Scott Stember

Scott Stember inquired about the Tools Group's recent negative performance after a rebound, asking if it indicated increased technician softness or a shift towards lower-ticket, quicker payback items. He also asked about specific subsegment performance and sales channels.

Answer

Nick Pinchuk, President, CEO, and Chairman of the Board, Snap-on Incorporated, explained that the Tools Group's flat performance was influenced by market turbulence (government shutdown, tariffs, general uncertainty). He highlighted positive signs like flattish originations and a 150 basis point increase in gross margins, indicating strong execution. He specified that tool storage sales to franchisees were down, hand tools were better, diagnostics were down, and power tools were up. Additionally, he noted that sales off the van were notably higher than sales to the van in the quarter.

Scott Stember asked about the Tools Group's recent negative performance following a rebound, inquiring if it indicated increased technician softness or a strategic mix shift towards quicker payback, lower-ticket items.

Answer

Nick Pinchuk, President, CEO, and Chairman of the Board, Snap-on Incorporated, explained that the Tools Group's flat performance was influenced by market turbulence, including government shutdowns and tariff fluctuations. He noted 'green shoots' in originations and highlighted a significant 150 basis point increase in gross margins, suggesting effective execution despite challenging conditions. Stember also inquired about specific subsegments, to which Pinchuk clarified that tool storage originations were flat, sales to franchisees were down, hand tools were better, diagnostics were down, and power tools were up. Lastly, regarding sales channels, Pinchuk observed that sales off the van were 'substantially bigger' than sales to the van in the quarter, viewing it as a positive 'green shoot' but not a definitive trend.

Scott Stember (ROTH Capital) asked for a breakdown of performance within the Tools Group, specifically for hand tools, power tools, and tool storage, and inquired about the dynamics of CNI's government-funded orders and the legal settlement.

Answer

CEO Nick Pinchuk reported that tool storage had an "occluded" quarter, hand tools did not perform well, while diagnostics saw significant growth. Power tools had a strong end to the quarter with a new product launch. For CNI, he noted continued delays in government-funded projects and general industry due to trade policy uncertainty, but strength in aviation, education, and natural resources. Pinchuk declined to elaborate further on the legal settlement beyond confirming it was in RS&I and unrelated to prior settlements.

Scott Stember of Roth Capital Partners, LLC inquired about the sell-in versus sell-through dynamics for the Tools Group, the leading product category driving its growth, and the quantifiable impact of tariffs.

Answer

CEO Nicholas Pinchuk stated that sell-in and sell-through were roughly balanced for the Tools Group. He identified hand tools as the leading product category, followed by strong performance in diagnostics. Regarding tariffs, he emphasized the company's resilience due to its 'make where we sell' strategy and highlighted the strong 50.5% gross margin as proof of successful mitigation, declining to quantify a specific headwind.

Scott Stember of Roth Capital Partners, LLC asked for clarification on sell-in versus sell-through dynamics in the Tools Group, questioned which product category led the group's growth, and inquired about the potential headwind from future tariffs.

Answer

Nicholas Pinchuk, Chairman & CEO, responded that sell-in and sell-through in the Tools Group were roughly in balance for the quarter. He clarified that Hand Tools was the leading growth category, though diagnostics also performed well. Regarding tariffs, he reiterated that Snap-on is well-positioned due to its 'make where we sell' strategy and that while exposures exist, the company has been able to mitigate them, making future impacts difficult to predict.

Scott Stember of ROTH MKM asked about Snap-on's strategy to counter declining technician confidence, the organic sales rate for the RS&I segment excluding intercompany sales, and the reasons for the downturn in military sales within the C&I group.

Answer

CEO Nicholas Pinchuk explained that the company's pivot to quicker payback items is working but was temporarily 'overrun' by an unprecedented drop in consumer sentiment. He noted RS&I's organic growth would have been slightly higher without intercompany sales, driven by strong software performance. Pinchuk attributed the military sales decline to a typical slowdown that occurs with new defense department leadership, stating C&I would have grown without this temporary headwind.

Scott Stember asked about the Snap-on Tools Group's progress toward positive growth, technician confidence amid macro uncertainty, and the status of the company's pivot to smaller, faster-payback products. He also requested the organic external sales figures for the C&I and RS&I segments.

