Good morning or good afternoon, all. Welcome to the LCI Industries' Second Quarter Earnings Call. My name is Adam, and I'll be your operator today. I will now hand the floor to Lillian Etzkorn to begin. So Lillian, please go ahead whenever you're ready.

Good morning, everyone, and welcome to the LCI Industries' second quarter 2024 conference call. I am joined on the call today with Jason Lippert, President and CEO; along with 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 and in 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 the forward-looking statements are made, except as required by law. With that, I would like to turn the call over to Jason.

Thanks, Lillian, and good morning. I'd like to welcome everyone to our second quarter 2024 earnings call. We delivered strong results in the second quarter with meaningful year-over-year margin expansion and solid performance from our aftermarket and OEM businesses. We believe these results highlight how our diversification strategy has structurally improved our business foundation. Total revenue was $1.1 billion in the quarter, an increase of 4% year-over-year with RV OEM growing approximately 20%. More importantly, our EBITDA rose nearly 40% and margins expanded by over 300 basis points. We again delivered market share gains in both RV OEM and aftermarket. We also delivered solid operating cash generation totaling $439 million of operating cash flows in the last 12 months, thanks to strong P&L performance and disciplined working capital management, including a $142 million year-over-year reduction in inventories. These results would not have been possible without the pure play RV business. We believe our diversification strategy is clearly working, reducing cyclicality by lifting revenues and margins, while greatly expanding our growth opportunity across our diverse markets. Over the last decade, our diversification has expanded Lippert's reach to include attractive markets like transportation, residential building products, marine, automotive, and RV aftermarkets in Europe. As a result, we have over $10 billion in opportunity just in these areas where we compete today, and our opportunities should continue to expand as we innovate new products for these markets. Beyond diversification, we believe our right to win in these markets is strong because of the investments we've made to build world-class manufacturing capabilities and teams. Our specialized teams and facilities are focused on the most sophisticated products and challenges from our customers in each of these markets. Due to decades-long relationships with our customers, we believe that they trust us to develop and launch cutting-edge solutions, and that we excel at designing and producing products that require complex engineering and innovation that others simply haven't been able to provide. We think that these advantages, combined with our reputation for quality, service and delivery speed, drive incredible value for our OEMs and the consumers. Looking ahead, we remain focused on identifying incremental cost reductions to support improved profitability. We are streamlining production and optimizing our manufacturing footprint while keeping capacity flexible. We have already eliminated nearly 1 million square feet of production space during the last 18 months without sacrificing production capacity and have more consolidation planned. Through our company-wide continuous improvement program, we have launched and completed over 25,000 continuous improvement projects year-to-date 2024 that improve operational manufacturing efficiencies, quality, and safety processes across our business. At the same time, we will continue to capture strategic growth opportunities as we did with our latest acquisition of Camping World's furniture business in May. This acquisition is already driving results with aftermarket sales of Camping World up 30% during the quarter. Beyond the lift in furniture, our enhanced partnership with Camping World should increase our presence across all our aftermarket product categories, both online and in our growing retail footprint of roughly 215 stores, which is targeted to reach 320 by the year 2028. I'll now walk you through what we are seeing in each of our businesses. First, on RV OEM, sales increased 20% during the second quarter of 2024 compared to 2023, driven by a 15% increase in North American Travel Trailer and Fifth-Wheel Wholesale shipments as well as meaningful market share gains. This improvement in RV OEM business, along with the performance in the adjacent OEM businesses, yielded an operating margin expansion of nearly 400 basis points for our OEM segment. Content per total RV for the quarter was $5,237 while content per motorhome RV was $3,766. Both were down slightly year-over-year, while up sequentially. These declines have moderated and are largely due to index pricing pass-throughs as well as product mix leaning towards smaller RVs. To highlight this point, organic content for towable increased 1% during the second quarter, both sequentially and year-over-year. In addition, we have now driven sequential growth for both towable and motorhome content two quarters in a row. All told, we have grown content by more than 50% in towable RVs since the year 2020 with organic growth coming from innovations across product groups like chassis, appliances, awnings, axles, windows, and air conditioners. These are all products that are either completely integral to the vehicle or include features and benefits that can't easily be replicated by other suppliers. Importantly, our increased content is also an indicator of our overall market share gains. As we continue to invest in new product development and innovation, we believe organic content will keep trending higher. Looking ahead, we believe that motorhome shipments will likely remain a drag on industry wholesale for the next 12 months, but towable shipments and dealer inventories are showing signs of recovery and should trend modestly upward. In addition, the 2025 model year changeover should help drive our content during the second half of 2024, with our commercial teams already seeing strong reception from OEMs that want to incorporate new and existing Lippert content. We believe that this continued expansion of our OEM content through innovation, coupled with our strong OEM relationship, is expanding our market share