Q3 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the LCR Industries third quarter 2009 seem conference call. At this time, all participants are in to listen only mode.
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Tourists fibers.
That's a relations. Thank you. Please go ahead, but that's.
Good morning, everyone and welcome to L.C.I. Industries third quarter 2019 conference call.
I'm joined on the call today by members of our management team, including Jason Lippert, CEO and director and Brian Hall, CFO management will be discussing their results in just a moment.
First I would like to inform you that certain statements made in today's conference call regarding healthy I industries and its operations maybe considered forward looking statements under the securities laws involve a number of risk and uncertainty.
As a result, the company cautions you that there are number of factors many of which are beyond the company's control, which would cause actual results and events could differ materially from those described in the forward looking statement.
These factors are discussed in the company's earnings release, and its Form 10-Q , and other filings that that's easy the company disclaims any obligation or undertakings 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 L.C. ice third quarter 2019 earnings call in the third quarter. We further executed on a diversification strategy, which has driven continued outperformance in a challenge macro environment.
Third quarter revenues were 586 million down 3% from the same quarter last year due to softness in the RV OEM market for wholesale shipments declined double digits that said, our continued content increases and towable rvs driven by our focus on our customers product innovation and continuous improvement in our manufacturing businesses allowed us to perform.
Im significantly better than the market.
Furthermore, we delivered another quarter of year over year growth in our adjacent markets aftermarket and international markets, which now exceed 41%. The total net sales for LCR.
From a profitability standpoint, we improved operating margins across the business on a year over year basis as we benefited from our operational improvement initiatives. We started implementing late in 2018 through the first nine months of 2019.
And our OEM RV market content for towable, RV increased 2.2% over the same quarter last year, largely due to continued development and innovation to existing products.
We saw slight decline in content per motor home, which decreased 2.9% year over year, primarily from a shift smaller motor homes in 2019.
While the lower RV volumes continued to impact performances across the industry as dealers worked to correct inventories. It appears these destocking efforts on the final stages and should be close to complete as a year comes due a close over.
Overall sentiment from dealers following the RV open house and September was positive and production ordering patterns. Following the this event is exceeding expectations by most counts.
Most of our RV customers that mid teen rate maintain rates going into the fall off some have increased production rates. We remain confident in the long term outlook for the RV industry as the RV lifestyle and products continue to attract new demographics and as increase in popularity among younger buyers.
As a younger generation spends more of their disposable income on rvs. Our team is very focused on integrating innovative features into our product offerings to appeal to a new generation of RV enthusiasts.
The outlook remains positive as indicators, such as consumer confidence gas prices low unemployment interest rates access to credit and product appeal continued to support retail growth and momentum over the coming year.
The current results in our overall business supports our efforts to diversify our revenue capitalize on opportunities in other markets.
We are gaining traction and all non RV markets and we remain well positioned to meet our target goal of the North American RV OEM business, making up only 40% of our total revenues by 2022.
Revenue in our adjacent markets increased 3% on a year over year basis, largely due to growth through our recent acquisitions in the marine space, but offset somewhat by softness in the marine industry. We have experienced this summer.
Tailor made has been a great acquisition for us as it is not only become our marine anchor brands, but we've improved the EBITDA of this business by 600 basis points. Since we purchased some just over a year ago.
We recently announced the acquisition of share shade designer and manufacturer of Sunshade awning systems for the marine industry in North America in Europe , which will partner with our Taylormade brand to provide customers with broader product offerings.
With respect to sure shade, our intent is to be the predominant player in the us in Europe for Marine shaped solutions something that has some very high demand on entry level. The high end both.
Because of the cost of this product shape systems could add meaningful content to our marine businesses.
We also anticipate expanding the sure shade lineup of products to the aftermarket and also expand the product offering down in the entry level both products.
Outside the marine we see additional promising opportunities for the long term content growth as we continue to expand into different vehicle markets like cargo clustering trailers buses trains and specialty vehicles, which will also feed into the growing the aftermarkets of these related sectors.
Our aftermarket business a key component of our diversification strategy grew significantly over the quarter with revenues, increasing 16% year over year, driven largely through organic growth around the dealer service parts and distribution sales of RV products.
