LCI Industries (LCII) 2022 Q1 法說會逐字稿

Hello, everyone, and welcome to today's First Quarter 2022 LCI Industries Earnings Conference Call. My name's Emma, and I'll be coordinating your call today. (Operator Instructions)

I'll now pass the call over to Brian Hall to begin. Please go ahead, Brian.

Good morning, everyone. Welcome to the LCI Industries First Quarter 2022 Conference Call. I am joined on the call today by Jason Lippert, President, CEO, and Director. 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 involving 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 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 the forward-looking statements are made, except as required by law.

With that, I'd like to turn the call over to Jason Lippert. Jason?

Thanks, Brian. Good morning, everyone, and welcome to LCI's First Quarter 2022 Earnings Call. On the heels of an amazing 2021, we carry forward our momentum to deliver a record top line in earnings performance. Our wide range of innovative offerings, coupled with our ongoing focus of providing best-in-class customer service and experience continue to be key competitive differentiators accelerating growth in our aftermarket marine and adjacent businesses alongside RV. As these other businesses continue to flourish, we are reinforcing our ability to drive countercyclical growth, helping position us to deliver strong profitability over the long term.

We ended the quarter with a record $1.6 billion in revenues up 64% year-over-year with strong demand across the markets we serve supporting double-digit revenue growth in each of our core markets. Our recent acquisitions added approximately $79 million in net sales for the quarter, helping expand our market share. RV OEM sales increased 84% during the first quarter of 2022 compared to 2021, reaching nearly $1 billion, primarily driven by strong demand for RVs. Secular mega trends driving the popularity of the outdoor lifestyle are now well-established as KOA's camping survey has recently shown that 57 million households camped in 2021.

RVs have quickly become an even more attractive alternative to the skyrocketing cost of air travel and hotel lodging. The industry continues to innovate, and within the explosion and popularity of peer-to-peer rentals, many new opportunities have opened up, which didn't exist prior. According to a recent RVIA survey, 46% of new RV buyers plan to list their vehicle on rental sites like Outdoorsy, which gives RV owners an effective way to help offset the cost of ownership.

The significant new trench should help further support the long-term growth of the industry, creating a new lane for RV-ers to come into the lifestyle along with new revenue streams in our well-established aftermarket business. We deliver strong content growth across the board as our teams continue to bring new features on existing products and altogether new technologically sophisticated products to market.

In the first quarter, content for total RV increased 40% to a record $4,854 while content for motor home RV for the first quarter of 2022 increased 25% to $3,144. As I mentioned in prior calls, because we had more access to inventory over the last 12 months, we gained significant market share in several of our core product categories as some supplier peers in the industry struggled.

The industry remains on track for another strong year, despite some recent slowness that will likely continue through the back half of the year. Retail demand is solid, and as the industry inventories levels stabilize, we are keeping and constant communication with our OEM and dealer partners to maintain appropriate levels of production. We've invested heavily in automation and continuous improvement projects over the past 12 months throughout our business, which has driven our great efficiency gains.

It is important to note that over the last 2 years, we didn't add much building capacity as volume skyrocketed in 2020 and 2021. We only really invested in second and third shifts to increase our output in our core product lines. This has allowed us to have a much more flexible cost structure that enables us to quickly adapt to any upward or downward swings and volume while helping us maintain solid levels of profitability. All this combined with our guidance of our veteran leadership team should help us successfully navigate through any future operational headwinds while maintaining high standards of quality and service that our customers have come to expect from Lippert.

Moving to aftermarket. Revenues grew 35% year-over-year supported by a combination of organic and inorganic growth. We are making great headway with the integration of Furrion. We are finding amazing ways to utilize the advanced appliance lineup to bring bold new programs to our existing customer base. Our aftermarket business benefited remarkably from the growth of the RV industry.

