Hello everyone, and welcome to the LCI Q4 2023 Earnings Call. My name is Emily, and I will be coordinating your call today. I will now turn the call over to our host, Lillian Etzkorn. Please go ahead.

Good morning, everyone, and welcome to the LCI Industries' fourth quarter and full-year 2023 conference call. I am joined on the call today by Jason Lippert, President and CEO; and Kip Emenhiser, VP of Finance and Treasurer. We will discuss the results for the quarter in just a moment. But first, I would like to inform you that certain statements made in today's conference call regarding LCI Industries and its operations may be considered forward-looking statements under the securities laws, and involve a number of risks and uncertainties. As a result, the company cautions you that there are a 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 the forward-looking statements. These factors are discussed in our earnings release and in our Form 10-K, as well as other filings with the SEC. The company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date of the forward-looking statements, except as required by law. So, with that, I would like to turn the call over to Jason.

Thanks, Lillian, and good morning, everybody, and welcome to our fourth quarter and full-year 2023 earnings call. Last year proved to be an eventful year for Lippert as we worked to extend our position as an industry leader, while navigating a challenging environment around the RV and marine businesses. Despite continued softness in the RV industry throughout 2023, along with a slowdown in the marine industry in the second half, our consistent execution on diversification priorities and steadfast commitment to operational discipline helped to lift our performance. As we faced these headwinds, our teams took action by leveraging our operational expertise. These customer relationships and robust culture of innovation drive the business forward. Looking at the full-year, we closed 2023 with $3.8 billion in revenue, declining year-over-year from last year's $5.2 billion in revenues, due largely to lower RV production and marine industry production levels as dealers worked to right-size inventories in both markets. That said, it is important to emphasize the durability of our business. As many of you know, we have significantly diversified Lippert beyond recreational vehicles into transportation vehicles, marine, automotive, residential, and their aftermarkets, as well as into Europe. And that effort is now paying dividends. In fact, over the past five years, we have successfully executed our strategic playbook by growing revenues in new markets by nearly 50%, which has bolstered our diversification. In this quarter, that growth was underscored by the strength of our growing aftermarket businesses. To be clear, these results would not have been possible if we had focused our attention solely on the RV space. Instead, by applying our core manufacturing competencies to gain a foothold in adjacent markets, we have created a range of what we believe are countercyclical revenue streams with a combined $11 billion-plus in total addressable growth opportunity. We're working hard to continue to grow these opportunities, both organically and through acquisitions. Net sales from acquisitions completed in 2022 and 2023, the majority of which are focused outside of North American RV, contributed approximately $74 million of revenue in 2023. Looking ahead, customer demand for our high-quality innovative content has resulted in new business commitments for 2024 of approximately $200 million net of any business losses. Moving forward, we continue to prioritize making improvements to our operations and optimizing our cost structure to support the long-term profitability of our business. We believe we have invested more capital into automation than any other player in the space, filling over $100 million over the last few years. With the added benefit of 20,000 continuous improvement projects completed in 2023, we have improved our flexible and efficient manufacturing footprint, through which we can quickly adjust production in line with constantly shifting demand levels in the cyclical markets. Additionally, we've worked through the last few quarters to consolidate certain facilities and decrease fixed costs. We believe that our advanced manufacturing capabilities serve as a major competitive advantage for our business that would take decades for any competitor to replicate, while also positioning us to derive profitable growth as RV and marine and OEM production begin to normalize in the coming quarters. Despite our great progress in reducing operating costs, we are constantly exploring opportunities to drive margin improvement. We also have been focused on strengthening our balance sheet, reducing inventories by $261 million this year, and delivering $527 million in cash flows from operations in 2023. This disciplined approach has further solidified our financial profile and balance sheet during a challenging period, establishing a stable foundation, which should allow us to weather many near-term challenges and capitalize on growth opportunities that lie ahead. During the fourth quarter, content per total RV decreased from the prior year to $5,058, while content per motorhome RV for the quarter was $3,506. Similar to the prior quarters, these content declines can largely be attributed to index pricing reductions versus actual reductions in our content. Excluding the impact from index pricing, we saw market share content gains of 8.5%, largely driven by a consistent focus on new products and market share wins. Looking at 2024, we anticipate that $130 million of the $200 million in new business I mentioned earlier will be RV, with new market share and content gains. While RV unit selling prices have declined, I want to again emphasize that we do not anticipate much, if any, impact from de-contenting trends as our stickiness is driven by several factors. From axles, chassis, windows, slides, leveling, and beyond, we have built our reputation on creating essential and innovative products for RVs that cannot easily be removed or replaced by another supplier. We believe that our domestic manufacturing footprint also adds significant value to OEMs and sets us apart from other suppliers, both domestic and international. Our domestic factories typically require just a week's lead time in order to supply products to our customers and our markets. For many customers, we often build products on demand for emergency needs, which