Good morning or good afternoon, and welcome to the LCI Third Quarter Earnings Call. My name is Adam, and I will be your operator for today. I will now hand the floor to Lillian Etzkorn to begin. Lillian, please go ahead when you're ready.

Good morning, everyone, and welcome to the LCI Industries Third 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. 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 would 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 of the forward-looking statements are made, except as required by law. With that, I would like to turn the call over to Jason.

Good morning, everyone, and thank you, and welcome to our third quarter 2024 earnings call. We continue to execute well during the third quarter, improving margin and increasing share as we navigate some continued headwinds in the RV and marine sectors. Over the past six decades, Lippert has been established as a leading global supplier of highly engineered components for the outdoor recreation, transportation and building products industries. We feel that our diversified product portfolio, combined with the results of our continued focus on innovation, customer satisfaction and strategic acquisitions continue to help us win with our OEM and aftermarket customers. With these advantages, particularly our innovative high-quality content, we've been able to gain RV OEMs market share year-to-date in our top five product categories, appliances, awnings, chassis, furniture and windows. These products made up roughly 71% of our total RV OEM business so far in 2024. Despite continued industry softness in RV and Marine, net sales declined only 5% during the quarter to $915 million. The quarter also benefited from increased automotive aftermarket sales, underscoring the success of our growth strategy as we track organically towards $5 billion in revenue for 2027. We also delivered meaningful profit growth this quarter. Operating margin increased to 100 basis points and operating income dollars grew 18%, driven primarily by operational improvement and cost management initiatives. Supply chain improvements helped lower material costs, while product quality and technical training initiatives reduced warranty costs by $10 million during the quarter. Furthermore, we continue to consolidate facilities and reduce our overall cost structure and footprint while maintaining scalable capacity. We believe there is further opportunity to execute on these types of cost savings initiatives and business unit consolidation to support enhanced profitability in the coming quarters. Lillian will talk about this in more detail shortly. I will now move on to our results by business. RV OEM net sales were $419 million, down roughly 2% versus prior year as the impact of lower motorhome shipments and mix shift towards smaller towable units offset the market share gains we delivered across our top product categories. Based on industry reports, RV production is now closely aligned with wholesale shipments and dealers are reporting low inventory levels, which should position us well when the industry begins its rebound. Content per towable RV was $5,131, down slightly versus prior year, while content per motorhome RV was $3,739, up slightly versus prior year. For towables, organic content was up 1%, driven primarily by gains in our top five product RV OEM categories. This growth was more than offset by the mix shift to single-axle trailers, which were up 38% over the same period in 2023. Based on feedback from certain dealers, there should be a return to higher content trailers in early 2025. Furthermore, as new LCI components are added to 2025 model builds, we should see an acceleration in organic content growth, which we believe should begin in the fourth quarter. We supply the top RV brands with what we believe to be premium innovative content. These new product introductions should remain a key driver behind content expansion and help accelerate long-term content growth as retail demand and industry production recover. We have already seen a strong response from customers to the products we showcased at the RV open house in September. These innovative products include our Touring Coil Suspension or TCS, our anti-lock brakes, larger windows, new glass doors and our new Chill Cube Air Conditioners, all of which are resulting in new business wins for 2025. Our new Touring Coil Suspension or TCS, the first towable suspension of its kind, cuts road vibration on towable units by about 50%, which should extend the life of the RV and drive share gains by lowering maintenance costs and increasing customer satisfaction. As consumers add more sophisticated content like this to their vehicles, TCS should fuel even greater demand. We've demonstrated TCS' effectiveness to several major OEM and dealers by having them experience the vibration that comes with a normal suspension as compared to our TCS. The dealers and OEMs simply couldn't believe the difference that TCS made. The