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Q1 2024 LCI Industries Earnings Call

Participants

Lillian Etzkorn; Independent Director; LCI Industries

Jason Lippert; President, Chief Executive Officer, Director, Chief Executive Officer of Lippert Components; LCI Industries

Frederick Wightman; Analyst; Wolfe Research

Scott Stember; Analyst; ROTH MKM Partners

Michael Swartz; Analyst; Truist Securities,

Brandon Rollé; Analyst; D.A. Davidson

Presentation

Operator

Hello, everyone, and welcome to the LCI First Quarter Earnings Call. My name is Emily, and I'll be moderating your poll today. (Operator Instructions).
I'll now turn the call over to our host, Ms. Lillian Etzkorn, to begin, please go ahead.

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Lillian Etzkorn

Good morning, everyone, and welcome to the LCI Industries first quarter 2024 conference call. I am joined on the call today with Jason Lippert, President and CEO, along with advertiser, the VP of Finance and Treasurer, 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.
And with that, I would like to turn the call over to Jason.

Jason Lippert

Thanks, Lillian, and good morning. I'd like to welcome everyone to our first quarter 2024 earnings call. We have started off the year exceeding expectations with strong profits and margin expansion in the first quarter, driven almost entirely by the continued strength in our diversified businesses and our disciplined operational execution. It is important to emphasize that Liberty is fundamentally much more than just a supplier to our VOEM.s, thanks to our strategic execution around diversification over the last decade, a global expansion of Liberte brand into growing markets like transportation, building products, automotive, marine and RV aftermarkets, manufactured housing, Europe and other adjacencies. It's been a key boosted performance in recent years, helping mitigate the cyclical impact that the RV industry can have.
For Q1 2024, we delivered $968 million in revenue, up 15% sequentially. Our aftermarket segment led the way with solid operating margins of 11.8%, along with other parts of our adjacent markets. While our RV OEM business is improving from prior quarters to date, we are tracking to the $200 million of organic growth increase across our business that we announced last quarter.
In the first quarter of 2024 or 57% of our total sales were derived from our businesses outside of North American RVOE. And even with the significant growth we have already achieved in these markets, we still have an extensive runway with over $11 billion of combined total addressable growth opportunities ahead of us of our addressable growth opportunities. We estimate over $5 billion of potential in aftermarket and over $4 billion in combined international and adjacent markets.
Given U.S. runway and backed by a solid balance sheet, we plan to continue to seek out and invest in more organic growth as well as strategic opportunities to further diversify our business. Additionally, we continued to execute on operational improvements in the quarter as part of our focus on streamlining production and reducing fixed costs. While keeping capacity flexible.
We have consolidated several facilities over the past year, effectively reducing almost 1.2 million square feet of production space while maintaining similar levels of production capacity. Our teams also achieved direct and indirect cost improvements ahead of schedule, driving down input costs, significantly improving margins in the quarter.
We continue to invest in automation to drive efficiencies and have put more resources in automation within our footprint, which we believe significantly differentiates us in the outdoor recreation space. For example, as we finished building and equipping our []$65 million glass and acrylic processing center. We can now process hundreds of thousands of pieces of glass on a monthly basis for use in a wide range of end markets from housing RV Marine, commercial glass solar glass and much more to efficiently meet demand across our diversified business.
We believe that this showpiece sets a new standard giving us competitive edge and showcasing our commitment to investing in quality manufacturing for the future. In addition, this automated facility also started building acrylic windows for RVs in the US like the ones we sell in Europe, the importance of this can't be underscored enough as we believe we are the only supplier in North America building this product as acrylic windows become more widely used in the market.
It will help us widen normal on this important category we remain hard at work to identify and capture strategic growth opportunities, such as our recently announced deal with camping World through which we purchased their furniture business unit. As many know, camping World embarked on a multiyear journey of exploring vertical integration.
