LCI INDUSTRIES

QUESTION AND ANSWER SECTION

Operator: Thank you. [Operator Instructions] The first question comes from Daniel Moore of CJS Securities. Your line is now open. Please go ahead.

<Q – Dan Moore – CJS Securities, Inc.>: Thank you. Jason, Lillian, thanks for the color. Congrats on the solid results.

<A – Jason Lippert – LCI Industries>: Thanks, Dan.

<Q – Dan Moore – CJS Securities, Inc.>: Want to maybe just parse out – good morning. So, in the quarter, adjusted operating margins rebounded quite a bit faster than expected. Can you maybe bucket or just rank order those improvements between leverage to higher volumes, optimization, mix? And I’m wondering if maybe tariffs didn’t have quite as much of an impact as expected as well.

<A – Lillian Etzkorn – LCI Industries>: Yeah. So, with that, Dan – so, I’ll start actually with the end of your question first. I’d say, from the tariff perspective, things continue to progress through the year as we had expected. And frankly, as we were foreshadowing previously, the team has done a really solid job of mitigating the tariff impact to the business, both from the resourcing, working with our vendors for options there to help drive the cost down, and then, to the extent that we needed to, we’ve been negotiating with our customers to pass along pricing. So, that definitely helped the results that we were able to effectively mitigate the tariffs.

Clearly, we saw the volume uplift. We’ve been seeing the strength in the industries, and I say that broadly, not just the RV, but also strength in other industries as we’ve been moving through the quarter. And that definitely helped. And you saw as well on the RV side of the business, the content expansion as our newer products continue to be very well-received and as we’re going through the model changeover and through Open House, we’ve continued to be very successful in penetrating market share with those products.

<A – Jason Lippert – LCI Industries>: And Dan, productivity was a huge boost, too. I’ll just give you a quick example. I think we’re down 50 team members year-to-date from the beginning of the year. And with all the acquisitions, especially the two large ones we did, we’ve added 1,000 people there. So, to be up 1,000 with acquisitions, but down net 50 for the year kind of shows you the productivity gains we’ve experienced through some of the footprint optimization or the productivity initiatives we’ve been working on.

<Q – Dan Moore – CJS Securities, Inc.>: Really helpful. I wanted to clarify the Q4 outlook. Revenue up mid-teens. Can you maybe break that down by end market a little bit. Obviously, the little bit better outlook in RV is helpful. And then, on the margin side, you mentioned similar improvements year-over-year. I’m assuming that’s about 150 basis points adjusted, putting us in the 4% range. Just want to make sure I’m understanding your thoughts on Q4 margin profile, Lillian? Thank you.

<A – Lillian Etzkorn – LCI Industries>: Sure. So, yeah, I think you’re getting to the right zip code with that in terms of that year-over-year margin expansion. In terms of more specific market clarity, I guess, the best way to characterize that without getting into specific numbers, we expect to see continued strength in the RV industry as we’re going through the fourth quarter. We’re seeing continued strength, as Jason was commenting about in his comments, around the mix of product having less of the single-axle units and more of the fifth wheels coming through is definitely beneficial as well from a top line perspective and for the business.

Also, keep in mind, as we look at the fourth quarter, that does tend to be a seasonally low time period for some parts of our business, specifically aftermarket. That’s a light quarter for us. And as well for international tends to be a little bit light, too.

<A – Jason Lippert – LCI Industries>: It appears that volume lift and productivity gains will help, as we’ve mentioned. It doesn’t appear that there’s any downtime that would be more than normal. I mean, everybody’s taking off kind of normal off times during the seasonality holidays. So, I think those are the biggies.

<Q – Dan Moore – CJS Securities, Inc.>: Really helpful. And appreciate the color on the margin uplift from the some of the divestitures and optimization steps that you continue to take. You generated a $20 million gain in the quarter. You’ve got two more facilities consolidations this year, 8 to 10 next year. Are there any sense for the potential proceeds and/or gains from those sales? I know they’re onetime, but it could be a nice cash benefit.

<A – Jason Lippert – LCI Industries>: Look, some of the facilities are leased there, some of them are owned. So, to the extent we can, we’re going to bleed out of a facility and not use it for something else. Then we’ll certainly look to put those on the market. So, there’ll be probably a couple of those, but we don’t have any dollars attached to those yet till we get that done. But we definitely have significant momentum in that category as we continue to really drive hard to consolidate and simplify the business.

