LCII

Hello, everyone, and thank you for joining us today for the LCI Industries first quarter 2026 earnings call. My name is Sammy, and I'll be coordinating your call today. Before we begin, I would like to remind you that certain statements made on 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 the company's earnings release, 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. In addition, during today's conference call, management will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures are available in the company's earnings release and investor relations presentation, which have been posted on the investor relations section of the company's websites and are also available on Form 8-K filed this morning with the SEC. On the call for management today are Jason Lippert, President and Chief Executive Officer, Lillian Etzkorn, Chief Financial Officer, and Kip Emenhiser, VP of Finance and Treasurer.

Later in the call, we will conduct a question and answer session, at which point you can register a question by pressing star one, and you may withdraw the queue by pressing star two. With that, it's my pleasure to turn the call over to Jason Lippert. Please go ahead. Jason, please go ahead.

Hello, thank you to everyone for joining us on our Q1 2026 earnings call. We are energized by the momentum we have built in recent quarters as well as by the current strength of our performance in 2026 as we begin the new year with solid results despite continued sluggishness across both retail and wholesale leisure markets. Before diving into the details, I want to recognize the exceptional work our teams have done over the past decade to diversify our business. Against a very challenging industry backdrop, the diversification has clearly proven its value. Our well-balanced portfolio continues to deliver strong results even in cyclical markets like RV experience volume pressure. Achieving this balance has taken time, discipline, and continuous refinement of both our teams and our strategy. Our European operations deliver the strongest quarterly results we have seen since building that platform.

Our transportation business continues to perform very well as we integrate Freedman Seating and Trans/Air Climate Control systems. Altogether, our diversified performance meaningfully contributed to LCI achieving an 11.5% EBITDA margin in our Q1 in what we call a pretty turbulent quarter. For the first quarter of 2026, revenue grew 4% year-over-year to $1.1 billion. We expanded profit margins by nearly 100 basis points and grew adjusted diluted EPS by a robust 18%. This outperformance reflects our ongoing investments and the strong execution of our teams as we continue to focus on operational excellence, manufacturing optimization, and self-help initiatives.

These efforts include significant plan optimizations, disciplined G&A cost reductions, and continued volume gains across the increasingly diverse end markets we serve, all while maintaining a strong focus on innovation and customer service, which remain core pillars of our success. Looking at performance by segment, OEM net sales increased 4% to $853 million. RV OEM revenue declined 4% due to lower North American travel trailer and fifth wheel shipments, which is a strong outcome considering RV wholesale shipments are down more than 12% through the first quarter. At the same time, we grew our adjacent industry OEM sales by 17%, driven primarily by higher demand from North American Marine OEMs as well as from bus and utility trailer OEM share growth. In addition, Freedman Seating and Trans/Air continue to outperform plan on both integration and synergy realization.

As I previously mentioned, our European business also contributed meaningfully following extensive restructuring efforts over the last 18 months that have positioned the region for improved bottom-line performance. In housing, sales were flat year-over-year, outperforming a down market due to continued strength in our residential windows, which helped offset lower manufactured housing demand. As we move through 2026, we expect to further accelerate content gains and expand across our 4 OEM markets while continuing to outperform the broader RV industry. We now expect RV wholesale shipments to be in the range of 315,000-330,000 units, which reflects a reduction of 20,000 units at both the high and the low ends of prior expectations. For the marine industry, we continue to anticipate flat to low single-digit OEM growth this year.

Innovation remains the cornerstone of LCI's long-term success and has driven a significant increase in towable content of 73% since 2020. Recent product introductions, including anti-lock braking systems, Touring Coil Suspensions, Sun Decks, Chill Cubes, and our 4000 Series windows continue to gain traction as customers look to enhance the end user experience. Total RV content increased 13% over the past year to $5,826 per unit, representing the largest year-over-year increase in our history as we close in on the $6,000 content per unit mark. Our five most recently launched products are now generating an annualized revenue run rate exceeding $270 million.

Looking ahead, we expect approximately $140 million in incremental annualized run rate gains from new product placements during this 2027 model change, as well as from market share expansion in the RV space. Our newest product launch is the next generation leveling and stabilization system for travel trailers that will be more affordable than past generations. It will also be featured as a standard equipment across all Brinkley travel trailers at this year's model change. Brinkley's Model I trailers rank among the industry's top 5 trailer brands, which will provide strong visibility for this product. We believe this launch represents a $100 million total adjustable market opportunity for LCI and a natural for customers, as we are the standout leader in leveling systems for towables and motorhomes.