products can be completed in a day or two. We're easily able to provide inventory to OEMs on a just-in-time basis, where if they were to order these same products from overseas suppliers, our customers would need to plan out much further than they do now and would have to carry much more inventory, which often leads to obsolescence. Additionally, we have a team of highly trained technicians that travel across the nation to help our dealers with service and train on all of our products, a unique capability not many other suppliers have. We have found that dealers value their servicing capabilities to the point that they will push OEMs to use Lippert content versus our competitors that cannot provide the same level of support. This fact is even more relevant for some of our more complex products. There's not a lot of talk about competition lately, as well as customer verticals. Our response to that is simply this: In the last 30 years; I've had the privilege to help lead this business. We've developed a great strategy with amazing teams, and we have a great track record of winning business; competition isn't new for us. We believe we are adept at beating competitors as our market share and history prove that we win more battles than we lose. And while we can't predict the future, we do know that our strategy and teams have the unique recipe to win competitive battles. We're also confident in our ability to continue growing our market share, both in RV and across adjacent markets. Our deep-rooted industry relationships, broad portfolio of innovative products, and reputation for best-in-class quality of service have helped us create value in a way that we believe cannot be replicated. Despite lingering chatter around heightened competition and new entrants, these differentiators have and should continue to keep us positioned as an industry leader, while driving long-term market share expansion. Now, I'd like to highlight some of our recent announcements. First, we established Amerimax for Mobility, a new joint venture with Euramax for Mobility, which is Europe's leading supplier of aluminum products for RVs. This partnership combines our well-established North American RV connections with Euramax's vast manufacturing knowledge to provide one of the most diverse catalogues with industry-leading customer service to a broader range of recreational and transportational vehicle customers. We will soon be announcing some exciting new products that this joint venture will launch with RV OEMs in an effort to change the game for metal siding on RVs. Secondly, we teamed up with Keystone Cougar, the best-selling fifth wheel in the country, to showcase our ABS brake technology on Cougar RVs at the Tampa RV SuperShow last month. Hosted on a racetrack in Tampa, we gave a live demonstration to RV ambassadors and Keystone RV leadership on how much of a difference ABS can make for safely towing both travel trailers and fifth wheels in adverse road conditions. We're excited to continue finding new ways like these to partner and collaborate with well-known brands and bring even more innovative content to the outdoor recreation markets. Now on to aftermarket, our aftermarket net sales were $881 million for the year, down 1% compared to 2022, yet up 10% in the fourth quarter as we continue to expand market share. We are proud to have achieved a 370 basis point increase in operating margins for the full year due to improved mix, along with tailwinds from continued operational efficiencies. With millions of vehicles entering the repair and replacement cycle in the coming years, our aftermarket will have some amazing opportunities. As our OEM market share has increased substantially over the last 10 years in all of our core product offerings, it stands to reason that as more and more ageing units enter their repair and replacement cycle in the near term, they will ultimately require more Lippert replacement parts in the aftermarket. Lippert, CURT, Ranch Hand, Solera, Furrion are just a few of our popular brands that are playing critical roles in fueling this bottom line strength and top line growth. Our automotive aftermarket brand, CURT, sold just shy of one million hitches during the year, a 6% increase over 2022, and continues to account for just over half of our total aftermarket sales. Appliances remain a massive opportunity, and products like Furrion water heaters, refrigerators, and air conditioners have seen double-digit market share gains in the last 12 months. Looking ahead, we expect to see gains in mattresses, furniture, and awnings as consumer refurnishes used RVs. Most people don't realize that the used RV market sales average around 600,000 to 700,000 units per year, which represents a huge opportunity for our aftermarket products and services. Our steadfast focus on service has also continued to fuel our growth. In addition to providing support through our large dedicated service center, we are always looking for ways to engage customers and dealers, gathering feedback to improve our products. We have had incredible success using the Lippert Technical Institute to host maintenance training for technicians and RV owners alike, helping people to learn how to extend the life of their vehicle and fix issues so they can spend more time on the road and help others along the way. During the quarter, we also returned to the Stuttgart Retail Show, connecting with European consumers to unveil some recent Furrion appliances and other innovations. Events like this, along with our other initiatives like Lippert Scouts, The Campground Project, and The Lippert Ambassadors; help us to build our relationships with the well-connected outdoor community, driving trust and long-term loyalty to the Lippert brand. Turning to the North American adjacent markets, 2023 revenues were down only 8% compared to the prior year. This decline was primarily due to softness in the marine retail environment, particularly impacting pontoon sales, where we sell the majority of our marine content. Marine production dropped sharply in the fourth quarter as OEMs began working to right-size inventory channels. We're expecting this softness to continue into the next two quarters of 2024, with marine sales likely to decline for the year. That said, we do expect a shorter downturn in marine versus what we have seen in RV, and we will focus resources this year to continue to develop new marine products as well as tighten efficiencies and processes. This year alone, we expanded our marine product catalog with products like our shallow