Answer

CEO Nicholas Pinchuk described technician confidence as being like 'Space Mountain at Disney World'—certain of a good outcome for vehicle repair but unsettled by the unpredictable journey due to macro and political factors. He confirmed the company's pivot is working, highlighting the Tools Group's narrowing organic sales decline from -7.7% to -1.4% over recent quarters. He also estimated that C&I's external sales were roughly half of its total reported sales.

Scott Stember asked about potential gains in the quick lube market from customers trading down from car dealerships in the current inflationary environment. He also inquired about potential tailwinds from Winter Storm Fern, such as increased demand for batteries and windshield wipers once stores reopen.

Answer

Lori Flees, President and CEO, Valvoline, noted that 35-40% of new customers come from dealerships, but emphasized convenience as the primary driver for switching, not necessarily trading down. She confirmed that winter storms typically drive demand for services like battery and windshield wiper replacements, expecting a shift in demand rather than a long-term loss, with labor and marketing spend modulated accordingly.

Scott Stember asked about potential gains for Valvoline from customers trading down from car dealerships in the current inflationary environment. He also inquired about potential benefits from Winter Storm Fern, such as increased demand for batteries and windshield wipers once stores reopen.

Answer

Lori Flees, President and CEO of Valvoline, noted that 35-40% of new customers come from dealerships, primarily driven by Valvoline's convenience rather than explicit trade-downs. She confirmed that winter storms typically lead to increased demand for services like battery and windshield wiper replacements, and the company modulates labor and marketing to capture deferred demand.

Scott Stember asked about the potential benefit Brunswick could receive if the IEEPA tariffs are eliminated, seeking to quantify their impact. He also followed up on consumer financing rates, asking for a comparison of current rates to six months prior, given recent Fed rate cuts.

Answer

CFO Ryan Gwillim estimated a full-year IEEPA tariff impact of $20 million-$25 million, noting it would be a material benefit but only a portion of total tariffs. Chairman and CEO David Foulkes explained that consumer financing rates peaked at about 10% in 2024, are now around 7.5%, and were 5.5%-6% pre-pandemic, indicating material improvements from the peak. He also mentioned modest price increases and normalizing trade-in values as additional tailwinds.

Scott Stember asked about the potential benefit if IEEPA tariffs were eliminated, requesting an estimate of how much of Brunswick's total tariff exposure is IEEPA-driven. He also followed up on consumer financing rates, asking for a quantification of the relief consumers have experienced in actual financing rates compared to six months prior, given the recent Fed rate cuts.

Answer

CFO Ryan Gwillim estimated the full-year impact of IEEPA tariffs at $20 million to $25 million, noting it would be a material positive but still only a portion of Brunswick's total tariff burden. Chairman and CEO David Foulkes detailed consumer financing rates, stating they peaked at approximately 10% in 2024 and have since decreased to about 7.5%, compared to pre-pandemic levels of 5.5%-6%. He also mentioned modest price increases and normalizing trade-in values as additional tailwinds for consumers.

Scott Stember inquired about recent boating participation trends and whether there has been any tightening of consumer credit availability since early April.

Answer

David Foulkes (executive) stated there has been no material change in boating participation and that retail financing rates have held steady around 8% with no signs of credit deterioration. Ryan Gwillim (executive) added that Freedom Boat Club trips are steady year-over-year and that dealer health on the wholesale financing side also remains strong.

Scott Stember asked about the performance of Goupil and Aixam and their contribution to the 2026 guidance. He also inquired if Polaris had observed any changes or 'budging' in retail lending rates from banks through their relationships.

Answer

Michael Speetzen (CEO, Polaris Inc.) clarified that the majority of the guidance movement is driven by the ORV and Marine businesses, implying Goupil and Aixam are not the primary drivers of the overall guidance. Bob Mack (CFO, Polaris Inc.) stated that credit statistics and lending rates remained consistent, with aggressive promotional financing having the intended impact. He noted some rate reductions for high credit scores but nothing dramatic, and Polaris is not assuming significant Fed-related assistance in 2026.

Scott Stember inquired about the performance of the Goupil and Aixam businesses and their specific contribution to Polaris's 2026 guidance. He also asked if Polaris had observed any changes or 'budging' in retail lending rates from banks through their relationships.

Answer

CEO Mike Speetzen clarified that the majority of the overall sales growth guidance for 2026 is driven by the ORV and marine businesses, implying Goupil and Aixam are not the primary contributors to the significant guidance shift. CFO Bob Mack reported no dramatic changes in lending rates, noting that credit statistics remained consistent. He stated that aggressive promotional financing had been effective, indicating consumers still seek lower rates, and assumed no significant help from the Federal Reserve in 2026, expecting promotional rates to continue playing a key role.

