LCI Industries Stock

Hello, everyone, and welcome to joining us today for the LCI Industries Second Quarter 2026 Earnings Call. My name is Rob, and I'll be coordinating your call today.

Before we begin, I would like to remind you that certain statements made on today's 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 described 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 presentation, which have been posted on the Investor Relations section of the company's website and are also available on Form 8-K filed this morning with the SEC.

On the call from management today are John Sirpilla, Interim Chief Executive Officer; Lillian Etzkorn, Chief Financial Officer; and Kip Emenhiser, VP of Finance and Treasurer.

[Operator Instructions]

With that, it is my pleasure to turn the call over to John Sirpilla.

Thank you, operator, and thank you, everyone, for joining us. This morning, Lillian and I will provide an overview of the business and share why we are energized about LCI's future.

We delivered solid second quarter results with expanded profitability despite continued soft outdoor recreation industry demand.

Our 2026 performance has been driven first and foremost by our self-help initiatives. Through disciplined operational efficiencies and strategic cost reduction actions, we structurally improved our cost base and expanded net margins despite a challenging wholesale RV production environment and continued retail softness.

Our disciplined cost management execution and increased product content per unit have fundamentally strengthened our earnings power and position us to generate higher returns throughout the cycle.

Although I have been in the interim CEO role for only 2 months, I have served on LCI's Board for more than 7 years. My first priority when taking the CEO role was to spend time with our dedicated team members, supply chain partners, and valued customers.

Those conversations have left me more impressed than ever by our team's commitment to supplying outdoor recreation, transportation, and housing markets with a broad array of highly engineered quality products and related services at affordable prices.

I am energized by the opportunities ahead and by the appreciation expressed for the value LCI delivers every day across the dynamic markets we serve. It is an incredible honor to serve in my new capacity, working alongside trusted colleagues while leading such an impressive organization.

Having spent nearly 3 decades in this industry, helping build a national retail brand after leading my own family dealership business, I come to my new role as a builder, not just a caretaker.

My 4 proven yet simple guiding principles are: curiosity, alignment, accountability, and gratitude, and I intend to apply each of those as we move through this transition.

Less than 2 months ago, my first investor call for LCI was to announce the proposed merger with Patrick Industries.

As we continue to spend time with Patrick's leadership team, our enthusiasm and confidence continue to build around the meaningful long-term value and opportunities the merger will unlock.

We are excited about the compelling strategic and financial rationale for the proposed merger. Together, we expect to create a broader, more innovative product platform and cost-effectively bring more products within reach of outdoor recreation consumers.

But for the time being, until the transaction closes, it remains business as usual at LCI. Ryan Smith and Jamie Schnor continue to lead our operating segments as group presidents. Our senior leadership team remains intact, and execution remains sharp.

Our talented innovation-minded teams remain squarely focused on our strategic priorities, maintaining a well-balanced portfolio, expanding across adjacent OEM markets, growing our aftermarket presence, considering accretive M&A opportunities, streamlining our operations and cost structure, partnering with our customers to deliver solutions, and accelerating content gains through new product innovation.

Our expanding product pipeline, combined with our engineering capabilities and deep customer relationships, provides a meaningful runway for continued content expansion.

This collaborative innovative spirit has driven remarkable growth over the year, with currently an estimated $270 million annual revenue run rate from our top 5 innovations.

Backed by the strength of our balance sheet and disciplined capital allocation, our strategic focus and operational execution will propel our drive to enhance shareholder value.

In the aftermarket, the large installed base of Lippert content already in the field creates a durable growth platform and strengthens our connection with customers throughout the product lifestyle through our network of dealer partners, technical care teams, factory service centers and mobile service capabilities.

Our diversification strategy to add and build the aftermarket segment and other OEM markets adjacent to RV has enabled us to profitably grow our business with higher-margin offerings and mitigate the cyclicality of the RV industry.

As part of our commitment to helping customers navigate the impact of rising prices, our finance and procurement teams moved quickly to identify, document, and file eligible claims early in the IHEPA tariff refund process.

Their efforts will enable us to return nearly $90 million in tariff refunds directly to our customers, providing meaningful support to their businesses and to the broader industry.

We took this responsibility seriously and made the deliberate decision to manage this effort internally rather than rely on third-party recovery firms that often charge large contingency fees on the amounts recovered.

While this represented a significant undertaking for our team, they executed with exceptional discipline and expertise, maximizing the value returned to our customers.

I want to personally thank our finance and procurement teams for their unwavering commitment and outstanding execution. Their work reflects our culture of partnership and our dedication to serving the markets in which we operate.

While these refunds have a minimal impact on our P&L given their pass-through nature, they represent something more important. We made a commitment to our customers that we would work diligently to mitigate the impact of tariff-related price increases wherever possible, and we have honored that commitment.

I want to thank all of our team members not only for their focus, resilience, and commitment during this transition, but also for the overwhelming warm welcome they've extended to me.

Their execution and partnership are the foundation of our performance and give me great confidence in LCI's future. I'll now hand it over to Lillian to walk us through the quarterly results and our updated outlook for the full year.

Thank you, Johnny, and thanks, everyone, for being with us. We continue to execute well across the business in the second quarter, delivering improved profitability despite persistent softness in outdoor recreation demand.

This performance reflects the strength of the platform we have built, the hard work of our talented team, and disciplined execution against our self-help initiatives, including operational efficiencies, strategic cost reductions, and increased product content per unit.

Together, these actions have structurally improved our cost base, expanded margins and strengthened our earnings power across the cycle.

As Johnny noted, it remains business as usual, and our team is squarely focused on advancing these priorities and driving shareholder value. With that, I'll walk through the key financial results and operating metrics for the quarter.

For the second quarter of 2026, and speaking on an adjusted basis, our consolidated net sales were down 4% to $1.1 billion. OEM net sales declined 10%, while aftermarket net sales grew 11%.

In the context of towable RV wholesale units being down 20% in the quarter, we are pleased with the resilience in our sales. Starting on the OEM side, our revenue performance reflects a decrease in North American travel trailer and fifth-wheel shipments as well as an increase in RV sales mix towards lower content single axle trailers.

Favorably offsetting factors include targeted commercial actions to address higher input costs and adjustments tied to select commodity indices and content gains from recent product innovations.

Top-line adjustments relate to tariff refunds passed through to customers. And in the earnings slide deck, in an effort to further enhance transparency, we've included a full income statement reconciliation for this quarter's adjustments.

Innovation remains a key driver of LCI's growth and customer value proposition. Despite the reduced mix of fifth-wheel units, we saw an 11% year-over-year increase to $5,831 of content per unit.

This was supported by strong adoption of recent product launches that are now generating more than $270 million in normalized annual revenues.

Content per motorized unit increased 2% to $3,852. We expect approximately $140 million of additional annualized revenue from new product placements during the 2027 model change.

Combined with our advanced manufacturing capabilities and expertise in mission-critical components, the innovation pipeline continues to deepen customer relationships and expand LCI's content across leading brands.

Turning to our aftermarket business. The 11% year-over-year growth in adjusted net sales was driven by targeted commercial actions to address higher input costs and adjustments tied to select commodity indices, sales from acquired businesses, and new customer volumes in the automotive aftermarket.

This increase also reflects the resilience of our installed base and continued execution across the business. More than $15 billion of replaceable LCI content has entered the RV market over the past decade, supporting a growing service opportunity as approximately 1.5 million units move into repair cycles over the next several years.

We are expanding our reach through a 400-plus member care and technical organization, new dealer-based retail concepts, factory and mobile service offerings, and added distribution capacity.

We continue to see repair and replacement demand as RV ownership and used unit acquisitions have increased over recent quarters, and this should serve as a tailwind moving forward.

From a profitability standpoint, we saw significant improvements during the quarter, and the team is continuing to drive our self-help initiatives.

Our consolidated operating profit of $99 million on an adjusted basis was up 8% over the prior year and reflects a 9.3% adjusted operating profit margin, which is up 110 basis points.

On the OEM side, our adjusted margin expanded a full percentage point to 7.5%, reflecting disciplined execution across cost improvement initiatives including material sourcing strategies, along with targeted commercial actions to address higher input costs and adjustments tied to select commodity indices.

These gains were partially offset by tariff-related material costs, higher steel, aluminum, and fuel costs, and lower fixed cost absorption.

Aftermarket adjusted operating profit margin was a very solid 14%, up another 30 basis points over the past year, reflecting disciplined cost management and continued execution of material sourcing strategies, supported by targeted commercial actions to address higher input costs.

These gains were partially offset by tariff-related material costs and higher commodity, fuel, and capacity-related costs.

Our adjusted EBITDA grew 7% year-over-year, coming in at $129 million and reflecting a margin of 12.2%, up from 11% a year earlier.

GAAP net income increased 16% to $67 million, with diluted GAAP EPS of $2.75, up significantly from the prior year period of $2.29. On an adjusted basis, diluted EPS of $2.70 was up from $2.39, which is a 13% year-over-year increase.

Turning to our balance sheet. We continue to operate from a position of strength with cash and cash equivalents of $217 million as of June 30. Plus $595 million of availability under the revolver, bringing total liquidity to $812 million.

Following the payoff of our 2026 convertible notes in May, our outstanding net debt balance was $636 million at the end of the quarter, and our net debt to adjusted EBITDA ratio stood at just 1.5x, significantly improved from 1.8x at the start of the year and at the conservative end of our targeted range of 1.5 to 2x.

We remain both balanced and disciplined in terms of capital allocation.

During the second quarter, our capital expenditures were $19 million. We also paid $28 million in dividends during the second quarter, maintaining our payout of $1.15 per share, which represented a yield of 4.3% as of the end of the quarter.

I'll close with our updated outlook, starting with July adjusted net sales of approximately $315 million.

For the full year, we now look for RV industry wholesale shipments to be in the range of 280,000 to 300,000 units relative to our prior range of 315,000 to 330,000 units.

We expect full-year adjusted revenue of $3.9 billion to $4.1 billion. And given the success of our self-help initiatives, we still anticipate an adjusted operating profit margin in the range of 7.5% to 8%.

We are pleased that even in this challenging industry environment, we are able to maintain the original guided margin range. The resulting outlook range for adjusted EPS is now $8.25 to $8.75. We also continue to expect full-year CapEx in the range of $55 million to $65 million.

In closing, our priorities are clear: help our customers win through differentiated innovation, exceptional quality and service while executing with discipline across the business.

Our content growth, diversified portfolio and expanding high-margin aftermarket platform, along with continued cost optimization, are strengthening profitability and positioning LCI to outperform across market cycles.

With the commitment of our team and the trust of our customers, we are confident in our strategy and focused on delivering sustainable long-term shareholder value.

Before we kick off the Q&A portion of the call, I wanted to briefly address our previously announced merger agreement with Patrick Industries.

As you would expect, we are limited to what we can say beyond the information that has already been publicly disclosed. We will remain focused on continuing to execute against our strategic priorities, while we are supporting the customary regulatory review and undertaking appropriate integration planning subject to the applicable legal safeguards.

And with that, we would be happy to take questions.

[Operator Instructions]

Your first question today comes from the line of Scott Stemler from ROTH Capital.

Before considering the proposed merger with Patrick and taking out the IEPA tariff refunds, which you will be giving back to your customers, is there a broader program going forward, addressing affordability?

Are you guys working with the Thors and the Winnebago to help them bring prices down in the market? And if it is, is that baked into guidance for the remainder of this year?

Scott, thank you for that question because that has been a big focus for us, because our goal in cost reduction is to help stimulate and drive volume really where we all win.

So outside of the IEPA tariff giveback, we have really done a strong job on our self-help initiatives, whether it's through strong G&A reduction. We've had facility consolidations, five last year.

We have another 8 to 10 planned in the back half of this year. We've really worked really hard on our quality initiatives over the past 18 months, and we're really starting to see those dividends with significantly strong quality gains that are positively impacting our customers and our efficiencies.

We've reshored product procurement to look for more affordable countries for tariff mitigation. And overall, all of those coming together, we've really been able to see this impact that we could continue to drive forward to our customers.

And then moving over to the aftermarket. You guys alluded to the wear and tear cycle starting to kick in. I know a lot of us have been waiting for that with the post-COVID jump in units in operation.

Are we really starting to see that? Could we see aftermarket demand accelerate in the quarters ahead?

We believe that we can see that, Scott. And being in this industry a long time, I'm very accustomed to where the aftermarket side can drive sales, could also drive continued interest in the use of vehicles for our customers in the outdoor recreation space.

So we're confident that that can continue to happen.

We've worked hard to ensure that our new DC footprint will be able to further service all the dealers out there, anyone in the aftermarket space where we can really drive a lot of on-time deliveries to them, get the product to them quickly so they can continue to take care of the customers that are in the market now that want to use their vehicles.

And then last question about cadence embedded in the guidance, Q3 and Q4, whether it's sales, margins, and EPS, how should we be modeling that with 2 quarters left?

Yes. I'd say, Scott, as we're looking at this year, it's probably a more normal year in terms of seasonality, whereas in past years, we've talked about there's anomalies going on.

So, I would say just typical seasonality that you would expect. Obviously, in Q3, we have summer shutdowns. In Europe, basically, they shut down for a full month, which is very typical, again, just normal seasonality. And then you get into the fourth quarter, you start to get into the holiday shutdown.

So very normal seasonal cadence as we round out the year.

Your next question comes from the line of Nathan Jones from Stifel.

This is Andres on for Nathan Jones. I have more of a broad question on end markets and specifically aftermarket. Can you talk about the dynamics at play there and what your expectations are for the year?

I'm sorry, you're cutting out a little bit. Can you restate the question again?

Yes. Can you talk about the end markets driving increased aftermarket net sales and what your expectations are for the year?

Yes. So, as it relates to the aftermarket, you obviously have a few different elements that come into play. You have predominantly the OEM aftermarket that supports our RV business.

That's been going well. And really, what comes into play there is the service and the repair cycle. So, as units are coming out of their warranty years, entering that service and repair.

One of the elements that does also impact that, frankly, is the use of the units while they've been in service. So what I mean by that is if you had a unit that every weekend, somebody is camping, and they're using it in essence full time, there's going to be greater wear and tear on the units.

So you're going to have more opportunities probably to have aftermarket servicing there, whereas if somebody is maybe a once-a-year type of RV and has come into play, you're going to have probably less service, or it's going to take more time for that unit to be coming into the service.

So we have definitely seen more used units being purchased, which is what we hear from the dealers, which does offer opportunity there.

As we think of the aftermarket as it relates to the automotive side, I'd say that industry itself has been a little bit more tepid as we've moved through the year, with the consumers being a little bit more sensitive to some of the affordability aspects out there and just the global macro; global macro has impacted some of the consumer confidence.

I think we've seen some automotive weakness.

That said, we have the benefit of gaining business, as we've talked about in prior calls, as a result of another competitor going through a bankruptcy process, and we've been able to pick up a nice amount of business from that.

We've also put considerable focus on aftermarket upgrades. Innovation is the key lane that we are really strong in.

And the team continues to put out products that give those consumers, as Lillian was mentioning, who are actively using their coaches, not only to look for opportunities when there is a repair needed, but when there's an upgrade.

And the upgrade is the opportunity to further enhance their enjoyment in their coach and their vehicle. And so with that, we're going to continue on that focus, and our engineers do a great job of working with our teams on driving innovation.

Brings me to my next question, actually. Can we talk a little bit about the pricing dynamics in the market given a relatively soft demand and the company's ability to pass through higher costs?

Generally, do you see easier to pass on price when it comes to the aftermarket business? Are you seeing that currently?

No. What I would say as it relates to pricing, so first, maybe more of a broad statement, is that unlike other industries, we don't participate in just pricing for the sake of pricing.

Generally, if we are taking pricing, it's because the input costs have gone up, notably with commodity costs.

So as an example, when I look at steel and aluminum, which are the primary commodities that we use in our products, aluminum is up 80% year-over-year. Steel has been up about 20% year-over-year. They've been stabilizing a bit, but they're definitely up.

Those types of costs are on index pricing with our customers. So we pass that along when there are increases. At the same time, as you saw us several years ago, as the cost came down for those commodities, we also pass that through.

So really, our approach and our philosophy with pricing is not to just pass on pricing for the sake of pricing. It really is as it relates to those input costs, really predominantly those commodities.

Aftermarket operates similarly in terms of, again, it's not opportunistic pricing. It really is related to the cost and the input costs of our products.