water anchor systems, glass systems, thrusters, new seating, and electric amenities for many classes of boats. We plan to continue these types of innovations in 2024 to bolster ongoing organic content growth. We're seeing strength in our other adjacent markets like transportation, supported by acquisitions like CURT and MTP. Outside of these acquisitions, we continue to successfully expand into other adjacent areas by leveraging our existing manufacturing competencies from our other core businesses. Our residential windows as well as our axle products continue to gain share, and the recent launch of our first transit bus seating products and bus chassis stretching is off to a great start. We're also making solid traction through our partnership with ATW, which is on the path of contributing 1 million axles annually. We've also nearly completed construction and rollout of equipment of our world-class glass and acrylic processing center. With approximately $65 million in automated equipment and building space under one roof, we will soon be able to process hundreds of thousands of pieces of glass per month for the housing, RV, marine, power sports, and commercial glass industries. This fully automated facility is the future of our window and glass processing and should provide us with significant advantages relative to any other competitor. This project is one of many that demonstrate our ability and willingness to invest in the future of quality manufacturing. Moving outside of North America, our international business grew 4% as supply chain headwinds decreased abroad, driving increased shipments to meet pent-up demand. Products like our pop-top acrylic windows, bed lifts, doors, electronics, and skylights continue to highlight how our international footprint works as an incubator for innovation across our brands. These products have the potential to bolster our competitive advantage in the U.S. as their popularity continues with U.S. OEMs. We also initiated a new leadership structure in the Europe business, elevating four seasoned leaders with extensive backgrounds in these recreation markets who will strive to take our international presence to the same leading position we have in North America. As you all know, innovation acts as one of the primary drivers of our content expansion. We have invested in our R&D capabilities at what we consider to be an unparalleled rate that we believe will continue to help us develop world-class products and keep our competitive edge. More importantly, we are also focused on making improvements to existing products, adding more content at a higher price point. This gives us a massive long-term opportunity to drive content growth as there are numerous products in our portfolio that we're able to improve upon. Further, these are typically unique products that are both integral to vehicles and cannot be commoditized, helping us avoid the contenting by OEMs. A prime example of our innovative capabilities driving our market share expansion can be seen in our transformational ABS system I mentioned earlier. ABS brakes were not readily available or affordable in the U.S. for RV production until we brought them to market. Since launching, we now have about 10 high-profile RV brands using ABS, with more in the process of committing to it, growing our market share into double digits with a total addressable market of $150 million to $200 million. We are finding that RV manufacturers vastly prefer having ABS on their vehicles due to the added level of safety and peace of mind it provides, helping us gain traction with the OEMs. In addition to ABS, we launched several products in 2023 that have great momentum heading into 2024. Some of the more notable developments were our 4K window series with integrated shades, a new high-capacity, quiet AC we call the Chill Pill, new leveling, bus seating, furnaces, a new line of electric, and much more. In 2024, one of our largest innovation announcements is that we are launching a brand new line of slide-outs for OEMs. As we expand our portfolio, we plan to continue introducing innovative products that cater to a wide range of customer needs, which should drive long-term content growth while expanding our presence and impact across the recreational markets. We believe that our enduring success stems from our strong culture. This starts at the top, where we have skilled empathetic leaders dedicated to fostering team members' professional and personal growth. We've implemented several programs to foster development, leading to one of the highest retention rates in the industry. Over the years, we have found that higher retention has a direct and meaningful impact on quality, safety, efficiency, and innovation, all things that we believe are very critical for any good business. Externally, we are actively engaged in supporting the communities where we work and live. In 2023, our team members contributed over 125,000 hours of community service worldwide, involving numerous charitable organizations. We are proud to note that around 75% of our 12,000-strong workforce participated in at least one of the service events throughout the year. As we aim to enhance our collective impact, we hope to inspire other organizations to contribute similarly to their communities. We delivered what we consider to be incredible cash generation of $527 million in operating cash flow in 2023. Considering the challenging conditions we have been working through, we expect to maintain this progress in 2024. In turn, we have strengthened our balance sheet, maintaining ample liquidity while paying down $277 million in debt. While we've cut down capital expenditures, we are continuing to prioritize spend in R&D, automation, operational excellence, M&A, and other high-return investments to support profitable growth for our business. In closing, I would like to thank all of our team members across the globe for their dedication to overcoming significant challenges and moving our business forward over the last year and a half. Any good business that experiences extreme cyclicality cannot make it through without great teams, and I believe we have the best. I'm incredibly encouraged by the development I've witnessed in our teams over the past year, both personally and professionally. As we work together to serve customers and deliver value to all of our stakeholders, we look forward to continuing this progress as we position Lippert for growth in 2024. I will now turn to Lillian Etzkorn, our CFO, to provide more detail on our financial results.