And we believe that they felt that their financial and labor resources were much better spent in other strategic areas. One of those areas in our fiber markets and the CW team was that of revamping their retail store and online space with a new look and new partners. Part of the strategic move for both companies was figure out how the Liberte brand can help bolster Camping World online and in-store sales.
Turning to RV during the first quarter, content per towable RV decrease from the prior year to $5,097, while content per motorhome RV for the quarter was $3,656. While content was down slightly in both areas year-over-year, driven largely by index pricing reductions. We saw sequential organic growth of 1% for total and 4% for motorhome content over Q4 2023.
Because of the impact of our innovation, our content continues to grow. Since 2020, our content has grown over 50% of towable RVs, demonstrating our ability over time to continue to innovate great content to OEMs. Rv OEM dealers are continuing to closely manage inventory levels with most of them bringing in just what they need for the spring season.
That said, we are seeing positive trends for spring as we grew North American RV OEM sales by 70% in the quarter over last year. Q1 motorhomes will likely be a drag on the industry wholesale for the next 12 months. And we also expect totals to soften after July with a possible pickup in production close to year end.
All in all, these factors put us close to our wholesale forecast from late last year of around 325,000 to 350,000 total. We do feel that 2025 will be slightly better than 2024. And as we have seen historically, we believe that we will likely have some sequential solid years of slow and steady growth post downturn. Rv production for April was up slightly from March, and we expect May to be on par or just slightly ahead of April.
We are diligently monitoring these trends as we work to ramp up production in support of the spring selling season, OEMs appear to be mixed and downtime for the July fourth holiday with some taking one week and others taking to we believe that a huge differentiator for Liberte of the short lead times, we're able to offer RVOEN.s on our products due to our footprint and business processes.
Our facilities can swiftly provide products with typically only a week of lead time with the ability of accommodating emergency demand as well as agility, coupled with the fact that our facilities are generally close in proximity to our RV customers allows us to offer just-in-time inventory to OEM.s, eliminating the need for them to carry any more inventory than needed, helping reduce our customers' cost.
We believe that this is a big part of our model when competitors trying to supply the industry with competing products outside of Elkhart County or even outside the country. Industry partnerships are another key way. We are strengthening our brand and advancing our leading position in the outdoor recreation space. Recently, we held our anti-lock braking system spring showcase where Bob Martin, CEO of Thor Industries and many other industry leaders and RV enthusiasts test drove our new ABS brakes on the Navistar track in northern Indiana.
Taking customers to the track and giving them real life experience has really helped and highlighting how much of a difference we believe EBS can make for safely tolling, both travel trailers and fifth wheels tolling is one of the biggest hurdles for new buyers to get over and we have found that dealers are having a much easier time getting new buyers peace of mind and units equipped with our ABS. suspension systems.
Turning to aftermarket, our aftermarket net sales were $210 million for the quarter, down 3% for the same period in 2023, while our automotive aftermarket was up double digits, our RV and marine businesses were nearly flat due to dealers being overly cautious about taking on more inventory.
Despite the small top line decline, we still achieved a 200-basis point increase in operating margins due to improved mix, along with tailwinds from continued operational efficiencies. We are proud of our aftermarket team for hitting an operating margin of double digits for the quarter.
Solidifying the importance of a diversified business has literally millions of vehicles approach the repair and replacement cycle in the coming years. We believe our aftermarket business is very prepared to capture demand for service support as well as replacement and upgrade at times this should be one of the single largest impacts in our business over the coming years is hundreds of thousands of vehicles come into service heating our parts.
We believe that the greater the content in the vehicles, the greater our service parts business. Based on our content increases over the years, these vehicles will be entering service with the greatest amount of labor content we've ever seen.