and elevating our leadership position within our core RV market. While we are tempering expectations for 2024 wholesale shipments, updating our anticipated range to 315,000 to 325,000 units due to increased softness in retail demand and the continued pressure of higher interest rates on consumer sentiment, we are confident in the overall industry resilience to return to steady growth. RV demographics are still very strong and the lifestyle continues to draw people in from all age groups to the attractiveness of outdoor recreation and family travel. Our confidence in our ability to drive future growth is driven by our significant competitive moat. We believe newer entrants and smaller competitors will have difficulty as long as we continue to innovate and supply SKU complex product lines in short delivery times. We also have very strong customer relationships and leadership teams that are three decades in the making. We believe that our product breadth is the largest in the industry, and that these products are more sophisticated in design and manufacturing as our manufacturing processes have been evolving for three decades. Additionally, we think that our reputation, history of our innovation, and our ability to make products in so many different categories from steel and aluminum fabrication, glass processing, electronic design and manufacturing, plastic forming, furniture and mattress manufacturing, design and manufacturing of electric and hydraulic slide and stabilization systems, and so much more gives us a huge edge over existing and new competitors. We should continue to attract incremental business from new players and legacy OEM partners alike, helping to cement our position as a go-to supplier in the RV space for components in many categories. Turning to the aftermarket. Net sales were $258 million for the quarter, up 1% versus the same period in 2023. Our operating margins in our aftermarket segment increased approximately 120 basis points, and that segment remains one of our most profitable parts of our business, delivering operating margins at least 400 basis points higher than our OEM segment. Our CURT business, which contributes roughly half of our aftermarket segment sales continues to perform well, helping to drive market share gains and an 8% increase in automotive aftermarket sales during the second quarter, offsetting the slight softness in RV and marine aftermarkets. We also now have over 50% market share in aftermarket hitches and are gaining momentum with auto OEMs where our CURT family of products has grown 40% since our 2019 acquisition. We also continue to gain share with Furrion's line of innovative products, which includes ovens, hot water heaters, cameras, furnaces, refrigerators, and air conditioners as consumers look to upgrade their vehicles with best-in-class content. With hundreds of thousands of vehicles entering the repair and replacement cycle annually, we believe that we can capitalize on the growing demand for service replacement parts and upgrades with meaningful growth runway ahead in aftermarket products. We will attempt to capitalize on these tailwinds through the best-in-class customer service and on-site dealership technical training and sales teams. We believe that having a solid and trusted presence at the dealer level is the key to pulling through our large lineup of aftermarket products into the dealerships. Our commitment to industry-leading customer service should continue to set us apart as, according to our customers and aftermarket, we're one of the easiest companies to do business with, and our care center facilitates over one million interactions annually with dealers and consumers. We strive to continuously evolve and improve the way in which we serve these customers in order to continue to be best-in-class, which we believe will ultimately bring more and more transactions in the aftermarket back to deliver brands. In addition, we believe that the initiatives like Lippert Scouts, the Campground Project, many consumer rallies and Lippert ambassadors foster trust, cultivate loyalty, and strengthen our connection and relationship with the RVers out there using our products. We also believe that our commitment to our customers is further exemplified by the enhanced products we deliver based on their feedback. Moving to North American Marine and adjacent markets, our revenues were down 12% compared to the prior year, with Marine revenue down 33% compared to the prior year, which we believe is due to ongoing softness in the marine retail environment while boat dealers lower their inventories. In the interim, we continue to focus on meaningful longer-term marine opportunities. For example, during the quarter, Lewmar, our leading brand of high-end marine components and equipment based out of the U.K. has launched a pontoon industry-first auto windlass anchoring system and thruster products. These products are brand new for the pontoon market and should create significant content opportunities for us. Some of our larger customers are planning to launch these products over the next model year, and we are excited to see the pontoon boat experience taken to another level. Outside Marine, overall revenues were up as we had solid results in several of our other adjacent markets. We are seeing strength in our residential vinyl window business, for example, which continues to gain share with this $2 billion addressable market. Over COVID, many of the traditional vinyl window suppliers simply could not keep up with demand for home remodeling. And since we manufacture vinyl windows for manufactured homes, we developed a lineup of vinyl windows designed specifically for the residential market. Since we have taken advantage of that opportunity, our new business has grown to over $30 million in this product alone. Other adjacencies like our manufactured housing building products group are consistently supporting momentum from the top and bottom lines. In addition, our transportation group for on-highway and off-highway vehicles continues to grow with customers like Polaris, Starcraft Bus, ATW, and Bluebird. We anticipate making more headway in our adjacent business as we continue to grow organically and inorganically. Revenue from our international business was roughly flat compared to the previous year. But business continues to perform well in Europe where their business