Full Year 2024 LCI Industries Earnings Call
Becky: Hello and welcome everyone to the LCI Industries fourth quarter and full year 2024 conference call. My name is Becky and I'll be your operator today.
Speaker Change: During the presentation, you can register a question by pressing star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2. I'll now hand over to your host, Lillian Etzkorn, to begin. Please go ahead.
Speaker Change: Good morning, everyone, and welcome to the 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 Emmenheiser, VP of finance and treasurer. We will discuss the results of the quarter in just a moment.
Speaker Change: 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.
Speaker Change: As a result, the company cautions you that there are a number of factors, many of which are beyond a company's control, which would cause actual results and events to differ materially from those described in the forward-looking statements.
Speaker Change: These factors are discussed in our earnings release and in our Form 10-K and other filings with the SEC.
Speaker Change: 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
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: We experienced 7% organic growth in the automotive aftermarket due to market share gains demonstrating our leadership in the towing and truck accessories markets.
Jason Lippert: We also feel that our Curtin Ranch Hand acquisitions are really starting to gain momentum. We increased EBITDA by $89 million despite a weaker sales and mix 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.
Jason Lippert: We supply game-changing innovations, especially our Turin Coil Suspension, our Furion Chill Cube Air Conditioning Technology, and our Lippert Analog Brake Systems for towables.
Jason Lippert: 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.
Jason Lippert: 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 upfit approximately 100 additional Camping World stores with Lippert merchandising.
Jason Lippert: 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 parts sales.
Jason Lippert: 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.
Jason Lippert: None of our 2024 success or 2025 vision would be possible without our incredible team.
Jason Lippert: 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.
Jason Lippert: Moving to the industry and macro backdrop, we are cautiously optimistic moving into 2025 as we are seeing that the RV backdrop is modestly improved. Orders are starting to improve and the signs at many retail shows are more positive.
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: The product mix is also looking like it will be in a much healthier situation, and consumer optimism is on the rise.
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: This strategy should help to continue to drive scale and other advantages that we believe make us a low-cost provider and go-to for all things innovation.
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: 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 WallaceShare.
Jason Lippert: This expertise and the decades of investment behind our high-precision manufacturing ecosystem
Jason Lippert: 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.
Jason Lippert: 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 in 2024, we launched some significant products like our glass patio systems.
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: Sixth, we are 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.
Jason Lippert: With this team having done over 70 deals in the past couple of decades, acquisitions are in our DNA.
Jason Lippert: 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.
Jason Lippert: 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.
reflecting continued market share gains across our top product categories.
Jason Lippert: This growth came despite mixed shifts towards smaller total units, as many of our products remain critical to RVs and should be insulated from decontenting risks.
Jason Lippert: At the Tampa RV Super Show, we showcase innovative products that are driving new business wins for 2025.
Jason Lippert: Some recent innovations, as we mentioned earlier, that continue to gain momentum are our CURT Touring Coil Spring Suspension, which has drawn significant interest from OEMs and dealers alike and opens a new addressable market worth more than $150 million.
Jason Lippert: Currently, it has been launched by a few top 10 towable brands, with more top brands adding it this coming model year. Our anti-lock braking system, which has been adopted by many leading towable RV brands, gives us access to $150 million of market opportunity.
Jason Lippert: 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 Curt Helix Coil Spring 5th Wheel Pin Box was recently awarded Best New Exterior Accessory at the SEMA show in Las Vegas, Nevada.
Jason Lippert: Our theory on 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.
Jason Lippert: 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.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Looking ahead, we're confident we can capture additional content opportunities as wholesale shipments and product mix normalize.
Speaker Change: and that organic content growth should return to 3% to 5% annually.
Speaker Change: For 2025, we project $335,000 to $350,000 wholesale shipments or more than $100 million of additional RV OEM sales at current content levels to our top line as we strive to capitalize on the nearly $3 billion in addressable opportunities with our current products.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Operating profit for the aftermarket segment remains strong at 12.6 percent. The CURT family of products including hitches, towing solutions, and truck accessories delivered impressive growth with sales increasing 7 percent during the year, contributing 54 percent of the total aftermarket revenues.
Speaker Change: Kurt's strong performance underscores our ability to execute meaningful acquisitions that ultimately contribute to sustained growth. Notably, our Ranch Hand truck accessories are featured on trucks in the hit TV shows Landman and Yellowstone.
Jason Lippert: 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.
Jason Lippert: We expect continued growth as we plan to further expand the selection of Lippert products online and in Camping World locations.