significant investment we made here last year looks to be paying off, and we believe that the addressable market for this unique product is over $150 million in revenue opportunity. Our Anti-Lock Brakes or ABS, is a key example of our commitment to innovation and meeting customer needs. Before our launch, ABS for RVs was virtually non-existent and extremely cost prohibitive. Now over 10 leading towable RV brands have adopted it, including Kruger and Reflection, two of the top three Fifth-Wheel brands, with more expected in fiscal year '25. We expect over time that it will be an industry standard largely because consumers seem to understand that purchasing an RV with anti-lock brakes means that the RV can stop in even shorter distances while improving emergency braking. To date, orders have been strong, which should position us to capture a significant share of this $150 million to $200 million addressable market. We are also starting to market this product to our utility trailer customers. We believe the utility trailer OEMs that manufacture trailers that carry expensive cargo are going to gravitate towards this product. We're excited about this opportunity as there are approximately 600,000 utility and cargo trailers manufactured every year. Our larger windows and new glass entry doors being purchased for use in many of the 2025 models should enable us to increase content on both towable and motorhome units as we believe that consumers will happily pay a premium for more natural light and the functionality of the products like our 4K Window Series with integrated chains. For example, Brinkley launched their brand two years ago with our new square bonded windows as part of their trademark new look. Lastly, worth noting is our Chill Cube Air Conditioner, which was designed by our talented HVAC team based out of Arizona to be the quietest AC in the North American market with the industry's highest capacity at 18,000 BTUs. Upon launch, we have seen immediate interest from many OEMs and this innovation will build on the market share we've been taking in this category over the last two years. Many people talk about innovation only to have their ideas end up as concepts in a showroom or a press release. We believe that real innovation like the newly launched products I just mentioned require that the new products make it into the vehicles, creating meaningful revenues and ultimately help improve the customers' experience. As we capture more content opportunities and as the wholesale shipments and mix normalize, we expect organic content growth to return to 3% to 5% on an annualized basis. The RVIA is projecting roughly 345,000 wholesale shipments in 2025 at the midpoint of its range, which should translate to over $100 million in additional sales for our business at current content numbers. Moving to aftermarket. Our aftermarket net sales were $231 million, flat versus prior year as strength in the automotive aftermarket was offset by some softness in the RV and marine aftermarkets. Operating profit for our aftermarket division was an outstanding 13.9% for the quarter. Our CURT family of products, which includes hitches, towing products and truck accessories continued to outperform, delivering a 7% increase in sales during the quarter and equaling 54% of our total aftermarket revenues, highlighting the impact of our diversification efforts. We are also driving aftermarket growth with our Camping World partnership through which we have upfitted over 10 Camping World RV parts retail stores since we acquired its furniture business and expanded our collaboration with its retail team this past May. Sales of Lippert products through the Camping World stores increased 47% in the quarter, and we expect our revenues here to grow as we work together to increase the selection of Lippert products, not only in those stores but also online and in an additional Camping World location. In addition, our Furrion suite of appliances, including ovens, hot water heaters, refrigerators, microwaves, furnaces and air conditioners continues to support aftermarket content growth through the upgrade repair and replacement cycle, contributing $47 million in just aftermarket revenues year-to-date, up 18% from a year ago. For example, Furrion's air conditioners, which have a high replacement rate are one of the top-selling products in the RV aftermarket. Our OEM sales of air conditioners and other products should set us up for direct replacement in the aftermarket once the repair cycle begins for an RV owner. As our OEM content increases on each product, the likelihood we get the aftermarket sale on those components should also increase. For example, in the first nine months of 2024 as compared to 2023, our air conditioner business is up 80%, which not only shows our ability to gain share on new OEM content, but we believe bodes very well for Furrion replacement air conditioners in the coming replacement and repair cycles. Turning to adjacent