Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Patrick Industries Second Quarter 2023 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve O'Hara, Vice President of Investor Relations. Thank you. begin. may you Steve,

Steve O’Hara

and on our Andy the President; interim Jeff everyone, I Nemeth, this am Rodino, CFO. Filer, Matt joined call and welcome morning, call to morning. CEO; Good today by

circumstances materially call conference considered the statements. releases, company's a and These those control, beyond be under the after our from the XXXX our statements undertake factors number today's in forward-looking factors, statements or other to the are made. results identified statements regarding Industries and date of reflect to operations forward-looking There and Commission. in laws. Exchange securities the our cause the year are many events in in press which obligation that and actual Securities for Form these forward-looking Patrick events no XX-K occur the the of could may statements its are differ described We filings with are Certain which update ended to

to like over now to would turn I Nemeth. Andy call the

Andy Nemeth

you, gentlemen, us today. Good call thank the on you for joining Thank ladies and morning, and Steve.

about positioned deliver future. consistently work They team about begin unwavering the to first express the to Their times. provide excellence, hard for well and pursuit we as sincere of Before in highest us to we service products And our foundation the half our increasingly this are customers. reasons exceptional talking of I to one the optimistic their of would we quarter in our to like our and second strive is are their of level company. take to gratitude dynamic these my members opportunity the and incredible XXXX, and especially commitment dedication empowers

first has comparison by a discipline of some declines over second last the a are year's of as in exhibited and sales in As quarter response industry XXXX, tough they performance, to period inventories our managed significant production record seen half we we reflect field OEMs uncertainty. earnings. decade result to in the most especially against the on as of the with incredible This pleased RV macroeconomic and

diversification, impact on Our have we the decline allocation management played in of offset intended and out quarterly as the helped and capital results. partially production strategic largely our inventory disciplined

has balance resilient And helped while sheet significant Our marine business managed and model. prudently our flow. diversifying our free capital, margins working more teams been bolster and business have our cash our generating

our we second weeks horizon RV tailwinds and calibrate we to As have are for building now sense from for believed to replenished, prepare discuss. that as further the starting to the industry be reduced unit the quarter on optimistic estimates industry in even hand increasingly quarter, becoming the which the Jeff inventories as will first suggest marine the dealers retail on are inventories

of strategic We confident navigation in remain three company's long-term and short-term uncertainty growth reasons. for our key

operationally with a proven strategically and we proactive we and model tested adapt when both a that conditions. and successfully volatility. our veteran First, team diversifying and dynamic been business approach uncertainties to culturally are well as thrive have we market industry with to macroeconomic and to business, responded our positioned faced Along have and

we we trends, the including thoughtfully meet demographic Second, and third, higher adjusting pandemic. heightened which output and markets were making drive than trends and interest believe demand, markets, promising. normalized And will leisure consumer outdoors pre decisions lifestyle leisure industry. the OEMs And what are the serve estimating these in in lifestyle each fortifies the our demand in health remain we disciplined markets to new of younger entering buyers long-term

transformation quarter, at But quarter the let's last of of before and pandemic, current earnings to quarter its little look a our a first, shows later. will company, second compared full the meaningful the power. XXXX, the give the Matt quarter overview resilience second of bit the which

the In was Despite of unit same XXXX. in sharply XX% were period XXXX, volumes, than lower the shipments of RV in quarter unit the the XXXX second lower wholesale and points higher, total Gross second points quarter versus operating revenue margin than in in basis XX% XX XXXX. same in was basis was higher XX% XXX margin a increase the period XXXX. helping higher EPS drive

In $XX XXXX. $XXX addition, generated this of cash quarter, free million versus we flow in million

are working. diversification data the model of believe the points We testament that is strategic that we've our to these business fact a orchestrated

customer-focused team Additionally, have our values the Patrick, and brands the not members that drive entrepreneurial spirit our changed. and

mix business We has a have lifestyle of where leisure and the today undergone a housing significant the Patrick across more markets. of transformation, balanced

we growth a bench are we and Strategically, commitment Together we strategic serve. established and thorough energized experience and values of in with the have we solutions knowledge, a who and to Today, grow we solid deep talented organic Better the of acquisitions. our experts leaders industries breadth they remain more the foundation a for Structurally, but through to dynamic quality product success anchored diversification, provide. have company, a with

these fruitful few for the years, have businesses marine in the past Over XX% our our of account with now market investments proven sales.