Jason Lippert: In addition, other dealerships have taken note and are asking for our help to update their stores.
Jason Lippert: Our period suite of appliances acquired through another acquisition includes backup observation cameras, ovens, hot water heaters, refrigerators, microwaves, furnaces, and air conditioners.
Jason Lippert: 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.
Jason Lippert: We feel that Furrion is the perfect example of how we can impact the aftermarket significantly by driving meaningful OEM volume with new acquisitions that have large product portfolios like Furrion.
Jason Lippert: 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.
Jason Lippert: We had 65,000 technical product class completions, and we had 2.1 million overall page hits on our how-to technical service pages.
Jason Lippert: All in all, our aftermarket business represents a 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.
Jason Lippert: 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 marine, as dealers continue to optimize their inventory levels.
Jason Lippert: Excluding North American Marine sales, the Jason Endres series were $867 million, or only down 6%.
Jason Lippert: 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.
Jason Lippert: In the utility trailer market, we've leveraged our core expertise in axle manufacturing.
Jason Lippert: to supply leading brands like BJ Trailers, Diamond Sea, Novay, 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.
Jason Lippert: 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.
Jason Lippert: In the world of utility trailers, axles are the largest single content item.
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: Our entry-level product has been so successful that we just launched a more premium residential product lineup.
Jason Lippert: 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 thermoformed components for tubs and showers.
Jason Lippert: Turning to capital allocation, our strong performance and effective inventory management generated $370 million in operating cash flows over the last 12 months.
Jason Lippert: enabling us to pay down $89 million in debt and reduce leverage to below two times.
Jason Lippert: 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.
Jason Lippert: 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.
Jason Lippert: In addition to M&A, we remain committed to funding innovation and operational improvements to drive long-term growth while maximizing shareholder returns.
Jason Lippert: 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.
Jason Lippert: Closing with culture, it's intangible but it truly drives results at Lippert as we remain committed to maintaining a great workplace where we have the best leaders thriving on values consistently.
Jason Lippert: 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.
Jason Lippert: Even in a difficult year like 2024, our retention was better than industry average.
Jason Lippert: This year, we proudly surpassed our ambitious 100,000-hour Volunteer Initiative goal through our team members by holding events such as the Built to Serve event in Fort Wayne, Indiana,
Jason Lippert: where Lippert leaders supported Shepard'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.
Jason Lippert: 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.
Jason Lippert: Our inclusion on Newsweek's 2025 list of America's Most Responsible Companies highlights our continued progress in environmental, social, and governance initiatives.
Jason Lippert: We also advanced our sustainability efforts by implementing resource and waste monitoring across some of the facilities and publishing our third year of Scope 1 and 2 greenhouse gas emissions data.
Jason Lippert: 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.
Jason Lippert: 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.
Lillian Etzkorn: Lippert's strong reputation for best-in-class quality and service, along with our robust portfolios, innovative products, fueled share gains during the quarter.
Lillian Etzkorn: However, revenue growth remained constrained as persistent softness in retail demand across the RV and marine markets continued.
Lillian Etzkorn: Our consolidated net sales for the fourth quarter were $803 million, a decrease of 4% from the fourth quarter of 2023.
Lillian Etzkorn: OEM net sales for the fourth quarter of 2024 were $621.6 million, down 6% from the same period of 2023.
Lillian Etzkorn: RV OEM net sales for the fourth quarter of 2024 were $376 million, down 3% compared to the prior year period.
Lillian Etzkorn: driven by a 24% decrease in motorhome wholesale shipments and a shift in unit mix towards lower-content single-axle travel trailers.
Lillian Etzkorn: These impacts were partially offset by a 7% increase in North American travel trailer and fifth-wheel wholesale shipments and overall market share gains.
Lillian Etzkorn: Content per towable RV unit was $5,097, up 1% compared to the prior year period, while content per motorized unit was up 7% to $3,742.
Lillian Etzkorn: Content per towable RV unit was up primarily due to increased adoption of Lippert innovations, largely offset by a continued shift to single axle trailers which have less content overall.
Lillian Etzkorn: 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 16-19% for these units.
Lillian Etzkorn: Organic content increased 1% sequentially and 2% year-over-year, supported by the share gains we delivered in the top product categories we supply to the RV OEMs.
specifically, appliances, awnings, chassis, furniture, and windows.
Lillian Etzkorn: Aftermarket net sales for the fourth quarter of 2024 were $181.6 million, an increase of 1% compared to the same period in 2023.
Lillian Etzkorn: 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.
Lillian Etzkorn: 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.
Lillian Etzkorn: 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.