Scott Stember asked if the projected negative EPS for Q3 is solely due to tariffs and whether there has been any deterioration in consumer credit.

Answer

CFO Robert Mack clarified that the negative Q3 EPS outlook is driven by both the significant tariff impact ($30-40M) and sequentially lower revenue due to disciplined inventory management. He stated that consumer credit remains stable with good availability, noting that write-offs peaked last year. The primary challenge is high interest rates impacting consumer affordability and company buy-down costs.

Scott Stember inquired about the nature and scale of the 'selective' price increases implemented on RV products, asking if any retail pushback had been observed. He also sought clarification on the balance between 'self-help' operational initiatives and market conditions contributing to the back-half loaded fiscal 2026 guidance, particularly concerning Q2's expected bottom-line performance.

Answer

CEO Michael Happe clarified that price increases were selective, targeting new products, feature enhancements, and brand transformations (e.g., Winnebago RVs pruning underperforming lines for healthier, potentially higher ASP products), rather than broad increases. He noted the market's unsuitability for significant price hikes. Regarding guidance, Michael Happe explained that the back-half loading of EPS is normal for the business. He attributed the confidence in fiscal 2026 results to controllable factors, including cost management, profit improvement initiatives, new product launches (some yet to be revealed), and brand expansion efforts, emphasizing agility regardless of market fluctuations.

Scott Stember asked for details on the size and scale of Winnebago Industries' selective price increases on RVs and whether any retail pushback has been observed. He also sought clarification on the proportion of self-help items versus market factors contributing to the back-half loaded guidance for fiscal 2026.

Answer

CEO Michael Happe explained that price increases were 'selective,' focusing on new products, feature enhancements, and brand transformations, rather than broad, significant increases, as the market is not conducive to them. Regarding guidance, Michael Happe noted that the back-half loading of EPS is normal for the company. He reiterated that the guidance reflects a collection of commercial and operational initiatives, including cost management, profit improvement, new product launches, and brand expansion, which are largely within the company's control.

Scott Stember inquired about the impact of tariffs on Winnebago's fiscal year 2026 guidance, specifically asking about the unmitigated expense portion and its relation to the guidance range. He also sought clarification on the expected cadence of earnings improvement throughout fiscal year 2026, particularly regarding the first half versus the back half.

Answer

President and CEO Michael Happe confirmed that the fiscal 2026 guidance fully incorporates the anticipated tariff impact, though a specific number was not disclosed due to the dynamic nature of the tariff environment. He noted that the company's teams are actively mitigating exposure and implementing disciplined pricing actions. Happe also explained that fiscal 2026 is expected to be back-half loaded in terms of profit generation, with a stronger start in the first half compared to the previous year. Senior Vice President and CFO Bryan Hughes added that each quarter is projected to show year-over-year improvement.

Scott Stember of Roth Capital Partners inquired about the model year 2026 price increases and the consumer reaction to them. He also asked for the reasons behind the strong outperformance of the Marine segment, including both the Barletta and Chris-Craft brands, relative to the broader industry.

Answer

CEO Michael Happe explained that the low-to-mid single-digit price increases for model year 2026 include some known near-term tariff costs, but it's too early to gauge consumer reaction due to existing dealer inventory. He attributed the Marine segment's success to strong leadership, disciplined inventory management, and successful new products at lower price points, such as Chris-Craft's Sportster and Barletta's Aria lineup.

Scott Stember asked if the lower shipment guidance for 2025 was driven by incrementally concerning retail trends in March and sought commentary on a competitor's recently announced strategic dealer alliances.

Answer

President and CEO Michael Happe stated that March retail patterns were consistent with February's and the guidance adjustment was primarily due to a later-than-expected retail rebound and continued dealer inventory discipline. Regarding competitor actions, Happe affirmed confidence in Winnebago's own dealer relationships and reiterated the strategy of balancing market share pursuit with profitability.

Scott Stember asked for details on the operational challenges at the Winnebago-branded Motorized business in North Iowa and the actions being taken to improve margins, such as facility consolidations.

Answer

CEO Michael Happe identified three key pressures: fierce competitive discounting, increased warranty expense from specific quality issues, and the ongoing need to improve operational efficiency. He confirmed the consolidation of a facility in Charles City, Iowa. CFO Bryan Hughes added that fixed costs have been managed appropriately given the market trough.