is sales, to has as Our housing a future affordable XX% path Americans' housing of a end runway. promising continues long our have market, to also which

our as structure near-term long-term us value delivering remain capital can we challenges liquidity, Financially, leave our the growing we and strong that team, on and advantage customers, positioning on, focused in with with meet our again, nimble drive head team continuously our leadership balance confidence us for our navigate has strategic and to opportunities apply sheet, challenges that take forward. members and to keeping shareholders. can risen plan us tandem of team time Time

we inventory of months inventories leisure the housing decelerating year, markets the on mix appears be our and in both weeks dealer rate based retail markets model imbalance half are in As of and the stabilization first the leisure to back appears RV The X lifestyle mix of towards decline XXXX. look the the on to for have growth. hand and improved, the poised is lifestyle in healthy markets marine

our billion. to year, decreased in XXXX numbers revenues And trailing million. revenues XX% $X.X to approximately XX-month consolidated our second on our record and $XXX basis, were And quarter a compared finally, turning the

to the $X.XX. quarter second approximately million decreased per XX% net income in income share and net Our was diluted $XX

We inventories continue by working $XXX million the half by than inventory in million of from to first reducing exercise and million second $XXX $XXX prudent more XXXX. to XXXX management, of capital the quarter

I'll now markets. highlight provide Jeff, and to on our over turn call the quarter end who the more will detail

Jeffrey Rodino

morning, Thanks, everyone. Andy, and good

total, quarter RV decreased of represents our to Our from second million. XX% which consolidated $XXX million $XXX revenues, XX%

by on same driven partially XXXX, period per X% Our to RV the a unit by content pricing. compared TTM to in share unit gains, offset per increased $X,XXX basis market

the quarter inventory by decline unit quarter decreased the units from XXX,XXX of the have and second metrics shipments of XX% We or net respectively. in registrations an second XX,XXX estimated estimate we XXXX. retail XX% XX,XXX XX,XXX imply quarter second units, approximately wholesale quarter of of RV of The year-to-date, a dealer outlined decrease the of XXXX. from XX,XXX units, and over currently

the approximately from fiscal the inventory is on at weeks to XXXX. XX weeks have quarter XX Our of end weeks of that XX to pre-pandemic XX of end XXXX hand hand This on quarter second estimates declined XXXX to on of weeks. first of below historical and indicate levels dealer the XX in the hand XX at TTM approximately to

normalize our past in demand outlined over XX the call, RV continued in we As to last months. has the market

XXXX And to worked a continue our scale parity suggest through dealers mix units. less-than-optimal model have and points of nearly we touch with to industry ensure Our OEM needs. year production

to have which to to on $XXX XX% gains. market declined revenues, wholesale estimated quarter. decline shipments, our lower marine by consolidated the share million Our sales, represents offset XX% shipments quarter in The acquisition that was second partially XXXX due of decreased revenues X% and in

business, approximating allows million aftermarket higher not an us have unit strong market. and only to offer basis. OEMs new replacement larger That center platform. diversify but a customization, annualized In growing the marine concert with aftermarket margin our further and solutions boat upgrade, and typically are marine portfolio Patrick's These around to building on repair we significantly units $XXX and solutions

that As X% unit estimate were were units XX,XXX we shipments the X% on approximately to estimated to shipments an down XX,XXX wholesale range to to of a units. down marine retail XX,XXX XX,XXX in to noted, unit quarter

content in $X,XXX marine XXXX. to period Our increased per on basis same compared unit TTM unit estimated a per wholesale the to XX%

our marine at from quarter overall weeks estimates. Pre-pandemic weeks ensure on on hand to caution on average first approximated weeks hand, to of demand. alignment XX inventories estimate the based decreasing XX approximately thoughtful to OEMs hand weeks XX XX We by XX on dealer XX are levels to retail on with approximately

to Revenues our in XX% represented consolidated sales. housing of XX% market $XXX million decreased our and

per $X,XXX XX% Our increased TTM same estimated period a unit compared the MH basis on unit per content in XXXX. to to

housing site-built price significant as by that rate crisis alternative an housing serves We to housing amidst cost-effective continue its believe a manufactured an to elevated environment. point compounded viable, advantage affordable with

is decreasing housing decreasing business housing, primarily our XX% were MH the to decreased single-family manufactured second and starts and single-family approximately estimated the of the making of housing up total. quarter XX% quarter in side down XX% tied while multifamily shipments wholesale manufactured unit residential XX% total starts housing X%. for housing The with multifamily with housing

housing Although consumers primed over continue to demand that supply structural to businesses interest the term, remain. higher succeed we and are long and believe the rates, given imbalances inflation our adjust to

based acquisition transportation Marine in quarter, now capabilities Transport front, our the this what Indiana. is expanded with we On Patrick Elkhart,

our RV set marine the our leisure increases transportation transportation a market Patrick and presence solidifies business, further marks and with it as industry. marine aligns lifestyle this business transportation to of While solutions provider provides well into the leading incredibly entry services to of our the

our continue monitor continue We in this other end adjacent valuations in and inorganic and and environment. dynamic see opportunities markets to organic markets to

us M&A great And flexibility our management with end selective. in look we teams partnering flexing in capabilities markets. forward Our provides our liquidity be of to execution all to