And as Lillian mentioned, with aluminum and steel as examples, they have leveled off, but unfortunately, they've leveled off at a higher level.

So that puts more pressure on us to look at our cost focus because really cost volatility today really no longer exists in the index-driven areas alone.

The real movers are tariffs and trade and trade policy, energy costs, geopolitical issues, freight and demand uncertainty.

So when we take all of that in, our team needs to work harder, which they have done. Our procurement team has done an outstanding job, as I mentioned before, looking for very creative sourcing solutions to reshore products from different locations.

And so commodities, of course, are an impact to us, but there's just so many factors in play that I'm proud of what the group has done to help mitigate those costs.

Your next question comes from the line of Joe Altobello from Raymond James.

I want to start on the aftermarket. You guys talked about a couple of different crosscurrents going on, obviously, gaining share from a competitor bankruptcy, also a lot of RVs moving into the repair cycle, for example. Should we start to think about that business as more of a steady-state, high single, low double-digit grower?

Yes. No, I think we have been seeing that type of growth recently. And I think that as we look forward, I would expect to continue to see those levels of growth.

That really is one of the areas of the business, I think, from putting aside the cyclical nature and where we are right now in the RV industry, that obviously will be recovering.

But what I'd say from just organic growth and continuing to grow a part of our business, aftermarket continues to be, I'd say, a bright spot for us as we look towards the future, both the opportunities in the RV side from the repair replacement cycle, the upfitting cycle, as Johnny was talking and the automotive aftermarket, I think, will continue to grow nicely for us on the top line.

I think the other important element to highlight there because we've been talking in the past few quarters about some of the headwinds from a profitability perspective from the aftermarket business.

As you know, we've been investing in the business for the infrastructure with the distribution centers. We're in the process of standing up a new facility down in Texas to support the Ranchan brand.

So there have been a number of investments that we've put into the aftermarket business that will also start realizing the improved margins as those investments taper off, and we start realizing business.

With our investment that we've had, Joe, when we look at Texas, we look at the opportunity there, consolidating facilities, opening really a new beautiful facility that we are going to be able to double our capacity for the future for the Ranchan products.

That is a strong investment into aftermarket.

When we look at the wins that we've had just in model year change, earlier this year, in the last 60 days or so, we have $140 million of new business awarded to us. That's on an annual run rate.

Every time that we get that new business and our customers continue to choose us for our innovation and for our brands, that also boosts our opportunity in the aftermarket for any replacement or repair needs on those products that we've gotten into the market.

So with that, we're going to continue on that path. When we look at the Furrion brand and the opportunities in the industry on the Furrion Chill AC, the team has done a really strong job with getting that stronger in the market as well.

And so again, those opportunities for increased aftermarket are there for us.

And just moving on to the margin outlook. You maintained it, obviously, with roughly $250 million of lower revenue guidance here.

What's the offset that's helping you maintain that margin? And is it more OEM or more aftermarket?

What I'd say as it relates to the margin is the team has been doing an outstanding job, call it, over the last 18 months of really executing hard on the self-help initiatives that we needed to be focused on.

And that includes overhead reductions, indirect spend improvements, lower G&A, really just dialing in our cost structure and how we're able to execute. 

And one of the things, and I know this quarter is a little bit more complicated because of the various moving pieces. But one of the things, when you cut through the noise in terms of margin improvement from the self-help actions that we've done, there was actually 160 basis points year-over-year from the self-help.

And it's because of that, frankly, that gives me the confidence as we go forward, despite the tepid top-line outlook because of lighter industry, I have that confidence that we'll continue to be able to execute and deliver that margin consistent with where we thought we would be when we started the year and put it out initially.

As I said earlier as well, Dan, we've always done a great job on innovation. That's a strength of ours.

But in this past year, we've really refocused innovation. And let's call it, 50% of our time is really looking at value-add analysis and engineering work where we are taking engineering initiatives to really reduce cost.

And so apologies, Dan, I meant to say Joe.

But when we look at that, that improvement that we're doing there and working on getting cost down, then taking the other half of our time in innovation, really looks at customer experience.

So it's that combination of customer experience and bringing cost down that has really helped to hit the bottom line.

And just one last one for me. Will there be additional AEPA refund pass-through in the second half?

So in terms of receipt of the tariff refunds, yes, there will likely be some continued receipts. But with the accounting treatment that we've chosen, basically, we've accounted for everything that we expect to receive back.

It's a matter of when the cash actually arrives. And then when the cash arrives, we're able to then turn it around and refund it back to the customers.

So from a cash basis, it really is that as the tariff cash comes in, we'll get that back to our customers on the pass-through as we've talked about. But from an accounting perspective, we have fully accounted for anticipated tariff activity in the second quarter financials.

Your next question comes from the line of Dan Moore from CJS Securities.

It's Pete Lucas for Dan. You covered most of my questions. Just, I guess, a bigger picture question in terms of retail demand.

Obviously, lots of headwinds: interest rates, inflation, oil prices. But just wanted to get your thoughts. Is it simply that we pulled forward so many units during the pandemic and are still working through that, or are there other factors in your mind impacting -- the biggest factors, I should say, impacting demand at the current stage?

There is, of course, you could say the tail on the adjustment from when the market was flooded during COVID.

But we've done a better job. Our customers, the OEMs, have done a great job on production, watching that, and the dealers have done a really nice job managing their inventory levels.

And so when you look out in the marketplace today and see at the dealer level, 18 to 20 weeks of inventory in the field, we think that's really responsible at this time of the year.

It's putting them in a really good position in the back half of the year for them to see what's going to happen here at Open House, which happens towards the end of September, and then be in a better position to stock up for Q1 and Q2 of 2027.

Your next question comes from the line of Tristan Thomas-Martin from BMO Capital Markets.

Could you update your retail expectation for calendar '26?

We did not put that out there. But what I would say from a retail perspective, we would expect it a little bit higher than the wholesale.

What we're hearing in talking to the dealers is that they're looking to continue to keep their inventories at a healthy range. So not necessarily replenishing unit for unit with the retail.

But seeing retail outpace wholesale even by a small margin puts us in a better position than we've seen traditionally over the past year.

And then just curious with the model year 27 release, do you see any OEMs maybe trade down the product cycle going from maybe a good product to better or best?

No, we have seen some shift there. Of course, entry-level product is always a focus to ensure that we get new people coming into the market.

But where we have seen in some parts of the business, for example, in marine, mid- to high-end products, wholesaling and retailing are better. And that really for us is a strong thing because our product content is so much stronger in those price points.

And whether it's windshields or Power biminis, Arches, high-end furniture, Luar, all of that is a good opportunity for us to be better represented in that price point.

[Operator Instructions] 

Your next question comes from the line of Alice Wycklendt from Baird.

Just back on that topic of affordability and pricing. Do you have any sense for where model year '27 pricing is shaking out on a like-for-like unit basis?

I think you're going to see it up just a bit, which doesn't surprise us at this point with all that's been going on in the market, but there's been good mitigation to the best of everyone's ability.

So I don't see it in my early thoughts right now to feel that it's significant.

And then maybe can you just provide an update on what's going on in your international end markets?

Yes. I'd say we've been seeing pretty consistent with Europe is what we're seeing here in North America. I'd say, saying that, we don't think they've been impacted quite as significantly as what we've seen here in the North American markets.

I think overall, the team is performing well there. I think we're continuing to see steady growth; I would characterize it as such. So there's still some softness overall, which is not inconsistent with what we're seeing here, but it's not to the magnitude that we're seeing in the U.S.

And then one more for me. Is there any way to frame your exposure to the Housing Act that changed requirements for manufactured housing chassis? 

I'm not sure it's material, but we've had a few questions about it.

Yes. I'd say it really comes to the materiality question. It is a fairly small part of our business. So not material at all for us in the scheme of things.

It is something that we're continuing to monitor just as we're supporting customers in the overall marketplace, but immaterial in terms of our results.

Your next question comes from the line of Bret Jordan from Jefferies.

This is Patrick Buckley on for Bret. On the merger, from where you're seeing things today, what are you seeing as the greatest regulatory risk on the deal? And what has been the initial response from your peers and partners across the industry?

Yes. I think, Patrick, as I indicated before kicking off the Q&A, we're not going to be talking about the merger on today's call, just as we're going through our regulatory filings and preparing the proxy.

I think we'll be in a better position to talk to you and everybody about the status once we get the proxy out, which will be later.

Just wanted to try. And then I guess as a follow-up here. On the aftermarket side, is there any profitability or sales difference when you compare sales related to a used RV unit moving to a new owner versus existing owners that are investing in their current unit and performing maintenance?

Well, there's always the opportunity when you look at somebody buying a used coach; they might be investing in that unit that the previous owner did not further invest in and take care of their unit.

So we like to see those people with enthusiasm come into the market. There's, of course, a better price point opportunity for them when they're buying used.

And so you see that enthusiasm and see people want to upgrade, and maybe some of the flaws in the coach that the previous owner was willing to accept, the new owner wants to make that change.

And so that's a space that we enjoy, then keeping them enthused, and it's our job to keep them in the market then.

And that concludes our question-and-answer session. I will now turn the call back over to John Sirpilla for closing comments.

Well, thank you, Rob. Thank you for everyone being on the call today. We appreciate your continued interest in LCI Industries, and please don't hesitate to reach out if you should have any other further questions.

We look forward to providing another update to you in the next quarter. And also, again, just have to thank our team here, the amazing colleagues that I have and team members, for welcoming me in and allowing me to serve in this capacity. It's truly an honor. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, ladies and gentlemen, and welcome to today's call. My name is Kevin, and I'll be your operator for today's call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the call over to Mr. Steve O'Hara. Mr. O'Hara, you may begin.

Good morning, everyone, and thank you for joining us. This is Steve O'Hara, Vice President of Investor Relations at Patrick Industries. Welcome to the joint conference call hosted by Patrick Industries and LCI Industries to discuss the proposed combination of our 2 companies announced earlier today.

Before we begin, this call is being webcast and recorded, and a replay will be available on the Investor Relations section of both companies' websites following the call. Earlier today, we issued a joint press release announcing the transaction, which we have -- and we have posted an accompanying investor presentation to both companies' IR websites. We encourage you to review those materials alongside our remarks.

Joining me on today's call are Andy Nemeth, Chief Executive Officer of Patrick Industries; and Johnny Sirpilla, Interim Chief Executive Officer of LCI Industries.

Before I turn the call over, I need to cover a few important items. Our remarks today and our responses to your questions will contain forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding the proposed transaction, its anticipated benefits and synergies, the expected timing of closing and the future financial and operating performance of the combined company.

Forward-looking statements are based on management's current expectations and assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially, including the possibility that the transaction does not close, the failure to obtain required shareholder or regulatory approvals the risk that anticipated synergies are not realized and integration risks.

Additional risk factors are described in each company's filings with the SEC, including the most recent annual reports on Form 10-K and subsequent reports as well as in today's presentation materials. We undertake no obligation to update any forward-looking statement, except as required by law.

To the extent we reference non-GAAP financial measures on today's call, reconciliations to the most directly comparable GAAP measures are included in our press release and presentation materials. This communication is for informational purposes only and is not intended to and does not constitute an offer to sell or the solicitation of an offer to buy any securities nor a solicitation of any vote or approval in any jurisdiction.

In connection with the proposed transaction, Patrick intends to file with the SEC a registration statement on Form S-4 that will include a joint proxy statement prospectus. We urge investors and shareholders to read the registration statement, the joint proxy statement prospectus and any other relevant documents filed with the SEC when they become available because they will contain important information about the transaction. These documents, once filed, will be available free of charge at the SEC's website, www.sec.gov, and on the Investor Relations sections of both companies' websites.

Patrick Industries and LCI Industries and their respective directors and executive officers may be deemed participants in the solicitation of proxies in respect of the proposed transaction. Information regarding these participants and their interest will be set forth in the joint proxy statement prospectus and other relevant materials to be filed with the SEC.

With that, I'll turn the call over to Andy.

Good morning, and thank you for joining us today. My name is Andy Nemeth, and I am the Chairman of the Board and CEO of Patrick Industries. It is with great excitement that I sit here alongside Johnny Sirpilla, Interim CEO of LCI Industries, also known as Lippert, to announce the proposed all-stock merger between Patrick and Lippert, 2 companies headquartered in Elkhart with deep history, strong operating foundations and complementary product capabilities.

Today marks the beginning of an exciting new chapter, not just for our companies, but for our customers, suppliers, team members and the communities we graciously serve. This is a disciplined strategic step forward. Both companies bring proven teams, strong customer relationships and a long track record of successful execution and stewardship. Bringing Patrick and Lippert together strengthens our ability to serve our customers, provide the most innovative component solutions, support our team members and communities while continuing to drive long-term value for our shareholders.

The fit is clear, and our complementary product suites provide us with a tremendous opportunity to deliver competitive, cost-effective solutions and help our customers address the acute need for long-term affordability in these dynamic times. This combination also deepens our capabilities and positions us to pursue growth more effectively across our diversified markets.

As we move forward, our priorities are straightforward: deliver on our strategic objectives and capital allocation strategy, execute the integration thoughtfully, maintain the high level of service that our customers expect and positively impact our team members, markets and communities with humility and in alignment with our values. We are enthusiasts, and we serve enthusiasts. That focus drives our commitment to enhancing not only the outdoor enthusiast experience for years to come, but also converting that passion into products and customers in our adjacent combined housing and transportation markets, all while delivering long-term value for our stakeholders. We'll walk through the transaction overview, strategic rationale, forward-looking vision and financial profile in the presentation that follows.

I'd now like to turn the call over to Johnny Sirpilla for some opening remarks.

Thank you, Andy, and good morning, everyone. I am Johnny Sirpilla, Interim CEO of LCI Industries. I am pleased to sit here alongside Andy to announce this proposed all-stock merger between Patrick and LCI. This combination brings together 2 established industry-leading American manufacturing companies with deep roots, long-standing partnerships across North America and Europe and shared track records of strategic and organic growth, innovation and customer service.

Together, Patrick and Lippert will form a more dynamic and innovative platform serving OEMs and customers across the outdoor enthusiast, housing and transportation markets with more than $8 billion in combined revenue and approximately $1 billion in estimated adjusted EBITDA pro forma with synergies and a highly complementary product portfolio across diversified end markets.

The combined company brings together more than 110 of the most recognizable brands in our markets, including leaders like Alpha Systems, TaylorMade, SeaDek, Furrion, CURT and Sportech. By combining Patrick's integrated design to delivery expertise, Lippert's mastery within highly engineered and innovative structural components, enhanced R&D capabilities and a shared commitment to innovation, we will be able to deliver differentiated, competitive, cost-effective solutions, strengthen value chain alignment and support long-term growth across our key diversified end markets.

As Andy mentioned, we believe this combination enhances our ability to meaningfully partner with our customers. Together, we are building a stronger, more resilient platform, one that enhances partnerships, expand capabilities and is better positioned to serve our customers.

Andy will now take us through an overview of the transaction.

Thanks, Johnny. We have structured this combination as an all-stock merger between Patrick Industries and LCI Industries in alignment with capitalizing on the strengths of both companies. We believe this aligns shareholders in the long-term success of the combined business and presents a compelling value creation opportunity.

With combined equity value of approximately $5.5 billion and an enterprise value of more than $7.5 billion at announcement, shareholders of both companies will participate in the future upside of the combined business, driven by synergy realization, innovative solutions-based partnerships with customers to help them address affordability and the creation of a stronger unified company that is both more resilient and diversified.

Upon closing, which is targeted in the first half of 2027, subject to customary shareholder and regulatory approvals, Patrick shareholders will own approximately 52% of the combined company, and LCI shareholders will own approximately 48%. Each LCI share will be exchanged for 1.2440 shares of Patrick common stock.

Turning to leadership following close. I will assume the role of CEO of the combined company. Todd Cleveland, former CEO and Chair of Patrick and a highly respected leader across the outdoor enthusiast market will serve as Chair of the Board -- of the combined Board. Johnny Sirpilla, Interim CEO of LCI, retired President and Chief Business Development Officer of Camping World and Good Sam and former owner of Sirpilla RV will assume the role of Vice Chair of the Board.

With overall industry experience of more than 90 years, this team is well positioned to lead the company into the future. We will take a disciplined, thoughtful and collaborative approach to building the combined leadership team focused on a humble servant leadership approach with the best and most committed talent from both companies, ensuring the right leaders are in the right roles across the organization.