According to the RVIA study I referenced earlier, 89% of all RV owners purchase aftermarket parts or accessories after buying an RV with over half of those customers buying multiple aftermarket products at once. This trend will be very favorable for us and our business as approximately 500,000 RVs currently on the road enter the repair and replacement cycle every year, creating an incredible growth trajectory for the aftermarket business over the long term.

In addition to millions of RVs entering their repair and replacement cycle, we should see a higher use case due to significant running that is now taking place that will drive more wear and tear and ultimately a higher frequency of repair and replacement parts. We have made significant preparations in our aftermarket business will be ready for this additional growth.

As the aftermarket grows, our goal to create the best possible customer experience will become more critical. With the summer season right ahead of us, we are excited to continue expanding our customer experience programs, leveraging them to interact with customers and collect feedback to enhance our products and services. To that end, we are holding our second Lippert Getaway rally later this year in Pine Mountain, Georgia, to follow up on the resounding success of our inaugural rally held last year.

Finding ways to creatively engage the RV consumer has led to a great return on investment for our business, helping us build real trust and real relationships with people who keep coming back to the Lippert brand. Our OneControl system has created 1 million RV health reports for consumers this year. Our care center and call centers eclipsed one million communications last year and our social media platforms accumulated over 150 million impressions last year alone.

Our first quarter adjacent market revenues rose 42%, again driven by heightened demand and RV business along with strong content growth. The rollout of electric chimneys and new furniture product lines over the past year, it's been an incredible success bringing a new level of convenience to boaters. With the boat inventories remaining low all over the country, marine shows ample runway for growth as we continue to expand market share through our industry-leading brands like Lewmar and Taylor Made.

Just like an RV, we are working to expand our marine customer experience programs as we head into the summer boating season and our Captains group now boasts over 1,000 members. As we continue to broaden our offerings across the recreation space, we will aim to build similar customer experience support groups to help serve as many consumers as possible.

Our international business grew 15% for the first quarter 2022 compared to 2021. As RV production in European markets is softening from the impact of the semiconductor shortage, caravan registrations decreased 13% with registration in Germany, the largest market down 8% for the quarter. Ship shortages will continue to challenge our European RV business into early next year, but we'll likely extend the demand tail over the longer term.

And now we'll move on to our innovation highlights. With younger tech-savvy consumers continue to stream into the outdoor lifestyle, our focus on innovation has become critical to our success. To complement the additional capabilities we've been rolling out to our OneControl platform, which has seen a 400% increase in usage in this past year, we just launched a complete redesign of the OneControl app. This redesign features a range of updates we are developing using customer feedback collected through our Lippert Scouts RV consumers through.

The new design enhances the functionality of the system, providing critical notifications quickly and efficiently through the new interface, and it's also seamlessly integrated with our wider suite of safety products. In addition, our users are now getting regular vehicle health reports that report on the status of features and service opportunities for their RV.

With our 100 talented engineers in Detroit technologies operation, we are continuing to work on extending the capabilities of the platform and overall ecosystem to support evolving customer preferences, ultimately improving the entire user experience. On top of our innovation, our focus on culture has proven to be a major differentiator for Lippert.

In order to increase production to meet heightened demand across our businesses over the last 2 years, we've worked tirelessly to onboard about 3,000 new team members. This is where our culture initiatives and leadership development programs have come into play. These programs have made Lippert into a place where people are grown and developed intentionally. As we do this, people choose more often to stay over the long-term, and when we retain team members over the long-term, key metrics in the business improve greatly including safety, efficiency, quality, and innovation.

As a result of the meaningful resources we have put toward culture and leadership development, our retention rates have grown significantly reducing our overall labor costs as turnover diminishes. Emphasizing the importance of health and wellness and creating wellness programs inside the company is another way we've been able to support our team members. For our Northern Indiana facilities, we've just introduced our mobile care unit to provide 3 on-site services including acute care, chronic disease management, and well-being resources for team members in need.