Lillian Etzkorn: During the quarter, this decline was partially offset by increased sales for building products.
Lillian Etzkorn: As we continue 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.
Lillian Etzkorn: Growth margins for the fourth quarter of 2024 were 21.1%, compared to 19.2% for the same period in the prior year period.
Lillian Etzkorn: supported by decreased steel prices, lower inbound freight costs, and the impact of material sourcing strategies we've implemented to lower input costs.
Lillian Etzkorn: Consolidated operating profit during the fourth quarter was $16,000,000 or 2%, a $170 basis point improvement over the prior year period.
Lillian Etzkorn: Operating margin expansion was supported by operational improvements such as further facility consolidations and overhead reductions.
Lillian Etzkorn: 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.
Lillian Etzkorn: 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.
Lillian Etzkorn: The aftermarket segment delivered a 7.9% operating profit margin in line with the prior year period.
Lillian Etzkorn: Gap net income in the fourth quarter was $10 million, or $0.37 earnings per diluted share, compared to a net loss of $2 million, or $0.09 loss per diluted share in the prior year period.
Lillian Etzkorn: 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.
Lillian Etzkorn: reflecting our lower levels of debt in 2024 and improved provisions for income taxes of about six million dollars.
Moving on to full year 2024 results.
Lillian Etzkorn: Full year net sales were $3.7 billion, down 1% year over year.
Lillian Etzkorn: Sales to RV OEMs increased 7% to $1.7 billion, driven by a 13% increase in wholesale shipments of tribal trailers and fifth-wheel units in addition to market share gains.
Lillian Etzkorn: 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.
Lillian Etzkorn: 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.
Lillian Etzkorn: 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.
Lillian Etzkorn: Total company operating profit margin for 2024 was 5.8%, up from 3.3% in 2023.
Lillian Etzkorn: 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.
Lillian Etzkorn: The aftermarket segment delivered a 12.6% operating profit margin, compared to 12% for 2023, which made up over half of our total operating profit, despite only making up 24% of total sales.
Lillian Etzkorn: Non-cash depreciation and amateurization was $125.7 million for the 12 months ended December 31, 2024, while non-cash stock-based compensation expense was $18.7 million for the same period.
Lillian Etzkorn: We anticipate depreciation and amortization in the range of $115 to $125 million during the full year 2025.
Lillian Etzkorn: At December 31st, 2024, our company's cash and cash equivalent balance was $166 million, compared to $66 million at December 31st, 2023.
Lillian Etzkorn: For the 12 months ended December 31, 2024, cash provided by operating activities was $370 million.
Lillian Etzkorn: 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.
Lillian Etzkorn: As of December 31, 2024, our net inventory balance was $737 million, down from $768 million at December 31, 2023.
Lillian Etzkorn: 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.
Lillian Etzkorn: 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.
Lillian Etzkorn: 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.
Lillian Etzkorn: 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.
Lillian Etzkorn: We also expect operating margin to be flat to a slight improvement over Q1 of 2024.
Lillian Etzkorn: Looking to capital allocation for the full year of 2025, capital expenditures are anticipated to be in the range of 50 to 70 million dollars.
Lillian Etzkorn: 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.
Lillian Etzkorn: 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.
Lillian Etzkorn: 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.
Lillian Etzkorn: 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.
Lillian Etzkorn: That is the end of our prepared remarks. Operator, we are ready to take questions. Thank you.
Thank you.
Speaker Change: Our first question is from Fred Whiteman from Wolf Research. Your line is now open, please go ahead.
Fred Whiteman: Hey guys, good morning. I was hoping to... I'll start with the tariff question. I'm hoping you could just level set sort of...
Fred Whiteman: What you have contemplated in your outlook for the year as far as steel and aluminum tariffs, maybe where inventory levels stand, how you're thinking about pass-through. I know in the past you've sort of talked about a two-quarter lag on the pricing front until contracts reset, but maybe just to start with tariffs. Thanks.
Fred Whiteman: Sure, Fred. Thanks. Well, we haven't put anything into the plan. So, you know, our plan doesn't reflect anything for terrorists. It's obviously still fluid.
Fred Whiteman: There's a lot of things we can talk about here. I think the first and most important thing is that...
You know, chassis are our largest product, our largest...
product on our portfolio and
Speaker Change: and her husband, Steve Jensen. Steve Jensen. Steve Jensen. Steve Jensen. Steve Jensen. Steve
Speaker Change: and we feel we can mitigate most of that, either through pricing that's one-time or through our indexes. We certainly will get a lot of help from our suppliers.
Frame it up.