markets. Net sales decreased 11% to $256 million versus the prior year, almost entirely due to weak demand in marine, where dealers continue to right size inventory levels. International sales were down 9% due to high inventory and some extended OEM shutdowns. We are focused on aggressively expanding market share in the RV, marine and rail markets internationally using the same products and playbook that have made us the leader in North America. We are also working to launch appliances in the European caravan market in 2025, which will be a substantial category for us in Europe. Elsewhere in the adjacent markets, we are gaining market share in transportation and building product markets by introducing new products and offering what we believe to be superior service, product quality and on-time delivery. For example, we've leveraged our core competency in axle manufacturing to expand into the utility trailer market, supplying top brands like ATW's, Big Tex trailers and many others. Over the last couple of years, we have made meaningful headway as there are approximately 600,000 utility and cargo trailers built annually. We see significant growth potential for our axles here. And as we gain more share here, we plan to offer upgrades such as ABS and TCS that I mentioned earlier to these utility trailer suspension. As I've mentioned on prior calls, our window and glass products are also driving meaningful revenue in off-road vehicles as well as school and transit buses. We are also gaining more ground on a meaningful opportunity for residential windows, which are a different category than our legacy manufactured housing windows. We have grown this business by $20 million in just the last few years and are finding that more and more residential distributors and builders are having a great experience with our new entry-level vinyl window products. Moving on to capital allocation. Our operating performance and inventory management have driven meaningful operating cash generation of $402 million over the past 12 months, and we have reduced our leverage to 2x. We continue to evaluate M&A opportunities as they arise and our balance sheet positions us well on those opportunities in the RV, aftermarket, marine and transportation markets that we believe are right for us. We have had success in creating value by acquiring companies with experienced leadership teams, great products and significant growth opportunities and plan to continue to prioritize acquisitions with these criteria. As we do this, we believe that enhancing our product portfolio continues to allow us to widen our competitive moat. In addition to M&A, we plan to continue to use our balance sheet to fund innovation and operational improvements of the business in order to maximize the return of capital to our shareholders. Before I close, I'll touch base on a couple of cultural achievements for this quarter. At Lippert, we're committed to using business as a force for good, and this is reflected in how we engage with our co-workers, customers and communities. In August, we received the 2024 Community Impact Award from Culture of Good, recognizing our dedication to a healthy culture and solid corporate citizenship. We also earned the 5 Star AchieveWELL Award from the Wellness Council of Indiana, highlighting our focus on workplace wellness as a driver of engagement and performance. Lastly, we are proud to announce in October, we crossed the one millionth hour of community service our teams have given back to the communities where we live and work since we started our 100,000 hours a year of community service program in 2017. This year, 78% of our team members serve in at least one community service project, most of which were organized by our company's community impact team. We're proud of these milestones and remain committed to ensuring our team members have plenty of opportunity to serve with the fellow Lippert team members regularly in our communities. In closing, I'd like to thank our fantastic team members for their hard work this quarter. Guided by our experienced leadership team, we believe Lippert is poised for long-term success. Our expansive competitive moat is made up of our experienced group of leaders, our large product breadth and our ability to be flexible with so many products across hundreds of thousands of SKUs, not to mention our decades-long deep meaningful relationships with our customers and a solid understanding of our industries. The operational improvements and market share gains that we made in a difficult environment should position us well for when retail demand rebounds, and we remain confident that our continued focus on innovation, customer satisfaction and strategic acquisitions should help us capture a meaningful share of the industry growth going forward. We look forward to continuing our progress and delivering value to all of our stakeholders as we close out 2024. I will now turn to Lillian to give more color on our financial results.