The mobile care unit will be staffed with medical professionals and we're making routine visits to approximately 30 facilities in the Northern Indiana region, where we have about 7,000 of our team members. We're excited to continue offering additional layers of aid for our teams, and the mobile medical care unit is only the first of several programs we have set this year to start helping our team members move the needle on their health and well-being.

Moving on to capital allocation, we are maintaining our focus on integrating our recent acquisitions and paying down debt. At the same time, we are continuing to invest in innovation and operational enhancements to drive efficiency, quality, and profitability throughout our business. In the first quarter of 2022, we allocated $25 million to growth in automation CapEx and expect to spend an additional $50 million on growth in automation CapEx in the remainder of the year.

In closing, I'd really like to thank, again, all of our team members for their ongoing dedication and commitment towards delivering quality products to our customers, while achieving record results to drive our business forward. Our teams all over the business have done an amazing job working through all the challenges and headwinds that made business so much more difficult than what we were used to pre-COVID. So, thanks to all of our teams for helping us win big in 2021 and 2022 so far. We look forward to continuing our progress into 2022 as we work to create value for our customers and shareholders.

I will now turn the call over to Brian Hall, our CFO, to give more detail on our financial results. Brian?

Thank you, Jason. Our consolidated net sales for the first quarter increased 64% to $1.6 billion compared to the prior year period, driven by strong market demand coupled with operational execution. Acquisitions contributed $79 million or 8% growth to our quarterly results, with organic growth contributing the balance or 56% of the improvement. While we have seen retail demand across many of our markets temper from the historical levels of 2021, April sales were up 47% to $537 million versus April 2021. Q1 2022 sales to RV OEMs increased 84% compared to the prior year period, due to strong wholesale and retail demand, and we also delivered substantial context expansion for towables and motorhomes during the quarter.

Content per towable RV unit increased 40% to $4,854, while content per motorized unit increased 25% to $3,144 compared to the prior year period. Towable content growth can be attributed to organic growth of 9% in addition to the impact of price increases enacted at the start of the year. Acquired revenues contributed 6% of the year-over-year growth in towable and content per unit.

We saw a great performance in the marine market driven by the same trends seen in the RV OEM market and North American Marine sales increased 49%. In all, sales to adjacent industries grew 42% versus the prior year periods supported by strong growth in marine sales, as well as building products which grew 50% due to market share gains and an increase in manufactured housing shipments. Aftermarket segment sales increased 35% and international sales increased 15% year-over-year as the recreation space continues to attract new customers.

Gross margins were 28.2% compared to 24.2% in the prior year period, supported by strong operating leverage and the impact of price realization. As we have communicated each quarter, contractual pricing for many of our key input costs such as steel, aluminum, and inbound freight, lags approximately 2 quarters. Pricing effective January 1 came more in line with current input costs for the quarter. While we did experience some temporary relief as steel and freight costs declined during the quarter, we subsequently have seen steel, aluminum, and freight costs continue to increase, which will create some short-term margin contraction until we were able to realize price adjustments.

In addition, the North American RV market has experienced some slowing in retail demand when compared to the all-time industry records achieved in 2021. This has allowed OEMs to balance inventories which were substantially depleted during the last 24 months and has resulted in reduced production rates and an effort to align current retail with industry production output.

As a result, we are anticipating some reduction in sales volume in North American RV which will decrease margins as a result. We anticipate some margin contraction on a sequential basis as 2022 progresses with an expected decrease of approximately 250 to 350 basis points in operating profit margin between Q1 and Q2 2022. That said, we will continue generating strong profitability as efficiencies are driven throughout our business, and along with leverage of fixed costs due to utilization of second and third shifts, we expect to keep expanding margins over the long term. Further additional price increases anticipated in the coming months will support strengthened margins towards the end of the year.

