Mike Swartz: Okay. That’s helpful. And then maybe just one follow-up for Lillian, I think you had just said in terms of or in response to Scott’s question about – I just want to make sure I heard it correctly around full year EBIT margin. I think you said around low-single digits. Is that what I heard? And I think you had said mid-single digits back in October, but just correct me if I am wrong in how I am thinking about that.
Lillian Etzkorn: Yes. It should be mid-single digits, Mike, so thank you for the clarifying question. That would be our expectation for the full year, consistent with our prior messaging of the mid-single digits for EBIT percent.
Mike Swartz: Okay. Perfect. Thank you so much.
Operator: The next question comes from Thomas Martin with BMO Capital Markets. Please go ahead.
Tristan Thomas-Martin: Hi. Good morning. I know in the past, you have talked about how there is open unit right they will be on the 20 that you are comping against. Can you quantify what that impact was relative to, like, the RV wholesale production?
Jason Lippert: You got the question? You want to repeat that again Tristan?
Tristan Thomas-Martin: Yes. They are just asking the benefit from comping against the open units that were shipped relative to the reported RVIA numbers in the quarter.
Lillian Etzkorn: Again, Tristan, just to make sure I am understanding the question, so in terms of the content per unit, so when we are reporting that, it’s on a trailing 12-month basis. So, we actually, in that computation, it’s still a headwind for us because of the wholesale exceeding production in 2023 calendar year. As we progress through 2024 calendar year, our expectation is that wholesale and production will be more closely aligned, so it won’t be a tailwind – or I am sorry, a headwind as we move through the year. But it still is a headwind this quarter of a few percent points. Does that make sense?
Tristan Thomas-Martin: I guess I was really asking, if you can quantify just the number, as in wholesale production was 10,000 more due to open, trying to get a number to quantify, I apologize, I am at an airport so I might be hard to hear.
Lillian Etzkorn: No, that’s okay Tom. From a wholesale versus production in 2024 calendar year, we are seeing that much more closely aligned. We didn’t have the same situation that we had in 2023 calendar year.
Tristan Thomas-Martin: Okay. Got it. And then I just kind of have to ask this question. There has been a ton of chatter about some of these, actually this is for Jason. I wanted to know if you had any thoughts or opinions you wanted to share.
Jason Lippert: I didn’t hear the question, Tristan. What was the question?
Tristan Thomas-Martin: Let me hop back in queue and see if I could find a better spot.
Jason Lippert: That sounds a little bit better if you want to try again.
Tristan Thomas-Martin: Okay. I just have to add, a ton of chatter with some of these Davidson headlines and issues, just wanted to get your opinion and your kind of comments on it.
Jason Lippert: Yes. Thanks. Okay. I got it now. Yes, I mean contrary to the Davidson note that came out, I will tell you that we don’t have widespread frame issues. We don’t have widespread warranty issues. So, the long and short is that we design frames to flex and over the years we have seen a handful of units. The numbers, as they come out to from a unit standpoint, it’s insignificant. It’s 300% of our total frame warranties. And in terms of dollars, it’s less than 100%. So, it’s hardly worth mentioning. What I can say is that with the issues related to the chat around Grand Design is they have issued a technical service bulletin to their dealers and the consumers. So, as far as I know, they are fixing those. Everything that pops up with respect to a customer concern today, I am 100% confident Grand Design is taking care of their customers.
And again, we have seen these flex issues over the years. We have got – especially on heavier units of 15,000 to 21,000 pounds, you see these are just giant houses moving down the road and sometimes with overloading or road abuse or an excessive impact you can see some walls break-loose from the frames, and it happens from time-to-time. And when they do happen and there is an issue with a manufacturer, they are generally getting taken care of. So, that’s probably the short answer. Our frame warranties, less than 0.75% of everything that we build has been for the last 10 years. 2024 is tracking the same. So, hopefully, that debunk some of the chatter out there. There was some big time social media stuff months ago, but I think it’s quieting down.
And like I said, with the issuance of the technical service bulletin and the dealers, those issues are getting taken care of. Is that helpful, maybe there is a question there?
Operator: The next question comes from Alice Wycklendt with Baird. Please go ahead.
