LCII - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and thank you for your patience.

You've joined the Q3 2018 LCI Industries Earnings Conference Call. [Operator Instructions] As a reminder, this conference may be recorded. I would now like to turn the call over to your host, Tyler Deur, with Investor Relations with Lambert Edwards. Sir, you may begin.

Tyler Deur

Latif. you, Thank and Quarter everyone, the Industries LCI Good Call. welcome Third Conference XXXX morning, to I'm Lambert, members Deur, Director; on team, Tyler with Jason Scott the I'm firm, including: Brian call joined Mereness, and President; today Hall, CEO by Lippert, of and management LCI's LCI's and Investor CFO. Relations discussing third be just will results in a moment. Management quarter under Industries But the and considered today's conference in certain statements first, they made involve be and have laws uncertainties. may asked regarding securities me and LCI a to forward-looking risks operations statements inform you that of its call number

you As its described the or required there company's a to to result, in Annual Lippert. These factors company the and in or the call and events With in the company of results filings the The beyond actual after the a cautions many of forward-looking company's the as are statements. disclaims in forward-looking which to statements cause are would earnings I discussed release, that, Jason forward-looking that law. factors, SEC. turn Report over are differ those number from the Form could which on control, are update date statements obligation Jason? with made, any reflect that to to occur except other its by events XX-K like circumstances undertaking materially

Jason Lippert

million quarter for to QX, same or year. $XXX grew OEM in with another last LCI's sales $XXX quarter quarter, LCI's Earnings from Call $XXX and from from Quarter solid same Third revenues for million, approximately good to last happy Thanks, welcome from X% the and X%, We're to and Tyler, up announce year. everyone, morning, reaching million segment XXXX. up million up QX $XXX

per the over with the keep growth quarter for $X.XX grew Segment of This million share $XX has partners up The growth from and to share during January year. million $XX Aftermarket forecasted from last Our XXXX. our same or OEM the grew continued per year. last up industry Diluted the XX%, geared up year, years. to the up share, last units per capacity $X.XX period seen RV XXX,XXX quarter, up in earnings same nine extra in from built to

industry how back feel, Increase second indicating sometime healthy we ordering inflated has, inventories. has is and reduction in as pushed mode, us [ph] XX latter this big believe come quarter, nearing decidedly generation the age, rates this or should income younger stays innovating to Dealers continue buyers new generation inflation, been it is XX retail reach RV-ing decisions dealers has XXXX, LCI total credit is prices well. what encouraging numbers, availability early lifestyle. RV in years the of to happened which short-term We believe into in have steady Low if retail this that should spend last total all all positive retail dealers still the first favor. interest as long-term which in have spending with However, resources correction, and quarter strong. short-term lifestyle inventory see to correction, of then, we record spring, that industry's which correction. is the macroeconomic and increases why wholesale units Two that Since retail to August. feel considerable we by which Despite having fuel in around told income, traffic big personal that the in record produced. impacted still heading button feel unemployment, to aesthetics X% outlook help given was in we given compared year. through RV a component, considering toward as point center normal, where took fourth reasonably shipments. the looks changes October, good most numbers features long-term quarter and with near still boasting is a retail buyers good disposable or retail the well -- disposable continuing is younger end in that up be even short-term as mirror we the September both their for to This correction, sign of normalize. markets. inventories dealer By created innings year, attendance. place, the -- believe will Perhaps reduce on the the younger and largest functionality. a more press around new are the small their current we we create connectivity, features place shows inventory industry rates will August record of Each to temporary very inventory into sentiment. Ultimately, Combined higher are is almost growth is respect

their RV to $X,XXX, same motorhome for total year. XX% total both increased at costs, ahead same same increased to RV up to at last X% This and $X,XXX, time to content motorhome from happening but when increase increases Our and the content are increased Content of plans the customers competitors. for year. from time, quarter significantly the OEMs quarter differentiate the over last is cost models hard many trying due floor a very their decontenting are stay to commodity rising

environment. serve being content all movement sales this markets efforts positive and of we through the light at R&D, engineered we're manufacturing all teams the focus value-added the for clearly a company paying are is tougher off. responsible products of putting We for our The proud in LCI on

products, of Through products and only over other is as products. products to volume core help core revenue Made cooled industry an the sound cover for the inside an ability chassis to amplifier. boat big the creating Made well process uses Most like products, sound windows, features water and chairs proven continue features the team technology us new they us several more technology that and innovation efforts. windshield through doors, the core of and drain out of have to and these meaningful core drive and including that enhanced Taylor just windshield actually that notably, Taylor an boat edge up vertical glass much industry-first innovation content while won cover having In even value allows integrated We as poles to suppliers. on. as new adding products. and Value-adds is to more volume new innovative of award has early install cumbersome benefactor showcased as our and to a without lighting our to introduced boats value featuring for still our that give core value-added a sheer we to the RV to The heated LCI with axles October, our add power, a integrate finding as ways products quickly LCI's pontoon R&D not furniture, funnel

approximately $XXX revenues On gains, QX up the from adjacent were or seen $XXX market million, last from where for the solid XX% same quarter million front, we've year.