This ongoing innovation, combined with our scale advantages, advanced manufacturing technologies, and deep expertise in complex mission-critical components, has created customer loyalty that continues to differentiate LCI. Our customers consistently look to us to help them stand out in their respective brands. Turning to aftermarket, the same customer loyalty continues to drive consistent outperformance. During the quarter, aftermarket net sales grew 7% in a down retail environment for both automotive and RV. Over the past decade, we have embedded more than $15 billion of replaceable content into RVs that will ultimately enter the service and repair cycles. Over the next three years, approximately 1.5 million of these RVs are expected to do so, each requiring LCI parts and service solutions across key categories, including chassis, leveling systems, slide-out systems, awnings, suspensions, windows, furniture, doors, and appliances, all of which are critical components.

Our RV and Marine Aftermarket Care Center and technical teams, now more than 400 team members strong, has been built from the ground up over the past decade. Today, our teams support thousands of dealer service and repair locations nationwide and manage more than two million customer interactions annually. As a result, LCI remains one of the most visible and trusted brands in the RV aftermarket. A recent milestone in our growth is the launch of our first in-store Lippert product setup within Blue Compass RV, the second-largest RV dealer in the country. As we expand these in-store concepts, we create incremental sales opportunities for both LCI and our great dealer partners.

The Lippert upgrade experience delivered through our brand-new Lippert factory service centers continues to gain traction by providing consumers and dealers direct access to advanced upgrades such as Touring Coil Suspension, anti-lock braking systems, and other advanced Lippert products. As for mobile service and in-factory upgrades, we are now performing more than 200 service appointments each week, and we expect this initiative to become increasingly impactful as it continues to scale. Our automotive aftermarket business is benefiting from M&A market disruption as First Brands, previously our largest competitor in the hitch and towing space, moves through bankruptcy. We are actively working to capture displaced OEM and aftermarket demand, representing an estimated $70 million incremental annual revenue opportunity.

Our automotive aftermarket business is currently trending up high teens year-over-year in the second quarter of 2026, reflecting early success in capturing this share, as well as great incremental growth in this category, given where retail demand is. We are also expanding our aftermarket infrastructure with the addition of two major facilities that we've mentioned on previous calls. Our new 600,000 square foot distribution center in South Bend came online last quarter, significantly increasing our national distribution capacity. A second facility, approximately 400,000 square feet, is expected to be completed by year-end and will consolidate several less efficient manufacturing operations that support Ranch Hand-branded products in Texas, while also positioning us in a more favorable labor market in Seguin, Texas. Profitability remains a key highlight.

Operating margin improved to 8.7% from 7.8% a year ago, driven by efficiency, improved product mix, plan optimization, and continued G&A discipline. We continue to evaluate divestiture opportunities for select lower-margin businesses. As a result, we continue to target 70 to 120 basis points of operating margin improvement in 2026 as we progress toward our long-term goal of achieving double-digit margins. Our balance sheet remains very strong, supported by more than $250 million of operating cash flow over the last 12 months and total liquidity exceeding $700 million at quarter end. We remain disciplined in our capital allocation, prioritizing investment in operational excellence, innovation-driven diversification, and complementary M&A. Over the past 25 years, we have completed 77 acquisitions, and our pipeline of smaller tuck-in opportunities remains active.

Most importantly, returning capital to shareholders remains an important priority, which has been supported by a dividend yield above 3.5% and opportunistic share repurchases. With regards to the discussions with Patrick, our board has determined that the best path forward is to continue executing our strategy as a standalone company, a strategy we feel has and will continue to position us and our stakeholders well into the future. In summary, we are confident in our ability to perform through a wide range of macro environments. Our innovation-driven content growth, higher margin aftermarket platform, expanding presence across adjacent OEM markets, and disciplined execution continue to strengthen our competitive position. Most importantly, none of this would be possible without the dedication and talent of the incredible people of LCI, who continue to drive our long-term success.

With that, I will turn it over to Lillian to walk through our financial results in more detail.