Thank you, Jason. Our innovative portfolio and reputation for best-in-class quality and service drove share gains during the quarter, but revenue growth remains pressured as we navigate continued retail demand softness in the RV and marine market. Our consolidated net sales for the third quarter were $915 million, a decrease of 5% from the third quarter of 2023. OEM net sales for the third quarter of 2024 were $685 million, down 6% from the same period of 2023. RV OEM net sales for the third quarter of 2024 were $422 million, down 2% compared to the prior year period, led by a 22% decrease in motorhome wholesale shipments and an increasing mix shift towards lower content single-axle trailers. Year-to-date, wholesale units through Q3 2024 were 256,400, while year-to-date retail units were 286,600 units, signaling healthier dealer inventory reduction. These impacts were partially offset by an 11% increase in North American travel trailer and fifth-wheel wholesale shipments and overall market share gains. Specifically, we gained share in our top five RV product categories, appliances, awnings, chassis, furniture and windows year-to-date through September 30, 2024. Content per towable RV unit was $5,147, down marginally compared to the prior year period, while content per motorized unit was up slightly to $3,768. Content per towable RV unit was down primarily due to the shift in single axle trailers, which had less overall content. These trailers accounted for about 23% of production in Q3 2024 compared to the prior year of 18%. Typically, we would see a mix range of 16% to 19% for these units. Organic content increased 1%, both sequentially and year-over-year, supported by share gains we delivered in the top product categories we supply to RV OEMs, appliances, awnings, chassis, furniture and windows. Aftermarket net sales for the third quarter of 2024 were $231 million, in line with the same period in 2023, primarily driven by continued growth in the automotive aftermarket, partially offset by softness in the RV aftermarket, which has been negatively impacted by lower consumer discretionary spend. Adjacent Industries OEM net sales for the third quarter of 2024 were $262 million, down 12% year-over-year, primarily due to lower sales to North American marine and utility trailer OEMs. Marine sales were down 16% due to the impact of inflation and still high interest rates on retail demand. We expect softness in the marine industry to continue for the remainder of 2024 and into 2025 as well. During this quarter, the decline was partially offset by increased sales for building products as we continue expanding our footprint in this market by capturing demand for core products like windows and chassis for manufactured housing. International sales decreased 9% year-over-year. The decrease was primarily driven by softening of marine and RV markets, partially offset by strength in the rail market. As Jason noted, we continue to focus on introducing popular European products in North American markets such as window blinds and pop tops for the RV market. Gross margins were 24% compared to 22% in the prior year period, supported by decreased steel prices, lower inbound freight costs and the impact of material sourcing strategies we've implemented to lower input costs. Consolidated operating profit during the third quarter was $54 million or 5.9%, a 110-basis point improvement over the prior year period. Operating margin expansion was supported by operational improvements. I would also like to highlight the fact that our warranty costs reduced by $10 million during the quarter. Year-to-date, warranty costs have decreased by about $20 million compared to the prior year period. The operating profit margin of the OEM segment increased to 3.2% in the third quarter of 2024. This is compared to 1.5% for the same period of 2023. The aftermarket delivered a 13.9% operating profit, a 100-basis point contraction over the prior year period due to temporary mix shifts and heightened facility costs related to the investments we have made to expand capacity in the automotive aftermarket business. GAAP net income in the third quarter was $36 million or $1.39 earnings per diluted share compared to net income of $26 million or $1.02 earnings per diluted share in the prior year period. EBITDA in the third quarter was $85 million, an 8% increase compared to the prior year period. The variance between EBITDA and net income growth during the quarter was primarily related to a 37% decrease in interest expense over the prior year period, reflecting our lower levels of debt in 2024. Non-cash depreciation and amortization was $96 million for the 9 months ended September 30, 2024, while non-cash stock-based compensation expense was $14 million for the same period. We anticipate depreciation and amortization in the range of $125 million to $135 million during the full year of 2024. At September 30, 2024, our company's cash and cash equivalents balance was $161 million. This is compared to $66 million at December 31, 2023. For the 9 months ended September 30, 2024, cash provided by operating activities was $264 million with $31 million used for capital expenditures, $20 million used for acquisitions and $80 million returned to the shareholders in the form of dividends. On an LTM basis, cash flows provided by operations was $402 million. As of September 30, 2024, our net inventory balance was $705 million, down from $768 million at December 30, 2023, and $792 million at September 30, 2023. As I've stated before, this business is a strong generator of cash. At the end of the third quarter, we had outstanding net debt of $661 million, 2x pro forma EBITDA adjusted to include LTM EBITDA of acquired businesses and the impact of non-cash and other items as defined by our credit agreement. For the month of October, sales were down about 4% versus October 2023, primarily due to an approximate 3% year-over-year decrease in North American RV production and a 12% year-over-year decline in marine sales. We are maintaining our estimated full year wholesale shipment range of 315,000 to 325,000 units as lingering consumer demand headwinds continue to impact retail performance, which we expect to begin improving as additional interest rate reductions are made, lowering financing costs for consumers. As we think about Q4, we expect overall revenue to be down 4% to 5% year-over-year. We expect RV OEM sales to be fairly consistent with prior Q4 levels. We also expect operating margin to expand versus Q4 of last year and to come in at about 2%, which would be down from Q3, primarily related to lower sales and seasonality. We are projecting positive net income in Q4, along with continued positive net cash flow from operations. For the full year of 2024, capital expenditures are anticipated to be in the range of $35 million to $45 million. Looking ahead, we aim to continue to utilize our balance sheet to pursue strategic opportunities to help us capture profitable growth and deliver shareholder value while maintaining a long-term leverage target of 1.5x net debt to EBITDA. We continue to strengthen our financial profile by making consistent operational improvements to our business while capturing demand for our innovative products, which is resulting in market share expansion across the business. We expect to see industry recovery across the markets we serve over the next several years in addition to organic growth fueled by our market share expansion. We look forward to continuing this progress, driving sustained profitable growth as we advance towards our $5 billion revenue target in 2027. That is the end of our prepared remarks.