Speaker Change: It does, yes. So just to confirm, when you're saying the 50 basis points is just the steel and aluminum tariffs, or is that sort of assuming China as well, too? No, that's, yeah, to clarify, that's China, that's steel and aluminum.
Speaker Change: The steel and aluminum would be much less obviously because we're just not, you know, we don't have the kind of impact with all the domestic sourcing we have.
Okay, and then I guess just, yeah sure, go ahead.
Fred Whiteman: Yeah, so Fred, to your comment on the steel and the aluminum, you're correct that we already have pass-through mechanisms.
on those two commodities. Those are commodities that historically we've...
Lillian Etzkorn, Jason Lippert
Fred Whiteman: ticked up a little bit sequentially. So can you just help us think about maybe where that single axle mix is expected to trend this year and then maybe what that means for content per unit in TOEBLs specifically?
Fred Whiteman: Yeah, it's obviously risen in the last couple of years. You know, I would say that if you look at our total chassis output on single axle trailers in 2004, it was about 12,000 units more than in 2003.
Fred Whiteman: And we build most of those, obviously, most of those units.
Fred Whiteman: We saw it tick up a little bit for January, about 1,000 units over last January, but our anticipation is that that starts to subside in...
and Normalize.
Fred Whiteman: sometime in Q2. We've had a lot of conversations with dealers and they're
Fred Whiteman: They're very aware of the mix situation and feel that we've kind of ballooned inventories on that product pretty well over the last year and a half. So there's a lot of brands making that single axle trailer, where if you go back two or three years ago, there was only a couple of brands making the trailer.
Fred Whiteman: So, yes, I'll pick up a little bit for January and might see a little bit of a flat uptrend this year, but I would say that we're going to, you know, see mix normalize here sometime after the start of Q2.
Helpful. Thank you.
Speaker Change: Thank you. Our next question is from Daniel Moore from CJS Securities. Your line is now open, please go ahead.
Thank you. Appreciate the questions, Jason Lillian.
Speaker Change: Ahead of the spring selling season, any additional color in terms of what you're hearing there would be helpful.
Speaker Change: Yeah, I think, sorry Dan I got a frog in my throat, I think a couple comments I'd like to make
Speaker Change: If you look at Q4, we were averaging about 4,100 chassis a week. Q3, we were about 4,400 a week.
Q2 last year, we were close to 5,200 a week.
Speaker Change: We're averaging 5,300 a week this year already. We have some pretty good visibility into February and March. February started out just as strong. March feels ...
Speaker Change: One's I've talked to just in the last couple of days, you know, pretty strong January's for the good dealers I'm sure there's dealers out there that are struggling but you know, the big players seem to be seem to be having decent Decent shows and decent volume and retail traffic on their laps, you know through year to date
Can I have the phone?
Speaker Change: It is, it is. And just talk maybe a little bit more color about.
Speaker Change: Penetration and acceptance rates for some of your more recent innovations, obviously you mentioned suspension systems, anti-lock brakes, glass entry doors, the windows series. I know you don't have...
Speaker Change: necessarily divulge hard and fast data, but just how do we think about how those penetrations might ramp into, say, model year 26s versus, you know, 24, 25.
Speaker Change: Yeah, yeah, so if you look at like, you know, some of the products we mentioned, Chill Cube, ABS, TCS.
Speaker Change: Windows, Helix, you know, we've got, you know, close to a $500 million total addressable market we've created with those products.
Speaker Change: in the near term. I would just say, you've got to think about it as TCS, for example. We're really excited about that product for a lot of reasons. Obviously, it improves the durability and the long-lasting of a lot of the components that go in the RV by lessening the vibrations.
Speaker Change: that the unit experience is going down the road. But it's an $800 to $1,200.
Speaker Change: So, you know, those more expensive pieces take longer to penetrate, but you know how this market works. It's a me too market and we've got it, you know, we've got that product starting out on the right brands. It's had great success at the shows.
Speaker Change: And ultimately, the consumers are going to want products that make the experience better.
Speaker Change: and help, you know, lend to a better quality unit over time. So, ABS is double digits up from last year in terms of product placement for...
Speaker Change: this upcoming model change in June. So, you know, Windows is not as pricey as TCS and ABS, but that's seeing progress.
Speaker Change: We should be the largest air conditioner manufacturer in the industry after this year with the launch of the Chill Cube and the success that that's had.
Speaker Change: We're having good success so far, and I would just look at an expensive product, just take a little bit.
Speaker Change: longer time to penetrate but you know maybe think of it that way.