Thank you, Jason, and thank you all for joining us. We're off to a strong start in 2026. In the first quarter, LCI delivered revenue growth, margin expansion, and significantly higher earnings per share. This performance comes despite weaker industry fundamentals and a full-year RV unit outlook that has deteriorated in recent months. Our results reflect the strength of our operating model and the tremendous efforts of the LCI team as we continue to execute on our strategic initiatives to drive growth and profitability. Taking a closer look at quarterly results, consolidated net sales grew 4% year-over-year to $1.1 billion. OEM net sales also grew 4%, driven by a 17% increase in adjacent industries OEM. This growth was fueled by strategic investments and stronger sales to North American adjacent industries OEM.

These gains more than offset a 4% decline in RV OEM net sales. The RV OEM performance reflects lower North American travel trailer and fifth wheel shipments, partially offset by price increases to cover increased material costs, a change in our RV sales mix towards higher content fifth wheel units, growth in our North American motorhome RV unit shipments, and progress in our ongoing efforts to take market share. Content per towable RV unit remains a tailwind for us, increasing to $5,826, which was up 13% year-over-year and 3% sequentially. This year-over-year increase was driven by approximately 3% organic growth from innovation and recent product launches, an improved mix of higher content fifth wheel units, and increases in selling prices to cover increased material costs.

Content per motorized unit increased 6% to $3,970. In our aftermarket business, net sales increased 7% year-over-year to $238 million. Growth was driven by price increases to cover higher material costs, as well as contributions from strategic investments. Consolidated operating profit totaled $95 million, up a robust 17% over the prior year period, with operating margin expanding 90 basis points to 8.7%. OEM operating profit margin expanded 150 basis points to 9%. This improvement was driven by higher prices on targeted products to cover increased material costs, as well as our ongoing efforts to enhance operating efficiencies through footprint optimization, material sourcing strategies, and other operating initiatives.

Aftermarket operating profit margin was 7.8% compared to 8.7% in the prior year period, primarily reflecting higher material costs related to tariff and steel, as well as investments in capacity and distribution to support continued growth in the aftermarket segment. We were able to partially offset these factors by raising prices for targeted products in response to a higher material cost, along with sourcing initiatives and favorable sales mix. Adjusted EBITDA for the quarter was $125 million, up 13% year-over-year, with the margin expanding 90 basis points to 11.5%. GAAP net income increased 27% to $63 million, resulting in GAAP EPS of $2.53. Adjusted diluted EPS was $2.59, reflecting a $0.06 accounting adjustment for dilution related to our 2030 convertible notes.

We remain very well-positioned from a balance sheet perspective. Cash and cash equivalents of $142 million at quarter end. Revolver availability was nearly $600 million, and total liquidity exceeded $700 million. Net debt to Adjusted EBITDA was 1.9x, within our targeted range of 1.5x-2x and reflecting a quarter end outstanding net debt of just over $800 million. Our approach to capital allocation remains balanced and disciplined. First quarter capital expenditures totaled just under $10 million, in line with the prior year. We also look to opportunistically buy back shares under our $300 million repurchase program, and we maintained our quarterly dividend of $1.15 per share, with $28 million paid during the quarter. Finally, we continue to seek thoughtful and complementary investments as part of our balanced capital allocation strategy.

Turning to our updated full-year outlook, RV wholesale shipments are now expected to be 315,000-330,000, as Jason mentioned. Marine industry deliveries are still expected to be flat to up low single digits. Despite the subdued industry backdrop, driven by our self-help initiatives and growth platforms, we continue to expect full-year revenue of $4.2 billion-$4.3 billion and an operating profit margin in the range of 7.5%-8%. Reflecting our strong first quarter performance, we are tightening our full-year guidance and now expect 2026 adjusted EPS of $8.75-$9.25. Looking ahead, some of the key growth drivers include continued innovation and increasing content per unit. Aftermarket growth that's benefiting from the growing number of RVs entering the repair and replacement cycle.

Housing growth benefiting from our growing number of residential window products and increased automotive aftermarket demand. Our adjusted EPS range, representing up to 24% annual growth at the high end, is supported by continued margin expansion. We expect to continue our footprint optimization and address another eight to 10 facilities this year alongside ongoing efficiency and cost containment initiatives. Rounding out our updated full year outlook, we expect capital expenditures to be $55 million-$75 million for the year, focused primarily on business investment and innovation. In closing, we are off to a strong start in 2026 with our team focused on executing strategies that drive growth, profitability and enhanced shareholder value. With that operator, we'd be happy to take questions if you could please open up the line.

