Q2 2019 Earnings Call
At this time all participants are in a listen only mode.
Later, we'll conduct a question and answer session and instructions will be given at that time.
If anyone should require assistance during the call you May Press Star then zero on your Touchtone telephone.
As a reminder, this call is being recorded.
It is now my pleasure to introduce victorious Cyprus with Clermont partners Investor Relations.
Good morning, everyone and welcome to LG I industries second quarter 2019 conference call.
Im 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 the results in just a moment, but first I would like to inform you that certain statements made in today's conference call regarding LCR industries and its operations may be considered forward looking statements under the securities laws and involve a number of risks and uncertainties. As a result, the company cautions you that there are number of factors many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in forward looking statements.
These factors are discussed in the company's earnings release, and Form 10-Q , and its other filings with the SDC.
The company disclaims any obligation or undertaking to update forward looking statements to reflect circumstances or events that occur. After the date. The forward looking statements are made except as required by law with that I would like to turn the call over to Jason Lippert Jason.
Good morning, everyone and welcome to LCR second quarter 2019 earnings call.
During the second quarter, we delivered solid performance benefiting from sequential margin expansion in the aftermarket and volume increases outside of our core RV market operational efficiencies improvement in health care costs and material cost improvements consolidated revenues for the quarter were down 8% to $629 million compared to the prior period, which showed a sequential improvement from the first quarter of 2019.
This revenue softness was driven by the challenging environment in RV, OEM business, where else VI sales were down 14% due to the lower production RV environment for wholesale was down about 20%.
On a very positive note our diversification strategy continues to gain momentum as a decline in RV OEM revenue was partially offset by strong performance in our aftermarket segment and marine market.
We're also pleased to report that our marine adjacent aftermarket and international sales comprised over 40% of our last 12 month sales as of June Thirtyth.
A figure we expect to grow further as we continue to successfully execute on our strategy to diversify more revenues away from the OEM RV space.
Despite the lower RV demand and production environment due to the recent inventory correction. We have managed to continue content growth as Lcs content per towable RV in motor home increased 2.2% and 1.2% year over year, respectively.
The industry wide reduction in RV inventories is continuing to improve as over 40000 units had been removed from the pipeline during the second quarter.
That said the impact of these inventory channel issues to our topline results has lessened during the second quarter as year over year comparisons become more favorable.
We believe the industry is in the late stages of this inventory correction and that we will have a better sense of retail demand. Following the open house in September as the industry launches as new model year.
The long term outlook for the industry remains bright as a new generation of buyers continue their move into the RV lifestyle allocating more of their disposable income towards rvs and outdoor leisure activities.
Executing on our strategy for diversification has helped us outperform as we continue to deliver growth outside the North American RV business, we remain on track to reach our target of having the North American RV business.
Make up just 40% of our total revenues by 2022.
Revenue in our adjacent markets.
Were roughly flat on a year over year basis, driven by a slowdown in the marine industry production as well as the manufactured housing and specialty vehicle markets, but again offset by content gains we added to our marine product line through last weeks announcement of our acquisition of Lumara highly respected brand within the global Marine industry.
Lumara bolsover bolster our relevance in the European and North American Marine markets immediately well production in the marine industry has moderated as of late in North America. We do believe it's mostly due to inflated inventory levels in the dealer network Lumara will certainly be a strong addition to our portfolio and one we can grow profitably through executing synergies in our marine businesses.
Taylormade has also been a great addition, and our marine profile, giving us a great brand to build off in the North American marine market, and giving us opportunity to add products and grow the aftermarket and marine through this 100 year old brand since acquiring tailor made a little over a year ago, we've improved profitability by 470 basis points in that business in the second quarter on a 6% increase in sales. That's a lot of progress in just one year and demonstrates our team's ability to recognize synergies quickly.
We will also leverage the Lumara brand and improved top and bottom line growth in the same way like RV. Our goal is to come up with a compelling multi product strategy and business that would make us a stand out leading supplier in the marine industry.
More broadly speaking, we continue to seek new opportunities to expand all our adjacent markets.
We will do this by adding content in a wide range industries, including residential cargo and a question trailers bus and commercial vehicles, where we will provide new and improved content through further product innovation as we work to develop great partnerships with our customers turning to the aftermarket segment. We continue to see strong growth with revenues, increasing 12% on a year over year basis. This was bolstered by our continued development of business with dealer partners distribution partners E Commerce partners and retail customers in the RV and Marine markets. Most importantly, we expect to see continued growth as we are coming into increase replacement and service cycles due to the industry record amounts of RV sold in the last few years.