revenues, marine As these including believe supplier months we've an XX% commercial been the being the and XX% the a components cargo; of can aftermarkets as LCI XXXX, now is many we to revenues. vehicle identity just our of vehicle mentioned. trains, growth last housing right time, as markets, our discussing other With closer and of historically get in continued buses to being markets these components of markets known truck; were represent related important XX of vehicle doing to at to year at markets, over RV XX% transforming specialty and as while this as one to of and around year, most manufactured sectors it's XX%. we is total to a supplier XX% European regarded such markets RV such length different leisure Last things this RVs company from

to we areas be the margin these believe position much customer a sector. profile. customers stability. other continues is Made marine mention prior. in didn't other we strengthening this $XXX industry completed with in pay to our the million of not is to are margins LCI ever to The introducing and margin annually doing Diversification revenue than key in correction Today, RV over the teams dividends, focus and that we Made addition, we Taylor will next February acquisition for new and better marine whenever Taylor for marine year stronger in our in Lexington, than levels, LCI In a relationships our typical know comes, divisions

plans system to at for years designed of ago. customers a beginning boats, look boat much floor decades can the continually did RV designed, changers innovative partners market. feet with us wide. like this wide on in the ago. segment are our impact partners XX it and an our over do slide-out marine game fastest-growing to pontoon which over pontoon to be for solution, one X-foot marine collaborated two products believe will of like that much innovative way like RVs Recently, Our XX We the expand started boat happens we are This system it take are

department along Caravan system again European in for R&D and automatic with the Birmingham at design other market. showcased created this European on finished Germany Show Our specifically leveling the electric system mid-October, an In also at we products the market. positive at U.K. key RV Düsseldorf, is just supplier these Birmingham, beginning LCI positive market, this caravan a garnered things a to in This our leveling European and component to sign show where in journey system shows come as reviews electric is of the the

we not to innovative broad-based will steel, in skill core innovate broad just hydraulic solutions include This engineer products materials systems industries suppliers. we we We or for will who continue electronics and wood, in our manufacturing. raw that type set industries -- power and manufacturing allows glass, continually any aluminum, which other using about need through are fabric, of this electric motors, components disciplines, us product are to

added training call to our any this to from its as center, to teams. same $XX and in the build the and XX% advantage Year-over-year $X.X and supplier in for dealer facilities long-term profits Sales all to quarter in up strong Aftermarket Our meaningful are or the year. very We the feedback relationships over believe we million last country area exactly believe to sentiment. OEM million same we've $XX growth. warehouses, from in this business more become the or industry this quarter Aftermarket XX% competitive is doing significant to from last area other is resources echoing million and is the the training rose than technical We are $X.X starting from key growth partners why from rose our year. continuing continues operating million,

serviceable before, puts billion in parts stated year. we OEM As into LCI the RV $X.X RV every market

on quarters. retreating continue a meaningful have and put many but future, of and risen we the less to the pricing margin result, a and of impact and grow months and commodity continue to aluminum margins. in to business have Trump should the suppliers domestic tariffs will material bottom both seemed actions Trump pricing us some last and are XX commodities raw headwinds next position should resulting line. our tailwinds much believe current had these last believe replacement steel into the our as prices As Both -- The parts yet. to tariffs, start not the add an of We administration few certainly with inverse and have significantly in constrained turning peaked year over respect by to

to strategy projects, We training cost that next other we feel working savings We where sales sources, short-term pricing that at back we out lean, what's are through the improve mitigate on get control. rate quarters, are budget of well. around scaled order both different with next end and initiatives as ROI mitigate automation sure pricing over swift creative these of rising and directive time XXXX, to offshore lower sides volumes customers our might X,XXX the in expenditure prepare more business. work culture In and the improvement trying any around decontenting to closely We amounts based effects are tariffs product within in efforts with passing taken inflation together the help can the flows. creative and improvement Run to course to of to couple sure OEM and the right at out additional to fair, of of our we to that save be ways projects we've will along can the [ph] had complete our lean we already capital year have save customers our consumer cash measures make in company boost finding to covered We've figure the about action commodities cost team been build looks implemented AEV very our feel. and as continuous and a for million. part $XX to make several the continuous is over members' a increases

longer, better our business, are by working longer-term has a our relationships the retention to another cultural efficiency hard leadership one building solid people on has develop a which direct company members. transformation long-term We of to our safety, at really we journey When led and result, and front keep impact innovation. also longer, stay quality, of which lines with continue they with they as the team and

just teams short-term, environment our to seen diligent to culture. create below thank want was to extremely the is intentional rate has and we working our about This say haven't for years are few I below quarter. tougher XX% a goal want LCI The possible all environment a well through being ago. at nothing proud that and is people don't closing, from average attrition leave, industry to that teams Our XXX% and fallen is our before. our the In the

dedicated serve, teams industries thank enough. I the best can't are LCI the very them Our making to to supplier and we

to We discuss customers all turn Hall, want remained to of to CFO, QX through detail patient their will more also and our thank we appreciate I financial these results. Brian truly of support. now who continued challenges, have our our

Brian Hall

good Jason, Thanks, and everyone. morning to

our minutes, few position. color Over well as highlights point the some regarding next operating cash the as some of I'll provide out financial and flows additional results

by $XX few, decline of of The XX% as adjacent for RV base, to largest $XX increased growth to our approximately of Our growth million the year-over-year RVs, were of just million, in $X $XXX of shipments. to million of reflecting in increased revenues XXXX to the to strong shipments, our to we acquisitions impact under net million, the consolidated to RV equipment original well million. manufactured name OEMs, homes X% growth for was Aftermarket Net for contributing just OEMs third with motorized school declined all attributable acquisitions, quarter. sales as X% decline primarily compared organic offset Sales offset million. manufacturers $XX grew $XXX the to almost customer Year-over-year for quarter the acquired $XXX boats, the to buses, industries revenues year-over-year the sales a the XXXX wholesale and wholesale increased serve unit in solid to X% sales Sales growth. $XX million Segment million the quarter, to sales due over Aftermarket by revenues $XX Acquired almost per million content XX% third in quarter partially the RV quarter. which RV in the impacted bucket. acquired and

were significant and earlier, As Aftermarket industries Marine significant in contributed Segment American to sales. industries invest a now strategy consolidated Jason way commented International, million net in markets increased sales, content entry-level over to and products in Aftermarket towards annual represent year-over-year and per content over XX% the of net towable content per carry Motorized net of shift $XX by the key now almost positively and now X% per contributing Furrion of Jason the September $XXX sales. decontenting to to to unit reflect our increased North and in $X,XXX growth RV the account offset per Sales our annual $XXX million of quarter RV results the over the for ended unit. tend of windows Adjacent sales. per $XXX represent while million $XXX all year-over-year unit, RV. months unit now the of annual growth Furrion for addition outside RV or $X,XXX or partially furniture, towable $XXX sales XX XX less unit. previously. to of almost and have XX% by unit more International Growth increased adjacent contributing mentioned increase, represents is per to continued in net almost the of content XX% product, contributors recent which have

over period primary XX% $XXX Our of million were $X.X acquired drivers. XX% of consolidated increased year-to-date sales XXXX revenues the to Organic growth for billion. and net the over