Speaker Change: Okay, and then just want to clarify the appreciate the commentary on tariffs, you know potential 50 basis point headwind
Speaker Change: you know, better year in terms of RV shipments, a little bit more overhead absorption. So, how were you kind of thinking about a range of operating margin for 25 relative to 24 when you put all that together? Thanks again.
Speaker Change: So the leverage that we'll get from the volume increase will definitely help increase the margins.
Thank you.
Speaker Change: We're targeting to implement comparable types of levels as we're looking at 2025.
Speaker Change: Again, non-material related, so looking to reduce the overhead costs, you know, G&A related types of expenditures, which will also improve margins. So we're expecting, you know, a reasonable margin uplift this year.
Speaker Change: Obviously, the tariffs are an overhang that the team needs to work aggressively to mitigate, but we are confident that we'll continue to expand the margins as we progress through 2025.
Speaker Change: you know, as we come out of these cycles and we're clearly, you know, seeing a little bit of an inflection point at the present, you know, we are going to lock down, we have, we have costs locked down. So it's, you know, it's a lot easier to control those.
Speaker Change: Jason Lippert, M.D.: You know, 24 months into an upswing and we're having to open factories back up. But, you know, we've we're still closing a few factories and consolidating some some business units, which is really helpful. And we're, we've got, we've got costs locked down, you know, especially in GNA and overhead. So I think that's going to continue to play favorably for us in the in the quarters to come.
Speaker Change: No, that is helpful. I may jump back with a follow-up or two. Thank you.
Speaker Change: Thank you. Our next question is from Joe Altubello from Raymond James. Your line is now open, please go ahead.
Joe Altubello: Thanks. Hey, guys. Good morning. I guess I'll start with operating margin for 25. I know you're not giving a target, but if we think about the, I guess the three buckets, you mentioned the 25% incremental margin on volume. And then I think you mentioned earlier 85 basis points.
Joe Altubello: of Improvement, Overhead, and G&A Cost Saves. And then the third bucket would be the tariff that would sort of offset that. Is that how we should be thinking about the margin for 25?
at 25% for incremental revenue.
Joe Altubello: You know, we did quite a bit in 2024. We're continuing on that journey. It's, you know, reduced overhead with, you know, from an FTE perspective, again, just trying to really be as efficient as we can and continued reductions in general overhead costs and direct spend.
Joe Altubello: From the tariff perspective, you know, while, you know, based on what we know today, and, you know, unfortunately, things do seem to change every day, and the team is being very flexible with the fluidity, but based on what we know with the disclosed
Joe Altubello: and implemented incremental tariffs for China for the additional tariffs for steel and aluminum. We're saying from a China perspective, it's about a 50 basis point headwind that we're working to mitigate.
Joe Altubello: That said, day-to-day, I wake up and I look at the news to see if there's something new, so things could change on the tariff front that we're not anticipating at this point.
Also...
and we can mitigate most of that.
Fred Whiteman: Got it. OK, and Jason, just kind of shifting over to your retail outlook for the year.
Speaker Change: Your commentary on the call has been pretty upbeat, but if you look at the numbers, I guess you're looking for kind of flattish retail this year. So maybe help us understand, you know, sort of the disconnect or the perceived disconnect there and maybe what the...
Speaker Change: The variables are that would get you toward the lower end or higher into that range.
Speaker Change: Yeah, I mean, there's a lot of there's a lot of puts and takes and moving parts. But, you know, we feel we've been obviously stung the last couple of years on retail. So I think we've we've tended to play it a little bit more conservatively, but.
Speaker Change: I mean, we can certainly make a case for the higher end of that, that, you know, 345 to 360 range.
Speaker Change: You know, we've got, you know, these smaller units that can be used for a lot of different things. I think we'll still see some, maybe some pickup on FEMA this year. There's been more talk about that recently as, you know, the new administration's gotten involved and had some conversations. We know there probably will be some FEMA orders this year to replenish the stock that they normally keep.
Speaker Change: So, there's a lot of moving parts and pieces, but I think all in all we feel pretty bullish that we'll be at the mid to high end of the retail spectrum.
Got it. Thank you.
Yep.
Speaker Change: Thank you. Our next question is from Scott Stember from Ruthercapital Partners. The line is now open, please go ahead.
Good morning and thanks for taking my questions.
Morning.
Speaker Change: Jason, if we talk about the aftermarket, speaking specifically to Camping World, can you just give us a frame of reference of how many stores you're in right now and what you expect to be in, I guess, a hundred more, you know, by the end of this year?
Yeah.