cycles tend to be less volatile than here in North America. I toured several of the European businesses last month, including our high-end Lewmar business and state-of-the-art acrylic window and door manufacturer, Polyplastic. During these visits, I was impressed by the creativity of our teams, their operational execution and the innovative new content they are developing. Products developed within our European brands such as pop tops, acrylic windows, anchor and windlass systems, bed lifts, doors, and electronics, highlight how our global footprint fosters innovation globally. We continue to receive positive feedback from customers as we introduce these products in North America. Looking ahead, we expect our international business to remain healthy with continued growth from Europe, as new products and strategic opportunities strengthen our position in this market. Innovation is another important growth driver that has moved the needle on market share gains. We continue to make meaningful R&D investments during the quarter to help develop the advanced products that we believe consumers want. We also continue to enhance existing products, adding features that consumers typically value and are willing to pay a premium for. With the annual RV open house only a month away, we look forward to showcasing these fantastic product introductions and are already driving content growth. We wanted to know a few of these industry-first innovations to product launches, the first being our new Chill Cube Air Conditioner system, which was designed to provide super cooling efficiency at a significantly reduced noise level, and is the first ever with a 18,000 BTU capacity. Our new anti-lock braking system brake technology, or ABS, developed by our team in Detroit, Michigan is receiving great feedback from the industry, and we will be inviting dealers to take a test ride in a unit equipped with ABS at a test track near the open house. Consumers have been vocal when pushing for improvements in the kind of safety and security that we believe our ABS system brings to the table. To demonstrate its popularity, Keystone Cougar, the best-selling fifth wheel in the country has adopted this product. Also, our TCS suspension system and Helux Pin Box innovation significantly dampened the ride for RVers and seems to be gaining traction. We designed the new suspension to significantly lessen the wear and tear that the inside of the towable RV experiences while moving down the road, which should ultimately give the consumers a better experience and improve the durability of the RV for the OEMs and the consumers. Finally, Brinkley RV partnered with us to design some new windows in an effort to change the window game, and now those windows are starting to gain traction in the market, which should create window content that didn't previously exist in an already existing product lineup. OEMs have already shown demand for many of these innovative products, and we look forward to explaining in future quarters how much these products will impact our organic growth and content. I can say without a doubt I've never seen a 12-month period during which our teams have introduced more transformational innovations for the industry. Our continued focus on culture and leadership development is an important source of fuel for the rest of our business. We simply believe you can't make long-term sustainable progress in quality, safety, innovation, and efficiency without team members that not only like to be here, but are also energized in bringing an extra level of passion to the business and their teams they are a part of. Said differently, if we have team members who feel like Lippert truly cares about them and develops them, we will perform better than companies at which team members feel they aren't important or cared about. During the quarter, we launched our second Built to Serve event in Eau Claire, Wisconsin, in collaboration with Acres for Joy. We are proud to expand these types of initiatives and even prouder of our team's effort to meaningfully serve and support their communities to create lasting change. We took over 50 of our leaders and high-potential team members to serve with our team members in Wisconsin on their home turf, and it truly engaged both groups. From our experience, engaged team members stay longer and are more productive. That's in addition to the community benefits that serving brings, which is why we plan to continue to lead by example in our community and support our team members in participating in hundreds of serving events like this every year. Moving on to capital allocation. Our strong operating performance that focused on working capital management, specifically improved inventory returns, continue to drive strong cash generation of $439 million in the last 12 months. Additionally, we paid down $25.8 million of debt under our current agreement in the second quarter. Looking forward, our teams remain deeply committed to effective cash management, and we expect to drive additional reductions in inventory levels, further strengthening our cash position. We have been extra diligent around CapEx this year as well as the RV business remains soft. Additionally, we have prospects in the acquisition pipeline and plan to continue to execute on strategic acquisitions in the coming 12 months. We also plan to continue returning capital to shareholders while investing in R&D and innovation, pursuing both organic and inorganic growth opportunities over the near and longer terms. In closing, we want to express our deepest appreciation toward all of our team members for their unwavering commitment and hard work to drive Lippert forward. Reflecting on my 30 years here at Lippert, I'm incredibly proud of what our business has become and even prouder of the hardworking leaders that work day to day. Our diversification in markets we have entered are starting to look more mature. And the many innovations we have brought to the industries and consumers over the years has, in our opinion, transformed the OEM, dealer, and consumer experience. Guided by our experienced leaders around the business, we remain committed to delivering exceptional service to our customers while achieving profitable growth, culminating in creating long-term value for all stakeholders. I will now turn to Lillian Etzkorn, our CFO, to give more detail on our financial results.