Industries, while and improve utility of in our solutions cutting-edge continued the capital is to related ways to example processes new fiber members our investment innovate our An our offering. materials. and other expand of are to Patrick efficiencies seeking of rollout carbon technology we offer continually allocation Further and product this at and composite team exploring the

to internal for industry XTCrbn, experts markets. knowledge market brand utilizes fiber marine manufacturing which we our Recently, beginning leveraged components, ski carbon end composite wakeboard and our new advanced with name, towers in a tops and formalize methodologies with relationships

reasons innovations installation that few a just will customers the solutions small we the increased that Providing of serve. products, durability, just decreased XTCrbn. and are continue are simplified new invest markets our innovations a of and is in to like we roll the This alternative our weight teams to sample in on out high-quality components working with and offer continue

to of in business As we ability look the the to confident are arises. any back year, in that we our manage half our environment

solutions, valuable experience, members innovations and building our acquisitions, family growth have and of we more stellar ever. together strategy Forged each of relationships a expanded resilient strategic This than organic creating table. through working bringing team of the experienced has Patrick decades to brands, through made

highlight Before heart, I especially I Matt, and very would that over the our of turn who close we we call these times. part to the organization are projects that are an to several philanthropic fabric dynamic as and like in hold of culture to

disabilities. an sponsor Montel of with Military means relates team with camps, our sponsorships all-inclusive for and it and Camps, consecutive children serves maintain we LOGAN Patrick not adults cancer as and and and third in takes healing any with great children which support Makeover the sending developmental support and with Care to summer the Resources, to supervised list supporting While culture, for pride who year. by medically Community And provides intellectual by major partnerships and philanthropy provide being

communities. these we with ensuring financial of team demonstrates additional partnerships turn our and are giving who our now heart comments the the our soul on will engage, the performance. call culturally I'll and organizations back spirit over members' Matt, to Our to aligned to organization provide

Matthew Filer

good and Jeff, everybody. morning, Thanks,

million. Our sales decreased or $XXX XX% million consolidated second to quarter $XXX net

schedules As we production in quarter. see similar June, in a to our marine number Jeff of noted, RV And OEMs the maintained strategies began from inventory management disciplined OEMs.

while X%, revenue Our XX%. decreased housing end RV revenues market and market by end declined respectively, our XX% and marine

the decline offset basis housing of in XX.X% impact production margin as XX RV our efforts levels in shipments lower Gross of increased the diversification market. points and strategic helped significant end to our

our we cost acquisitions, Additionally, reduction of and initiatives. labor automation result benefited recent and initiatives production efficiencies from a as

higher increased lower a basis the $X revenue. of an primarily sales higher Operating declined expenses our generate and gross quarter $XX Warehouse reflecting to recent million but carry percentage also delivery to margins million SG&A representing XX points prior QX acquisitions XXX investments in $XXX period, the in for tend or to on as versus XXXX XX.X% mix. which sales, basis XX% expenses second a declined of increase but year of points million

a revenue. declined costs. expenses taken increased of basis an have SG&A XXX approximately on in out basis, as million sales we total XX% annualized $XX fixed On lower percentage points but

done obscured reductions the Some expect be businesses But cost flex to on work of of higher made. our the have impact is in teams fixed we have to our by these acquisitions durable we the cost production future. levels when

Operating factors to to income and previously decreased decreased to million diluted the $XX X.X%, million, $X.XX per basis operating by decreased which income XXX driven XX% primarily $XX margin equates described. Net share. points

Adjusted EBITDA second XX.X% XXXX. second were adjusted $XXX EBITDA to million $XXX quarter and respectively, compared and XX.X%, in the of and margin XXXX quarter million the for of

was year. second tax the overall Our XX.X% compared the prior rate for effective in quarter XX.X% to