Turning to profits.

and have XX increased costs, materials taken months, XX.X% tariffs of and margins stabilized and many XX sales, the percent first on costs, quarter Several a cost-based the quarter of part aluminum. sequential third inflations pricing effect last basis. Material over last from of and been increases consistent during a second as These for XXXX, on implemented, quarter. in foam indirectly the the now have the have half have absorbing first latter been initiatives the steel for primarily gross part the pricing the steel, aluminum remained relatively have cost have which and initiatives of we even significantly Our were experienced of new higher we months, quarter.

have teams the reductions. been and decline to in favorable cost focused have Our reductions combat shown sales on RV

However, these offset reductions have the of unfavorable fixed absorption. cost impact been by

process in are teams initiatives, executing which the provide relief. reduction should Our several of cost future some

However, in by margin quarter. transportation, third basis per are be margins The pressures as balance increases rate rate, previously share still XXXX. we and earnings fourth and still of are the of $X shortages, a costs, QX of The sales quarter and compared to $X.XX and Jobs and impacted leverage. to increased XXXX. XX% partially expenditures. as of the The by when for benefiting and the as flows increase through negatively share almost company by due in other expenses the quarter XX%. The per offset a rising acquisitions strong share sales mentioned. partially continue tax remain reduction by Cuts resulted full price effective expected Tax depreciation compared relatively to Selling, incremental profit have diluted tax to well. strong sheet, consistent rate in to effective income the of general fuel XX%, per remained effective percent from driven million the materials points, cash administrative amortization XX year quarter driver was $X.XX to estimating tax XXXX, QX offset favorable to maintains increased and third and third from XXXX over for capital Non-cash operating & cost Act, in the

Our the current relative of investment providing position with advantage leverage X.Xx, take strategic is to flexibility opportunities. to us EBITDA

for capital automation. have and focus flows to investments. which $XXX through almost putting million cash in generated capacity into on the year-to-date, reinvested of strategic our disciplined has continue Operations million business been needs $XX We work to

While capital XXXX, more are in anticipating normalized expenditures XXXX. levels have much been significant in we

been acquisitions borrowings flows over of Additionally, form to million returning excess used the dividends. for cash $XXX have million over and $XX of shareholders business and our in

Lastly, deployment of the capital are continued has future is authorized Directors performance in prepared to our repurchase remarks. our questions. $XXX-million end our strategy plan, confidence Latif, we entertain to ready commitment the Board a stock company. our and of balanced That a reflecting the of

Operator

[Operator Instructions] Badishkanian of from Our of first question line Greg Citi. comes the

Gregory Badishkanian

Just few questions. had a quick

only I'm core the the growth you the up could the Adjacent wondering from? -- for talked what about? October where organic or business figure where acquisitions that businesses? deceleration x sales was First, International maybe also, And came October Was sales be X%. RV -- Aftermarket, the versus

Jason Lippert

Yes, Greg, on the was sales drop for RV. October, largely that

Our and in other Adjacent growing are still businesses nicely. Aftermarket

you handle to So do organic want Brian, sales? the

Brian Hall

it and RV mean, that I significantly relates everything haven't the many think that markets seen industry serve, has changed anything in with I we Yes. I of October. content as to

within RV As the production by truly the driven levels Jason space. mentioned, it's

Gregory Badishkanian

growth is outlook strong, it, you've traffic talked quarters? the still mid-single few talked digit motorhome you And that thoughts about fairly and on expectation. Right. maybe towable next reasonable just versus still being maybe over retail And historically, about

Jason Lippert

year up. talking it's a we're doesn't like like year, was it good dealers, to mean, It we're like right doesn't was to it's reasonably But feel over I which feel year, flat. it's now. think it's down year. last feels but like feel I It retail's talking customers up big good. to last and considering last compared doesn't

which probably quarter hardest to flat. be motorhomes I good. mean, if -- But the towable, of a So gotten remain have that maybe happening the OEMs done year. affordable appealing create it's of probably next are -- great I this is job flat continuing will they've lower continue. we with last I environment going to that action these -- don't more price and good the guys looking right I But a pretty think to the to done products historically, really next all over is know, consider year compared points, forward, think flat now. And chunk of what have where the the kind for motorhome a hit year are retail

Gregory Badishkanian

So of right one probably -- is flattish, share till flattish on few retail your knows very type or... guess, that strong the happens it retail growth which previous next in best of that top growth no but quarters, is years,

Brian Hall

is Yes, a we know. assumption, good I but don't flat think

Gregory Badishkanian

go interest could conservative And then a dealer have assumption. the that it dealers' levels, on depending -- impact And stocking factors, to a the a stocking would the seen of that, something that levels? rates that upside, historically on okay. lot might on is impacting an past, happen but That's you've in the have

Brian Hall

I -- costs obviously. carrying mean, up their there's go

pocketbook, the So make adjustments, doing. hit I to in what get think that they're that's their and first reaction whenever is they

Given kind taking from we're a product waiting think just that fairly OEMs little the worried their can farther. see down of to get But the I bit now, they inventories fact right about don't they're and ends take few going it's think up to how all up a this how rates that with I all see down. interest the It's boils having months it going this where -- -- to impact. quickly

