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

Aug 04, 2020 • 08:30 am ET


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


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Jason D. Lippert

while on the road. With an RV, all of these amenities are made available in the vehicle, providing both safety and convenience that consumers are looking for. The addition of current travel restrictions, along with favorable gasoline prices and low interest rates for consumer financing have led many people to make the decision to start using RVs with a solid uptick of first-time RV buyers in recent months.

To highlight this trend, a recent RVIA survey reported that 46 million Americans said they'll likely take an RV road trip over the next 12 months, an incredible and encouraging statistic for us. Leveraging our reputation for high-quality innovative products, we are confident that we'll be able to capture a significant amount of this demand as people are increasingly drawn into the RV lifestyle in both the near-term and beyond.

As a result of the temporary production shutdowns and weaker consumer demand at the start of the quarter, RV OEM sales were down 38% year-over-year to $237 million for the quarter. We've been more than encouraged by the recovery in retail demand with RV sales in June up 17% year-over-year for LCI. Our run rates since June and July would place us at an all-time high output rate for 2020. And in addition, these were the two biggest revenue months ever in company history, with July 2020 sales over 53% higher than July 2019.

On the wholesale side, OEMs are adding capacity to keep up with increased demand, and our reopening facilities have been closed prior to the outbreak of coronavirus. Despite operating in a lower production environment in the beginning of the quarter, content per towable RV adjusted to remove Furrion sales from prior periods increased 4% year-over-year to $3,371. Our sustained content increase in towable RVs is driven by continued new product innovation and market share gains. Content per motorhome RV decreased 4% year-over-year to $2,308, driven by a shift in wholesale mix towards smaller entry-level Class C units. Our diversification strategy continues to gain momentum as our adjacent Aftermarket and international markets grew altogether during the quarter.

On a combined basis, these markets now make up more than 48% of our trailing 12-month sales, keeping us on track to reach our target of having these markets make up 60% of our total revenue by 2022. The continued execution on this strategy through both acquisitions and organic growth positions LCI to outperform the broader RV industry, even in challenging market conditions like this last quarter. We remain focused on further advancing our diversification strategy in developing our leading positions in markets outside of RV OEM to drive incremental growth.

As part of our long-term diversification strategy, we work towards strengthening our business across various adjacent markets. Revenue in our adjacent market category for the second quarter declined 23% year-over-year to $131 million, driven by the temporary production shutdowns in Marine, which resumed production in the latter half of April and early May. Marine, which has benefited from the same secular