Our automotive aftermarket brand Kerr continues to thrive, representing over half of all Lippert aftermarket sales. Last year alone, Kurt sold just shy of $1 million hedges and we are confident that this will continue in 2024 since our acquisition of the current family of products in late 2019, we have seen that business grow over 40% in the top line.
The appliance market also offers substantial growth opportunity potential to our aftermarket with Varian's ovens, hot water heaters, refrigerators and air conditioners driving market share and top line expansion. Our new supply agreement with Camping World should help increase our aftermarket top line for RB, not only due to the fact that Camping World has such a large footprint but also because we believe Camping World will continue to execute a new store acquisitions and startups taking our retail footprint with them as they continue their expansive growth towards their stated 320 stores by 2028.
Alongside our expanding parts and service business, we are actively seeking ways to engage consumers and dealers together feedback to enhance our products we believe that Liberté Technical Institute has been instrumental by hosting maintenance trainings for dealer technicians and RV owners, empowering them to help prolong lifespan of the vehicles and resolve issues efficiently all enabling more time on the road.
We also believe that having what we consider to be the best in industry customer service and striving to be among the easiest to do business with and over million transactions annually with dealers and consumers are strong differentiators for those groups.
We believe the main engine for our aftermarket business is the continuous improvement of our customer service and the experience of every single customer during the quarter, we also hosted the annual installer council Summit and au Claire, Wisconsin, where we engage with customers and gather important feedback to leverage in our automotive aftermarket product development.
Events like this, along with our other initiatives like Liberte Scouts, again, ground project, consumer rallies and Liberte ambassadors help us to build our relationship with a well-connected outdoor community with a hope of driving trust and long-term loyalty to the Liberte brand.
Turning to North American adjacent markets, first quarter revenues were down 17% compared to prior year due to the ongoing softness in the marine retail environment this softness is expected to continue throughout the year however, we anticipate that Marine wholesale will start improving toward year end, we remain focused on leveraging our innovation engine to drive new product introductions while adding new efficiencies to support profitability in the current downcycle.
We also expect easier year-over-year comps in this area. As we head into the second half of 2024, we are showing solid results in the other adjacent markets, including manufactured housing, utility trailers and commercial vehicles. These markets are continuing to grow, and we are also seeing our market shares increased for products like our residential windows and trailer axle and suspension products.
As we have stated over the last couple of calls, our axle and suspension products business continue to grow, especially in the trailer space with their over 500,000 utility and cargo type trailers built annually in this area. We have added almost $90 million in new business since 2022.
Also in our adjacent markets, we saw a strong start for our newly launched bus chassis, stretching and transit bus seating products. This was a great organic startup that began in 2024, where we utilized buildings and team members that we already have in the business.
Moving outside of North America, international business grew 5% over the prior year as our international aftermarket business continues to grow and European RV dealers continue to take on more inventory since the time we started investing in Europe, we have noticed that their business cycles are much less cyclical than what we are accustomed to in North America. Which helps smooth out our revenue.
We believe that our products such as pop tops, acrylic windows, better lift stores and electronics, exemplify how our global presence fosters innovation across our brands and we are continuing to see a warm reception of these European developed products when we introduce them to our North American markets.
We expect Europe's growth and performance to continue as we keep looking for new products and strategic options for this important market as many of you know, innovation serve as a fundamental piece of our growth strategy, we made significant investments in our R&D capabilities and remain confident that our innovation will continue fueling the development of new products, the savvy consumers are looking for, which helps bolster our competitive edge and increase revenues.
