LCI Industries

LCI Industries fourth quarter and full year 2024 conference call. I am joined on the call today with Jason Lippert, President and CEO, along with Kip Emenheiser, VP of Finance and Treasurer. 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 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.

Good morning, everyone, and thank you for joining us on our fourth quarter and full year 2024 earnings call. Today, I will walk you through our highlights from the year, provide an update on the industry backdrop, and how we will strive to continue to expand our market leadership in 2025. Then I will break down our business performance by market and outline our financial strategy before turning it over to Lillian for a deeper dive into our financials. Starting with highlights from the year, 2024 proved to be a good year for Lippert as we showcased the resilience of our diversified business by delivering full-year revenue of $3.7 billion, down only 1% despite a challenging RV and marine backdrop. As our presence in various end markets, such as building products international and aftermarket, helped offset some of our headwinds and should effectively position us to reach our organic target of $5 billion in total revenue in 2027. We expanded our market leadership across our top five product categories, appliances, awnings, chassis, furniture, and windows, which together accounted for 71% of our North America RV OEM sales. We experienced 7% organic growth in the automotive aftermarket. to market share gains demonstrating our leadership in the towing and truck accessories markets we also feel that our curtain ranch hand acquisitions are really starting to gain momentum we increased ebada by 89 million despite a weaker sales and mixed backdrop by delivering cost savings and operational improvements helping to pave the way for a return to double-digit margins as we strive to deliver further operational improvements we supply game-changing innovations especially our current touring coil suspension our furion chill cube air conditioner technology and our Lippert analog brake systems for towables. We feel that these products clearly set us apart from our competitors and help drive organic content for towable RV up 2% year over year in 2024. We are successfully delivering on our new Camping World partnership with product sales up 62% in their stores. We should be positioned to capitalize on more growth in 2025. Our goal this year is to up-fit approximately 100 additional Camping World stores with Lippert merchandising. Camping World has told us they are ecstatic with what we are doing as our partnering efforts are helping to drive their in-store and online aftermarket part sales. And finally, we reduced net debt below two times EBITDA as we created cash flow from operations of $370 million. As we exit 2024, we're in a really good position, competing in what we believe are the right categories and markets to strengthen our leadership and drive continued margin expansion. None of our 2024 success or 2025 vision would be possible without our incredible team. We are grateful for their hard work, dedication, and relentless drive to push us forward. Our commitment to excellence and innovation is what makes our success possible. And I couldn't be more excited to continue building with them in 2025 and beyond as we execute on our vision and help the business reach new heights. Moving to the industry and macro backdrop, we are cautiously optimistic moving into 2025 as we are seeing that the RV backdrop has modestly improved. Orders are starting to improve and the signs at many retail shows are more positive. Our January RV sales are up 17% as dealer inventories are at their lowest point in recent history, which should create a favorable environment for demand. Also encouraging are reports that interest rate declines have helped the dealer floor planning outcomes. If you take these things and consider that the dealer profits are starting to improve, we believe there's a pretty good case to feel strongly that 2025 will hit its wholesale and retail estimates. Product mix is also looking like it will be in a much healthier situation, and consumer optimism is on the rise. As a reminder, historically, when the industry comes off a two year downturn, we usually see three to seven years of industry growth. And if the same trend occurs as in the past, we believe we stand in a great position to capitalize on those tailwinds. So how will we expand our leadership position in 2025? Well, first I want to emphasize that our market leadership matters. Over the last three decades, the team and I feel as though we have built meaningful brand authority and trust with our customer base, which we believe has created a strong foundation for cross-selling whichever products we decide to manufacture. This strategy should help to continue to drive scale and other advantages that we believe make us the low-cost provider and go-to for all things innovation. It also should give us a significant advantage as the supply side consolidates because we usually stand out when there are fewer choices because of our innovation and creativity. However, it isn't our market position alone that sets us apart. We think our competitive moat is built on many advantages that make us a trusted partner. I'll talk about seven of these that we believe position us to capitalize on industry tailwinds, drive sustained market share gains, and outperform the market in 2025. Each of the following points