Scott Stember inquired about current retail trends following recent industry shows, whether lower interest rates are boosting dealer orders, and the long-term outlook for Motorized segment EBITDA margins with the new Grand Design entry.

Answer

President and CEO Michael Happe stated it was too early to see a material impact from recent rate moves and that retail conditions remain sluggish. SVP and CFO Bryan Hughes reaffirmed that the long-term expectation for Motorhome EBITDA margins remains in the double-digit range, expressing increased confidence with the addition of the Grand Design brand.

Scott Stember inquired about potential elasticity issues observed by a major customer, specifically on the DIY side, and asked if Dorman Products was seeing similar behavioral changes in either DIY or DIFM segments. He also asked for clarity on future margin trajectory, considering the optical distortion from tariff-related price increases and ongoing self-help initiatives.

Answer

Kevin Olsen, President and CEO, stated that Dorman's portfolio, being heavily non-discretionary, has historically shown inelasticity and performed well through inflationary periods. He highlighted solid Q3 growth and positive macroeconomic trends. Regarding margins, Mr. Olsen acknowledged strong Q3 performance but anticipated some compression in Q4 due to tariffs impacting cost of goods sold, reiterating a long-term target of high-teens operating margin supported by cost and productivity initiatives.

Scott Stember asked about potential elasticity issues, particularly on the DIY side, and any observed changes in customer behavior (DIY vs. DIFM) following recent price increases.

Answer

Kevin Olsen, President and CEO, Dorman Products, stated that Dorman experienced a solid quarter with strong POS growth, driven by new products and positive macro trends. He emphasized the non-discretionary nature of Dorman's portfolio, which has historically shown inelasticity and performed well through past inflationary periods (2018, 2019, 2022-2023). Scott Stember also inquired about the future trajectory of margins, specifically if Dorman expects to maintain relatively flat margins due to self-help initiatives despite tariff-related price increases. Kevin Olsen confirmed strong Q3 operating margins but anticipated some compression in Q4 as tariffs impact cost of goods sold, while reiterating a long-term target of high-teens operating margins, supported by ongoing cost initiatives and productivity improvements.

Scott Stember of ROTH Capital Partners inquired about potential customer pre-buying ahead of tariffs, the drivers of strong sell-in versus POS, the company's tariff mitigation strategies, the timing of financial impacts, and specifics on Section 232 tariff exemptions.

Answer

CEO Kevin Olsen clarified that strong sell-in was due to an easier prior-year comparison, with no evidence of customer pre-buying. He detailed Dorman's improved position to handle tariffs, citing a more diversified supply chain (30-40% from China vs. 70%+ previously) and a 6-month lag on financial impact due to FIFO accounting. Olsen reiterated their playbook of negotiating with suppliers, driving internal productivity, and implementing price changes. He added they are still evaluating Section 232 tariffs but believe exemptions are primarily for OEMs.

Scott Stember of ROTH MKM inquired about the drivers of Dorman's Light Duty segment outperformance amid market softness, specifically the contribution from new products versus same-SKU sales, and the potential operating margin for the Heavy Duty segment once the market recovers.

Answer

CEO Kevin Olsen attributed the Light Duty strength to Dorman's focus on the professional (DIFM) channel and non-discretionary parts, which are less impacted by DIY trends. He confirmed that new product innovation remains the company's primary growth driver. For the Heavy Duty segment, Olsen stated that before the recent downturn, the business generated mid-teen operating profit margins and the company expects to return to that level when the market inflects.

Scott Stember inquired about the drivers of the strong Light Duty POS growth, asking if Dorman saw weakness in specific sub-categories like hard parts, and sought to understand the split between market growth and share gains. He also asked about future operating margin expectations for the Heavy Duty and Specialty Vehicle segments as sales potentially recover.

Answer

CEO Kevin Olsen attributed the broad-based Light Duty growth to favorable macro trends and significant traction from new product launches, noting 1,700 new SKUs were introduced in Q2. CFO David Hession outlined target operating margins, expecting Light Duty and Specialty Vehicles to reach the high-teens and Heavy Duty to achieve mid-to-high teens, noting they are already approaching these levels in two of the three segments.

Scott Stember of Roth Capital Partners, LLC inquired about the performance of the on-road truck OE business within the Powered Vehicles Group. He also asked for an update on the full-year growth outlook for the Marucci business.