FC&A costs as a percentage of sales decreased year-over-year due to fixed costs spread over a higher sales base, offsetting increases in freight and transportation costs. Operating margins increased roughly 625 basis points compared to the prior year period driven by operational leverage on a significant sales growth and the successful implementation of our continuous improvement efforts. GAAP net income in Q1 2022 with $196.2 million or $7.71 per diluted share, compared to $74.1 million or $2.93 per diluted share in Q1 2021, increasing due to heightened demand accompanied by effective cost management.

EBITDA increased 139% to $301.5 million for the first quarter compared to the prior year period. Noncash depreciation and amortization with $31.8 million for the 3 months ended March 31, while noncash stock-based compensation expense was $6.5 million for the same period. We anticipate depreciation and amortization in the range of $130 million to $140 million during the full year 2022, primarily due to increases in capital investments to enhance production capacity and enable further manufacturing efficiency.

For the 3 months ended March 31, 2022, cash generated from operating activities was $135 million with $50 million being used for business acquisitions. $42 million for capital expenditures, and $23 million was returned to our shareholders in the form of dividends. Operating cash flows were again positively impacted by increased earnings, and as inventories continued to normalize, we anticipate a further reduction in the impact of working capital on cash generation. At the end of the first quarter, we had an outstanding net debt position of $1.2 billion, 1.7x pro forma EBITDA adjusted to include LTM EBITDA of acquired businesses.

With the constantly evolving operating environment, we are focused on maintaining a strong balance sheet and continue to target a long-term leverage of 1.5x net debt to EBITDA. In the near term, we are working to integrate recently completed acquisitions, which we expect to positively impact our operating cash flows in the coming quarters. For the full year 2022, capital expenditures are anticipated in the range of $130 million to $150 million.

Looking ahead, we are confident in our ability to keep up our strong performance as we progress further into 2022. Through the investments we have made in both our facilities and our teams, we are well-positioned to drive growth in any operating environment while creating additional value for our shareholders. That is the end of our prepared remarks.

Operator, we're ready to take questions. Thank you.

(Operator Instructions) Our first question today comes from Kathryn Thompson from Thompson Research Group.

You had nice gross margin improvements up 400 basis points sequentially and previously you talked about seeing 200 basis points expected from materials and pricing alone. My question is, the remaining 200, that's all efficiencies and volume, or there are other factors we should take into consideration?

Yes, definitely. Kathryn, I would tell you, one, volume certainly exceeded I think our original expectations. So we picked up some additional incremental margin there, and then our efficiencies were some of the best we've seen. I think as you've heard in our prepared remarks, and I know we've talked about it offline as well, running multiple shifts for us is something that's been new. We've gotten great teams that we've assembled and executed very, very well. So we certainly had additional operational efficiencies that make up that difference.

Okay. And how much -- if you look at the components of the gross margin upside, and roughly what were the biggest buckets in terms of the year-over-year gross margin improvement?

If you look -- and just to add to what Brian said, Kathryn, the run rate for first quarter was about 620,000 units is what we were actually running production at. So that's where a lot of the big volume came from. But if you look at how that's broken out, it's about 5-or-so percent in volume increases and operational excellence and improvements there. They're some of the things Brian alluded to, and then a couple of points in pricing improvement from some of the pricing indexes that swung in our favor for Q1.

Okay, and following up on the pricing index curve, is there more pricing to go given we've seen one quarter of significant margin expansion, or how should we think about that price cost as we look through all of '22?

Yes, I think from an industry standpoint, it still sounds like with other suppliers, other vendors that there's still some pricing to give, but for us, we've got, as I just mentioned, the steel index slung pretty good in our favor for the first time in 5 quarters. I mean, we've been chasing steel for 5 quarters as it's run up to almost double the prior historical highs, and turn back in our favor this quarter. And we'll get a quarter and a half or so of improvement there.

And then in Q3, there's -- we're going to be getting back what we saw steel drop this quarter because of how we do the indexes, our customers will see those decreases in Q3 roughly. It's in aluminum still bouncing around at all-time highs. So that's still going to, I don't know that we'll have to give any increases for that based on what we've seen because it feels like it's at a high, but there will definitely be some givebacks on steel, which will overshadow most of the, any increases that are happening right now for us.