Thank you, Jason. Our consolidated net sales for the fourth quarter decreased 6% to $838 million compared to the prior year period, primarily impacted by a reduction in North American RV and Marine production, as well as decreased selling prices which are indexed to select commodities, partially offset by acquisitions. Our operational improvements and diversification strategy have helped mitigate the impact seen from lower wholesale segments in the quarter. Sales to North American RV OEM declined 11%. Excluding both North American RV OEM and marine OEM, our business increased 8% compared to the prior year period. Our diversification strategy and continued pursuit of operational improvements have not only provided near-term support but a strong platform to drive long-term growth. The decline in Q4 2023 sales to North American RV OEM was driven by a decrease in wholesale shipments, influenced by current dealer inventory levels, inflation, and rising interest rates. Content for total RV unit decreased 17% to $5,058, while content per motorized unit decreased 14% to $3,506 compared to the prior year period. These content declines are largely attributed to index pricing adjustments versus elimination of product content. We have continued to increase our organic content and market share through our focus on innovation. In Q4 2023, our organic growth contributed approximately 5.4% year-over-year to content per unit. Sales to adjacent industries declined 9% versus the prior year, driven by a 41% decrease in marine sales. Marine content per powerboat decreased 27% to $1,244, primarily due to price decreases associated with year-over-year declining input costs and changes in product mix. However, sales were positively impacted by acquisitions and pricing adjustments for our transportation products. Q4 2023 sales to the aftermarket increased 10% compared to the prior year period, driven by increased repairs and replacements and continued growth in automotive products, helping to illustrate the counter-cyclical nature of the business. International sales increased 4% year-over-year as supply chain headwinds decreased abroad, driving increased shipments to meet pent-up demand. This increase was also driven by an estimated 2% positive impact from exchange rates in the quarter. Gross margins were 19.2% compared to 16.4% in the prior year periods, primarily due to positive mix and lower sales volume, partially offset by the timing of sales price reductions contractually tied to commodity prices. Operating margins increased compared to the prior year period, driven by decreased material commodity costs and effective cost leverage. The aftermarket business delivered solid operating profits in the quarter at 8%, which is an 860 basis point improvement over the prior year. GAAP net loss in Q4 of 2023 was $2.4 million or a $0.09 loss per diluted share. This is compared to a net loss of $17.1 million or a $0.68 loss per diluted share in Q4 of 2022. EBITDA increased 248% to $35.6 million for the fourth quarter compared to the prior year period. Moving on to the full-year 2023 results, sales to North American RV OEMs decreased 47% to $1.5 billion driven by decreased wholesale shipments. Sales in North American adjacent markets decreased 8% to $1.1 billion in 2023, driven by softness in marine production. North American aftermarket decreased its total sales by 1% to $814 million, while international sales increased 4% to $414 million compared to the prior year periods. Acquired revenues were approximately $73.6 million for the full year of 2023. Non-cash depreciation and amortization was $131.8 million for the year ended December 31, 2023. Non-cash stock-based compensation expense was $18.2 million for the same period. We anticipate depreciation and amortization in the range of $130 million to $140 million during the full-year 2024. For the 12 months ending December 31, 2023, cash generated from operating activities was $527 million, with $62 million used for capital expenditures, $26 million used for business acquisition, and $106 million returned to shareholders in the form of dividends. We have had a strong focus on generating cash and continuing to improve working capital with an emphasis on decreasing inventory. This resulted in a decrease in inventory of $261 million in 2023. We made net repayments on our long-term debt of $277 million in 2023, including prepayments of $37.5 million under term loan principal. These term loan prepayments were applied to pay in full the scheduled principal amortization payments through Q1 of 2025 and are projected to save us approximately $1.9 million in annual interest expense based on the rates in effect at the end of 2023. At the end of the fourth quarter, we had an outstanding net debt position of $781 million, which is 2.7 times pro forma EBITDA, adjusted to include the latest twelve-month EBITDA for acquired businesses and the impact of non-cash and other items as defined in our credit agreement. Overall, we are seeing positive signs in total revenue both sequentially and year-over-year. For the month of January, sales were up 13% to $308 million versus January of '23, primarily due to more RV production days in 2024 compared to the prior year. This was partially offset by a significant decline in marine sales in the month compared to 2023. We expect marine softness to continue into the next two quarters of 2024. With marine sales likely to decline for the year, we are pleased to see February RV orders increase and anticipate that these positive trends will continue throughout 2024. During the year, we will also continue to grow the aftermarket and adjacent businesses through both organic and inorganic methods while the RV industry regains its footing. Regarding RV wholesale segments, we estimate a full-year range of 325,000 to 350,000 units. As we look forward, we are focused on maintaining a strong balance sheet and targeting a long-term leverage of 1.5 times net debt to EBITDA. For the full-year 2024, capital expenditures are expected to be in the range of $55 million to $75 million. We are confident in Lippert's ability to deliver long-term profitability and value for all of our stakeholders. Our strategic approach, coupled with investments in innovation, facilities, and our team will further drive our success and enable us to achieve long-term sustainable profitable growth.