Thank you very much. Our first question comes from Nathan Jones from Stifel. The line is open, Nathan. Please go ahead.

Good morning, everyone.

Morning.

I guess I'll start with my first question on the adjacent industries, OEM growth at 17%. Maybe give us a little bit more color on where you saw the, you know, the strengths and weaknesses in that segment, given that the growth there was so strong.

I think a big piece of that came from the. We haven't lapsed the Freedman and Trans/Air acquisitions completely yet. That's part of it. All the adjacent markets are growing a little bit, that lapse created some, created some additional increase.

Yeah, Nathan, specifically the revenue from the acquisitions was $47 million in the quarter, so that contains a good chunk of it.

Fair enough. I guess second question on the margin performance, it was obviously also very strong. Can you talk about some of the contributors to that? I know you obviously had some inflation going through the business this quarter and pricing going through it. Was price cost positive to that or neutral to that? Just any color you can give us on the contributors to the margin expansion. Thanks.

Well, I think the biggest piece of the 100 or near 100 bits there is the all the self-help we're doing, you know, with the G&A improvements, all the facility consolidations and things we're doing there. That's obviously gonna continue on through this year. When we talked about the eight to 10 facility consolidations we have this year, there's some big ones wrapped up in there. We'll be able to give more color at second quarter, 'cause really, we're waiting for July shutdown. There's usually a decent time shutdown during the Fourth of July where we can take the time and shut some of these facilities down and consolidate them with others that are still standing.

On the price co-cost equation, are you able to fully offset the inflationary costs, tariff costs, with price, or is there a lag to that? I guess just the last one, the changes in tariffs, any incremental impact from those? I'll leave it there. Thanks.

Yeah, there's a lot of puts and takes happening at the moment, obviously. I mean, with the new tariff stack after, you know, the Supreme Court struck down the old tariffs, you know, there's a little bit of a stack on top of where we were before. We'll be dealing with that over the next months. Our assumption is we're not gonna have any different approach or results to dealing with the tariffs that we did in the last, you know, few years that we've been dealing with it. Same strategy. You know, gonna continue to work on our strategic sourcing, make sure that we're buying from places and buying from countries strategically so that we're not overpaying on tariffs.

If we've got to pass some things along, we're gonna do that and do that carefully with our customers. There always is just a little bit of lag as we sort these things out, but it's not meaningful.

Thanks for taking the questions.

Thanks.

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

Thank you. Morning, Jason. Morning, Lillian.

Yeah.

Looking at the revenue guide unchanged despite, you know, obviously a softer RV outlook. Just in terms of where you see the opportunity to make it up, it sounds like you raised the aftermarket opportunity for First Brands. Are there other things that are trending stronger, be it pricing, content, you know, adjacent markets? Where's the kind of the makeup there? Thank you.

You know, First Brands and the aftermarket piece is a piece of it, obviously. We mentioned in the prepared remarks that, you know, revenues for our automotive aftermarket division are, you know, mid-teens% for the second quarter. We've obviously got good visibility on April and May, we feel comfortable about that. I think the other big piece is the product placement that we've done. On the RV side and the marine side for model year change that's coming up here in June. For just the RV piece alone, it was $140 million of new product placement. That's new products that we've launched and put in the model year change cycles and also some market share improvements in different areas in the business.

We're winning in some of the other diversified adjacent businesses, but the $140 million piece, you know, from June forward, you know, annualized is probably the other big piece to offset any kind of softness in RV.

Really helpful. You mentioned the obvious momentum in aftermarket. April revenue as a whole down 4%. Just talk about the cadence of revenue entering May and, you know, expectations for Q2 more generally that's kind of embedded in your 2026 revenue guide.

Sure. As you know, Q2 historically is probably the strongest quarter for us in any given year, and that is what we're expecting for this year as well. Despite April being a little bit softer, we are expecting sequentially to be up and also to be up year-over-year for the second quarter. I would say really just normal seasonality as we move through the balance of the year. Third quarter, you know, we tend to have more of the shutdowns, Europe has shutdowns, fourth quarter we taper off. Yeah, second quarter, we're expecting it to be nice and strong.

