LCI Industries

Hello everyone and thank you for joining us today for the LCI Industries first quarter 2026 earnings call. My name is Sammy and I'll be coordinating your call today. Before we begin, I'd like to remind you that certain statements made on today's conference call regarding LCI Industries and its operations may be considered forward-looking statements under security 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 the company's earnings relief, Form 10-K, and in 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 of the forward-looking statements are made. except required by law. In addition, during today's conference call, management will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are available in the company's earnings release and investor relation presentations. which have been posted on the investor relations section of the company's website and are also available on form 8K filed this morning with the SEC. On the call for management today are Jason Lippert, President and Chief Executive Officer, Lillian Etskorn, Chief Financial Officer, and Kip Emanhauser, VP of Finance and Treasurer. Later in the call, we will conduct a question and answer session, at which point you can register a question by pressing star, one, and you may withdraw the queue by pressing star 2. With that, it's my pleasure to turn the call over to Jason Lippert. Please go ahead. Jason, please go ahead.

Hello and thank you to everyone for joining us on our Q1 2026 earnings call. We are energized by the momentum we have built in recent quarters as well as by the current strength of our performance in 2026 as we begin the new year with solid results despite continued sluggishness across both retail and wholesale leisure markets. Before diving into the details, I want to recognize the exceptional work our teams have done over the past decade to diversify our business. Against a very challenging industry backdrop, the diversification has clearly proven its value. Our well-balanced portfolio continues to deliver strong results, even as cyclical markets like RV experience volume pressure. Achieving this balance has taken time, discipline, and continuous refinement of both our teams and our strategy. Our European operations deliver the strongest quarterly results we have seen since building that platform, and our transportation business continues to perform very well as we integrate freedom of seating and Transair climate control systems. Altogether, our diversified performance meaningfully contributed to LCI achieving an 11.5% EBITDA margin in our Q1 in what we call a pretty turbulent quarter. For the first quarter of 2026, revenue grew 4% year over year to $1.1 billion. We expanded profit margins by nearly 100 basis points and grew adjusted diluted EPS by a robust 18%. This outperformance reflects our ongoing investments and the strong execution of our teams as we continue to focus on operational excellence, manufacturing optimization, and self-help initiatives. These efforts include significant plan optimizations, disciplined G&A cost reductions, and continued volume gains across the increasingly diverse end markets we serve, all while maintaining a strong focus on innovation and customer service, which remain core pillars of our success. Looking at performance by segment, OEM net sales increased 4% to $853 million, RV OEM revenue declined 4% due to lower North American travel trailer and fifth wheel shipments, which is a strong outcome considering RV wholesale shipments are down more than 12% through the first quarter. At the same time, we grew our adjacent industry OEM sales by 17%, driven primarily by higher demand from North American marine OEMs, as well as from Boston utility trailer OEM share growth. In addition, frequent seating and Transair continue to outperform plan on both integration and synergy realization. As I previously mentioned, our European business also contributed meaningfully. Following extensive restructuring efforts over the last 18 months that have positioned the region for improved bottom line performance. And housing sales were flat year over year, outperforming a down market due to continued strength in our residential windows, which helped offset lower manufactured housing demand. As we move through 2026, we expect to further accelerate content gains and expand across our four OEM markets while continuing to outperform the broader RV industry. We now expect RV wholesale shipments to be in the range of 315 to 330,000 units, which reflects a reduction of 20,000 units at both the high and the low ends of prior expectations. For the marine industry, we continue to anticipate flat to low single digit OEM growth this year. Innovation remains a cornerstone of LCI's long-term success and has driven a significant increase in towable content of 73% since 2020. Recent product introductions, including analog braking systems, touring coil suspensions, sundecks, chill cubes, and our 4000 series windows continue to gain traction as customers look to enhance the end user experience. Towable RV content increased 13% over the past year to $5,826 per unit. representing the largest year-over-year increase in our history as we close in on the $6,000 content per unit mark. Our five most recently launched products are now generating an annualized revenue run rate exceeding $270 million. Looking ahead, we expect approximately $140 million in incremental annualized run rate gains from new product placements during this 2027 model change, as well as from market share expansion in the RV space. Our newest product launch is the next generation leveling and stabilization system for travel trailers. It