LCI INDUSTRIES

QUESTION AND ANSWER SECTION

Operator: We will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Dan Moore with CJS Securities. Your line is now open. Please go ahead.

Hi. Good morning. It's Pete Lukas for Dan. Just looking at your revised outlook of approximately flat for RV demand and shipments next year, what gives you the confidence that this year is the bottom and how are you thinking about potential for upside or downside to those projections? In other words, is the risk skewed higher or lower in your view?

That's a good question, Pete. Being in this industry for 35 years, I've seen the cycles. And one of the ways that we really gauge it is listening to our customers and listening to the dealers on the RV side, and hearing directly from them what they're doing in order to manage the business. And one of the things I can tell you is that we've been really happy with what we've heard from dealers in terms of their inventory that they have in stock. We think that our OEMs have done an outstanding job of managing inventory with their dealer partners.

And so as we look at this, what we see today and what we feel in the market by watching the numbers, we feel good about this range that we're putting out today. And it's year after year in doing this, I understand that we can only make decisions off of the data that we have in front of us today. We continue to prepare. And as you see with the impact that we've delivered on the OI side and being up 100 bps for this quarter again and consistent with this year, we've managed to those expectations or the realities that come even if we were a little bit below plan for wholesale production this year.

Hey, Pete, it's Lillian. Just to clarify, because I think when you started the question, you were referring to our outlook for 2027. The outlook that we put out there for wholesales reflects 2026. We'll provide more details for the 2027 outlook for wholesales and retail when we do our fourth quarter call, just to be clear on that.

Very helpful. Thanks. And then just last one for me. Can you talk about your expectations for organic content growth in both RV and marine over the next several quarters?

Our customers continue to choose us. We see that in meeting after meeting that our sales and ops teams work closely with our customers. And so we're confident of what we saw this year in the 6% increase on the RV side and great results as well on the marine side with them choosing us. And so we feel really good about that. And our good, better, best product offering is one of the things that is really a great process that we've worked together with really creating innovation and new products for our customers that fall into those good, better, best categories, where they can choose and decide what works better for their various price points that they offer. So we have good confidence in that.

Great. Thanks. I'll jump back in the queue.

Operator: Your next question comes from the line of Craig Kennison with Baird. Your line is now open. Please go ahead.

Hey, good morning. Thanks for taking my questions as well. Wanted to follow up on the content per unit trend. I think in towables, it was up 6%. And there was also a note on a shift towards more single axle trailers, if I'm not mistaken. So curious if you could sort of reconcile that trend, and I'll have a follow-up.

Thank you, Craig, for the question. Quite simply, we've seen consistency on that trend on the single axle and expect to see more of that for into next year.

Thanks. And just thinking about the content per unit growth in the context of the merger, I know you're limited in what you can say, but have you seen any behavior shift among your OEM partners who are saying maybe it's an important time for them to diversify to protect their strategic interests?

I would say that our OEM partners have asked all of the right questions, and we've really appreciated the opportunity to engage with them. And our teams developed such close relationships with our customers that we've really had good open dialog. And what we've heard is that they are wanting to see the statements that we've made in terms of what we believe that we can do for affordability for the industry and what we can do together with this merger, that they're looking forward to seeing us do that. I believe that they have confidence that we can, but, of course, for them, they need to see the proof of that. And that's what we're here to do as this merger gets to a close and deliver that to them.

Thank you.

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

Good morning, and thanks for taking my questions as well. Just focusing on the cost cutting and facility rationalization process, which has had a great impact on your margins. In past quarters, you've given an update of how many facilities have been consolidated and just basically giving us a line of sight of how long that will positively benefit margins. Can you potentially do that? And the other part of that, to the extent that you can talk, is if the merger does take place, does the narrative or the line of thinking for some of those consolidations change?

So great question, Scott, and thank you for asking that. So we remain on pace and on target for the 8 to 10 facility consolidations that we talked about. And right now, in Q4, we're in the heat of that in this quarter, wrapping those up into Q1. And so we have been on target for that throughout the year in the planning and feel really good about where we are and being on pace for that.

I would tell you as well that at Ranch Hand, that facility consolidation in Texas is going into a new facility that's absolutely amazing. This new facility will increase our capacity by about 2.5 times. And we currently are going into that facility with 20 weeks of backlog, which this is going to help us very strongly by that, and we'll have that consolidation move completely finished and up and running fully by the end of the year.

And as you said about, with the merger and what's ahead, it really creates more opportunity for footprint optimization. It does not impact negatively in any way all that we have planned because we've done a lot over the last 12 months. We still have, in this next quarter, the final execution of the 8 to 10 that are in play, but the merger, it creates a wide open field for more opportunity for footprint optimization.

Got it. And then just on the aftermarket, last question. Lillian, you made some comments. It sounds like the CURT side of the business probably did a little better, but could you parse out the legacy pure RV side versus CURT?

Yeah. Good morning, Scott. Thanks for joining. So I'd say, really across the aftermarket business, the team performed quite well. We highlighted the towables and the CURT side just because we have been seen exceptional growth there, and it also leads into the strength that Johnny was just talking about in terms of the strategy with Ranch Hand and opening the new facility. But on the OEM aftermarket side, we are still seeing nice growth there and penetration. We've talked in the past around the addressable market. And as we've increased the content over the past several years, as those units are now coming into the service and repair cycle, we have the opportunity to capture those sales, the business, and to support the customers as they continue to enjoy and utilize their RV going forward.

Got it. That's all I have. Thank you.

Thanks, Scott

Operator: Your next question comes from the line of Tristan Thomas-Martin with BMO Capital Markets. Your line is now open. Please go ahead.

Hey. Good morning.

Good morning, Tristan

Johnny, I think you referenced good, better, best product offerings. Which of those buckets are your customers favoring as they start to think about model year 2028.

It's in the good range. [ph] They are (00:25:48) continuing to look for affordability and value to the customers right now, so those goods stand out.

Okay. Thank you. And then just on the kind of the ongoing cost inflation, how are you thinking about that? And then how should we think about kind of the index pricing puts and takes in 4Q and maybe early into next year? Thank you.

Sure.

Go ahead. You start, I'll jump in after.

Perfect. So Tristan, as you know, with the commodities, most of that is on an index-based pricing. So that continues and that specifically addresses steel and aluminum. If you recall, there's a little bit of a lag on some of that, maybe up to one to two quarters in terms of being able to pass that through. And I should note, it passes through both if costs go up and the prices reduce as commodities come down, which hopefully they will at some point. I mean, clearly, at this stage, we're not seeing that relief, but the index pricing does work both ways.

And Tristan, I want to add to that. I meet twice a week with our Chief Supply Chain Officer, Scott Meiner, who just does an outstanding job. Yesterday, we had in-depth conversations about steel and aluminum and the work that our team is doing to continue to look to bring procurement value to our customers. The commitment that he has – and it is, it's a tough market right now in steel and aluminum. And so he's working hard to mitigate, especially on the conversion costs that we see. And so he's doing a really nice job on that. He and his team, we're super proud of.

And so that's something that we continue to focus on and look to work with our customers the best way possible. And when you look at the improvement that we've seen in operating margin this year, again, procurement has been a big part of that in terms of helping to us to be able to mitigate some of the price off to our customers as well as ensuring that we're doing the best job procuring the products and working to drive our margin in those positions as well.

Got it. Thank you.

Operator: There are no further questions at this time. I will now turn the call back to Johnny Sirpilla for closing remarks.

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