Alice Wycklendt: Good morning everyone, on for Craig today. Most of my questions have been answered, but maybe I just wanted to dig in on the M&A landscape. I mean I think you said you are in more talks today than you were a year ago. What areas are you focused on? And what are you seeing out in the market today?
Jason Lippert: Yes. So, I mean we are focused just as much on adjacencies and aftermarket probably as we are RV. There is – as we have acquired in the RV space over the last 20 years, there is probably less to buy there. So, I would say most of our M&A is focusing on some of our adjacencies in aftermarket. But we feel like we can get a couple of these deals over the finish line in the next 12 months. I mean we are making good progress, and we are having – we didn’t have any – hardly any conversations last year because we were just paying attention to our use of capital and our cash flow given the environment. But things are obviously improving and results are improving, and we feel pretty solid about where adjacent markets and our aftermarkets are sitting as well as our RV market and our performance there. So, I would say we are making good progress with some targets today.
Alice Wycklendt: Great. Thanks. That’s it for me.
Operator: The next question comes from Brandon Rolle with D.A. Davidson. Please go ahead.
Brandon Rolle: Good morning and thank you for taking our questions, I am shouting out or no?
Jason Lippert: Good morning.
Brandon Rolle: First, on the frame flex topic, we just talked with Winnebago on Monday, and they indicated they weren’t the only OEM that was having frame flex issues. So, I guess I think Grand Design has got a lot of publicity obviously. You guys had to quiet some of the influencers, but what other OEMs are seeing these frame flex issues? And I know you said it’s not widespread, but are there issues with each of the three main OEMs, or is it just concentrated to a couple?
Jason Lippert: Yes. I mean there is none that I am aware of. I mean again, frame flex, I would say every brand of fifth wheel because of some of the overloading and trauma that some of these units, these bigger units, say again, we are talking, this is only happening typically on 15,000 to 21,000 pound units, which are largely the luxury high-profile fifth wheels and heavy toy hauler fifth wheels. You don’t see this issue on travel trailers and low-profile fifth wheels, you just don’t see it. But there is maybe – every brand has had, since I have been in the business, three or four a year to just pop in. So, yes, as Mike said, it’s not a new issue, but it’s certainly not widespread and it’s certainly not happening everywhere. I would say to put it in numbers it’s probably 5 to 10 a year for each brand, but that’s not news.
Brandon Rolle: Okay. Great. And who would be on the hook for any of these issues that are going on or people having some warranty claims or whatever the case may be is, were you guys just producing really good frames and it’s on the customer or the OEM, or are you guys potentially liable for any of these issues?
Jason Lippert: Yes, I would say that technical service bulletin calls out specifically to the dealers that they are checking for some of those screws from the walls of the frames and things like that. So, like I said, our warranty on this will be less than 300% on our businesses, on our frame business. So, Grand Design is handling this with their dealers and they are taking care of every single one that pops up. And I don’t have really any more I can comment there probably.
Brandon Rolle: Okay. And then kind of circling back to Tristan’s question earlier, in 1Q ‘23, last year production was less than shipments. Are you saying in the first quarter of this year, production and shipments were more or less aligned? I guess we are trying to just trying to understand what the headwind was last year, so we can better understand where your content is shaking out.
Jason Lippert: Yes. Sure. That win last year was largely around the fact that there just was no production in January. And there was not a whole lot in February either. But the OEMs were shipping. All their yards were fairly full, and they were shipping units. So, wholesale numbers were being – were happening to the dealers, and there just wasn’t any production. And this year, you are seeing yards that are normalized and wholesale happening and production kind of equaling what we are wholesaling this year. We just had a big gap last year in January.
Brandon Rolle: Okay. Alright. Thank you so much.
Jason Lippert: Yes. Thank you.
Operator: We have no further questions, so I will hand the call over to Jason for closing remarks.
Jason Lippert: Yes. So, we are really proud of our results this quarter and things are looking a lot brighter in the last 20 months. So, really proud of the teams for making it through this last cycle and really happy with the diversified bottom line results we had from our diversification efforts this past quarter. Look forward to talking to you all next quarter. See you. Bye-bye.
Operator: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.