will be more affordable than past generations and will also be featured as standard equipment across all Brinkley travel trailers at this year's model change. Brinkley's Model I trailers rank among the industry's top five trailer brands, which will provide strong visibility for this product. We believe this launch represents $100 million total addressable market opportunity for LCI and a natural for customers as we are the standout leader in leveling systems for totals and motorhomes. This ongoing innovation, combined with our scale advantages, advanced manufacturing technologies, and deep expertise in complex mission-critical components, has created customer loyalty that continues to differentiate LCI. Our customers consistently look to us to help them stand out in their respective brands. Turning to aftermarket, the same customer loyalty continues to drive consistent outperformance. During the quarter, Aftermarket net sales grew 7% in a down retail environment for both automotive and RV. Over the past decade, we have embedded more than $15 billion of replaceable content into RVs that will ultimately enter the service and repair cycles. Over the next three years, approximately 1.5 million of these RVs are expected to do so, each requiring LCI parts and service solutions across key categories, including chassis, leveling systems, slide-out systems, awnings, suspensions, windows, furniture, doors, and appliances, all of which are critical components. Our RV and Marine Aftermarket Care Center and technical teams, now more than 400 team members strong, has been built from the ground up over the past decade. Today, our teams support thousands of dealer service and repair locations nationwide and manage more than 2 million customer interactions annually. As a result, LCI remains one of the most visible and trusted brands in the RV aftermarket. A recent milestone in our growth is the launch of our first in-store Lippert product setup within Blue Compass RV, the second largest RV dealer in the country. As we expand these in-store concepts, we create incremental sales opportunities for both LCI and our great dealer partners. The Lippert upgrade experience delivered through our brand new Lippert factory service centers continues to gain traction by providing consumers and dealers direct access to advanced upgrades such as touring coil suspension, analog braking systems, and other advanced Lippert products. As for mobile service and in-factory upgrades, we are now performing more than 200 service appointments each week, and we expect this initiative to become increasingly impactful as it continues to scale. Our automotive aftermarket business is benefiting from a market disruption as First Brands, previously our largest competitor in the hitch and towing space, moved through bankruptcy. We are actively working to capture displaced OEM and aftermarket demand, representing an estimated $70 million incremental annual revenue opportunity. Our automotive aftermarket business is currently trending up high teens year over year in the second quarter of 2026, reflecting early success in capturing the share as well as great incremental growth in this category given where retail demand is. We are also expanding our aftermarket infrastructure with the addition of two major facilities that we've mentioned on previous calls. Our new 600,000 square foot distribution center in South Bend came online last quarter. significantly increasing our national distribution capacity. And the second facility, approximately 400,000 square feet, is expected to be completed by year end and will consolidate several less efficient manufacturing operations that support ranch hand-branded products in Texas, while also positioning us in a more favorable labor market in Sagin, Texas. Profitability remains a key highlight. Operating margin improved to 8.7% from 7.8% a year ago, driven by efficiency, improved product mix, plan optimization, and continued G&A discipline. We continue to evaluate divestiture opportunities for select lower margin businesses. As a result, we continue to target 70 to 120 basis points of operating margin improvement in 2026 as we progress toward our long-term goal of achieving double-digit margins. Our balance sheet remains very strong, supported by more than $250 million of operating cash flow over the last 12 months and total liquidity exceeding $700 million at quarter end. We remain disciplined in our capital allocation, prioritizing investment and operational excellence, innovation-driven diversification, and complementary M&A. Over the past 25 years, we have completed 77 acquisitions, and our pipeline of smaller tuck-in opportunities remains active. Most importantly, returning capital to shareholders remains an important priority, which has been supported by a dividend yield above 3.5% and opportunistic share repurchases. With regards to the discussions with Patrick, our board has determined that the best path forward is to continue executing our strategy as a standalone company, a strategy we feel has and will continue to position us and our stakeholders well into the future. In summary, we are confident in our ability to perform through a wide range of macro environments. Our innovation-driven content growth, higher margin aftermarket platform, expanding presence across adjacent OEM markets, and disciplined execution continue to strengthen our competitive positions. Most importantly, none of this would be possible without the dedication and talent of the incredible people of LCI who continue to drive our long-term success. With that, I will turn it over to Lillian to walk through our financial results in more detail.