And our first question today comes from Fred Wightman from Wolfe Research. Fred, your line is open. Please go ahead.

Hey guys, good morning. Thanks for taking the question. Helpful to get the wholesale shipment outlook for next year, but I'm wondering if you could just help us with the mix components of that, and then maybe if it's relevant, the commodity headwinds as well, too?

When you say mix components, you're talking about just mix of the RV types?

Correct. Yes.

It's difficult to determine. As mentioned in our prepared comments, we believe that the mix should normalize a bit more. I'm not sure if it will return to the levels we saw a couple of years ago, specifically with single axle trailers making up 15% to 17% of towable units; that has now increased to over 20% in the last quarter. We expect it to decrease again, though it may not go back down to 15% to 17%. It should improve slightly from its current state. Regarding the wholesale outlook, we're projecting figures between 335 and 355, and we will refine that next quarter. I anticipate there will be a small single-digit increase, or possibly a high single-digit increase from this year.

And Fred, to your question in terms of the commodity pricing pass-throughs, we've been seeing that mitigate as we've gone through 2024 calendar year. We're still putting together our plans clearly for next year as we're in the budget season right now. But I would not expect pricing pass-throughs to be anything material as we're looking into next year as we really have mitigated that at this stage.

Definitely more stabilized.

Makes sense. And then I'm wondering just post-election, if you could remind us the import exposure that you guys have to China specifically and maybe how we should think about that potentially impacting COGS going forward?

Since 2020, we have taken steps to reduce our risk in China related to tariff activities. While China still represents a significant part of our expenses, it is considerably less than in the past. If tariffs are implemented again, we anticipate having a few months to prepare and will plan to move more operations to offshore locations in Asia, nearshoring, and bringing some production back to the U.S. For costs we cannot mitigate, we aim to pass those through. This is our strategy moving forward.

The next question comes from Craig Kennison from Baird. Craig, your line is open. Please go ahead.

Good morning. Thanks for taking my question. Just to follow up on Fred's topic there on tariffs. Are you able to share what your tariff tax was or has been in the last few years?

Craig, no, I don't have that in front of me. I can take that back and see if we can find something and follow up with you separately.

Good morning. Just to follow up on Fred's topic there on tariffs. Are you able to share what your tariff tax was or has been in the last few years?

And obviously, we're getting a lot of questions on it. And maybe I wanted just to ask you, Jason, whether in the context of tariffs, whether you feel like you have competition that might be more disadvantaged than you and if you look at it holistically, maybe there's a different perspective on it?

Yeah, I feel that way for sure around some of our product lines. I mean we obviously build a lot of products and even have products like chassis, which is the largest product line in the company for RV. Almost 100% of the components there are sourced domestically. So that's not an issue for some product lines. But, like I said a minute ago, we're de-risking out of China. We have been for several years, and several of our competitors are still firmly planted there. And that gives us a huge advantage because we're already out on some products like appliances and furniture and things like that, where we can continue to bolster some of our importing partners that are not in China specifically. Not to say that some of those other partners won't get tariff as well, but likely not as much as China.

And then maybe a big picture question. If I look prior to the pandemic shutdown, just looking at four or five years prior to that, your average EBITDA margin was in that 8% to 10% range, maybe 9%. What are the ingredients to getting you back to that level?

Yes, so I'll answer it a couple of different ways. I'm sure Lillian has a couple of thoughts on that as well. But, if you go back to 2018, 2019, we were much more heavily concentrated from an RV perspective there. So we've diversified the business significantly since that period of time, which has caused some of the added cost structure. We've got mature businesses there now. I think we've talked about that in the last couple of calls, our margins in those other businesses are starting to mature and become better and become additive to that double-digit margin that we've been shooting for. Then as soon as we've done so much cost work around the business, just cost structure work and putting ourselves in a great position for when we see this inflection point in the next couple of quarters in RV, it will start to really show up. But we feel we're going to get back to double-digit margins as soon as the business normalizes on the RV side specifically, and we kind of consider normalization of 400,000 to 425,000 unit wholesale range with RVs where it's kind of averaged over the last 10, 15 years.

