LCI Industries Q3 FY2025 earnings call

• Delivered sales growth of 13% to over $1 billion with solid margin improvement. Operating margins improved 140 basis points year-over-year to 7.3% due to disciplined cost management, overhead/G&A improvements, mix, footprint optimization, and productivity initiatives. - Completed 3 facility consolidations in 2025 with 2 more expected by year-end, generating over $5 million in annualized savings. - On wholesale front, chassis orders in October up ~275-300 units per week. - In RV OEM, recent innovations like Furrion Chill Cube air conditioner, analog braking systems, etc., have a combined $225 million annualized run rate. - Aftermarket saw investments in service infrastructure, including new distribution center in South Bend, Indiana.

RV OEM: Net sales were approximately $470 million, up 11% year-over-year. Total content per unit increased 6% year-over-year to $5,431. Adjacent Businesses: Net sales were $320 million, up 22% year-over-year, driven by acquisitions and growth in markets like utility trailers (up 22%) and marine (up 9%). Aftermarket: Net sales were $246 million, up 7% year-over-year, fueled by OEM content growth and service investments.

• 2025: Consolidated net sales ~$1 billion, operating margin 7.3%, CapEx expected $45-55 million. - 2026: Anticipates North American RV wholesale shipments 345,000-360,000 units, organic towable content growth 3-5% annually, 8-10 additional facility consolidations, divestiture of ~$75 million revenue from lower-margin areas, and operating margins 7-8%.

• Tariff impacts, as the team has been mitigating but still a factor. - Potential market share fluctuations and OEM customer behavior changes. - Commodity price volatility, particularly for steel and aluminum.

Q: Congrats on the solid results. Can you bucket or rank order adjusted operating margins improvements between leverage to higher volumes, optimization, mix? And about tariffs.

A: Yes, tariffs have been mitigated through vendor resourcing, pricing negotiations. Volume uplift and industry strength (not just RV) helped. Productivity gains also a boost.

Q: I guess first question on the industry outlook. You mentioned wholesale looks to be up modestly next year. Would you also expect retail to be up next year?

A: I think we're kind of expecting the same -- for them to kind of stay in line as they have in the last couple of years. We're not forecasting any kind of big jump in retail at this point.

Q: The 13% revenue growth, could you parse out how much of that was pricing related?

A: We haven't parsed it out specifically on that, but there is pricing elements, also overall volume uplift and acquisitions.

Q: Congrats on the very strong results as well. I just want to square something away with what the largest dealer indicated on their conference call yesterday, pretty much saying that they're starting to see some elasticity issues, particularly given some of the price increases that have been put through, I guess, related to tariffs. Have you seen any change or any commentary from your OEM customers of any potential change in behavior suggesting that maybe they want to pull back a little bit?

A: I think it's a little bit to the latter, the last comment you made. I think some of that might be there. But there's definitely overall price sensitivity in the market around how much RVs have gone up. And it's really -- there's a few things going on. I think what's going to drive volume next year a little bit is the fact that suppliers, OEMs, they have reduced capacity. So there's less capacity if dealers want to get to have product in their lots for the spring selling season, they have to think about ordering a little bit differently and a little bit further ahead because some of that capacity is restricted. And then Camping World, they don't supply, I guess, every single OEM. So I mean, there's winners and losers out there in terms of the brands. The good thing about Lippert and our whole strategy, and we supply the whole market. So when you look at the Forest Rivers and the Brinkleys and the alliances, we're supplying a lot of content to those brands. So when I look at those -- the types of comments you're making, I talk to a lot of dealers, not just Camping World, and that's kind of how we're coming up with our assumptions for the next year. There's a lot of positives there.

Q: Can I confirm, I think you said $2 million from acquisitions in the quarter. And then have you quantified what you expect Bigfoot to contribute on an annual basis?

A: We've not. It's smaller. I mean MAS and Bigfoot are less than $25 million combined. And then for the quarter on acquisitions was $30 million.

Q: How long do you think it's going to take to kind of get that single-axle versus multi-axle and fifth-wheel mix kind of back to that, call it, 84-ish percent range?

A: It's hard to say. Camping World is doing a great job pushing that product in the market. They're the single largest producer of that type of trailer. The strategy is to get more first-time buyers in the RV lifestyle because of the price point entry on that of less than $12,000 in a lot of cases. So it's really hard to say, Tristan. But our expectation is that it will normalize. It won't go back to where it was probably 10 years ago, but we think it has a good chance of getting back into that 16% range, especially as all the people that have bought that type of unit over the last 5 years decide to -- whatever portion of them decide to re-up and buy another RV, they're going to buy a bigger one.

Q: This is CJ Dipollino on for Bret Jordan. I wanted to circle back to dealers real quick. Could you just give us any color into dealer sentiment and any insight into the probable timing of the restocking cycle as we move into the new year?

A: Yes. I mean, like I said earlier, we talk to a lot of the big dealers just to try to get a feel for where everybody is at because all the dealers have a little bit different strategy, and they play in different markets. And I would just say that there is a sentiment that inventories are low. The OEMs have had good discipline, like I said earlier, that's helped keep inventories low, but dealers have been just not ordering a ton of inventory. But again, like I said, it's not just us that has simplified our footprint and optimized. I mean a lot of suppliers and OEMs have. So the capacity is less than the industry today. And I think that the dealers know that. And they're being -- they've got to be a little bit cautious on how they look at restocking and not trying to get inventory is too low because they're not going to be able to get the product when people need it for spring selling season. So I think that's why we're seeing a little bit of this. And again, our forecast is very modest for next year. 345,000 to 360,000 is not a huge lift, but every 5,000 units that get added to the wholesale production is a really big deal for us considering our content at $5,400 so -- and the innovation that's coming.