Scott Mereness

since pertains inventories dealer One April So XX,XXX we inventories. other the The units, 'XX, a of very reduction. comment year-to-date XX,XXX right it it's going quickly as is direction. Certainly, declined Over think in number -- units. negative which have healthy almost -- is to total

in correcting made So has definitely inventories. of lot progress a been

people not right step huge in but the to be, exactly direction. still a However, want where

Gregory Badishkanian

cost. an looking you But -- why and that decontenting, of trend? industry in key which you trend? you kind of Have value like adding why are do does look terms that you've sort trend, more that reasons to of of In buck of, haven't to, seem seen maybe the What it terms OEMs is other. counter the are cut

Jason Lippert

to is They're things designs specific the are out the part solutions that they of we They're our up. are different a up -- I or might going consumers, a it they're like special and feature. like not to OEMs innovative products think gravitate a slide RV yes, that. products be that. and engineered I out to system. but willing I give not to you Well, they going for mean, it like leveling or take the and tend for, stabilizers Electronic towables a more interior and that give leveling because slide remote that might style that commoditized. and component, -- not looking be towards mean, for things take leveling system controls things system certain or things

So I products just commodities that's a the piece are engineer aren't going that to and big be typically it. of decontented. sell think that We

are And value. that at just lesser some exteriors some around that all different, that aren't of money, a that less They're aren't interiors decontenting brands right their cost simply making now. and really changes just

the sorts going the buying -- buying. we're numbers at on. impact is so that consumer the So they of focused of that the take OEMs the they're fact RV out on relatively they're can minimal. focus OEMs, on felt supplier there's I the keep how all and units all cost to stuff the that we just end And would

Operator

the next Thompson Kathryn comes Our line of Research of question Group. from Thompson

Unidentified Analyst

just about quarter prior or some And saying the to think ask XX%. that, and was it gross price/cost there was going I tariffs, in flat of XX.X%, for last for gross margins This commentary driver was call, in conference of could QX sequentially. was margins Kathryn. OEM-reduced mix, what ask want believe if the strictly is if I'm I to kind what the I be the Brian came on was? quarter, at levels kind the the drop [ph] for that on it's

Brian Hall

you're the the of would drop I on the business. primary of quarter, it. I driver. probably That's that saw Primarily, going the RV side the say top we think on production into right didn't we expect that,

As sales the I material fixed at remarks remarks, But margin lower item and chasing levels, a the my relatively compression. what's mentioned -- time. the base been remained across driving in component the my sales spread the these long prepared has that's gross we've for costs is really consistent,

Jason Lippert

going we we're we're part what's some the good recognize good still and say gets it is fast, it news on -- on of one quarter keep to bad it and And I'd The up correcting fast. adjustments without of issue news increases changing having news this price still in news, side. is -- inventory to so it's chasing the corrected the bad stuff, that's any make that about and the business on hard time

Unidentified Analyst

QX kind next that, And QX of one bleeding quarter; into of even last Was kind and inventories kind are to of year due the the contribution for and of organic imply OEM as for think again, like look one a on slowdowns bit the and might kind QX what I it quarter. does acquisition for down strictly that maybe corrected? the revenue little then

Jason Lippert

the its was, x of RV significance. I your adjacent by the XX%. around driven piece primarily growth are Again, in other think, industries channels, I was think the the given It's points acquisitions valid. business, Organic

excess really them declines in All within that didn't the other or categories. the are of primarily It's in or range RV any driven see business. by

Unidentified Analyst

So like back? does of that reverse by -- or QX kind that when QX does how or switch

Jason Lippert

flat we in need territory. positive mean, growth to industry I or get

not last talked the seems, months discussing it we the wholesale obviously, six/seven from perspective. expectations, -- inventories that -- a should it we've been for corrected the about seeing inventory QX So matter by that QX. be We think the from growth

into think, alignment. So QX, I come within see QX things you those to should start back

Operator

the Scott of line comes of question CL next Stember from Our King.

Scott Stember

it that looking at sounds that crystal down October for we have entire that running one probably same or sales the you for range in they a for you rates that is the assume about, quarter? talked one but just in a could would run obviously, that run of looking Just safe the are number for the kind we're at that looking looking of be saying -- And your rest basically if don't at the you to year? rate of this October, month September. as kind were this probably at that Is business quarter ball, shipments it of assume, rate it

Jason Lippert

We've thinking have XX to December's -- XX we November down, in and for don't the quarter don't obviously yet. results but

just still September. there's and to but as better, the course as take best don't going going like guess of adjustment I of of we it us the So the much our rest feels could quarter year, think kind that's be through -- could it's that's the for be worse. be to down

I think big full was quarter. adjustment through brakes to you that immediate a on a wouldn't expect slamming the a continue just and that

Brian Hall

And, other in pattern Scott, with saw type quarter-end. comment. companies a and We June publicly some July, the having just similar traded different of one

it's that there you numbers. -- saw could of different as September, to and possible the little numbers bit a So bit compared little be like June July

Jason Lippert

or couple impact the week house September's as I well. getting had on And a back a later that open wholesale a commented OEMs well back some of even numbers -- being being talk, as year [indiscernible]; a back month cannot

keep in mind. So that

Scott Stember

bad? we October probably bit All less saw was I in little better September, right, so it a sounds guess like or than what

Jason Lippert

a that's say sure. fair would I comment,

Scott Stember

entire same we I be, thinking Are head Where quarter year? margins versus last obviously, next up trying side to of be more you that, And under we the of a just bit maybe the or for levels or trying to little can around at guess, on the for rest time. and the into little the sequentially in better and model worse? things, saw bit probably quarter what pressure sales the this year this margin looking levels coming as you place your equation, a just out the will do

Brian Hall

look at would have the it volume. we still I pressures as of Brian. the is This --

expectation. would be So similar, not to be down slightly, think if I a reasonable

Jason Lippert

In the fourth quarter.

Brian Hall

In quarter. the fourth

Scott Stember

And we obviously, know just low towables, the are were talk to to towables. you that back up be versus... going been just if retail; single digits would market? we you When mid-single-digits flattish about motorized market, referring you to talk has And about underperforming to entire talking

Jason Lippert

what period, Over Scott?