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

Yes, good morning, Jason. Morning, Lillian. Thanks for taking the question. You mentioned, again, 335,000 to 355,000 wholesale units. Just wondering if you could talk a little bit about the cadence, you'd expect within that range kind of H1 versus H2? And then I appreciate the color on content. Do you think you can get back to 3% to 5% content growth in '25? Or will that be a little bit more dependent on mix and the level of entry-level single axle trailers over the next 12 months?

It definitely depends on the mix, Dan. A few days ago, my answer might have been different, but with the reduction in interest rates and improvements in inflation—both pending and current—I believe we've already seen a slowdown. The main factor now is consumer confidence, which appears to be better than we expected based on recent insights. Additionally, dealer lots are experiencing historically low inventory levels, which are quite diminished, and I think we're set for a restock. Overall, depending on the timing of this assessment, I feel much more confident today. It should happen sooner rather than later, likely within the next quarter or two. Hopefully, the second half of the year will be strong.

Very helpful. And then I know this is a crystal ball or maybe guidance in terms of a question, but solid operating margin improvement this quarter. Obviously, Q4 has a little bit less absorption. But when you put it together, exiting somewhere around 5% in terms of operating margin for '24. Given the outlook that you've kind of given for RV, how do we think about potential for what a margin uplift might look like in '25, let's say, marine is down modestly and RV is in that range that you described?

Yes. So as we think about next year, and as I mentioned, we are in the process of finalizing our budget at this point for next year. So we'll provide more color on our next call. But as I think about the progression from this year to next, there's a few different puts and takes. Clearly, we're expecting to see that continued modest growth and progression on the RV side of the business. When we think about the marine side of the business, it's probably going to be a little bit more tepid as we look towards the next year and a couple of other puts and takes within our adjacent businesses. That said, my expectation for the business would be a modest increase in terms of our margin and our profitability for next year just from the perspective of a couple of things. One, clearly, just with the revenue uplift, we get better fixed cost absorption with our facilities. We've talked about in the past, Dan, in terms of the consolidation of our footprint and more of the optimization. We're going to continue to work towards reducing some of the footprint which will also take some cost out of the system, continue focusing on some of the overhead costs to reduce as well. So really trying to attack it on several different fronts, first and foremost, being volume benefits and then also focusing on continuing to improve our costs as we move forward.

Yes. I want to emphasize the point about cost improvement. In Q4, we will provide updates on our cost structure based on the improvements we believe we can still achieve. For the past few years, especially in recent quarters, we have felt like we were at the lower end of the industry. However, we do believe that we are gaining momentum in improving our cost structure. Additionally, we have significant opportunities for market share in our top innovations and key product categories like chassis and windows. Overall, there is a potential market of over $0.5 billion in these categories, including ABS, TCS, leveling appliances, axles, and slide outs. This presents a substantial market share opportunity that we intend to pursue. Depending on how the product mix shapes up next year, this could provide a positive boost for us if the mix starts to normalize.

Really helpful. Last one, and I'll jump back. But you mentioned M&A. And obviously, with the significant cash generation we've seen over the last 12 months, leverage has come down nicely and hopefully, EBITDA is bottoming here. So it takes two to tango, but talk about the pipeline and your outlook for M&A over the next kind of six to 12 months relative to the last six to 12?

Yes. We've obviously been fairly inactive in the last couple of years just to preserve cash and do the right things and the smart things there. We have had a lot of conversations with a lot of different targets in the last several quarters. So hopefully starting to get closer on some things and definitely expect more activity to come about the next couple of quarters. But we're hoping that M&A is more active in the next calendar year than what we've seen this year, obviously. I feel good about it.

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

Hey guys, good morning. Maybe to start, just Lillian I think you had mentioned and Jason you had mentioned that organic content in the towable business was up about 1% and reported content was down 1%. Can you help us bridge the gap on what pricing, mix, some of the other M&A, some of the other variables might have contributed to the quarter?

