates have grown significantly, reducing our overall labor costs as turnover diminishes. Emphasizing the importance of health and wellness and creating wellness programs inside the company is another way we've been able to support our team members. For our northern Indiana facilities, we've just introduced our mobile care unit to provide free on-site services, including acute care, chronic disease management, and well-being resources for team members in need. The mobile care unit will be staffed with medical professionals and will be making routine visits to approximately 30 facilities in the northern Indiana region, where we have about 7,000 of our team members. We're excited to continue offering additional layers of aid for our teams, and the mobile medical care unit is only the first of several programs we have set this year to start helping our team members move the needle on their health and well-being. 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 in innovation and operational enhancements to drive efficiency, quality, and profitability throughout our business. In the first quarter of 2022, we allocated $25 million to growth and automation CapEx and expect to spend an additional $50 million on growth and automation CapEx in the remainder of the year. In closing, I'd really like to thank, again, all of our team members for their ongoing dedication and commitment towards delivering quality products to our customers. while achieving record results to drive our business forward. Our teams all over the business have done an amazing job working through all the challenges and headwinds that made business so much more difficult than what we were used to pre-COVID. So thanks to all of our teams for helping us win big in 2021 and 2022 so far. We look forward to continuing our progress into 2022 as we work to create value for our customers and shareholders. I will now turn the call over to Brian Hall, our CFO, to give more detail on our financial results. Brian?