Answer

CEO Mike Dennison clarified that the on-road business mentioned in prepared remarks was aftermarket, while the automotive OE business remains very stable due to its focus on premium SKUs. Regarding Marucci, he confirmed that despite a difficult comparison in the first half, the business is expected to be up year-over-year and achieve a record year due to new product launches scheduled for the second half.

Scott Stember asked for more detail on the Specialty Sports Group's (SSG) performance, specifically the relative growth of the bike and Marucci businesses. He also inquired about retail pull-through for high-end mountain bikes and the performance of the new lower-priced fork.

Answer

CEO Mike Dennison stated that both the bike and Marucci businesses beat internal forecasts for the quarter. He noted the strong bike revenue points to market stabilization but was cautious about declaring a full recovery yet. He also confirmed that the entry-premium suspension products launched last year have performed well, successfully expanding the company's market share in that space.

Scott Stember of ROTH MKM asked for an update on demand trends in the automotive truck upfitting business (PVG and AAG), particularly on the high end. He also sought clarification on whether the $25 million in expected expense savings is entirely for 2025 or includes prior actions.

Answer

CEO Mike Dennison stated that high-end PVG OEM demand remains intact, while AAG is focused on creating demand for iconic, enthusiast-driven brands and new use cases like agriculture to counter interest rate headwinds. CFO Dennis Schemm confirmed the $25 million savings plan is a forward-looking goal with tangible progress already made, with the bulk of the financial impact expected in the second half of 2025.

Scott Stember inquired about the bike business's performance in Europe versus North America and asked for initial expectations and growth drivers for the Marucci business next year.

Answer

CEO Mike Dennison explained that while Europe's bike market recovery remains slightly ahead of the U.S., a key Q3 trend was stronger performance from top-tier OEMs and dealers while smaller players softened. For Marucci, he stated that, macroeconomics aside, the business is expected to achieve double-digit growth in 2025, driven by new product launches and significant new retail opportunities stemming from the Major League Baseball partnership.

Scott Stember questioned the pricing environment for the 2026 model year amid tariffs, confirmed operating margin guidance, and asked for an update on aftermarket initiatives, particularly with RecPro.

Answer

President - RV, Jeffrey Rodino, anticipates low-to-mid single-digit price increases in the second half due to tariffs and supply costs. CFO Andrew Roeder confirmed the full-year operating margin outlook is unchanged. Rodino also highlighted aftermarket progress, noting RecPro now features over 500 Patrick SKUs and efforts are underway to expand marine distribution.

Scott Stember of ROTH MKM questioned the reduction in the manufactured housing forecast, asking if it was driven by an actual decline in demand or a more conservative stance. He also explored potential cross-selling opportunities for RecPro into the housing market and asked for the total size of the company's aftermarket business.

Answer

CEO Andy L. Nemeth clarified that the MH forecast adjustment reflects OEMs thoughtfully managing production to maintain backlogs in the current environment, rather than a confirmed drop in demand. President, RV, Jeff Rodino stated that RecPro's cross-selling focus is squarely on the RV, Marine, and Powersports markets, not housing. He quantified the aftermarket business as approximately 8% of 2024 revenue, with expectations to grow into the double digits in 2025.

Scott Stember asked about the fourth-quarter outlook for the RV and Marine segments amid expected production shutdowns and the strategic positioning of the company's aftermarket business following the RecPro acquisition.

Answer

CEO Andy L. Nemeth explained that OEMs are maintaining significant inventory discipline, which will lead to reduced Q4 production but positions the industry for a necessary restock. Regarding the acquisition, Nemeth and President, RV Jeffrey Rodino described RecPro as a foundational aftermarket platform, noting that teams are already actively integrating products and pursuing synergies.

Scott Stember of Roth Capital Partners asked about the potential impact of tariffs on 2026 model year pricing and affordability. He also questioned the sustainability of recent F&I growth and its contribution to achieving the company's SG&A leverage targets.

Answer

President Matthew Wagner estimated an average 5% price increase for the 2026 model year, with potential for further hikes due to tariffs. Chairman & CEO Marcus Lemonis noted that any new price increases are beneficial, as they boost the value of used inventory and highlight the competitiveness of their contract-manufactured products. On F&I, Lemonis expects gross profit dollars to continue growing in line with rising ASPs, which is a critical component for achieving the 600-700 basis point SG&A improvement goal.