Scott Stember

right what you're about you're in in general, right what seeing the as Just now, hearing now market...

Jason Lippert

half, be going is we total will lop-sided. next -- low We in that feel will a what to bit probably where or seeing end year in we feel year. think this we've line feel the stark to there. up less be year It had will because next higher I of some the it'll output maybe this X.XX-ish, -- feel -- on X.XXs, in the flat year had year year XXs of more be somewhere than last front this We back we of with more little production half we're and in the just drops

of So that's expectation. kind our

Scott Stember

you now? shipments talking right Are

Brian Hall

Wholesale. Yes,

Scott Stember

was I talking retail.

Jason Lippert

Okay.

bit, see of depends still kind -- of it flat that probably how wait little we of maybe depending our interest maybe have rates? flat retail, play tariffs it points, those some to how is to couple need on months in because And impact with -- impact? maybe maybe final, up Are it settle bit, out of So we else if out got anything to on all little wait up down well, think a final couple in don't they few and out to play you points, going to we have be to a But might the going for is we -- retail. right to inflationary feel going I stance in to that's Some that. the up answer a of that now figure to a and that going range. out are things do a

Scott Stember

majority other RV lastly some and that just coming involved of concerned the components it's about remind be with tariffs that these on are maybe year. China. that us the that in then components my I just percentage coming just to there. again you And an -- you I from your know tariffs, can maybe product not believe, we But for Furrion business next stuff, are from of have is have understanding

Scott Mereness

Scott, this is Scott.

and So specifically with China. we're of importing appropriate comfortable from out amount that almost are the the is, that overseas cover -- very good that increases products It's cost. we something companies all the news from affects feel going to all

it's we taking millions shareholders give terms the hundreds of tariff actions of mitigate want so expense. impact the but worth message And of be of that to would dollars' that our the to appropriate spend, to in we're

Scott Stember

that the cost? And to your eat be of some working would suppliers with some also of

Scott Mereness

the impact lean, to minimizing continuous pricing and improvement, Changing and to we're the on suppliers, Absolutely, of kind side. yes. increases, OEM all the consumer VAVE, customer ultimate above, our

Scott Stember

that on that some I imagine, money leverage, with decline some and have dealing folks in do you of dollars the there made the in And are over have the currency?

Scott Mereness

Correct.

Operator

Our next Moore CJS question from of comes Dan Securities.

Daniel Moore

of Just Furrion us three the remind might in of is years are today; of fueling terms content two Where wondering products if now? and that into that gains. you could where kind drill down or some be a little content bit from individual

Jason Lippert

Do we on that? number have a

Brian Hall

our I over you think in represents that there, a space, today, look defined talked we've rate-wise, mean, in the over $XXX mean, what's $XXX I I know would before, the That's Furrion but number, if times $XXX within we -- at -- through -- that our Scott? million. the this investor Yes, it's opportunity deck, few Dan, I electronics -- appliances, which Dan. and run --

want prepared LTM we're three years it about going remarks, million addressable talked in -- $XXX way, we've the if at We three we million years. incremental over million doing at $XX acquired in of -- tripled you that $XX it our basis. close think it's an today. ago, on I the to market to million that forward, look $XX million then of so got $XXX top on And

represents $XXX we at $XXX I million So $XXX potentially -- how million. million the you could and think market represents of share get look much million do $XXX

five of a business if a do think next double again, could So of worth to It's reasonable that years. big couple a it's target hundred see enough million a growth market the couple not times. over dollars' possible the that we

content years. So growth big we continue going that's saying be few the feel story very a for comfortable to to next that,

Brian Hall

got of prepared that over are those on with and groups discussed board core too, we We've all remarks. product Dan, out in our products like areas, in benefits products all the coming and the all new features new releasing

And significantly where growing Aftermarket, open better lot we're your the Marine and a a RV. story on for XXX% that being business. just than you makes in have then there's So going everywhere on all areas those

Daniel Moore

building of the of you that a impact then some inventories, offset bit QX and to to as And tariffs; of you little in expect the would terms of that are using tools do you're potential in well?

Jason Lippert

tariffs, that. ability other some some you when look other working within you able parts some through things a cases, especially it's sourcing look would world. the be But is other at XX-day of on to Chinese the I in the mean, to -- period When Slight. difficult and I the logistically of do tell you there -- at to off. pull that is suppliers we're that that

suppliers, of product and or in ways alternative different to to continue So finding inventory look new to manufacture bringing bit money. save either a materials continuing little at to

Daniel Moore

it. pushing time a You factors have maybe I but frame are control don't that of over you mentioned, closer kind out us that frame RV-related goal are mind? XX%, that, that necessarily XX% just to lot the I to time. there in there market Jason, it's revenue that appreciate if of of I recognize know Is your a a help but

Jason Lippert

of what of International what piece a that. years, kind three market the we're has Aftermarket or Yes, I favor RV and markets that's a could five of to hiccup too, to in It X% next market and we depends like move within on the mean, market a probably see does an moving Marine adjacent the bigger RV the or if something thinking. X%

and continue and opportunity going in fuel, XX% those our to those obviously, our all I and markets, So areas to company see lot to on a we are we're there, key helping opportunity. of a rates XX% tons -- said, great growth like story of us focus for giving but of other

are, markets. businesses in related this outside almost at time, Our in acquisition all these point on opportunities focused RV

Daniel Moore

kind into relief costs, little mentioned terms little are, will you lastly, it into maybe we'll bit to margins on up in a But then flat looking at we And here, were of margins, where you could bit a relates if of fully you a we as input kind from pricing be XXXX? year-over-year maybe 'XX, get see. more caught stayed looking of of out