Really helpful, Lillian. Last one for me. A little long-winded, I apologize. You know, you're clearly incurring incremental costs from tariffs, from steel, aluminum, you know, still maintaining 7.5%-8% margin for the year. Given that a lot of these will likely be passed on with a little bit of a lag and ongoing facility consolidations throughout the year and lower fixed cost absorption, let's say we enter the year end, ended the year at kind of that midpoint, 7.75%, what would that imply on a run rate basis entering fiscal 2027, you know, assuming inflationary pressures start to level off?

Yeah. With that, again, kind of from the seasonality perspective, the fourth quarter in terms of a jump point in absolute terms is always going to be the lightest quarter. I wouldn't necessarily use the fourth quarter as the run rate into next year just because that is the low point. What I would say, and I think it's reasonable to assume, is as you're seeing the year-over-year improvement in margin by quarter, to continue to see that improvement kind of as that delta year-to-year as your start point for the following year, I think is reasonable.

I think the other thing to point out just in terms of the self-help, yes, it's a lot of, you know, the cost activities that Jason's highlighting, but I would also say just from efficiencies and how we're operating within our facilities, the team has done a really nice job of executing on that in some really difficult environments right now from an industry perspective.

There's we feel there's a lot of pent-up demand out there. We're obviously not seeing it, you know, in the beginning part of the year here on the retail side, although, you know, used, you know, used seems to be up pretty heavy, much bigger than what new is. New obviously, it's flat to down in most places, but used is up anywhere from, you know, high singles to mid-teens on most counts where we're taking those, you know, taking those points and talking to dealers. Yeah, I think it really depends a lot on, you know, where retail falls and if we can get new going again.

We're certainly gonna be working with our customers to make sure that we're giving them every opportunity to get at affordability, 'cause that's the biggest headache out there when it comes to some of the sluggishness on the new purchases.

Yeah. I guess I, my thought was given the lag in some of the pricing, and some of the initiatives, you'd probably be entering 2027, you know, at an even higher level, on an annualized basis. I'll take the rest offline. Thanks again for the color.

Thanks.

Thanks, Dan.

Our next question comes from Joseph Altobello from Raymond James. Your line is open, Joe. Please go ahead.

Thanks. Hey, guys. Good morning. Want to just follow up on that line of questioning along operating margin and the improvement you're seeing this year. Obviously, it sounds like most of that is not volume dependent and it's largely in your control. You're talking about eight to 10 facilities closures this year. How much runway do you see into 2027 on that self-help side?

Yeah. Obviously we've got, you know, we've got flow-through from all the changes we made last year that are kinda happening throughout this year, and we've got some carryover from that. Like I said, these eight to 10, I mean, we're literally just getting ready to start making these moves and changes and consolidations in July. You know, you can anticipate the benefits from all those moves to impact our P&Ls from, you know, July of this year through July of next year. We've got, you know, more self-help initiatives and other facility consolidations on tap for next year already lined up.

The way I'd categorize what we've done here is we've, you know, we started thinking really hot and heavy about this in the middle of 2024 and started making changes just in the event that things didn't get better and the environment didn't improve. I'm glad we did that. I think a lot of people were thinking that, you know, they'd come into, you know, 2026 and that volume would have to get better because it's been such a long depressed period of low retail and wholesale activity. As we've dug into these self-help initiatives and around G&A specifically and around our plant consolidations and optimizations specifically, we just continue to find more and more things.

I mean, the low-hanging fruit we're kinda taking care of this year. There's still some things we can do next year and that'll continue to benefit us through, you know, 2027 and maybe even into 2028.

Well, that's sort of what I was getting at, which is, you know, if the industry looks next year like it does this year, you still see some pretty good margin expansion.

Yeah.

Yeah, I think that's reasonable. I mean, you know, Joe, as we've talked before, you know, we've put out there the target of a double-digit EBIT margins. Really, a lot of the self-help that we're doing puts us on a nice glide path towards that. You know, obviously as we've spoken before, we do need to see some industry recoveries for the markets that we participate in. We feel real good with the actions that we can take independent of the industry movements to put us on continued progression from a margin aspect.

I think the self-help and the consolidations and optimizations are helping a lot more than what we thought. We've had to rip the Band-Aid off in some spots and get uncomfortable, but at the end of the day, we're starting to scratch double digits without the, without the improvement in the market right now. I think that that's a good sign.

