LCI Industries (NYSE:LCII) Q2 2020 Earnings Conference Call - Final Transcript

Aug 04, 2020 • 08:30 am ET

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LCI Industries (NYSE:LCII) Q2 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

[Operator Instructions] And or our first question comes from the line of Craig Kennison with Baird. Go ahead, please. Your line is open.

Analyst
Craig Kennison

Hey, thanks for taking my question. Brian, starting with you, really impressive execution in a very dynamic quarter from a margin standpoint. Curious, how should we think through Q3 EBIT margin and the balance of this year, given what you're seeing on the demand side and how you've chosen to manage costs?

Executive
Brian M. Hall

A couple of things. I think, first of all, I'll start with SG&A, provided pretty good color around that within the within my prepared remarks. So I think the one thing to look at then would be gross margins. And so gross margins all things considered for Q1, that's a pretty good gross margin for us. It certainly is on -- is much higher than that for June. I'm expecting that if you look at it year-over-year, we still have we've got a lot of labor efficiencies, first and foremost. Those are somewhere called around an additional percentage point in gross margin. And then you have operating leverage on our fixed cost at these kind of volumes. So between a couple of those, at least where we've talked in the past about a 25%, 26%-type gross margin, I think we're there, and that's probably the low end of the range for Q3.

Analyst
Craig Kennison

That's great. And then, Jason, maybe just comment on your view of the RV market, in particular, whether you think some of this incremental demand that has come in since the pandemic creates some sustainable growth? Or maybe some challenges next year to try to comp all of it?

Executive
Jason D. Lippert

Well, in terms of the record demand, we're sitting in a spot where we're limited with respect to total capacity in the industry. We can't go out and build facilities quick enough. Obviously, dealer inventories are extremely low. The OEMs are responding as quick as they can to -- as well as the suppliers to meet the demand that we're seeing right now. So I mean, given that the post-pandemic lifestyle and limited travel and vacation options out there, put us in a position for the foreseeable future anyway, people are going to make different decisions. And it just feels like it's got a pretty long runway.

So we're planting our feet right now and trying to figure out how we have second shift, how we increase capacity where we can. We don't want to go out and buy a bunch of buildings and add capacity from a capex standpoint. We want to look at some of the options that we've got right now. And then the biggest challenges are going to be quality customer experience and sustain those things with all the flood of new buyers, both on the marine and the RV side.

Analyst
Craig Kennison

Great. Thank you.

Executive
Jason D. Lippert

Thanks, Craig.

Operator
Operator

Our next question comes from the line of Kathryn Thompson with Thompson Research Group. Go ahead, please. Your line is open.

Analyst
Brian Biros

Hey, good morning. This