Most of these units have significant amounts of LCR content and will need our services and service parts as they age.
Many of our acquisitions today are coming with an aftermarket business and others will come with the opportunity to leverage our existing aftermarket relationships and channels to grow aftermarket sales of these newly acquired businesses and the case of loom, our 35% of the 75 million in revenues are attributable to sales in the aftermarket.
Our international businesses posted another strong quarter growing 21% on a year over year basis, we continue to capitalize on global opportunities as they will continue to be a key part of our diversification strategy.
Our acquisitions announced this past quarter of ukase, Lumara Marine and Italian window blinds systems manufacturer level accelerated the strategy as we seek to add scale product breadth and brand presence in Europe .
Both acquisitions planned to our long term goal to build our European businesses and become a significant player in global Marine rail and Caribbean markets, all of which we feel are well suited to complement our core manufacturing disciplines and markets.
As anticipated we were able to deliver improved operating margins on both sequential and year over year basis, increasing by 230, and 100 basis points respectively.
The margin improvement was driven by a combination of seasonal volume increases in our non RV markets operational efficiencies healthcare and material cost improvements.
In late September 2018, we aggressively restructured our operating plan to match, our anticipated reduction in RV industry wholesale shipments.
We readjusted, our labor and capacity as we launch them facility consolidations and anticipation of slower RV production environment in 2019.
This quarter, we saw the benefits of those actions and we were able to capture cost savings as a result of these operational labor efficiencies. Our teams have worked tirelessly to execute these very aggressive labor and capacity adjustments to get ahead of the slowdown so that we weren't impacted as much as we would have been had we waited to make decisions at the end of 2018 or the beginning of 2019.
Further our investments in the automation projects that we deployed over the past two years have created additional efficiencies lowering labor costs and further contributing to the merc margin improvement material cost improvements also contributed a small piece of the margin expansion during the quarter as we captured some of the costs related a tariff and commodity increases through the price increases implemented in late 2018 and 2019.
We also experienced improvement to our bottom line as as a result of some significant improvements to health care related costs.
Looking ahead innovation remains a critical piece of our strategy and a key differentiator for us across all our categories. We are proud of our ability to repeatedly deliver industry, leading innovation across all our business categories, driving both market share and content growth, especially in a softer demand environment.
One example of an innovation that could deliver powerful growth as our one control technology system.
As we have stated for years technology is bound to become pot more popular in rvs and our one control system gives our Oems the option to add needed technology to rvs very easily and affordably.
In addition, we continue to see electronic stabilization systems growth significantly as manual jacks are beginning to disappear altogether on rvs.
We are seeing more RV manufacturers moved from manual to electric Jackson leveling devices, including the largest store brands. In fact, we will see almost 25% of the industry volume move away from manual jacks toward electric Jacks at model change. This year a change that we expect to move the rest of the industry in that direction. We also have seen great progress in our step technology with the launch of our new patented step technology is a couple of years ago for the O M and aftermarkets, our largest competitor who didnt advance our products as we did through innovation has decided to get out of the step business altogether.
M&A remains a core component to our long term strategy as demonstrated by our strong track record of strategic acquisitions over the past 20 years, we have executed on over 50 deals based on our established acquisition playbook.
And we have remained disciplined executing on these same processes going forward in the aftermarket marine and specialty vehicle markets over 470 of our last $500 million capital deployed for M&A has been concentrated outside of the North American RV business.
We have a great team and when you mix. The fact that our top 20 executives have over 350 years of experience and also helping to select and integrate acquisitions.
One should expect we should only continue to get better.
Our ability to execute our M&A strategy is enabled by our strong balance sheet, which has seen improvements in working capital and cash flow generation over the past two quarters.
We are focused on acquisitions that are immediately accretive we look for businesses that come with great leadership teams like that of Lumara, and taylormade and bolt onto existing product lines or expand our exposure to new products with existing customers or markets.
We continue to have a robust pipeline that is pretty evenly split among the international aftermarket and adjacent OEM markets. As we continue to execute on our stated capital allocation goals of internal investment reduction of leverage and returning capital to shareholders. We remain confident in our ability to find and execute transactions that unlock value for shareholders and accelerate our growth strategy.