Got it. Maybe last one from me. You know, Jason, I'm not sure how much you wanna comment on the discussions with Patrick, but maybe talk about what initially attracted you to the deal. I don't know if you wanna talk about why it ultimately fell apart.

As we said in the prepared remarks, 77 acquisitions over the course of at least my last 20 years or so in the seat. We're looking at stuff all the time, and our board's always challenging us to look at everything from small tuck-ins to large transformational deals. This just happened to be one that you heard about that got into discussions. At the end of the day, of the 77 we've done, we've probably talked to 400 people, and there's been 300 that haven't gotten done. We're always looking at these things, and we're always looking to whether it's transformational or small tuck-ins, these things pop up.

You just don't necessarily hear about all of them. That's about all we're willing to comment on, Joe.

Okay. Thank you, guys.

Thanks.

Our next question comes from Patrick Buckley from Jefferies. Your line is open, Patrick. Please go ahead.

Hey, good morning, guys. Thanks for taking our questions.

Morning.

I think you called out strong European results in your prepared remarks. What's driving that improvement over there? Is the broader consumer environment showing signs of improvement from what you're seeing?

I would tell you that, you know, we've been over there since 2016, starting to, you know, accumulate a platform over there. We bought several businesses and put them together to create a little consolidated supply business over there. Since we've been over there, you know, the market doesn't ever grow big or drop fast. It's pretty consistent, so I wouldn't say it's market conditions. About 18 months ago, we decided to completely restructure the business over there, really decentralize it, and took away a bunch of a corporate structure we had put together. Again, done some of the same self-help initiatives and plant consolidations and optimizations over there that we've done here in the last 18 months, and it's starting to show through on results really nice.

Got it. On the Lippert factory service, could you talk a bit more about the size of that today and what you view as the ultimate size and growth potential of that opportunity and maybe the timeline there?

Yeah. It's more of a thought we had last year. We kind of implemented this concept last year to say, "Look, there's just As long as we've been in the business, you know, service continues to be a pain point for the consumer." We decided to put a few of our own up. We had one here in Goshen for a long time, but we moved out to Howe right off the toll road, bought a bigger facility with some camping spots and things like that, so it's just more of a destination for people to come to. You know, we've added two more facilities, you know, at the beginning of this year, tail end of last year. You know, it's small today.

You know, it's not bigger than $10 million, we've got, like I said, 200 appointments per week, right now, that's continuing to grow as we get the word out and advertise about this, we're really taking really good care of consumers that come. Our hope is that over the next several years, we can grow this into a bigger platform that's more meaningful, we'll continue to give you updates as we move along quarter to quarter.

Great. That's all for us. Thanks, guys.

Yep.

Our next question comes from Scott Stember from Roth Capital. Your line is open, Scott. Please go ahead.

Good morning, thanks for taking my questions.

Morning, Scott.

A lot of facility consolidation going on over the last six to nine months. I know that there's a bunch that took place in 4Q and another eight to 10 for this year. Can you maybe size up the actual benefit that we'll see down to the bottom line this year just from that? Because that's a huge part of the story for your results this year.

Yeah. No. That, that is, that is a key part of the story for the results. You're seeing it in the first quarter when we had 80 basis points improvement, you know, from cost enhancements. A good portion of that is going to be from the consolidations that we've done. You know, like Jason was saying, we expect that to continue as we progress through this year. In the second half, similar to last year, second half is really where you'll see more of the consolidation activity and the benefits starting to realize, call it towards the end of this year, and more so materially as we get into 2027 is where you'll see the greater impact from our actions in 2026.

Got it. Jason, you made some comments about, I jumped on the call late, so I'm not sure if I heard everything, but some comments about how the aftermarket is trending currently for you, I think, in April and May. Can you maybe just talk about that again? Also with used RVs, outcome forming new. Could you maybe just remind us of how much of a benefit that could be for LCI in the aftermarket with, refurbishing, you know, reconditioning units?

First, you know, what I mentioned earlier was the auto aftermarket is trending revenue, Q2 up mid-teens from last year. As you know, we've got two key components to our aftermarket business. We've got the automotive aftermarket, which is roughly half of our aftermarket business, and then we have the RV and marine piece, which, you know, RV is the big piece of that. I would say the RV side is still, you know, it kind of follows new units. If there's less used units, there's a little bit of sluggishness on the aftermarket side for RV.