Thank you, Jason. Our consolidated net sales for the second quarter were $1.1 billion, an increase of 4% from the second quarter of 2023. OEM net sales for the second quarter of 2024 were $796 million, up 5% from the same period of 2023. RV OEM net sales for the second quarter of 2024 were $490 million, up 20% compared to the prior year period, led by volumes, which were driven by a 15% increase in North American travel trailer and fifth-wheel wholesale shipments, increased selling prices, which are indexed to select commodities and market share gains. Content per towable RV unit was $5,237, while content per motorized unit was $3,766. Both were down marginally compared to the prior year period, primarily due to index pricing pass-through and mix. Content increased $140 sequentially for towable and $110 for motorhome content. Excluding index pricing, mix and M&A, organic content increased 1%, both sequentially and year-over-year, as the market continues to respond well to our innovation, which remains a key strategic pillar of ours and an engine for growth. Adjacent Industries OEM net sales for the second quarter of 2024 were $306 million, down 12% year-over-year, primarily due to lower sales in North American marine and utilities trailer OEMs, driven by current dealer inventory levels, inflation, and rising interest rates impacting retail consumers. Resiliency in transit and building product markets have supported performance, partially offsetting the impact from North American marine. North American marine OEM net sales in the second quarter of 2024 were $64 million, down 33% year-over-year. We expect this softness to continue for the balance of this year and into 2025 as well. Aftermarket net sales for the second quarter of 2024 were $258 million, up 1% year-over-year, primarily driven by market share gains in the automotive aftermarket, partially offset by lower volumes within marine and RV aftermarket, which has been negatively impacted by lower consumers' discretionary spending. International sales were down slightly at 1% year-over-year. The decrease was primarily driven by softening of marine and RV market and elevated interest rates impacting lending that's partially offset by strength in the rail market. Gross margins were 25.3% compared to 21.5% in the prior year period, primarily due to lower inbound freight and material sourcing strategies. Gross margins were also positively impacted by better fixed cost absorption from our higher sales. Additionally, we had $4 million of reduced warranty expense in the quarter. Of note, on a year-to-date basis, warranty costs have decreased $12 million compared to the prior year period. Consolidated operating profit during the second quarter was $91 million or 8.6%, which is a 320 basis point improvement over the prior year period. The operating profit margin of the OEM segment increased to 6.4% in the second quarter of 2024 compared to 2.5% for the same period of 2023. Aftermarket delivered a 15.5% operating profit margin, a 120 basis point improvement over the prior year. GAAP net income in Q2 2024 was $61.2 million or $2.40 earnings per diluted share compared to a net income of $33.4 million or $1.31 earnings per diluted share in Q2 of 2023. EBITDA increased 39% to $122.6 million for the second quarter compared to the prior year period. Non-cash depreciation and amortization was $64.7 million for the six months ended June 30, 2024, while non-cash stock-based compensation expense was $9.3 million for the same period. We anticipate depreciation and amortization in the range of $125 million to $135 million during the full year 2024. At June 30, 2024, the company's cash and cash equivalents balance was $130 million, this compares to $66 million at December 31, 2023. For the six months ended June 30, 2024, cash provided by operating activities was $185 million with $21 million used for capital expenditures, $20 million used for acquisition, and $53 million returned to shareholders in the form of dividends. We remain focused on inventory reductions to improve cash generation and optimize working capital. As of June 30, 2024, our net inventory balance was $688 million, down from $768 million at December 31, 2023, and $830 million at June 30, 2023. At the end of the second quarter, we had outstanding net debt of $699 million, 2x pro forma EBITDA adjusted to include LTM EBITDA of acquired businesses and the impact of non-cash and other items as defined in our credit agreement. For the month of July, sales were up 6% versus July 2023, primarily due to an approximate 15% year-over-year increase in North American RV production, partially offset by a 16% year-over-year decline in marine sales. Regarding RV wholesale shipments, we now estimate a full year range of 315,000 to 325,000 units as lingering consumer demand headwinds continue to impact retail performance longer than anticipated. As we think about Q3 and the cadence of the business, we expect overall revenues to be down about 5% year-over-year, with RV down about 5% and marine down about 20%. As a reminder, Q3 tends to be a lighter quarter due to holiday shutdowns and seasonality. So sequentially, our expectation is for Q3 revenue to be down around 12%. This reduced sequential volume will also have a negative impact on sequential operating margins in the third quarter. As we look forward, we are focused on maintaining a strong balance sheet and targeting a long-term net leverage of about 1.5x net debt to EBITDA. For the full year 2024, capital expenditures are anticipated in the range of $40 million to $60 million. We remain highly confident in Lippert's ability to achieve enduring profitability and value for all stakeholders, and believe we are well positioned to drive sustainable long-term growth. That is the end of our prepared remarks. Operator, we are ready to take questions. Thank you.