In addition to the new product development, we are also focused on making improvements to existing products, adding additional content consumers deem of value at a more premium price point historically This strategy has provided us with significant opportunity for long-term content growth as there are numerous products in our portfolio that we will drive to continue to enhance and evolve.
Additionally, these improvements and innovations are typically unique and essential to RVs, helping to make them resistant to commoditization and mitigate the risk of de-contenting by oil, in most cases, by adding content like last entry doors, chassis modifications or any like braking systems to axles. It helps to make us more competitive and less susceptible to intense competition.
We believe the antilock brakes have been a significant example of how we innovate for and anticipate customer needs. And our brake systems were not readily available or affordable in the US for RV production until we brought them to market last year since launching, we now have over 10 high-profile towable RV brands using ABS with more in the process of committing and model change, growing our market share into the double digits with a total addressable market of $150 million to $200 million.
In addition, we just launched coil spring independent suspension to lessen vibrations from the road to the trailer box, which should significantly less than the shakedown the trailers experience on the road, thus greatly improving quality issues for the audience.
In addition to these new products, our 4K window series with integrated chains unique Square, one to design, new slide-out, new high-capacity, quite air-conditioners, new leveling, but seating furnaces, a new line of electric remedies and many more new products should gain momentum as we move through 2024.
As we expand our portfolio, our focus remains on introducing innovative products that cater to a multitude of customer tastes and needs in the diversified markets we serve as we have long stated, our culture starts with the experienced and empathetic leaders with a top score constantly growing and developing their own leadership we believe that great leadership drives retention and higher retention is directly linked.
And increases in innovation, safety, efficiency and quality, all of which are key drivers of success in any business just a few weeks ago during our volunteer, we hosted our annual pack out of that, or more than 1,200 Liberty members showed up impact over [144,000] items to be donated to the Boys & Girls Clubs of Volcker and St. Joe counties, as well as other organizations and local schools more than 2,200 team members participated in volunteer week company-wide.
It was yet another opportunity to demonstrate our business can be a force for good, utilizing our teams to make an impact in the communities where we live and work the best thing about this is that we see more businesses attempting to follow our lead and set up their own larger-scale community impact efforts. Additionally, we held the third with a purpose of that, the Jayco Jubilee rally, where attendees from all over the country together to pack boxes to essential items including clothing, school supplies and hygiene products to be donated to local Boys and Girls Clubs, thanks to our large scale and company-wide focus on supporting the communities around us.
We were named as one of America's Most Responsible Companies 2024 by Newsweek, an honor We are quite proud to have received we remain focused on disciplined working capital management, including improving inventory turns and have line of sight to additional inventory reductions this year to support cash generation. Just only about a year ago, our inventory was nearly $1 billion, and that's now sitting at the end of March, around $734 million.
Our team is laser focused on cash management. We plan to continue to invest in R&D and innovation while pursuing strategic growth opportunities and returning capital to shareholders at the present, we are holding more conversations around strategic acquisitions with some very intentional targets. It feels like we are getting back on track with our more normal historical cadence of acquisitive growth after taking a breather last year to conserve capital given the RV environment.
In closing, I'd like to thank all of our global team members for their hard work and consistent dedication and moving Lippert forward. This past quarter, every week I visited at least one facility and meet with our frontline team members, leaders and management and it's amazing to see what a talented group of people we have leading the businesses all over the company.
With the guidance of our experienced leaders, we plan to continue to execute on our strategic priorities, striving to provide best-in-class service to our customers while delivering profitable and diversified growth and long-term shareholder value.
I will now turn to Lillian Etzkorn, CFO to give more detail on our financial results within.