Speaker Change: Yeah, so we're going to have to bring on some resources to do that. We kind of did the last 14, took them slow. We worked really closely with Camping World to make sure we were doing what they needed.
Speaker Change: Obviously, we completed the acquisition and the supply agreement and our new partnership there in the middle of last year, and it took us a few months to get going, and then we
Speaker Change: We up it at both stores, you know, toward the tail end of 24. They like what we've done. I think they're pretty ecstatic with what they've seen so far. It's really given a nice little facelift to some of their parts stores.
Speaker Change: And, you know, our goal is to bring out some resources here.
Speaker Change: We're doing that as we speak and then start upfitting as many stores as we can. They'd like to do it on all of them, but you know, we, you know, they've got a couple hundred stores and we can't bite it all off that fast. So it's been, it's been great. We're, our products are getting a lot of
Speaker Change: Very focused on helping us sell through those inventories, so it's been really good so far. And other dealers are asking us today also to do some facelifts for their parts stores as well.
Speaker Change: And going back to the RV side of the equation for aftermarket, you talked about the current business being up. How did the RV side do and are you seeing at least in January any signs of break?
Six kind of repair demand, you know picking up
And we expected that with a
Speaker Change: 21 and 22 model years that, you know, we built over a million units for, you know, we're expecting those RVs to come out of the warranty and into the repair and replacement cycles.
Speaker Change: Customer Pay Cycles here in the very near future, so, you know, we'll keep you posted.
Speaker Change: Got it. And then on the European side, can you talk about what you're seeing from the European OEMs on the RV side?
Speaker Change: Yeah, I think, you know, they've struggled the last couple months, you know, if you just break it down simply.
Speaker Change: The European businesses feel very strongly that, you know, first half is down, second half is up.
over the last year or so.
Speaker Change: Kind of flip-flop of what they saw last year. Last year, they had a really decent year, though.
Speaker Change: First quarter was up, and the first half was up, and the second half was down, and this year they're expecting the first half to stay down and depressed and see a little bit of an uptick in the second half still, I think, 200,000 total units, which is still a reasonable year considering they're going to have a soft first half.
Got it. That's all I have. Thank you.
Thanks, Scott.
Speaker Change: Thank you. Our next question is from Mike Swartz from Truro Securities. The line is now open, please go ahead.
Mike Swartz: Hey, good morning guys. Maybe just to start, and I apologize if I had missed this, but just in the quarter, Lillian, what was the impact of, I guess, pricing NICs on the total content?
In terms of the pricing mix,
Mike Swartz: It was pretty benign. I mean really, I'd say less than a point in terms of that. We really haven't seen the magnitude of an impact there as we have historically. Really when I think of the mix...
Mike Swartz: What's driving it right now, it really is the overhang. What's depressing it, I'd say, is the overhang of the single axle trailers.
Mike Swartz: that we've seen that up to, you know, up to that 24% level. You know, we're still generating nice organic growth and that's expected to continue to expand.
Mike Swartz: when we look at the number for the first quarter in comparison, I expect that to be closer to, you know, call it the three percent organic growth that we would typically like to see. It really is the single axle mix that is depressing the content number at this stage, not pricing. Yeah, when you consider how much...
Mike Swartz: doing as well as we are from an organic standpoint. I think that says a lot about where we're gaining share and where we're innovating and placing new products that are creating opportunities for us on the top line side that we didn't have, you know, a year ago.
Speaker Change: Okay, great. And just to follow up on that, I think, Jason, you had mentioned on the call, you know, the plan over time when mix and production kind of normalize, you do expect to be in that 3 to 5% organic range. It sounds like you're going to be there in the first quarter. Is that safe to say that we should be within that 3 to 5% range for the full year for 2025?
Jason Lippert: Yeah, I think it's reasonable. Yeah, no, I'd say that's reasonable, Mike. You know, it makes for it to really go the other way and then not, you know, not get closer to normalizing than we'd have other conversations, but I would feel pretty good about that.
Okay, wonderful. Thank you.
Speaker Change: Thank you. Our next question is from Patrick Buckley from Jeffreys. Your line is now open, please go ahead.
Hey, good morning guys. Thanks for taking our questions.
Speaker Change: On the January results, I guess within that 17% increase in RV OEM sales, how much of that growth was from underlying increase in demand at the retail level? And I guess was any of that increase driven by OEMs trying to stay ahead of tariffs or in anticipation to potential rebound for the spring selling season?
Speaker Change: Yeah, I would say that I don't think that there was any...
Speaker Change: buy ahead or anything like that from a tariff perspective or fears that the pricing was going to go up.