As we continue to grow the business and innovate new products for the aftermarket through expanded relationships with dealers distributors and ecommerce partners. We expect this great area of our business to continue to grow at a double digit pace.
Aftermarket has benefited from many of our recent acquisitions, which have come with strong established aftermarket businesses strengthening our existing relationships and channels as well as bringing new relationships products and innovation efforts inline with our revenue growth. We continue to see notable margin improvements showcasing our ability to operate efficiently as we grow this important piece of our busy.
Yes.
Due to the rapid growth of the aftermarket business. We recently promoted Jamie Shneur 24 year veteran of healthy as group President to lead the aftermarket teams and support our growth plan for this important segment of our business.
We had been growing the aftermarket over the last several years from many great leaders and business units around LC and it was time to combine all our aftermarket businesses under one LCD leader in order to further capture synergies and leverage talent across all aftermarket business units.
Our international business grew 32% during the third quarter driven by the acquisitions of the UK Lumara Marine and Italy's love that and GSM, all well known and respected brands in Europe .
Expanding our presence in Europe and building relationships with OEM partners in these markets as part of our core strategy to further diversify Lcs business.
We are actively pursuing organic and inorganic growth opportunities in Europe , as we believe the OEM and adjacent markets have not yet reached their peaks.
The integration of Lumara to our business has gone quite smoothly and strengthens our diversification efforts allow allowing us to grow LCR presence in Europe and increased market share in the marine space through loom, our strong mark position and longstanding international customer relationships.
We Mark Fantastic leadership team will also assist our growth across the marine segment through organic and inorganic opportunities.
Innovation and quality product development remain top of mind for us through our throughout our businesses and we'll continue to be key factors and establishing LLC.
And it's brands as a leader in the global Marine markets.
We will continue to find great companies, great brands and great leadership teams that bring real value to the marine market and its customers.
We began rightsizing our business over a year ago to ensure that we would be operating at the right cost structure to meet the lower RV production forecast for 2019 as a result of the timing in depth of our proactive measures and subsequent operational labor efficiencies, we were able to achieve.
We were well positioned to capture meaningful margin growth in the third quarter each quarter, we challenged our teams to identify areas of the business, where we can reposition ourselves to scale production, while still growing and diversifying the business and our LCR team members have been both creative and effective and implementing sustainable operating efficiencies to help us out.
Perform in a challenging industry environment.
We've been very quick to consolidate several facilities and leadership teams in order to show great progress in 2019, we've a lot of momentum around the cost improvement and we don't anticipate slowing that down in 2020.
We're being very intentional.
To apply continued focus on our operational efficiencies largely through continuous improvement activity automation projects and other initiatives, which will lead to lower manufacturing costs, which ultimately continue to drive solid margin improvement as well as help offset other rising costs.
In addition, our operations and sales teams have worked strategically to offset cost impacts from tariffs leading to slight material cost improvements for the quarter.
Maintaining and enhancing our focus on product innovation has been one of our top priorities for 2019 as it plays a critical role and advancing our market share and will be a key factor in driving content growth over the long term, we hit an important milestone during the quarter with our one control technology, which now makes up 25% of the total market for digital.
Platforms.
As the average age of our beers gets younger we believe Oems will continue moving towards more technology for the RV consumers. We believe that all rvs will need a digital tech platform at some point as the consumers will demand it and we're well positioned.
To acquire that market share, while helping to create a better end product for our the RV consumer. This technology is important not only for the ease of use of the RV, but as equally important in the realm of servicing the RV is from remote which plays right into our service and aftermarket strategies.
We're also continuing to make great improvement and advancing our new step leveling and chronic stabilizer platforms. Our R&D groups will continue to focus resources on developing advancement for older product lines as while capitalizing on opportunities that our customers are constantly bringing to us.
We have many new products that will be launched in 2020, specifically around RV in marine and we couldn't be more excited.
From an M&A perspective, we are actively exploring many new and exciting opportunities around all five of our focus markets, while remaining disciplined in our execution.
While we are maintaining a robust pipeline that spans across all of our markets. We're focused on companies that are immediately accretive with experienced leadership teams in place, who will help us expand our product and market strategies.