<Q – Dan Moore – CJS Securities, Inc.>: Absolutely. Last, appreciate the outlook for kind of the RV wholesale shipments, preliminary look for 2026. Do you have kind of a similar outlook for marine at this stage?

<A – Lillian Etzkorn – LCI Industries>: At this stage, Dan, we don’t. I think when we come out with the fourth quarter results, we’ll have a more comprehensive outlook for next year.

<A – Jason Lippert – LCI Industries>: And our big opportunity marine right now is just content growth through some of the innovation we’ve launched here in the last couple of quarters.

<Q – Dan Moore – CJS Securities, Inc.>: Got it. All right. Well, hopefully all of the share gains that we’re seeing come through put some of that chatter to rest. Appreciate all the color, and I’ll circle back for any follow-ups.

<A – Jason Lippert – LCI Industries>: Thank you.

Operator: Thank you. The next question comes from Joe Altobello of Raymond James. Your line is now open. Please go ahead.

<Q – Joe Altobello – Raymond James & Associates, Inc.>: Thanks. Hey, guys. Good morning. I guess, first question on the industry outlook, you mentioned wholesale looks to be up modestly next year. Would you also expect retail to be up next year?

<A – Jason Lippert – LCI Industries>: I think we’re kind of expecting for them to kind of stay in line as they have in the last couple years. We’re not forecasting any kind of big jump in retail at this point.

<Q – Joe Altobello – Raymond James & Associates, Inc.>: Okay. Got it. And then just in terms of the quarter, the 13% revenue growth, could you parse out how much of that was pricing related?

<A – Lillian Etzkorn – LCI Industries>: So, we haven’t parsed it out specifically on that, Joe. There is pricing elements to that, but it’s also the overall volume uplift as well, and the acquisitions, as we identified, the $42 million.

<Q – Joe Altobello – Raymond James & Associates, Inc.>: Okay. And maybe one last one for me. You talked about the mix improving, and I know this time of year with the model year changeover, you usually see a little bit of a richer mix of larger units. Are you seeing an improvement beyond what you would expect normally from a seasonal perspective?

<A – Jason Lippert – LCI Industries>: Well, I’d say that the mix to single-axle trailers has changed significantly over the last – it’s been in process for the last eight years or so. But I think what we’ve seen is the momentum slow down and start to retreat the other way, a meaningful way quarter-to-quarter. So, it could change next year. It could go back up a little bit. But our expectation is that it’s going to kind of stick around where it’s at with all the conversations we’ve had with the dealer – the dealers, they’re are driving – seeing a lot of this retail activity. There’s a lot of those units out in the market. So, that, I think, is one of the things that’s going to hold that number down. You can only sell so many of those. So, that’s the short answer, Joe.

<Q – Joe Altobello – Raymond James & Associates, Inc.>: Okay. Super. Thank you, guys.

<A – Jason Lippert – LCI Industries>: Thanks.

Operator: The next question comes from Scott Stember of ROTH Capital. Your line is now open. Please go ahead.

<Q – Scott Stember – ROTH Capital Partners LLC>: Hi. Good morning. Thanks for taking my questions and congrats on the very strong results as well.

<A – Jason Lippert – LCI Industries>: Good morning. Thanks.

<Q – Scott Stember – ROTH Capital Partners LLC>: I just want to square something away with what the largest dealer indicated on their conference call yesterday, pretty much saying that they’re starting to see some elasticity issues, particularly given some of the price increases that have been put through, I guess, related to tariffs. Have you seen any change or any commentary from your OEM customers of any potential change in behavior, suggesting that maybe they want to pull back a little bit? Or is the comments we heard yesterday probably just more episodic or related to that dealer?

<A – Jason Lippert – LCI Industries>: Yeah. I think it a little bit of the latter. The last comment you made, I think some of that might be there, but there’s definitely overall price sensitivity in the market around how much RVs have gone up. And it’s really – there’s a few things going on. I think what’s going to drive volume next year a little bit is the fact that suppliers, OEMs, they’ve reduced capacity, so there’s less capacity. If dealers want to get to have product in their lots for the spring selling season, they have to think about ordering a little bit differently and a little bit further ahead, because some of that capacity is restricted.

And then, Camping World, they don’t supply, I guess, every single OEM. I mean, there’s winners and losers out there in terms of the brands. The good thing about Lippert and our whole strategy, we supply the whole market. So, when you look at the Forest Rivers and the Brinkleys and the Alliances, we’re supplying a lot of content to those brands. So, when I look at those types of comments you’re making, I talk to a lot of dealers, not just Camping World, and that’s kind of how we’re coming up with our assumptions for the next year. There’s a lot of positives out there.