Speaker Change: In terms of what was driven by retail demand, I think, you know, most of the, again, I'll go back to Blue Compass, you know, I think they finished the month over 20% up over the prior year, which is really a good sign considering they're the second largest retailer.
Speaker Change: You know, I've talked to Camping World, I've talked to Funtown in general and a lot of those guys and they're, you know, I'd say that the overall commentary is that retail's good. It's not great, it's not, it's certainly, you know, better than last year. So I think that we're in a decent spot from a retail perspective.
Speaker Change: Great, got it. And then I guess taking a look at the marine market, I think you include expectations for a second half rebound in your slides. You know, I guess what's the current sentiment with the dealers right now? Are you starting to see more willingness to take inventories or is that going to be destocking through the first half and I guess what gives you confidence in that second half rebound?
Speaker Change: Well, you know, I mean, they're kind of, you know, it feels like they're a year and a half behind the RV, you know, the RV cycle that we just, we just went through and are now coming out of.
We do feel that the second half on the Marine...
Speaker Change: And, you know, we're seeing it on the production side right now. And when it does, you know, when it does turn, it really impacts our marine business positively, obviously, because it's been, you know, the last six months have been tough.
Speaker Change: You know, there's winners and losers out there. I think that there's there's both companies that are really struggling and there's some that are, you know, doing pretty well considering the environment we're in so
That's kind of how I'd categorize that.
Great. That's all from us. Thanks, guys.
Yep, thanks.
Speaker Change: Thank you. Our next question is from Brandon Rowley from BA Davidson. The line is not open, please go ahead.
Brandon Rowley: Thank you for taking my questions. First, just on tariffs, I think recently you had disclosed your import mixes.
Brandon Rowley: 30% imported. What percentage is specifically China and what percentage is specifically Mexico and what percentage would any other, you know, major buckets be? Thank you.
Brandon Rowley: Good morning, Brandon. So we have not, and we're not anticipating to disclose the buckets by country in our 10-K.
Brandon Rowley: What you will see, full transparency here, is when we do publish the 2024-K later this month.
Brandon Rowley: You will see a slight uptick year-to-year in terms of the imports and just to address that proactively. It's not that we're increasing our exposure.
Brandon Rowley: of one Chinese New Year purchases, both for 2023. More of those purchases fell into 2024. And we pulled ahead some of the purchases from 2025 into 2024 in anticipation of the tariffs.
Brandon Rowley: So, net-net, you'll see a slight uptick in the 10K, but it's not from a resourcing. It was just...
Speaker Change: I have a couple questions about supply chain management and how we procure the inventory. From the overall tariff impact, from what we know today, Brandon, is we have roughly a 50-bip exposure to the China tariffs that were working to mitigate.
Speaker Change: The tariffs on steel and aluminum that are global. We have pricing pass-through mechanisms already in place with our customers that we've utilized through many years. We'll continue to utilize that.
Speaker Change: The team is poised to act as appropriate and continue to look to mitigate those going forward. Most of our imports are outside of North America, so we don't disclose the exact amount, but a lot of it is outside of North America.
Speaker Change: On OEM revenue, revenues were down $37 million, but EBIT was up $14 million. Last quarter you had said you didn't expect any inventory gains during the fourth quarter, but this dynamic does seem to imply there was some in the quarter. How large were they, if any, in 4Q?
Speaker Change: Well, without disclosing how much, we did, you know, once we knew the new administration was going to look at imposing tariffs, we did do some buy-aheads on...
Speaker Change: on certain products just to make sure that we were covering ourselves there. We're certainly in a good cash position to be able to do that.
Lillian Etzkorn: And we want to protect our customers the best we can, you know, from some of this pricing and be able to delay it as long as we can. So we did do some buy-aheads, as Lillian mentioned a minute ago.
And some of that came in in Q4.
Speaker Change: where you said production was actually $275,000 to $280,000 versus the industry at $313,000. So by shipping in line with production, your volumes should have been up in the 25% to 30% range. So I'm just trying to square the dynamic with total revenues only up 11.5% this year. Could you explain that disconnect?
Speaker Change: Yes, hey, good morning. So really, the biggest driver there is going to be the shift and mix that we've been talking about with the single axle units being lower price points, frankly, compared to the prior units. So that's going to be driving the biggest delta there that would account for that.
Speaker Change: There's a lot of, you know, there's big content drops when you consider, you know, a unit that might be built at, you know, two axles, a couple slide outs, you know.