In addition to its strategic and customer-focused benefits, the transaction is financially compelling and is expected to be accretive in the first year. On a pro forma basis, revenues are approximately $8.1 billion. Adjusted EBITDA is approximately $1 billion, representing a margin of 12.6%. Free cash flow is expected to be $508 million. Pro forma net leverage is estimated at 2.1x, below Patrick's target ratio of 2.25 to 2.5x. These figures include the impact of approximately $150 million of annual run rate cost synergies with accretion realized in year 1 and all synergies fully realized within 3 years of closing.

This transaction has been unanimously approved by the Boards of both companies. With respect to the Board of Directors, the combined company will initially have 12 members with 6 designated by Patrick and 6 designated by LCI. Following the second Annual Shareholder Meeting after closing, the Board will begin to transition to a standard nomination process and a reduced size. Together, we are advancing our goal of being the supplier of choice for the outdoor recreation, housing and transportation markets.

Johnny will now discuss the potential value for stakeholders.

This transaction creates value for stakeholders. For our OEM customers, they will benefit from broader product offerings, enhanced solutions and deeper technical expertise to accelerate innovation. Customers will also maintain their decades-long trusted relationships with our teams and benefit from a stronger, more capable long-term partner.

Together, we expect to deliver even more cost-effective and competitive solutions, helping address affordability for the long-term benefit of the markets we serve. For our customers and end users, they will benefit from faster innovation cycles, expanded aftermarket access and better value, improving the overall experience. For our people, the combined organization has over 22,000 team members operating across approximately 350 facilities with over approximately 110 unique brands, creating a unified high-performing talent base.

Our people remain our greatest asset, and we are committed to preserving the humble culture and values that have driven our success. For our communities, Patrick and Lippert share a deep commitment to supporting the local communities in which our team members live, work and experience our products and markets. We will support job stability, drive economic growth and build on our community partnerships to help foster the next generation of enthusiasts. And as has been the case since 1956 for LCI and 1959 for Patrick, the combined company will remain headquartered in Elkhart, Indiana, further reflecting our deep roots and long-standing commitment to the community.

For our shareholders, the combination of these benefits translates directly into long-term value creation for our shareholders. That is exactly why this combination is so exciting. Shareholders benefit from greater end market product diversification, expanded aftermarket capabilities, stronger strategic positioning for OEM recovery cycles, strong free cash flow generation and balance sheet flexibility, near-term and long-term synergy accretion and a disciplined capital allocation strategy.

As you can see, these benefits build on the strength of what both organizations have created independently. Now, enhanced through our shared culture, stronger partnerships and greater scale, we are better together.

Andy will now discuss how we believe the combination can drive future performance.

If you recall at the Patrick Investor Day back in December 2024, we outlined our long-term vision, which highlighted our continued investment along 3 core fronts: first, reinvest in the company and our people; second, deliver organic growth through innovation, footprint expansion and scalability. Third, continue to drive our proven M&A strategy to optimize our exposure to the outdoor enthusiast markets, the aftermarket and in opportunities in the housing and transportation markets. Those core themes are further enhanced through the Patrick and LCI combination, as Lippert has been executing upon a similar strategy to grow through innovation and expand into adjacent complementary markets. Lippert has built a strong aftermarket network that will provide a launching pad for Patrick's products.

At the macro level, the long-term vision of the combined company is about continuing to evolve from a collection of strong brands and businesses into a collaborative platform, capitalizing on best practices that is even more aligned with how our diversified end markets operate. First, we are moving toward a more solutions-driven model to drive organic growth. We're not just providing individual components. We are increasingly focused on delivering higher-value, custom-integrated offerings that improve value for our customers, which can then be passed along to consumers in an effort to attack real affordability concerns. We are also looking at facility expansion hubs to be closer to our customers and increase our service touch points.

Second, we will leverage our strong cash flows and proven capital allocation strategy to reinvest in the business and drive results. We will continue to prioritize opportunities that drive long-term returns, including strategic growth, investments in automation and technology, share buybacks and disciplined returns of capital via dividends, all while maintaining a strong and flexible balance sheet.

And third, we see a meaningful opportunity to continue expanding our presence in the aftermarket, which is a structurally attractive part of Lippert's already established aftermarket platform, strategy and model and significantly enhances and expedites Patrick's product penetration opportunities in the space.

On Slide 14, we'll break down the combined company's core businesses. RV at 50% serves the largest and most established end market. Marine represents 12%. Truck & Adventure Off-Road, which includes brands like CURT and Ranch Hand, represents 6%. Powersports represents 5%, rounding out the outdoor enthusiast markets.

Total outdoor enthusiasts represents approximately 73% of combined revenues. From the other adjacent markets perspective, housing represents 17% of the mix, and transportation rounds out the portfolio at 10%, adding further diversification. The aftermarket overlay represents a powerful 16% of total revenue with tremendous opportunity for further growth. Altogether, the business represents approximately $8.1 billion in total pro forma revenue.

Turning to Slide 15 and 16. I want to highlight what we believe is one of the most important and differentiated aspects of this combination, our ability to bring together highly complementary products and capabilities to deliver more comprehensive, cost-effective solutions to our customers. Patrick and Lippert each bring distinct product categories, capabilities and areas of expertise with very limited product redundancy across the portfolio. What that means in practice is a significant increase in customer touch points.

We are engaging across more categories earlier in the design process and throughout more stages of the product life cycle. Those expanded touch points naturally lead to more frequent and more strategic conversations with our customers. And as those conversations evolve, the focus shifts from selling individual components to delivering integrated, competitive customer-centric solutions. That is a critical distinction. It allows us to move up and down through the value chain with a good, better, best product offering, collaborate more closely with OEM partners and better understand their needs and provide value-added solutions.

Supporting that shift is a deep and expanding pipeline of customer-driven innovation. By bringing together our engineering, design and technical teams in combination with our new virtual reality product design technology and studio, we are creating a more unified innovation platform, one focused on speed, responsiveness and practical application. This enables us to move faster from concept to commercialization while ensuring that what we bring to market is aligned with real customer needs. That same complementary strength extends across diverse end markets.

As you can see on Slide 16, the combined portfolio delivers adjacent solutions across recreational vehicle, marine, powersports and truck and off-road as well as housing and transportation from towing systems and cargo management to flooring, framing, climate control and seating. The result is broader end market exposure and a meaningfully expanded addressable market, strengthening our resilience through the cycle and creating significant cross-sell opportunities as we introduce each company's products through the other customers and channels.

As I highlighted earlier when discussing the vision of the new company, you can see on Slide 17, the combination of Patrick and LCI creates a powerful aftermarket presence with significant growth opportunity. It's not just the size of this revenue, it's the quality of the revenue and the margin profile of the business. The aftermarket is structurally different from OEM. It is less dependent on new unit production and more tied to the 8.1 million RVs and 10 million boats in service in North America, not to mention the average U.S. pickup truck production representing approximately 7 million vehicles annually.

This increased connectivity allows us to move faster and bring new products to market more efficiently, while increasing our exposure to the consumer demand across the life cycle of outdoor enthusiast products, which can last up to 30 years or more. That translates into more stable demand, better visibility and what is typically a stronger margin profile. The other important point is how this enhances our go-to-market capabilities. We are expanding our distribution footprint and broadening our relationships with dealers and installers. And perhaps more importantly, we are strengthening our direct connection with end consumers.

Aftermarket channel access is dependent on the strong portfolio of brands Patrick and Lippert bring to the table, including Furrion, TaylorMade, CURT, Ranch Hand, RecPro, SeaDek, Sea-Dog, Rockford Fosgate and Wet Sounds. These brands are already well recognized and trusted across their respective categories. We see this as a structural shift toward a higher quality, more resilient and a more margin-accretive business model with significant TAM opportunity, and we see the aftermarket becoming an increasingly important driver of long-term profitable growth.

Finally, as you can see on Slide 18, we are not just strengthening our foundation. We are significantly accelerating our ability to execute on growth and thoughtfully continue to diversify our business model with identified runway in our existing markets. The opportunity set in front of us is significant. Successfully executing on these growth initiatives will allow us to expand our capabilities across the outdoor enthusiasts, housing and transportation markets.

How are we going to do this? First, this new platform allows us to invest more meaningful in research and development, accelerating innovation, shortening time to market and delivering more differentiated customer-focused and affordable solutions. Second, we are also broadening our reach. With a more comprehensive and diversified portfolio, we are deepening relationships and expanding our role as a trusted solutions provider.

Third, importantly, as I highlighted earlier, this combination creates a significant opportunity to enhance our aftermarket business. As a result, we expect aftermarket revenues to grow from approximately 16% today to 20% to 25% over the next 5 years.

Fourth, as we'll touch on shortly, we are well positioned to capture upside as overall OEM market volumes improve.

And finally, with increased financial strength and liquidity, we will continue to execute on a disciplined and strategic M&A approach, targeting opportunities that strengthen our capabilities, expand our market presence and drive accretive growth.

Put simply, this transaction positions us to grow faster, operate more efficiently and deliver greater value over the long term. This is not a new playbook for either company. Over the past 20-plus years, both Patrick and LCI have consistently executed this model with discipline and at a high level, delivering results across all market cycles. That track record gives us confidence in our ability to execute and realize the full potential of this combination.

While Johnny already covered much of the data on Slide 20, I want to underscore one point here. These are the last 12-month actuals as of March 2026, a period that reflects near trough conditions across several of our key diversified end markets. So what you are looking at is the earnings power of the combined company at a low point in the cycle, which speaks to both the resilience of the combined platform and to the upside that lies ahead in a market recovery.

Let me spend a moment on the synergies because they are a central part of the value creation story. We have identified more than $150 million in annual run rate cost synergies. These are cost synergies. They do not rely on revenue assumptions, and we have a high degree of confidence in our ability to capture them because they come from areas where both companies have a long track record of execution.

The opportunity breaks down across 3 categories. Together, procurement and facilities are roughly half. We'll execute on this through supply chain and logistics optimization, smarter warehousing and distribution and deploying a best-in-class operational playbook across the combined footprint. By combining our purchase volumes across direct materials and indirect spend, optimizing volume and rebate terms and standardizing sourcing, we can drive meaningful efficiencies on our key inputs. And G&A makes up the balance, public company cost savings, corporate function optimization and shared services and technologies.

On timing, we expect the synergy realization to commence promptly after closing, with the transaction being accretive in year 1 and the full run rate synergies realized by year 3. I will close on this slide with a point that is important to how we think about the business. These procurement and supply chain efficiencies do not just benefit us, they position us to offer our customers more competitive pricing and enhanced value, which will help them directly address affordability. This reflects our commitment to growing alongside the partners who depend on us.

Finally, I want to place this combination in the context of where we're at in the market cycle because timing matters. As you can see on Slide 22, we are creating this platform at what we believe is a very attractive inflection point. Our key end markets are at or near cyclical troughs today, and that creates a compelling backdrop. We are combining from a position of discipline and strength, and we are positioning ourselves to better serve our customers and capture the upside as conditions recover.

Now, we are not simply waiting for the cycle to turn. The combined platform enhances our ability to deliver comprehensive, high-quality solutions, enabling our customers to bring compelling affordable products to market. Second, our expanded aftermarket channel creates more predictable recurring revenue that better weathers the peak to trough swings that have historically characterized our markets.

When you put it all together, we have attractive market dynamics with substantial recovery upside, deeper connection to our customers across our diversified end markets and greater stability through the aftermarket and increased diversification. The combined platform is exceptionally well positioned to capitalize on the expected improvement in market conditions and to do so with greater resilience than either company could achieve on its own.

We are now ready to take questions.

[Operator Instructions] Our first question today is coming from Daniel Moore from CJS Securities.

Andy, Johnny, congratulations on the announcements and appreciate you taking the time.

As you described really well, Patrick has been on a journey of becoming a more solutions-oriented provider. LCI has a long history of innovation, developing new products that really fuel the growth of your industries and customers. So I'm just wondering where do you see the most opportunity for accelerated innovation and growth over time? Is it in the core kind of RV? Is it in maybe some of the adjacencies like marine, powersports, transportation, aftermarket? I don't know if you could rank order, but just kind of would be really interesting to kind of drill down and hear a little bit more about where you see those opportunities.

I'll tell you, it's exciting what we have ahead. And when I think about our kind of core businesses in RV and marine, we'll continue to be driving innovation there. That is a lane that we've always felt very comfortable in, and we'll really continue to press there. We are really excited about transportation and housing as 2 areas for significant growth. We think the transportation market for us can really be a strong opportunity to see impact that we can make with some innovative products and what we already have in strong products in the market.

Yes. And I think, Dan, as we look at it in the 2 companies, and complementary products is really key. And as we look across the product portfolio, it just really increases the depth and breadth in our primary industries without question. And I look at the highly engineered products that LCI produces. I look at the solutions-based model and decorative products and functional products that Patrick does today and look at the runway that we have for further driving solutions together. It's really exciting. And it's exciting in RV. It's exciting in marine.

And as Johnny mentioned, when I think about it from Patrick's perspective, the opportunity to deliver more value in transportation is without question, exciting. Our housing, it opens up new capabilities and opportunities potentially in housing. And so we're really, really energized by the potential for the solutions that we can create across the market sectors in alignment with the expertise and relationships that we have today with our existing markets.

Our next question today is coming from Nathan Jones from Stifel.

This is Andres on for Nathan Jones. Just on the $150 million of run rate cost synergies, maybe can you break down how quickly you expect to drive G&A, facilities and procurement synergies? Just maybe some color on the cadence of the cost synergies.

Yes. Thank you very much. We worked, as we were kind of diligencing the model, our teams work together to really get at a detailed level when it comes to synergy execution and define these opportunities. And so as we look at where the industries are at today, I would expect us to start kind of delivering independently on potential for synergies. From an independent perspective, that also will further align and benefit the collective group going forward.

So we're going to look at where the industries are at today. We're going to size our business appropriately together, as I think as we think about it for the future and really set the platform for that future as we go forward. But we'll be able to really collectively execute on synergies once we close the transaction. But in thinking about the vision that's been put together, I would expect some things to happen even in the interim period independently, knowing that they'll value the independent companies as well as the collective company.

I'll tell you, the combination of our teams coming together was a great sign of what was ahead and the energy, and the enthusiasm they had on the synergies really compelled both Andy and me to look at the opportunity with a lot of optimism for what we could do together.

Our next question is coming from Craig Kennison from Baird.

It's with respect to the aftermarket opportunity. I'm wondering if you can just shed more light on the scale of that opportunity, what it takes to unlock it and whether you need to make any new investments in either systems or the distribution platform to really get after that opportunity?

Sure, Craig. This is Andy. I think as -- we've always admired LCI's aftermarket platform. They really leaned hard into the aftermarket over the last several years and have built an incredible platform. And as Patrick is primarily historically focused on OEM with really our recently developed aftermarket strategy, we think we can absolutely come together, and we think LCI's platform for aftermarket, direct-to-consumer, direct-to-dealer. Third-party distribution is already set up to really, really turbocharge Patrick's existing aftermarket. So we're really compelled by this.

I think as we looked at the numbers, today, we're roughly 15%. There's potential to get to 20% to 25% of the combined volume of the 2 companies. And so we're really excited about what the aftermarket can do together and really take Patrick's aftermarket into the next trajectory.

The aftermarket business, Craig, was really a big part of my past. And so spending time with Lippert as a customer many years ago in expanding and looking for the opportunities to grow aftermarket because I knew what that segment needed. Back then, I was working with Patrick as well. And today to have this under Jamie Schnur's leadership in aftermarket will really put us in a nice position to work together to bring Patrick's great products out to the markets that we serve.

Our next question today is coming from Joe Altobello from Raymond James.

I guess a question for Andy. Back when the news of the discussions between the 2 companies was announced, you saw the stock reaction, your stock reaction, and it's trading down here pre-market as well. I'm sure you heard the same things that we heard from your shareholders. So I guess my question is, what are they missing in this deal?

I think the initial reaction, Joe, when the news first broke and the information came out prematurely through a leak. And as we kind of talked, we weren't able to really deliver the narrative driving the value proposition for the value and the vision of the 2 companies. And so I think from our perspective, I don't know what the assumptions that were made, but there really wasn't a lot of clarity to the vision and strategy. And so as we're -- as we sit here today, our opportunity to be able to describe the strategy, the vision that we see together, we're hopeful that our shareholders, LCI shareholders both see this value proposition that we see.