Lillian Etzkorn

Thank you, Jason. Our consolidated net sales for the first quarter were $968 million, a decrease of 1% from first quarter 2023 this was primarily driven by lower North American Marine production levels and decreased selling prices, which are indexed to select commodities, mostly offset by increased North American RV wholesale shipments.
On a sequential basis, we were up 16% from Q4 of 2023, delivering strong growth across most of our markets. Oem net sales for the first quarter of 2024 were $758 million, roughly flat with the same period of 2023. Rv OEM sales for the first quarter of 2024 were $460 million, up 15% compared to the prior year period, driven by a 9% increase in North American RV wholesale shipments, partially offset by decreased selling prices, which are indexed to select commodities.
Content per towable RV unit was $5,097, while content per motorized unit was $3,656, both were down compared to the prior year period, primarily attributed to the index pricing pass throughs. We had sequential growth of $39 for towable and $150 for motorhome content over Q4 of 2023.
We have continued to increase our organic content and market share through our focus on innovation in Q1 of 2024 or organic growth contributed approximately 1.6% year over year and LTM content per unit adjacent industries OEM net sales for the first quarter of 2024 were $299 million, down 17% year over year, primarily due to lower sales to North American Marine OEM North American Marine OEM net sales in the first quarter of 2024 were $65 million, down 45% year over year, driven by inflation and rising interest rates impacting retail consumers.
As Jason mentioned, we anticipate the softness to continue throughout the year. However, we anticipate the pressure on online sales will start decreasing towards the end of the year as we begin to cycle easier comps Q1 2024. Sales in the aftermarket business decreased 3% compared to the prior year period, primarily driven by lower volumes within markets and pressure on discretionary spending this was partially offset by growth in the automotive aftermarket, where we have been realizing strong market share gains.
International sales increased 5% year over year, and we have been pleased with the performance of the team and strong market reception to our innovative products the strength seen in our diversified businesses continued to support our profit and margin performance. Gross margins were 23.1% compared to 19.1% in the prior year period, primarily due to lower material and freight costs.
Additionally, warranty costs decreased $8 million compared to prior year. I do want to comment that we achieved margin expansion earlier in the year than originally anticipated. So although we will deliver our highest margin in Q2 due to seasonality first quarter will be the high watermark for margin expansion through the balance of the year.
Consolidated operating profit during the first quarter was $58 million or 6%, which is an improvement of 390 basis points over prior year. The aftermarket segment delivered strong operating profits in the quarter at 11.8%, which is a 220-basis point improvement over prior year. Gaap net income in Q1 of 2024 was $36.5 million or $1.44. Earnings per diluted share compared to a net income of $7.3 million or $0.29 earnings per diluted share in Q1 of 2023.
EBITDA increased 72% to $90.3 million for the first quarter 2024 compared to the prior year period. Non-cash depreciation and amortization was $32.7 million for the three months ended March 31st, 2024, while non-cash stock-based compensation expense was $4.3 million for the same period, we anticipate depreciation and amortization to be in the range of $130 million to $140 million during the full year 2024.
For the three months ended March 31st, 2024, cash used in operating activities was $8 million, with $9 million used for capital expenditures and $27 million returned to shareholders in the form of dividends. These results are in line with our expectations as we typically have relatively higher cash used at the beginning of the calendar year due to the seasonality of production and sales.
At the end of the first quarter, we had an outstanding net debt position of $833 million, 2.5 times pro forma EBITDA, which is adjusted to include LTM EBITDA of acquired businesses and the impact of non-cash and other items as defined in our credit agreement. Overall, we are seeing positive signs in total revenue, both sequentially and year over year.
For the month of April sales were up 12% to $378 million versus April of 2023. This is primarily due to three more RV production days in 2024 compared to the prior year period. This was partially offset by significant decline in marine sales in the month compared to 2023.
We do expect marine softness to continue, but we expect pressure to abate somewhat as we cycle easier comps in the second half of 2024 as Jason stated earlier, although we do not have a great amount of visibility into the full year, we are seeing continued positive production trends in the near term. Gradual improvements in the RV OEM market, coupled with continued performance in our diversified businesses, will continue to drive Lippert forward.
Regarding RV wholesale shipments, do we estimate a full year range of 325,000 to 350,000 units as we look forward, we are focused on maintaining a strong balance sheet and targeting a long-term leverage of 1.5 times net debt to EBITDA for the full year of 2024.
Capital expenditures are anticipated in the range of $55 million to $75 million, and we remain confident in our ability to achieve long-term profitability and value for all stakeholders through our strategic initiatives and investments in innovation, facilities and our team. We will continue along the path to delivering sustainable long-term growth. That is the end of our prepared remarks. Operator, we are ready to take questions. Thank you.

Question and Answer Session

Operator

(Operator Instructions)
Our first question comes from the line of Daniel Moore with CJS Securities. Please go ahead.

Hi, this is Justin on for Dan. 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?

Lillian Etzkorn

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 to 350 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 to 350 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.

Okay. That's helpful. Then 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?

Lillian Etzkorn

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.

I appreciate you guys taking the questions, Thanks.

Lillian Etzkorn

Thank you.

Operator

Frederick Wightman with Wolfe Research

Frederick Wightman

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?

Lillian Etzkorn

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 at 350 was the number, and that appears to continue to be right where things are headed. So yes, but what I can say in that.

Frederick Wightman

Okay, and you mentioned the March retail data that just came out. If we look at just reported results for the industry and then comp trends or unit trends for some dealers that are emphasizing lower cost value units. I mean it seems to be a pretty big delta. So I'm wondering if you could just touch on how you guys think content per unit and sort of overall trends at Lindbergh shake out. If we do see a prolonged shift towards lower-cost products?