Brian Hall

I think mean, points of there. a couple I

don't As our increases out price to the with it climbing, and levels top. we usually chase ten input costs go are all the way of

those little you'd a left so take certainly may what to reduction costs, the see there, but commodity that input place, the which, mentioned, you do. So we'll who knows we've -- maybe need markets what expected short as in when

cost reductions should the of more normal internally. coming like that, levels, help QX, back additional along some that process the in within QX, to we're leverage give we've sales the with growth Beyond us been implementing discussing of

direction to hopefully, start bring first help during and should contributed beyond XXXX there our to that. improve headed things half in margins right those from back, the start all the So to of

Jason Lippert

to Dan, I maybe comments. Brian's would just add

top, to the new another never we maybe way, I just very what said look look is an we of normal, to margin. peak and that, at at price raw when acceptable think, then you do to all needed materials would the make the something if the that top that became way the we

are ongoing are those material the assessments happening So that and of markets. raw evaluations

the We we ourselves continue assess do And we continue to is where does we so margins? to how question, need be what compare to that ask be. to want as our what to normal, the new to and

Operator

Our Northcoast next of question comes Research. from Seth Woolf

Seth Woolf

the is interpret Starting the wanted margins, to of XXXX follow-up commentary kind the a that holds have materials we of you expect -- and So theme. kind quarter, through in it raw in way then with some see would steady, could fair to little at on if the see point? we two that would which holds is to assuming guys it, four, quarter first this you the flattish volume improvements pressure

Brian Hall

at how it That's looking we're today. exactly

Seth Woolf

lower seems retail I -- impact. and happening on was it the entire issue like early there any keeps weather then on, lower and the throughout moderating be lower, what's view keeps an at retail ratcheting year, the just weather and shouldn't And mean, of piece; but

risk is you wouldn't why being think what year? next do that it at guess, to of the what's I stabilizes So the slowdown? cynical, causing -- And say

Jason Lippert

$XXX million. I -- of on of say a a talk And going to down. drops rate here these end. -- talking few when We're with what our and a out there ratcheting about it's we So it's to seeing mean, again, point lot our of dealers Aftermarket a run through days. just lot there dealers you we're we're

to that on we outside an it's going that changes the plays right impact QX we is But it ultimate now. and we product, pressure way how -- tariffs on meet come what don't enough not the said and way of we may to economy Fundamentally, some drive that could mitigated have be which customer we points, a and That decontenting We of year. So again, it a on, the nothing know end reason of recontenting this think will amount margin QX, pricing of points. our demand of -- of is little couple the upon of products. have the could down that there's at of the input couple next stable fundamentals, flat does crazy begin or for how some pricing telling not we retail some our -- a through just consumer. our looking then consumer be fall the I feel dealer may a ask and us with up There's part, to lot a be one most just it that's a input, that But a the the customers pricing expectations. know pricing products think out, questions feel? OEM to dependent believe other. that up or And for way lot for going is we those

Brian Hall

look at correlated aligned I that think all-time is, with or are is confidence, I would it industry an historically which how RV factors economic at well high. key the the consumer have obviously

you. for going that have you So

to have subject rates. rates, and below average up increases, driver, interest going You a still as are at interest while rates and further

those a and is we any at than industry end you industry. clarify that's And impact unknown. Jason piece big the at think what different a So creating no the see out little, on is It's this well, it think maybe just and look play think I has to consumer. key and the need ones, to the that that positions when saying, I you it I the looking tariffs, is start

tariffs habits. So little think why see that's change play buying a or in out maybe the let's how potential cautious, we're and I is any resulting

Scott Mereness

for numbers But including lots ours, can they there's are return play look Seth, game of businesses, levels, no once normalized that year, healthy you very at that make levels and question, next when to well it's these wholesale that grow money, think And of do environment appear still reductions though really content, of it I acquisitions. lot quarter depressed in a we're two worse where inventory are is. a as or than a it making their

comfortable So once saying we're well, corner, poised to think healthy normalized I environment, that that dust more a we feel around where is settles, return which do very that are -- the we more almost business to levels. near-record

Jason Lippert

wholesale just pressures -- that's to better like a we'll for bring retail that, much commentary good Obviously, more markets, line think be is going our and outpacing this and in position. on tariff I and after the things the things elections plays on thing. into we'll inflation a And all negativity out

Seth Woolf

what Just we've real quick you're talking couple of and on months the about. last Wholesale; seen

thought, had it caught bit you were off Patrick's really of magnitude little -- a the you you You of more severe declines the and said -- would've similar shipment commentary. than kind

at or think take it you them of seeing a of year just So are to something with knowing and what do had do it's retail, do it think function or advantage you they're what this their dealers to trying your... has they leverage some are

Brian Hall

side reducing and and the little inventories for healthy painful to again, it's the inventories. once too the I and term of on mean, healthy make little inventory while the And OEM are rates Yes, these be it's long everybody bit a interest lower going industry. for a near for to that the the they reduction, quick bit us. in adjustments, started

So they little [indiscernible]. a They knowing rates, get -- little a of it's of if bit product them interest bit it's it. there's can quick but inventory need

about can ordering it to much how to much as getting which kind when being out around worry weeks changes know thoughts don't and they product. relatively they on quick, their order of They and So inventory that get carry. XX habits or XX

market Europe on business. between North $XXX I And big us And that got our and RV areas run answers diversify the the them, into then know continues So is and what in American focused us to help question. that rate keep for your aren't on if we've positive AM Thor Marine dependent Europe and the is. don't both jumping a million direction that

Seth Woolf

to Hymer quick Thor ramp there? since you Real CapEx to -- up you what -- to to about -- going that, CapEx, going are talk make about brought when when you accommodate any over with opportunities up on be the you able to thinking deal, you're have

Brian Hall

in over Not in the several facilities U.K., really. Ireland and Italy. We've Europe, got

the flat-out well well, push we're on really in and some to will we think positioned. the I have us. of, Thor will last we're of that which that. - four design help to and there, front getting think and they five already seen, really Thor help over the We're we're years. So market product expedite good be hope know movement, introduction they'll that do some remains or We on Whether or not impact but that we early think which is whole for