And we're really excited about the opportunity today, especially in a period of where affordability is such a headline amongst our customers. And the opportunity to partner, bring solutions that drive value and help address affordability for the industries that we serve are really compelling. And so again, I think we look at best practices. We look at best talent across the 2 companies. There's just a tremendous amount of fit between our 2 organizations and strengths and weaknesses that match up really well.

And so we're hopeful that we can communicate this vision appropriately to our shareholders on both sides. So you can see what we see as it relates to where we think this combined company can go. And so we didn't have a chance to address that last time. And this time, hopefully, we're going to be able to do that in a much better way with much more clarity, and we hope that this is the start of that.

Our next question today is coming from Bret Jordan from Jefferies.

What's been the feedback from regulators and/or OE customers on the combined scale of this business? Obviously, a lot of content per unit between the 2 of you in the pro forma revenues. I don't see any divestitures anticipated. But could you give us sort of the feedback from regulators and maybe the primary OE customers?

Sure. Let me start with the OE customers. First and foremost, I think when we first started talking, that was -- the primary concern was what are our customers going to think and what is our value proposition that makes this a benefit to all of our stakeholders. And so we were able to have those conversations. And I would tell you, the OE customers definitely see this -- the strength and size of the 2 companies, but as well the opportunity to deliver those solutions at a cost-effective model that helps address affordability. And so we need to get out there and show our customers this plan, and we fully expect to do that.

We fully expect to be able to communicate how we're going to be able to deliver this, but we can start with so many avenues based on the collective talents of the companies, our engineering talent, our product development and really benefit them with unique cost-competitive solutions. So the OEs are -- want to see us deliver, and we fully expect to deliver, but that was first and foremost.

As it relates to regulatory, we spent a lot of time thinking about regulatory. And I think, again, one of the things that we think is so compelling about these 2 companies coming together is that there is very little product crossover. And so as we look at that product crossover, we've identified potential avenues to be able to mitigate any regulatory concerns there. We've proactively identified actions that we could take in that limited crossover category model. And so we've done a lot of work ahead of time. And we fully anticipated and are going to be prepared to address all of the regulatory requirements when we do file for regulatory approval. So a lot of planning went into that ahead of time and a lot of planning went into the diligence amongst the 2 companies in the product categories.

That's really well said, Andy. And I just want to comment on that, Bret, that our entire thesis is that together, we're going to better serve our customers and our OEMs and the shareholders and stakeholders. So for us, at this point, it is time for us to get to work and bring that value to them, show it to them and really earn the respect that they can see for this organization coming together that I can understand if they might have a concern, but it's now on us to show them that we will really do a great job of bringing value to them.

Our next question is coming from Gregory Miller from Truist Securities.

I'd like to ask how you envision your strategy for smaller acquisition targets post combination? Do you anticipate that a majority of capital allocation to be used for acquisitions as has been the case for Patrick in recent years? And relatedly, is smaller tuck-in M&A less likely for the foreseeable future?

Yes. So we've identified the candidate pool in each of our markets as it relates to the M&A pipeline. And I'd say collectively between both Patrick and LCI, I'd like to say that M&A is in our DNA and that we've really established a repeatable strategy based on being able to execute with M&A and being a buyer of choice, hopefully, in the marketplaces that we serve.

And so I would expect a combination of continued tuck-ins based on the identification of that pipeline as well as some larger scale opportunities that are out there that we've got the potential liquidity and financial strength to be able to acquire. So it only expands the potential M&A pipeline, and we fully expect to be very, very aggressive as it relates to M&A as part of the capital allocation strategy. So I would not expect any changes.

Our next question is coming from Noah Zatzkin from KeyBanc Capital Markets.

Can you talk about what the merger unlocks in terms of your ability to provide more comprehensive component solutions? And how do you think about any hurdles there and the timing around integrating your offerings?

Sure. So first of all, I think, like I said, the engineered solutions that LCI has combined with Patrick's product solutions and decorative and capabilities as well as our virtual reality technology and studio that we've got today provides a really unique benefit for our customers where we can really create true custom solutions for those customers. We can bring our products together. We can value-add, value-engineer cost out of the products at the initial phases, especially if we can get into with our advanced product group out 2 and 3 model years. I think we can really take advantage of that opportunity to help customers take cost out.

And so we're really excited about the capabilities of the 2 teams and the strengths of the 2 teams, as they match up with their engineering talent, product design talent, our sales forces collectively and the relationships that they have. And then, our relationships with our customers to really help implement that change from the top level on down, where you really need the support at the OEM level to drive value-add value engineering through the model. So we see just an enhanced opportunity from a solutions perspective.

Agree. Our OEM customers expect that innovation from us. Both companies have been known to do that, and we'll continue on that path.

Our next question today is coming from Tristan Thomas-Martin from BMO Capital Markets.

Andy -- drill down into everything. What are you kind of excited about most product-wise with the LCI portfolio? What do you think maybe there's some room for improvement? And then, just you mentioned affordability a couple of times in your preamble in Q&A., will there be any change to pricing strategies now that you're -- or potentially one combined entity?

Again, I really look, Tristan, at the opportunity to get in ahead of time on solutions with customers, where we can increase our product with the customer. We can get more volume with the customer, but also provide more savings based on those volumes. And so strengths and weaknesses again of the 2 companies, I think we match up really well when I think again about engineering, I think about product development, talent. Our independent brands and the creativity that they have together and really collaborating.

And I think one of the things that I'm most excited about is the way the 2 teams know each other in the marketplace, understand each other, the respect that our teams have for each other and the energy that's already been created in some of the due diligence amongst our leaders, as we've gone through this process to work together to develop product solutions and also the synergies. I mean, there's just been a tremendous energy that's been created. So I'm very optimistic about what we see.

And I think there's also going to be a tremendous reality and also openness to looking at where the weaknesses are at and where the strengths and weaknesses make up for each other. And we've got that open mind today. I see that on the LCI side as well. And again, that energy, I think, can really translate into a lot of benefit, especially when we're willing to acknowledge where those strengths and weaknesses are at. So altogether, I think, again, it just matches up really well.

[Operator Instructions] Our next question today is coming from Brandon Rollé from Loop Capital.

Piggybacking on that affordability question. I was going to ask, I guess, how quickly do you feel like you could get prices lowered to OEMs and maybe the magnitude of the price decreases? I think previously, OEMs have talked about prices could be lower if suppliers were to lower their prices, but it seems like margins were top of mind. And so I guess just any color that you could give there on how quickly you plan to solve affordability.

Sure. And I think this also ties in a little bit to Tristan's question on pricing. And so when we thought about this, again, solutions were first and foremost, cost-effective solutions we thought about. And then, we thought about the synergy savings that we're going to generate and really kind of a comprehensive model of being able to deliver more cost-effective solutions and sharing the synergy savings with our customers as we think about this going forward to be able to impact that affordability model and where all of us can benefit together for the good of the industries that we serve.

And so the ability to impact that, I would just say that where we sit today with the markets and where they're operating, everybody is focused on that affordability model. And so we want to make sure that we're looking at a long-term approach. And we may take some short-term actions to drive that long-term approach, knowing where we're headed and knowing what this vision can match up to. So I could see some short-term solutions or short-term opportunities that we will present customers with for the benefit of the long term of the organizations, all of our organizations collectively and our customers together. So it could be very, very quickly as we've thought about it, and we'll certainly extend as we continue to be able to get together and bring our solutions together once this transaction closes.

I'll tell you, we really, from the very beginning, had the approach and the mindset that this is what we need to do is drive value back to our OEM customers and our customers. It was job 1 for us to look for these synergies. And when the teams came together to begin those discussions, it was top of mind that we need to work to drive pricing down. And so we're excited about the synergy work that's been developed so far in the planning. And as we get to close in the work up to that point, really getting to a spot where we turn that into real price decreases for the teams.

Our next question today is a follow-up from Daniel Moore from CJS Securities.

Just I guess, maybe drill down even a little bit further on the potential revenue synergies, kind of where you see the most opportunity for cross-selling over the next few years. And then secondly, are there any potential businesses that might be, if not divestment candidates, a little further down in terms of the area of focus. I'm thinking LCI had made a proactive effort to grow in Europe. It seems like there's more opportunity here in North America, particularly in the aftermarket. So just wondering if there's any businesses that might be kind of noncore as we move forward.

Sure. So when I think about solutions and where we can collectively work, I think, in enhancing simple solutions that we've got today. I think about the marine market, right? I think about LCI's strength in their seating platform, their bimini platforms that we can collectively put together with our instrumentation and digital switching systems. Our wire harnesses and dash panels, towers that can all be integrated into a very, very compelling unique product solution for customers.

I look at roofing systems and automation potential that we could help collectively work together as it relates to slide-out systems and integration amongst the RV business that we have today. So I really see just a whiteboard of opportunity, as it relates to those solutions.

And then, potential divestitures, yes, there could be some potential divestitures. And I think, again, as we looked at the regulatory side, there are some things that we may do, we may proactively do, all for the long-term vision of the combined company to deliver the most cost-effective solution to our customers. So there could be some divestitures. And again, on the crossover products as we looked at it. But overall, we're going to look at this business and these businesses together for what makes the most sense for our customers, utilizing best practices and the best talent to be able to produce the most cost-effective solutions.

Aftermarket, we really had a great opportunity. When I think about our towing systems, the running board, steps, grill guards, all of those areas, I think, in truck and adventure off-road really exciting opportunities there. On the transportation side, with our climate control systems, our windows, glass, seating. Again, more opportunity that we can really grow in transportation. So we're going to be very focused on that, and we'll have great leadership there. And again, in housing, just windows as an example, another great opportunity for us to really hit the market strong.

We reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Thank you. Before we close, a brief personal reflection on behalf of the Lippert team. Serving Lippert as a Board member has been a tremendous honor and to now serve as an interim CEO at such a defining moment is both humbling and deeply meaningful. On behalf of Group Presidents, Ryan Smith and Jamie Schnur, and our entire leadership team and Board, we are honored to walk alongside Andy Nemeth and the exceptional team at Patrick, as we begin this next chapter together.

My respect for Patrick has only grown throughout this process for the strength of their business and the character of their people. While each company has its own history, we share a brief -- a belief that great organizations are built by serving others, investing in people and creating lasting value. By combining our complementary strengths, we believe we are building a stronger company, better positioned to innovate, to serve our customers, to create opportunities for our team members and to deliver long-term value for our shareholders.

I'm grateful for the opportunity to serve during this important chapter, and I look forward to writing the next one together with humility, with purpose and with deep commitment to the people who make both organizations so special. Thank you.

As Johnny noted, I think as we close out today, we do so with a tremendous sense of gratitude and humility, as we look back and we look at the 2 companies and where they've come from and the talent that exists amongst our 2 businesses. And so we're really grateful to be in this position. We're excited about the vision, if you can't tell. And we're excited about the opportunity and potential and what we can do together to really benefit our industries and then positively impact our team members and our communities.

I really want to thank our collective team members for their tremendous dedication throughout these times. The team has just been so dedicated and committed. We want to thank our customers, our partners. I want to thank our collective Boards of Directors for supporting the vision and working together in unity to help define that vision for what success can look like as well as in their efforts in making this possible. And so there's just a tremendous amount of energy that's been created during this process, and I fully expect a tremendous amount of energy to come out of the back end of this process.

So thank you again. We look forward to talking to you with further updates on future calls.

Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Hello, everyone, and thank you for joining us today for the LCI Industries First Quarter 2026 Earnings Call. My name is Sami, 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, which may -- which -- 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 by -- 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 website and are also available on Form 8-K filed this morning with the SEC.

On the call from management today are Jason Lippert, President and Chief Executive Officer; Lillian Etzkorn, Chief Financial Officer; and Kip Emenhiser, VP of Finance and Treasurer. [Operator Instructions]

With that, it's my pleasure to turn the call over to Jason Lippert. Please go ahead. Jason, please go ahead.

Hello, and 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 delivered the strongest quarterly results we have seen since building that platform. And 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 plant 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 to 330,000 units, which reflects a reduction of 20,000 units at both the high and the low end of prior expectations.

For the marine industry, we continue to anticipate flat to low single-digit OEM growth this year. Innovation remains a 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, SunDecks, Chill Cubes, and our 4000 series windows continue to gain traction as customers look to enhance the end user experience.

Towable 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 on the $6,000 content per unit mark. Our 5 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 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 addressable 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. Auring 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 3 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 team support thousands of dealer service and repair locations nationwide and manage more than 2 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 a market disruption as First Brands, previously our largest competitor in the hitch and towing space, moved 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 2 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. And the 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, plant 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 basis points 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 stand-alone 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 will 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 OEMs. 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 tariffs 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 1.5 to 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 to 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 to $4.3 billion and an operating profit margin in the range of 7.5% to 8%. Reflecting our strong first quarter performance, we are tightening our full year guidance and now expect 2026 adjusted EPS of $8.75 to $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 8 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 to $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 enhance shareholder value.

With that, operator, we'd be happy to take questions if you could please open up the line.

[Operator Instructions] Our first question comes from Nathan Jones from Stifel.

I guess I'll start with my first question on the Adjacent Industries OEM growth at 17%. Maybe you can give us a little bit more color on where you saw the strength 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, but that lapse created some additional increase.

Yes. 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 then on the margin performance. It was obviously also very strong. Can you talk about some of the contributors to that? I know you had -- 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.

Well, I think the biggest piece of the 100 bps or near 100 bps there is the -- all the self-help we're doing with the G&A improvements, all the facility consolidations and things we're doing there. And that's obviously going to continue on through this year. When we talked about the 8 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 because really, we're waiting for July shutdown. There's usually a decent time shutdown during the 4th of July, where we can take the time and shut some of these facilities down and consolidate them with others that are still standing.

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

Yes, there's a lot of puts and takes happening at the moment, obviously. I mean, with the new tariff stack after the Supreme Court struck down the old tariffs, 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. But our assumption is we're not going to have any different approach or results to dealing with the tariffs that we did in the last few years that we've been dealing with it.

So same strategy, going to 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. And if we've got to pass some things along, we're going to do that and do that carefully with our customers. And there will be -- there always is just a little bit of lag as we sort these things out, but it's not meaningful.

Our next question comes from Daniel Moore from CJS Securities.

Looking at the revenue guide unchanged despite 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, adjacent markets? Where is the kind of the makeup there?

Yes. So First Brands and the Aftermarket piece is a piece of it, obviously. We mentioned in the prepared remarks that revenues for our automotive aftermarket division are mid-teens for the second quarter. We've obviously got good visibility in April and May. So 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. So 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. And we're winning in some of the other diversified adjacent businesses, but the $140 million piece from June forward annualized is probably the other big piece to offset any kind of softness in RV. So...

Yes, 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 expectations for Q2 more generally that's kind of embedded in your '26 revenue guide.

Sure. So, 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. So 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. And then I would say really just normal seasonality as we move through the balance of the year. Third quarter, we tend to have more of the shutdowns, Europe has shutdowns and then fourth quarter, we taper off. But yes, second quarter, we're expecting it to be nice and strong.

Really helpful, Lillian. Last one for me, a little long-winded, I apologize, but you're clearly incurring incremental costs from tariffs, from steel, aluminum, still maintaining 7.5% to 8% margin for the year. Given that a lot of these will likely be passed on with a little bit of a lag and the ongoing facility consolidations throughout the year and lower fixed cost absorption, let's say, we entered the year -- ended the year at kind of that midpoint, 7.75%, what would that imply on a run rate basis entering fiscal '27, assuming inflationary pressures start to level off?

Yes. So 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. So 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.

And I think the other thing to point out, just in terms of the self-help, yes, it's a lot of the cost activities that Jason is 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.

We feel there's a lot of pent-up demand out there. We're obviously not seeing it in the beginning part of the year here on the retail side, although used seems to be up pretty heavy, much bigger than what new is. New seems -- obviously, it's flat to down in most places, but used is up anywhere from high singles to mid-teens on most counts where we're taking those points and talking to dealers. So, yes, I think it really depends a lot on where retail falls and if we can get new going again, we're certainly going to be working with our customers to make sure that we're giving them every opportunity to get at affordability because that's the biggest headache out there when it comes to some of the sluggishness on the new purchases.