Lillian Etzkorn

Yeah, I mean, I don't think that there's I don't think there's a long-term shift toward lower cost. I think it's the time that we're in right now, and we've been seeing a steady, a steady movement toward a lot of these entry-level trailers. Camping World talks about [11,000 thousand 99] trailer that they sell a lot of we've seen gravitation or in single axle trailers is the smaller, cheaper units over the last couple of years to the tune of know it used to be closer to 15% of our chassis production.
Now it's closer to 20, but I know the other thing, the Ceragon content, as you some of the bigger toy haulers, you know, those are way down. And those for us, content can get up to 15,000 a trailer. So toy hauler space is kind of kind of dead right now and then we're going to continue to innovate on content.
As we've talked about, we're going to find ways to either bring new products to market that we've talked about with the window products and our suspension products, but also going to continue to evolve our existing content and add bells and whistles and features to drive content drive content up there.

Frederick Wightman

Okay. Thank you.
Thanks, Brent.

Operator

Scott Stember from ROTH MKM Partners

Scott Stember

Good morning and thanks for taking my questions. Lorne from 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.

Lillian Etzkorn

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 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.

Jason Lippert

And to Scott, with respect to diversification, I think that the the quality of our margins and the diversified parts of our business have continued to evolve and get better and better every year. So while we start diversification the top line 11 or 12 years ago and the quality of our margins, there are continuing to get better and continue to lift up the rest of the business.

Scott Stember

Got it. And just shifting over to the aftermarket on, could you just give us some reads of POS or at the dealer level, break-fix kind of demand. Just trying to get a sense of what's the come from the repair cycle, which will likely start this year?

Jason Lippert

So yes, we've done a lot of talking about the repair cycle. The last several calls is all these these units that were built and during COVID start to come into the repair and replacement cycle. So that's going to be really healthy, and we anticipate a lot of good opportunity there. Again, part of the reason because our content was bigger in those years than prior years.
So, our content continues to grow. As we mentioned 50% sense in our growth in 2020, we ought to see more and more content replacement repair and replacement cycles in these next couple of years. So we're excited about that. I think at the dealer level right now, you're seeing you know, the retailers and dealers be cautious about bringing in too much parts and pieces and upgrade content inventory just like they are the the full full RVs, as you know, are the norm, our aftermarket kind of divided in automotive, aftermarket and marine and RV and automotive side, that's that's really doing well for us right now. Kurt's, you know, creates expanded greatly since we bought them in late 2019. And I think we're up 40% there on the top line. And that was the it was a $300 million plus business and we bought it back then. So that's that's helping lift the aftermarket pretty significantly.

Scott Stember

Got it and just last question on the balance sheet, the [$460 million convert to in 26]? Just trying to get your sense of what your plans will be for that if you were looking at it?

Lillian Etzkorn

Yes, I think it's still a little bit early Scott for us to have to look to do anything and obviously continue to watch the market on and look to see what opportunities there are. But I'd say we're still probably early overall for refinancing of the elements on the balance sheet.

Scott Stember

Got it. Thanks again.

Lillian Etzkorn

Thank you.

Operator

Michael Arlington Swartz from Truist Securities,

Michael Swartz

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 gum as you usually do?

Lillian Etzkorn

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 kind of the expected organic growth that we would expect for the business in the year.

Michael Swartz

Okay. That's helpful. Thanks for that. and then, Jason, maybe just on the $200 million in front of new business wins, could you maybe just break that down a little bit for us? And I'm just trying to understand like how much of that is RV, how much of that is marine and others? and does that include the new go Camping World furniture business? And then just any commentary around it as far as the visibility you have right now, model-year 25 versus model year 24 an RV?

Jason Lippert

Yes, sure. No problem. So we figure over half of it, half of the numbers are V. It does not include the Camping World, especially that is owned. So there's a lot of innovation going on. We've got a lot of great products from around the RV space. We've got customers like Brinkley who you know, who's relatively new to the scene that we continue to grow content, whether as a continued organic growth with, say, continue to grow their business.
And then I'd say one of the other one of the other areas is because the e-axle actual products, inspection products, we've got a lot of innovation going on there. And again, all of our business, we're innovating in every piece of our business. So some parts are farther content. We've mentioned the bus products and things like that where we got we got chassis stretching and bus seats that are brand new to organic growth pieces of new business coming in there. As we grow those new markets. So that be maybe some granularity to some of the things we're doing with respect to that $200 million.