reveal our opinion of our place in the market and what should help us continue to succeed. First, our best in class manufacturing attracts new customers and expands wallet share. This expertise and the decades of investment behind our high precision manufacturing ecosystem should make it incredibly hard for others to replicate our manufacturing capabilities and speed on complex components across RVs, boats, and other product categories. Second, our extreme product breadth should give us a natural advantage in cross-selling, bundling and expanding our footprint with existing customers. Third, we are the leaders in RV and marine innovation. Innovation has been part of our DNA for over 25 years as we started launching products beyond chassis that our customers were asking for. We have so many new exciting projects in the pipeline, and in 2023 and 2024, we launched some significant products like our glass patio systems, 4K windows, ABS, PCS, and the Chill Cube, to name a few. With these products, we believe we have essentially created another $500 million in addressable market for RVs. Fourth, we deliver unmatched dealer support through our robust technical support network. This is a significant competitive advantage that most people don't realize because we are touching customers and forming significant relationships outside of the OEM channel. From our mobile service teams that bail out customers who have broken down on the road, to our tech teams that travel to dealers every week for service trainings, to our 200 customer service agents at our care center in South Bend that handle over 1.25 million customer interactions annually. The dealer body relies on Lippert to help train and fix issues around thousands of products that are constantly changing or being added to our portfolio. Fifth, we're the low-cost producer. Decades of manufacturing expertise, along with our immense volume, should give us the purchasing power which allows us to deliver exceptional value while protecting our margins. Sixth, we're an effective consolidator. With a solid balance sheet and strong track record of strategic acquisitions, we should have flexibility to pursue any compelling opportunities that arise. With this team having done over 70 deals in the past couple of decades, acquisitions are in our DNA. Finally, our leadership team has seen it all. We've successfully navigated many economic cycles, industry cycles, but most importantly, over the last 20 to 30 years, our team has developed a lasting and consistent culture built on trust and long-term meaningful relationships with our OEM partners and with each other. In addition to expanding our market leadership in 2025, We will strive to drive operational leverage and optimize overhead costs to ensure our fixed cost structure remains as efficient as possible, supporting profitability and long-term value creation as we progress back towards double-digit operating margins. To prove how serious we are about making sure our cost structure is optimal, we have set a stretch target of an 85 basis point improvement for this year in our overhead and G&A cost structure. I'll now move on to our results by business. In 2024, RV OEM net sales totaled $1.7 billion for the full year, up 7% versus the prior year, reflecting continued market share gains across our top product categories. This growth came despite mixed shifts towards smaller towable units, as many of our products remain critical to RVs and should be insulated from decontending risks. At the Tampa RV Super Show, we showcase innovative products that are driving new business wins for 2025. Some recent innovations, as we mentioned earlier, that continue to gain momentum are our CURT Touring Coil Springs Suspension, which has drawn significant interest from OEMs and dealers alike, and opens a new addressable market worth more than $150 million. Currently, it has been launched by a few top 10 towable brands, with more top brands adding it this coming model year. Our Analog Braking System, which has been adopted by many leading towable RV brands, and gives us access to $150 million of market opportunity. We also anticipate this product will emerge as a standard across utility and cargo trailer segments in the near future, creating even more total addressable market for this great product lineup. Our current Helix coil spring fifth wheel pin box was recently awarded best new exterior accessory at the SEMA show in Las Vegas, Nevada. Our Furion Chill Cube air conditioner, by far the quietest and most powerful in its class amongst the other air conditioner brands, has gained immediate interest from OEMs and consumers alike further strengthening our position in this category as the new leader in HVAC systems. We also continue to expand RV content with larger windows and glass entry doors for 2025 models, which provide more natural light and integrated functionality. Brinkley RV has incorporated these square bonded windows with integrated shade systems in their high-end units, demonstrating the premium value that these products bring to the market. We have invested over $50 million in glass processing technology over the last few years, to keep us leading in all things glass and windows. Looking ahead, we're confident we can capture additional content opportunities as wholesale shipments and product mix normalize and that organic content growth should return to 3% to 5% annually. For 2025, we project 335,000 to 350,000 wholesale shipments or more than 100 million of