Yes. I guess my thought was given the lag in some of the pricing and some of the initiatives, you'd probably be entering '27 at an even higher level on an annualized basis, but I'll take the rest offline.

Our next question comes from Joe Altobello from Raymond James.

I want to just follow-up on that line of question 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 8 to 10 facilities closures this year. How much runway do you see into '27 on that self-help side?

Yes. So, obviously, we've got flow-through from all the changes we made last year that are kind of happening throughout this year, and we've got some carryover from that. And then like I said, these 8 to 10, we're literally just getting ready to start making these moves and changes and consolidations in July. So you can anticipate the benefits from all those moves to impact our P&Ls from July of this year through July of next year.

And then we've got more self-help initiatives and some other facility consolidations on tap for next year already lined up. So the way I'd categorize what we've done here is, we started thinking really hot and heavy about this in the middle of '24 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 they come into '26 and that volume would have to get better because it's been such a long depressed period of low retail and wholesale activity. But as we've dug into these self-help initiatives and around G&A specifically and around our plant consolidations and optimization specifically, we just continue to find more and more things.

I mean the low-hanging fruit, we're kind of taking care of this year, but there's still some things we can do next year, and that will continue to benefit us through '27 and maybe even into '28.

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

Yes.

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

And 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 improvement in the market right now. So I think that that's a good sign.

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

I mean, as you know, I mean, we've done, as we said in the prepared remarks, 77 acquisitions over the course of at least my last 20 years or so in the seat. And we're looking at stuff all the time. And our Board is always challenging us to look at everything from small tuck-ins to large transformational deals. And this just happened to be one that you heard about that got into discussions. But at the end of the day, I mean, of the 77 we've done, we probably talked to 400 people, and there's been 300 that haven't gotten done.

So 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. So that's about all we're willing to comment on, Joe.

Our next question comes from Patrick Buckley from Jefferies.

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?

So I would tell you that we've been over there since 2016, starting to 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, 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.

And then, 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 are starting to show through on results really nice.

Got it. And then 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 time line there?

Yes. So it was more of a thought we had last year. We kind of implemented this concept last year to say, "Hey, look, there's just -- as long as we've been in the business, service continues to be a pain point for the consumer." So we decided to put a few of our own up. We have 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. And we've added 2 more facilities at the beginning of this year, tail end of last year.

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

Our next question comes from Scott Stember from ROTH Capital.

A lot of facility consolidation going on over the last 6 to 9 months. I know that there was a bunch that took place in 4Q and another 8 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?

Yes. No, that is a key part of the story for the results. And you're seeing it in the first quarter, and we had 80 basis points improvement from cost enhancements. So a good portion of that is going to be from the consolidations that we've done. And 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. And then, 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?

And then also with used RVs outperforming new, could you maybe just remind us of how much of a benefit that could be for LCI in the Aftermarket with refurbishing, reconditioning units?

Yes. So first, what I mentioned earlier was that the auto Aftermarket is trending revenue, Q2 up mid-teens from last year. And as you know, we've got 2 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 RV is a big piece of that. I would say the RV side is still -- it kind of follows new units. So if there's less used units, there's a little bit of sluggishness on the Aftermarket side for RV.

But with respect to the used units, and Wagner says it best, I mean, every time they sell a lot of used units, they're always refurbishing and creating more value in those used RVs by whether it's repairing and fixing things or just upgrading some things. So there is a little bit of that. It's just hard to quantify because it's just really hard to track. But used units, new units going up, it's good for our Aftermarket business, and we'll continue to see benefit from that as this goes along.

But I think the big piece as we keep talking about is, 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. And as those start coming in for repair and replacement parts, a lot of that business is going to come our way.

And 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?

Yes. Yes, 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. So the people that were buying First Brands hitches and towing products basically had to go find new suppliers over the last few months. So this is kind of broke loose. And as the second -- is really the largest player in that space, we're the beneficiary of a lot of that new business. So we're trying to take on as much as we can, given our -- given what capacity we have, and we expect that to continue through the long term because there's -- it doesn't appear that there's anything going to happen with First Brands.

Our next question comes from Tristan Thomas from BMO Capital.

Jason, could you update your retail assumption for the year?

Yes. I'd say we're kind of -- yes, down mid-single digits probably is 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. And then just looking at Slide 21, your mix of single axle versus multi-axle fifth-wheels, flat year-over-year in the quarter. Do you expect -- is that surprising? I'm curious if you expected that to maybe be a little bit richer.

Yes. Yes, it is a little surprising. I mean we obviously talk to a lot of dealers. We talked to a lot of the OEMs. Their commentary to us on the 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 slowed down. I mean, for the last several years, it's been going up. So we've seen it flatten out and peak at this point in time, and we expect it to go down on the flip side. We've seen fifth-wheels -- as you know, we build a lot of chassis, and we get to see a lot of these ratios, 1 for 1 and fifth-wheels are up a little bit right now, which is a good sign. We obviously put a lot more content into fifth-wheel units than we do tandem or single-axle travel trailers. So that's kind of what we're seeing right now.

Okay. And then I'm going to sneak in one more. Just how do we -- from kind of a modeling standpoint, I think you called out $140 million from new model year '27 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? And then also kind of the $140 million, how much of that falls in calendar '26 versus calendar year '27?

Yes. It's not a big piece of that. Tristan, the $100 million is a TAM, is the total addressable market for leveling systems of that type. So 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 we're trying to find leveling systems that fit into 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. So our plan is over like any product launch and innovation, we -- 3 to 5 years, we want to penetrate at least 50% of the market. That's kind of our gold standard for product launches. So we've got -- 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.

But a lot of that $140 million is all sorts of products. Obviously, we've been talking a lot about our Chill Cube and our AC movement. I mean, 3 years ago, we were 15% of the AC market. Today, we're close to 60%. We're making a lot of headway with appliances and our TCS, our Touring Coil Suspensions and our ABS suspension products. So suspension appliances, air conditioners are getting a big piece of that $140 million. But we're also making progress with windows and furniture and chassis and some of our other core products.

Our next question comes from Brandon Rolle from Loop Capital.

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?

Yes. Again, the way I probably think about is think of the year-over-year improvement. Second quarter, again, tends to be a pretty strong quarter for us, just given the seasonality. So typically, you would expect to see that sequential improvement and that year-over-year improvement continuing as well.

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

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

And then the second thing is, 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. So there's not a single large OEM that we're not having those conversations with right now. And we'll continue to work with them as we get through this retail season and see how things are going. But we've got some -- as you know, we've got a little bit of tariff refunds hopefully coming.

We don't have visibility on that yet. But if that does flow through and the refunds come through as the government has promised, then we'll be giving back to the large OEMs what they -- what we had to increase them back when those things first came out. So that will give some additional relief, hopefully. But affordability is the key issue right now, and we need to do everything we can as a supplier in the OEM community to give the dealers products that are priced right for the consumers.

Our next question comes from Alice Wycklendt from Baird.

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

So yes, so again, just in terms of the breakout for the content improvement, 3% was organic growth, really driven by the innovative products continuing to get traction in the marketplace. And then as we look at that other, it's a combination of the mix. So as we've had greater fifth-wheel units coming into play, that's benefited us. And then probably proportionately as well are those sales price increases to cover the material costs. And really, those started coming into play, I'd say, last year, call it, into Q2, Q3-ish really around the summertime is when we started to see that. So those impacts will continue to benefit on that content unit as we're moving forward. But the unit mix was also an important part of that increase as well just because we have more content on those larger, better equipped units.

And then just maybe want to take a step back. It sounds like integration of Freedman and Trans/Air is going well. But what does the M&A pipeline look like today? And maybe what are you focused on?

Yes. As always, we've got a lot of names on the list, Alice. And we're -- at any given point in time, we're talking to 4 or 5 different tuck-in opportunities, and those range anywhere from early discussions to LOIs, and we're -- we'll just keep you posted as we get close to getting these done, but the pipeline and multiples really haven't changed much in the last couple of years since we started looking at M&A again.

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

Yes. Well, I think the headlines are -- a lot of the self-help that we've been doing is starting to come into play and have a great impact on the results. And 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.

Hello, everyone, and thank you for joining us today for the LCI Industries Fourth Quarter 2025 Earnings Call. My name is Lucy, 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 the most directly comparable GAAP financial measures are available in the company's earnings release and investor presentation, which have been posted on the Investor Relations section of the company's website and are also available on Form 8-K filed this morning with the SEC.

On the call from management today are Jason Lippert, President and Chief Executive Officer; Lillian Etzkorn, Chief Financial Officer; and Kip Emenhiser, VP of Finance and Treasurer. [Operator Instructions]

With that, it is my pleasure to turn the call over to Jason Lippert.

Thank you, and welcome, everyone, to our Q4 2025 earnings call. We are pleased with the company's strong results as our teams continue to execute effectively, delivering a 16% year-over-year top line growth along with further margin expansion in the fourth quarter. By leveraging our diverse competitive strength, we capitalize on opportunities across our RV, Aftermarket, transportation, marine and housing end markets. At the same time, our relentless focus on our operational efficiencies drove enhanced profitability with fourth quarter operating margin more than doubling, expanding 180 basis points compared to Q4 of the prior year.

Starting with our OEM segment. Net sales increased 18% to $737 million in the fourth quarter. RV OEM revenue rose 17%, driven by market share gains, increased sales of newer products, and a favorable mix shift toward higher content units. Our other OEM end markets, transportation, marine and housing delivered 21% year-over-year net sales growth to $297 million or 8% on an organic basis. This growth was primarily driven by market share gains and content growth in North American utility trailer, bus and marine OEM customers.

Bus related content contributed $31 million of year-over-year growth in the quarter, reflecting the recent acquisitions of Freedman Seating and Trans Air,for which integration efforts and synergies are ahead of plan. Looking ahead, we expect to expand market share across all 4 of our OEM markets.

As we move into 2026, we expect RV wholesale shipments to range between 335,000 and 350,000 units. While we expect the both industry to remain flat to up low single digits. Despite a potential flatter industry backdrop, we have multiple growth strategies in place that we believe will drive OEM expansion in excess of overall end market volumes. Central to this strategy is our relentless focus on innovation. Since 2020, new products and market share gains have driven a 67% increase in towable content. These innovations include these slide-out designs, [indiscernible] air conditioners, advanced window designs, antilock braking systems, [ touring ] coil suspensions, bed lift and bed tilt mechanisms, larger and more robust fit-built chassis, electric [indiscernible] and our new ladder system for both among others.

In many of these categories, we offer either the leading product or, in fact, the only product available further expanding our addressable market, margins and long-term growth opportunities.

In the fourth quarter, our total content per unit increased 11% year-over-year, reaching $5,670 and representing our largest year-over-year content growth in the past 5 years. To highlight our innovation momentum, our 5 most recently launched products are now generating an annualized revenue run rate of approximately $225 million. For example, our air conditioner unit shipments increased from 50,000 units in 2023 to more than 200,000 units last year, partially driven by strong consumer adoption of our [indiscernible] conditioner platform. In addition, following the launch of our patented [ Sundeck ] in 2025, we are scheduled to build over 4,500 of these patio systems this year, contributing over $4,000 in revenue per unit. These examples underscore our ability to create and scale high-value innovative content with the entire RV customer base quickly.

At a high level, LCI's competitive moat built on our scale, technology, deep industry expertise and people positions us to consistently outgrow the market. Our broad product portfolio, structurally efficient operating model and strong customer relationships enable us to rapidly scale new product launches and seamlessly integrate acquired companies. Our competitive advantage is reinforced by highly differentiated sophisticated manufacturing technologies that enable us to produce complex mission-critical components through flexible and increasingly automated processes.

Equally as important, our people are the best in the industry, leading in innovation, cultivating deep customer partnerships and sustaining the collaborative culture that is foundational to our long-term success. The same competitive amount that drives our OEM business also provides significant advantages in the Aftermarket, where we grew net sales 8% year-over-year in the fourth quarter to $196 million. This continued success is directly driven by the strength of our OEM sales platform, which expands content with key customers.

When one of our OEM components requires repair replacement in the field, it almost always must be replaced with our proprietary parts for fully integrated assemblies, creating natural durable and high-margin aftermarket revenue streams.

Taking a step back, we have come a long way. Just 12 years ago, we had virtually no presence in the RV Aftermarket. Over the past decade, we have organically built our RV Aftermarket organization to approximately 400 team members with a singular focus on delivering the best customer experience across more than 2 million annual interactions with dealers and RV consumers who acquire our parts and services. The primary catalyst for growth in our aftermarket engine is simple. We have embedded more than $20 billion of replaceable content into the RVs through our OEM partners over the last decade. These RVs eventually all come into the aftermarket service and repair cycle.

At the moment, approximately 1.5 million RVs are entering the repair and replacement cycle in the next 1 to 3 years, each 1 requiring our parts and service solutions. Our components to reach nearly every RV consumer because our parts are literally on almost every RV on the road, because we manufacture a broad portfolio of mission-critical products, dealers and consumers relying on us for service and replacement across virtually every major RV system. From slide-outs and leveling systems to doors and awnings, chassis and suspension systems, windows and appliances, mattresses and furniture and much more. This breadth positions LCI as a trusted partner throughout the entire RV ownership life cycle, supporting every customer channel from dealers and distributors to OEMs, direct-to-consumer and leading e-commerce platforms.

We have a uniquely strong right to win in the aftermarket, something that no other suppliers incredibly match. To further accelerate service-related aftermarket growth and strengthen dealer relationships, we continue to invest in our service infrastructure. In 2025, dealer service personnel completed approximately 50,000 of our technical training courses and our online technical resources generated nearly 2 million business as dealers and consumers increasingly rely on our service videos to resolve issues in the field. These efforts are driving higher quality service outcomes and stronger dealer partnerships, reinforcing Lippert as the go-to partner in RV aftercare.

In addition, we expanded our service footprint in 2025 with the opening of 3 new service facilities and the doubling of our mobile technician workforce. These investments have already resulted in a double-digit increase in service completion improving speed, convenience and customer satisfaction while allowing us to schedule and complete significantly more service projects than a year ago.

Our goal is to simply reach more consumers seeking a better service experience including faster turnaround, higher quality care and the opportunity to upgrade their RVs with our newest and most talked about products. This year, we are partnering with dealers to launch the Lipper Upgrade Experience, a new program that enables our dealers to offer upgrades such as TCS, ABS and other advanced systems not currently offered by dealers. Several of the largest dealers in the country have already expressed strong interest in rolling the program out later this year.

Turning to our auto Aftermarket business, there have been several important developments worth highlighting. As many of you are aware, First Brands, which owns our largest competitor in the hitch and tolling space, has experienced significant operational challenges as a result of a complex bankruptcy process. As a result, both automotive OEMs and aftermarket customers are actively seeking new, stable long-term partners. Against that backdrop, we are already seeing meaningful opportunities emerge, and we are in the process of capturing substantial incremental business as a result.

Although it is still early, we currently estimate the potential opportunity here at approximately $50 million annually. We expect to share more of these developments as things progress. We have the existing capacity to support this incremental volume without the need for new facilities for additional shifts in most cases allowing us to efficiently absorb this anticipated growth. We are also continuing to strengthen our auto aftermarket infrastructure. We recently transitioned into a state-of-the-art 600,000 square foot distribution center in South Bend in Indiana consolidating operations from a couple of smaller, less efficient distribution facilities. In addition, we are preparing to open a new manufacturing facility in [indiscernible], Texas later this year, which will serve as the home for our Ranch Hands truck accessory business, a brand that has seen growing consumer awareness and demand, including increased visibility through popular shows like Yellowstone and Landman.

Turning to our profitability initiatives. We delivered a full year operating margin of 6.8% an improvement of 100 basis points year-over-year, driven by cost improvements, market share gains and enhanced operating efficiencies. Given the challenging environment that persisted in 2025, we are pleased with the results we delivered and are excited about the goal for 2026 that position us well for continued progress. We believe these strategies can drive an additional 70 to 120 basis points of operating margin improvement over the last year. While also providing a clear and disciplined path toward our objective of achieving double-digit operating margins. These gains will be supported by continued market share growth and improving product mix, and further reductions in overhead and G&A, where we made meaningful progress in 2025.

To build on last year's progress in 2026, we plan to complete 8 to 10 facility consolidations on top of the 5 we executed last year. We also continue to evaluate the divestiture of select lower-margin businesses while accelerating automation, operational efficiencies and fixed cost reductions throughout the year.