Operator

of from Our Baird. next Wycklendt Alice question comes

Alice Wycklendt

accept success such follow-up designed been features on what road? OEMs, units to business content more wanted decontenting with I'm that ultimately about in unit. trend, maybe sold are decontenting but with Despite of down going that's today your benefit the wondering, that some condition to could from are to basic the extent aftermarket but I your trends. you've on the I talked content mean, per

Jason Lippert

these a that we're Aftermarket our going being are answered lot to stuff The just people real are bigger features quick and I also of selling items Well, to upgraded always that, then Aftermarket. replace. again, stuff saying by up isn't the decontented,

is furniture. One of our largest aftermarket items

furniture in that of is are RVs out going sell putting stop many products to the we you're the So the Aftermarket not in to and everything retrofittable there.

can like like stabilizing and match so... things that what of You systems and offer furniture and mattresses mix things upgraded in terms we and

Alice Wycklendt

another the actually, just on though. on then inventory And follow-up balance sheet

it growth considerably quarters, So behind when expect we key some of build you can grown maybe as of about mentioned should maybe several talk and to ahead some earlier, that, But is over impacts. inventory past tariff moderate? drivers that's you the of an that year-over-year the the

Jason Lippert

turns I Alice. that we inventory the growth, business well. of -- with then in of inventory resulting like get I a in things, that commodity be potential as environment, growth, advantage in that business the you addition item to you And those volume, there is out But some that impact and you to see. Aftermarket also build would -- businesses would mean, a lower turns, that, with our in growing be number Furrion due we're purchases the the sharp rising the way along of and might tariffs, pullback to throw our there's come our Couple to take obviously, significantly. make third areas tend hedge happen some

So to I the some inventory third think the build. contributor of that's

Alice Wycklendt

capital M&A this this repurchase you share And just prioritize how the And down have expectations versus market, allocation, you on with among buyback then targets would activity come authorization in valuation now M&A? point? seen at potential

Jason Lippert

to acquisitions as we we try CapEx, I for we all on returns and share repurchase. returns between see still consider versus opportunities options the disciplined the mean, weighing and I Yes. that a think that dividends, repurchases, we remain there, we're Acquisitions, certainly four want. the so look those

today, related lot Now think at it's of stocks the certainly these at levels investment a trading a RV that are I depressed opportunity. and nice

Brian Hall

pretty Alice, -- the predominant seen we're still still prioritize historically, of consistent top We our we list. CapEx those M&A as in prioritize probably But via capital. back allocators of the business we still that investments as and at you've

result buying we're closer always -- be repurchase, quicker -- stock just going see leverage process. of with acquisitions, a to we're announcing You a might see to move as we're that our the move the us to but going you comfortable in might just level us back stock be top evaluating because

you answer both of or your that have... So did questions

Alice Wycklendt

great. that's No, does. It

Operator

& next Steve question of Company. O'Hara from Sidoti Our comes

Stephen O'Hara

Just curious.

or to get the single-digit do or I second you about where you and niche where you year. little to I wholesale that jump could next in, if most growth then of flat bit. terms kind retail little wholesale January half kind growth where and at shake low point starts get up? level can at wholesale think a So of see be the of first to to where be little what say, decline versus, a has catch does have And flat pick at in inventory shipments, the talked let's month continue if just And -- in seems wondering an the -- coming quarter maybe mean, point out you maybe... about talk kind retail in I'm if I of think area that the retail the stronger holds retail, it very to you -- have in like fourth a of -- of least, that a a than does down to probably kind

Jason Lippert

that every is keeping believe of the in going think we they're I really going know currently own what it terms and inventories how low the part dealers don't they aggressive part be far their lower. is answer -- -- it to continue order on their level based to And that comments. But the to or lowering We changes answer. is down, drop of product to in available probably their quickly current question. inventories. and isn't how creative how know know just have all We are other I'll guys they to don't of

we definitely think said that stays QX, way strong, sized quick like by right think solid. latest, the if -- but be headed we So we're QX, comments, prepared at the that will it retail in we

Brian Hall

that, a years as that that think couple chasing OEMs ramp-up numbers. of one retail they saw maybe the a to would I as the Wholesale you'd given of capacity would were need see I significant a done, adds have when think in to the don't maybe I that ago have is thing you add that

up there's retail enough that needed on to bit mirror a quicker shrunk where that can lead you a with now time closer So Wholesale basis. little capacity and and there

Scott Mereness

LTM to of -- about one this retail, units. combined look XXX,XXX at that almost XXX it's one be it the is basis, on would one thing -- -- Steve, an way retail,

up if for So closely they a just to little retail, build. if if think good want said, than Brian look the what that's to what what think versus a bit more about matching at a run is -- expectation if way you slight wholesale retail maybe you inventory wholesale that's that

XXX. earlier XXX-ish number think said I is Jason 'XX, this for

between of guess be numbers -- something kind we're probably good on be would that So a somewhere talking would those Wholesale. about in two

Stephen O'Hara

backs natural if the year, of worse next is the been fewer a that and long-term expected kind in growth, retail et increase the on of does just maybe in attracting shouldn't I then bringing so industry out new demand imply mean, itself than the keep to or the retail, guess, RV, assuming, that And has I or RV in, little guess, flattens but new off talking is expands? is but -- cetera. about is obviously back that's, I millennials because the traditional industry is pulling that I seeing be coming say, economy actually mean, entrants, let's you're consumer kind if the and just think, entrants bit? almost And whatever a due a