Sure, Mike. I'd say the biggest contributor to the downward pressure this quarter is mix. As I mentioned in my prepared remarks, the percentage that we saw in the quarter for single-axle trailers came in at about 23%. Typically, we'd see anything from 17% to 19% is what we had seen historically. That headwind alone pressured the content number by about 3.5% in the quarter on a trailing 12-month basis. From an organic perspective, that was actually positive for us in the quarter again. It was up 1%. The commodity prices at this point, the pass-through really is pretty mitigated at this point. So really, what we're dealing with is predominantly that mix number that I was referring to, offsetting a good chunk of the organic growth that we're seeing. And as we think about the content on a go-forward basis, we'll start seeing in the fourth quarter more of a pickup on some of the innovative products that Jason has been talking about that we highlighted at the open house. We'll start seeing that organic content come up as we progress into the fourth quarter and then as we move into next year, again, presuming that production picks up as well. We will still need to be watching the mix number because I think that is going to continue to be a headwind as we move into 2025, as Jason was commenting on, but do feel good about the organic pickup at this point.

And just to kind of echo Lillian's comments on the single-axle trailers. I mean it's up 38% from last year. Camping World is a big driver of that unit. I mean they pushed a lot of those into the market to entice some first-time buyers, and it's been, I think, a good thing. But when you look at the content on those trailers versus what you would typically see in a travel trailer, the average travel trailer price is around $30-ish thousand today. And some of those are selling for $9,000 to $11,000. So you can just imagine the lack of content in a lot of those trailers. So they've given us some indication that the next couple of quarters are going to see some more normalized ordering patterns with trailers with more content.

Okay. That's helpful. And then just a follow-up. Lillian, I may have missed it, but did you cite what M&A added to the quarter?

In terms of sale?

Yes, yes.

In terms of consolidated sales... I did not, but it's pretty small. Again, to the comment that we made in terms of M&A, it's been pretty quiet the last couple of years. We only had the one acquisition earlier this year as it related to the Camping World Furniture business. So the sales related to M&A really, call it, single digits.

And then final question, just on CapEx. I noticed you pulled that down a little bit. Is that just a timing issue with some of those capital projects now falling in 2025?

I'd say part of it will be timing. I would expect CapEx to tick up next year. It's the cadence of the spend. And frankly, while we have been generating very strong cash flows throughout this year and last year, the team has been focused on focusing the spend on what's truly necessary from a maintenance perspective. Yes. So to that extent, I'd say we're spending where we need to spend, and it's more of a timing that we'll see that uptick a little bit more into next year.

The next question comes from Scott Stember from ROTH.

Jason, let's discuss the aftermarket. The business overall is performing as expected during these challenging times. How do you see this sector developing next year, particularly concerning RVs, especially if the attachment side of the business begins to stabilize and the brake repair segment is influenced by the wear and tear on the RVs that entered the market post-pandemic? I'm looking for insight into what to anticipate over the next year or two in that area.

Certainly. We expect to see continued growth in our automotive and truck accessory segment, similar to what we experienced last year, driven by favorable conditions. Regarding RVs, it’s important to note that about 1.5 million RVs that were produced between 2020 and 2022 will exit their warranty periods by 2025. This significant number presents many opportunities for customer pay as these vehicles age. Additionally, the 2023 and 2024 models are now entering their warranty phases, which should exert downward pressure on warranty costs compared to the high levels we witnessed during the peak production years of 2020 to 2022. This scenario is advantageous for our aftermarket business related to repair, replacement, and upgrades, as those 1.5 million RVs will soon be in the customer pay category, creating strong revenue opportunities for us.

Last question also on the aftermarket. When you guys were aggressively advancing this back in, I guess, three or four or five years ago, the narrative was that this business could be 2x on the margin versus the OEM business. Is that still the case? And would that suggest that the margins in aftermarket could go into the high teens, pushing 20%?

It depends on the mix. If you look at our automotive aftermarket margins, we've mentioned in previous quarters that they are lower, accounting for about 60% or 54% of our total aftermarket revenues. As long as we maintain that mix, it's unlikely to change significantly, but we can still expect good margins and great opportunities. As I mentioned, with units coming out of warranty and entering the customer pay cycle, we have a substantial opportunity in the next two to three years. We will begin to see the impact of this. Over the past ten years since we established the aftermarket division, we have proven our ability to operate this business effectively, and it is now established, allowing us to achieve strong margins.

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

Good morning. Good morning. Kind of trying to quantify a potential tariff impact. I think last year, you called out about 30% raw materials and components is imported. And then Jason, I think you said a was a significant amount from China. So does that mean north of like 15-ish-plus percent of raw materials and components imported from China? Or am I not thinking about that the right way?