With respect to the used units, and Wagner says it best, I mean, every time they, you know, every time they sell a lot of used units, they're always, you know, refurbishing and creating more value in those used RVs by, you know, whether it's repairing and fixing things or just upgrading some things. There is a little bit of that. It's just hard to quantify because it's just really hard to track. You know, used units, new units going up, it's good for our aftermarket business, and we'll continue to see, you know, benefit from that as this goes along. I think the big piece, as we keep talking about, is, you know, these COVID units that are going to continue to need repair and replacement over the next several years.

I mean, there is a slug of those, obviously, to the tune of 1.5 million units. As those start coming in for repair and replacement parts, you know, a lot of that business is gonna come our way.

On the auto side of the aftermarket, what is driving that demand, and do you think that's sustainable for the balance of the year?

Yeah. Yeah, for sure. I mean, the big piece, as we keep mentioning, is the First Brands, kind of that whole bankruptcy that's creating issues. I mean, they have not solved the problem. They've not moved any of those businesses to other businesses that have bought those. You know, the people that were buying First Brands hitches and towing products basically had to go find new suppliers over the last few months that this has kind of broke loose. You know, as the second, you know, as really the largest player in that space, we're the beneficiary of a lot of that new business. We're trying to, you know, take on as much as we can, you know, given what capacity we have.

We expect that to continue, you know, through the long term because it doesn't appear that there's anything gonna happen with First Brands.

Gotcha. That's all I have. Thanks for taking my questions.

Thanks, Scott.

Our next question comes from Tristan Thomas from BMO Capital. Your line is open, Tristan. Please go ahead.

Good morning.

Good morning.

Good morning.

Jason, could you update your retail assumptions for the year? For all of them.

Yeah. I'd say we're kind of down mid-single digits probably where we're at, somewhere in there. It's hard to say. I think we'll have a really good feel in a few months after we get through the summer selling season here, obviously, but that's our best guess right now.

Okay. Just looking at slide 21, your mix of single axle versus multi-axle and fifth wheels, flat year-over-year in the quarter. Is that surprising? I'm curious if you expected that to maybe be a little bit richer.

Yeah. Yeah. It is a little surprising. I mean, we obviously talk to a lot of dealers. We talk to a lot of the OEMs. You know, their commentary to us on these single axle units is they fully expect that to start trending downward at some point in the near future. They said that there's just too much inventory out there. The good news is it's slowed down. I mean, for the last several years, it's been going up. You know, we've seen it flatten out and peak at this point in time, and we expect it to go down.

On the flip side, you know, we've seen fifth wheels, you know, as you know, we build a lot of chassis, and we get to see a lot of these ratios, you know, 1 for 1. Fifth wheels are up a little bit right now, which is a good sign. We obviously put a lot more content into, to fifth wheel units than we do, you know, tandem or single axle travel trailers. That's kinda what we're seeing right now.

Okay. I'm just going to sneak in one more. Just how do we, from kind of a modeling standpoint, you called out $140 million from new model year 2027 kind of share gains? Does that include the $100 million opportunity from the travel trailer, leveling and stabilization system, the one you called out for Brinkley? Also kind of the $140 million, how much of that falls in calendar 2026 versus calendar year 2027? Thanks.

Yeah. It's not a big piece of that. Tristan, the $100 million is a TAM, is a total addressable market for leveling systems of that type. We're just launching that, and we expect that once Brinkley gets it out there and people start seeing it, that they'll want to get a piece of that at least. You know, we're trying to find leveling systems that fit into, you know, the lower price point trailers, some of the lower price point trailers. We've already got leveling systems for trailers, for travel trailers that are a little bit more expensive. You know, our plan is over, like any product launch and innovation, we, you know, three to five years, we want to penetrate at least 50% of the market. That's kind of our gold standard for product launches.

You know, we've got it. We're off to the races with a really good customer and brand, and we'll get some good visibility, and then we'll see what happens as it makes its way into the market. A lot of that, a lot of that $140 million is all sorts of products. You know, obviously, we've been talking a lot about our Chill Cube and our AC movement. I mean, you know, three years ago, we were 15% of the AC market. Today, we're close to 60%. You know, we're making a lot of headway with appliances and our TCS, our Touring Coil Suspensions and our ABS suspension products. You know, suspension, appliances, air conditioners are getting a big, big piece of that $140 million.