Thank you. We will now begin the question-and-answer session. Our first question today comes from the line of Scott Stember with ROTH MKM. Scott, please go ahead.

Good morning, guys, and thanks for taking my questions.

Morning.

Could you remind us about how the indexing, the timing, all the mechanics work? How often do you go back to the OEMs to talk price? And what's the tell here? How far into 2024 should we expect to see headwinds as you return price?

Yes, that's a good question. We're indexed on steel and aluminum, as you know, so those just happen without any conversations, and we just follow the indexes on those two commodities. So steel, we've seen a trending down in price last quarter and this quarter, and what we're giving back to our customers, we'll see that increase again where they'll actually see some increases on steel in Q2 as steel went down to low thirties and now it's back up into the mid-fifties. Aluminum has stayed pretty consistent, so there hasn't been a whole lot of movement on aluminum. We might maybe index more than other businesses out there, so the good of it is, is we just don't have to go and have those conversations with our customers on a regular basis concerning the steel commodity-related products. The rest of it's just kind of as we see commodities moving up to need price or to give price back, then we have those conversations with our customers. But steel and aluminum, they're fixed on the indexes.

All right.

Scott, to provide additional insight, the index pricing continues to significantly affect the change in content per unit over the past twelve months. The fourth quarter aligned with our previous discussions and also had a mid-teens percentage give-back impact on the content figure.

Got it. And then my next question and I'll go back into the queue, is on the first quarter, just trying to make sense of some of the puts and takes as far as sales. And will we be profitable in the first quarter?

So, yes, that's the expectation here. Regarding sales expectations as we begin the year, RV is recovering. In January, we had good production, which is an improvement compared to last year. I anticipate that RV will continue to perform well as we progress through the quarter. However, marine is definitely a significant challenge. We had a very strong first quarter in 2023, but we are significantly below that level in January, and I expect this trend to continue. We are down approximately 40% to 50% in marine compared to last year. Overall, I expect revenue to grow sequentially from the fourth quarter, but we will be lower than in 2023 due to the weakness in the marine segment.

And, Scott, we've had January results, and so we were profitable in January. We know January. February; revenues look very similar to January at this point in time, at least from an RV perspective. If you look at March, we have visibility into March, and we're seeing RV OEMs increasing some days of production, which in some cases will be 20% for some of those, and others that are flat, and others are just adding a few units a week to their production schedule. So, January and February look pretty consistent with one another, and March looks like it'll be up a little bit. It seems like, as we've said all along, we know that what goes down must come up. It feels like we're starting to come off the bottom, at least in March we'll certainly see a little bit more volume in RV. That helpful?

No, very helpful. So, just to be clear, profitability would be lower than last year's first quarter? I'm just trying to understand.

Well, we're not through the quarter yet.

Yes.

Okay. I'm just trying to get a clearer understanding.

What I was saying regarding revenue is that I expect it to be lower overall due to the softness in the marine sector offsetting some of the impacts.

Say, flat-to-lower.

Yes, flat to lower, and then from a margin perspective, I would expect us to be a little bit better than where we were last year in the first quarter.

Okay, perfect. Thanks so much, guys.

Yes.

Yes.

The next question comes from Fred Wightman with Wolfe Research. Please go ahead.

Hey, guys, good morning. I just wanted to maybe clarify something on the shipment outlook for '24. And I believe it's unchanged versus what you guys talked about last quarter. But Jason, you've also talked about some of the disconnect between what the RVIA reports in terms of shipments versus what's actually produced. So, can you just sort of level-set if we think about the 313 that the RVIA reported for '23, what you think the actual production number was, and maybe how to evaluate that against your 325 to 350 outlook for '24?

Yes, I'm glad you brought that up because it's important to distinguish between wholesale production and wholesale sales. They reported 313 last year, but we believe the actual production number was around 280 to 275 units. This discrepancy arises because many units sold in 2023 were built in 2022, for which we had already manufactured components. Even if we consider the lower end of our 325 to 350 estimate for RVs, we anticipate producing an additional 35,000 to 45,000 units this year compared to last year from a wholesale perspective. While January saw a slight increase, we expect higher demand for products in March, April, May, and June, which will help us get closer to that 325 and above target. Overall, we're poised to produce significantly more units this year than last year.

Okay, that's helpful.

That helpful?

Yes, no, that's great. Just thinking about the January and February commentary, I mean basically every other consumer company has talked about some impact of weather in January. Is there anything that you would call out there that we should keep in mind, either days that got cut that are reflected in that January number, incremental days in February, anything that stood out from a weather impact perspective?

There was weather impact for sure. There were a few days of shutdown, but the OEMs made some of that back, and then some of it they didn't. Some of those days fell in inventory days, so there might have been a little bit of impact there. But I would say that, year-over-year, we're always seeing weather-related impacts, a day or two here or there, and it's usually in January or February.

Fair enough. Thanks a lot.

The next question comes from Daniel Moore with CJS Securities. Please go ahead, Daniel.

Perfect. Thanks, Jason. Thanks, Lillian, for taking questions. First, on the marine side, that down 40% to 50% that you described, is that all production? Are your customers managing down their inventories or is it a mix of that more just-in-time, similar to RV?