<Q – Scott Stember – ROTH Capital Partners LLC>: Got it. Awesome. And maybe talking about, I guess, one of the bigger components that you have to put price increases through for was steel and aluminum. And in the past, there’s usually been a timing delay of when you get those prices through. It seems as if you were pretty successful in getting those through. I just want to see how this time – if it is different than the last time that we saw steel and aluminum prices running up.

<A – Jason Lippert – LCI Industries>: Yeah. Nothing’s really changed there. I mean, those two commodities are the largest components of our BOMs, at least on the RV side. And they are all controlled largely by these indexes. So, right now steel’s a good guy and aluminum is a bad guy. Aluminum pricing is going to be going up here for the next couple of quarters and steel pricing starting to come down, so there’ll be a little bit of offset there. There were some tariff announcements this morning that there’ll be some favorability. Hopefully, we don’t have timing on that yet, as it was just announced here in the last 24 hours.

So, I think the big headline for cost next year is the fact that tariffs seem to be at least settled in place, where things are predictable and we can start working on cost better and we’re going to work with our OEMs the best we can and the discipline that they’ve had to get to real production back to make sure that we’re getting them the best we can for costs. And as they redo bill of materials and re-content and de-content, that we’re a bigger part of the solution as possible.

<Q – Scott Stember – ROTH Capital Partners LLC>: Got it. And last one for me on the Aftermarket, very strong results, very resilient. I know you have a lot of traction from previous OEM introductions that you’re working into the aftermarket, but just trying to get a sense of a breakdown in the business between Curt the automotive side and the RV side. Is there a big difference in growth between the two right now?

<A – Jason Lippert – LCI Industries>: So, the RV aftermarket for us has grown sequentially almost since we’ve started it 10 years ago – a little over 10 years ago. The repair and the replacement service business is growing always for us, because we’re always putting more content in the RV. So, I’ll go back to the example I used in my opening remarks of, we launched air conditioner – we’ve launched a lot of products in the last five years, but we launched air conditioners a few years ago.

I think I said in 2022, we had maybe 5% of the total OEM content, but we had no aftermarket business in ACs. And today, if you fast forward, we’ve got probably 50% market share OEM, which is fantastic. But now we’re seeing close to – we’ll see close to $20 million AC aftermarket business this year.

So, again, the point is that when we launch new products, for most of the products we launch, there’s a meaningful aftermarket once we penetrate the OEM business. So, we expect the aftermarket business to continue to grow, especially with the tsunami of units that were built in 2020-2022 that are going to start hitting the repair and replacement cycle here in the next couple years.

And on the auto side, we’ve had a lot of great success against our largest competitor, who used to be Horizon Global, went to First Brands, and if you’ve read anything about First Brands in the last month, they’ve got some serious issues. So, our largest competitor, we’re already starting to make some huge inroads here recently just because there’s a lot of uncertainty around whether that business is going to continue to exist and who’s going to own it. You look at the brands they have, like REESE and Fulton and BULLDOG – I mean, CURT’s their largest competitor. So, we’ve got some significant upside on that part of our business as it relates to the auto hitch and trailering components. So, hopefully that’s helpful, Scott.

<Q – Scott Stember – ROTH Capital Partners LLC>: No, no, that’s great. Great. Thank you so much.

<A – Jason Lippert – LCI Industries>: Yes.

Operator: Thank you. The next question comes from Tristan Thomas of BMO. Your line is now open. Please go ahead.

<Q – Tristan Thomas-Martin – BMO Capital Markets Corp.>: Hey, good morning.

<A – Jason Lippert – LCI Industries>: Hey.

<Q – Tristan Thomas-Martin – BMO Capital Markets Corp.>: Can I just confirm, I think you said [ph] $2 million (00:36:25) from acquisition in the quarter. And then, have you quantified what you expect Bigfoot to contribute on an annual basis?

<A – Jason Lippert – LCI Industries>: We have not. It’s smaller. I mean, Moss and Bigfoot are less than $25 million combined. And then, for the quarter on acquisitions was...

<A – Lillian Etzkorn – LCI Industries>: $42 million total.

<A – Jason Lippert – LCI Industries>: $42 million?

<A – Lillian Etzkorn – LCI Industries>: Yes.

<A – Jason Lippert – LCI Industries>: Yeah.

<Q – Tristan Thomas-Martin – BMO Capital Markets Corp.>: Okay. Great. And then, for next year, how are you thinking about kind of the annualized tariff impact, either on a gross or net basis or maybe both?