Michael Swartz

Okay. That's helpful. And maybe just one follow-up for Lilly. And I think you had just said in terms of or in response to Got a question about I did want to make sure I heard it correctly around full year EBIT margin, I think you said around low single digits. Is that is that what I heard? And I think you had said mid-single digits back in October, but just correct me if I'm wrong on how I'm thinking about that.

Lillian Etzkorn

Yes, it should be mid-single digits, Mike, so thank you for the clarifying question. That would be our expectation for the full year consistent with our prior messaging of the mid single digits for for EBIT percent.

Jason Lippert

Okay, perfect. Thank you so much.

Operator

Thomas-Martin from BMO Capita

Hi, good morning. Could you wanted to I know in the past you've talked about how there's open units, right? Their ability on them[ 21] you're comping against. Can you quantify what that impact was relative to like the Army wholesale production?

Jason Lippert

It's a question, but you want to repeat again, Tristan?

Yes, I'm just asking the benefit from comping against the open units that were shipped relative to the reported RBA numbers in the quarter.

Lillian Etzkorn

And again, to just make sure I'm understanding the question. So in terms of the content per unit. So when we're reporting, Matt, it's on a trailing 12 month basis. So we actually, in that computation is still a headwind for us because of the wholesales exceeding production in 2023 calendar year as we progress through 2024 calendar year. Our expectation, our expectation is that wholesale and production will be more closely aligned, so it won't be it won't be a tailwind or sorry, a headwind as we move through the year. But it is still it still is a headwind this quarter, a few percentage points. Does that make sense.

And I guess what I was really asking is if you can quantify yes, just the number of wholesale production was (inaudible) more due to open. (inaudible) We're trying to get a number here on, if I'm apologize, Matt.
And therefore, it's not like we are there now that

Lillian Etzkorn

That's okay. That's a pit comes on from a wholesale versus production in 2020 for calendar year, we're seeing that much more closely aligned. We didn't have the same situation that we had in 2023 calendar year.

Okay. Got it and then I and I kind of have to ask the question. There's been a ton of chatter about some of the world's famous actors who gave them. I wanted to know if you had any idea thoughts or opinions you wanted to share?

Jason Lippert

I didn't I didn't hear the question, Tristan, what was the question?

Let me.
Yes, let me hop back in queue. And if I can find a better slug, that sounds a little bit better if you want to trade against or project. I'm just out that kind of chatter from some of these frame plant headlines and an issue, how can I get your opinion in your kind of common product?

Jason Lippert

Yes, yes, thanks. Okay, I've got you now. Yes, I mean, contrary to the Davidson note that came out in, I'll tell you that we don't have widespread frame Efraim issues. We don't have widespread warranty issues. So, you know, the long and short is that, you know, we design frames to flex.
And over the over the years, we've seen a handful of units at the numbers as they come out to from a unit standpoint, insignificant. It's 300. That's of a percent of our total frame warranties. And in terms of dollars, it's less than 100%. So, it's hardly worth mentioning what I can say is that with the issues related to the chatter around Grand Design as they have issued a technical service bulletin to their dealers and the consumers.
So, you know, as far as I know they're fixing those, , you know everything that pops up with respect to a customer current concern today, 100% confident great designs taking care of their customers I mean, again, we've seen we've seen these selection issues over the years.
We've got, you know, especially on heavier units of (inaudible) [15,000 to 21,000]. You see these are just giant houses moving down the road and sometimes with overloading or road abuse or excessive impact, you can see some malls break loose from the frames and that happens from time to time.
But you know, I don't want to do happen and there's an issue with manufacture. They're generally getting taken care of. So that's let's start with the short answer in our frame warranties, less than three quarters of a percent of everything we build has been for the last 10 years, 2024 is tracking the same. So hopefully that debunk some of the chatter out there.
There were some, you know, big-time social media stuff months ago, but it I think is quieting down. And like I said, with the issuance of the technical service bulletin and the dealers on both those issues are taken care of that.

Helpful. Either questions there, aluminum or upside.