Okay. And the final question is more on content per unit. How much of that was increased, the volume versus price versus Furrion? Just really wanting to get to an organic number.

Yes. So it doesn't take into account because it's on a per unit basis, the changes in volume, but -- so what you ultimately end up with is acquisitions contributed about 6% of the year-over-year growth, our organic growth was about 9%, which would account for all of our content gains, as they bleed in over a 12-month period of time. So we're expecting, as Jason mentioned, in his prepared remarks, we gained significantly during the last 24 months locking in new business, as we have the inventories that we're able to support the industry at record volumes.

And because of that, you're seeing that continue to bleed in. So to show 9% organic growth year-over-year, and I would expect that to continue to grow from this point forward until it's fully implemented in the 12-month period of time.

And just to clarify that 6% and 9%, those are referencing volume only numbers because of the -- go ahead.

Those -- I mean, it's the contents of per unit basis, so the volume doesn't -- if the industry volume as an example changes, it doesn't impact that, but for all of the additional new business that we had, those sales would get incorporated in that organic number, any acquired revenues we pull in, the acquired revenue number, and then any additional growth on top of that from the acquisition date forward gets reflected within our organic growth number.

Okay. And real quick, and then I'll hop back in the queue, just any update on the state of the supply chain versus 3 months ago, like 6 months ago? Are there any categories that are better or worse?

Yes. Thanks. It feels better today. I mean, we're anticipating a rough go with some of the freight again, with some of the headaches that we're seeing in Asia with some of the COVID lockdowns that have really pushed things back. But with volume diminishing over the coming quarters, that should play into our favor along with, as Brian mentioned, we're sitting on a good amount of inventory because up until last month we were preparing for some pretty sizeable run rates and wholesale, and obviously, as those things start to tail off, we'll have some inventory there and a little bit of a cushion. So, we should be sitting good. Chips are the big headache for us right now, and we're having to make changes there and redesigning products along our electronics lineups, but other than that, things have been pretty decent.

Our next question today comes from Scott Stember from MKM Partners.

Just following up on Kathryn's questions about content, was that towable, the 6% and the 9%?

Yes.

Okay. So the remaining -- the [dose] to the 40, 40% is pricing then?

Correct.

Okay. Got it. And just if you were looking, I guess, at the sales rates that we're seeing so far, or that you talked about for April, the 47%, could you maybe parse that out a little bit, what's organic versus what's priced? Is it maybe the same ratios that we saw in the content?

Yes, I don't think there'd be meaningful change other than RV-related volume. So, we've certainly seen production rates with the OEMs slow some during the month of April, which I think was as everyone has expected. So, when you look at our year-over-year growth rate for Q1 versus the year-over-year growth rate for April, the most meaningful change in that is RV production rate.

Pricing, I mean, to go back to something that Kathryn mentioned and then you've brought it up as well when you look at what materials have done, and I know we've talked about it quite a bit in the past, knowing that we know what our prices are going to be 2 quarters out given the lag on the indexes, and as we've stated before, January one was the first time that we've got our steel prices in line with what we had been consuming steel at. So, that was in the $0.90 per pound range.

And so not a great deal of change as you move into Q2 in that regard, but with the 2 quarter lag, as during Q1, you saw steel prices drop all the way to almost $0.50 a pound, and then it came back up to, I think, somewhere mid to low $0.60 a pound, you will see that price ultimately get reflected during the third quarter. So, as it relates to second quarter, not expecting a great deal of change there from an input cost perspective, other than maybe a little bit on freight, because some of those indexes have they do adjust it at different periods, not as consistent as what the steel indexes adjust. So, there will be a little bit of give back in that regard during the second quarter, but I would think for second quarter, one of the most meaningful variables that's changing is just the RV-related production volume.