Yes, we're for sure just in time. But I think that the downside that we're seeing there is partially similar to what we saw with RV, where inventories are starting to be just at the dealer level, and OEMs just aren't building. So, you'll probably see a little bit more sell through on the retail side, which will impact both the OEMs and our production on marine.

Understood. That's helpful. And then, maybe just, you talked about it in roundabout terms, but just your expectations for content growth in RV as well as marine kind of H1 versus the full-year '24. Do you expect positive growth for the full-year and is pricing more likely to be a headwind at least for the first half?

Yes, we maintain that if you eliminate the indexing puts and takes out of whatever the content number is that our ability to continually organically grow content of 3% to 5% to 6%, somewhere in there. It just depends on what we're launching and how the OEMs adapt and bring in our new products. So, we feel like we can positively grow organic content on a consistent basis, and we've demonstrated that over history.

Okay. One more, little in the weeds, but the glass and acrylic factory, can you maybe provide a little bit about some of the newer end markets you're targeting with that capacity and capabilities and what does the total TAM look like relative to the revenue you're currently generating out of there? Thank you.

Yes, we don't have a total addressable market on there yet because we're in early stages. But we've got probably three-fourths of the factory running. So, we've been kind of installing it in pieces, and it's impressive; if you come out next time, we'd love to take you through. Let's see everything, but we're doing housing glass for both manufactured housing and residential housing, we're doing certainly RV glass and now our RV door glass. If you've been around RVs lately, we're putting glass on the front doors of the units to make it look nicer and adding some content there. But if you look at some of the commercial markets we're building for there, you look at solar glass, refrigerator glass, and grocery stores we're doing some of that. A lot of garage door glass, if you look at garage stores these days, both commercial and residential, you see a lot of glass in the garage doors versus just an older type door that you'd normally expect. We're also doing acrylic. They can do some thermoforming there and we expect acrylic to be significant in RVs, I mean we're going to certainly offer that as part of our mode on windows, which is the second or third largest component in the RV business for our core products. So, we'll have acrylic for windows, which nobody else has here, and then we also will do acrylic skylights and things like that. We're seeing a trend with our RV OEMs that continue to put more glass and acrylic around the units to just let more natural light in the units. It sells units. So, that's where we're at today; more of an update next quarter.

Very good. Okay. I'll jump back if I have any follow-ups. Thank you.

Sure. Thanks, Dan.

Our next question comes from Mike Swartz with Truist Securities. Mike, please go ahead.

Hey, good morning. Just a first question maybe, Lillian, on the towable content, down 17% in the quarter, I think you provided some of the moving pieces there. But can we just go through how much of that was M&A versus pricing versus organic growth?

Yes, I'd say the key elements to break out there, Mike mentioned that in terms of the index pricing to give back, that was in the mid-teens as a percentage basis. The organic growth was about 5.4%. If you looked, and I think Jason cited this in his commentary, the overall growth, which would have included acquisitions as well, was sitting at about 8.5%. So, really, the biggest headwind that we've been experiencing, and this has been consistent as we move through the quarters in 2023, has been the index pricing giveback. That'll begin to mitigate as we move through 2024. We'll still have a little bit of a headwind in Q1, but as we move through the quarters, consistent with what we've talked about before, we expect that to mitigate, and you'll really see more of the full impact of the organic benefit of our growth of 3% to 5% that Jason was just citing.

Got you. That's helpful. Thank you. And then, just on the gross margin in the fourth quarter, maybe if we compare it to the third quarter, I guess what were the puts and takes there? It's down about 300 basis points, but we assume that that mix towards aftermarket was a positive. But what are some of the negatives that you encountered in the quarter?

Yes, I'd say the biggest impact, frankly, is the volume, and the headwind that had on us. Mix was a little bit, but by far it was just decreasing the sales volume.

Okay, perfect. And then, I know in the past, you've kind of provided us some guide rails around EBIT margin, and I think you said in the first quarter on a year-over-year basis. It should be a little better. But I guess any way to think about that on a full-year basis for 2024 and maybe how that plays out as the year progresses?

Yes, so we've talked before that we'd expect the margins to be in the mid-single-digits. Really, that's probably where we're going to see ourselves this year as we progress through 2024 with the quarter. So, there'll be some higher quarters depending on the volume that's flowing through and some lower quarters depending on seasonality. But net-net, kind of mid-single-digit for this year is probably a reasonable assumption.

And Mike, going back to the other question too, we did call out warranty as well. If you look at sales, like Lillian said, significantly underpriced compared to the last couple of years when we had a substantial amount of units built over COVID, just the volume of it and that starts to show up a couple of years after these units start getting sold, so, that'll eventually retract.

Okay, great. Thank you.

Thank you.

The next question comes from Craig Kennison with Baird. Please go ahead.

Yes, thank you for taking my questions. Jason, I just wonder if you would characterize the competitive landscape today versus your long history with the company. There's just a tremendous amount of investor concern about your share loss, and yet you talk about organic growth when you unpack some of your content per unit metrics. So, honestly, just trying to reconcile a lot of different information from some different sources there, and wonder how you would characterize the competitive landscape and whether there are categories where you're losing share.