Scott Stember of Roth Capital Partners, LLC inquired about the potential impact of tariffs on 2026 model year affordability. He also asked about the sustainability of the strong growth in Finance & Insurance (F&I) and its contribution to achieving SG&A leverage goals.

Answer

President Matthew Wagner estimated a baseline 5% price increase for MY2026, which could be further impacted by tariffs. Chairman & CEO Marcus Lemonis added that any new price increase is a net positive for Camping World, as it enhances the value of their used inventory and benefits their contract manufactured products. On F&I, Lemonis explained that as ASPs rise, F&I gross dollars per unit will naturally increase, which is a critical component for reaching their 600-700 basis point SG&A improvement target.

Scott Stember sought clarification on the term "explosive EBITDA growth" for Q1, asked for full-year EBITDA guideposts, and inquired about trends in customer-pay work within the parts and service business.

Answer

CEO Marcus Lemonis defined "explosive" Q1 EBITDA growth as expecting "no less than 3x, 3 to 4x" the $8 million reported in the prior-year quarter. While not providing a specific full-year EBITDA forecast, he reaffirmed that the company's guideposts should lead to results consistent with Street expectations. Regarding service, Lemonis stated customer-pay work was not as strong as needed in 2024 and that a clear trend for 2025 won't emerge until the core season begins in March/April.

Scott Stember requested more detail on the competitive landscape, particularly regarding aged inventory at other dealers. He also asked about the financial benefit of a 1% Fed rate cut and the performance of the parts and service business.

Answer

CEO Marcus Lemonis noted that while much of the industry is healthier, a subset of dealers still struggles with aged inventory, especially in the contracting diesel motorhome segment. CFO Thomas Kirn quantified the benefit of a 1% rate cut at up to $30 million annually. Executive Matt Wagner confirmed that core service revenue grew in the single digits, and Lemonis identified improving service customer retention as a key opportunity.

Scott Stember of Roth Capital Partners asked about the sources of increased competition in North America, the outlook for repairable claims given used car pricing trends, competitive dynamics in Europe, and the financial impact of tariffs.

Answer

President & CEO Justin Jude explained that while used car prices saw some improvement, the recovery is not yet strong enough to close the gap with rising repair costs. He also clarified that European performance comparisons are complex due to differing market exposures, but noted LKQ is maintaining share by focusing on its value proposition. Regarding tariffs, Senior VP & CFO Rick Galloway and CEO Justin Jude confirmed they are successfully passing through the costs via pricing, with the main challenge being the impact on working capital, not profitability.

Scott Stember inquired about real-time trends from insurance carriers regarding used car pricing and total loss decisions, and asked about the potential impact of tariffs from Taiwan on LKQ's business and its ability to pass on price increases.

Answer

CEO Justin Jude noted that after a two-year decline, used car values saw an uptick in April, which, combined with flattening insurance premiums, could improve repairable claim volumes. Regarding tariffs, Jude and CFO Rick Galloway explained that historically, tariffs have benefited the industry and LKQ. Galloway quantified direct import exposure as less than 10% of global COGS. Jude stated that LKQ would first pursue mitigation with suppliers and supply chain optimizations before passing on costs, noting that competitors face the same pressures.

Scott Stember asked for commentary on the early returns and key performance indicators for the new mega yards, and for clarification on the expected cadence of recovery in North America throughout 2025.

Answer

President and CEO Justin Jude explained that mega yards improve returns by consolidating operations, increasing dismantling capacity, and allowing vehicles to be held longer to sell more parts. CFO Rick Galloway addressed the recovery cadence, stating they expect the trend to be the reverse of 2024, with performance starting down in the first half of 2025 and turning positive in the second half, resulting in a roughly flat full-year organic growth rate on a per-day basis.

Scott Stember asked for clarification on the performance of the North American aftermarket business, questioning if weakness was due to tough comparisons from the prior year or a customer shift back to salvage parts. He also requested a quantification of the financial impact from recent storms and strikes on the company's revised guidance.

Answer

CEO Justin Jude attributed the aftermarket decline primarily to the significant drop in repairable claims, which disproportionately affects the collision-focused aftermarket segment. CFO Rick Galloway added that prior-year comparisons were indeed difficult due to a revenue boost from State Farm's return and an OE strike. Regarding guidance, Galloway stated the reduction was driven by a larger-than-expected drop in repairable claims (over 9% vs. an expected 7%) combined with the impact of two hurricanes and a dock worker strike.