XX%. to overall to estimate rate tax our XX% continue for We to approximately XXXX effective be

of operations an $XX million compared year more monetization approximately a offset decline period. and Cash Looking in prior significant capital in provided Working million XXXX months the of source at approximately cash increase was or $XXX X net year-over-year. for XXX% the than million, first cash income $XXX of to flows. was by the

remains million or capital down or XX% $XXX we're management. to from year-end team working our million $XXX on down inventory Our XX% million and successful XXXX. driving in $XXX year-over-year focused And

property, This quarter, million plant equipment. we in invested $XX and

and our As are initiatives in our customers. value to continued meant software team technology to operational automation, enable to Jeff efficiency improve noted, and our deliver members investments exceptional

to expect capital XXXX. expenditures $XX $XX We million spend continue on in to million to

of $XXX generated in cash implying $XXX operating the million. free flow of During quarter, quarter flow the we cash million,

XX-month we trailing period, million generated $XXX cash of flow. free the For

of unused debt, net revolving we QX, quarter on our $XXX end revolving had the $XXX approximately paid At of our In on cash we by a facility million. Total paying of second down of total of credit and after million. our million credit was $XX $XXX net million the million leverage liquidity, and hand $XXX facility total comprised capacity on X.Xx.

capital years support effort secure our to and a the macroeconomic long-term we flows, to the Our to With shares structure in growth are manage of form maturities are navigate the of and to strong the strategically and result major cash sources ready and resources poised returned funding liquidity profile for total approximately We proactively of business no diligent diverse $XX dividends. XXX,XXX in $X stability. XXXX, shareholders repurchased environment. and debt until million quarter of current million quarterly allocate

Moving to our end market outlook.

to in of be grow demand. profitably uncertainty, we We to will shipments But continue macroeconomic the impact optimistic to continue and we see consumer which our many a and likely regarding period remain opportunities business. long-term future,

shipments positive registrations RV have wholesale their year. meaning both and retail remained their noted, removing the But Jeff down through the are of production have wholesale retail from OEMs as shipments, in lots, exceeded months and are first signs. inventory registrations dealers X disciplined

Based registrations implying currently to down on retail we recent full XX%, year approximately XX% trends, estimate approximately RV to XXX,XXX units. will XXX,XXX be

continue to XX% a Jeff levels unit of XXX,XXX dealer of discussed, to from implying to we shipments hand estimate XXX,XXX XXXX. as decline XXXX RV as wholesale consistent units, approximately full weeks current, Assuming XX% on year

our to year. In XX% in seasonality shipments Pre-pandemic XXXX wholesale produced back of first the of in year and XX% we half retail spread estimate to between XX%. XX% the marine approximately produced production units of half be was the and the of generally market, down units

as cadence XXXX's balance to XX%, to dramatic quickly half a to half inventory in consumer currently OEMs XXXX dealers continue in with decline reacted more work We and keep levels marine expect demand. with aggressively first versus second slightly XXXX have XX%

has calibrated believe and generally for we many largely retail equilibrium categories. noted, dealer inventory reached inventories with As are believe

starts approximately side available XX% absorbing shipments real-time expect with approximately XX%. our a XX% XXXX down to sales basis. to XXXX to on we we production wholesale the market, housing retail MH expect the housing for business, be On down end In residential wholesale be of XX% housing will new

to markets estimate up, and outlook will we've wrap year and X.X% X.X% To margin most on between for continue full the our our end in trends fine-tuned recent our be XXXX. operating based

aligns in implying this based revenues, generate of estimates. free operating working or million CapEx cash year $XXX million with cash capital on to a at expect We as our $XXX excess more flow or of flow

my completes That remarks.

ready now questions. for are We

Operator

[Operator Instructions].

Stember Our with ROTH first question is from MKM. Scott

Scott Stember

inventory the better-than-expected the maybe inventory the new accounted of net now -- regarding by result you what Can 'XX products? the is right about on Congrats was 'XXs? results. seeing quarter, given dealers average as of you're percentage like talk what last for think have you with might I what thought an update, you of dealer's a

Jeffrey Rodino

XX% this the moving that quickly. they time, in focused was And where was we did the of -- some think it down of like were quarter, that retail Jeff. on second were Scott, really is we about saw we kind I thinking the action. units But Yes, range. felt in pretty last 'XX

good. we So feel pretty

touch them are manageable good are forward at looking a gotten the units be seems in with to now. range they've points shape. they're to 'XX the Our where saying 'XX And down into and really

Scott Stember

that XX% percentage talking think is? XX%, lower? Are probably it you What maybe Okay. we or

Andy Nemeth

Scott, we we to partnership And think matched out of sure that pricing at. lot this the that 'XX dealer the where is level units. make with at they've up think moved That's are there a things Andy. also is

it, has pricing. to that we XX% to think the mix an that, And average XX% we think equilibrium there's 'XX come can or So also range in XX%. down call you