Got it. And to that point, I think the first quarter, I think the rate was around 65,000 units. What are you seeing that rate from a production standpoint? What are you seeing that come down to? And then maybe just tie that into what you're hearing at the dealer level from an inventory standpoint where we are.

Yes, I don't think from a dealer perspective we're hearing much different than what everybody else is. I know some of the recent dealer reports for April show that retail seems a little soft. A lot of that's partially due to some of the weather that we've had. I think there's anticipation that in the next few weeks that the retail will start getting a little bit better. But, I say that our -- we're planning on a run rate, as we're planning on kind of a 525,000 unit number for the year based on all the inputs that we're hearing both on the retail and the wholesale side with plan downtime and things like that.

So obviously, we're running a little bit hotter than that, but we've been coming off of a high run rate sometime in Q1, it was about 620,000 units, is what the wholesale run rate was running. So, we've come off of that and we feel we're going to end up the year, give or take 15,000 units from 525,000, we think that that's pretty realistic.

Okay. And then on the aftermarket, I think last quarter you had talked about you had a lot of things that were in the R&D queue that you were all holding off on, particularly for Furrion, just because of the demand and just trying to keep up with that. Can you remind us again of the opportunity for aftermarket to take another big step up just from Furrion alone?

Yes. I think Furrion, they sold most of their aftermarket through e-commerce and they just didn't have the robust representation out in all the different channels, whether you're talking about Amazon or the big dealers or some of the big wholesale distributors and some of the other channels that we've used. You know, we sell international aftermarket.

So it takes time, but we're continuing to plug them into every single channel that we've got, and we're having good success and whether it's cameras or refrigerators or hot water heaters or some of the other appliance items that they've got, we're going to continue to grow there aftermarket nicely because it's a good category, but we're still in early stages there, just getting everything in the catalogs lined up and making sure all the channel customers know exactly what we've got to offer.

Our next question today comes from Daniel Moore from CJS Securities.

I apologize for this, I jumped off another call. Can you just repeat, Brian, the expectations for gross margins sequentially for Q2 and a commentary you gave for the rest of the year numerically?

Okay. Yes. I think that a couple of different variables. First of all, if you start on our input costs and the pricing that we've been chasing for quite a few quarters in a row at this point, we've finally January one got us to where we're somewhat balanced. When I say balanced, I mean our pricing to our customers is reasonably close to what our input costs were. As you are well aware, you've now seen steel come back down from those all-time highs.

Those are on a 2 quarter lag though, so that will be setting a lot of the stage for the back half of the year when we get to our beginning of quarter 3 pricing adjustments for steel. Steel, ultimately, I think came down to low to mid $0.60 a pound at the end of the first quarter. So, that'll be what's setting our Q3 pricing. You know, so, you've got that variable to consider. So, going from Q2, probably not that meaningfully different from an input cost perspective, other than some givebacks on some of our inbound freight costs...

And lower volumes.

Correct. So, to address the pricing, the input costs first, like that's what I would expect. Q2, not a significant amount of change, but back half of the year is where that pricing comes into play. The other variable, as Jason mentioned, is volume. And so, certainly from a volume perspective RV or RVOEM being the most significant part of our business, we are anticipating volumes to continue to decline some, as Jason just mentioned, you know. April, we did see some reduced production rates from the OEMs. You know, some of that's because of retail slowness that we have been experiencing for a number of months, but now, I don't think it's been helped by the poor weather that we've had here in North America.

So, we're certainly seeing retail get off to a slow start. So, I think OEMs are reducing their production schedules accordingly. Inventories are balanced in a good position. So hopefully, however, retail does play out as the spring-summer selling season kicks into full gear, that will ultimately determine, I think, what the OEM production rates are. But we're expecting those to decline from, as Jason said, we're probably running at close to 620,000 plus unit run rate during Q1. RVIA forecast, I think the most recent one's still at 591,000. But we're looking at more or somewhere around that 525,000 unit type number.