Speaking on behalf of Scott Stember, an analyst asked for details on LCI's supply chain diversification out of China, including the most impacted product categories, and questioned if OEMs were pulling forward orders to get ahead of tariffs.

Answer

CEO Jason Lippert identified appliances, furniture, and axles/suspension as the most impacted categories, noting that the company has been diversifying its supply chain since 2017 into regions like Malaysia, Turkey, India, and Vietnam. He stated that there is no significant evidence of OEMs pulling forward orders and that any such impact would be minimal.

Scott Stember from ROTH Capital Partners inquired about the Camping World partnership, asking how many stores LCI is currently in and the expansion plan for 2025. He also asked about the performance of the RV aftermarket and trends in the European RV market.

Answer

CEO Jason Lippert explained that after outfitting 14 Camping World stores toward the end of 2024, the goal is to add approximately 100 more in 2025. He noted the RV aftermarket was down slightly last year but expects units from the 2021-2022 peak to enter the repair cycle soon. Regarding Europe, he stated the market feels the first half of the year will be down, with an expected uptick in the second half, contrasting with the prior year's trend.

Scott Stember asked for the 2025 outlook for the aftermarket business, particularly the RV segment, considering the balance between new attachments and break-fix services. He also questioned if the aftermarket margin could still reach twice the OEM margin, potentially pushing into the high teens.

Answer

CEO Jason Lippert highlighted a significant opportunity in the RV aftermarket, with 1.5 million RVs from the 2020-2022 period now exiting their warranty cycles, which will drive customer-pay repairs and upgrades. He clarified that while aftermarket margins are strong, achieving a 2x OEM margin is complicated by the business mix, as the fast-growing automotive aftermarket segment (now 54% of aftermarket sales) carries lower margins than the RV aftermarket.

Scott Stember from ROTH Capital Partners inquired about the magnitude of Vehicle Control's point-of-sale (POS) growth, the potential for tariff relief on aftermarket parts, the performance and synergy progress of the Nissens acquisition, and the status of the new Kansas distribution center.

Answer

CEO Eric Sills confirmed low single-digit POS growth for Vehicle Control, an improvement from the prior year's flat trend. He stated that recent tariff relief announcements appear geared towards automakers with minimal impact expected for SMP. Regarding Nissens, he noted it is outperforming the European market, but significant sales synergies are anticipated in 2026 after a preparatory year in 2025. COO Jim Burke added that the new Kansas facility is in its testing phase and on track for completion by year-end 2025. CFO Nathan Iles confirmed related start-up costs are within the previously guided $6-8 million annual range.

Scott Stember asked for a breakdown of the company's geographic exposure regarding potential tariffs, a performance overview of Nissens' individual business segments (air conditioning, engine cooling, engine efficiency), and an update on the progress of the new distribution facility in Kansas.

Answer

CEO Eric Sills stated that while the company has global exposure to tariffs, it is not overly concentrated in any one region and the plan is to pass through costs, similar to the approach in 2018. He detailed that Nissens' largest segment is engine cooling, followed by air conditioning, and a newer, growing 'engine efficiency' line. CFO Nathan Iles reported that the Kansas facility is progressing well with automation installation, targeting completion by the end of 2025, with the old facility to be put on the market in early 2026.

Scott Stember inquired about the drivers of Vehicle Control's strong performance despite reports of sluggish professional business, customer inventory levels in Temperature Control after a strong season, the outlook for Engineered Solutions amid market softness, and key financial factors to consider for 2025.

Answer

Chairman and CEO Eric Sills explained that Vehicle Control's outperformance relative to flat point-of-sale data is due to customers' evolutionary expansion of their footprints and assortments. He also noted that Temperature Control customer inventories are in a good position after a strong season where sell-in matched sell-through. For Engineered Solutions, he acknowledged softness in some end markets but highlighted that new business wins are offsetting production slowdowns. CFO Nathan Iles addressed the 2025 outlook, confirming that interest rates and distribution center costs are key variables to watch but declined to provide formal guidance.

Scott Stember of ROTH MKM requested a performance breakdown between the Mexico and Brazil international markets and asked if the company discloses the DIY versus DIFM sales mix for its Mexico operations.

Answer

Executive Philip Daniele stated that the company does not break out performance by individual international country or disclose the DIY/DIFM mix for Mexico. He noted that growth is strong in both markets, driven by exporting successful domestic strategies, with commercial representing a significant growth opportunity.