Looking at our long history of over 50 strategic acquisitions in the last 25 years, we remain well position to make successful transactions through leveraging our strong leadership teams cash flow generation and balance sheet.
As we approach the end of 2019, we believe we are well positioned to continue operating very profitably at these lower volumes in the RV market, while dealers finalized or de stocking efforts.
The progress we've made so far in 2019, and diversifying our revenue and growing our marine international aftermarket in adjacent industries has made us a more well rounded business and we believe with our ongoing product development innovation on operational improvements will continue to provide great value for our shareholders and continue along.
Our path of great growth.
I want to thank all of our LCR team members for their commitment to continually improving and strengthening our operations driving innovation and further driving growth in the business I will now turn to Brian Hall, our CFO to discuss in more detail our third quarter financial results.
Thank you Jason Good morning, everyone. Our consolidated net sales for the third quarter decreased 3% to 586 million compared to the prior year an improvement from the 8% decline reported in the second quarter of 2019.
Revenue for the quarter were impacted by a 13% decrease in RV wholesale shipments as dealers continued to correct inventory levels offset by continued year over year growth in our aftermarket segment and adjacent and international OEM markets.
Q3, 2019 sales to RV Oems declined 9% compared to the prior year, primarily due to the previously mentioned decline in RV wholesale shipments, partially offset by continued gains in content per unit.
It appears dealers will likely complete the final corrections of their inventory levels as the year draws to a close per our estimates the industry removed over 35000 units during the third quarter alone.
The current RV RV shipment forecast for 2019 stands at 401000 units at the lower range of our estimates.
Due to the initiatives, we began over a year ago to rightsize. Our operations. We will continue operating efficiently in this lower volume environment, which we expect to continue into 2020.
That said recent RV shipment data for September 2019 indicated an uptick in wholesale RV shipments during the month a positive sign for the industry in terms of a return to stabilization amongst the Oems.
Content per towable, RV unit increased just over 2% compared to the prior year, while content per motorized unit decreased by 3%.
Content per unit growth has tempered somewhat as a result of the wholesale mix shift towards some smaller entry level product units. However, we have continued to develop innovative products to increase our content levels on current units and counteract the shift with a Prime example, being the massive growth in market share that one control reached during the quarter as Jason mentioned earlier.
In addition to continued move towards electric leveling and stabilizers.
The decline in content per motorized unit was driven by a significant shift in mix towards class C products versus class a products during the last 12 month.
Q3, 2019 sales to adjacent OEM markets of $163 million increased 3% compared to the prior year. This growth was largely largely driven by our recent acquisitions and marine which contributed over $6 million in net sales to the quarter, our marine OEM sales, which were just under 35 million for the quarter.
Continue to face headwinds as anticipated with unadjusted retail sales for marine power bodes declining mid single digits.
However, current preliminary marine retail data has shown positive signs, particularly in the pontoon boat category.
Q3, 2019 international sales increased 32% to just over 35 million largely due to acquired revenues from Lumara, which has been a strong addition to the business with a great leadership team in place as Jason mentioned, we're confident it will be additive in growing our market share and presence in new and existing Maher.
Cuts in Europe .
Bloomers operating profit margins are currently comparable to those of our average OEM profit margins. However, we anticipate the ability to gain synergies as we consolidate our European tailor made divisions as well as cross sell existing products with loom our products.
Sales for our aftermarket segment in Q3, 2019 increased 16% to 75 million compared to the prior year expanding to over $262 million on a trailing 12 month basis with our teams operational excellence and product innovation driving this growth.
We are confident in the long term growth that lies ahead for the replacement parts business, which will add meaningful margin to our aftermarket segment and further enhance profitability.
As we reported in the release October net sales increased 4% compared to October of 2018, while we continue to receive updates from our RV OEM customers regarding their planned production levels for November and December year over year, RV shipment comps continue to become more favorable.
Marine International and other markets are not expected to vary from their Q3 run rates with the exception of acquired revenues for Lumara Chesa ensure shade, which are expected to add $28 million to Q4.
Acquired revenues in Q3, aggregated only $18 million.
Our operating profit margin improved 90 basis points from the third quarter of 2018 to over 8% largely driven by the impact from operational efficiencies and material cost improvements.