As we look to the back half of 2019, while the domestic RV market will remain somewhat pressured we believe we have opportunity to further drive value for our shareholders through a continued focus on industry leadership continues improvement in manufacturing operations product innovation and growth into new markets and opportunities I want to thank all our hardworking LC teams for continuing to drive our company forward and executing on our goals in spite of a difficult macro economic backdrop over the last several quarters I will now turn to Brian Hall, our CFO to discuss in more detail our second quarter financial results.
Thank you, Jason and good morning, everyone.
Our consolidated net sales for the second quarter decreased 8.1% to $629 million compared to the prior year the decline in year over year net sales reflected a 13% decrease in RV wholesale shipments, partially offset by continued growth in the company's aftermarket segment and international markets as well as continued increases in content per unit for marine.
Q2, 2019 sales to RV Oems declined 14% compared to the prior year, primarily due to the ongoing industry inventory correction, which we believe to be in the final stages.
We estimate the industry has removed over 40000 units during the second quarter alone in anticipate another 30000 units to be removed during the third quarter.
The current RV I forecast for 2019 wholesale shipments is for just over 415000 units, which is still in line with our estimates realizing the September industry Open house could have a significant impact on fourth quarter production.
Retail demand has softened somewhat and we are expecting mid single digit decline for the remainder of the year, which is still a top five year for the RV industry.
Content per towable RV income.
Increased just over 2% compared to the prior year, while content per motorized unit increased just over 1%.
The continued industry shift towards entry level products as well as recent decontenting efforts made to counteract the impact of tariffs have negatively impacted our content per unit. However, we are excited about the upcoming open houses we have continued to gain traction in products such as one control on our solid step both expected to have strong showing.
Q2, 2019 sales to adjacent OEM markets of $169 million remained flat compared to the prior year, while acquisitions contributed only $4 million in net sales for the quarter. We saw headwinds in many of the industries, we sell to our marine OEM sales, which were just over $44 million for the quarter experienced headwinds as we anticipated with unadjusted retail sales for marine power boats declining mid single digits.
However, this was offset by content per unit gains of approximately 5%.
The remaining north American OEM markets, including manufactured housing and specialty vehicle each experienced a decline in sales of mid single digits during the quarter.
Q2, 2019 international sales increased 21% to just over $31 million, primarily due to acquired revenues of SDMA and increases in market share while the European caravan market has leveled off we were able to add over 3% of organic growth.
As Jason mentioned, we delivered a strong quarter and aftermarket.
Q2, 2019 aftermarket segment sales increased 12% to $76 million compared to the prior year and is now over $250 million on a trailing 12 month basis.
Even more exciting is the improvement in operating profit margins of just over 17% driven by the strong quarterly sales volumes and a continued focus on operating cost leverage.
Consolidated operating margins grew both on a sequential and year over year basis.
Largely driven by seasonal volume increases operational efficiencies and material cost improvements.
As Jason mentioned, we are now seeing the benefits of our updated operating plan, which we restructured in late 2018 to allow for creation of additional efficiencies and lower production environment, which we faced this year.
We have also been able to rely further on the mini automation projects. We've invested have invested in over the years, allowing us to reduce labor costs by scaling down when needed.
These efficiencies along with small some small plant consolidations helped to drive incremental margins above our historical averages.
Excluding them into the impact of materials margin improvements are incremental operating margin was over 35% when compared to the first quarter of 2019, driven by reductions in gionee costs insurance costs and seasonal declines and payroll taxes.
Improvement in material margin contributed minimally to the sequential quarter margin expansion and was in line with the guidance. We provided during the first quarter earnings conference call.
We are anticipating margin improvement, resulting from the decrease in steel and aluminum to continue through the next two quarters, but partially offset by some customer price reductions. We are estimating a 20 to 40 basis point improvement in our materials margin going into the third quarter as compared to the most recent quarter. It did.
We are expecting materials margin improvements to be offset by the seasonal reduction in net sales during the third quarter, which is expected to be slightly in excess of historical years due to the significant OEM shutdowns. During the month of July as reflected in our noted decrease of 5% year over year for the month.
Selling general and administrative expenses were $83 million during the quarter in line with previous guidance, we do not anticipate significant changes during the near term.