Our first question comes from Scott Stember from ROTH MKM. Scott, your line is open. Please go ahead.

Good morning, and thanks for taking my questions. Lillian, you just said that you expect overall sales, I think, for the third quarter to be down 5%, yet you're running up about 6%. Can you maybe just talk about the different buckets of how we see a deceleration from the trends that you're seeing at least through the month of July?

Sure. Good morning. So if you recall, last year, specifically with the RV business, when we came out of the July 4 holiday last year, we had some pretty extended shutdowns, just given where the demand profile was in 2023. So in part, when you're comping that for July of this year where we didn't have those same extended shutdowns in the month, we have more favorable comps. As we start looking to August and September, we are expecting the customers to take some extended shutdowns around the Labor Day holiday, and also some additional shutdowns in September. So I think the timing and the cadence of some of those shutdowns year-over-year are just different by month, which will result in kind of the overall slowdown for the quarter versus what you're seeing in the month of July.

So most of that's RV, the slowdown?

Yes, exactly.

Very helpful. And Jason, you talked about the model year '25 conversion and that you would expect to get benefit in the back half of the year. What are you seeing so far this year? And maybe just also, as a follow-up, just talk about retail, what you're seeing right now and what's your expectations for the full year for RV?

Yes. During the model year transitions, we are definitely increasing our product offerings. The challenge we face is that we are experiencing lower volume in the second half of the year. While we are introducing some strong fifth-wheel and trailer products and the OEMs are enthusiastic about them, the reduced volume in the latter half is introducing some uncertainty. On the positive side, dealer inventories are low. We are being very cautious regarding retail sales, likely maintaining a one-to-one ratio right now and reducing stock until the interest rate situation improves. There is retail activity, and dealers are not overly pessimistic; they are simply waiting for accumulated demand to be unleashed once interest rates adjust and we get past the election. We anticipate mid-single-digit growth in 2025 and believe that depending on interest rate changes, it could be even greater. However, dealers are resilient and are striving to navigate the current environment with today's interest rates.

Lillian, regarding the margins for the third quarter, could you discuss the 8.2% that you achieved or the 8.6% from the second quarter? Do you anticipate that level to be maintained in the second half of the year, or should we expect it to potentially decrease to the mid-single digits, considering Jason's remarks about production?

Yes. I believe the expectation is that if the volume fluctuates, we will benefit from fixed cost absorption, as we did in the second quarter with higher revenue. Therefore, as this revenue gradually decreases in Q3, I anticipate that margins will return to levels more similar to those in the first quarter, around the mid-single digits, due to the volume and the impact of the decremental margin.

Got it. That's all I have.

Offset by some of the things like that...

Okay. Got you. Thank you.

Offset a little bit there, yes.

The next question comes from Fred Wightman from Wolfe Research. Fred, your line is open. Please go ahead.

Hi, guys. Good morning. Could you just touch on the organic content per unit that you're seeing in towables? I think you said that was up a little over 1% last quarter. I think it was up 1% again this quarter. And in the past, you've talked about something in the 3% to 5% range. So can you just sort of help us bridge that and maybe why it's a little bit softer year-to-date?

Yes. So you're correct. So about 1% organic growth is what we've seen in these past two quarters. Really, I think, generally speaking, the overall expectation would be about 3% to 5% in a given year. I think as you see us progress through the year and with the strength of the product and the content, and the growth in market share as we think about the '25 model year changeover, you'll start to see the increase in that organic content based on some of the products that Jason was referring to, some of the more innovative products that have been very well received such as the ABS, some of the window products, et cetera. So we'll continue to see that organic growth number grow as we move through this year.

The only challenging aspect right now is the mix. Currently, there are many small trailers being produced, but they contain less content. On a positive note, dealer inventories for mid to high-end products are continuing to decrease. As they need to restock those in the upcoming quarters, this will be beneficial for content since we have prepared those earlier.