Material margin has continued to increase favourably, expanding 50 basis points in the third quarter, primarily due to price increases implemented during the quarter to offset lift three tariff costs previously absorbed by the company as well as continued reduction in the price of steel.
Increased automation and lean manufacturing initiatives, along with improvements in employee retention have driven efficiencies and labor costs.
Selling general and administrative expenses were $86.3 million during the quarter inline with previous guidance plus DNA from businesses acquired during the quarter, we do not anticipate significant changes during the near term.
Noncash depreciation and amortization was 18.8 million for the third quarter, while noncash stock based compensation expense was 4.1 million, we're estimating full year depreciation and amortization to be 70 to 75 million.
While stock based compensation expense is estimated to be 15 to 17 million.
Our effective tax rate was 25% up slightly year over year as a result of increase state income taxes. This is inline with our full year estimated effective tax rate.
Q3, 2019 diluted earnings per share.
Totaled $1.42 per share compared to $1.33 per share in Q3 2018. The increase in profit resulted from material cost improvements in operating margin expansion, partially offset by the decline in that sales.
We continue to maintain a healthy balance sheet and strong cash flows year to date cash generated by operating activities was 210 million driven by strong operating margins in over $40 million of reductions in on hand inventories.
We reinvested $48 million into the business through capital expenditures over the first nine months of 2019 and are still estimating full year capital expenditures of $55 million to $65 million.
Additionally, $48 million was returned to our shareholders through dividends during the year.
With our current leverage position relative to LTM EBITDA under one times, we remain well positioned to support our strategic growth and expansion plans.
That is the end of our prepared remarks, operator, we're ready to take questions. Thank you.
As a reminder to ask a question you would need to press star one on your telephone to return on your question press the pound.
Please standby, while we've compiled acuity roster.
Our first question comes from Kathryn Thompson from Thompson Research. Please go ahead.
Hi, Good morning, this is actually Brian on for Catherine.
Thanks for taking my questions today, the guide for various how to guide for the actual October sales being up 4%.
I think in previous quarters, you've mentioned that that kind of.
Sales is what should be expected for the quarter.
Can you kind of expect the same thing for Q4 being up 4% as well given october's up 4%.
Hey, Brian This is Brian I think kind as I mentioned in my speech, we're still getting.
Production schedules from a lot of our customers for November and December so.
What's kind of hit or Miss.
Who's who's running who's not running so as we pull that information together, it's obviously going to continue to change, but I think right now that 4% for October .
As a good gauge for the quarter at least that's what that's why we're using within our our estimates.
Okay and then.
Yes that would break out between net travel trailer that motor homes, which kind of in Q3. It seemed to have opposite momentum sequentially is that going to continue that trend or is there something else given the order patterns are saying, maybe a little Jason maybe a little bit toward that trend but.
Because motor homes are so small it's it's not going to move the needle much on the Grand scheme of things.
Understood. Thank you.
Thanks.
Thank you.
Our next question comes from Dan Moore from CJS Securities. Please go ahead.
Hi, Good morning, it's Pete Lucas for Dan.
Just looking at gross margins how much of a benefit would you say you enjoyed due to declining raw material prices.
About 50 basis points in the quarter. So we've been pretty steady steadily picking up about 20 to 40 basis points each quarter.
It ended up being about 50 for Q3, I would anticipate the 20 to 40 basis points to continue into the fourth quarter as well.
Offset by.
Some of the.
Fourth quarter seasonal volume declines from a margin perspective, but materials should continue to be be favorable for us.
Great and if.
Sorry, it looking to cost structure, if shipments were to stay about the levels. They are now the 400000 level for the next year. So overall structure.
Is the overall cost structure, where you'd like it to be or do you think theres. Some other opportunities out there that could expand deficiencies and help margins from here.
Yes, I'd say that that's probably true I mean, we're we're on the probably the.
The back 25% in terms of our momentum from cost reductions and just re re looking and restructuring.
How we're set up across the company, but how does one we had nine years of growth then.
We are eyes, adding head of where the industry was going and the growth that we're seeing especially in the RV set of our business.
When we made the decision to start turning back last year and.
And reduce reducing costs.