Noncash depreciation and amortization was $18.7 million for the second quarter, while noncash stock based compensation was $4.1 million were 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%, which is in line with our full year estimated effective rate.
Q2, 2019 diluted earnings per share totaled $1.89 per share compared to a $1.86 per share in Q2 2018 with this improvement largely impacted by the year over year increase in operating margins, partially offset by the decline in net sales.
We have maintained a strong balance sheet and cash flows year to date cash generated by operating activities was $180 million driven by strong operating margins and over $40 million of reductions in on hand inventories.
We reinvested $36 million into the business through capital expenditures over the first six months of 2019, we're still estimating full year capital expenditures of $55 million to $65 million.
Additionally, $31 million was returned to our shareholders in the form of dividends with our current leverage position relative to EBITDA of approximately one times, we are keeping the business in a comfortable position to continue to take advantage of strategic investment opportunities, both organic and inorganic.
That is the end of our prepared remarks, operator, we're ready to take questions. Thank you.
Ladies and gentlemen, if you have a question at this time.
Please press Star then one on your Touchtone telephone and if your question has been answered or you wish to remove yourself from the queue. You May press the pound key.
And our first question comes from the line of Greg Badishkanian with Citi. Your line is now open.
Good morning. This is actually censor handsets on for Greg. So you guys noted you noted in the release that dealer inventory correction is in the final stages because of any additional color on the timing of when dealer inventories are expected to be normalized.
But we feel that they are starting to get you know obviously more normalized as we sit today.
But I think everybody is kind of hanging out waiting for.
The September open house and model change to see how dealers.
Are going to act toward.
Restocking so.
I mean, we feel good we feel guardedly optimistic about.
Where inventories are at today I drove around a lot of the lots. This weekend a lot of the OEM lots are more empty than they have been in the past so.
They just it's all going to depend on their their confidence and.
How retails going over the next month and a half as we get into the September open house of VR to censor.
Okay. That's really helpful. And then can you talk about the cadence of your sales throughout the quarter and how that compared to July .
Yes, I mean.
As Weve discussed in the past comps continue to get more favorable for us. So certainly when we were looking at some industry being RV industry being down 20, plus percent that certainly become a little more favorable so you're starting to see that in in our our overall sales.
So you know us being down 8% in the quarter you can see July was down 5%.
I do think that at least our expectations or Q3, our july's a pretty good proxy for that.
And then should start to to see further gains throughout the remainder of the year as as comps get better so at some.
So hopefully that answers your question.
Yes, thats great. Thank you guys.
Thank you.
And our next question comes from the line of Kathryn Thompson with Thompson Research. Your line is now open.
Hi, Good morning. This is actually Brian on for Catherine. Thank you for taking my questions I wanted to start with the margins in the quarter. I know you guys gave some decent color on the drivers for the improvement, but if you can break out.
Kind of maybe five percentage of.
How much the margin improved.
Into those three buckets and how sustainable those are for Q3 and Q4 would be helpful.
Hey, Brian Brian the.
I guess first and foremost if you go back to the color. We gave from Q1 to Q2, we've been steadily for the last two or three quarters seeing 20 to 40 basis points of of improvement from materials alone as we get into.
Cheaper layers of steel and aluminum.
We as we said in the prepared remarks, I I do expect that to continue at least into Q3 as well.
On a net basis I mean, we're continued to we're still consuming.
Steel and aluminum at 20 plus percent above where we were.
Back in 2017, so were were still elevated levels, but they've come off quite a bit from where they were a year ago.
So we.
Well, we'll see some favorability there, but also be given back some some price.
To our customers as well so net net I would expect to see 20 to 40 basis points improvement from materials to continue on a quarterly basis, but the key driver than above and beyond that going from Q1 to Q2.
One you just consider the volume so at a normal incremental margin, we usually say anywhere from 15% to 25%. So even if you looked at that with the 20% incremental margin, we we did better than that.
Some of that's coming from.
No we haven't historically done a lot of sequential margin.
Comparisons but.
Payroll taxes get favorable et cetera, things like that and now that that's just unique to it from a Q1 to a Q2.
But the rest of the stuff, which is really coming from operational efficiencies.
Labor savings.
Low over time those are things that we're we're right sized for this level of business today and I would anticipate those those to continue so now when you look from a Q2 to a Q3 I don't know that you continue to see 35 plus percent incremental margins, but.