We're also making progress with windows and furniture and chassis and some of our other core products.

Great. Thank you.

Yep.

Our next question comes from Brandon Rolli from Loop Capital. Your line is open, Brandon. Please go ahead.

Good morning. Thank you for taking my questions. Just first, just digging in on the second quarter, are you expecting operating margin, sequential operating margin expansion, versus that 8.7% you had in the first quarter?

Yeah. Again, the way I'd probably think of that is, think of the year-over-year improvements. You know, second quarter, again, tends to be a pretty strong quarter for us, just given the seasonality. Typically, you would expect to see that sequential improvement and that year-over-year improvement continuing as well.

Okay. Great. Just on the overall industry recovery for the RVs, clearly retail's underwhelmed year to date. Is there a scenario where, you know, you potentially have to start absorbing some of the raw material price increases, because, you know, the prices are, you know, too much to the end consumer, or OEMs just begin to push back a little bit there? You know, do you feel comfortable, you'll be able to push through price, regardless of industry fundamentals?

Yeah, absolutely. I mean, there's a couple strategies. One is the, you know, obviously good, better, best. We're working with our customers all the time on, you know, good, better, best products. You know, trying to find the most affordable options for people to still offer the consumers, you know, the best possible RV they can offer them, even if they've got to, you know, go from a good product or a better product to a good product or from a best product to a better product. That's obviously part of the strategy, and we're always having those conversations and making, you know, running changes with our customers on those types of things.

The second thing is we're, we are working with our customers right now on special floor plans and doing some special deals so that we can get some more affordable product into the marketplace on really popular floor plans. There's not a single large OEM that we're not having those conversations with right now. We'll continue to work with them as we get through this retail season and see how things are going. We got some, we've got a little bit of tariff refunds hopefully coming. We don't have visibility on that yet.

If that does flow through and the refunds come through as the government has promised, then we'll be giving, you know, we'll be giving back to the large OEMs what they, what we had to increase them back, you know, when those things first came out. That will give some additional relief, hopefully. Affordability is the key issue right now, and we need to do everything we can as a, you know, supplier and OEM community to give the dealers products that are priced right for the consumers.

Okay. Great. Thank you for that color.

Sure, Brandon.

Our next question comes from Alice Wycklendt from Baird. Your line is open, Alice. Please go ahead.

Good morning. Thanks for taking my questions. Just want to circle back on the content per unit. Obviously, really strong organic growth. Is that up 3%? The other bucket is a big contributor. I think the bulk of that is the index price adjustments. Maybe provide a little bit more detail there, and I'm curious on, you know, what was the timing of some of those increases and the expected duration of that tailwind for content per unit.

Hi, good morning, Alice. Again, just in terms of the breakout for the content improvement, 3% was organic growth, you know, really driven by the innovative products continuing to get traction in the marketplace. As we look at that other, it's a combination of the mix. As we've had greater fifth wheel units coming into play, that's benefited us. Probably proportionately as well are those sales price increases to cover the material costs. Really, those started coming into play, I'd say, last year, call it into Q2, Q3-ish. You know, really around the summertime is when we started to see that. You know, those impacts will continue to benefit on the content unit as we're moving forward.

The, the unit mix was also an important part of that increase as well, just 'cause we have more content on those larger, better equipped units.

Thanks, Marlene. I want to take a step back. It sounds like integration of Freedman Trans/Air is going well, but what does the M&A pipeline look like today? What are you focused on?

Yeah. Yep. As always, we've got a lot of names on the list, Alice Wycklint. You know, we're, at a given point in time, we're talking to four or five different tuck-in opportunities, you know, those range anywhere from early discussions to, you know, LOIs. You know, we'll just keep you posted as we get close to getting these done. The pipeline and multiples really haven't changed much in the last couple of years since we started looking at M&A again.

Great. Thanks. That's it for me.

Great. Thanks.

Thank you.

We currently have no further questions. I'd like to hand back to Jason for some closing remarks.

Yeah. Well, I think the headlines are, you know, a lot of the self-help that we've been doing is starting to come into play and have great impact on the results. You know, after 10 years of really focusing on diversifying the business in all these different areas, all the acquisitions and organic growth we've done there is really starting to play into our results as well, and we're excited to update you on our Q2 results in a few months. Thanks everybody for tuning in.

This concludes today's call. We thank you for joining. You may now disconnect your lines.