additional RVOM sales at current content levels to our top line as we strive to capitalize on the nearly 3 billion in addressable opportunities our current products supporting these projections blue compass the second largest rv dealer in the country reported record sales of the tampa rv show up 20 from their best prior year furthermore lci's january rv sales increased 17 year over year which we believe are all signs that point to the improvement in the industry backdrop Turning to the aftermarket, net sales were $881 million for the full year, roughly flat year over year. Strength in the automotive aftermarket was offset by some softness in the RV and marine aftermarkets. Operating profit for the aftermarket segment remained strong at 12.6%. The CURT family of products, including hitches, towing solutions, and truck accessories, delivered impressive growth with sales increasing 7% during the year, contributing 54% of the total aftermarket revenues. Kurt's strong performance underscores our ability to execute meaningful acquisitions that ultimately contribute to sustained growth. Notably, our ranch and truck accessories are featured on trucks in the hit TV shows Landman and Yellowstone. Camping World's furniture business acquisition and accompanying supply agreement has continued to exceed our expectations as we have outfitted more than 14 Camping World RV parts stores. With Lippert products in these stores increasing our sales with the world's largest RV retailers, 52% year over year. We expect continued growth as we plan to further expand the selection of Lippert products online and in Camping World locations. In addition, other dealerships have taken note and are asking for our help to up their stores. Our Furion suite of appliances acquired through another acquisition includes backup observation cameras, ovens, hot water heaters, refrigerators, microwaves, furnaces, and air conditioners. It continues to help drive aftermarket revenue through the upgrade, repair, and replacement cycle contributing 56 million to our aftermarket group sales alone for the year, a 22% increase over 2023. Again, demonstrating our ability to grow acquisitions. We feel that Furion is a perfect example of how we can impact the aftermarket significantly by driving meaningful OEM volume with new acquisitions that have large product portfolios like Furion. To further capitalize on the aftermarket, as large numbers of vehicles transition out of their warranty periods, we've emphasized dealer tech training programs, strengthening a dealer's knowledge of and preference for Lippert products by equipping technicians with the expertise to service and install our offerings effectively. Over the course of 2024, we trained 36,000 dealer service personnel. We had 1.6 million views of our tech support seminars. We had 65,000 technical product class completions, and we had 2.1 million overall page hits on our how-to technical service pages. All in all, Our aftermarket business represents more than $10 billion in addressable market. Our presence has grown substantially since our entrance in 2013, and we will continue to focus on organic and inorganic growth in this critical area for us. Turning to adjacent markets, net sales decreased 13% to $1.1 billion for the full year when compared to the prior year, largely due to weak demand in the marine, as dealers continue to optimize their inventory levels. Excluding North American Marine sales, the Jason Ender series were $867 million, only down 6%. In the year, we feel as though we've made significant strides in several end markets that position us well to achieve growth moving forward. In the utility trailer market, we've leveraged our core expertise in axle manufacturing to supply leading brands like PJ Trailers, Diamond Sea, Inove, and Big Tex Trailers. With approximately 600,000 utility and cargo trailers built annually, We believe this market is a significant growth opportunity for LCI content. As we continue to gain share, we plan to introduce several advanced upgrades, such as ABS and TCS, further enhancing utility trailer suspension performance and safety for the end consumer. In the world of utility trailers, axles are the largest single content item. Additionally, our window and glass products are successfully adding to our content gains in areas like off-road vehicles, school buses, and transit buses. with our on-highway and off-highway transportation markets. This represents a significant content opportunity as approximately 70,000 buses of all types are built annually. For building products, we have gained notable traction in residential windows over the past few years, growing this business by 20 million as more residential distributors and builders recognize the value of our entry-level vinyl window products. Our entry-level product has been so successful that we just launched a more premium residential product lineup. This represents only one of the many products we have that have been gaining share with builders. Others include our chassis for manufactured homes, residential awnings, and thermal form components for tubs and showers. Turning to capital allocation, our strong performance and effective inventory management generated $370 million in operating cash flows over the last 12 months, enabling us to pay down $89 million in debt and reduce leverage to below two times. Our solid balance sheet should position us well to pursue a robust pipeline of M&A that aligns with our strategic goals in existing markets. We feel