It's my favorite topic, Craig. So, yes, I'll categorize it. I mean look, like I said, I've been in this business since we started our first RV products. So, 30 years, I watched a lot of competitors come and go. I put them into a couple of different categories. Some we've beaten and they're gone. Some we've acquired, and they're part of our business now and others are still around. We're competing with them on a regular basis. And I have to say, over the 30 years what's been consistent is not only that but the fact that competition is part of what we do. It's part of the business, it's part of any business. If you look at the new entrants now, if you're looking at the axle discussion that people keep bringing up, the air axle thing, people keep bringing up. We've had new competitors, I would say, almost every year in the last 30 years. So, I just keep pointing people to our track record and say, look at our track record. We have won more battles than we've lost. We continue to use innovation to beat our competitors. We use our bundling and just our vast array of products to beat competitors. And now we've got a diversification strategy, which allows us to do some things that we couldn't do five to 10 years ago. So, I point to those things and look at, if you're specifically pointing to air axle, I would say look, we're taking double-digit margin increases in market share against that business in the last two years. You look at this axle thing that's popped up, yes, we've lost a little bit of axles on the Forest River side of our business, but axles in general is a small part of our business. And to boot, we've had we won a million axles this year. So, axles were like one of the biggest gainers in 2023 where we were almost flat year-over-year in our axle business. We don't typically get that granular, but to kind of defend the whole competitive landscape thing, I have to point it out. And just to say, look, we're down 50% in other RV products, and we were flat in axles even though we lost a little bit of market share. So, I just say we're going to continue to compete. We'll find we'll have new competitors next year, and it doesn't bother us.

Yes, thanks for that, Jason. And I just wonder if there's a way to reconcile what you just talked about with what Lillian talked about, which was mid-single-digit margin. I know that's below your long-term target and maybe what you've delivered in the past in terms of EBIT margin. So, what is driving that margin pressure if the competitive landscape is within the realm of what you've experienced in the past?

Yes, I have a few points to make. First, looking at the last three years, 2023, 2022, and 2021, our operating margin was a bit over 8% with total revenue of $16 billion. If you analyze that, you might wonder about our performance over time. We've experienced one down cycle, and overall, we've seen about a 2.5% decline over the last 15 years, with some dips in 2018 and again in late 2022 and 2023. In those years, we certainly faced margin pressure. One difference between now and 2008 is that we have various indexes to manage extreme volatility in steel and aluminum prices, which can cause significant swings in profitability; however, everything balances out eventually because we will regain the price at some point. In fact, we saw a sharp drop in prices during the second half of last year, particularly in the fourth quarter and the first quarter of this year, which contributed to some of those challenges. By the second quarter, we expect to be in a better position thanks to some upcoming price increases in steel. Overall, I anticipate maintaining similar margin performance over time, acknowledging that we will encounter down cycles occasionally. Additionally, I think we are contributing to the current lower average selling prices because we have implemented some substantial increases in steel pricing. A lower average selling price usually means we have a better chance of selling more RVs.

Craig, also building on what Jason was just saying, while yes, we are seeing the RV industry recovery in 2024, we're still not back at the historic levels in terms of wholesale and production. This business, as we stated before, this business really is and will be a double-digit margin business. I'd say once the overall industry is in plural, not just the RV, but overall industries return back to what is more normalized. I think we've done the right actions in terms of flexing the business, streamlining where appropriate. And now it's a matter of capitalizing on the recovery of the various industries that we perform to get back to those double-digit margins that we should be delivering, and we will be delivering.

Great, thank you, and helpful. Thanks.

The next question comes from Bret Jordan with Jefferies. Please go ahead.

Hi, good morning guys. This is Patrick Buckley on for Brett. Thanks for taking the questions.

Good morning.

Could you talk a little bit more on the international side of the RV business and how that's trending? How is that cycle over there compared to the U.S. as of late?

We've been involved in the international market for nearly a decade. From our experience, we've noticed that movements in this area, whether upward or downward, tend to be slower. The response time from the market, the OEMs, and the supply chain all seems to be somewhat delayed. Over time, we expect the RV segment to exhibit more consistency. It rarely shows significant increases or decreases. Currently, it appears to be relatively stable. Although there are discussions about some downturns in certain regions, we still see opportunities for growth in content and market share there. Therefore, we anticipate it to remain flat.

Got it. That's helpful. And then, on the marine side of things, how close is that to the bottom? Is it still accelerating down here? Or is it going to start to flatten out soon?

Yes, I think they have recognized, when observing releases from other public companies, that it's essential to slow down production, and they've initiated that, beginning to significantly reduce output in the early part of the second half of last year. We'll see how fast the dealers can move through inventory, but the products have never appeared better, which I believe contributes to sales. There is certainly product still moving, although it hasn't entirely ceased on the retail side. We're essentially in the same situation that the RV OEMs and dealers faced last year, waiting for inventories to balance out and return to manageable levels before resuming normal operations. However, it doesn't seem like this process will be as prolonged or intensive as what we experienced on the RV side, so we are optimistic that they can resolve these issues this year.