Scott Stember

it. Got

July, August open out. the the you 'XXs talk expect dealers and hearing what you week -- September if where know guess, I everybody come for we the you that X before and I production sure the shutdown. finish to And making a has house? were into maybe I race heading about that And to was -- look July OEMs at Can guess, Okay. know from you're July --

Jeffrey Rodino

shutdown, pretty from some Fourth see out Coming is production this July Scott, Jeff. left in consistent of the June. we where we of Yes, levels

I manage hopes at 'XXs going to come inventory with are coming we now dealers think that of to position, weeks puts them Certainly, levels some off assembly the little the in to dealers. the show. try going lines bit buying the a we're the shutdown that and more to the see that into and the to still between show see continue show going a now

'XXs activity to So dealers there see to those there and some end going the to getting consumers the for of for is be out see.

so consistent year seen now the throughout pretty show just feel like the far into weeks at that year, down manage show the level. dealer what we've between really we've So may the been seen and like it's we with to inventory have and to this continue leading the

Andy Nemeth

Scott, little bit I a want to that. to add

retail right As I we as now. lean decelerating we declines, think weeks at, mentioned, they're look hand, dealer look very at as the on we

on Our touch the with whether not whether kind relates is lines, we've it there it sectors, but yards rates. points the floor with capacity that across or normal space, of kind individual transport to be even inventory are the historical seen run our in indicate our plan averages transport yards it of from field lenders and as in down that be our in only

And feel the like right so we very channel now. is very, clean

we today. production that tremendous be And has the we encouraged we optimistic been really is inventories so and been. September, show well it's are But of positioned. weeks discipline. think relates think and on go anticipation the hand it And there will the cleanliness as that we're And sitting as scaled to the in as of there's it quarter next the through in and

say. So production we But lean would clean disciplined. is what are levels inventories again, right are and very, the now, very

Scott Stember

usual sales of fleshing the sales quarter? you the Got it. the give out the lastly, And in XX% could components decline, the decline of then

Matthew Filer

This Scott. is Matt. Sure,

XX% as And down we're on the XX% of actually an of obviously driven X% but net from That by growth down X%. we're noted. that led So up decline, industry. that's decline we And by are RV about on up Acquisitions X%. organic that seeing organic a includes growth. X% pricing, standpoint,

Operator

Zatzkin Noah KeyBanc Capital with from is question Markets. next Our

Noah Zatzkin

maybe seeing hoping strong to just drilling quickly, July-to-date. color then terms some CPUs out in bit, on marine post markets. kind second, Just demand or across could of provide And the you of you're of kind continue on a hearing you real what retail end side

some So color strength to ability drivers maybe there. the just behind around your to of show kind continue

Andy Nemeth

Sure, this is Andy.

calibrated. retail now, tell the you particular the marine seeing the about feeling declining as inventories impact a think of on the that what that in what field. we we the as is right little and at the I'd is see encouraged again deceleration see of encouraged again level marine inventories think of we do it bit rate marine as I we're by we're by to retail in have side relates

reacted think I OEMs extremely quickly inventories And kind rebuilt. anticipated so marine of was to the once have the what were

feel lean like again we that. into we as so are position the inventories And

have our a manage across sectors, our I with to inventories been needed customers. able pricing it work customers, as to As job where given inventories, with to to working our hard we've in in bring various relates content our we've our done partnership per really certain with customers unit We've great market teams think down. back and

so that's there. been And

we when organic it's with pricing, to I quarter, think expectations of we think net want net about gain our in the a we feel where line be. and overall, again X% in But

business. of for efforts is different out with solutions job customers. related So of Content our managing our great a that And today again, pricing. are the losing not team lot there and doing declines are a to really we're options specifically

Noah Zatzkin

seeing perspective, just terms now, in there helpful. are, more, are one you bit. where your from might market touched maybe a comment you this I right of an set And out on M&A maybe there kind of just end detail kind guys appetite would maybe of just where that know any on But be be opportunity the valuations

Andy Nemeth

is This again. Sure. Andy

got businesses of it's that M&A, that And though. now, to to we would buy We call I pipeline, an our, just as pipeline. we've it, us. part is right don't being organic in in are or acquisition what cultivating opportunities brought think broken say constantly I are deals the certainly it's DNA let's relates that it whether

haven't there, much. would look I alignment at expectations are too are the at. we expectations in with really opportunities we multiple say as that businesses that valuation where think changed are so And

said, liquidity being kind a well today execute and to the valuation multiples the of with the Matt the noted, find certainty volatility we're continuing That balance run matching just cash aren't as cultivate to up normalized expectations flows, rate, with with the necessarily pipeline. lack today. our our positioned strength But position, our and strength and sheet to the of a of of