as though we have a proven track record for driving value through acquisitions, focusing on companies with experienced leadership teams, exceptional products, and significant growth potential. In addition to M&A, we remain committed to funding innovation and operational improvements to drive long-term growth while maximizing shareholder returns. This past quarter, we advanced our commitment to returning cash to shareholders by raising our dividend 10% to $1.15 per share. Providing this value to shareholders remains a key priority and reflects our confidence in the strength and resilience of our business in the short and longer terms. Closing with culture, it's intangible, but it truly drives results at Lipper as we remain committed to maintaining a great workplace where we have the best leaders driving on values consistently. When we create a great workplace, people tend not to leave very often, which helps create a lot of consistency and momentum in the manufacturing processes and the overall business results. Even in a difficult year like 2024, our retention was better than industry average. This year, we probably surpassed our ambitious 100,000 hour volunteer initiative goal through our team members by holding events such as a built to serve event in Fort Wayne, Indiana, where Lippert leaders supported Shepherd's House, a non-for-profit providing long-term care for homeless veterans facing addiction and mental health challenges, along with hundreds of other events put on by our teams to assist our communities where there is need. We are trying to set an example for many other businesses to follow because we believe by doing this, business can be a greater force for good in the world. Our inclusion on Newsweek's 2025 List of America's Most Responsible Companies highlights our continued progress in environmental, social, and governance initiatives. We also advance our sustainability efforts by implementing resource and waste monitoring across some of the facilities and publishing our third year of scope one and two greenhouse gas emissions data. These initiatives reinforce our focus on transparency and accountability, supporting Lippert's vision of long-term growth that benefits all stakeholders. In closing, I want to thank our dedicated team members once again for their incredible efforts. We believe Lippert is well positioned for long-term success, and we are excited about the road ahead as we continue to innovate deliver exceptional customer experiences, and create value for all of our stakeholders. I'll now turn it over to Lillian, who will provide more detail on our financial results.

Thank you, Jason. Lippert's strong reputation for best-in-class quality and service, along with our robust portfolios' innovative products, fueled share gains during the quarter. However, revenue growth remained constrained as persistent softness in retail demand across the RV and marine markets continued. Our consolidated net sales for the fourth quarter were 803 million, a decrease of 4% from the fourth quarter of 2023. OEM net sales for the fourth quarter of 2024 were 621.6 million, down 6% from the same period of 2023. RV OEM net sales for the fourth quarter of 2024 were 376 million, down 3% compared to the prior year period. driven by a 24% decrease in motorhome wholesale shipments and a shift in unit mix towards lower content single axle travel trailers. These impacts were partially offset by a 7% increase in North American travel trailer and fifth wheel wholesale shipments and overall market share gains. Content per towable RV units was $5,097, up 1% compared to the prior year period. while content per motorized unit was up 7% to $3,742. Content per towable RV unit was up primarily due to increased adoption of Lipper innovations, largely offset by a continued shift to single axle trailers, which have less content overall. These trailers accounted for about 24% of production in Q4 of 2024, compared to the prior year of 20%. Typically, we would see a mixed range of about 16% to 19% for these units. Organic content increased 1% sequentially and 2% year over year, supported by the share gains we delivered in the top product categories we supplied to the RV OEMs, specifically appliances, awnings, chassis, furniture, and windows. Aftermarket net sales for the fourth quarter of 2024 were 181.6 million, an increase of 1% compared to the same period in 2023, primarily driven by continued growth in the automotive aftermarket, partially offset by softness in the RV aftermarket, which has been negatively impacted by lower consumer discretionary spending. Adjacent industries OEM net sales for the fourth quarter of 2024 were 245.5 million, down 9% year-over-year, primarily due to the lower sales to North American marine and utility trailer OEMs. Marine sales were down 15% due to the impact of inflation and still high interest rates on retail demand, and we expect softness in the marine industry to continue for the first half of 2025. During the quarter, this decline was partially offset by increased sales for building products, as we continued expanding our footprint in this market by capturing demand for core products, supplying axles to top trailer brands, and adding windows in off-road vehicles, school buses, and manufactured housing. Gross margins for the fourth quarter of 2024 were 21.1%. compared to 19.2% for the same period in the prior year period, supported by decreased steel prices, lower inbound freight costs, and the impact of material sourcing