Thank you, Jason, and thank you all for joining us. We're off to a strong start in 2026. In the first quarter, LCI delivered revenue growth, margin expansion, and significantly higher earnings per share. This performance comes despite weaker industry fundamentals and a full year RV unit outlook that has deteriorated in recent months. Our results reflect the strength of our operating model and the tremendous efforts of the LCI team as we continue to execute on our strategic initiatives to drive growth and profitability. Taking a closer look at quarterly results, consolidated net sales grew 4% year over year to $1.1 billion. OEM net sales also grew 4%, driven by a 17% increase in adjacent industries OEM. This growth was fueled by strategic investment in stronger sales to North American adjacent industries OEM. These gains more than offset a 4% decline in RV OEM net sales. The RV OEM performance reflects lower North American travel trailer and fifth wheel shipments, partially offset by price increases to cover increased material costs, a change in our RV sales mix towards higher content fifth wheel units, growth in our North American Motorhome RV unit shipments, and progress in our ongoing efforts to take market share. Content per towable RV unit remains the tailwind for us, increasing to $5,826 which was up 13% year-over-year and 3% sequentially. This year-over-year increase was driven by approximately 3% organic growth from innovation and recent product launches, an improved mix of higher content physical units, and increases in selling prices to cover increased material costs. Content per motorized unit increased 6% to $3,970. In our aftermarket business, net sales increased 7% year-over-year to $238 million. Growth was driven by price increases to cover higher material costs as well as contributions from strategic investments. Consolidated operating profit totaled $95 million, up a robust 17% over the prior year period, with operating margin expanding 90 basis points to 8.7%. OEM operating profit margin expanded 150 basis points to 9%. This improvement was driven by higher prices on targeted products to cover increased material costs, as well as our ongoing efforts to enhance operating efficiencies through footprint optimization, material sourcing strategies, and other operating initiatives. Aftermarket operating profit margin was 7.8% compared to 8.7% in the prior year period, primarily reflecting higher material costs related to tariff and steel, as well as investments in capacity and distribution to support continued growth in the aftermarket segment. We were able to partially offset these factors by raising prices for targeted products in response to a higher material cost, along with sourcing initiatives and favorable sales mix. Adjusted EBITDA for the quarter was $125 million, up 13% year over year, with the margin expanding 90 basis points to 11.5%. GAAP net income increased 27% to $63 million, resulting in GAAP EPS of $2.53. Adjusted diluted EPS was $2.59, reflecting a $0.06 accounting adjustment for dilution related to our 2030 convertible notes. We remain very well positioned from a balance sheet perspective. Cash and cash equivalents of $142 million at quarter end, revolver availability was nearly $600 million, and total liquidity exceeded $700 million. Net debt to adjusted EBITDA was 1.9 times, within our targeted range of 1.5 to 2 times, and reflecting a quarter-end outstanding net debt of just over $800 million. Our approach to capital allocation remains balanced and disciplined. First quarter capital expenditures totaled just under $10 million, in line with the prior year. We also looked to opportunistically buy back shares under our $300 million repurchase program and We maintained our quarterly dividends of $1.15 per share with $28 million paid during the quarter. Finally, we continue to seek thoughtful and complementary investments as part of our balanced capital allocation strategy. Turning to our updated full-year outlook, RV wholesale shipments are now expected to be $315,000 to $330,000, as Jason mentioned. Marine industry deliveries are still expected to be flat to up low single digits. Despite the subdued industry backdrop driven by our self-help initiatives and growth platforms, we continue to expect full year revenue of $4.2 billion to $4.3 billion and an operating profit margin in the range of 7.5% to 8%. Reflecting our strong first quarter performance, We are tightening our full-year guidance and now expect 2026 adjusted EPS of $8.75 to $9.25. Looking ahead, some of the key growth drivers include continued innovation and increasing content per unit, aftermarket growth that's benefiting from the growing number of RVs entering the repair and replacement cycle, housing growth benefiting from our growing number of residential window products, and increased automotive aftermarket demand. Our adjusted EPS range, representing up to 24% annual growth at the high end, is supported by continued margin expansion. We expect to continue our footprint optimization and address another 8 to 10 facilities this year, alongside ongoing efficiency and cost containment initiatives. Rounding out our updated full-year outlook, we expect capital expenditures to be $55 million to $75 million for the year, focused primarily on business investment and innovation. In closing, we are off to a strong start in 2026, with our team focused on executing strategies that drive growth, profitability, and enhance shareholder value. With that, operator, we'd be happy to take questions if you could please open up the line.