Jason Lippert

now. that got with And I of just you the the impact, we're got some the talk that interest the consider election, when tariffs we stuff to turbulent-type the inflationary of right just on going of and you've think consider the the I in environment Yes, some think some rates. environment,

kind eye find into continue really and entrants come new I like that quarters to we or be the be just the find whether of entrants got in momentum to fundamentals the I might next -- to already the plans product market. around and have have based But the and keep about great. at, talking market few So We're fundamentals. or see people you're continues they think kind there's of feel -- to we the fundamentals you're temporary of that It's think now, But XXX,XXX we're the we talking that products the more bouncing been guess are to we're and product to but that on whether are come in trying appeal going we out the or just the that on new are overall OEMs XXX,XXX as solid, there, the might right ride about industry normal talking we're where new XXX,XXX, creative are it's real and whether affordability and -- in economic the there. trying floor whether available whether and ever on. it's the a about, have what's the runway future

Scott Mereness

that we XX-year to Steve, in a have fact one range, almost X% an years. the that's of of XX-year-old individuals the we're fall roughly, X.X XX-year-old new just a new the half and market They've slides from by survey and people have X% coming additional into XXXX data. million millennials share. that roughly that and between our the And out population XX to under that million XXXX, down grows the in breaking about deck is that's doubled that's period, to of seeing XX four stat gone

So in has segment, [indiscernible] four next is XX%. the doubled years, and the millennial grown which XX, by segment they've to XX

period, in XX% So XX% from the they've X-year period. actually, gone X.X-year to

to growing next people share, individuals last and early increasing tailwinds. are over the going the show over million to XX market So years, think, these of I good years very by some have that we're good continue stats population signs significantly their that X four the

Operator

question from of Our comes CL Scott Stember King. next

Scott Stember

the that moving in expect talking couple of a market any further would and talk Hymer Europe when that relationship? Europe, to or into traction you Thor's you Just quick, to about see because follow-ups real immediacy about could of

Jason Lippert

we give on you that But We specifics Well, the know. of when I obviously can't we lots closes, opportunities. it closes, think because don't there's just once can't. that deal

opportunities. and the to will it's really allow Thor and but us more our for we're not that Hymer involved strengthen -- already that this not think going with only here I going good present years, at just having folks well a to bode And it's at to relationship months. will level relationship developing be be

partners. treated brand love -- So reputation. really high-profile that just involved. we're great a with getting well They've over really company and us they're We as supplier that a excited They're there.

hope So question. that answers your

Scott Stember

Yes, in rhetoric go least meaning have or for modestly no, do and just and say, that's the not retail adjusting that let's tariffs of number a of early at And Number that see forth. event new of the some the change, all back next that's to tariffs next about over about good. that growth your first beating a lot one? view place all were going just the we change in been does either to death. potential question lessening impact, for And of have. year. that, Obviously, market? retail year Would But the the progress, two, you a I how the feeling all, finally,

Jason Lippert

towards pricing. along takeoff late and initial We the going have in you XX. with be to going of But don't happened continue continued wait question me we're XX% I to And And what's a late thought happens add to non-RV-related Well, has our extra stuff to know $X partners. going December, The they going different have happen. so alternatives billion with we do, our creative if have, were don't the see we're September. pass to our they're to that in we more we if but... what on all to just already the to of products tracking that OEM all have to ask just how

Scott Stember

to I you just was hoping death. beating kept it

Jason Lippert

your we We pretty increases confident It's that have been the this as but year. tariffs of question, the customers on out domestic significant and commodities figure tariffs with suppliers. know, we can year our around Scott? Does for don't impacts we're have answer a that had

Scott Stember

to I for for your and guess change, guess. Right? conservatism change trying that if I could year to is of was next one because maybe just things tariffs, the make reasons just that sure I of --

Jason Lippert

to lot to if continues the -- we the product, lot be spring this the overcome. than there's entry concerned if, level to it's the travel let's now. market change trailer product in the ever of a products I last a a would of a the right from high-priced hurdle selling XX% more significant product were are overall And even gravitate the But and price in high-end, to not and spring, say, continues more affordable activity around

Operator

Tree from Capital. next Our comes Kaplan Maple question of Barry

Barry Kaplan

My answered was already. question

Operator

next Woolf from of comes Seth Our Northcoast Research. question

Seth Woolf

growth much huge has and comment the dealers So you know other the you the know you businesses, -- this I overhang. you the going talked to about but the do business Jason, are to how want -- might've destocking exceptional in made don't RV been a

really -- to the level keep continues doomsday guys but you're they they destocking if, flat, that on So is currently it the to for what your done maybe I of view say, think to turns'. the flooring say, the about extreme envisioning? any to dealer is cost it that take -- -- measure, that take rise scenario how we're 'okay, think and to the people do the stock, the get to it retail what would dealers be help could an destocking work if on going would extreme improving you they and doomsday flat Have shipments understand

Brian Hall

what of where that case That's inventories. destocking Is a what I hearing mean asking? their you're part just ask just for on lowering what's aggressively loaded scenario -- you dealer I'm or question of the worst is kind

Seth Woolf

Yes.

here Let's flat there's nobody at sitting you It's there's say, no some this we're say, limit about all then retail, has is a the to point, But, -- -- have a right they destock have talking idea. how... -- any and and number, let's guess.

Jason Lippert

to have right. They order,

Seth Woolf

Exactly.

scenario guess you're shipments about would we're do for shipments flat call the to retail XXX,XXX next going being do, this What I year? next it, right if So year, think you worst-case year. be

Scott Mereness

I this is think -- Seth, Scott.

think an a gave retail little XXX, bit LTM basis, on a XXX, about I we maybe you XXX. than we flat that idea is little if of XXX and talked of maybe more kind bit between

Operator

Jason for Lippert to Sir? closing to turn over the this back At remarks. call any time, I like

Jason Lippert

call Thanks, you Thanks, joining Yes. talking us quarter. Bye-bye. to to on We for today. again. everybody look the forward next

Operator

conference. day. gentlemen, have your and and for you participation, this today's ladies wonderful And a concludes Thank

You may at lines disconnect your this time.

LCI Industries (LCII) 3 Nov 182018 Q3 Earnings call transcript