<A – Lillian Etzkorn – LCI Industries>: I think as we think about the tariffs for next year, really in terms of what we would expect is really a continuation of this year in terms of that mitigation. We’ve got the actions in place so that they’re not impactful. So, again, assuming that there’s no changes with the global tariffs and they seem to have stabilized, I’d expect that we continue to have that full mitigation that we do presently going into next year.

<A – Jason Lippert – LCI Industries>: Should be a lot easier.

<Q – Tristan Thomas-Martin – BMO Capital Markets Corp.>: Okay. And just one last question, how long do you think it’s going to take to kind of get that single-axle versus multi-axle and fifth wheel mix kind of back to that, call it, 84-ish percent range? Thank you.

<A – Jason Lippert – LCI Industries>: It’s hard to say. Camping World is doing a great job pushing that product in the market. They’re the single largest producer of that type of trailer. The strategy is to get more first-time buyers in the RV lifestyle because of the price point entry on that of less than $12,000 in a lot of cases.

So, it’s really hard to say, Tristan, but our expectation is that it will normalize. It won’t go back to where it was probably 10 years ago. But we think it has a good chance of getting back into that 16% range, especially as all the people that have bought that type of unit over the last five years decide, whatever portion of them decide to re-up and buy another RV, they’re going to buy a bigger one.

<Q – Tristan Thomas-Martin – BMO Capital Markets Corp.>: Great. Thank you.

<A – Jason Lippert – LCI Industries>: Yes.

Operator: Thank you. [Operator Instructions] The next question comes from Bret Jordan of Jefferies. Your line is now open. Please go ahead.

<Q – CJ Dipollino – Jefferies LLC>: Hey, good morning. This is CJ Dipollino on for Bret Jordan. Thanks for taking our questions.

<A – Jason Lippert – LCI Industries>: Good morning.

<Q – CJ Dipollino – Jefferies LLC>: I wanted to circle back to dealers real quick. Could you just give us any color into dealer sentiment and any insight into the probable timing of the restocking cycle as we move into the new year?

<A – Jason Lippert – LCI Industries>: Yeah. I mean, like I said earlier, we talked to a lot of the big dealers just to try to get a feel for where everybody is at, because all the dealers have a little bit different strategy and they play in different markets. And I would just say that there is a sentiment that inventories are low. The OEMs have had good discipline, like I said earlier. That’s helped keep inventories low. The dealers have been just not ordering a ton of inventory.

But again, like I said, it’s not just us that have simplified our footprint and optimized. I mean, a lot of suppliers and OEMs have. So, the capacity is less in the industry today. And I think that the dealers know that and they’re being – they’ve got to be a little bit cautious on how they look at restocking and not trying to get inventories too low, because they’re not going to able to get the product when people need it for spring selling season.

So, I think that’s why we’re seeing a little bit of this. And again, our forecast is very modest for next year, 345,000 to 360,000 is not a huge lift. But every 5,000 units that get added to the wholesale production is a really big deal for us considering our content of $5,400. And the innovation that’s coming.

<Q – CJ Dipollino – Jefferies LLC>: Okay, great. Thank you. And then, could you just comment on trends in contenting that you’re seeing? More specifically, just want to see if the de-contenting of the RVs has started to stabilize.

<A – Jason Lippert – LCI Industries>: I feel it has. And again, I’ve always said that we’re a little immune to that just from the standpoint that we tend to have a lot of the products that customers need to differentiate their products from others. And those would be things like the Chill Cube air conditioner that we’ve talked about, the bus style square window that we’ve launched in the last year-and-a-half with the different colors and the exteriors, TCS and ABS, and things like that. They tend not to de-content those things. So, the biggest thing that hurts us is mix when it comes to de-contenting. It’s just – the biggest negative in content for us would be a mix shift. But like I said, we’re seeing a shift to the positive at this point in time.

And just another anecdotal thing I was thinking about with the dealers, I was talking to a dealer the other day and they’re a multi-site dealer. Their most popular floor plan they had of what they sell, they had six on the ground, which doesn’t lend itself to good sales for the dealers if they don’t have really popular floor plans in the right geography. So, I think that that’s another reason we’re seeing a little bit of positivity out there from some of the dealers that we’re talking to.

<Q – CJ Dipollino – Jefferies LLC>: Okay, great. Got it. Thank you. That’s very helpful. That’s all from us.

Operator: We currently have no further questions. I’d like to hand back to Jason for any final remarks.

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