You know, it could be plus or minus 15,000 units or so, but we're expecting that to play out over the rest of the year. So, you would certainly expect Q2 to see some further declines in RV-related volume, which will impact our margins. I mentioned in my prepared remarks that we're expecting a 250 to 350 basis point reduction moving into Q2, and that's primarily driven by volumes with a little bit of freight index adjustments. And then the rest of the year gets a bit fuzzy, but that'll certainly be driven by whatever retail demand is during the summer months.

That's helpful. No, those are the numbers that I had missed. And then as we look at a little bit further a lot of moving parts, obviously, but even running so hot and facing so much labor and raw material headwinds. If we level off in that 500,000, 525,000 range looking beyond 2022, the potential to sustain or even improve margins in a more "normal" operating environment in fiscal '23 and beyond, just talk about the puts and takes there.

Yes, so with a 620,000 run rate, we obviously crushed overheads and fixed costs. You know, we settled back down to 525,000 unit run rate. We still feel we can maintain a lot of those efficiencies and OpEx things we talked about earlier. We'll still need to run some second and third shifts at 525,000. You have to remember that even though it's coming down, 525,000 would be probably a top 2 a year for the industry and that volume is great.

I want to underscore the notes that Brian mentioned earlier. You know, we made a conscious decision in 2020 to not run out and buy a bunch of buildings and add capacity from a building standpoint that we would need to filled up with equipment and people. So we chose otherwise to really focus on putting resources to [adding] second and third shifts, which really allows us a more flexible model, and we hadn't done that in the past.

So, as we settle back down to those 525,000 units or so, we're going to be sitting on roughly the same footprint we had prior to COVID, which I think really helps our efficiencies, and then saying that we plan on keeping some of those operational efficiencies at run rates that are higher than 500,000 units, we'll keep some of those efficiencies. We'll lose some of the pricing benefit that we add, obviously. So we've been traditionally at a 10 point hot margin, we feel we can be a little bit better than that, and kind of where we're at.

Perfect. Lastly, is just kind of longer-term trajectory of content gains, it's been really strong recently, obviously. Just talk about beyond Furrion once we sort of get to a little bit more normalized, if we are in an environment where maybe we're normalizing unit growth, your ability to continue to take share and what you think that kind of content growth might look like.

Yes, I think just look a little bit past RV. I mean, even the volumes have come down, I'm excited about what the next 12 months looks like for us because we're going to add about $350 million in market share gains in just RV alone and just some of the stuff business we've closed over the last quarter or so that'll run out through next year as we start some of this new business up. So, that's a pretty significant improvement and gain given that volume's coming down and then we've got significant growth in Marine and aftermarket and the rest of our adjacent markets. You know, those businesses will continue to grow nicely over the next 12 to 18 months.

Especially Marine, we feel that they have a super long demand tail because they just haven't been able to get the amount of boats out that the dealers need and dealer inventories are very low there. So, as our Marine business continues to grow, so should the volume on top of that. So, we'll have content gains in Marine, innovation gains there along with volume gains as they continue to fill up dealer inventory. So, we feel really good heading into a lower demand time with RVs, we feel really good about the rest of our business, including some of the share gains we've had with RV.

Our next question today comes from Fred Wightman from Wolfe Research.

I was hoping you could maybe just compare or contrast the environment that we're in today. You did 620,000 in the first quarter. It seems like you're going to expect volumes to decline for the rest of the year. Can you just contrast sort of how today looks relative to what we were seeing in 2018 and 2019, whether that's the level of inbound volumes you're seeing from your customers in terms of throttling down production, whether you think it's earlier than what we saw last time, and maybe just why this time might be different.