Makes sense. And then just in terms of dealer inventories, Jason, I think you said that they were in pretty good shape. Are you still seeing any lingering signs of non-current inventories across the channel? Or do you feel like that's in pretty good shape and dealers have sort of taken the pain to clear through the non-current?

I think there's still a little bit out there, but I was with a couple of dealers, big dealers last week, and they worked through a lot of the '22s and '23s now. Obviously. And then there weren't many '24s built. So I think we're in the best shape we've been in the last couple of years. I'm really comfortable with where we're at. And like I said, some of the high-end inventory on the towables and the midline inventory in the towables is low and once the interest rate situation corrects itself and people get out and some of that past demand releases, we'll see some of the dealers stock up some of this product. Again, that's got some of the content that we talked about on the call with the things that Lillian just mentioned, some of those are on more of the mid to high-level high-end vehicles.

Makes sense. Thank you.

The next question comes from Daniel Moore from CJS Securities. Daniel, your line is open. Please go ahead.

Thank you. Good morning, Jason. Good morning, Lillian. Just following up on the inventories. I guess, number one, from your perspective, how much lower can we go in terms of weeks on hand? And second, crystal ball question, but when retail demand bottoms and does start to recover, how much restock would you expect either in weeks on hand or in terms of total units?

Yes. I think from the inventory perspective, there's still room for us to move. We've taken care of some of the low-hanging fruit over the last handful of quarters. So like anything, we need to develop some momentum on things like inventory reductions. We've still got opportunities across our 140 locations, and we'll keep working on that. With respect to the other question, what was the other question again, Dan?

Just in terms of dealer inventories, to get back to normal, how much of a restock is likely once retail does bottom and start to recover a bit from your perspective?

I mean, we think it will be slower to restock and not going to go crazy. I think the industry will just like to get back to one-to-one at some point and the destocking to cease. So again, we're kind of predicting mid-single digits next year. We think it will be a slow comeback. But like we keep talking about, every 50,000 units in the industry goes up, that's another $250 million in top line for us just on RV, maybe a little bit more than that with really good incremental margins of around mid-20s. So that's really healthy. And whether we get 25 next year or 50 or 18, it's still a win.

Very helpful. I appreciate the updated view on marine. I have a similar question regarding inventory levels for pontoon boats. How much destocking does your outlook anticipate? It seems this trend will continue into 2025. Do you expect things to start improving by midyear next year, or might it take a bit longer based on current market conditions?

Thank you. Yes, that's good. All the major boat shows are happening this month, with some currently taking place. We anticipate receiving valuable information in the upcoming weeks. However, our initial impression is that there is still some destocking needed in the boat market, and dealers are experiencing a bit more difficulty. As a result, manufacturers will likely control production and reduce it for now, which may continue until the first quarter. We hope to see normalization by the spring selling season next year.

All right. Last for me, the balance sheet in good shape and getting better by the quarter given the working capital release. Just talk about the pipeline, where you're seeing the most opportunity in terms of M&A and how you rank ordering things like buying back your own stock versus potential M&A opportunities here?

Yes. M&A and acquisitions are a key part of our growth strategy. We are currently evaluating a couple of opportunities. We will provide more details in the future regarding those. Our pipeline is full, with about seven or eight companies under consideration or conversation. However, we are getting serious with a couple of them. More updates will follow in the next quarter.

I think also building on that, Dan, as we look at the balance sheet and really the health of the business, this is a business that is a very strong generator of cash. We were through the down cycle. We continue to generate very strong operating cash. That's something that we'll expect to continue to do. So that does afford the flexibility to look at the various options. Obviously, we want to continue to maintain that really solid balance sheet, working towards net debt of about 1.5x is also important to us as we continue to support the growth and innovation, and look at organic and inorganic opportunities. So I feel really good that we're very well positioned to continue to generate really positive shareholder returns and support the growth that we need going forward.

To build on that, Dan, I would just say that we are not finished with our cost-saving initiatives and planned consolidations, as well as ongoing restructuring efforts. Although there has been a significant two-year decline in wholesale volumes, we are actively working on enhancing our operations. This includes improving efficiencies and restructuring some of our facilities to become more cost-effective.

All right. Very helpful. I look forward to an update out of the open house in a month or so.

Thanks.

The next question comes from Michael Swartz from Truist Securities. Mike, your line is open. Please go ahead.