I'll wrap up my remarks with an update on our balance sheet and capital allocation strategy. Despite a challenging operating environment last year, we have made significant progress in strengthening our financial profile. Since 2023, we've increased ROIC from 5.3% to 13.5% as of December 2025, reflecting improved returns and disciplined capital deployment. We ended 2025 with a net debt to adjusted EBITDA ratio of 1.8x, supported by strong cash generation. Earlier in the year, we also completed a successful refinancing that both extended and staggered our debt maturities, further enhancing our financial flexibility. Liquidity remains robust, with over $200 million in cash and equivalents, along with full availability under our revolving credit facility of $595 million.

As we enter 2026, we will remain disciplined in our capital allocation, with a continued focus on investing in the business to support innovation and ongoing product development. Our M&A pipeline remains active and smaller tuck-in acquisitions continue to be a core competency for LCI Industries, completing 77 strategic acquisitions since 2001. We will continue to evaluate opportunities within our existing markets and expect to remain active on the M&A front. Building on the success we have achieved in 2025 with successful acquisitions like Freedman and Trans Air.

Returning capital to shareholders also remains a priority as we continue to pay an attractive dividend, currently yielding about 3%. During 2025, we returned $243 million to shareholders, including $114 million in dividends and $129 million through share repurchases. In closing, our entire team is energized by the opportunities ahead. And we are confident in our strategy to leverage many strengths to drive continued growth, margin expansion and shareholder value creation. I've had the privilege of leading this company for more than 25 years. I've never been more excited about the opportunities in front of us than I am today.

We have a tested focused and highly capable team ready to execute on the plan. And I'm incredibly proud of the accomplishments of our more than 12,000 men and women at LCI, with perseverance and commitment continue to be the driving force behind our success. Because of their efforts, we entered 2026 and one of the most competitive positions in our company's 70-year history.

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

Thank you, Jason. We ended the year on a strong note with the fourth quarter results that included double-digit top line growth and meaningful margin expansion. These results cap a year of progress in which the hard-working men and women of LCI executed our strategic initiatives, demonstrating the potential of the LCI platform, and we enter 2026 well positioned to generate even stronger results in the new year.

For the fourth quarter, consolidated net sales were $933 million, up 16% year-over-year. OEM net sales grew an even stronger 18%, which included 17% growth for RV, primarily driven by sales price increases due to higher material costs, a favorable mix shift towards higher content fixed wheel units and LCI's ongoing market share gains. We also generated 21% top line growth across our other OEM end markets, with transportation and marine expanding year-over-year, partially offset by a modest decline in housing. Primary drivers included sales from acquired businesses and higher sales to North American utility trailer OEMs.

Our content per towable RV unit increased 11% over the prior year to $5,670, and content per motorized unit was up 7% to $3,993. Towable RV organic content grew significantly up 3% year-over-year, driven by the continued success of our recent product launches. Content levels also benefited from the continued strength of higher contented fifth-wheel units. We also expanded motorhome RV content per unit by 7% to nearly $4,000.

Turning to Aftermarket. Our net sales expanded 8% versus the prior year quarter to $196 million, primarily driven by product innovation and increased demand for our upgrade and service parts as more units enter the upgrade and repair cycle to which Jason referred. Our consolidated operating profit during the fourth quarter was $35 million, reflecting 180 basis point margin expansion to 3.8%. Our margin growth benefited from our continued focus on driving operating efficiencies and cost reductions, along with the increased North American RV sales volume related to an increased sales mix of higher content to fuel units and market share gains. Partially offsetting this progress was $3.9 million of restructuring costs related to the closure of our glass operations in Ireland.

Breaking down further our margin performance. Our fourth quarter OEM-related operating profit margin was up significantly to 3.7% versus 0.3% in the same period the prior year. This operating profit expansion was driven by the increased selling prices for targeted products, primarily related to increased material costs as well as reduced costs from our material sourcing strategies and better fixed cost absorption.

For Aftermarket, our operating profit margin was 4.3% in the fourth quarter as compared to 7.9% a year earlier. This operating profit margin change was primarily driven by higher material costs related to tariffs and higher steel, aluminum and freight costs, increases in sales mix towards lower-margin products and investments in capacity, distribution and logistics technology to support the growth of the Aftermarket segment. The margin was positively impacted by increases in selling prices for targeted products primarily related to increased material cost and reduced cost for material sourcing strategies.

Turning to adjusted EBITDA. We generated robust annual growth of approximately 53% to $70 million, reflecting a 7.5% margin or 180 basis points above the 5.7% margin in the fourth quarter of 2024. Our GAAP net income came in at $19 million or $0.77 per diluted share, more than doubling over the prior year quarter $0.37. On an adjusted basis, excluding restructuring costs, net of tax effect, net income of $22 million equated to $0.89 per diluted share, which also more than doubled.

Turning to the balance sheet. We continue to operate from a position of strength ending the year with cash and cash equivalents of $223 million, which was up from $166 million to start the year. The increase benefited from cash provided by operating activities of $331 million and also reflects $147 million of investment-related cash outlay, which included $53 million in capital expenditures, and $113 million worth of acquisitions during the year. As of December 31, we had outstanding net debt of $723 million, reflecting a net debt-to-EBITDA ratio of 1.8x, which is within our targeted range.

In terms of our balanced approach to capital allocation, in addition to strategic investment in the business and the pursuit of select accretive acquisition opportunities, we continue to execute on the $300 million share repurchase program announced last year. During the fourth quarter, we returned $28 million to shareholders through our quarterly dividend of $1.15 per share. For the full year, we repurchased $129 million worth of shares and paid $114 million in dividends as the return of capital to shareholders remains a key component of our commitment to creating long-term shareholder value.

Turning to our outlook. As Jason mentioned, we expect to see industry RV wholesale shipments of 335,000 to 350,000 in 2026, and we look for the marine industry to be flat to up low single digits. For the transportation market, we expect the market to be flat, but we will have the benefit of increased sales from the acquisitions of Freedman Seating and Trans Air, which we completed in 2025. We also expect that the housing industry growth will be in the low single digits, aided by our growth of residential window products.

For the Aftermarket, we are estimating mid-single-digit growth supported by the significant numbers of RVs entering the repair and replacement cycle in the next few years. Lippert should also see lift in automotive aftermarket sales as the result of the key competitors bankruptcy. I would also like to note that we have started the year strong with January net sales of approximately $343 million, up 4% from prior year. With this backdrop, we expect consolidated 2026 revenue of $4.2 billion to $4.3 billion, and operating margin in the range of 7.5% to 8%, and adjusted diluted EPS of $8.25 to $9.25.

Helping to drive the bottom line results, we plan to consolidate 8 to 10 facilities during the year on top of the 5 that we completed in 2025, while also continuing to focus on additional efficiency initiatives. In addition, we expect our continued penetration of newer end markets to support margin expansion, and we will also continue to seek divestiture opportunities related to lower-margin noncore products.

For capital allocation in the new year, we expect $60 million to $80 million of capital expenditures, mainly for business investment and innovation. We also look to return additional capital to shareholders through both our dividend and opportunistic share repurchases, while maintaining our target leverage ratio of 1.5 to 2x net debt to EBITDA. In summary, while we ended 2025 on a strong note, we're even more excited about the opportunities ahead for LCI and are determined to create additional long-term shareholder value through adherence to our strategic initiatives, with a focus on diversified growth opportunities and disciplined cost management.

And now operator, if you could please open the lines, we'd be happy to take questions.

[Operator Instructions] The first question today comes from Bret Jordan of Jefferies.

This is Patrick Buckley on for Bret. Focusing on the 2026 outlook. I guess, how sensitive is that range to potential rate cuts to do 3 or 4 rate cuts drive the high end or potentially higher? Or I guess what other metrics drive that range there?

I would just say we're not factoring the rate cuts into the range. I think it's kind of steady state as we are right now. Certainly, if we get some rate cuts, that would be helpful. I mean a lot of our growth that we're planning on the top line is going to be predicated on market share gains and some of the other things we talked about in the call. So is that helpful?

Yes. Yes. And I guess staying on the '26 guide here, can you help us bridge the difference between 2026 and what may be a potential "normal run rate" looks like, I guess, between the COVID highs and the post-COVID lows, where do you expect to settle in during a more normal cycle?

Yes. I think when you look at the past cycles, I mean, we're kind of -- as I say to a lot of people, we went up to such a [ Monster High ] that when we came down to half of the [ $600 million ] down to [ $300 million ], things broken into a lot of pieces. So I think we're going to be picking those pieces up for a while. It's been 3 years. I think it's going to be a slow coming out of the cycle. So obviously, if you look at our forecast for 2026 with units at a midpoint of 345,000or 344,000 whatever the midpoint is of our range. It's -- we feel like we're coming off slow. And we'll pick up more momentum next year as we get through more of this.

But I think we would say that the midpoint is probably [ 375 to 415 ] somewhere in that range in terms of what is more normalized for the near term. But as we've said on past calls over the years, and we feel like this is a 500,000-plus industry, but we got to get healthy before we get back to that.

The next question comes from Scott Stember of Roth Capital.

Jason, just wanted to -- early in the year, we're hearing of trade-up activity, mix shift towards higher-priced units. And obviously, we're seeing that in your results already. What are you hearing through your various touch points at retail? Just trying to get a sense if that narrative is continuing as we enter the selling season.

Yes. Yes. I think there's a lot going on out there on the retail side of things. I would say that they're -- I've been and sat with a talk to a handful of the larger dealers lately, the larger dealers seem to be doing decent. But I think that there's a lot of small and midsized dealers that are struggling. I think everybody is struggling on the margin side. But I think everybody is being very disciplined. We had some weather. I heard that [ Camping World ] had as well as some other stores had 45 to 60 stores that were down for a couple of days because of weather. So we have that kind of thing going on this time of year.

But I think the big guys are doing okay. Some of the smaller guys and mid-sized guys are struggling. I think that's what gets us to our forecast of that [ 335 to 350 ]. It just feels like things are moving slowly and hopefully, we get some stronger retail numbers as we get into the selling season this year.

Got it. And then looking at the aftermarket, you called out the RV side, I guess, doing better and that was -- if you look at the profit for aftermarket as well, it looked like it was a little bit lower. Maybe just talk about on the aftermarket RV versus the automotive side, maybe talk about [indiscernible] brands...

I was just going to say that some of the headwinds on the aftermarket side related to the pricing on the auto aftermarket side. So we have pricing cycles typically January and April. So when you look at fourth quarter, some of our numbers on the profitability side were held up a little bit there, but all those increases due to the tariffs and all the other related inflation that we had last year will come in the next couple of quarters.

But all in all, like we said, our aftermarket side of our business is doing well. We've got new products, new market share. We're continuing to gain steam on the RV side. And then as we said, we've got some really big opportunities on the automotive aftermarket side with a bankruptcy of announcement of first brands and what they're going through. A lot of pieces to pick up there for us.

Got it. And then just last question on guidance cadence. Anything we should know about modeling down to the bottom line for the first quarter?

Yes. So Scott, as you think about the first quarter, I think January is pretty indicative of what we're thinking that we're going to see from a year-over-year perspective. So we started off with an improvement over last year, but it is only 4%, I think we're expecting that, that's going to trend fairly consistently as we look at the quarter. And when we think about the margin cadence going through the year, we're not going to start at the 7.5% to 8% operating margin. We'll step into that as we go through the year.

The next question comes from Daniel Moore of CJS Securities.

Maybe go back to the first question a little bit. guidance, kind of low to mid-single-digit growth for '26. Just talk about puts and takes, one, kind of price versus volume to expectations for content gains. And then how much revenue -- is -- are you contemplating being -- coming out of the bucket, either deemphasized or discontinued either from consolidating facilities or kind of shedding low-margin business?

Dan, definitely, a lot of puts and takes as we're looking at that potential range going into this year. From an organic growth perspective, we've talked before around that 3% organic growth. I'd expect that we continue to see that as we move through 2026. Probably less so from a pricing perspective and more so from that market share expansion. I think we shared previously in the third quarter call that we're looking at maybe $75 million of potential divestitures of that lower-margin product. So that could be one of the takes from the growth and then modest expansion across the market, flat to modest expansion, as we highlighted in the prepared remarks. So definitely puts and takes, but feeling good as we're starting the year.

And then I would just add that our expectation is continued content growth. Obviously, we had a nice content growth year this past year. But I look at last year was a tough market. we grew $308 million in that market, some through M&A and through organic growth and market share gains. We expanded our margin during that time. We consolidated facilities to the tune of 5 facilities, which helped. And we've got that momentum carrying on into this year with another 8 to 10 facilities as well. We again expect a little bit of growth flat to a little bit of growth in all of our markets, maybe a little bit more in aftermarket, given some of the things going on there.

But I think when you look at the growth that we had last year, significant growth in a really tough market, and we're continuing that this year with even more ability to improve our cost structure. I think it's a really good position we're entering '26 and...

Really helpful. Maybe just following up on the last question. Looking at Q1, the full year guide implies 70 to 120 bps of operating margin expansion. I think last year was around 7% or 7.8%, if I'm not mistaken, adjusted operating income. Just how are we thinking about kind of year-over-year growth as far as op margin for the first quarter given weather and some of the other issues.

Yes. I'd say probably less of a year-over-year growth from an operating margin perspective, more as we get into the latter part of the year to get us to that 7.5% to 8% margin. Yes. So I mean, I think first quarter is going to look very similar to the operating margins that you saw in the first couple of quarters of last year.

Very helpful. And then just going back to kind of the aftermarket opportunity, you talked about 1.5 million units coming into the age of repair in the next 1 to 3 years. How do you think about kind of that aftermarket business? You gave color for this year? How do you think about that ramping over the next 2 to 3 years? And what are your kind of near-term and longer-term operating margin goals in that business?

Yes. I think when it comes to those units coming into their repair and replacement cycle, again, a lot of those parts on those units that come into repair and replacement are proprietary. They need to use our parts -- so all we know is we're getting closer and closer to when those units start to really flow into the dealers for service. So we've seen a little bit of that over the last couple of years, but we expect it to grow. Like I said, there's a lot of units out there that need -- that we will need to come back into the repair and replacement cycle.

And again, on the aftermarket side for automotive, we just have a lot of opportunity on just share gains through the First Brands issue. Lots of hitch on towing and electrical business that's just going to be sitting out there out for bid, and we're the likely candidate there for that business just because there's really only been 2 strong players in that market over the last decade. And it's a high barrier to entry business. I mean you've got to have significant engineering design built up to cover automobiles and trucks that go back 30 years for fit and finish on the hitch and towing aspects. And then obviously, when we get to a situation like this, we've got a little bit more margin opportunity and control than what we would if they were more players. So I think our aftermarket margins will stay pretty steady.

Lillian, I don't know if you have any other color there?

Yes. The only other thing I would add to that, Dan, is keep in mind, we have been doing investment into the aftermarket business really to support this future expansion. So the margins have been pressured from that. And in the near term, you're going to still see some of that pressure as we're investing in the facility in Texas as we're continuing to support the investment into the distribution aspect for aftermarket. But I think longer term, clearly, we expect nice solid returns with the aftermarket business, just a little bit of near-term continued headwinds.

The next question comes from Joe Altobello of Raymond James.

I guess first question for you, Jason, your industry outlook for wholesale shipments on the RV side is a little bit softer than what we talked about in late October. I'm just curious what you've seen over the last 3.5 months or so that makes you a little bit less sanguine on the industry this year?

Yes. Like I said, I think there's still a lot of pieces to pick up. There's still a lot of -- probably the biggest answer to your question there, just there's a lot of mid- and small-sized dealers still out there. A lot of those dealers are going through the question of do they want to stick around? Do they want to sell to somebody bigger? I think the bigger guys have put the brakes on a little bit in terms of acquisition of some of these smaller dealerships. So it just feels like there's a little bit of a log jam up there until some of that gets sorted out. But we're taking a conservative approach.

I mean, again, we feel that the industry can be a lot better. Some of it is we just need some of the macro factors to come back and improve a little bit. But all in all, we're certainly coming off the bottom. We drop to 300 went to 315 to 335 to 342 this year. So we're already seeing the beginning portion of coming off the cycle. It's just a matter of how quickly it's going to ramp up. And that depends on retail and the overall dealer environment out there.

Got it. Helpful. And maybe just in terms of the first quarter outlook, I think you mentioned similar to what you saw in January, call it, plus 4%. It's obviously, a slowdown from 4Q plus 16%. Is that just a tougher compare? Or are you seeing other dynamics playing out here early in the first quarter?