Well, if you go back to 2018, 2019, we struggled in 2018 because there were some pretty significant drop-offs probably heading to a 450,000 type unit number back then. And it feels bad right now because we're coming off such a high, but again if we land in that 525,000 unit run rate, and that's about what the industry's running today, we expect that to dip a little bit so that the year balances out to be 525,000, but 525,000, it's a big number and our plants are still really busy at that number. We're just cutting some overtime and cutting some shifts on our end to maintain that without really jeopardizing the impact of our fixed costs and overhead, so…

I guess said differently, is it fair to say that the OEMs are being a little bit more proactive about ratcheting down capacity versus what we saw a few years ago?

Oh, absolutely, yes. Yes, for sure.

Our next question today comes from Ethan Huntley from Jefferies.

This is Ethan Huntley on for Bret Jordan. Is there a way you can sort of break out the impact that inflationary pricing had on top-line growth during Q1 and maybe sort of what you expect moving into the back half of the year here in terms of pricing?

I mean, that's a difficult one, Ethan, but it's across so many different markets and each one of them has a different degree of steel and aluminum components, and if you look at the hitch business, which is a lot of steel components, there's certainly a heavy weighting to price as we had to chase steel all the way from $0.25, $.30 a pound all the way up to almost $1 a pound.

You know, it's probably been the most meaningful within our RV and Marine components, which is why we've spent most of our time talking about the price as it relates to those markets. Certainly, when you step back and think about all the different components that we supply within an RV, many of which I think I've said before that of our materials that we consume, approximately 50% of them are steel and aluminum, and that's the dominant share of that is steel.

And so, it's been very meaningful for us on a percentage basis at any given point in time. I think within the content color that we provided earlier, that's a very good indicator of what is baked into top-line growth as a percentage. So, I think I would kind of fall back on that, which is about 56% of our sales today is RV OEM, and the other markets follow that somewhat similarly.

Got it. And then maybe as a follow up here, I think you mentioned April sales are up 47% year-on-year. Is there a way you guys can sort of break out what percentage might be organic versus acquired there or?

Acquired revenue shouldn't have changed a great deal. So, it's about 7%. Yes, we acquired Girard, so we picked up a little bit there. So, we were 6% for the quarter, but April would have increased to about 7%.

Our next question today comes from Brandon Rollé from D.A. Davidson.

First, you had mentioned some strong market share gains recently. Could you talk about some of the drivers of your market share gains and future opportunities? And then my second question would just be on the pricing environment. You know, you're talking about additional price increases still having to flow through the retail channel. How do you feel the pricing has impacted retail demand thus far?

Yes, so, start with some of the drivers. I'd say the biggest percentage, the 80-20 of the drivers on RV market share gains over the next 12 months that we've secured are largely core products. You look at chassis business, window business. Furrion business is certainly taking off. That was part of our plan from the beginning when we purchased it last July, has taken -- taking grow there $150 million business significantly, we felt, and as we said on prior call, we could double that business fairly easily given some of the competitive landscape and given some of the products that Furrion has that are innovative and right for the market.

So those would be the big ones. A little bit of furniture, but then if you look at inflation, to your second question, with respect to retail sentiment and how it's impacting consumers and buying decisions, I mean, certainly, there's impact there. If they're not paying all cash and they're financing a deal, then the impact maybe isn't as significant on a smaller unit, but certainly, the bigger units get a little bit more costly.

And we're in for, like I said, our pricing to our customers that will ultimately flow back through to the dealer should net go down for our customers and by Q3. So that should provide some relief for him. I can't speak for all the other components and things that they buy. I think it's a mixed bag when you look at all of our peers on the supply side and the business, but at least from our standpoint, there should be some net decreases for our customers come Q3.

This concludes today's Q&A session, and I'd like to turn the call back to Jason Lippert.

Yes, we appreciate everybody tuning in today. We'll talk to you on our next quarter earnings call. Thanks again and have a great week. Thank you.

This concludes LCI Industries First Quarter 2022 Earnings Conference Call. Thank you all for joining. Enjoy the rest of your day. You may now disconnect your lines.