Hi, good morning, everyone. To start, Lillian, you mentioned that the towable content grew organically by about 1%. I take that to mean that pricing has likely decreased by around 5% to 6%. Could you clarify how much of this pricing change is purely due to pricing adjustments and how much is a result of mix? I'm trying to get a better understanding of the different factors at play here.

Good morning. Thanks for the question. So we are definitely still seeing some of that index pricing pass-through. In the past quarters, we've had it as high as 15%, 16%. It's been gradually mitigating. We're down to probably closer to 4.5-ish percent in terms of the commodity pricing pass-through mix. And Jason talked about it a little bit in terms of the smaller units becoming more prominent. We have been seeing that increasing over the past several quarters. And as we look at the headwinds in the year-over-year trailing 12-month content, we're probably sitting at a little over 3% of the year-over-year decline of being that mix number. So that's something that we've been closely launching and is something that we'll continue to launch just in terms of industry and customer preferences. But that metric has grown in terms of the prominence of the weight on the content number.

It's challenging to provide detailed insight on the mix. However, I can highlight that Camping World is the leading seller of 17-foot travel trailers, which have limited content. They are selling a significant number of these units. The positive aspect is that we are attracting many first-time buyers into the market, although this comes at a cost to the content. While it's difficult to measure precisely, I hope this provides some useful context.

Yes. Super helpful. And maybe just looking out, I think Jason, you made some pretty positive commentary around content for model year '25. And in the past, I think you've given us some quantification maybe in terms of the overall business. I think you've said $200 million-plus in content wins over the past quarter or two. Do you have any update on maybe what that looks like with model year '25 content performing a bit now as we sit here in August?

Yes, the team has done a really nice job of working with the customers and had some really nice incremental net new business wins for the business. I'd say as we start looking to the potential going forward, there's another $150 million that the team has been successful in acquiring. And again, that kind of builds on the confidence that we have of that organic number trending more to the 3% to 5% on an annual basis. Generally speaking, it's just being able to deliver those types of wins, and really the customers, frankly, having the confidence in us and our products and the innovation and the service that we're able to provide on an ongoing basis that they put forward the trust to keep delivering the business to us.

Yes. And that $150 million she just mentioned is on the industry volume or wholesale volume of 315 to 325 kind of where we're at today. So it's a relatively low bar. So again, if you factor that we get back to 400,000 in the next year or two, or however long it takes, it's a significant increase to our organic content growth. And ABS, for example, on top of what we've already gained from the OEMs, there's another $150 million of runway just on that product alone. So with the products we mentioned in the beginning comments, it's about $400 million of runway just on those new products. So it takes years to get to those, but it just proves that we can innovate our way into really attractive organic growth opportunities.

Thanks a lot.

The next question comes from Bret Jordan of Jefferies. Bret, your line is open. Please go ahead.

Hi, good morning, guys. On the same topic, I think, I guess, you were sort of talking about expectations of some rate adjustments or reductions going into '25 would be constructive. I guess what level of rate cuts do you think is needed to really shift the consumer sentiment in the RV space now?

Many people are asking that question. I don’t have a definitive answer, but I believe consumers are seeking positive momentum. This could shift the dynamics and help release some pent-up demand. However, it's uncertain, as the election may also influence this situation. If we begin to see the Fed change its approach, I believe it will make a difference for us. Our business relies on an average price of $25,000, so we don’t need consumers to invest heavily in RVs or vehicles. Once conditions improve, we have good opportunities. RVs remain affordable, and prices have decreased, making the lifestyle appealing. We just need to see that positive momentum start to shift.

And I guess your outlook for Open House, obviously, last year was not a lot of purchasing activity, more booking. Are you expecting this year to be a big uptick as far as year-over-year actual dealer transaction?

I don't anticipate a significant increase. As we've mentioned before, dealers won't start restocking until they observe more retail activity. However, retail won't pick up until rates adjust and change. The focus for now is on building relationships with suppliers and OEMs. Additionally, they'll have the opportunity to check out the new products we have, including ABS technology, and experience their capabilities first-hand. The OEMs will showcase their latest innovations and floor plans. When it's time to restock meaningfully, they will be aware of the products available that can help drive market movement and attract new customers.

And then quick final question, I guess, on the aftermarket business with Camping World, is that margin profile different than aftermarket average or pretty much in line?

It's in line with our RV aftermarket margins.

The next question comes from Alice Wycklendt from Baird. Alice, your line is open. Please go ahead.

Good morning. Thanks for taking my questions. Most have been answered. So maybe just a couple of housekeeping ones. I think you took your CapEx guidance down about $15 million. What drove that change? Is there just a shift in priorities? Or is it a timing issue?