I think it's just a lot of dealer and OEM discipline at this point in time. I mean they're being as good as I've ever seen in terms of just pumping the brakes and making sure that we're not getting ahead of ourselves and putting inventory out there that's just going to sit. So dealers and OEMs are ordering and building the right inventory, I feel better than I've ever seen. And I think they're just waiting for the retail numbers to pop up, shows have been good. Traffic has been decent. There's no signs out there that would point otherwise that it would be going the other way. So we do think it's -- we should be up a little bit this year. But those are some of the early indicators.

The next question comes from Tristan Thomas-Martin of BMO.

I want to follow up on Joe's questions. So up a little bit of retail for the RV industry year-over-year. Is that right?

I think retail and wholesale stayed pretty aligned this year. We'd love to see retail up again. I think some of it is just going to depend on how the macro factors play out over the next months. The tariff environment not being here this year will help significantly because pricing is a little bit more consistent. We can rely upon at the moment where we're at with things.

Okay. And then just kind of on the change you just announced. I just want to summarize to make sure I'm understanding it correctly. But it sounds like dealers are just continuing to be maybe a little bit more hesitant and you thought to take on new inventory?

I think there just being -- I just think they're being cautious right now. And again, we had some significant weather. I mean I said weather in the North during this time of the year, but the weather was kind of spread out all over the place. Again, some of the numbers I heard from some of the bigger dealers where they had multiple days of shutdowns and 50 to 60 stores across the country, some of them. I mean that's a big -- nobody can go in and buy our RVs when, that many dealership ships are shut down. So I think that, that played a little bit of a role. But ultimately, we still feel optimistic that this year can be better than last year.

Okay. And then just one more question. Can you maybe remind everybody but the kind of typical RV trade-up cycle is from a consumer standpoint? And then maybe could it be maybe a little bit quicker this time just because there's been a lot of really cheap smaller kind of low content RVs that have been sold in the last couple of years?

Yes. I think to your point, on the more entry-level stuff, especially the single axle product, you're going to see quicker trade cycles than you would on a bigger motor home or a larger pit wheel. We typically say that the trade-in cycle is 3 to 5 years. And a lot of that just will depend on the buyer and the type of unit that they have. So obviously, you built -- the industry built a lot of those single axle trailers over the last years. So we think that will bode well for the industry as people start to think about continuing camping and a bigger unit. So we've seen some of that improvement already with some of our content gains in the last few months.

Next question comes from Brandon Rollé of Loop Capital.

Just first on affordability. Could you just talk about maybe affordability in the RV industry entering 2026 versus maybe where we were last year and how that might overall have an impact on the industry's recovery. I think this is the first year pricing has started to come back up again, but rate relief really hasn't been significant, at least on the consumer side. So any comments there and how that might impact your pricing?

Yes. I think there's a lot of -- there's always a lot of pricing discussions going on. There's -- I think there's 2 big factors that usually weigh into how ASPs are going to -- and in any given year, and I think that the OEMs right now are really focused on driving those ASPs down through a lot of content realignment. So there's been a lot of that going on since model change to try to stay focused on bringing prices down. The only negative we have right now is just aluminum costs in general are up. So that's kind of a headwind for the industry, but it sits near the 5 or 7-year high there. So -- but that will come back down. Right now, it's a little bit of a headwind. There's a lot of aluminum in alone of these RVs that are built.

But we're working with our customers like we always do and good, better, best philosophies. And maybe a good is good enough, instead of them buying a best type of product or a better type of product component for their RV to help bring pricing into a better alignment for the consumer. And then you've got the third lever, which is a lot of OEM discounting and dealers discounting to try to move product and keep product moving, so it doesn't get scale out there. And I think that our industry does a better job and than most industries at managing those factors.

You look at the boat industry and they're kind of strapped by engine prices. Engine prices really haven't come down much since COVID and boat prices are really high and there's not a lot the boat manufacturers can do because it's the largest ticket item for components that they buy for the boat. So I think RVs and in better shape.

The next question comes from Kevin Condon of Baird.

This is Kevin on for Craig at Baird. I was hoping to understand and unpack the margin guide a bit better. Just thinking the 70 to 120 basis points of improvement. Wondering if you could comment on our rank order, some of the largest drivers of that being operating leverage on the top line growth? Do you expect favorable mix impact, maybe the net incremental impact of tariffs? Just how you're thinking about some of those buckets contributing to that 70 to 120 basis points increase?

I'll start and let Lillian chime in after. But I think one of the biggest things that I mentioned earlier that we've got going for us is just some of the consolidation efforts we have in restructuring, we have -- that we started early last year on. If you look at last year, like I said, we increased $308 million in our top line. Through our acquisitions, I think we acquired 1,000 team members. We ended the year 400 team members up over the beginning of last year. So when you consider that we grew $400 million, added 1,000 team members and ended only 400 from where we started. I think that shows the power of some of the consolidation efforts that we're making around G&A and overhead. So that would probably be 1 of the bigger levers. And obviously, that continues in just a dramatic fashion as last year because we're going to double -- we're going to nearly double the amount of consolidations we're doing this year that we did last year.

Yes. Thanks for that, Jason. And Kevin, building on that. so clearly, the consolidations are going to continue to benefit us. When we think about kind of the range that we have out there, part of what's still to be determined as we go through the calendar is the timing of those consolidations of those incremental [ 8 to 10 ]. So we have the full year benefit of the 5 that we consolidated last year, which will benefit us throughout the year. And then as we cadence in the 8 to 10, which will not all happen obviously February 1 or March 1, it'll cadence over the full year, that will also drive efficiencies for 2026.

Additionally, as we have the incremental revenue coming in we've typically guided and will continue to guide that incremental margins, roughly 25% our fair assumptions as you're modeling. So there's a benefit there. And really, as Jason was saying, we'll continue to drive overall operating efficiencies. So as we're able to get more volume and more units through our manufacturing facilities, you have better efficiencies just in your fixed cost absorption as well. So it really is a multitude of factors there that but to us being able to deliver that margin expansion. And frankly, continuing us on that progression towards the double-digit margin, which is what we've been talking about reaching. So continued steady progress towards that goal.

Understood. And then on the -- I think in the past, you've disclosed a single axle mix of shipments. Was that a metric that you offered for Q4? And I just wonder your expectations for 2026 if that's still a tailwind for the full year outlook.

Yes. So for the fourth quarter, we are providing it. It's in the presentation back from the very back of the appendix. But the fourth quarter came in at about 21%, so a little bit up from the third quarter. So I think we're kind of bouncing around that 19% to 21%. Fifth wheels were definitely still strong as we reported. I think it's yet to be determined for the full year for 2026, but that 19% to 21% feels kind of like an ambient level at this point.

Yes. And just to give you a little bit more color, just for January, for example, single axles were a little down over last year, January. fifth wheels were up a little bit. So that's -- we're seeing that content move the right way for us. And we'll see how the rest of the year goes. That's just a 1-month look.

[Operator Instructions] The next question comes from Mike Albanese of Benchmark.

Just kind of a quick follow-up on really the last question. If you could just comment again on RV product mix expectations. Obviously, some momentum in the fifth wheel here. I mean do you see that more as dealers kind of rightsizing or level-setting inventory? Or is this more consumer-driven momentum that could continue?

Well, I mean, we hope that the that mix rightsizes back more toward not just fifth wheels, but higher contented trailers. It's just healthier for the industry. And again, we put so much of that single-app product into the industry over the last 5 years that eventually, that part of the market will get saturated and people will start trading up and that mix shift will happen hopefully a little bit more dramatically. But like I said, all I can tell you is January right now and kind of what we see in the very, very near term, which we've seen single axles drop a little bit over last year's same period. Fifth wheels increased a little bit over last year's same period in January.

Talk at the shows that the high-end buyer is there and not as impacted as some of the entry-level buyers, a little bit more willing to spend money. So that's where we're at right now.

Thank you. We have no further questions at this time. So I'd like to hand back to Jason for closing remarks.

Yes. Again, thanks, everybody, for joining the call. And again, against a really tough backdrop. Our performance, we feel, has been very, very strong. We've got lots of good things happening this year. Again, even if the industry is flat to a little bit up, we feel like we'll perform similar to last year and continue to make some of these consolidation efforts pay off on the bottom line. So thanks for joining the call. We'll talk to you next quarter. Thanks.

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

Hello, everyone, and thank you for joining us today for the LCI Industries Third Quarter Earnings Call. My name is Lucy, and I'll be coordinating your call today. [Operator Instructions]

It is now my pleasure to hand over to your host, Lillian Etzkorn, CFO, to begin. Please go ahead.

Good morning, everyone, and welcome to the LCI Industries Third Quarter 2025 Conference Call.

I am joined on the call today by Jason Lippert, President and CEO; along with Kip Emenhiser, VP of Finance and Treasurer. We 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 of the forward-looking statements are made, except as required by law.

In addition, during today's conference call, we will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in our earnings release and investor presentation, which have been posted on the Investor Relations section of our website and are also available in our Form 8-K filed this morning with the SEC.

With that, I would like to turn the call over to Jason.

Thank you, Lillian, and good morning, everyone. Welcome to LCI Industries' Third Quarter 2025 Earnings Call.

This quarter, we continued to build on our ongoing and successful efforts to drive efficiency and drive benefits from our years of diversification and our relentless focus on growth. To that point, we delivered an exceptionally strong quarter with sales growth of 13% to more than $1 billion, along with solid margin improvement, driven by double-digit gains across our RV and Adjacent businesses. This demonstrates the continued benefit of our innovation strategy and successful integration of our recent acquisitions. Our entire organization continues to work diligently to optimize productivity, footprint and resources, positioning the company for outperformance as the industry begins to recover from this prolonged cycle.

Operating margins improved 140 basis points year-over-year to 7.3%, a direct result of our disciplined cost management, sustainable improvements in overhead and G&A, more favorable mix, footprint optimization and ongoing productivity initiatives. Year-to-date, we successfully completed 3 facility consolidations with 2 more expected by year-end. Our facility consolidation actions completed in 2025 alone are expected to generate more than $5 million in annualized savings. Collectively, these initiatives position us to deliver our 85-basis-point operating margin improvement goal for the year. On the wholesale front, following a strong Elkhart Open House, we expect a near-term uptick in units produced. Our chassis orders in October are up roughly 275 to 300 units per week compared to prior months, an encouraging sign of OEM confidence and proactive dealer restocking ahead of the next selling season.

Turning to RV OEM. Net sales were approximately $470 million, up 11% year-over-year. This double-digit growth underscores the effectiveness of our innovation strategy and the strength of our competitive moat. Total content per unit increased 6% year-over-year to $5,431 as we continue to expand share across our top 5 product categories: chassis, appliances, axles and suspensions, furniture and windows. Since 2020, our total content has grown an impressive 60%. Recent innovations like the Furrion Chill Cube air conditioner, analog braking systems, 4K Window series, SunDeck and TCS suspension systems continue to gain momentum. Together, these platforms have reached a combined $225 million annualized run rate, more than doubling from $100 million just 2 quarters ago.

The enthusiasm around all new products at the Elkhart Open House were tremendous, with strong OEM and dealer engagement as these new innovations showed up on many leading brands. Our ability to deliver high-impact innovation supported by our customer relationships, our expansive product portfolio, scale and manufacturing expertise positions us to consistently capture 3% to 5% organic content growth annually. We also saw some easing in product mix pressure this quarter as smaller single-axle trailers declined from the mid-20% range earlier this year to about 19%, supporting both content and margin growth. Looking ahead, we expect North American RV wholesale shipments in the 340,000 to 350,000 range for 2025. As demand returns, our focus on innovation and share growth will continue to drive solid performance.

Net sales in our Adjacent or diversified businesses were $320 million, up 22% year-over-year. This strong performance reflects growth across our building products, utility trailer, transportation and marine markets. Of the total increase, approximately $39 million came from acquisitions, specifically Freedman Seating and Trans Air, where synergies are tracking well ahead of schedule. Since our acquisition of Freedman Seating, they have entered the heavy-duty bus seating market, $150 million addressable opportunity where they are already capturing orders, showcasing our ability to scale our furniture manufacturing expertise. At Trans Air, we're streamlining operations and achieving early wins consistent with our proven acquisition playbook.

Subsequent to the quarter, we also expanded through the acquisition of Bigfoot Leveling in October, which broadens our hydraulic leveling system offerings and MAS Supply, which enhances our residential window capabilities, complementing our internal window lines. Utility trailer production remains healthy at around 700,000 units per year. We're accelerating content growth through innovative new products for this market like ABS, coil spring suspension and tire pressure monitoring systems, all helping to elevate our offerings in this market. We're also leveraging our manufacturing expertise to expand into high-growth sectors like OEM and aftermarket golf cart seating, an area experiencing strong growth in residential and community living markets. Collectively, LCI's total addressable market opportunity is approximately $16 billion and strategically aligned with our core manufacturing strengths.

Turning to Aftermarket. Net sales were $246 million, up 7% year-over-year as our strong OEM content continues to fuel aftermarket growth. The growth in OEM content directly fuels additional revenue streams with increased demand for product enhancement and service in the aftermarket. A great example of this is our Furrion air conditioners. In 2022, our OEM share was less than 5% with virtually no aftermarket presence. Today, just 3 years later, we captured over 50% OEM market share, and we expect more than $20 million in aftermarket air conditioner sales this year. This formula is clear. OEM success and momentum drive aftermarket growth.

To support our continued growth in the service portion of our Aftermarket business, we continue to invest in service infrastructure. Year-to-date, over 28,000 dealer service personnel have completed our technical training programs with thousands of in-person sessions and over 1 million visits to our online tech pages. These training efforts are driving higher quality service and strong dealer partnerships. We've also expanded our service footprint, adding 3 new facility sites in 2025 and doubling our mobile tech staff. These investments have already increased service completions by double digits, improving speed, convenience and customer satisfaction. All in all, LCI is a huge right to win in the aftermarket. LCI is one of the only players in the industry that truly touches every RV consumer as our components are present in nearly every unit on the road. That unmatched footprint fuels long-term aftermarket growth and positions us as a trusted partner across the entire life cycle of RV ownership.

We're also leaning into new opportunities like upfitting solutions, allowing customers to add features like leveling and TCS if it wasn't included in their OEM packages. We are also partnering with campgrounds and storage centers to enhance service accessibility and convenience for our customers. With roughly 1 million RVs entering the service cycle over the next few years, we are exceptionally well positioned to capture recurring aftermarket demand. To meet rising demand in the aftermarket, we've recently opened a new state-of-the-art 600,000-square-foot distribution center in South Bend, Indiana. This facility further enhances our logistics capabilities, boosting speed, accuracy and overall capacity while supporting our margin performance as we transition from our older, less efficient Mishawaka location.

We remain disciplined in capital allocation, maintaining our industry-leading dividend yield and executing meaningful share repurchases. Year-to-date, we have returned $215 million to shareholders with a repurchase of $129 million of stock and have paid $86 million in dividends. We have a solid balance sheet, having refinanced our convertible notes and other long-term debt earlier this year. In the third quarter, we refreshed and repriced our term loan, reducing annual interest expense by roughly $1 million and improving free cash flow. CapEx for the year is now expected to land between $45 million and $55 million, better than our prior range of $50 million to $70 million, reflecting disciplined capital project management.

Looking ahead, our team's confidence continues to build given the multitude of innovation and efficiency efforts we have delivered and will continue to deliver that should result in the sustained future growth and enhanced financial performance. As we look beyond the end of the year into 2026, we expect continued 3% to 5% organic content growth from innovation and our competitive advantages, driven in part by a $225 million run rate in our top 5 product innovations, manufacturing optimization, including $5 million in annual run rate savings from 2025 consolidations and 8 to 10 additional consolidations planned for 2026, better product mix normalization as single-axle trailers decline, RV wholesale shipments to lift to 345,000 to 360,000 units in 2026 with near-term strength already evident, aftermarket tailwinds with approximately 1 million RVs entering the service cycle and exploring divestiture opportunities of approximately $75 million of revenues that are dilutive to the business in 2026.

Together, we expect these targeted initiatives to lift operating margins to 7% to 8% in 2026. Most importantly, none of this will be possible without our incredible team, the dedication, resilience and commitment of our 12,000 team members remain the foundation of our success. Over the past 3 years, we have navigated through some tremendous challenges. And today, we're operating from a position of real strength, solid cash flow and balance sheet, healthy margins and strong customer sentiment.