I don't have the exact number right now, but it is much lower than it was in 2020. To consider the potential impact of tariffs, it’s important to note that we will likely have some time to respond. This could take a few months, similar to the previous situation. Last time, our margins didn’t really suffer because we took immediate action. We have been offshoring more production from China for a few years now, and we are also exploring nearshoring in the U.S. and bringing some manufacturing back home. We are actively considering all three options. I believe we will manage the tariff situation well. Additionally, we may choose to pass some of the costs onto customers, as we did during the last round of tariffs. Overall, we are well-prepared to navigate this challenge as we have gained valuable experience from the past.

Okay. So do you think you will proactively take some of those steps? Or just regarding tariffs, I believe.

Yes, we've already been doing that. Since we started the offshoring program in China a few years ago, we have actively continued this approach and set company goals to move products out of China. So, one way to look at it is that we are currently engaged in this process. We will provide more details on the specific actions once we have more information.

Yes. No more color would definitely be helpful considering how quickly I feel like things can change post the election. And then just really quick, with something like TCS, is that a '25 model year '25 benefit? Or is that really like a '26 and beyond story?

I think it's '25 and beyond. I mean we launched it this year, obviously, and we've got some really good brands on it. And that's really how you promote innovation and you really get a good return and quick return on innovation is getting the right brands on it quick. So we've got brands like Brinkley and Alliance, Grand Design. We've got the other majors looking at it, but we've got some really top-notch brands that are already using it today. So some of it depends on when they want to implement it, whether it's a model year change or a running change, but our goal is to put this product ABS and a couple of the others on steroids over the next couple of years with programs and really make it more of an industry standard.

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

Good morning. Thank you for taking my questions first. Just following up on Tristan's question. Globally, is 30% of your raw materials and components imported still the right way to think about the business heading into 2025? Or has that mix increased or decreased any just looking globally, not just China?

I don't know the right number, and we'll get back to you on that, Brandon, and Tristan, for that matter. But I would say that number is decreasing because of our initiatives to bring more either to North America or offshore Asia.

Okay. One of the mitigation efforts you mentioned was possibly passing those costs onto the consumer. Considering the current environment with a more price-conscious consumer and high interest rates, do you think that mitigation effort might face challenges given that pricing is so critical in the market right now?

Well, let me be clear. I mean that's our last priority is to pass it along. Our first priority is to find a way to mitigate it through finding new suppliers, whether they're in different countries or whether we're bringing the product back here and finding suppliers domestically or building the components domestically. But again, we always work with the OEMs, and it's a last resort to pass it along to the consumer, and it's usually a small portion of what the overall picture is going to look like once we find out what that picture actually is.

Okay. And just finally, I think in the press release, you had mentioned strong market share gains within the chassis market. Can you talk about maybe the market share gains you're seeing within chassis? It seemed like a couple of OEMs in the market had maybe gone to another supplier for certain products and even one had mentioned that maybe traditional suppliers needed to earn their business moving forward. So any color there on what strong means and maybe where your market share is today versus where it was at the end of last quarter, if possible?

Yes. I will provide a few examples. We are currently supplying 98% of Fifth Wheel manufacturers. These manufacturers are looking for more durable chassis foundations as users are spending more time in these units and taking them off-road. There is a strong demand from many OEMs and brands that produce Fifth Wheels for larger, more robust chassis. We have been actively working on this, which significantly increases our content as it involves adding more steel and other materials. We've also modified our slide-out mechanisms and integrated leveling systems into the chassis, as well as introduced new suspension options. These improvements will contribute to enhancing our market share. In response to whether we have lost some market share, it's true that each year brings some gains and losses. Over the past decade, while we might have lost a few brands annually, we've also acquired new ones. Overall, we've seen our chassis revenues improve year-to-date compared to the same period last year, despite some cost adjustments. Currently, we have the unique capability to offer a complete range of chassis types that other brands may not, from small travel trailers to large tow haulers, making us the only manufacturer capable of producing such a diverse lineup.

We have no further questions. So I'll turn the call back over to Jason for closing remarks.

All right. We appreciate everybody for tuning in today. We look forward to giving you more color on the next quarterly call in a couple of months. Thanks.

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