Operator

Our is Baird. Kennison next question from with Craig

Craig Kennison

in I need the and sufficient? would that you're destocking went shipments, the wanted seeing to going a situation with marine. lead cycle? to see start Or forward in curious at to industry all need with destock you industry would are for marine where inventory Do a decline what X:X be a destock. that respect Even the same a I'm RV to we to way the through but marine in

Andy Nemeth

This Craig. is Andy. Sure,

we are we weeks look call, as our as and X:X a about we retail the right and we spend talked marine. data data, think lot hand at inventories we I on on with as look the on at lined and feel metrics a of on wholesale up time like and now

manufacturers thoughtfully quickly that, stays paused very the the make very, I and X:X that same. prudently think sure alignment have to

where space on general total, weeks have historical been. marine down And that's tell kind on at down levels XX look of in from you And Jeff side, that hand, across just at XX as I'll from in mentioned, again, QX and so we weeks to being. certainly if the

the towards at as in and certainly it, at that X:X. balance we we're data, The space look points

we business, kind of we are line say look balance as that as we little now look the of destock, our right forward. X:X. a hope a as at of in bit could see inventories at we on go think, the and that, be things I and in would the seasonality So But

So again, are them very manufacturers seen the disciplined as we've well. space very react very, I think that quickly. very, in And

Craig Kennison

start that dealers on a for feel boats and to and really It way. comes about damage an lot our of such marine of a demand that from ultimately outlook affordability? the costs little the price in input there where done to a improves where that have are like volume space down Is just affordability like feels you in bit concerned fade perspective, do And Andy, maybe your higher has that checks and inflation marine consumers?

Andy Nemeth

engineering But Sure, the and can space, we technology. there's the that the certainly speak in be we the manufacturers focus that that is I consumer. in on at for and dealers. thinks space, one innovations And say continuing the look tremendous that Craig. those and marine look can't I the just thing about marine forward-leaning that that to in as at bringing way the to industry innovation

industry what overall And marine tell don't is plans their I maintaining of at what a continues view on technology strategic so focus really a where at that normalized basis, today overall I constrain know does level push I probably those and towards marine But kind at capacities to they're level, and would say. unit But think innovation, basis. sales you we that that aggregate pricing say look it of run the an on on I efforts. think technology-leading I the that rate would innovation also and

it our to But over to the historically push of that are relates run of that use like as their last heads at at. seen the said, talk around look where several so I can't rate view, they've to marine it, we is as think kind I the normalized pricing, innovation industry that And focused continues we kind years.

industry-forward I forward-leaning So and again it's think innovation. on again, that

Operator

Our Mike Truist next with question Securities. from Swartz is

Michael Swartz

were or to the wanted you've just cost structural of that year. you on, talking about touch some this Jeff, made fixed maybe, reductions think, I I

two, where 'XX? how here. versus I costs think you've of much million $XX then $XX of about as How gotten have expect of of of million incremental flow those XXXX, guess, those predominantly year-to-date? into system? the much I And are i.e., quantified being to couple that it's do questions annualized, taken guess, you kind you, million. I Maybe a out $XX that if

Andy Nemeth

probably Mike, X/X would And that really been in in costs, of first has this take the our in half. million that at is Andy. fixed the I'll we annualized I there's say aggressive one. team moving. that look When $XX

fabulous the look group As a has things we of done of side of kind where managing at, RV are job that at business.

Our taking care certainly marine working making the they've been sure of customer. that teams are as we're

do come to we in end. expect so And some the back

And on fixed total look net totality, split to fixed business, and that across amongst In basis. -- are look equally direct taken almost variable our spectrum, basis, go-forward out at the the it, the relates we the as cost total, we're below costs as will and as reductions in a we the so materials sustainable materials of on line certainly cost of a we it's net cost really estimating million and it labor, the labor. above and of at $XXX labor, have categories about line

fabulous and the So of reflecting team flexibility job done our variable has a cost nimbleness the model. really

Michael Swartz

And clarify, even million $XX RV? the is just that system volume out comes of back when in to

Andy Nemeth

Correct.