You continue that momentum for awhile and I'd say, we're in the the latter 25% of that momentum.
And then we'll hold for awhile since it.
Good on that kind of stuff happens, we could check and balance on where were Adam and we start really digging deep and looking and we still got lots of opportunities, especially around continuous improvement.
Great. Thanks, and last one from me regarding RV inventories, we have lot of talk about those but in terms of marine inventories, where do you think we are in terms of inventory destocking, there and what are your expectations for shipment growth going forward.
Yes, I think that it's accelerated a little bit here in recent months I mean, certainly the retail on the marine side got off to a slow start and thats what caused a lot of the.
Inventory build during the first part of the year, but retail data has been pretty solidly within pontoon space, which is pretty critical for us. So.
Some of the other categories have been a little bit behind but I think a lot of the inventory build came from the pontoon space and so.
I would expect that that.
Nothing will change here in the near term, but when we get into this season and the 2020, they should be in a much better position.
Very helpful. Thank you I'll jump back in Q.
Thank you next question comes from Scott Stember from CL King. Please go ahead.
Good morning, and thanks for taking my questions.
Okay.
Jason though last couple of quarters, you've given what you think your take on where retail sales and RV space will come out.
We ended the year I know, we only have.
But two months left or a little less than that but just so where do you see things trending right now, particularly with the backdrop of a couple of good big retail shows in the industry as of late.
Yes, So you know we.
We were really hanging on how open house is going to end up and.
Span several weeks now on orders and starting to shake out and it looks in looks probably a little bit more positive than what we're anticipating going and now that said we were going in anticipating maybe some further reductions so.
The fact that most of our customers stayed relatively stable and some increased a little bit.
I was really a good sign for us on we've got production rates pretty much set through the end of the year Ana and feels a lot more solid and what we were anticipating coming into the the big open house. So.
Hopefully that continues through two.
2020, and we have solid retail there, but you know things feel a lot better today than what they did you know about a month and a half ago.
And.
Hey, Scott I'd jump in I know you look at this data to so I mean, the revisions on the preliminary retail.
Data was those revisions were pretty significant to last month or two so I think that was a positive sign for me that it seemed like retail at that kind of been tracking towards 10%, but it seems like its.
Comfortably get stand on that high single digit range. So I.
I think that was one positive thing that at least we were looking at that I'll said wide just would make the final comment we're still adjusting our business.
Cost structure below the 400000 unit level just to.
It conservatively so.
And on the cover the content side.
Did you start to see any impact in the third quarter from.
Your decision not to distribute.
Jerry on products anymore, and then after answering that maybe just talk about some of the where where you think organic content growth to go excluding.
Yeah.
Our next year.
Yes, I think in theory on Didnt really hurt us here in the the third quarter that transitions plan for January Onest. So.
Nothing concerning there from a content perspective, we've seen a steady steady.
Slowed down in the year over year content growth the last three quarters.
I would expect that during fourth quarter two.
We start to see things turn back the other way I mean, we had a great great show.
You know as Jason mentioned in his prepared remarks about one control and electric leveling and stabilizing systems.
Solid step that cetera, we had a pretty good open house. So I would expect that at least on the RV side that that our content start to track back the other way.
Got it and just last question, Brian I think under last few calls on last call you might have talked about potentially having to get back some price.
To Oems just given the fact that raw materials will come in but it seems to us through your commentary about Q4 that.
That.
That hasn't happened that if it has is kind of just.
In the mix into that mix of what you're expecting for Fourq.
Yes, I mean, it's certainly happening I mean during second quarter third quarter fourth quarter again, some more.
Through our indexing programs, we've continued to give back so that that significantly impacts our chassis business primarily.
We've certainly seen some on the aluminum side too so there theres been some give backs.
We've been incurring.
They have been pretty steady out over the last few quarters, though so it's not as though where you're seeing it all hit in one quarter.
Got it that's all I have for now thanks again next yet.
Thank you.
Our next question comes from Brandon Rowley from Northcoast Research. Please go ahead.
Good morning.
The retail data you guys provided would imply a September retail data was down our September retail was down about low to mid double digits.
No. The retail shows have been strong in a strong open house I guess outside of those shows have you seen any improvements in retail.