I'd also like to recognize the passing of our founder, our grandfather, Larry Lippert, whose vision, ingenuity and perseverance built this company from the ground up. His culture of grit, innovation and courage continues to define who we are today. To our teams across the globe, thank you for relentlessly serving our customers and community every day. Together, we are building a stronger, more resilient and a truly differentiated LCI Industries.

I'll now turn it over to Lillian, who will provide more detail on our financial results.

Thank you, Jason.

Lippert's innovation, competitive strengths and successful M&A supported double-digit net sales growth this quarter, while sustainable operational improvement initiatives translated into meaningful margin expansion. Our consolidated net sales for the third quarter were $1 billion, an increase of 13% from the third quarter of 2024. OEM net sales for the third quarter of 2025 were $790 million, up 15% from the same period of 2024, driven by RV OEM net sales of $470 million, which were up 11% compared to the prior-year period. This increase was a result of market share gains and an increased mix of higher content fifth-wheel units.

Content per towable RV unit increased 6% year-over-year to 5,431 and content per motorized unit increased 2% year-over-year to 3,839. Towable RV organic content grew 3% year-over-year and 1% sequentially, supported by the share gains we delivered in the top product categories we supply to RV OEMs, specifically appliances, axles and suspension, chassis, furniture and windows as well as the continued adoption of recent innovations like our ABS, TCS, appliances, Furrion Chill Cube and the SunDeck.

Adjacent Industries OEM net sales were $320 million, up 22% year-over-year, primarily due to acquisitions within the transportation market, which represented $39 million in the quarter. This increase was also supported by other markets such as utility trailers, where net sales grew 22% and marine, where net sales rose 9%. We continue to further expand our presence across numerous diversified markets.

Aftermarket net sales were $246 million, an increase of 7% compared to the same period in 2024, primarily driven by product innovations and the expanding Camping World relationship within the RV aftermarket, partially offset by lower volumes within the automotive aftermarket.

Consolidated operating profit during the third quarter was $75 million or 7.3%, a 140-basis-point expansion over the prior-year period. This growth was primarily driven by reduced costs from material sourcing strategies and increased North American RV sales volume related to market share gains and increased sales mix of higher content fifth-wheel units. The operating profit margin of the OEM segment increased significantly to 5.5% in the third quarter compared to 3.2% for the same period of 2024, primarily driven by increases in selling prices for targeted products, reduced cost from material sourcing strategies, improved fixed cost absorption and production labor efficiencies.

Our Aftermarket segment delivered a 12.9% operating profit margin compared to 13.9% in the prior-year period. This change was primarily driven by higher material costs related to tariffs and higher steel, aluminum and freight costs, lower production volumes in the automotive aftermarket as a result of lower retail volumes and investments in capacity, distribution and logistics technology to support future growth. These were partially offset by our ability to increase selling prices for targeted products.

Adjusted EBITDA grew 24% to $106 million compared to $85 million in the third quarter of 2024. GAAP net income in the third quarter was $62 million or $2.55 earnings per diluted share, up from $36 million or $1.39 earnings per diluted share in the prior-year period. Adjusted net income increased to $48 million, up 35% to $1.97 per diluted share, excluding loss on extinguishment of debt and gain on sale of real estate net of tax effect.

Noncash depreciation and amortization was $90 million for the 9 months ended September 30, 2025, while noncash stock-based compensation expense was $17 million for the same period. We continue to anticipate depreciation and amortization in the range of $115 million to $125 million during the full year 2025. At September 30, 2025, our cash and cash equivalents balance was $200 million, up from $166 million at December 31, 2024. For the 9 months ended September 30, 2025, cash provided by operating activities was $252 million. Investing cash flows included $38 million used for capital expenditures and $103 million used for acquisitions.

During the quarter, we refinanced and repriced our term loan facility, lowering interest by 25 basis points. This action strengthens our capital structure and should reduce annualized interest expense by approximately $1 million, supporting continued cash generation and balance sheet flexibility. We also continue to execute on the $300 million share repurchase program that we announced last quarter. During the quarter, we returned $38 million to shareholders through share repurchases and $29 million through our quarterly dividend of $1.15 per share. Year-to-date, we returned $215 million to shareholders in the form of dividends and share repurchases, underscoring our commitment to balanced capital allocation and shareholder returns.

As of September 30, 2025, our net inventory balance was $741 million, which was about flat to prior year. At the end of the third quarter, we had outstanding net debt of $748 million or 1.9x pro forma EBITDA adjusted for the impact of noncash and other items.

Looking forward, we expect October net sales of approximately $380 million, up 15% from prior year, and we anticipate mid-teens year-over-year growth for the full fourth quarter. As Jason mentioned, we project that North American RV wholesale shipments for 2025 will be in the range of 340,000 to 350,000. Margin expansion continues to run ahead of plan as well. Fourth quarter year-over-year operating margin expansion is expected to match third quarter levels. Efficiency initiatives and infrastructure optimization continue to drive these results. For example, we plan 2 more facility consolidations by year-end for a total of 5 this year. This translates to $5 million run rate in annual savings.

Looking to capital allocation for the full year 2025. Capital expenditures are expected to be in the range between $45 million to $55 million, focused on business investment and innovation. We continue to use our balance sheet to prudently pursue strategic opportunities that drive profitable growth and deliver shareholder value. Our long-term leverage target remains at 1.5 to 2x net debt to EBITDA, and we remain committed to returning cash to shareholders.

Our preliminary outlook for 2026 calls for North American RV wholesale shipments of approximately 345,000 to 360,000 units, and we continue to target organic towable content growth of 3% to 5% annually. From an efficiency perspective, we expect 8 to 10 additional facility consolidations and are exploring divestiture opportunities of roughly $75 million of revenue from lower-margin noncore areas in 2026. These factors, combined with identified operational improvements and further expansion of our presence in diversified markets are expected to support operating margins in the range of 7% to 8% for 2026.

In closing, we are confident that our operational flexibility, strategic diversification and effective cost management, along with our strong balance sheet, will enable us to deliver sustainable and measurable shareholder value over time.

With that, operator, we're ready to take questions, if you could please open the line. Thank you.

[Operator Instructions] The first question comes from Daniel Moore of CJS Securities.

Congrats on the solid results. I want to maybe just parse out -- so in the quarter, adjusted operating margins rebounded quite a bit faster than expected. Can you maybe bucket or just rank order those improvements between leverage to higher volumes, optimization, mix? And I'm wondering if there -- if maybe tariffs didn't have quite as much of an impact as expected as well.

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

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

And Dan, productivity was a huge boost, too. I just to give you a quick example. I think we're down 50 team members year-to-date from the beginning of the year. And with all the acquisitions, especially the 2 large ones we did, we've added 1,000 people there. So to be up 1,000 with acquisitions, but down net 50 for the year kind of shows you the productivity gains we've experienced through some of the footprint optimization and other productivity initiatives we've been working on.

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

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

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

It appears that volume lift and productivity gains will help as we've mentioned. It doesn't appear that there's any downtime that would be more than normal. I mean everybody is taking off kind of normal off times during the seasonality holidays. So I think those are the biggies.

Really helpful. And I appreciate the color on the margin uplift from some of the divestitures and optimization steps that you continue to take. You generated a $20 million gain in the quarter. You've got 2 more facilities consolidation this year, 8 to 10 next year. Are there -- any sense for the potential proceeds and/or gains from those sales? I know they're onetime, but that could be a nice cash benefit.

Some of the facilities are leased there. Some of them are owned. So to the extent we can -- we're going to fully get out of the facility and not use it for something else, then we'll certainly look to put those on the market. So there'll be probably a couple of those, but we don't have any dollars attached to those yet till we get that done. But we definitely have significant momentum in that category as we continue to really drive hard to consolidate and simplify the business.

Absolutely. Last, I appreciate the outlook for the RV wholesale shipments, the preliminary outlook for '26. Do you have kind of a similar outlook for marine at this stage?

At this stage, Dan, we don't. I think when we come out with the fourth quarter results, we'll have a more comprehensive outlook for next year.

And our big opportunity in marine right now is just content growth through some of the innovation we've launched here in the last couple of quarters.

Got it. All right. Well, hopefully, all of the share gains that we're seeing come through, but some of that chatter to rest.

The next question comes from Joe Altobello of Raymond James.

I guess first question on the industry outlook. You mentioned wholesale looks to be up modestly next year. Would you also expect retail to be up next year?

I think we're kind of expecting the same -- for them to kind of stay in line as they have in the last couple of years. We're not forecasting any kind of big jump in retail at this point.

Okay. Got it. And then just in terms of the quarter, the 13% revenue growth, could you parse out how much of that was pricing related?

So we haven't parsed it out specifically on that, Joe. I mean it is -- there is pricing elements to that, but it's also the overall volume uplift as well and the acquisitions that we identified the $42 million.

Okay. And maybe one last one for me. You talked about the mix improving. And I know this time of the year with the model year changeover, you usually see a little bit of a richer mix of larger units. Are you seeing an improvement beyond what you would expect normally from a seasonal perspective?

Well, I'd say that the mix to single-axle trailers has changed significantly over the last. It's been in process for the last 8 years or so. But I think what we've seen is the momentum slow down and start to retreat the other way in a meaningful way quarter-to-quarter. So it could change next year. It could go back up a little bit, but our expectation is that it's going to kind of stick around where it's at with all the conversations we've had with the dealer -- the dealers are driving and seeing a lot of this retail activity. There's a lot of those units out in the market. So that, I think, is one of the things that's going to hold that number down. You can only sell so many of those. So that's the short answer, Joe.

The next question comes from Scott Stember of ROTH Capital.

Congrats on the very strong results as well. I just want to square something away with what the largest dealer indicated on their conference call yesterday, pretty much saying that they're starting to see some elasticity issues, particularly given some of the price increases that have been put through, I guess, related to tariffs. Have you seen any change or any commentary from your OEM customers of any potential change in behavior suggesting that maybe they want to pull back a little bit? Or is the comments we heard yesterday probably just more episodic or related to that dealer?

Yes. I think it's a little bit to the latter, the last comment you made. I think some of that might be there. But there's definitely overall price sensitivity in the market around how much RVs have gone up. And it's really -- there's a few things going on. I think what's going to drive volume next year a little bit is the fact that suppliers, OEMs, they have reduced capacity. So there's less capacity if dealers want to get to have product in their lots for the spring selling season, they have to think about ordering a little bit differently and a little bit further ahead because some of that capacity is restricted.

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

Got it. Awesome. And maybe just talking about, I guess, one of the bigger components that you had to put price increases through for was steel and aluminum. And in the past, there's usually been a timing delay of when you get those prices through. It seems as if you were pretty successful in getting those through. I just want to see how this time -- if it is different than the last time that we saw steel and aluminum prices running up.

Yes, nothing's really changed there. I mean those 2 commodities are the largest components of our BOMs, at least on the RV side. So they are all controlled largely by these indexes. So right now, steel is a good guy and aluminum is a bad guy. Aluminum pricing is going to be going up here for the next couple of quarters and steel pricing is starting to come down. So there'll be a little bit of offset there. There were some tariff announcements this morning that there will be some favorability. Hopefully, we don't have timing on that yet as it was just announced here in the last 24 hours. So I think the big headline for cost next year is the fact that tariffs seem to be at least settled in place where things are predictable, and we can start working on costs better, and we're going to work with our OEMs the best we can and the discipline that they've had to get real production back to make sure that we're getting them the best we can for costs and as they redo bill materials and recontent and decontent that we're a bigger part of the solution as possible.

Got it. And last one for me on the Aftermarket, very strong results, very resilient. I know you have a lot of traction from previous OEM introductions that you're working into the aftermarket. But just trying to get a sense of a breakdown of the business between the automotive side and the RV side. Is there a big difference in growth between the 2 right now?

So the RV aftermarket for us has grown sequentially almost since we've started it 10 years ago, a little over 10 years ago. The repair and replacement service business is growing always for us because we're always putting more content in the RV. So I'll go back to the example I used in my opening remarks of we launched air conditioning. We've launched a lot of products in the last 5 years, but we launched air conditioners a few years ago, I think I said in '22, we had maybe 5% of the total OEM content, but we had no aftermarket business in ACs.

And today, if you fast forward, we've got probably 50% market share OEM, which is fantastic. But now we're seeing close to -- we'll see close to $20 million in AC aftermarket business this year. So again, the point is that when we launch new products, for most of the products we launch, there's a meaningful aftermarket once we penetrate the OEM business. So we expect the aftermarket business to continue to grow, especially with the tsunami of units that were built in 2020 to 2022 that like you're going to start hitting the repair and replacement cycle here in the next couple of years.

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

The next question comes from Tristan Thomas of BMO.

Can I confirm, I think you said $2 million from acquisitions in the quarter. And then have you quantified what you expect Bigfoot to contribute on an annual basis?

We've not. It's smaller. I mean MAS and Bigfoot are less than $25 million combined. And then for the quarter on acquisitions was $30 million.

$42 million total.

$42 million.

Okay. Great. And then for next year, how are you thinking about kind of the annualized tariff impact either on a gross or net basis or maybe both?

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

It should be a lot easier.

Okay. And then just one last question. How long do you think it's going to take to kind of get that single-axle versus multi-axle and fifth-wheel mix kind of back to that, call it, 84-ish percent range?

It's hard to say. Camping World is doing a great job pushing that product in the market. They're the single largest producer of that type of trailer. The strategy is to get more first-time buyers in the RV lifestyle because of the price point entry on that of less than $12,000 in a lot of cases. So it's really hard to say, Tristan. But our expectation is that it will normalize. It won't go back to where it was probably 10 years ago, but we think it has a good chance of getting back into that 16% range, especially as all the people that have bought that type of unit over the last 5 years decide to -- whatever portion of them decide to re-up and buy another RV, they're going to buy a bigger one.

[Operator Instructions] The next question comes from Bret Jordan of Jefferies.

This is CJ Dipollino on for Bret Jordan. I wanted to circle back to dealers real quick. Could you just give us any color into dealer sentiment and any insight into the probable timing of the restocking cycle as we move into the new year?

Yes. I mean, like I said earlier, we talk to a lot of the big dealers just to try to get a feel for where everybody is at because all the dealers have a little bit different strategy, and they play in different markets. And I would just say that there is a sentiment that inventories are low. The OEMs have had good discipline, like I said earlier, that's helped keep inventories low, but dealers have been just not ordering a ton of inventory. But again, like I said, it's not just us that has simplified our footprint and optimized. I mean a lot of suppliers and OEMs have. So the capacity is less than the industry today.

And I think that the dealers know that. And they're being -- they've got to be a little bit cautious on how they look at restocking and not trying to get inventory is too low because they're not going to be able to get the product when people need it for spring selling season. So I think that's why we're seeing a little bit of this. And again, our forecast is very modest for next year. 345,000 to 360,000 is not a huge lift, but every 5,000 units that get added to the wholesale production is a really big deal for us considering our content at $5,400 so -- and the innovation that's coming.

Okay. Great. And then could you just comment on trends in contenting that you're seeing? More specifically, I just want to see if the decontenting of RVs has started to stabilize.

I feel it has. And again, I've always said that we're a little immune to that just from the standpoint that we tend to have a lot of the products that that customers need to differentiate their products from others. And those would be things like the Chill Cube AC that we've talked about, the bus dial, square windows that we've launched in the last 1.5 years with the different colors on the exteriors, TCS and ABS and things like that, they tend not to decontent those things. So the biggest thing that hurts us is mix when it comes to decontenting. It's just the biggest negative and content for us would be a mix shift. But like I said, we're seeing a shift to the positive at this point in time.

And just another anecdotal thing I was just thinking about with the dealers. I was talking to a dealer the other day and their multisite dealer, their most popular floor plan they had or what they sell, they had 6 on the ground, which doesn't lend itself to good sales for the dealers if they don't have really popular floor plans in the right geographies. So I think that that's another reason we're seeing a little bit of positivity out there from some of the dealers that we're talking to.

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

Well, the last 3 years have been tough being at the bottom of the cycle, but we figured out how to peak operating performance here in the trough. We're really proud and happy with the results we've -- the solid results that we put out here in the last quarter, and I look forward to talking about that continued momentum next quarter. Thanks for the call.

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