Got it. Very helpful. Thanks, guys.

Thanks, Patrick.

The next question comes from Brandon Rolle with D.A. Davidson. Please go ahead.

Good morning. Thank you for taking my questions. First, just on the competitive landscape, you had talked about organic market share gains, keeping your market share. With increased competition, are those market share wins or your ability to protect the market share you have coming out of lower margin maybe from people, more people bidding on products or just an overall push in the market to get pricing lower to the consumer?

Yes, in some instances, the answer is yes and in others, no. This has always been the case. You can argue that heightened competition and pressure can drive margins down in certain situations. However, many of our offerings, such as our air conditioner, are unique in the market. While we face competition in the air conditioning sector, we have a product that stands apart. It has a higher capacity, operates more quietly, and we can maintain margins on anything that features intellectual property or distinctive qualities. Our ABS, for instance, has no real competition, allowing us to sustain margins, as do our new suspension systems. On the other hand, we do experience margin pressure on some commoditized products. Still, I don’t believe it's significantly more than what we typically face, and that's the core narrative. We have been competing for the last 30 years; it just seems to be more on everyone's radar now.

Okay. And then, just lastly, just going back to the fourth quarter, wholesale production was much stronger than I think you guys had forecasted for the quarter. Earnings came in a little lighter than expected. What kind of gives you confidence in your ability to forecast margins moving forward, given it seems like throughout the second half of the year, maybe around the new model year, things got a little uncertain in terms of just accuracy with the forecast. Thank you.

Yes. So, to that, I mean, a couple of things to point out with the fourth quarter. So, we were within that range. However, I'd say at the very low end on the RV side. Brandon, the biggest driver there was the marine drop-off. I don't think that was anticipated or expected for the industry itself to drop off so dramatically. Look, when we're in a time of dramatic volatility in terms of industry expectations, production levels, frankly, it's difficult to plan and it's difficult to forecast in that manner. As we're looking forward to 2024, when I think of the various markets that we're in, I think we're anticipating a little bit more stability from the RV side of the business, which is obviously a significant part of the business. Marine is going to be a challenge. We're expecting that to be down this year. Again, it's going to be driven by the industry. It's not us driving it. We'll need to flex and respond appropriately. So, taking into account the macros and what we're hearing from our customers and the dealers, we're confident in what we're putting forward. Again, the industry is always going to be a little bit of your wildcard in terms of what actually pulls through for production.

To add to what Brandon said, there was a bit more warranty than usual, as I mentioned earlier. That should normalize once we see some volume. Marine was another significant area that Lillian talked about, but it represents less than 10% of our overall business, so its decline isn't as impactful as it may seem. Regarding RV, as she noted, we anticipate continued normalization, and the aftermarket has remained quite stable. We expect the service and repair aspect of our business to continue growing at double-digit rates. We're increasingly involved in repair and service work because more OEM parts are out in the field due to our greater market share and OEM content over the last ten years. These units are now coming back for repairs on components like inners, axles, slide-outs, and leveling systems. I hope that clarifies things.

It was. Thank you.

Yes, thanks.

Yes.

Our final question comes from Tristan Thomas-Martin with BMO. Please go ahead.

Hi, good morning.

Hi, how are you doing?

Good morning.

Jason, was there a significant difference between wholesale shipments and wholesale production in the fourth quarter?

For the year, I can't specify the exact number because I'm not sure, but it seems like there wasn't a significant change. It could be slightly more or slightly less, but I don't have the specifics. We mentioned that you can expect around 35,000 to 45,000 units this year, which is probably in line with last year's wholesale figure of approximately $325.

Got it. Regarding the RV industry's production in January compared to your sales guidance, is the content on the RV side similar to what it was in the fourth quarter? Is that the appropriate baseline to consider moving forward?

Yes, that should be quite consistent. I'm considering it in a trailing 12-month perspective. Overall, it's fairly stable.

The only difference we observed was a slight shift in the mix of single axle trailers compared to historical data. Bob Martin mentioned in a podcast that he noticed a significant movement of entry-level models at the shows. This indicates a trend, but it's crucial to differentiate between a mix shift and de-contenting. While we might see a reduction in content with the shift to lower-end models, we do not anticipate any de-contenting of our products that would significantly affect our content figures.

Okay, I understand. I just want to ask one more thing. You mentioned market share content gains of 8.5%. How is that calculated and what factors contribute to that?

Yes. What that was, the $8.5 million that Jason quoted was the organic growth in our product on a trailing 12-month basis, plus the addition of acquisition content.

So, the index pricing pulls out of there.

Okay, okay, got it. Thank you.

We have no further questions. So, I'll turn the call back over to Jason. Thank you.

Thanks, everybody, for joining. We're really looking forward to next quarter. We'll see you all then. Thanks. Bye-bye.

Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.