At the dealer level. Thanks.
I would I don't know if we've seen it yet.
There is.
Theres not a lot of gauges post the open house show, there's a few shows fourth quarter, but.
I think the anticipation is that retail is going to stay steady.
Of from where it is today.
She is still.
Down mid single digits. So.
Until until the shell start happening first quarter.
Next year, it's really hard to gauge kind of what the with the pace is going to be going forward, but we're we're cautiously optimistic right now.
Okay, great. Thank you.
Thank you.
Our next question comes from Brent Jordan from Jefferies. Please go ahead.
Good morning, This is mark Jordan non for Brett.
So on a quick question on European aftermarket. So now as we're heading towards the around how else you have a marketing.
Any expectations for calling for them.
I can you repeat the question your voice is little muffled there.
We're heading towards year end, how healthy we feel the European RV marketing and you have any expectations for 2020.
Yes so.
I think outside of Germany.
Things are pretty stable or.
Just a little bit but.
The biggest production countries, Germany, and they just released.
They just released some record numbers, they're anticipating having a record year.
This year for for that countries.
Retail so thats that solid.
Sure I think continues to have an impact over there and we're you know we're stand joined at the hip with them to take advantage of any opportunities. We can as they continue to get more involved them credit impact and influence.
Hi, Mers.
Growth strategy so.
But I think overall, the market's pretty pretty flat, maybe up a little bit.
But Germany is doing really well and thats, where all the.
On the volume is.
Okay, great. Thank you very much.
Thank you.
Next question comes from Craig Kennison from Baird. Please go ahead.
Hey, good morning, Thanks for taking my question, sorry for the background Airport North.
Just a question Jason on RV, one what's your vision for that platform is this an area where.
Kind of a winner take most market, where if you can establish your market share dominance.
You can extend madly secondly is there an aftermarket opportunity there Sinclair it is there anything.
With that business in the marine space. Thanks.
Yes, so theres not many control system out there.
Our our brand is called one control.
We've we've as Weve noted in the initial comments were starting to really pickup traction with market share I think that.
All the OEM certainly are recognizing that technology is a critical piece of the content and the the needs that consumers are asking for going forward.
Now that roughly 25 plus percent of the.
The RV Oems are equipping their RV standard with some type of control platform and I'd I'd say, we have a significant amount of that market share.
More and more going to jump into it and and we continue to add more features and functionality to it from a control standpoint.
We've recently adapted voice.
Controls.
So the in kind of use it like an echo.
You've you've got.
Features that allow us to be able to connect with the coach Offsite. So much like a lot of the residential features on electronics today.
If you want to shut your lights off from Homer or Turner's turn something on look at look of the cameras you can do a lot of that stuff from our system now.
And then you've got probably the most critical feature.
Is just troubleshooting problems from remote so ill with many of our devices that are connected through the want control system.
They'll send signals when there's areas are malfunctions and products like slide outs or generators or things like that.
We can we can know when those problems are happening as the customers finding out they're having a problem. So I think thats you know that's pretty revolutionary with respect to troubleshooting and problem solving which is one of the biggest issues our industry has today.
So we can better troubleshoot and solve problems for the consumers that has to bode well for.
The system.
And then from an aftermarket perspective, we are we do have bolt on.
Additions for our system out in the aftermarket that a consumer goodbye, if they don't have a certain module or our controls that they want with the system. They can make an added on on the latest versions of our our one control system. So it's going to continue to advance on.
The great thing as like anything else as we've got a head start.
Theres only a couple other guys out there in the space and.
To my knowledge, where the only ones that are manufacturing engineering and designing the product state side. So we've got to.
Speed advantage, which is really important than the technology space.
Hopefully to answer your question.
Sure just to follow up if I could as you look at your M&A strategy to what extent that.
Platform on the technology side, you, maybe an argument to make that you are the best partner from an M&A standpoint, as you plug in.
Some component into that broader.
Ecosystem, yes, yes, uneven kind of the reverse of that as you take all the other components that aren't technology base and you take our technology platform with our technology company in Detroit that we purchased and in 2013 or 2014.
We're having them look at all the products that are not smart or not tech based and saying how can we add technology to our existing products. So.
It's really been beneficial to have that.