Michael Swartz

that's to single-digit the half the balance come down we playing kind second are the of to do Or out then there Okay, high RV in think And forward? year? I like I it I the of content, talked number quarter And say. quarter-over-quarter Was year? is we've of you've think of giveback guess, down there starts what some peak think it what calls. X% and deflation in helpful. and back see the a seen as declines through X% going I it about kind then of kind lot we how in you the sounds out the that was prior in the just that about pricing is of heard of smooth

Jeffrey Rodino

Yes, this is Jeff.

of out And really at look down year. through now and is we pricing So we're quarter pricing. driven the that primarily, the second kind starting it looking the way a of see bit being the rest spread little is at we by

So have commodities pricing, the We as based additional our on feel they down to we commodity decline they've work like pass in will stabilized. but our through some see real-time with inventory come along very a basis. decreases get of kind and customers closely those

unit. pricing -- do we share will throughout and good what So of and We where we think offset us per changes. which we've we've we're believe about content organic with year growth ability pretty to give that those us and that the on still where the gains got good pricing some on pass how the opportunities that some along visibility at the that will affect have feel to side, for our that able been market take will

Michael Swartz

if then Okay. I question just one And final can.

the it on during the the don't transport I or metric standpoint? size that. think business any you calling that way I made to of acquisition Just quarter, it kind you that acquisition, a any But other revenue from BTI. was remember

Andy Nemeth

it Patrick Mike. Sure, Marine is Transport. Andy. This We've rebranded as

advantage the in As And this RV was $XX know, for to with million opportunity lot It's upside. some us side. cohesive for industry, the you opportunity on very today of. got a certainly we've of a transport take expertise business a about

Operator

with question is Daniel CJS Moore next from Our Securities.

Daniel Moore

think segment Putting how of levels, what what saw production should QX? QX and in in together you we for about reported terms and revenue described to by relative we overall just

Andy Nemeth

in we're looking as total, So this Dan, Andy. -- is

In segment, going we is by across half pretty to side the kind of bit. XX%, are be looking marine. the going think think back and in down going little shipment half, be certainly mentioned, at first as year levels XX-XX, as consistent think RV a of we on that I to business. to second XX%, the space the the we're the half back were we We marine of half

side little the overall production bit marine. a So in on stronger decline

like at level very are inventories in said, the said, being I low a That field. the out

at uptick as retail with we in some that. be So as we're just I QX markets, a shows we see as and think the the the for But into after again, we'll quarter basis. general what deceleration then there look revenues the some pretty across declines, see And think fourth as happens I quarter. overall, could in RV our consistent QX see the in third looking on potential we

Daniel Moore

Very on margin gross extremely helpful. And well the margin decline RV the is shipments, on especially the side. up holding in side, despite

at of this terms lower how And or between are do the your QX? the cadence operating point? guide, and the of margin, unchanged we leaning the about kind range for towards In end think higher you of QX end

Andy Nemeth

again. Andy This Dan. Sure, is

think really perspective, kind from we -- seasonality, the as back our business. at I into of look has come

opportunity, gained the in we've business that out pricing perspective. and And of our efficiencies so margin the taken in some and that cost alignment from we've are QX strongest of the and light with also especially a of QX margin

great our acquisitions margin a of profile. a lot job bolstering op accretive on margin those have done higher better got As a but certainly to gross we We've OpEx note, a that's our well of as overall. Patrick

a And to perspective. we And kind of so in seasonality expect again, QX QX the and strongest. come QX are from would back

overall in margin we've from of and we we those remain of at taken out. periods especially QX But that strong kind perspective, QX light seasonality-wise and of really, what model see for look a the us, kind as

we're They've So as our a job our done X.X% to job, business. guidance, relates have again fabulous done of teams it to a X.X% great managing today.

don't really And successful we high low I feel again, that's to a get for end in. that. able But want be us of to like be very into or to range relevant so still

Daniel Moore

operating last over fiscal for Perfect. out, if few I I'll peaked me Last jump margins XX% look just and years, 'XX. in the back to

of initiatives some and over given the upside next is prior think a some cost years, reduction you the words, of other business? normalizes level, the the the changes diversification today, reasonable the there few do In described peak Given on demand that longer-term in to target? as what is call

Andy Nemeth

Sure, Dan. is This Andy.

a model. highly I think again, it's leverageable

with in to inventory being continue we're make partners partnership and it good We to with working them. our stewards sure the good managing do to levels, managing relates teams and sure right things customers that continue as cost make takeouts, and to our our pricing

back leverage And certainly so continue think we those and as we levels. normalized to to to volumes get there's numbers upside

Operator

question Davidson. with is from Griffin D.A. Bryan Our next

Griffin Bryan

There's of a covered lot today. stuff here

question do just I'll So one here.

hitting that the on the talk the mind, pricing everyone's just Regarding of pricing 'XXs? are versus I given model seeing 'XX unit year market, model kind that environment. can comparable the of you're you new know about year I mean, kind

color any great. there would So be

Andy Nemeth

is This Andy. Sure.