We're being more cautious. In this uncertain environment, we're trying to play it safe and focus on projects with strong returns and quick paybacks, while not overextending ourselves. We have many projects we'd like to pursue, and as the business starts to recover, we expect to return to more typical activity levels. However, we anticipate reaching around $40 million to $55 million this year, which is still considerably lower than last year, and last year's figures were significantly lower than the year before.

Great. I apologize if I missed it due to connection issues, but did you report any revenue contribution from acquisitions in the quarter?

About $5 million, I mean, pretty nominal.

That's helpful. That's it for me. Thank you.

Thanks, Alice.

You're welcome, Lillian.

The next question comes from Tristan Thomas-Martin from BMO Capital Markets. Tristan, your line is open. Please go ahead.

Hi, good morning.

Hi, good morning.

Can you talk to maybe what the industry production versus industry shipment dynamic in the quarter? It kind of seems like production outpaced shipment in the quarter. Can you maybe talk to that?

I can't definitively say one way or the other. It didn’t feel any different to us, I believe.

Yes. No, it's definitely not what we had seen last year, Tristan, in terms of that mismatch of the production versus shipments. There can always be a little bit of timing, especially as you cross the quarter, but it definitely did not seem like it was anything of any significance this year.

Yes. It could be some of the reporting too, as you know, some of that reporting comes in later they misstate and things like that. So there might be some catch-up to come, but we think that the OEMs are being really diligent on production. We see that in their production schedules. So that's good.

I'm just trying to square kind of your travel trailer fifth-wheel revenue up 26% versus industry shipment is up 13%. Could you maybe kind of talk to what that delta was?

There are several factors at play. First, it's connected to the production levels and the original equipment manufacturer (OEM) production. Pricing is also a contributing factor that will have a positive impact. Additionally, there's organic content to consider. We generally focus on the trailing 12-month metric for content, but when analyzing the current quarter alone, there's positive content there as well. Other aspects are also contributing to our top line results.

And then just one final question for me. You talked a lot about kind of the incremental content on the model year '25. How has the kind of competitive bidding environment been, let's call it, kind of the like-for-like content on '25 versus '24?

The what environment?

We understand the additional content for '25 and the opportunities it presents. However, what has the competitive bidding environment been like for the products you had in '24 that you wish to retain for '25?

Yes, I believe we are on track. We expect our content and market share to keep growing. The increase in content is generally a sign that we are maintaining or expanding our market share. We haven't observed any negative changes; if anything, we've noticed some positive developments in our core products offered to the market.

Our final question today comes from Brandon Rolle from D.A. Davidson. Brandon, your line is open. Please go ahead.

Thank you. Good morning. Following up on Tristan's question about your market share in key categories this year compared to last year. Can you comment on that for chassis and some of the other main businesses within RV OEM? It seems like the competitive environment hasn't really changed, but I'm curious how that's played out. Were you able to maintain your share, and did that come at the expense of any margin? Thank you.

No, I would say from the perspective of market share on core products, Brandon, chassis, axles, windows, furniture, we're at or above where we were last year in all those key categories, and then some categories like appliances were up. I can tell you, axles, for example, one of our top three categories, we're going to do more in sales this year in axles than we did in 2022, and then we competed for the last 30 years for every little bit of business we've taken. And I think our teams are competing as well as they ever have right now in maintaining or improving market shares in core products.

Okay, great. And then just a follow-up on another Tristan's question. You had mentioned that 26% growth versus 13% wholesale shipment growth. How much of the 26% was volume versus price versus mix?

I don’t have the specific breakdown or will not share the specific differences among the various categories. However, it's fair to say that they are significant in terms of the pricing we’ve managed to achieve alongside the growth in market share. Unfortunately, I can't provide further details on that, Brandon.

Some of it comes in as minor examples, but all these factors contribute significantly due to our numerous product lines. For instance, many OEMs have raised chassis prices since last year, which has increased our chassis content. We've also seen a substantial increase in our market share for air conditioners over the past 12 months. We experience increases in certain categories like that. While there are fluctuations, the positive factors are substantial enough to drive our growth.

And Brandon, just to clarify on the metric itself, the RV business for us, aftermarket OEM was up 20%, not 26%. So if I had misspoken during the remarks, I apologize for that, but we are up 20%.

Okay. Thank you so much for the additional comment.

Thanks, Brandon.

Everybody, we appreciate your time and your questions. Thanks for tuning into the call. We thank all of our team members around the business for the incredible effort they put forward this last quarter and for the year. So we'll talk to you in Q3. Thanks, everybody. Bye-bye.

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.