strategies we've implemented to lower input costs. Consolidated operating profit during the fourth quarter was 16 million, or 2%, a 170 basis point improvement over the prior year period. Operating margin expansion was supported by operational improvements, such as further facility consolidations and overhead reductions. I would also like to highlight that our warranty costs reduced by $9 million during the quarter. For the full year, warranty costs have decreased about $29 million compared to the prior year period, driven by the implementation of product quality initiatives. The operating profit margin of the OEM segment increased to 0.3% in the fourth quarter of 2024, compared to a loss of 1.8% for the same period of 2023. The aftermarket segment delivered a 7.9% operating profit margin in line with the prior year period. GAAP net income in the fourth quarter was $10 million, or 37 cents earnings per diluted share. compared to a net loss of $2 million, or $0.09 loss per diluted share in the prior year period. EBITDA in the fourth quarter was $46 million, a 29% increase compared to the prior year period driven by higher earnings, along with a 46% decrease in interest expense over the prior year period, reflecting our lower levels of debt in 2024 and improved provisions for income taxes of about $6 million. Moving on to full year 2024 results. Full year net sales were $3.7 billion, down 1% year over year. Sales to RV OEMs increased 7% to $1.7 billion, driven by a 13% increase in wholesale shipments of travel trailers in fifth-wheel units in addition to market share gains, partially offset by a 24% decrease in motorhome wholesale shipments and a shift in unit mix towards lower-content single-axle travel trailers. Sales to adjacent markets decreased 13% to $1.1 billion in 2024, primarily due to lower sales to North American marine and utility trailer OEMs, driven by current dealer inventory levels inflation, and elevated interest rates impeding retail consumers. Aftermarket sales were relatively flat when compared to the prior year at $881 million, as gains in the automotive aftermarket effectively offset impact from lower RV and marine aftermarket demand. Total company operating profit margin for 2024 was 5.8%, up from 3.3% in 2023. The operating profit margin of the OEM segment increased to 3.7% for the full year, compared to 0.6% for 2023, as we made significant operational strides. The aftermarket segment delivered a 12.6% operating profit margin, compared to 12% for 2023, which made up over half of our total operating profits, despite only making up 24% of total sales. demonstrating how our diversified business exposure has effectively supported profitability. Non-cash depreciation and amortization was 125.7 million for the 12 months ended December 31st, 2024, while non-cash stock-based compensation expense was 18.7 million for the same period. We anticipate depreciation and amortization in the range of 115 to 125 million during the full year 2025. At December 31, 2024, our company's cash and cash equivalent balance was $166 million, compared to $66 million at December 31, 2023. For the 12 months ended December 31, 2024, cash provided by operating activities was $370 million, with $42 million used for capital expenditures, 20 million used for acquisitions and 109 million returned to the shareholders in the form of dividends. Additionally, the company had net repayments of indebtedness of $89 million. As of December 31st, 2024, our net inventory balance was 737 million, down from 768 million at December 31st, 2023. At the end of the fourth quarter, we had outstanding net debt of $591 million, 1.7 times pro forma EBITDA, adjusted to include LTM EBITDA of acquired businesses and the impact of non-cash and other items as defined in our credit agreement. For the month of January, sales were up 6% versus January 2024, with RV sales up 17% and aftermarket up 6%. offset by softness in international and other adjacent markets. We are anticipating an estimated full-year wholesale shipment range of 335,000 to 350,000 units as lingering consumer demand headwinds begin to abate. As we think about Q1, we expect overall revenue to be about flat year over year. We expect RV OEM sales to be up about 9%, and we expect continued softness in marine and international markets. We also expect operating margin to be flat to a slight improvement over Q1 of 2024. Looking to capital allocation for the full year of 2025, capital expenditures are anticipated to be in the range of $50 to $70 million. We continue our aim to utilize our balance sheet to pursue strategic opportunities that help us capture profitable growth and deliver shareholder value while maintaining a long-term leverage target of one and a half to two times net debt to EBITDA and maintain our commitment to returning cash to shareholders. We intend to further strengthen our financial profile by making consistent operational improvements to our business while supplying innovative products that result in market share expansion throughout the business. We expect to see industry recovery across the markets we serve over the next several years, in addition to organic growth fueled by our market share expansion. We look forward to continuing this progress, driving sustained profitable growth as we advance towards our $5 billion revenue target in 2027, while remaining committed to returning to double-digit margins. That is the end of our prepared remarks Operator, we are ready to take questions. Thank you.