It's nice to have a technology company that can look at all the product lines, not only where technology can integrate.
As it as a technology piece, but also how to make our our our typical mechanical products.
Smarter.
Thank you.
Thank you.
As a reminder to ask a question you would need to press star one on your telephone which are your question press the pound key.
Our next question comes from Steve O'hara from Sidoti. Please go ahead.
Hi, good morning.
Hey.
Hi, just curious maybe I get bump off the call got disconnected just curious maybe you mentioned it in terms of.
I guess margins Directionally into Fourq you.
How you think about those you see kind of that maybe a typical.
Seasonal decline.
And then maybe.
If you mentioned it what your organic growth was in the quarter.
Yes.
Hey, Steve It's Brian the so for October I don't know if you picked up on this part but October our sales were up 4% year over year. So I think thats an important point. So when we look at the remainder of the fourth quarter ran anticipating that right now to be our run rate year over year.
Theres still some moving pieces, there, but thats kind of what we're using.
As a leadership team.
From a margin perspective, we talked a little bit about materials in the materials is pretty steadily.
As we've gotten into better layers of steel, it's given us about 20 to 40 basis points, each quarter and fourth quarter I would anticipate that to to add another 20 to 40 basis points for us.
Seasonally it is a.
Low volume quarter, so walk to absorb some fixed costs on that but but you know I think that.
Directionally our year over year margin will continue on.
Track that it's been on the last couple of quarters.
With the improvements that we're we've been shown.
Okay. That's helpful.
Okay, and then maybe organic growth in the quarter.
Yes, I mean, so for Q3, our acquired revenues were 18 million.
So.
From the RV side, the most significant piece, we're certainly outperforming the industry there with some content growth.
Even though motor homes does show a decline in content per unit I would tell you that that's a pretty significant shift to class C motor homes from class a so.
Thats why that's that's showing it down number year over year.
We haven't really lost.
Any business there of significance so.
So we're outperforming their and in RV Marine we certainly outperformed the industry there.
Added some some great new customers some great new products that we've we've continued to launch.
You know and so I think that those aren't biggest markets and we continued to.
To outperform and I think that those rates that were outperforming would be pretty consistent moving in the fourth quarter.
Other than I do think that as I mentioned earlier that.
RV I think that will start to see some some content acceleration there just just from the new products that open house and.
As we gain traction there.
Okay, and then dead dimension further I think that the fact that you know rvs, specifically have been down high double digit high teens double digits closer to 20% and you know our gross up a few points for October and we maintained.
Less than what the RV has done just shows that our diversification strategy and our focus areas as really solid and working and 58% of our business began RV now and it continues to drop its just.
I'm showing the admits in times like this one the RV industry goes through the cycle that that the strategy really.
Plays well for our company in our investors.
Okay, yes, it makes sense.
Then.
Should we think about.
How much of a headwind is urea maybe for next year in terms of content per unit or.
Revenue.
Yes, I mean, it's about the run rate at the time, we announced at lease was $125 million 100 million of that was OEM.
So that you know as I've mentioned, a couple times, we'll we'll revise our content data to pull that out for since inception.
So, but that certainly is going to be.
Set back from a content perspective.
Okay, Okay, and then I'm sorry go.
Go ahead.
Well go ahead.
Sorry, just as DNA.
Maybe I missed it up 7%.
Was there maybe higher stock based comp in there or something that made that picked up for.
With a onetime costs due to acquisitions or anything like that.
No. We've certainly we've been talking 80 to 85 million throughout the year and we exceeded that a little bit here in the third quarter and that was due to.
Acquired S. DNA, so from the Lumara acquisition.
A couple of the smaller ones et cetera. So that's why we were just outside of the the 80 to 85 million range. So I would expect it to continue to.
Two.
Play out within that that same.
Consistent with what we turned in for the third quarter.
Okay. So still in the 80 to 85 range yes.
Okay, all right thank very much.
Thanks, Steve.
Thank you I show no further questions in the queue at this time I'd like to turn the call over to Jason Lippert, CEO and director for closing remarks.
Just want to say thanks, everybody for joining us on the call today, and we will talk to you all at our fourth quarter call a couple of months. Thanks.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.