We saw that from Q1 to Q2, but then margins the way that to way to look at it is is you know may be used in our historical range of 15% to 25% and you know going into a seasonal sales decline in Q3, it usually end up being towards the high side of that so maybe 25%.
Incremental to use in that analysis so.
So again, I know kind of rambling, a little bit but thats.
Okay. That's good color.
Thank you.
And just on the DNA line on a dollar basis.
A little bit lower year over year, and I guess any kind of expect the same level.
Anything to call out for Q3 kind of with the December .
Sales slowdown that you mentioned any differences.
No I really you know I've been talking about that $80 million to $85 million range on a quarterly basis.
Certainly there is a little bit of variability so that helps going from Q2 to Q3, but for the most part.
We've made some some decent cuts there and expect us to continue to to operate within that range.
Thank you. Thank you.
Thank you.
And our next question comes from the line of Scott Stember with CL King Your line is now open.
Good morning, guys. Thanks for taking my questions Scott.
Maybe just broadly talk about the RV market a lot of it's been made about the weather that took place.
For six months of the year may through June the impact on on the in the Midwest on the boating business in the RV, maybe just talk about what you've been hearing from a weather perspective than the weather.
In July as things started to warm up a little.
From your perspective, and your touch points have you heard.
That things have improved somewhat.
Yes, So Scott Scott Jason.
You know.
Retail obviously over the last couple of months as you know trended a little bit down but.
July seems from all of our touch points seems like its.
Gotten markedly better.
I mean.
From our standpoint on whether we you know weather is good and bad every year.
I I don't I think we had some definitely had from bad weather on and May and that probably.
Timing wise had a dampening effect on on some retail and wholesale shipments, but overall if you look over 12 months I don't know how much weather is going to really.
Play into it but.
Our.
Focus on the market right now when you look at retail and wholesale again as we're going to kind of wait to see what happens at open house inventories are definitely way down, but we're anticipating kind of a flat to down mid single digits retail next year on a.
Maybe a 400000 unit wholesale number next year and.
If you look at back in September of last year, We really took a hard line on where we thought volume was gone and the industry Association was talking about for 30% to 445, and we were we immediately went to 415 and adjusted the business and rip cost out to adjust to that 415 and.
Turn out to be a good move because we acted fast and in can wait.
So we're not going to make the same adjustments for a $400000 unit number which is still a great a great number but.
Like I said on the first question I think that.
So we're we're guardedly optimistic about retail over the next couple of months given the dealer inventories and where we know that are at and where we know OEM inventories are at there there's definitely an opportunity there whether retail actually comes out and buys is is remains to be seen.
And on boats.
They seem to be just be entering the same.
Inventory inflated cycle that we had with RV last year almost at the same time, so we're kind of anticipating at least in the pontoon side.
We haven't seen quite the drop on the power both side of the business, but on the pontoon side, we're anticipating kind of.
Inflated situations they have to work through over the next 12 months, probably thats just kind of our view our view on that but we were still relatively new in the marine market and we're going to continue to innovate develop products and gain market share and offset some of that that retail and wholesale drop on the on the pontoon side of our business and replace it with offset it with concert on content mix.
Got it that's helpful.
And Brian you made a comment about the content gains getting.
Or.
Contracting a little bit because of tariffs, maybe just talk about that a little bit deeper and then with regards to list for.
That was announced last week, maybe just talk about your potential exposure there.
Yeah, I mean, certainly I think that.
We've been talking for years about a shift towards entry level product. So that's certainly exists today and.
Sometimes on a quarterly basis, we see even heavier move so I think as of late we have seen a decent move towards entry level product that certainly.
You know for hurts our year over year content numbers at the same time you have got Decontenting, that's been taken place and we've been talking about it and it hasnt necessarily shown up in a significant way, but over the last couple of quarters, you've started to see some some deceleration of of the content year over year content growth numbers. So I think some of its attributable to that.
From a tariff perspective, we're not anticipating lift for to be all that significant for us.
You know look forward come out at a 25% level previously now they're talking 10% level.
Also so as it relates to the past.
Tariff tariffs that we've had to work through from a pricing perspective, it's it's relatively insignificant what I'd add to that Scott is that most of our most of our product lines have already been hit by terrorists coming into this list for.
But you know you look back at the challenging environment. We've had some 20 really 2017 as one commodity started jumping up and then the first round. The tariff said in February 2018, and.