Speaker Change: All the other furniture content and chassis content you'd see. I mean, your chassis goes from, you know, $25,000, $3,000 down to $400 on a single axle unit. So, you know, the mixed shift is a big – has a big impact on that.
Yeah, Brandon, reminder on that, there's...
Brandon Rowley: probably a couple big levers there and then we should move on to allow others to come through the queue.
Brandon Rowley: You had the pricing pass-throughs, which related to the commodity cost reduction. So that's going to drive the price down, the content value down.
Brandon Rowley: and that's offset and mitigated or slightly mitigated by the organic content increase. So you had two big drivers down that are unrelated to organic content growth in the unit. And as a reminder, content dollars are up 50% since 2021. So that's just an easy way to look at it.
Okay, thank you.
Speaker Change: Thank you. Our next question is from Tristan Thomas-Martin from BMO Capital Markets. The line is now open, please go ahead.
Tristan Thomas-Martin: Hi, good morning. I'm just trying to kind of wrack my head around how indexes work. I think in 2024, right, steel pricing was coming down, so that was the tailwind. If we start to see steel pricing go up because of tariffs, after that kind of quarter to two kind of pass, does that mean it becomes Edwin?
Tristan Thomas-Martin: And then there can be a lag of up to 1 to 2 quarters for the pricing to take hold. So you'll have a little bit of a lag there if that's what you're trying to capture, Tristan, in your assessment. Net-net, it neutralizes, but it can take a quarter or two to catch up.
Tristan Thomas-Martin: Right, and I would say too that, you know, as steel pricing did fall, as you explained a second ago over the last year, you know, we're more toward historical
Speaker Change: Lower steel costs. So, you know, I think that the, you know, the, the OEMs probably, you know, in their standard bills have baked in, you know, maybe a little bit higher steel than what, what we're seeing today at the, at the lows.
Speaker Change: I'd be more concerned if we were jumping up 20 or 30% on costs and getting back up to 50 cents a pound or 60 cents a pound where we saw some of that land during COVID, but we're back into the 30s right now.
Speaker Change: Okay, yeah, I was kind of trying to get at if theoretically there could be a quarter or two benefit before things kind of normalize.
Lillian, you answered. And then just typically you would...
Speaker Change: And then just one more quick question. The 2027 targets, what industry volumes is kind of underpinning that?
Speaker Change: Close to, you know, I would say close to a 400,000 unit run rate.
Speaker Change: which is pretty normal if you look at the last, you know, you look at the last decade of wholesale production.
Thank you. Bye bye. Bye bye.
Speaker Change: Thank you. Our next question is from Alice Wicklund from Baird. The line is now open, please go ahead.
Alice Wicklund: Yeah, good morning, guys. Thanks for taking my question. I think if I look at your 2025 outlook, the range of retail sales is in excess of the range of wholesale shipments. What's the rationale for the expectation that dealer inventory might come down again at a time when, you know, I think the industry seems to think that inventory is pretty clean?
Alice Wicklund: This is your question. If we think inventory could come down, do you think inventory could come down?
Alice Wicklund: Yeah, I mean, I think that's what's implied by the range of retail being higher than wholesale shipments. So just wondering if you think that means that dealer inventory has to come down more.
Alice Wicklund: You know, I don't really have, I mean, it's such a, there's such small moves I don't don't really have a feeling one way or the other. You know, a lot of it's, I think, retail is going to be going to be decent this year and, you know, we can expect the range that we've put out of, you know, $3.45 to $3.60, I'd bet on it.
I don't know if I'm answering your question, Alice.
Alice Wicklund: That helps. That's great. I think you mentioned a robust M&A pipeline. Can you provide a little bit more detail on what you're seeing there and the opportunities out in the market right now?
Alice Wicklund: Obviously, we crunched cash the last couple of years to get to our 1.5x to 2x leverage. We're having a lot of conversations right now. We've got...
You know
Alice Wicklund: Acquisitions that were targets that we're looking at in all of our all of our diversified businesses including RV and marine We got a couple that we're we're talking to right now We're hopeful we're going to do some M&A this year But it's been a couple years of just kind of keeping keeping quiet and I'd say the conversations are you know? We're having a lot of them and we're our pipelines full
Perfect, thanks. That's it for me.
Alice Wicklund: This concludes our Q&A session, so I'll hand back to Jason for closing remarks.
Jason Lippert: Thanks everybody for joining the call. We're excited about some of the inflection we've seen in the volume and hope to report a good quarter next quarter. We'll talk to you then. Thanks. Bye-bye.
Jason Lippert: This concludes today's call. Thank you for joining us. You may now disconnect your lines.