right can't points that, we're touch and least I models. equalize, our and hearing, we from we think that what all a manufacturers, indicate certainly and just at the bit. it now, say, hit little But on I'll let's but touch across speak pricing for of dealers the

the and as of 'XXs So up 'XXs. match with 'XXs up with match appropriate levels well discounting on to

point years hearing our based model on So this from touch least what the at we believe points. at in we're there's equilibrium

Operator

Jadrosich with Bank Our next America. question Rafe of is from

Rafe Jadrosich

was to really helpful thought shows the kind of and of comparison I stickiness that the of some XXXX the market share.

wanted And expecting follow So of the second your happening of compare that raw maybe pricing the on but you not and materials? breaking just what the terms in that just half thanks for does to that up I are how to in question, for then costs year? pricing retail on side, out. what's labor

Andy Nemeth

Rafe. Sure,

stabilized I have think noted, as materials we look commodity as at pretty pricing just space. across Jeff much the general, in

so managing And and we're as we with we're pricing making to giving work as sure get making customers and we're that back that again, that continuing well. sure it

not erosion any going significant pricing in certainly expecting customers that lot with light of But we're a of we going So commodity forward. are to changes partner we our see.

just a have and to noted we expect, labor because noted you down on content well. cost, And On come content labor unit, a just overall as of then general stabilized as well, pricing expect to But organic our given. in we've as basis as some we TTM especially the space, basis, TTM as do do Jeff per it well, RV costs gains. the relates that as

is being a that of managed today. inflation across effectively really not We're seeing so space. lot labor And the

relates lot we're as to volatility of a so not two. it And expecting those

Rafe Jadrosich

obviously, to just has the marine then And mix great. rise. continued and Okay, housing

right destock about there on evolve? that some RV out of should But have we term? probably has how think in to the expect or terms Is specific how longer of mix you target there And that that's you going the now. a do that strategy with to

Andy Nemeth

again. is This Andy Rafe. Sure,

we the certainly to term, we encouraged I certainly able to housing the as we've then some well And in see honestly, we at see opportunity see marine opportunity well certainly I space we're look And continue by the as as that you, to upon. We space. execute longer as even that tell opportunities. think diversification kind model. of drive in would been RVs, the

we mix, the and that the the like it's way played diversification So out.

cost result great current it perspective the leveragability as that's the I the RV when our model, mix. potential relates of as And is the this especially think we're there. from comes about a we think excited very back, about to

to on our we to we So to maintain sure business diversified continue and stability look improve make that to model. stay of continue

Rafe Jadrosich

channel -- expectation me, end where to really as wholesale then of we are inventories? dealers next It and fallen one to are And see have kind going again the going gave believe below reasons rebuild Okay. by that XXXX. operate the Is your just you in go market, those start year, forward, of into outlook which for like like to inventories they the Or last retail a helpful. is on sort there with historical were inventory? of lower the levels channel like of we than that just seems

Andy Nemeth

Sure.

get arms a good think kind that everybody to really I that's question. around. of looking something that's their And is

the to inventory. decline sectors dealers as But learned lower certainly across have quite I levels think retail the on operate seen we've well, with of the time for some now.

hand certainly for would look and weeks the we there kind is level, it it of on like start as rebuild, look once at So to like, opportunity looks at things bounce inventory capital the environment, with of where certainly When a sits look there. rate of inventory staying managing everybody think disciplined and you cost I at build is today to the kind levels. everybody interest definite

there's perspective, our on that across they're that our levels of heads upside at. in of fact the at where inventory the from I lot are space But we've today. bit the at we're hand a so would And the And potential seen discipline the be by weeks certainly, a encouraged to think are of little build space. kind

stabilized like some think feel with rates the and it's with I for environment. some anything, rebuild overall happens if So economic X:X what depending on opportunity we and

Operator

comments. to the There over back are floor no further for to I Andy hand would questions this closing like at time. any Nemeth

Andy Nemeth

to the by up want members. our call thanking I you. team again today wrap Thank of all

has work hard instrumental and to been dedication success. our Your

to and an and support as ever-evolving while We retail to the markets supporting be partner, continue housing leisure OEMs reliable lifestyle leading in success mission our mutual customers supplier and to addressing a driving marketplace. demand growing will a in our valued

the about optimistic future. I ahead, remain look we As

our foundation, Our are long over thank talented joined strategies remain on challenges call everyone shareholders many has short-term and With navigate a a demographic success. in term. proven the has point long-term a place, growth. right today. and track deliver of to the the disciplined we business value model our OEMs ability confident in to towards We and record sustained strong trends who us team

Operator

This concludes today's conference.

may time. You at participation. for this your your disconnect Thank you lines

Patrick Industries (PATK) 27 Jul 232023 Q2 Earnings call transcript