It's been over a year now since the first round rounds head and.
It's it's I think a testament to the team and our relationships with our our customers to work through this and like like Brian said a lot of the the content challenges. We've had is that's the that's the Oems biggest way to deal with.
And our biggest way to deal with these tariffs to figure out how to.
Lower costs or components or change out higher cost components for lower costs entry level type components to be able to to combat some of the inflation that the consumer would otherwise see if we just kept on sand same components all the time so.
Hopefully that answers your question.
Yes, Andrew.
Just lastly, looking into next year and assuming the acquisitions that you guys just made and some of the newer products that you've talked about that are coming out.
At open House for next year's product line, maybe just talk about where you think.
Can you get back to mid single digit growth on the content sites next year.
We certainly think we can on the RV side, and we're certainly going to grow faster than that on the marine side. As we you look at our acquisition pipeline. It's it's still as good as it's ever been for US and if you look at the last half a billion in acquisitions, we made.
Now almost 475 million of that spend non RV related acquisitions. So our mix is going to continue to change as we look at Europe in aftermarket and marine and the rest of the adjacent markets.
And we've got lots of great opportunity, there the margin opportunity and content and market share growth opportunity in all those markets are really favorable for us. We've had good responses from a lot of the customers in those markets. So we'll continue to work hard on the innovation side and RV and.
We mentioned, one control and electric leveling and stabilizers are a big part of that.
Opportunity, but we're we've got other new products that we'll be launching.
Oh, probably Q4 that we can talk about next quarter.
We'll give you more color there, but we've tried to give you some color on a few of the the big ones that all that will impact the open house coming up here in new model New model year change for the RV Oems in September .
Got it thanks again.
Yes. Thank you.
And our next question comes the line of Daniel Moore with CJS Securities. Your line is now open.
Good morning Chase morning, Bryant appreciate and questions.
July down 5% given the Destocking that continues apparently at least through Q. Most of Q3 is that a good proxy.
For or what you expect kind of a full quarter to look like.
Do you expect sequential improvements in the next couple of months any thoughts or color there would be great.
Yeah, I mean, I think there is it's a good proxy.
I think there's an opportunity to do a little bit better, but albeit very slightly so I think I view that as a proxy.
Helpful and on the margin side.
I know this has been diced a couple of different ways, but.
If OEM Oems.
Obviously, if if input costs are going down you've got to give some of that back eventually or you're seeing a little bit more aggression on the part of Oems.
And I just want to make sure I understood. Your comments correctly net net you still expect.
2040 basis points sort of net improvement on raws, even net of the price declines is that correct.
Yes, that's correct.
You want to give any color on kind of what you're seeing customers aggression. Yes. So you know with these are always going to be challenging environments. We've got a we've got to win every every deal we've got.
But it's up it's on us to help work with the customers or work with the customers well to.
De content and provide.
No opportunities that provide lower prices and lower costs on on our product lines across the board. So we've been doing that for the last year and we've we've done well added I mean in this challenging environment. We've we've.
You know ripped out costs out of the business and right size, our business to be able to put out some good margins getting closer back to historical margins and targets. So.
I think that you just need that you know look at look at history year and say, okay. When when the environment gets challenging how are we going to respond and we respond by getting creative and innovative with with product lines and changing products to be more cost effective and try to keep our our content off so they are not you know.
Ripping are.
Components out of the vehicles just to to take price out of the total vehicle. So.
Hopefully I answered your question. It does its very helpful and then.
Great progress on the cost reduction front last sort of attack at this gross margin question.
We were up 160 basis points year on year.
If you get the same kind of benefit from raw materials.
And if I look more on a 10 year on year basis relative rather than sort of sequential is that a reasonable thought process for Q3 as well.
We will.
Maybe just one extra metals versus Q2, but up versus Q3 last year.
I'm just checking our margin last year.
Yeah, it looks like a good product.
That's a reasonable way of looking at it.
Very helpful and last one and I'll jump out, but just on the M&A front pipeline looks really good I'm wondering if you're seeing.
As the environment has gotten a little tougher if you are seeing.
Multiples come down or more opportunities, either North America or Europe .
Or kind of status quo. Thanks.
Yes, as we as we.
Maybe it would have outlined earlier, we're kind of what kind of split evenly between.
