Yahoo Finance LCI Industries Inc (LCII) Q1 2024 Earnings Call Transcript Highlights: Strong Performance and ...
Revenue: $968 million, up 15% sequentially from Q4 2023.
Net Income: $36.5 million, significantly up from $7.3 million in Q1 2023.
Earnings Per Share (EPS): $1.44, compared to $0.29 in Q1 2023.
Gross Margin: Improved to 23.1% from 19.1% in the previous year.
Operating Profit: $58 million, a 390 basis point improvement year-over-year.
Aftermarket Segment Operating Margin: Strong at 11.8%, a 220 basis point increase from the previous year.
EBITDA: Increased 72% to $90.3 million.
Capital Expenditures: $9 million for the quarter.
Dividends: Returned $27 million to shareholders.
Debt Position: Net debt of $833 million, 2.5 times pro forma EBITDA.
Forecast: RV wholesale shipments estimated between 325,000 to 350,000 units for the full year.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
LCI Industries Inc (NYSE:LCII) reported strong profits and margin expansion in Q1 2024, driven by diversified businesses and disciplined operational execution.
Revenue for Q1 2024 was $968 million, up 15% sequentially, with significant contributions from the aftermarket segment and other adjacent markets.
LCI Industries Inc (NYSE:LCII) has diversified its business beyond North American RV OEMs, with 57% of total sales derived from businesses outside this segment, providing a buffer against RV industry cyclicality.
Operational improvements and cost reductions were achieved ahead of schedule, contributing to margin improvement and reduced input costs.
LCI Industries Inc (NYSE:LCII) continues to invest in automation and innovation, such as the new $65 million glass and acrylic processing center, enhancing production capabilities and competitive edge.
Negative Points
Despite overall revenue growth, the aftermarket net sales were down 3% for the same period in 2023, with flat performance in RV and marine businesses due to cautious inventory management by dealers.
North American adjacent markets saw a revenue decline of 17% in Q1 2024 compared to the previous year, primarily due to ongoing softness in the marine retail environment.
The content per towable RV and motorhome RV decreased from the previous year, primarily due to index pricing reductions.
Marine sales continued to decline significantly, with a 45% decrease in North American Marine OEM net sales in Q1 2024, impacted by inflation and rising interest rates affecting retail consumers.
LCI Industries Inc (NYSE:LCII) faces challenges in the RV OEM market, with expectations of motorhomes being a drag on industry wholesale for the next 12 months and a potential softening in totals after July.
Q & A Highlights
Q: Can you give us an update on what you're hearing from OEMs and dealers regarding retail demand? And then you made some comments about the spring selling season. So are you able to give us an indication and where that demand is trending on a year-over-year basis? A: Jason Lippert - LCI Industries - President, Chief Executive Officer, Director, Chief Executive Officer of Lippert Components: Yes. So obviously, with retail sales just coming out, just and we, you know, we felt those were down again from here for the for the month of March, it was reported, but we still feel comfortable that the retail and this kind of corresponds to what I think some of the other industry players have said recently, but 325,000 to 350,000 on retail as well. And we don't see any reason that we're not going to get there. Obviously, if interest rates lower sooner. I think we will get there quicker, but I think I think we feel comfortable with the 325,000 to 350,000 number and retail is happening out there but there's probably some people sitting on the sidelines because they're just waiting for interest. Interest rates have dropped.
Q: On RV and marine, I know you mentioned some marine softness and you expected, you know that to abate kind of in the back half of the year or get a little easier as the comps get easier. So beyond 2024, when do you think we can get back to your more typical 3% to 5% annual content growth specifically? A: Jason Lippert - LCI Industries - President, Chief Executive Officer, Director, Chief Executive Officer of Lippert Components: Yes, again, I think it depends on when retail start to kick in wholesale into gear again, and I talked to a couple of the key both CEO. is just yesterday and dealer inventories are down a pretty good compared to where they have been in the past. So, I think it's just a matter of retail kicking up and pushing things forward. But like we said in our comments, prepared comments, that and sequentially we start getting better in the back half of the year or comps could get better in the back half of the year, starting in June when things really started to fall off last year and the beginning of the summer.
Q: Hey, guys.Good morning. Jason, you gave some some color on how you see towable shipment cadence in the back half of the year. I think you talked about a pickup in July and then maybe some moderation beyond that. I assume that's just the model year changeover, but can you give a little bit more detail on how you see that driving? A: Jason Lippert - LCI Industries - President, Chief Executive Officer, Director, Chief Executive Officer of Lippert Components: Yeah, I mean, we're obviously, we're obviously some seem to wholesale pickup in the spring here. Dealers need inventory to sell through, but they just appear to be bringing on just what they need and don't see that picking up until you know, their rate situation gets better, and the rate situation gets better for the retail consumer. So, and again, we feel we came out last, you know, quarter four and stated that in October that that we felt 325,000 at 350,000 was the number, and that appears to continue to be right where things are headed. So yes, but what I can say in that.
Q: Good morning and thanks for taking my questions. Lilly and maybe on the margin side, 23% very impressive. And you said that the second quarter would be sequentially higher. And I guess just trying to get a sense of how much stickiness is here and given all the puts and takes and particularly with content and also on the operating margin line, you have some visibility of where you think the range could be for the full year. A: Lillian Etzkorn - LCI Industries - Independent Director: And yes, hey, good morning, Scott. Thanks for the questions. So very pleased with the performance this quarter.As I mentioned, we achieved some of the margin expansion a little bit earlier in the year than we originally anticipated. And that was due to the lower material and freight costs and also some nice improvement on the warranty, the warranty line as well. So when I when I think through the cadence of the year, in particular for second quarter, that does tend to be our seasonally high quarter in large part because of our diversified businesses, specifically aftermarket. That tends to be the high quarter for aftermarket. So specifically from a margin perspective, I would expect the margins to improve slightly as we move into the second quarter. Just from a drop-through of volume on just to get a little bit more color on that from an overall revenue perspective sequentially, I would see second quarter up about 10% in total and led by aftermarket at about a 20% sequential improvement. So where that would land us from a margin perspective in the quarter on the gross margin line is about 24% when I think through the drop through incrementals, we previously shared in our prior call, for the full year, overall operating income margins to be in the low single digits there's nothing that I'm seeing from our estimates for the year to move from that is still feel very comfortable with with that from an overall full year perspective. But just again, trying to provide a little bit more color for the second quarter, if that's helpful.
Q: Hey, good morning, guys and maybe just to start off, Lilly interested the on the towable content year over year, it was down about 13% in the quarter. And I think you said organic volume, if I heard you correctly, was up 1.5 or so could you just give us the breakout of price in M&A and organic as you usually do? A: Lillian Etzkorn - LCI Industries - Independent Director: Yeah, I'd say the biggest driver again, as we've been talking the past couple of quarters has been that index pricing adjustment that was in the low double digits this quarter. Again, that's going to continue to abate. That's gradually has been coming down in the prior quarters. When we move into Q2 on a trailing 12-month basis, that will be down into the, call it the mid single digits at that point. So really the two biggest drivers there. It's the index pricing pass through of about, call it 10%-ish 11%. And then we have the goodness on the organic growth of 1.5%, 1.6%. And that also as we continue to go through 2024 in the next few quarters, you'll see that continue to increase on. If you recall, overall, our expectation is typically 3% to 5% of organic growth in any given year. and obviously, that varies in a year. And but overall, that's
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