Operator

Your next question comes from Allison. We can live. With that, please go ahead.
Morning, everyone. I'm on for Craig today. Most of my questions have been answered, but maybe just wanted to dig in on the M&A landscape. I mean, I think you said you're in more talks today than you were a year ago on what areas are you Pakistan? And what are you seeing out in the market today?

Jason Lippert

Yes.I mean, we're focused as much on adjacencies and aftermarket. Probably as we are be, there's there's as we've acquired in the RV space over the last 20 years, there's there's probably less to buy there. So I would say most of our M&A is focusing on some of our adjacencies and aftermarket. But, you know, we feel like we can get a couple of these deals over the finish line in the next 12 months.
I mean, we're making good progress and we're having we didn't have any hardly any conversations last year because we're just paying attention to that in our use of capital and our cash flow given the environment. But and now things are obviously improving and results are improving and we feel pretty solid about where our adjacent markets and our aftermarkets are sitting as well as our RV market and our performance there. So I'd say we're making good progress with some some targets today.
Great. Thanks.That's it for me.

Operator

Brandon Rollé from D.A. Davidson

Brandon Rollé

Good morning, and thank you for taking our questions and shouting out our note line of first on the on the frame Flex, I think you on the frame flex and we just talked with Winnebago on Monday and they indicated they weren't the only OEM that was having frame flex issues. I guess you and I think Grand Design's got a lot of publicity. Obviously, you guys had acquired some of the influencers, but what other OEMs are seeing these frame flex issues? And I know you said it's not widespread, but are there issues with each of the three main OEMs? Or is it just concentrated to a couple?

Jason Lippert

Yes. I mean, it is not none that I'm aware of. I mean, again, Flame frame Flex, you know, I'd say every brand of fifth wheel because of some of the overloading and trauma, the some of these units, these bigger units see, again, we're talking that's only happening typically on (inaudible) units, which are largely the luxury luxury, high-profile fifth wheels and heavy toy hauler fifth wheels.
You don't see this issue on travel trailers and low-profile fifth wheels, you just don't see it, but there's maybe three or maybe every brand has had since I've been in the business three or four a year in. So yes, as Mike said, it's not a it's not a new issue, but it's certainly not a widespread and it's certainly not happening happening everywhere. I'd say to put it in numbers, it's probably five to 10 a year for each each brand, but that's not new. That's not news.

Brandon Rollé

Okay, great. And who would be on the hook for any of these issues that are going on? Are people not having some warranty claims or whatever the case may be is, were you guys just producing really good friends and it's on the customer or the OEM? Or are you guys potentially liable for any of these issues?

Jason Lippert

Yes. So the technical service bulletin calls out specifically to the dealers that they're just they're checking for some of those screws from the loss of the frames and things like that. So I guess at our warranty on this will be less than 300% on our business this airframe business. So on screen designs, handling this with our dealers and they are taking care of every single one that pops up. And you know, I I don't have really anymore. I can comment there probably on telco.

Brandon Rollé

And then kind of circling back to Christine's question earlier in 1Q 23, last year, production was less than shipments. Are you saying in the first quarter of this year, production and shipments were more or less aligned. I guess we're trying to just trying to understand what the headwind was last year, so we can better understand, you know where your content is shaking out?

Jason Lippert

Yes, sure. That win last year was largely around the fact that there just was no production in January and there was not a whole lot in February either. But the the OEMs were shipping, all the yards were fairly full and they were shipping units. So wholesale numbers were being promoted. Wholesale numbers. We're being we're happening to the dealers and there just wasn't any production. And this year you're seeing you're seeing yards that are normalized and wholesale happening. And then production are kind of equal in what we're what we're wholesaling this year through exotic like Apple actually engineer, pardon.

Brandon Rollé

Okay. All right. Thank you so much.

Jason Lippert

Yes. Thank you.

Operator

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

Jason Lippert

Yes. So, we're really proud of our results this quarter and things are looking a lot brighter than the last 20 months. So, I'm really proud of the teams for making it through this last cycle. And I'm really happy with the diversified bottom line results we had from our diversification efforts this past quarter before talking to you all next quarter, too.
Bye-bye.

Operator

Thank you, everyone, for joining us today. This concludes our call and you may now disconnect your lines.