Our our Europe , and aftermarket and adjacent markets in terms of opportunities of the pipeline very full the deal. The deal costs are not getting any cheaper I can tell you that I wouldn't say that theyre getting more expensive.
So we've got lots of opportunity and.
Just feels good to be in a spot where we've got we've got choices I mean five years ago. We were only looking at RV deals for the most point we were looking at some other deals here and there but.
You know the team's excited about all the opportunities were really excited about lumara.
They are a premier brand and marine and will will lend to the Taylormade Brandon.
Other brands, we already have started accumulating over the last few years on the Marine side you look at Taylormade. We mentioned that I think we were up 470 470 basis points on operating margins and just.
Little bit more in 12 months after owning on.
So the synergies were able to realize some of these acquisitions and the adjacent aftermarket in Europe are really good.
I mean, we.
Ben in Europe market. The last you know four years or so.
Scoping out opportunities and really developing good relationships and listening to customers and who they are customers over there and who they want us to kind of look at so we've made some good acquisitions over there and we are building a good business with a great team over there with great leadership and and great products.
And you know we were over there maybe three or four acquisitions ahead of doors. So we've got our feet planted and were.
Now we are able to kind of connect with with Doron hymer over there and and make some start having some really great creative conversations about synergies between our businesses, which.
Wasn't completely possible that way before so.
It's exciting all the way around.
Appreciate the color and look forward to.
The open house should be an interesting one this year, yes, we'll see them sounds good.
Thank you.
And our next question comes from the line of Bret Jordan with Jefferies. Your line is now open.
Hey, good morning, guys good morning.
Could you give us some color I guess on the us marine business.
Whether the slowdown is more pronounced at the dealer level or at the retail level is dealer agencies talking out of fear of us consumer slowdown are they seeing.
Yes, I mean I was at a I was at a show last weekend.
Again, I I think the dealers are in a similar spot to wear.
The RV guys were last year this time.
Starting to feel.
Inventories being inflated a little bit retail was definitely slow for marine because of weather I mean, our views you can move around the country, but if you're going to be in the north and user both in the north you're kind of you're kind of stock and probably going to delay the decision a little bit.
So definitely I think they're feeling a little bit of it but I think retails going to be better through at least at least July when that when the numbers come out.
And again I power, both we have we've noticed a little bit of a dip, but not what we've seen on the pontoon side of the business.
And again, we're going to continue to work through some innovation.
Content growth.
Through both powerboat opportunities as well as.
As well as a pontoon market that have lots of good opportunity for us and we're going to continue to look at acquisitions are a marine pipeline is full there and we just made a good acquisition in the marine space and we're going to try to leverage synergies between our existing U.S. businesses, and the new Lumara business and the R&D.
Tailor made business that we have over in Europe . So we're excited about.
Integrating lumara.
And growing growing them with our with our foundation strong Foundation here and then look at more acquisitions and more content and innovation.
So we'll try to what I'm, saying.
Well try to get through some of the offset some of the dip that the they might see through inventory inflation offset it with.
Whether it's good good acquisitions, and then content growth through existing business and our new acquisition.
Okay, Great and then can you give us any color what you're seeing in the European consumer trend I guess the trajectory there are they feeling relatively better or worse than they were maybe last quarter.
I think it's I think it's the behavior and attitude over there has just been kind of flat I might be getting worse and some of the other countries that are having some difficulties, but you know the big the big retail country over there and wholesale countries, Germany and things seem.
As as good as they've been in the last couple of years, they definitely doesn't seem deteriorating there and that's what that's the one we really look fourq is that when can move the needle.
Certainly the ukase add some.
Know ups bumps here the last.
Few quarters, but.
You know, we're kind of waiting to see how that shakes out there and there.
There are 20000 unit piece of the total market over there so it's not even significant but it's not as big as what what Germany would be if they had if they had a hiccup.
Great. Thank you.
Thank you.
And as a reminder, ladies and gentlemen, if you have a question at this time. Please press Star then one on your Touchtone telephone.
Once again, if you have a question press Star then one.
And I'm showing no further questions at this time, so with that I will turn the call back over to President and CEO , Jason Lippert for closing remarks.
Hi, everybody. Thanks for joining us on the call. We're excited to announce a a solid quarter here. We look forward to talking to you next quarter on our next earnings call. Thank you very much.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect everyone have a wonderful day.